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on Regulation |
| By: | Wolfgang Briglauer (Austrian Regulatory Authority for Broadcasting and Telecommunications (RTR), Economics Division); Georg Götz (Justus-Liebig-University Gießen, Department of Economics); Anton Schwarz (Austrian Regulatory Authority for Broadcasting and Telecommunications (RTR), Economics Division) |
| Abstract: | This paper looks at the effects of different forms of wholesale and retail regulation on retail competition in fixed network telephony markets. We explicitly model two asymmetries between the incumbent operator and the entrant: (i) While the incumbent has zero marginal costs, the entrant has the wholesale access charge as (positive) marginal costs; (ii) While the incumbent is setting a two-part tariff at the retail level (fixed fee and calls price), the entrant can only set a linear price for calls. Competition from other infrastructures such as mobile telephony or cable is modelled as an ‘outside opportunity’ for consumers. We find that a horizontally differentiated entrant with market power may be subject to a margin squeeze due to double marginalization but will never be completely foreclosed. Entrants without market power might be subject to a margin squeeze if the wholesale access price is set at average costs and competitive pressure from other infrastructures increases. We argue that a wholesale price regulation at average costs is not optimal in such a situation and discuss retail minus and deregulation as potential alternatives. |
| Keywords: | access regulation, foreclosure, margin squeeze, telecommunications, fixed networks |
| JEL: | L12 L41 L42 L50 L96 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:200827&r=reg |
| By: | Adrien De Hauteclocque (ADIS - Analyse des Dynamiques Industrielles et Sociales - Université Paris Sud - Paris XI); Vincent Rious (SUPELEC-Campus Gif - SUPELEC) |
| Abstract: | This paper evaluates regulatory uncertainty and inefficiency that may prevent merchant transmission investors from committing in Europe, in particular when they are dominant generators. We argue that market players may perceive regulatory uncertainty to acquire exemption on merchant line mainly because of the discretion given for the application of Art. 7 of the Regulation 1228/2003 on cross-border exchanges. However we show that an emerging strategy of the European Commission for granting exemption on merchant transmission line can be eventually derived from recent legal and regulatory proceedings. It mainly consists in relying on TSOs to build merchant lines. We demonstrate that this strategy is neither a first best nor a second best given imperfect unbundling and the current flows in the allocation of regulatory powers. Indeed, it prevents merchant line investment by dominant generators with low generation cost while they have currently more incentive than TSOs to build merchant lines. Since unregulated merchant transmission investment by generators would be problematic, we show eventually that the current strategy of the application of Regulation can easily be fine-tuned to reach this second-best optimum. |
| Keywords: | Regulatory Uncertainty and Inefficiency for the Development of Merchant Lines in Europe |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00338296_v1&r=reg |
| By: | Wolfgang Briglauer (Austrian Regulatory Authority for Broadcasting and Telecommunications (RTR), Economics Division); Georg Götz (Justus-Liebig-University Gießen, Department of Economics); Anton Schwarz (Austrian Regulatory Authority for Broadcasting and Telecommunications (RTR), Economics Division) |
| Abstract: | In the beginning of fixed network liberalisation in Europe in the late 1990s, the main concern of regulators was to lower calls prices. This was done by introducing wholesale regulation and promoting service based competition. Some years later, the concern of some regulators turned from too high calls prices to too low calls prices which might ‘squeeze’ entrants out of the market. We look at a simple model in which this development is explained by increasing competitive pressure from an ‘outside opportunity’, e.g. mobile telephony. We conclude that a margin squeeze is not necessarily used by the incumbent as a device to drive competitors out of the market and increase market power but can also result from increased inter-model competition. If this is the case, we argue that regulators should consider alternatives to cost oriented access prices such as retail minus or complete deregulation. |
| Keywords: | access regulation, vertical integration, foreclosure, price squeeze, telecommunications, fixed networks |
| JEL: | L12 L41 L42 L50 L96 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:200826&r=reg |
| By: | Arvind Magesan; Matthew A. Turner |
| Abstract: | This paper considers the problem of an imperfectly informed regulator constrained in his choice of environmental regulation by the political opposition of those affected by the policy. We compare the value of two types of information to the regulator: the social cost of pollution and the profitability of firms present in the economy. We find that in environments where small increases in the losses to regulated firms greatly affect the regulator's ability to implement the policy, it is most valuable to learn the types of firms, while it is most valuable to learn the social cost of pollution when small increases in losses are relatively ineffectual. |
| Keywords: | Environmental Policy, Pollution, Optimal Taxation |
| JEL: | H23 Q52 D81 |
| Date: | 2008–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-345&r=reg |
| By: | Louis Hotte (Department of Economics, University of Ottawa); Stanley L. Winer (School of Public Policy and Administration and Department of Economics, Carleton University) |
| Abstract: | We study the nature of individual demands for environmental regulation and for trade openness in the general equilibrium of a small open economy where the environment is an input to production. Differences in the ability of individuals to afford private mitigation of the adverse consequences of pollution is a central feature of the analysis. Private mitigation leads to an endogenous, unequal distribution of the health-related consequences of pollution across income groups in a manner consistent with epidemiologic studies, in contrast to much of the literature which assumes equal health effects for all. We show that when private mitigation is possible at a cost, trade polarizes the interests of rich and poor with respect to the stringency of regulation. Moreover, even though trade has the potential to benefit everyone, the poor may oppose trade openness because of a concern that laxer environmental regulation will then be imposed in the interest of the rich. We explain why and how heterogeneity in the intensity of preferences, and not just in their direction, is likely to play a role in the determination of collective choices with respect to the regulation of the environment and of trade. We conclude by drawing out the general implications of the analysis for the study of the political economy of the environmenttrade- welfare nexus. |
| Keywords: | regulation, environment, pollution, private mitigation, trade, welfare, collective choice |
| JEL: | D7 F18 Q56 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:ott:wpaper:0810e&r=reg |
| By: | Collie, David R. (Cardiff Business School); Le, Vo Phuong Mai (Cardiff Business School) |
| Abstract: | In a Bertrand duopoly model, it is shown that an anti-dumping regulation can be strategically exploited by the domestic firm to reduce the degree of competition in the domestic market. The domestic firm commits not to export to the foreign market which gives the foreign firm a monopoly in its own market. As a result the foreign firm will increase its price allowing the domestic firm to increase its price and its profits. If the products are sufficiently close substitutes then the higher profits in the domestic market are large enough to compensate for the loss of profits on exports. |
| Keywords: | anti-dumping regulations; Bertrand oligopoly; strategic behaviour |
| JEL: | F13 L13 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2008/27&r=reg |