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on Regulation |
| By: | Knieps, Günther |
| Abstract: | Regulatory reforms in European network industries are strongly influenced by legal decisions. The cases considered in this paper not only initiated the liberali-zation process of the markets for network services but also provided an impor-tant signaling function for the remaining regulatory problems: localization of network-specific market power, abolishment of grandfathering rights, ex ante regulation of network-specific market power instead of negotiated unregulated network access, incentive regulation instead of cost-based regulation. The process towards sector-symmetric market power regulation based on economi-cally founded principles gains increasing relevance. Nevertheless, there are fur-ther reform potentials to be exhausted in the future. -- |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:aluivr:129r&r=reg |
| By: | Knieps, Günter |
| Abstract: | The focus of this paper is on regulatory reforms towards rule-based regulation. The theory of monopolistic bottlenecks is contrasted with the concept of essential facilities and the so-called three-criteria test. It is important to differentiate between efficient private bargaining of access conditions among competitive networks and regulated third party access to monopolistic bottlenecks. Regulation of infrastructure access charges should be limited exclusively to price-capping. In order to avoid the problem of extensive discretionary behavior of regulatory agencies a disaggregated regulatory mandate should be implemented. -- |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:aluivr:132&r=reg |
| By: | Knieps, Günter |
| Abstract: | Due to its dynamic nature, and the increasing importance of competitive sub-parts, the telecommunications sector provides particularly interesting insights for studying regulatory unbundling. Based on the theory of monopolistic bottle-necks the fallacies of overregulation by undue unbundling obligations are indicated. Neither the promotion of infrastructure competition by mandatory un-bundling of competitive subparts of telecommunications infrastructure, nor regulatory induced network fragmentation within monopolistic bottleneck com-ponents is justified. The impact of the shrinking of the areas of network specific market power on the remaining unbundling regulation is analyzed. Finally, the phasing-out potentials of unbundling regulation in European telecommunica-tions markets are pointed out. -- |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:aluivr:137&r=reg |
| By: | Littlechild, S. |
| Abstract: | The UK utility regulation framework developed in the 1980s was intended to improve on the restrictive, inefficient and burdensome regulatory approach in the US. But the UK regulatory process has itself now become increasingly burdensome. Meanwhile, utilities and customer groups in the US and Canada have developed methods of negotiating and settling regulatory issues that more directly reflect the interests of customers, often embody incentive price caps as in the UK, and avoid unduly burdensome regulatory processes. There is now scope for UK regulators to learn from overseas. This paper summarises these developments. It then examines how three UK utility regulators – the CAA, Ofgem and Ofwat - are responding to them. Briefly, the CAA has moved firmly in this direction, but Ofgem and Ofwat have nominally rejected it while seeking to secure many of the benefits of the approach via a less committed process. There is scope for governments to encourage a regulatory approach that offers the prospect of better outcomes for customers and a less onerous process for all concerned. |
| JEL: | L51 L9 |
| Date: | 2011–06–28 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1142&r=reg |
| By: | Estrada, Javier |
| Abstract: | I argue in this paper that the imposition of insider trading regulations on a securities market generates not on1y a reallocation of wealth from insiders to liquidity traders, but also a reallocation of risk from the former to the latter. I further argue that, although the wealth reallocation has no impact on social welfare, under plausible assumptions, the risk reallocation imposes a cost on society. |
| Keywords: | Insider trading; Securities Regulation; |
| URL: | http://d.repec.org/n?u=RePEc:ner:carlos:info:hdl:10016/3900&r=reg |
| By: | Battilossi, Stefano; Reis, Jaime |
| Keywords: | Sistema financiero; Riesgo financiero; Mercados financieros; Política financiera; |
| URL: | http://d.repec.org/n?u=RePEc:ner:carlos:info:hdl:10016/11689&r=reg |
| By: | Estrada, Javier |
| Abstract: | I evaluate in this paper the impact of insider trading regulation (ITR) on a securities market and on social welfare. I show that ITR has both beneficial and detrimental effects on a securities market. In terms of welfare, I show that ITR has a purely redistributive effect; that is, it generates trading gains and trading losses that cancel out at the aggregate level. However, the goods and services that could have been produced with the resources allocated to enforce such a wealth redistribution are a net social cost of restricting insider trading. Finally, although I establish two conditions under which ITR is beneficial, I argue that neither condition provides sufficient support to the imposition of such a regulation. |
| Keywords: | Insider trading; Securities Regulation; |
| URL: | http://d.repec.org/n?u=RePEc:ner:carlos:info:hdl:10016/2922&r=reg |
| By: | Estrada, Javier |
| Abstract: | I analyze in this paper the impact of insider trading regulation (ITR) on a securities market and on social welfare. I argue below that the imposition of ITR forces a reallocation of wealth and risk that decreases social welfare. Three reasons explain this resulto First, ITR increases the volatility of securities prices, thus making the market more risky; second, it worsens the risk sharing among investors; and, third, it diverts resources from the productive sector of the economy. Further, although I formally establish conditions under which ITR makes society better off, largue that those conditions cannot be used to justify the imposition of this regulation. |
| Keywords: | Insider trading; Securities Regulation; |
| URL: | http://d.repec.org/n?u=RePEc:ner:carlos:info:hdl:10016/3901&r=reg |
| By: | Knieps, Günter |
| Abstract: | In order to create incentives for Internet traffic providers not to discriminate with respect to certain applications on the basis of network capacity require-ments, the concept of market driven network neutrality is introduced. Its basic characteristics are that all applications are bearing the opportunity costs of the required traffic capacities. An economic framework for market driven network neutrality in broadband Internet is provided, consisting of congestion pricing and quality of service differentiation. However, network neutrality regulation with its reference point of the traditional TCP would result in regulatory micro-management of traffic network management. -- |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:aluivr:135&r=reg |
| By: | Verniers, I.; Stremersch, S.; Croux, C. |
| Abstract: | Research on the launch of new products in the international realm is scarce. The present paper is the first to document how launch window (difference in months between the first worldwide launch and the subsequent launch in a specific country) and launch price are interrelated and how regulation influences both launch window and launch price. The research context is the global – 50 countries worldwide – launch of 58 new ethical drugs across 29 therapeutic areas. We show that the fastest launch occurs when the launch price is moderately high and the highest launch price occurs at a launch window of 85 months. We find that the health regulator acts strategically in that the extent to which it delays the launch of a new drug increases with the price of the new drug. We also find that regulation overall increases the launch window, except for patent protection. Surprisingly, regulation does not directly impact launch price. The descriptive information on average launch window and launch price and the interconnection between launch window and launch price allows managers in ethical drug companies to build more informed decisions for international market entry. This study also provides public policy analysts with more quantitative evidence regarding launch window and launch price on a broad sample of countries and categories. |
| Keywords: | entry timing;international new product launch;launch price;launch window;pharmaceutical;regulation |
| Date: | 2011–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:eureri:1765023488&r=reg |
| By: | Christoph Bšhringer (Department of Economics, University of Oldenburg); Victoria Alexeeva-Talebi (Centre for European Economic Research, Mannheim) |
| Abstract: | Unilateral emission reduction commitments raise concerns on international competitiveness and emission leakage that result in preferential regulatory treatment of domestic energy-intensive and trade-exposed industries. Our analysis illustrates the potential pitfalls of climate policy design which narrowly focuses on competitiveness concerns about energy-intensive and trade-exposed (EITE) branches. The sector-specific gains of preferential regulation in favour of these branches must be traded off against the additional burden imposed on other industries. Beyond burden shifting between industries, differential emission pricing bears the risk for substantial excess cost in emission reduction as policy concedes (too) low carbon prices to EITE industries and thereby foregoes relatively cheap abatement options in these sectors. From the perspective of global cost-effectiveness we find that differential emission pricing of EITE industries hardly reduces emission leakage since the latter is driven through robust international energy market responses to emission constraints. As a consequence the scope for efficiency compared to uniform pricing is very limited. Only towards stringent emission reduction targets will a moderate price differentiation achieve sufficient gains from leakage reduction to offset the losses of diverging marginal abatement cost. |
| Keywords: | unilateral climate policy design, leakage, competitiveness |
| JEL: | D58 H21 H22 Q48 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:old:wpaper:338&r=reg |
| By: | François Destandau; Elsa Martin; Anne Rozan |
| Abstract: | The purpose of this paper is to analyze the implication of wetland construction for the cost-effective design of a pesticide charge. A model is developed in order to show that, for a given target, the introduction of wetland construction can reduce overall abatement costs and can lower the input charge asked to the farmers. This result remains true as long as the cost of constructing a wetland is not too high. A numerical illustration is carried out in order to simulate pesticide regulations in a wine catchment in North-East of France. |
| Keywords: | Water policy, constructed wetlands, agricultural pollution regulation |
| JEL: | Q25 Q58 K32 |
| Date: | 2011–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:ceo:wpaper:31&r=reg |
| By: | Samartín Sáenz, Margarita; Cardone Riportella, Clara; Bustamante, Rodrigo |
| Abstract: | Theoretical banking literature has largely explored the role of financial intermediaries in the economy, market failures (banking panics) in the banking sector and the need for bank regulation. However, most models of banking panics and regulation have not been empirically tested. The Argentine 2001 crisis, with a large deposit withdrawal and the regulation introduced (suspension of convertibility) constitutes a scenario in order to apply some of the theoretical predictions. In particular, the paper applies Samartín (2002) to the particular case of Argentina. After the estimation of the most important parameters, the model predicts that suspension of convertibility seems to have been the most efficient intervention measure to stop the massive deposit withdrawals. |
| URL: | http://d.repec.org/n?u=RePEc:ner:carlos:info:hdl:10016/97&r=reg |
| By: | Knieps, Günter |
| Abstract: | In the U.S. paying for priority arrangements between Internet access service providers and Internet application providers to favor some traffic over other traf-fic is considered unreasonable discrimination. In Europe the focus is on mini-mum traffic quality requirements. It can be shown that neither market power nor universal service arguments can justify traffic quality regulation. In particular, heterogeneous demand for traffic quality for delay sensitive versus delay insen-sitive applications requires traffic quality differentiation, priority pricing and evolutionary development of minimal traffic qualities. -- |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:aluivr:136&r=reg |
| By: | Athanasoglou, Panayiotis |
| Abstract: | This paper examines the simultaneous relationship between bank capital and risk. A model is set up which assumes that banks’ decisions regarding capital and risk are made endogenously in a dynamic pattern. A simultaneous equation system was estimated using an unbalanced panel of SEE banks from 2001 to 2009. A key result for the whole sample of banks is the relationship between regulatory (equity) capital and risk which is positive (negative). However, a positive two-way relationship between regulatory capital and risk was found only in less than-adequately capitalized banks, which also increased substantially their risk in 2009. Thus, banks’ decisions differentiate between equity capital and risk and regulatory capital and risk. A positive, significant and robust effect of liquidity on capital was identified. Both regulatory and equity capital exhibit procyclical behaviour, whilst the relationship between risk and rate of growth of GDP is ambitious. |
| Keywords: | Banking; capital; risk; liquidity; regulation; panel estimation |
| JEL: | G32 C33 G21 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32002&r=reg |
| By: | Strand, Jon |
| Abstract: | This paper provides counterexamples to the idea that mitigation of greenhouse gases causing climate change, and adaptation to climate change, are always and everywhere substitutes. The author considers optimal policy for mitigating greenhouse gas emissions when climate damages follow a geometric Brownian motion process with positive drift, and the trajectory for damages can be down-shifted by adaptive activities, focusing on two main cases: 1) damages are reduced proportionately by adaptation for any given climate impact ("reactive adaptation"); and 2) the growth path for climate damages is down-shifted ("anticipatory adaptation"). In this model mitigation is a lumpy one-off decision. Policy to reduce damages for given emissions is continuous in case 1, but may be lumpy in case 2, and reduces both expectation and variance of damages. Lower expected damages promote mitigation, and reduced variance discourages it (as the option value of waiting is reduced). In case 1, the last effect may dominate. Mitigation then increases when damages are dampened: mitigation and adaptation are complements. In case 2, mitigation and adaptation are always substitutes. |
| Keywords: | Climate Change Economics,Adaptation to Climate Change,Climate Change Mitigation and Green House Gases,Science of Climate Change,Climate Change Policy and Regulation |
| Date: | 2011–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5724&r=reg |
| By: | Pradiptyo, Rimawan; Rokhim, Rofikoh; Sahadewo, Gumilang Aryo; Ulpah, Maria; Sasmitasiwi, Banoon; Faradynawati, IAA |
| Abstract: | The Government of Indonesia (GOI) has been proposing a draft act on financial service regulatory authority, called Otoritas Jasa Keuangan (OJK hereafter). In the aftermath of 1998 Asian crisis, the establishment of the institution was mandated through Bank Indonesia Act (Indonesia’s central bank bill) in 1999, which was later updated in 2004. According to the draft act, the OJK has been designed using an integrated approach, which is similar to the arrangement of FSA in the UK. This paper aims to examine the feasibility of establishing OJK. The existing financial supervision suffers from several problems: a) the quality of supervisions tend to be heterogeneous among the financial supervision bodies, b) there is a gap in supervision, whereby thousand of non-banking financial institutions have not been supervised properly, and c) financial offences have been flourishing in inter market transactions. We found that the establishment of OJK, however, would not minimize, let alone, resolve the problems above. The draft act has not proposed a mechanism on how to address these very issues. We estimated the minimum irreducible costs of establishing and operating OJK and found that the costs are paramount. According to the draft act, the costs would burden all financial institutions and obviously this creates complexity in financing OJK. Finally, two alternative approaches have been proposed in order to improve the feasibility and the effectiveness of the OJK by considering the structure of financial sector supervision in Indonesia. |
| Keywords: | Financial sector regulatory authority; supervision framework design; feasibility study |
| JEL: | L51 G28 E61 |
| Date: | 2011–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32004&r=reg |
| By: | Chen, Yongmin |
| Abstract: | A vertically integrated firm, having acquired the intellectual property (IP) through innovation to become an input monopolist, can extract surplus by supplying efficient downstream competitors. That the monopolist would refuse to do so is puzzling and has led to numerous debates in antitrust. In this paper, I clarify the economic logic of refusal to deal, and identify conditions under which prohibiting such conduct would raise or lower consumer and social welfare. I further show how IP protection (as determined by IP laws) and restrictions on IP holders' conduct (as determined by antitrust laws) may interact to affect innovation incentive and post-innovation market performance. |
| Keywords: | Refusal to Deal; Intellectual Property Rights; IP protection; Antitrust; innovation |
| JEL: | O3 L1 L4 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:31974&r=reg |
| By: | Lee G. Branstetter; Chirantan Chatterjee; Matthew Higgins |
| Abstract: | With increasing frequency, generic drug manufacturers in the United States are able to challenge the monopoly status of patent-protected drugs even before their patents expire. The legal foundation for these challenges is found in Paragraph IV of the Hatch-Waxman Act. If successful, these Paragraph IV challenges generally lead to large market share losses for incumbents and sharp declines in average market prices. This paper estimates, for the first time, the welfare effects of accelerated generic entry via these challenges. Using aggregate brand level sales data between 1997 and 2008 for hypertension drugs in the U.S. we estimate demand using a nested logit model in order to back out cumulated consumer surplus, which we find to be approximately $270 billion. We then undertake a counterfactual analysis, removing the stream of Paragraph IV facilitated generic products, finding a corresponding cumulated consumer surplus of $177 billion. This implies that gains flowing to consumers as a result of this regulatory mechanism amount to around $92 billion or about $133 per consumer in this market. These gains come at the expense to producers who lose, approximately, $14 billion. This suggests that net short-term social gains stands at around $78 billion. We also demonstrate significant cross-molecular substitution within the market and discuss the possible appropriation of consumer rents by the insurance industry. Policy and innovation implications are also discussed. |
| JEL: | I11 I38 O3 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17188&r=reg |
| By: | OECD |
| Abstract: | This report focuses on developments in broadband market structures emerging from the deployment of high-speed broadband services and the policy and regulatory implications. |
| Date: | 2011–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaab:183-en&r=reg |
| By: | Svetlana Maslyuk; Dinusha Dharmaratna |
| Abstract: | Emissions trading schemes (ETS) have been operational to control greenhouse gas emissions in European Union since 2005. Under the EU ETS, the governments of the Member States agree on national emission caps, allocate allowances to industrial operators, track and validate the actual emissions and retire allowances at the end of each year. ETS have been proposed to be introduced in New Zealand, Australia, Japan, US, Canada, Korea, India and two Chinese provinces in the near future. The main idea of the ETS is to create the market for pollution which will provide economic agents with incentives to reduce their emissions ( Stavins, et al., 2003). The design of ETS plays an important role in reducing greenhouse gas emissions and promoting environmental and economic sustainability. There are several designs of ETS including cap-and-trade, baseline-and-credit and hybrid, however, cap-and-trade scheme is the most popular among the proposed ETS. The purpose of this paper is to perform a comprehensive review of the existing and the proposed ETS focusing on design issues. Findings of this research will be useful for countries with existing and proposed ETS and for countries intending to adopt ETS in the future. |
| Keywords: | Emission Trading Scheme (ETS), Sustainability, Cap-and-trade, Baseline-and-credit, Hybrid |
| JEL: | Q54 Q58 |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2011-15&r=reg |
| By: | Silvester Van Koten; Andreas Ortmann |
| Abstract: | We try to better understand the comparative advantages of structural and behavioral remedies of deregulation in electricity markets, an eminent policy issue for which the experimental evidence is scant and problematic. Specifically, we investigate theoretically and experimentally the effects on competition of introducing a forward market — considered a behavioral remedy by the European Commission. We compare this scenario with the best alternative, the structural remedy of reducing concentration by adding one more competitor by divestiture. Our study contributes to the literature by introducing more realistic cost configurations, by teasing apart competition effect and asset effect, and by investigating competitor numbers that reflect the market concentration in the European electricity industries. Our experimental data suggest that introducing a forward market has a positive effect on the aggregate supply in markets with two or three major competitors, configurations typical for the newly accessed and the old European Union member states, respectively. Introducing a forward market also increases efficiency. In contrast to previous findings, our data furthermore suggest that the effect of introducing a forward market is stronger than adding one more competitor both in markets with two, and particularly three, producers. Our data thus provides evidence that behavioral remedies may be more effective than structural remedies. Our data suggest that competition authorities are well advised, in line with EU law (European Commission, 2006a, p.11), to focus on introducing, and facilitating the proper functioning of, forward markets rather than on lowering market concentration by divestiture. |
| Keywords: | economics experiments; market power; competition; forward markets; EU electricity market; |
| JEL: | C91 D61 L13 L43 L94 Q48 |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp437&r=reg |