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on Regulation |
| By: | Jens Weinmann |
| Abstract: | The absence of one broadly accepted design template for liberalised electricity markets induces regulatory competition and institutional diversity. Focussing on continental Europe and the USA, this analysis explores how agents and structures accelerate or impede the move to one standard market design in the electricity sector. It reveals that market design convergence in Europe is driven by the 'Florence Consensus,' a tripartite coalition between the European Commission fostering European integration and the internal market, informal regulatory networks between grid operators, standardisation authorities and regulators, who have been coordinating their actions in the 'Florence Forum,' and epistemic communities exemplified in the Florence School of Regulation. In contrast, the United States' Federal Energy Regulatory Commission lacks support among politicians, many states' public utility commissions, the neo-liberal intelligentsia and even industrial lobbying groups to effectively push for a standardised market design. However, design convergence in the USA may be induced by the gradual expansion of multi-state markets operated by regional transmission organisations. |
| Keywords: | Electricity, Deregulation, Regulatory Competition, Policy Diffusion |
| JEL: | K23 L16 L43 L51 L94 Q48 |
| Date: | 2007–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2007/15&r=reg |
| By: | João Vareda (Autoridade da Concorrência) |
| Abstract: | We study the investment of a telecommunications incumbent in quality and in cost reduction when an entrant can use its network through unbundling of the local loop. We fi?nd that unbundling may lower incentives for quality improvements, but raises incentives for cost reduction. Therefore, it is not true that all types of investment are crowded out with unbundling. If the regulator can commit to a socially optimal unbundling price before investment, the incumbent makes both types of investment. In the absence of commitment, the incumbent will not invest, so that unbundling regulation may lower welfare as compared to no regulation. |
| Keywords: | Access Pricing, Telecommunications Regulation; Unbundling; Investments; Quality upgrades; Cost reduction; Commitment |
| JEL: | D92 L43 L51 L96 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:pca:wpaper:31&r=reg |
| By: | João Vareda (Autoridade da Concorrência); Steffen Hoernig (FEUNL) |
| Abstract: | We analyze the impact of mandatory access on the infrastructure investments of two competing communications networks, and show that for low (high) access charges fi?rms wait (preempt each other). Contrary to previous results, under preemption a higher access charge can delay fi?rst investment. While fi?rst-best investment cannot be achieved with a fi?xed access tariff, simple instruments such as banning access in the future, or granting access holidays right after investment, can improve efficiency. The former forces investment when it would happen too late, while the latter allows for lower access charges in order to delay the second investment when it would happen too early. |
| Keywords: | Access pricing, Investments, Preemption, Access ban, Access holidays |
| JEL: | D92 L43 L51 L96 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:pca:wpaper:29&r=reg |
| By: | João Vareda (Autoridade da Concorrência) |
| Abstract: | We study the impact of access regulation in a telecommunications market on an entrant?s decision whether to invest in a network or ask for access when the regulator cannot observe its potential demand. Since the entrant has incentives to not compete vigorously right after entry in order to convince the regulator that it needs cheap access in the future, the regulator must set access prices which tend to be distorted (lower or higher) as compared to fi?rst best. Still, this is better than committing to ignore ex post demand information. Consulting the entrant earlier about its expectations improves welfare and may help to achieve the ?first best. |
| Keywords: | Access Pricing, Asymmetric Information, Signaling, Revelation principle |
| JEL: | D82 D92 L51 L96 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:pca:wpaper:30&r=reg |
| By: | Mark Thatcher |
| Abstract: | The article examines whether and how independent regulatory agencies (IRAs) have altered the strategies, relationships and power of French policy makers in markets and whether they led to convergence with Britain in state-market relations. It relates these questions to broader debates about the extent to which previous policy-making systems have been transformed, whether Europe has one regulatory state or several, whether France has become a form of 'liberal market economy' and the power of the state after reform of markets. It argues that although, as in Britain, France has established IRAs with responsibilities for ensuring competition in key economic domains, French state strategies remained very different from British ones and markets operate very differently in the two countries. Moreover, the break with the past has been limited: public policy makers continue to have significant capacities to mould markets and delegation to IRAs has often reinforced the power of existing elites and aided the adaptation of traditional French industrial strategies to new conditions. Thus even if France has adopted the formal institutions of competitive markets, it has not converged with a liberal market economy such as Britain in terms of strategies and behaviour. State forms and instruments may have altered, but an activist French industrial policy is alive and well. |
| Keywords: | regulation, independent regulatory agencies, electricity, 3G mobiles |
| Date: | 2007–05–21 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2007/17&r=reg |
| By: | Reisinger, Markus; Schnitzer, Monika |
| Abstract: | This paper develops a model of successive oligopolies with endogenous market entry, allowing for varying degrees of product differentiation and entry costs in both markets. Our analysis shows that the downstream conditions dominate the overall profitability of the two-tier structure while the upstream conditions mainly affect the distribution of profits. We compare the welfare effects of upstream versus downstream deregulation policies and show that the impact of deregulation may be overvalued when ignoring feedback effects from the other market. Furthermore, we analyze how different forms of vertical restraints influence the endogenous market structure and show when they are welfare enhancing. |
| Keywords: | Deregulation; Free Entry; Price Competition; Product Differentiation; Successive Oligopolies; Two-Part Tariffs; Vertical Restraints |
| JEL: | L13 D43 L40 L50 |
| Date: | 2008–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:3189&r=reg |
| By: | Christoph Böhringer and Knut Einar Rosendahl (Statistics Norway) |
| Abstract: | The EU Emission Trading Scheme (ETS) is breaking new ground in the experience with emission trading regimes across multiple jurisdictions. Since the EU ETS covers only some industries, it implies a hybrid emission control scheme where EU member states must apply complementary domestic emissions regulation for the non-trading sectors of their economies in order to comply with their national emission reduction targets. The EU ETS thus opens up for strategic partitioning of national emissions budgets by the member states between trading and non-trading sectors. In this paper we examine the potential effects of such strategic behavior on compliance cost and emissions prices. We show that concerns on efficiency losses from strategic partitioning are misplaced if all the member states behave in a Nash-Cournot manner. However, if a single country takes the official partitioning of the other countries as a reference point, there is substantial scope for exploiting market power. |
| Keywords: | Emissions Trading; Allocation of Quotas; Strategic Behavior |
| JEL: | C61 C72 Q25 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:538&r=reg |
| By: | Zhijun (ESRC Centre for Competition Policy, University of East Anglia) |
| Abstract: | This paper incorporates the economic theory of organizations into the framework of public law enforcement, and characterizes the dual-coalition structure of cartel organization that allows us to highlight the strategic interactions between cartel participants under different antitrust policies. We show that delegation of authorities over collusive decisions from top executives to subordinates can mitigate the temptation of renege on collusive relationships and thus contributes to facilitating collusion. This result parallels the insights in Baker, Gibbons and Murphy (2002, 2006) which find that the optimal allocation of decision rights is to minimize the maximum temptation to renege on relational contracts. Moreover, the efficiency gains of delegation in facilitating collusion can be mitigated when the corporate leniency program is introduced, in particular whenever it is unlikely to detect cartels absent leniency and the corporate liability is muc more significant than individual liability. |
| Keywords: | cartel organization, antitrust enforcement, leniency programs |
| JEL: | D23 K21 L41 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:ccp:wpaper:wp08-21&r=reg |