nep-reg New Economics Papers
on Regulation
Issue of 2012‒12‒06
eleven papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Regulation and Unintended Consequences By Färe, Rolf; Grosskopf, Shawna
  2. A Dynamic Analysis of Regulation and Productivity in Retail Trade By Maican, Florin; Orth, Matilda
  3. Internet Interconnection and Network Neutrality By Choi, Jay; Jeon, Doh-Shin; Kim, Byung-Cheol
  4. Joining the CCS Club! Insights from a Northwest European CO2 Pipeline Project By Massol, O.; Tchung-Ming, S.
  5. Technical Appendix to "Quantitative Analysis of Health Insurance Reform: Separating Regulation from Redistribution" By Svetlana Pashchenko; Ponpoje Porapakkarm
  6. Empirical essays on ex post evaluations of competition and regulatory authorities decisions and policy reforms. By Ozbugday, F.C.
  7. Integrated timetables for railway passenger transport services By Sonia Stube Martins; Matthias Finger; Andreas Haller; Urs Trinkner
  8. The Credit Rating Market - Options for Appropriate Regulation By Andreas Freytag; Martin Zenker
  9. Estimating non-marginal willingness to pay for railway noise abatement: application of the two-step hedonic regression technique By Swärdh , Jan-Erik; Andersson, Henrik; Jonsson, Lina; Ögren , Mikael
  10. Natural Gas and U.S. Economic Activity By Arora, Vipin; Lieskovsky, Jozef
  11. Endogenous Investment Decisions in Natural Gas Equilibrium Models with Logarithmic Cost Functions By Daniel Huppmann

  1. By: Färe, Rolf (Dept. of Economics); Grosskopf, Shawna (CERE, Centre for Environmental and Resource Economics)
    Abstract: Production of desirable outputs such as Kwh of electricity are often accompanied by the production of undesirable or ‘bad’ outputs such as SO2. These undesirable outputs are frequently regulated in the sense that their production is not allowed to exceed certain amounts. In this paper we analyze what we call the unintended consequences of regulation of bads where that regulation limits the quantity of bads produced. We consider the simple case in which there is one good and one bad output. Under constant returns to scale we provide a theorem that characterizes the situation in which quantity regulation of the bad output restricts the production of the intended good output. Our theorem is in the spirit of Shephard’s proof of the Law of Diminishing Returns.
    Keywords: Regulation; Unintended Consequences
    JEL: Q40
    Date: 2012–11–20
  2. By: Maican, Florin (Research Institute of Industrial Economics (IFN)); Orth, Matilda (Research Institute of Industrial Economics (IFN))
    Abstract: Liberalization is widely recognized to drive productivity growth. Retail trade is often thought to substantially contribute to the frequently debated productivity gap between Europe and the U.S. In Europe, entry regulations empower local authorities to decide on the entry of new stores. We use a dynamic structural model and data on all retail stores in Sweden during the period 1996–2002 to quantify the effect of entry regulations on productivity in retail. The results show that the approval of an additional application by local authorities increases median productivity by approximately 2 percent in most subsectors. A stricter regulation in terms of one fewer approved application in each local market corresponds to an annual economic cost for the retail trade sector of nearly 10 percent of total annual capital investments. Our findings suggest that a restrictive entry regulation limits the role of entry and exit in local market dynamics and productivity growth.
    Keywords: Retail Trade; Regulation; Imperfect Competition; Dynamic Structural Model; Productivity Decomposition
    JEL: L11 L81 L88 O30
    Date: 2012–11–14
  3. By: Choi, Jay; Jeon, Doh-Shin; Kim, Byung-Cheol
    Abstract: We analyze competition between interconnected networks when content is heterogeneous in its sensitivity to delivery quality. In a two-sided market framework, we characterize the equilibrium in a neutral network constrained to offer the same quality and assess the impact of such a constraint vis-à-vis a non-neutral network where Internet service providers (ISPs) are allowed to engage in second degree price discrimination with a menu of quality-price pairs. We find that the merit of net neutrality regulation depends crucially on content providers' business models. More generally, our analysis can be considered as a contribution to the literature on second-degree price discrimination in two-sided platform markets.
    Keywords: Net neutrality, Internet interconnection, Two-sided markets, Second-degree price discrimination, Access (Termination) charges, CPs' business models
    JEL: D4 L1 L5
    Date: 2012–11
  4. By: Massol, O.; Tchung-Ming, S.
    Abstract: The large-scale diffusion of Carbon Capture and Storage (CCS) imposes the construction of a sizeable CO2 pipeline infrastructure. This paper analyzes the conditions for a widespread adoption of CCS by a group of emitters that can be connected to a common pipeline system. It details a quantitative framework capable of assessing how the tariff structure and the regulatory constraints imposed on the pipeline operator impact the overall cost of CO2 abatement via CCS. This modeling framework is applied to the case of a real European CO2 pipeline project. We find that the obligation to use cross-subsidy-free pipeline tariffs has a minor impact on the minimum CO2 price required to adopt the CCS. In contrast, the obligation to charge non-discriminatory prices can either impede the adoption of CCS or significantly raises that price. Besides, we compared two alternative regulatory frameworks for CCS pipelines: a common European organization as opposed to a collection of national regulations. The results indicate that the institutional scope of that regulation has a limited impact on the adoption of CCS compared to the detailed design of the tariff structure imposed to pipeline operators.
    Keywords: OR in environment and climate change; carbon capture and storage; CO2 pipeline; club theory; regulation; cross-subsidy-free tariffs
    Date: 2012
  5. By: Svetlana Pashchenko (Uppsala University); Ponpoje Porapakkarm (University of Macau)
    Abstract: Technical appendix for the Review of Economic Dynamics article
    Date: 2012
  6. By: Ozbugday, F.C. (Tilburg University)
    Abstract: Abstract: Fatih Cemil’s main specialization field is competition and regulatory economics. In this dissertation, he conducts several empirical analyses on various regulatory experiments in different industries such as health care, manufacturing and electricity distribution. These experiments take place in different countries such as the Netherlands, Germany and New Zealand. The dissertation consists of 4 parts including 6 chapters. The first part contains two empirical studies on the analysis of the confidential exemption requests in the Netherlands, which were allowed under the new Competition Act. The second part contains two short empirical letters on the analysis of the change in the competition law in the Netherlands. The main purpose of the third part is to test whether clinical quality in German hospitals increases with the publication of quality results by an external authority. The fourth and final part consists of a study that examines the operational cost efficiency and pricing behavior of regulation-exempt consumer-owned electricity suppliers in New Zealand. Each part has important conclusions and policy implications for similar regulatory decisions, experiments and policies to be designed in the future.
    Date: 2012
  7. By: Sonia Stube Martins; Matthias Finger; Andreas Haller; Urs Trinkner
    Abstract: Rail passenger transport services with integrated regular interval timetables (IRIT) offer passengers a regular interval timetable for services on the railway network. IRIT have the potential to increase the quality and attractiveness of railway passenger services in comparison to other transport modes. This paper summarizes the advantages and challenges of an implementation of IRIT for railway passenger services, presents a quantitative model which simulates passenger utility in an IRIT railway system compared to other forms of timetables, and derives the main requirements for the successful introduction of IRIT. The comparison of the regulatory framework, the role of IRIT and the development of passenger railway services in CH, the NL and the UK, shows that in those countries where either IRIT has been introduced (CH) or the high frequency of trains between cities provides for a system comparable to IRIT (NL), railway services play a more important role in the modal split. The successful introduction of IRIT requires a long-run implementation schedule which identifies the necessary investment in the railway infrastructure and points out the financial resources available to make those investments. Further, IRIT requires a high level of punctuality of railway passenger services, the coordination between railway companies when designing the timetable and a priority rule for passenger railway services within IRIT when there are capacity restrictions on the railway network.
    Keywords: IRIT, integrated timetables, rail passenger transport services
    JEL: L92 L59 R41 R42
    Date: 2012–11
  8. By: Andreas Freytag (Friedrich-Schiller-University Jena and University of Stellenbosch); Martin Zenker (Friedrich-Schiller-University Jena, Graduate Programme "Soziale Marktwirtschaft")
    Abstract: The principal agent problem is one of the major issues of the credit rating agency market. Is it possible to solve the prevailing incentive problem of the market and contemporaneously satisfy the reputation demand of the investors? This paper presents an option for regulating the credit rating agency market more effectively. The market shall be coordinated through a central allocation office, which is acting as a mediator between both contractual parties. The paper develops a game theoretical approach that considers reputation as one of the most important aspects within the market. After analysing the status quo two policy options are discussed on a game theoretical basis. The main result is that the incorporation of a mediator, which awards the contracts based on a lottery drawing, would help to solve conflicts of interests. The incentive to inflate ratings decreases significantly. Moreover, rating shopping option becomes impossible. Two possible positive side effects for smaller CRAs and new incumbents are the increase of market share as well as reputation. Therefore, the market competition should be affected positively, too.
    Keywords: credit rating agencies, regulation, reputation, rating inflation, rating shopping
    JEL: G24 G28 D43 D82
    Date: 2012
  9. By: Swärdh , Jan-Erik (VTI); Andersson, Henrik (Toulouse School of Economics (LERNA)); Jonsson, Lina (VTI); Ögren , Mikael (VTI)
    Abstract: In this study we estimate the demand for peace and quiet, and thus also the willingness to pay for railway noise abatement, based on both steps of the hedonic model regression on property prices. The estimated demand relationship suggests welfare gains for a 1 dB reduction of railway noise as; USD 162 per individual per year at the baseline noise level of 71 dB, and USD 86 at the baseline noise level of 61 dB. Below a noise level of 49.1 dB, individuals have no willingness to pay for railway noise abatement. Our results also show the risk of using benefit transfer, i.e. we show empirically that the estimated implicit price for peace and quiet differs substantially across the housing markets. From a policy perspective our results are useful, not only for benefit-cost analysis, but also as the monetary component on infrastructure use charges that internalize the noise externality.
    Keywords: Benefits transfer; Hedonic regression; Railway noise; Willingness to pay
    JEL: C21 C26 Q51 Q53
    Date: 2012–11–22
  10. By: Arora, Vipin; Lieskovsky, Jozef
    Abstract: Previous empirical work has shown that real natural gas prices have a small to negligible impact on total U.S. industrial production and most of its sub-indices. We first show that these results still hold with a sample that runs through mid-2012 and uses a different natural gas price. Concerns about the joint determination of the real natural gas price and U.S. economic activity lead us to reassess these results using a multivariate framework. Our model shows that natural gas does affect U.S. economic activity, but primarily through changes in natural gas production. We also show that natural gas supply, inventory demand, and responses to events in the oil market have been the most important contributors to the real natural gas price since 2000. In terms of approximate point estimates, our results indicate that increases in natural gas supply can raise total U.S. industrial production by 0.1 to 0.5 percent under plausible scenarios.
    Keywords: Natural gas; VAR; Granger causality; endogenous; industrial production
    JEL: F47 E37 Q43
    Date: 2012–11
  11. By: Daniel Huppmann
    Abstract: The liberalisation of the natural gas markets and the importance of natural gas as a transition fuel to a low-carbon economy have led to the development of several large-scale equilibrium models in the last decade. These models combine long-term market equilibria and investments in infrastructure while accounting for market power by certain suppliers. They are widely used to simulate market outcomes given different scenarios of demand and supply development, environmental regulations and investment options. In order to capture the specific characteristics of natural gas production, most of these models apply a logarithmic production cost function. However, no model has so far combined this cost function type with endogenous investment decisions in production capacity. Given the importance of capacity constraints in the determination of the natural gas supply, this is a serious shortcoming of the current literature. This paper provides a proof that combining endogenous investment decisions and a logarithmic cost function yields indeed a convex minimization problem, paving the way for an important extension of current state-of-the-art equilibrium models.
    Keywords: Natural gas, equilibrium model, endogenous investment, capacity expansion, logarithmic cost function
    JEL: C61 Q41 L71
    Date: 2012

This nep-reg issue is ©2012 by Natalia Fabra. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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