nep-reg New Economics Papers
on Regulation
Issue of 2009‒09‒05
eight papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Mobile Termination and Mobile Penetration By Sjaak Hurkens; Doh-Shin Jeon
  2. Why do savings banks transform sight deposits into illiquid assets less intensively than the regulation allows? By Holl, Dorothee; Schertler, Andrea
  3. Quality of Supply in Energy Regulation Measurement,Assessment and Experience from Norway By Growitsch, C.; Jamasb, T.; Mueller, C.; Wissner, M.
  4. Shocks at large banks and banking sector distress: the Banking Granular Residual By Blank, Sven; Buch, Claudia M.; Neugebauer, Katja
  5. CO2 mitigation in road transport: Gasoline taxation and/or fuel-efficiency regulation? By Rüdiger Pethig
  6. Does banks size distort market prices?: evidence for too-big-to-fail in the CDS market By Völz, Manja; Wedow, Michael
  7. Carbon Markets and Technological Innovation By Weber, T.A.; Neuhoff, K.
  8. De Facto and De Jure Property Rights: Land Settlement and Land Conflict on the Australian, Brazilian and U.S. Frontiers By Lee J. Alston; Edwyna Harris; Bernardo Mueller

  1. By: Sjaak Hurkens; Doh-Shin Jeon
    Abstract: In this paper, we study how access pricing affects network competition when subscription demand is elastic and each network uses non-linear prices and can apply termination-based price discrimination. In the case of a fixed per minute termination charge, we find that a reduction of the termination charge below cost has two opposing effects: it softens competition but helps to internalize network externalities. The former reduces mobile penetration while the latter boosts it. We find that firms always prefer termination charge below cost for either motive while the regulator prefers termination below cost only when this boosts penetration. Next, we consider the retail benchmarking approach (Jeon and Hurkens, 2008) that determines termination charges as a function of retail prices and show that this approach allows the regulator to increase penetration without distorting call volumes.
    Keywords: Mobile Penetration, Termination Charge, Access Pricing, Networks, Interconnection, Regulation, Telecommunications.
    JEL: D4 K23 L51 L96
    Date: 2009–07–31
  2. By: Holl, Dorothee; Schertler, Andrea
    Abstract: For their short-term payment obligations, savings banks hold substantially more liquid assets than the liquidity regulation requires. This paper investigates whether sight deposits, an important funding source for savings banks, help in explaining liquid asset holdings in excess of regulatory requirements. We analyze whether savings banks transform sight deposits in illiquid assets less intensively than is permitted because (i) the liquidity regulation underestimates actual withdrawal rates (underestimation effect) and/or (ii) savings banks are subject to limits in their lending to non-banks that they do not offset by, for instance, medium-term interbank lending or fixed asset holdings (lending effect). In our sample, we do not find the underestimation effect to be applicable as actual deposit withdrawal rates are in most cases lower than the regulatorily specified rate. However, we find the lending effect to be at work: Savings banks with low shares of loans to non-banks do not transform sight deposits into illiquid assets as intensively as savings banks with high shares of non-bank loans. Our analysis does not only show that liquid assets positively depend on sight deposits, but also shines a light on how bank size and the individual bank's position in the interbank market affect liquid assets.
    Keywords: Liquid assets,sight deposits,prudential liquidity regulation
    JEL: G21
    Date: 2009
  3. By: Growitsch, C.; Jamasb, T.; Mueller, C.; Wissner, M.
    Abstract: In order to overcome the incentive of excessive maintenance reductions and insufficient network investments in incentive regulation of electricity distribution companies, regulators throughout Europe have started regulating quality of service in the energy sector. In this paper, we discuss the issue of assessing and implementing quality-related incentives based on customers’ WTP for network reliability and analyse the impact of such regulatory measures by means of a concrete casestudy. Surveying the most prominent methodological approaches to quantify customers’ WTP for quality we find that survey techniques such as contingent valuation and conjoint analysis cover regulatory purposes well. As Norway has put the measurement and assessment of quality of supply into practice, we empirically examine how network operators have adapted to quality-incorporated regulation. We find that the external cost for quality has not played a major role in Norwegian electricity distribution.
    Keywords: electricity, quality of service, willingness-to-pay, data envelopment analysis
    JEL: L15 L51 L94
    Date: 2009–08–30
  4. By: Blank, Sven; Buch, Claudia M.; Neugebauer, Katja
    Abstract: Size matters in banking. In this paper, we explore whether shocks originating at large banks affect the probability of distress of smaller banks and thus the stability of the banking system. Our analysis proceeds in two steps. In a first step, we follow Gabaix (2008a) and construct a measure of idiosyncratic shocks at large banks, the so-called Banking Granular Residual. This measure documents the importance of size effects for the German banking system. In a second step, we incorporate this measure of idiosyncratic shocks at large banks into an integrated stress-testing model for the German banking system following De Graeve et al. (2007). We find that positive shocks at large banks reduce the probability of distress of small banks.
    Keywords: Banking sector distress,size effects,shock propagation,Granular Residual
    JEL: E44 E52 E32 G21
    Date: 2009
  5. By: Rüdiger Pethig
    Abstract: Although gasoline taxes are widely used (nearly) efficient CO2 emission controls, additional fuel-efficiency regulation is applied e.g. in the USA and in Europe. In a simple analytical model, we specify the welfare implications of (i) gasoline taxes, (ii) of 'gas-guzzler taxes' (iii) of fuel-efficiency standards, and of combinations of the above. Both forms (ii) and (iii) of fuel-efficiency regulation turn out to produce the same suboptimally low emission rates. Combining (i) and (ii) is also distortionary, while efficiency can be secured by combining (i) and (iii). However, in the optimal mix of the latter two instruments the fuel-efficiency standard is redundant.
    Keywords: CO2 emissions, road transport, fuel efficiency regulation, gasoline tax
    JEL: D61 H21 H22 Q52 Q53 Q58
    Date: 2009
  6. By: Völz, Manja; Wedow, Michael
    Abstract: This paper examines the potential distortion of prices in the CDS market caused by too-big-to-fail. Overall, we find evidence for market discipline in the CDS market. However, CDS prices are distorted due to a size effect which arises when investors expect a public bail-out as a result of too-big-to-fail. A one percentage point increase in size reduces the CDS spread of a bank by about two basis points. We further find that some banks have already reached a size that makes them too-big-to-be-rescued. While the price distortion for these banks decreases the existence of banks that are considered to be toobig-to-rescue raises important new issues for banking supervisors.
    Keywords: Market Discipline,Too Big To Fail,Too Big to Rescue CDS Spreads
    JEL: G14 G21 G28
    Date: 2009
  7. By: Weber, T.A.; Neuhoff, K.
    Abstract: This paper examines the effects of firm-level innovation in carbonabatement technologies on optimal cap-and-trade schemes with and without price controls. We characterize optimal cap-and-trade regulation with a price cap and price floor, and compare it to the individual cases of pure taxation and simple emissions cap. Innovation shifts the trade-off between price- and quantity-based instruments towards quantity-based emissions trading schemes. More specifically, an increase in innovation effectiveness lowers the optimal emissions cap, and leads to relaxed price controls unless the slope of the marginal environmental damage cost curve is small. Because of the decrease in the emissions cap, innovation in abatement technologies can lead to a higher expected carbon price, so as to provide sufficient incentives for private R&D investments. The expected carbon price decreases once innovative technologies are widely used.
    Keywords: Carbon Emissions; Carbon Taxes; Cap-and-Trade; Environmental Regulation; Induced Technological Innovation; Price Caps; Price Floors; Prices vs. Quantities
    JEL: H23 Q28 Q54 Q55 Q58
    Date: 2009–08–30
  8. By: Lee J. Alston; Edwyna Harris; Bernardo Mueller
    Abstract: We present a conceptual framework to better understand the interaction between settlement and the emergence of de facto property rights on frontiers prior to governments establishing and enforcing de jure property rights. In this framework, potential rents associated with more exclusivity drives “demand†for commons arrangements but demand is not a sufficient explanation; norms and politics matter. At some point enhanced scarcity will drive demand for more exclusivity beyond which can be sustained with commons arrangements. Claimants will therefore petition government for de jure property rights to their claims – formal titles. Land conflict will be minimal when governments supply property rights to first possessors. But, governments may not allocate de jure rights to these claimants because they face differing political constituencies. Moreover, governments may assign de jure rights but be unwilling to enforce the right. This generates potential or actual conflict over land depending on the violence potentials of de facto and de jure claimants. We examine land settlement and conflict on the frontiers of Australia, the U.S. and Brazil. We are interested in examining the emergence, sustainability, and collapse of commons arrangements in specific historical contexts. Our analysis indicates the emergence of de facto property rights arrangements will be relatively peaceful where claimants have reasons to organize collectively (Australia and the U.S.). The settlement process will be more prone to conflict when fewer collective activities are required. Consequently, claimants resort to periodic violent self-enforcement or third party enforcement (Brazil). In all three cases the movement from de facto to de jure property rights led to potential or actual conflict because of insufficient government enforcement.
    JEL: D72 Q15 N40 N50 O17 K11
    Date: 2009–09

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