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on Regulation |
| By: | Haikel Khalfallah (PACTE - Politiques publiques, ACtion politique, TErritoires - Institut d'Études Politiques [IEP] - Grenoble - CNRS : UMR5194 - Université Pierre-Mendès-France - Grenoble II - Université Joseph Fourier - Grenoble I) |
| Abstract: | Network regulation is playing an active role in a context of restructuring energy systems for long term transition to a smart grid. Regulation of network companies' activities should consider both cost efficiency objectives and other objectives such as quality and network innovation. It is in this context that incentive regulation tools are discussed and assessed in this paper. The aim is to show their key features and how they could be aligned with the main regulation goals. This paper concludes that they should be considered as complementary tools to address conflicting regulatory aspects in an efficient manner. |
| Keywords: | incentive regulation ; electricity ; cost efficiency ; quality ; innovation |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00931301&r=reg |
| By: | Brekke, Kurt R. (Dept. of Economics, Norwegian School of Economics and Business Administration); Holmås, Tor Helge (Uni Rokkan Centre); Straume, Odd Rune (University of Minho) |
| Abstract: | This paper studies the effects of price regulation and parallel imports in the on-patent pharmaceutical market. First, we develop a theory model in which a pharmacy negotiates producer prices with a brand-name firm and then sets retail prices. We show that the effects of price regulation crucially depend on whether the producer faces competition from parallel imports. While parallel imports improve the bargaining position of the pharmacy, price regulation counteracts this effect and may even be profitable for the producer. Second, we use a unique dataset with information on sales and prices at both producer and retail level for 165 substances over four years (2004-7). Exploiting exogenous variation in the regulated price caps, we show that stricter price regulation reduces competition from parallel imports. While the effect is clearly negative on producer profits for substances without parallel imports, the e¤ect is not significant for substances with parallel imports. Finally, we show that stricter price regulation reduces total expenditures, but the e¤ect is much stronger for substances with parallel import. Thus, our results suggest that price regulation may promote both static and dynamic efficiency in the presence of parallel imports. |
| Keywords: | Pharmaceutical market; Price regulation; Parallel imports. |
| JEL: | I11 I18 L13 L51 L65 |
| Date: | 2014–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2014_001&r=reg |
| By: | Schmitt, Stephan; Kucsera, Denes |
| Abstract: | The aim of this paper is to give deeper insights into the impact of regulatory reforms and privatization on R&D spending of electricity utilities. Building on a panel data set including the biggest European utilities from eight EU-countries over a period from 1985 until 2010, we find a strong negative influence of privatization and also a negative overall impact of regulation on R&D investment. Nearing competition has a dampening effect on R&D spending, but once the market and regulatory framework conditions have been established, higher levels of competition positively influence R&D. Our results further indicate that the relation between competition and innovative investment can be described as inverted U-shaped. Finally, we could not find any evidence that (ownership) unbundling and incentive regulation affect R&D expenditures of the utilities. -- |
| JEL: | L43 L51 L94 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc13:80035&r=reg |
| By: | Schober, Dominik; Schäffler, Stephan; Weber, Christoph |
| Abstract: | We analyze the treatment and impact of idiosyncratic or firm-specific risk in regulation. Regulatory authorities regularly ignore firm-specific characteristics, such as size or asset ages, implying different risk exposure in incentive regulation. In contrast, it is common to apply only a single benchmark, the weighted average cost of capital (WACC), uniformly to all firms. This will lead to implicit discrimination. We combine models of firm-specific risk, liquidity management and regulatory rate setting to investigate impacts on capital costs. We focus on the example of the impact of component failures for electricity network operators. In a simulation model for Germany, we find that capital costs increase by approximately 0.2 to 3.0 percentage points depending on the size of the firm (in the range of 3% to 40% of total cost of capital). Regulation of monopolistic bottlenecks should take these risks into account to avoid implicit discrimination. -- |
| Keywords: | Idiosyncratic/firm-specific risk,discrimination,incentive-based and quality regulation,liquidity management,size effects,electricity networks |
| JEL: | G32 G33 L51 L94 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:14010&r=reg |
| By: | Sebastian Schäfer (University of Siegen) |
| Abstract: | This paper contributes to the literature of overlapping regulations as we introduce a model, which gives insights in an effective combination of the EU emissions trading system (ETS) and the promotion of renewable energy within the electricity sector. Under consideration of EU long term objectives in CO2 mitigation we evaluate the efficient share of renewable energy. Hence, we give rise to the question, if the actual amount of renewable energy production already exceeds this share making a stop or at least a modification of its promotion necessary. Our approach proves to be robust to a change of pattern of marginal abatement costs (MAC), while resulting variances can be narrowed down and quantified. For its application to empirical data, we develop a method to evaluate the performance of the ETS and the promotion of renewable energy. On that basis we suggest modifications of the ETS to uncouple the certificate price from economical fluctuations and the development of renewable energy leading to their better combination and stronger mitigation incentives. For Germany it turns out, that the electricity generation of renewables has not exceeded its optimal share yet, while data is restricted due to low mitigation incentives set by the ETS. Therefore both the suggested improvement of the ETS and the monitoring of the development of renewable energy, referred to our model, is strongly recommended. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201409&r=reg |
| By: | Bertsch, Joachim; Growitsch, Christian; Lorenczik, Stefan; Nagl, Stephan |
| Abstract: | The EU member states have declared to strongly increase the share of Renewable Energy Sources in the next decades. Given a large deployment of wind and solar capacities as well as limited cost-efficient storage technologies, this has two major impacts on electricity systems. First, the electricity system has to be flexible enough to cope with the volatile RES-E generation i.e. ramp up supply or ramp down demand on short notice. Second, sufficient back-up capacities are needed for times with low feed-in from wind and solar capacities. The provision of both back-up capacity has been intensively discussed in the previous literature of recent years (for instance Cramton and Stoft, 2008 and Joskow, 2008). In addition, Lamadrid et al (2011) argue that with increasing volatility, incentives to invest in flexible resources should be implemented in market design. However, they did not have a look at the dynamic view in an integrated analysis necessary to to answer the questions of how an electricity system can adapt to an increasing share of renewables. This paper therefore analyses the flexibility requirements of the future European electricity system and the policy implications for market design with a system-economic dynamic approach. For this purpose, we simulate the development of the European electricity markets up to 2050 by using a linear investment and dispatch optimization model. Flexibility requirements are implemented in the model via constraints for ramping and provision of balancing power. We find that although an increase of fluctuating renewables has a tremendous impact on volatility and therefore flexibility requirements, the main trigger for investments into flexible conventional capacity are the achievable full load hours rather than ramping capabilities. Therefore any market design with investment incentives of achievable full load hours does not need additional incentives for flexibility. -- |
| JEL: | D02 C63 Q40 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc13:79944&r=reg |
| By: | Meya, Johannes |
| Abstract: | Real life applications of Yardstick Regulation frequently refer to historical cost data. While Yardstick Regulation cuts the link between fi rms own costs and prices firms may charge in a static setting, it does not in a dynamic setting where historical cost data is used. A fi rm can influence the price it will be allowed to charge in the future if its behavior today can e ffect future behavior of other fi rms that determines the price this fi rm will be able to charge later on. This paper shows that, assuming that slack, infl ating of costs, is bene cial to fi rms, a tradeoff between short term profit through abstinence from slack and the benefit of slack in (in finitely) many periods arises. A ratchet eff ect that Yardstick Regulation was meant to overcome can occur and firms can realize positive rents because of the use of historical cost data, even if firms are identical. Equilibria with positive slack can exist without any collusion between fi rms or threat. Moreover, this problem is more severe if the fi rm with lowest costs of all other firms instead of the average fi rm is the yardstick. -- |
| JEL: | L51 L97 L94 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc13:79796&r=reg |
| By: | Sieg, Gernot; Rothbauer, Jula |
| Abstract: | A welfare-maximizing Public Service Broadcaster (PSB) broadcasts both information-type and show-type content if (i) the information consumption of TV viewers generates external benefits for society by improving the ability of voters to control politicians and (ii) the marginal external benefits of information consumption diminish as the information possessed by voters increases. We analyze a two-sided free-to-air TV market with two differentiated private channels and a commercial-free PSB. Welfare depends on the efficiency of the PSB, the external benefits of voter information, and lost rents from the advertising market. Welfare can be higher without a PSB. -- |
| JEL: | L82 D72 L32 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc13:79800&r=reg |
| By: | Kaiser, Ulrich; Méndez, Susan; Rønde, Thomas; Ullrich, Hannes |
| Abstract: | Reference prices constitute a main determinant of patient health care reimbursement in many countries. We study the effects of a change from an "external" (based on a basket of prices in other countries) to an "internal" (based on comparable domestic products) reference price system. We find that while our estimated consumer compensating variation is small, the reform led to substantial reductions in list and reference prices as well as co-payments, and to sizeable decreases in overall producer revenues, health care expenditures, and co-payments. These effects differ markedly between branded drugs, generics, and parallel imports with health care expenditures and producer revenues decreasing and co-payments increasing most for branded drugs. The reform also induced consumers to substitute from branded drugs - for which they have strong preferences - to generics and parallel imports. This substitution also explains the small increase in consumer welfare despite a substantial decrease in expenditures. -- |
| JEL: | I18 C23 D22 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc13:79937&r=reg |
| By: | Giovanni Immordino; Michele Polo |
| Abstract: | In this paper we review some recent work on public intervention in economic environments where ?firms undertake investments in research or in physical assets, and then choose appropriate business practices to extract pro?ts from the outcomes of the investment process. Public policies may take different forms: the release of an authorization; the setting of ?nes and damages for liability; or the choice of legal standards in antitrust law enforcement. The business practices are privately pro?table but may be welfare enhancing or socially harmful. When expectations are optimistic, public policies face a trade-off between ex-ante effects on investment, that suggest hands off, and ex-post control of practices when harmful, that requires intervention. Our general result suggests that public policies should be softer when innovation is an important source of welfare improvements.Keywords: Regulation, Antitrust, Legal Standards JEL classification: D73, K21, K42, L51. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:igi:igierp:507&r=reg |