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on Regulation |
| By: | Haucap, Justus; Müller, Hans Christian |
| Abstract: | Economic theory suggests that gasoline retail markets are prone to collusive behavior. Oligopoly market structures prevail, market interactions occur frequently, prices are highly transparent, and demand is rather inelastic. A recent sector inquiry in Germany backed suspicions of tacit collusion and suggested to adopt regulatory pricing rules for gas stations similar to those implemented in Austria, parts of Australia, Luxembourg or parts of Canada. In order to increase consumer welfare these rules either restrict the number of price changes per day or they limit the mark‐up for gasoline retail prices. As theoretical predictions about the impact of these measures are mixed and empirical studies rare, we analyze the effects, using an experimental gasoline market in the lab. Our results reveal that two of the suggested rules rather decrease consumer welfare: The Austrian rule which only allows one price increase per day (while price cuts are always possible) and the Luxembourg rule which introduces a maximum markup for retailers. While no rule tends to induce lower retail prices, the Western Australian rule which allows at most one daily price change (no matter whether up or down) does at least not harm consumers. -- |
| Keywords: | Gasoline Prices,Fuel Prices,Experimental Gasoline Market,Fuel Price Regulation,Retail Price Regulation,Gas Stations |
| JEL: | L13 L71 L81 L88 K23 C90 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:47&r=reg |
| By: | Stühmeier, Torben |
| Abstract: | This model discusses mobile network operators' (MNOs) incentives to invest in their network facilities such as new 4G networks under various regimes of data roaming charge regulation. Given an induced externality of investments (spillovers) due to the roaming agreements it will be shown that MNOs, competing on investments, widely set higher investments for below cost regulation of roaming charges. Otherwise, if MNOs are free to collaborate on investments, they set higher investment levels for above cost roaming charges. Both below- and above cost charges may be preferred from a welfare perspective. Furthermore, the paper discusses e ects of the roaming charge regulation on roaming quality and MNOs' coverage. -- |
| Keywords: | mobile Internet,investment spillover,national roaming,regulation |
| JEL: | L22 L51 L96 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:46&r=reg |
| By: | Perino, Grischa; Requate, Till |
| Abstract: | We show that for a broad class of technologies the relationship between policy stringency and the rate of technology adoption is inverted U-shaped. This happens when the marginal abatement cost (MAC) curves of conventional and new technologies intersect, which invariably occurs when emissions are proportional to output and technological progress reduces emissions per output. This outcome does not result from policy failure. On the contrary, in social optimum, the relationship between the slope of the marginal damage curve and the rate of technology adoption is also inverted U-shaped. Under more general conditions, these curves can look even more complicated (e.g. such as inverted W-shaped). -- |
| Keywords: | induced diffusion,environmental policy |
| JEL: | Q55 Q52 Q58 H23 O33 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cauewp:201205&r=reg |
| By: | Acharya, Viral V; Öncü, T Sabri |
| Abstract: | One of the several regulatory failures behind the global financial crisis that started in 2007 has been the regulatory focus on individual, rather than systemic, risk of financial institutions. Focusing on systemically important assets and liabilities (SIALs) rather than individual financial institutions, we propose a set of resolution mechanisms, which is not only capable of inducing market discipline and mitigating moral hazard, but also capable of addressing the associated systemic risk, for instance, due to the risk of fire sales of collateral assets. Furthermore, because of our focus on SIALs, our proposed resolution mechanisms would be easier to implement at the global level compared to mechanisms that operate at the level of individual institutional forms. We, then, outline how our approach can be specialized to the repo market and propose a repo resolution authority for reforming this market. |
| Keywords: | crises; fire sales; macroprudential regulation; resolution authority; runs; sale and repurchase agreements; systemic risk |
| JEL: | E58 G01 G28 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:8927&r=reg |
| By: | Charles Goodhart; Anil K Kashyap; Dimitrios Tsomocos; Alexandros Vardoulakis |
| Abstract: | This paper explores how different types of financial regulation could combat many of the phenomena that were observed in the financial crisis of 2007 to 2009. The primary contribution is the introduction of a model that includes both a banking system and a “shadow banking system” that each help households finance their expenditures. Households sometimes choose to default on their loans, and when they do this triggers forced selling by the shadow banks. Because the forced selling comes when net worth of potential buyers is low, the ensuing price dynamics can be described as a fire sale. The proposed framework can assess five different policy options that officials have advocated for combating defaults, credit crunches and fire sales,namely: limits on loan to value ratios, capital requirements for banks, liquidity coverage ratios for banks, dynamic loan loss provisioning for banks, and margin requirements on repurchase agreements used by shadow banks. The paper aims to develop some general intuition about the interactions between the tools and to determine whether they act as complements and substitutes. |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp702&r=reg |
| By: | de santis, roberta |
| Abstract: | In an increasingly integrated world with declining trade barriers, environmental regulations can have a decisive role in shaping countries’ comparative advantages. The conventional wisdom about environmental protection is that it comes at an additional cost on firms imposed by the government, which may erode their global competitiveness. However, this paradigm has been challenged by some analysts. In particular, Porter (1991) and Porter and Van der Linde (1995) argue that pollution is often associated with a waste of resources and that more stringent environmental policies can stimulate innovations that may over-compensate for the costs of complying with these policies. This is known as the Porter hypothesis. While there is a broad empirical literature on the impact of trade on environment the empirical literature on the impact of environmental regulations on trade flows is relatively scarce, very heterogeneous and presents mixed results. The innovative feature of this paper is its attempts to estimate, in a gravity setting, augmented with a proxi of environmental stringency, the impact of three major Multilateral Environmental Agreements (MEAs) on 15 EU countries bilateral exports. According to our estimates, in the period 1988-2008, to be member of MEAs had a positive average impact on EU15 bilateral exports. This evidence can be partly explained by a possible trade diversion effect with respect to countries that did not sign MEAs, and a corresponding trade creation effect among members of the environmental agreements. Furthermore, evidence coming from interaction effects estimates seems to show that for exporting countries having signed the UNFCCC and the Montreal agreements, partly mitigates (by the amount of the estimated coefficient ) the negative impact of having a relatively more stringent environmental regulation on bilateral trade. This result could have important policy implications for the future international trade- environmental negotiations. |
| Keywords: | Comparative advantage; environmental regulation; trade |
| JEL: | F18 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37756&r=reg |
| By: | Arturo Galindo; Liliana Rojas-Suárez; Marielle del Valle |
| Abstract: | Since the eruption of the global financial crisis in 2008 international setting bodies and local regulators around the world have been hard at work designing and implementing new regulatory frameworks to deal with the regulatory deficiencies that were exposed during the crisis. In particular, there is now a consensus that existing regulations in developed countries were not able to contain excessive risk-taking activities by financial institutions in this group of countries during the pre-crisis period. Among these regulations, the newly proposed set of reform measures developed by the Basel Committee on Banking Supervision (BCBS): "Basel III: A global regulatory framework for more resilient banks and banking systems" (2011) is perhaps the one that has attracted most attention worldwide because a central focus of the recommendations lies on important changes in banks' regulatory capital requirements. Where does Latin America stand with respect to capital requirements? Can banks in the region satisfy with ease the new capital requirements of Basel III or will the implementation of this new set of capital recommendations require large efforts from banks in the region? This paper deals with these questions for the case of four Andean countries: Bolivia, Colombia, Ecuador and Peru. |
| Keywords: | Financial Sector :: Financial Policy, Capital Requirements under Basel III, financial framework, financial reform |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:65038&r=reg |
| By: | Vera Angelova (Max Planck Institute of Economics, Jena, Germany); Giuseppe Attanasi (Toulouse School of Economics, Toulouse, France); Yolande Hiriart (Universite de Franche-Comte (CRESE), Besancon, France) |
| Abstract: | We compare the performance of liability rules for managing environmental disasters when third parties are harmed and cannot always be compensated. A firm can invest in safety to reduce the likelihood of accidents. The firm's investment is unobservable to authorities. Externality and asymmetric information call for public intervention to define rules aimed at increasing prevention. We determine the investment in safety under No Liability, Strict Liability and Negligence, and compare it to the first best. Additionally, we investigate how the (dis)ability of the firm to fully cover potential damages affects the firm's behavior. An experiment tests the theoretical predictions. In line with theory, Strict Liability and Negligence are equally effective; both perform better than No Liability; investment in safety is not sensitive to the ability of the firm to compensate potential victims. In contrast with theory, prevention rates absent liability are much higher and liability is much less effective than predicted. |
| Keywords: | Risk Regulation, Liability Rules, Incentives, Insolvency, Experiment |
| JEL: | D82 K13 K32 Q58 |
| Date: | 2012–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2012-012&r=reg |
| By: | Kalantzis, Fotis; Sakellaris, Kostis |
| Abstract: | This empirical study assesses the impact of specific regulatory policy measures, adopted in the Greek wholesale electricity market during the period 2004-2011, on the Day-Ahead Market Price. We consider an ARMA-GARCH model extended to include dummies and other exogenous variables that affect market prices, such as RES and Hydro electricity production, as well as load volumes and Brent crude oil prices. In order to analyse the impact of the regulatory reforms on price and volatility dynamics, we include regime dummy variables, reflecting the timeline of these reforms. Based on the results, we discuss the impact of the examined reforms and their significance. |
| Keywords: | Electricity Market; Greek Wholesale Market; Regulatory Reform; Day-Ahead Price; GARCH |
| JEL: | L51 C01 |
| Date: | 2012–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37794&r=reg |
| By: | Andrew Ellul; Chotibhak Jotikasthira; Christian T. Lundblad; Yihui Wang |
| Abstract: | This paper explores the trading incentives of financial institutions induced by the interaction between regulatory accounting rules and capital requirements by investigating insurance companies’ trading behavior during the recent financial crisis. According to insurance regulation, life insurers have a greater degree of flexibility to hold downgraded instruments at historical cost, whereas property and casualty insurers are forced to re-mark many of their downgraded securities to market prices. Using firm-level insurance company transaction and position data, we study the implications of this accounting difference, and document direct evidence of ‘gains trading’ associated with historical cost accounting during the financial crisis. When faced with severe downgrades among their holdings in asset-backed securities (ABS), life insurers largely continue to hold the downgraded securities at historical cost and instead selectively sell their corporate bond holdings with the highest unrealized gains. This is particularly true for insurers facing regulatory capital constraints and with high ABS exposures. This behavior is largely absent among property and casualty insurers; they instead disproportionately sell their re-marked ABS holdings. Finally, we find that the gains trading among life companies induces significant price declines in the otherwise unrelated corporate bonds that happen to exhibit high unrealized gains. |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:fmg:fmgdps:dp701&r=reg |
| By: | Pollitt, M. G. |
| Abstract: | The aim of this paper is to discuss the period of energy privatisation and liberalisation which began in the 1980s within its wider historical context. The key issues are: what has been learned from this recent period, and; how significant is it in the light of an energy transition to low carbon energy system by 2050? Energy liberalisation has led to positive and globally widespread but modest efficiency gains but a lack of clearly visible direct benefits to households in many countries. It has significantly improved the governance of monopoly utilities (via independent regulators), the prospects for competition and innovation, and the quality of policy instruments for environmental emissions control (through the emergence of trading mechanisms). We conclude that it is not liberalisation per se that will determine the movement towards a low carbon energy transition, but the willingness of societies to bear the cost, which will be significant no matter what the extent of liberalisation. |
| Keywords: | energy liberalisation; energy privatisation; energy transition |
| JEL: | L94 |
| Date: | 2012–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1216&r=reg |
| By: | CARLETTI, Elena; HARTMANN, Philipp; ONGENA, Steven; ; |
| Abstract: | We construct a unique dataset of legislative reforms in merger control legislation that occurred in nineteen industrial countries in the period 1987-2004, and investigate the economic impact of these changes on stock prices. In line with the hypothesis that merger control should challenge anticompetitive mergers and thus limit future monopolistic profits, we find that the strengthening of merger control decreases the stock prices of non-financial firms. In contrast, we find that bank stock prices increase. Cross sectional regressions show that the discretion embedded in the supervisory control of bank mergers is a major determinant of the positive bank stock returns. This suggests that merger control is anticipated to create a “separation of powers” and “checks and balances” mechanism in the banking sector that mitigates the potential for abuse and wasteful enforcement of the supervisory control. We provide a case study further supporting this interpretation. |
| Keywords: | merger control; legal institutions; financial regulation |
| JEL: | G21 G28 D4 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2012/12&r=reg |
| By: | Daniel L. McFadden; Carlos E. Noton; Pau Olivella |
| Abstract: | This expository paper describes the factors that contribute to failure of health insurance markets, and the regulatory mechanisms that have been and can be used to combat these failures. Standardized contracts and creditable coverage mandates are discussed, along with premium support, enrollment mandates, guaranteed issue, and risk adjustment, as remedies for selection-related market damage. An overall conclusion of the paper is that the design and management of creditable coverage mandates are likely to be key determinants of the performance of the health insurance exchanges that are a core provision of the PPACA of 2010. Enrollment mandates, premium subsidies, and risk adjustment can improve the stability and relative efficiency of the exchanges, but with carefully designed creditable coverage mandates are not necessarily critical for their operation. |
| JEL: | D4 D62 I18 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17938&r=reg |
| By: | Jordi Perdiguero (Dept. de Política Econòmica. Grup de Recerca en Governs i Mercats (GiM). Institut d’Economia Aplicada (IREA). Universitat de Barcelona. Spain); Joan-Ramon Borrell (Dept. de Política Econòmica. Grup de Recerca en Governs i Mercats (GiM). Institut d’Economia Aplicada (IREA). Universitat de Barcelona. Spain) |
| Abstract: | Relevant market definition is still a key element of economic analysis of competition in the gasoline market. It is particularly difficult to handle when competition is local and market power is geographically constrained like is the case in the gasoline market. We analyse how the application of the hypothetical monopolist or Small but Significant Non-Transitory Increase in Prices (SSNIP) test performs for defining isochrones using only information on prices and distance among competitors. We conclude that geographic information systems can be very successfully used to define more precisely relevant geographic market in the gasoline retailing. The application to the Spanish gasoline market concludes that geographic relevant market is composed by 5-6 minutes of travel time. Localised market power should be taken into account when analysing the adverse effects of mergers and entry regulations in gasoline retailing. Only drawing small enough isochrones will drive competition in local markets because it is just close rivals that compete effectively with each other. |
| Keywords: | Gasoline, Market definition, Retailing. |
| JEL: | L11 L12 L14 R12 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:xrp:wpaper:xreap2012-04&r=reg |
| By: | Russell Cooper; Guan Gong; Ping Yan |
| Abstract: | This paper studies the employment and productivity implications of new labor regulations in China. These new restrictions are intended to protect workers' employment conditions by, among other things, increasing firing costs and increasing compensation. We estimate a model of costly labor adjustment from data prior to the policy. We use the estimated model to simulate the effects of the policy. We find that increases in severance payments lead to sizable job creation, a significant reduction in labor reallocation and an increase in the exit rate. A policy of credit market liberalization will reduce employment, slightly increase labor reallocation and reduce exit. The estimated elasticity of labor demand is about unity so that an increase in the base wage leads to sizable job losses. |
| JEL: | E24 J08 J23 O38 O53 P2 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17948&r=reg |