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on Regulation |
| By: | Michał Grajek; Lars-Hendrik Röller |
| Abstract: | We provide evidence of an inherent trade-off between access regulation and investment incentives in telecommunications by using a comprehensive data set covering 70+ fixed-line operators in 20 countries over 10 years. Our econometric model accommodates: different investment incentives for incumbents and entrants; a strategic interaction of entrants’ and incumbents’ investments; and endogenous regulation. We find access regulation to negatively affect both total industry and individual carrier investment. Thus promoting market entry by means of regulated access undermines incentives to invest in facilities-based competition. Moreover, we find evidence of a regulatory commitment problem: higher incumbents’ investments encourage provision of regulated access. |
| Keywords: | Telecommunications, Access Regulation, Unbundling, Investment |
| JEL: | C51 L59 L96 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2009-039&r=reg |
| By: | Itai Agur |
| Abstract: | How damaging is competition between bank regulators? This paper develops a model in which both banks' risk profile and their access to wholesale funding are endogenous. Regulators weigh not only welfare, but also the number of banks under their supervision. Simulations indicate that the gains from consolidating US regulation are moderate, roughly 0.5-1% of GDP. But retaining multiple regulators implies a choice for a financial system that is both more profitable and more fragile. The paper also shows how complex balance sheet items give rise to a gradual rise in bank risk, followed by a sudden interbank crisis. |
| Keywords: | regulatory competition; arbitrage; bank risk; liquidity risk; interbank market. |
| JEL: | G21 G28 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:213&r=reg |
| By: | Rinaldo Brau; C. Carraro |
| Abstract: | This paper analyses the conditions under which a group of firms is incentivised to sign a voluntary agreement (VA) to control polluting emissions even in the presence of free-riding by other firms in the industry. We consider a policy framework in which firms in a given industry decide whether or not to sign a VA proposed by an environmental regulator. We identify the features that a VA should possess in order to incentivize firms to participate in the VA and to enhance its economic and environmental effectiveness. Under very general conditions on the shape of the demand schedule, we obtain the following results. First, a VA does not belong to the equilibrium of the coalition game when benefits from voluntary emission abatement are a pure public good. Second, in the presence of partial spillovers – i.e. when signatories obtain more benefits from the VA than non-signatories – a VA belongs to the equilibrium only if a minimum participation rule is guaranteed. Third, a VA with a minimum participation rule and a minimum mandatory emission abatement may improve welfare (and even industry profits) compared to a VA in which firms are free to set their own profit maximising abatement level. |
| Keywords: | Voluntary agreement; voluntary approaches; new policy instruments; environmental regulation; coalition structures; emission standards |
| JEL: | D21 K32 Q28 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:200907&r=reg |
| By: | Olli Castrén (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Trevor Fitzpatrick (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Matthias Sydow (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | In terms of regulatory and economic capital, credit risk is the most significant risk faced by banks. We implement a credit risk model - based on publicly available information - with the aim of developing a tool to monitor credit risk in a sample of large and complex banking groups (LCBGs) in the EU. The results indicate varying credit risk profiles across these LCBGs and over time. Furthermore, the results show that large negative shocks to real GDP have the largest impact on the credit risk profiles of banks in the sample. Notwithstanding some caveats, the results demonstrate the potential value of this approach for monitoring financial stability. JEL Classification: C02, C19, C52, C61, E32. |
| Keywords: | Portfolio credit risk measurement, stress testing, macroeconomic shock measurement. |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091002&r=reg |
| By: | Arthur J. Caplan (Department of Applied Economics, Utah State University) |
| Abstract: | This paper makes two contributions to the carbon-sequestration literature. The first is the development of a theoretical framework in which sequestration and permit trading are analyzed jointly in the context of a competitive fringe model. The second is a numerical analysis demonstrating the role market structure, or market power, might play in the determination of an equilibrium sequestration allocation and carbon price. We present three comparative-static cases, the first two of which assess the impact of relative changes in the cost structures of the dominant firm and competitive fringe. For these two cases we find that the equilibrium allocation of sequestration aligns with a higher carbon price when the competitive fringe experiences an increase in its marginal cost parameter. Conversely, the carbon price falls when the dominant firm experiences a decrease in its marginal cost parameter. In a third case we evaluate the impact of stricter regulation on the abatement decisions of the polluting firm. Our results demonstrate the importance of incorporating into empirical supply-side models demand-side information that is reflective of an underlying market structure. |
| Keywords: | carbon sequestration; competitive fringe; abatement credits |
| JEL: | D43 L13 Q54 |
| Date: | 2009–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:usu:wpaper:2009-10&r=reg |
| By: | Milena Stoyanova |
| Abstract: | The 2002 Common Regulatory Framework diversifies remedies to competition problems according to the market strength of telecoms providers. One set of remedies is particularly targeted at posing constraints on (pre-)existing significant market power (SMP) in the relevant market. Those remedies are provided for in the Access and Interconnection Directive and in ascending order of intrusiveness they are transparency obligation, non-discrimination obligation, accounting separation, access obligation and price control. A second set of measures are meant to apply to all telecoms providers irrespective whether they have market power or not. This set of measures is introduced by the Universal Service Directive (USD). |
| Date: | 2009–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:erp:euirsc:p0217&r=reg |
| By: | Stefan Lutz; Mario Pezzino |
| Abstract: | We study the influence of minimum quality standards in a two-region partial-equilibrium model of vertical product differentiation and trade. Three alternative standard setting arrangements are considered: Full Harmonization, National Treatment and Mutual Recognition. The analysis integrates the choice of a particular standard setting alternative by governments into the model. We provide a set of sufficient conditions for which Mutual Recognition emerges as one regulatory alternative that always improves welfare in both regions when compared to the case without regulation. We show that Mutual Recognition, being the default procedure if governments do not reach a unanimous decision, is the only possible equilibrium of the game. |
| Keywords: | product differentiation, oligopoly, trade, quality standards, policy coordination |
| JEL: | F12 F13 L13 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:icr:wpicer:02-2009&r=reg |
| By: | Mark Dawson |
| Abstract: | The increasing use in the EU of soft law norms has created an extensive debate over the centrality of law as the principle instrument of European integration. Under a certain understanding of legality - one that sees the function of law as the provision of stable normative expectations - the development of methods like the OMC appears as an explicit threat. By another, the complex nature of the EU polity - and the functional tasks it must carry-out - places an impossibly high burden on any attempt by the EU to model its conception of legality this way. While this seemingly leaves the EU with a stark choice, the very features - the dispersion of normative authority between different national orders, and the need for rapid and iterative regulatory interventions - that have borne soft law also point towards the development of new conceptions of legality and its limits in a post-national setting. Soft law has both empirically challenged law's place in the integration project, and demanded a re-evaluation of its contemporary meaning. |
| Keywords: | European law; open coordination; social policy; soft law; rule of law |
| Date: | 2009–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:erp:euirsc:p0214&r=reg |
| By: | Arthur J. Caplan (Department of Applied Economics, Utah State University); Yuya Sasaki (Department of Economics, Brown University) |
| Abstract: | This paper examines how a regulatory authority might subsidize (i.e., cost share) the partici- pation of associations (or teams) of agents in a surplus-generating economic activity, and how the agents might in turn cooperatively share the surplus. Toward this end, a subgame-perfect equilibrium concept is used to model the “multilateral contracting” relationship between the regulatory authority and the associations when the authority has incomplete information about both the association’s behavior and the natural environment. A common surplus-sharing rule – the Shapley value – is then applied to model the relationship among agents comprising a given association. We show that for convex surplus-sharing games the Shapley Value is included in a non-empty core. The analysis depicts the relationship between a federal regulatory agency and associations of nonpoint pollution sources in a watershed-wide water quality trading market. |
| Keywords: | water quality trading |
| JEL: | Q24 Q25 Q19 |
| Date: | 2009–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:usu:wpaper:2009-09&r=reg |
| By: | Christian Schultz (Department of Economics, University of Copenhagen) |
| Abstract: | The paper considers tacit collusion in markets which are not fully transparent on both sides. Consumers only detect prices with some probability before deciding which fi?rm to purchase from, and each fi?rm only detects the other fi?rm's price with some probability. Increasing transparency on the producer side facilitates collusion, while increasing transparency on the consumer side makes collusion more difficult. Conditions are given under which increases in a common factor, affecting transparency positively on both sides, are pro-competitive. With two standard information technologies, this is so, when fi?rms are easier to inform than consumers. |
| Keywords: | transparency; tacit collusion; cartel theory; competition policy; internet |
| JEL: | L13 L40 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuieci:2009-01&r=reg |
| By: | Kleopatra Nikolaou (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | We discuss the notion of liquidity and liquidity risk within the financial system. We distinguish between three different liquidity types, central bank liquidity, funding and market liquidity and their relevant risks. In order to understand the workings of financial system liquidity, as well as the role of the central bank, we bring together relevant literature from different areas and review liquidity linkages among these three types in normal and turbulent times. We stress that the root of liquidity risk lies in information asymmetries and the existence of incomplete markets. The role of central bank liquidity can be important in managing a liquidity crisis, yet it is not a panacea. It can act as an immediate but temporary buffer to liquidity shocks, thereby allowing time for supervision and regulation to confront the causes of liquidity risk. JEL Classification: G10, G20. |
| Keywords: | liquidity, risk, central bank, LLR. |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20091008&r=reg |
| By: | Fredrik Carlsson (Department of Economics, University of Gothenburg); Mitesh Kataria (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Elina Lampi (Department of Economics, University of Gothenburg) |
| Abstract: | We investigate whether Swedish Environmental Protection Agency (EPA) administrator recommendations regarding improvements in environmental quality differ from citizen preferences. The scope and significance of the possible difference are assessed by conducting identical choice experiments on a random sample of Swedish citizens and a random sample of administrators working at the Swedish EPA. The experiment concerns two environmental quality objectives: a Balanced Marine Environment and Clean Air. The EPA administrators were asked to choose the alternatives they would recommend as a policy, while the citizens were asked to act as private persons. We find that the rankings of attributes differ between the two groups and that the willingness to pay (WTP) obtained from the choices made by the administrators is higher for five out of the seven attributes, and in some cases the difference between the WTPs is not only significant but also substantial. We also asked the administrators to motivate their choices in the experiment, and the main motive was ecological sustainability. |
| Keywords: | Choice experiment, environmental policy, administrators, citizens, environmental objectives. |
| JEL: | D61 Q51 Q58 |
| Date: | 2009–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2009-057&r=reg |