|
on Regulation |
| By: | Obradovits, Martin |
| Abstract: | In January 2011, a price regulation was established in the Austrian gasoline market which prohibits firms from raising their prices more than once per day. Similar restrictions have been discussed in New York State and Germany. Despite their intuitive appeal, this article argues that Austrian-type policies may actually harm consumers. In a two-period duopoly model with consumer search, I show that in face of the regulation, firms will distort their prices intertemporally in such a way that their aggregate expected profit remains unchanged. This implies that, as some consumers find it optimal to delay their purchase due to expected price savings, but find it inconvenient to do so, a friction is introduced that decreases net consumer surplus in the market. |
| Keywords: | Price Regulation; Consumer Search; Price Dispersion; Intertemporal Search; Regulation; Austria |
| JEL: | L5 L13 D83 |
| Date: | 2012–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:42529&r=reg |
| By: | Gert Brunekreeft |
| Abstract: | Electricity networks currently face massive investment requirements. This paper argues that, given the investment requirements, (international) benchmarking is not an adequate tool for the regulation of transmission system operators (TSO). Errors in the outcomes of benchmarking will likely distort network investment and therefore the costs of doing it wrong are high. The paper discusses options to reduce the weight of benchmarking in TSO regulation and options that do not rely on benchmarking at all. Overall, facing massive investment requirements, it seems desirable to switch to a regulatory system with ex-ante investment approval and away from ex-post benchmarking. |
| Keywords: | electricity, network, regulation, benchmarking, uncertainty |
| JEL: | D42 G00 L51 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:bei:00bewp:0012&r=reg |
| By: | Ursino, Giovanni; Piccolo, Salvatore; Tedeschi, Piero |
| Abstract: | We study a Bertrand game where two sellers supplying products of different and unverifiable qualities can outwit potential clients through their (costly) deceptive advertising. We characterize a class of pooling equilibria where sellers post the same price regardless of their quality and low quality ones deceive buyers. Although in these equilibria low quality goods are purchased with positive probability, the buyer (expected) utility can be higher than in a fully separating equilibrium. It is also argued that low quality sellers invest more in deceptive advertising the better is their reputation vis-à-vis potential clients — i.e., firms that are better trusted by customers, have greater incentives to invest in deceptive advertising when they produce a low quality product. Finally, we characterize the optimal monitoring effort exerted by a regulatory agency who seeks to identify and punish deceptive practices. When the objective of this agency is to maximize consumer surplus, its monitoring effort is larger than under social welfare maximization. |
| Keywords: | Misleading advertising; Deception; Bayesian Consumers; Asymmetric Information |
| JEL: | L1 |
| Date: | 2012–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:42553&r=reg |
| By: | Horbach, Jens; Chen, Qian; Rennings, Klaus; Vögele, Stefan |
| Abstract: | Despite the high CO2 emission intensity of fossil and especially coal fired energy production, these energy carriers will play an important role during the coming decades. The case study identifies the main technological trajectories concerning more efficient fossil fuel combustion and explores the potentials for lead markets for these technologies in China, Germany, Japan and the USA taking into account the different regulation schemes in these countries. We concentrate on technologies that have already left the demonstration phase. This is the case for supercritical (SC) and ultra-supercritical (USC) pulverized coal technologies that are already established. The analysis shows that the typical pattern of a stable lead market only applies to a limited extent. In the 1960s and 1970s, the USA has established a lead market for SC und USC technologies. In the meanwhile, Japan has surpassed the United States, although it started as a typical lag market. Japan has caught up in terms of supply factors, China in terms of price, demand and regulation advantage. This supports the hypothesis that - apart from the demand-oriented lead market model - push factors such as R&D activity play a strong role as well. The advantage of Japan mainly stems from its intensive R&D activities. It can also be observed that some other advantages - such as price and demand advantage - are shifting to China. China is practicing a leapfrogging strategy, and has already become a leader in the market segment of low and middle quality boilers, whereas Japan and Germany still dominate the world turbine market. The conclusion is that lead markets may switch over time to markets with high growth rates, although first mover advantages exist for some market segments such as turbines. First movers have a strong technological expertise which is important in the catching up process of late followers, and they may even profit from the growth in lag countries by exporting and cooperation activities. Thus international technology cooperation is a beneficial process for all involved parties. -- |
| Keywords: | Lead Markets,Coal Power plants,Energy Technology,Energy Policy |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:12063&r=reg |
| By: | Heindl, Peter |
| Abstract: | As shown by R. Hahn [6], free allocation equal to the amount of permits a firm with market power uses in equilibrium, can prevent welfare losses. If the necessary amount of free allocation is not provided to the firm with market power, a second best solution is obtained where marginal abatement costs of regulated firms are not equated. In this paper, it is proposed that the government may change the economy wide emissions constraint (cap) as a response to market power, e.g. when free allocation cannot be adjusted. Changing the cap can lead to a situation where marginal abatement costs are equated in the presence of market power. Because changing the cap will lead to changes of social welfare, both effects must be balanced. It is shown that there exists a second best social optimum by balancing the positive effect of limiting market power and the negative effect of changing the cap. -- |
| Keywords: | Tradeable Permits,Market Power,Environmental Regulation |
| JEL: | Q53 L12 D21 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:12065&r=reg |
| By: | Heindl, Peter |
| Abstract: | This paper examines the role of intermediaries in quantity regulation theoretically and presents a data application to the EU Emissions Trading Scheme (EU ETS). The choice of regulated firms to trade permits through intermediaries or directly at the exchange is discussed. Permit pricing strategies of intermediaries and possible issues of market power of intermediaries are modeled. Based on empirical data, the model application aims to assess the actual costs (fees, fixed costs) from permit trading, which represent costs of transacting. In a competitive setup, costs are relatively modest with about 1% to 2% of the permit price. In the EU ETS, firms that trade more than 283,000t CO2/year are likely to directly access the exchange while others trade with intermediaries. In the unlikely event of an intermediary having market power, overall costs would be six times higher in the model application. Options for regulated firms to access a permit exchange directly at low costs decrease the costs of transacting considerably in a competitive and non-competitive intermediary market. -- |
| Keywords: | permit trading,financial intermediaries,market power |
| JEL: | Q52 D42 D21 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:12064&r=reg |