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on Regulation |
| By: | Pollitt, M.G. |
| Abstract: | This paper discusses whether a new paradigm is necessary for independent economic regulation of electricity (and closely associated natural gas) systems. We begin by summarising the nature of the traditional model of electricity reform and the place of economic regulation within it. Next we outline the drivers for changing the current model of electricity regulation, namely, the maturity of the existing model, the reality of changing circumstances, and the coming of age of climate change concern. We go on to discuss the premises on which a new model of regulation should be based. These are: remembering the successes of the current system of regulation; a new focus on processes not just outcomes; a recognition of the economics of climate change; and the appropriate management of uncertainty. We then highlight the key elements of a new model for regulation: new processes of regulation; new models of competition and the issues raised by a focus on climate change.The paper draws heavily on the experience of the UK, but has direct implications for the rest of the European Union countries and for other countries whose regulatory systems mirror them. |
| Keywords: | independent regulation, electricity, gas. |
| JEL: | L43 L94 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0819&r=reg |
| By: | Johan Stennek (Gothenburg University); Thomas TangerŒs (Research Institute of Industrial Economics); |
| Abstract: | This paper questions whether competition can replace sector-specific regulation of mobile telecommunications. We show that the monopolistic outcome may prevail independently of market concentration when access prices are determined in bilateral negotiations. A lighthanded regulatory policy can induce effective competition. Call prices are close to the marginal cost if the networks are sufficiently close substitutes. Neither demand nor cost information is required. A unique and symmetric call price equilibrium exists under symmetric access prices, provided that call demand is sufficiently inelastic. Existence encompasses the case of many networks and high network substitutability. |
| Keywords: | network competition; two-way access; mobile termination rates; entry; collusion |
| JEL: | L12 L14 L51 L96 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0809&r=reg |
| By: | Antonio Estache; Liam Wren-Lewis |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2008_018&r=reg |
| By: | Strauss, Jason |
| Abstract: | Competition can be an effective regulator of rates in property-casualty insurance markets. While many states have moved to file-and-use or use-and-file provisions, some have adopted flexible rate-filing regulations (flex-rating) as a means of combining competitive forces with prior-approval regulation. This short note proposes a change to flex-rating so that it can be used to gradually transition a state from prior-approval to file-and-use or use-and-file. |
| Keywords: | Insurance; Regulation; Flexible Rate Filing Regulation |
| JEL: | L5 G22 G28 |
| Date: | 2008–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11167&r=reg |
| By: | BARDEY, David; CANTA, Chiara; LOZACHMEUR, Jean-Marie |
| JEL: | I18 L51 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:9681&r=reg |
| By: | Duarte Brito (Universidade Nova de Lisboa); Pedro Pereira (Autoridade da Concorrência and IST); João Vareda (Autoridade da Concorrência and Universidade Nova de Lisboa) |
| Abstract: | We analyze the incentives of a telecommunications incumbent to invest and give access to a downstream entrant to a next generation network. We model the industry as a duopoly, where a vertically integrated incumbent and a downstream entrant, that requires access to the incumbent's network, compete on Hotelling's line. The incumbent can invest in the deployment of a NGN that improves the quality of the retail services. Access to the old network is regulated, but access to the new network is not. If the innovation is drastic, the incumbent always invests in the NGN, but does not give access to the entrant. If the innovation is non-drastic and if the access price to the old network is low, the incumbent voluntarily gives access to the NGN. If the innovation is non-drastic, there is no monotonic relation between the access price to the old network and the incumbent's incentives to invest. A regulatory moratorium emerges as socially optimal, if the innovation is large but non-drastic. We also analyze the case where both firms can invest in the deployment of a NGN. |
| Keywords: | Next Generation Networks, Investment, Access, Regulation |
| JEL: | L43 L51 L96 L98 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0810&r=reg |
| By: | Cosnita, A.; Tropeano, J.P. |
| Abstract: | This paper contributes to the economic analysis of merger control by taking into account the efficiency gains for the design of structural merger remedies when the competition authorities do not observe the magnitude of efficiency gains. We show that whenever divestitures are necessary, the Competition Authority will need to extract from the merging partners their private information on the merger’s efficiency gains. For this we propose a revelation mechanism combining divestitures with two additional tools, the regulation of the divestitures sale price and a merger fee. We show that an optimal combination of both instruments is effective: the most efficient merged firms are claimed to pay a merger fee while the less efficient divest asets at an upwards distorted sale price. |
| Keywords: | MERGER CONTROL;STRUCTURAL MERGER;REMEDIES;ASYMETRIC INFORMATION |
| JEL: | L41 D82 K21 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gbl:wpaper:200803&r=reg |
| By: | Stéphane Auray (Université Lille 3 (GREMARS), Université de Sherbrooke (GREDI) and CIRPÉE); Thomas Mariotti (Toulouse School of Economics (GREMAQ/CNRS and IDEI)); Fabien Moizeau (Toulouse School of Economics (GREMAQ)) |
| Abstract: | We investigate the design of incentives for quality provision in a dynamic regulation setting in which maintenance efforts and quality shocks have durable effects. When the regulator contracts with a sequence of agents, asymmetries of information can lead to overprovision of quality, reflecting a dynamic rent extraction motive. When the regulator hires a single agent to manage quality, over-provision of quality can also be used by the regulator to strengthen dynamic incentives. We further show that for small levels of asymmetric information, the regulator may prefer contracting with a sequence of agents rather than hiring a single agent if high quality shocks are relatively unfrequent, provided all parties can commit to a long-term contract. When no such commitment is feasible, the fact that quality physically links periods together leads to a ratchet effect even under recurring private information, and shorter franchises are beneficial from a social viewpoint. |
| Keywords: | Quality, Regulation, Asymmetric Information |
| JEL: | D82 L15 L51 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:shr:wpaper:08-11&r=reg |
| By: | Winston Harrington |
| Abstract: | This paper will trace the development of modern regulation of emissions, both local and global, from motor vehicles. To illuminate the principal themes of this story the focus will be on the experiences of the United States and Europe. Among those themes, three stand out, questions that sooner or later must be considered in the development of any environmental policy. First, the theme of federalism. In every country, governments are constituted at various levels of aggregation, from local to national. Which level of government is the most suitable for attacking a given public problem. If different levels of government can fairly claim to have a role in addressing the problem, how will the various responsibilities be assigned and coordinated? In order to develop an effective and efficient public policy, the governments must have both the right incentives and the capacity to do so. Finding the right level of government to address an environmental problem is a tradeoff between two competing considerations. The government’s jurisdiction must be large enough to “internalize the externalities,” as an economist would say. That is, if either the environmental evil or the policy remedy has effects that extend beyond its borders, then the policy-maker’s incentives will very likely be inappropriate. For example, policies to control emissions of stationary-source air pollutants may not be stringent enough if most of the effects of pollution are experienced in neighboring jurisdictions. At the same time, the level of government must be appropriate to the problem. Smaller, more local units of government are more likely to know the preferences of their citizens, yet less likely to have the expertise and experience to deal effectively with particular problems. The second pervasive theme here is the choice of policy instrument: the specific mechanisms used to achieve the environmental objective. It is common to pose two polar types: direct regulation and economic incentives (EI). Rather than commands or requirements, EI instruments provide penalties or rewards to encourage behavior that will improve environmental quality. Another way of putting the difference is this: With direct regulation, there is a bright line that determines whether behavior will be tolerated. With EI, the relationship between performance and consequences is continuous and gradual. There is no bright line, just steadily increasing rewards for better performance. |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaaa:2008/2-en&r=reg |
| By: | Tullio Jappelli (Università di Napoli Federico II, CSEF, and CEPR); Marco Pagano (Università di Napoli Federico II, CSEF, EIEF and CEPR); Marco di Maggio (MIT) |
| Abstract: | The paper studies the determinants of international differences in household indebtedness, and inquires whether indebtedness is associated with increased “financial fragility”, as measured by the sensitivity of household arrears and insolvencies to the amount of lending and to macroeconomic shocks. It also investigates whether financial fragility is affected by institutional factors, such as information sharing arrangements, judicial efficiency and individual bankruptcy regulation. We address these issues by tapping three data sets: (i) cross-country data on household indebtedness; (ii) European panel data for households lending and arrears; and (iii) time series data for household lending and insolvencies in the U.K., the U.S.A. and Germany. Overall, the analysis underscores the importance of institutional arrangements in determining the size and fragility of household credit markets. |
| Keywords: | household debt, financial fragility, arrears, insolvency, information sharing, judicial efficiency, bankruptcy law |
| JEL: | D14 G21 G28 G33 |
| Date: | 2008–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:208&r=reg |
| By: | Flavio Menezes; Christian Roessler (School of Economics, The University of Queensland) |
| Abstract: | We examine sources of consistent regulatory decisions in a model where regulators respond to mixed incentives, including career concerns. In the reference case, regulators act as "public servants" who strive to make the socially optimal decision, given limited information and the opportunity to observe the prior decision of another regulator. Adding career concerns, such as a desire to avoid controversy or to implement a future employer’s preferred policy, tends to reduce the degree of differentiation in sequentially taken decisions, hence increasing consistency. Thus, it is possible to observe that the self-interested career concerns of regulators give rise to consistency in regulatory decision-making. This type of consistency might lead to substantial deviations from optimal regulatory policies. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:376&r=reg |
| By: | Alessandro Petretto (Università degli Studi di Firenze, Dipartimento di Scienze Economiche) |
| Abstract: | In this paper, we reconstruct the process by which the decisions of a regulated local public utility, in terms of productive efficiency and quality of the service provided, impact on prices of final consumption goods, supplied in a oligopolistic market operating in the same geographic area. We obtain some formula for these effects which can be quantified by estimating firms’ conditional input demand function of the public service and firms’ inverse demand function for this public good, non-rival, component. Finally, we draw the effects of productive efficiency and quality on consumer welfare and cost-of-living, via changes on tariffs, external effects and final goods prices. |
| Keywords: | regulation, x-efficiency, oligopoly, consumer welfare |
| JEL: | L51 D11 D21 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2008_10.rdf&r=reg |
| By: | White, Ben; Raguragavan, Jananee; Chambers, Robert C. |
| Abstract: | A land retirement policy whereby land is taken out of agriculture and converted to natural vegetation or forestry has the potential to reduce environmental damage related to dryland salinity in Western Australia. This paper uses some recent results in the theory of directional distance functions (Chambers and Fare, 2004) to analyse alternative policy designs for a land retirement scheme. The results indicate that a fixed price scheme is inefficient compared with a first-best solution, but performs adequately. A scheme requiring a fixed proportion of area retired by all producers is inefficient. A separating solution, based on mechanism design, gives a small but siginificant increase in welfare compared to a fixed price scheme. |
| Keywords: | Agri-environmental policy, distance functions, efficiency, mechanism design, Environmental Economics and Policy, Q12, |
| Date: | 2008–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aes007:7963&r=reg |
| By: | James Crotty (University of Massachusetts Amherst); Gerald Epstein (University of Massachusetts Amherst and Political Economy Research Institute (PERI)) |
| Abstract: | It is now clear that we are in the midst of the worst financial crisis since the Great Depression. This crisis is the latest phase of the evolution of financial markets under the radical financial deregulation process that began in the late 1970s. This evolution has taken the form of cycles in which deregulation accompanied by rapid financial innovation stimulates powerful financial booms that end in crises. Governments respond to crises with bailouts that allow new expansions to begin. As a result, financial markets have become ever large and financial crises have become more threatening to society, which forces governments to enact ever larger bailouts. This process culminated in the current global financial crisis, which is so deep rooted that even unprecedented interventions by affected governments have thus far failed to contain it. In this paper we first analyze a series of structural flaws in the current financial system that helped bring on the current crisis, and then propose a nine point regulation policy, informed by our analysis, designed to end this destructive dynamic. We believe that if enacted and vigorously enforced, the policy could sharply reduce financial instability and minimize the problems caused by future financial cycles. JEL Categories: |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:ums:papers:2008-15&r=reg |