nep-reg New Economics Papers
on Regulation
Issue of 2014‒03‒22
seven papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Market Power Indices and Wholesale Price Elasticity of Electricity Demand By Talat Genc
  2. The Impact of Carbon Trading on Industry: Evidence from German Manufacturing Firms By Sebastian Petrick; Ulrich J. Wagner
  3. Industry structure and collusion with uniform yardstick competition: theory and experiments By Mulder, Machiel; Haan, Marco A.; Dijkstra, Peter T.
  4. The strategic value of partial vertical integration By Fiocco, Raffaele
  5. Bias in Reduced-Form Estimates of Pass-through By Alexander MacKay; Nathan H. Miller; Marc Remer; Gloria Sheu
  6. How Do Electricity Shortages Affect Productivity? Evidence from India By Hunt Allcott; Allan Collard-Wexler; Stephen D. O'Connell
  7. Criminality spread: a "Boomerang effect" of public transport improvements?. By Carlos Augusto Olarte Bacares

  1. By: Talat Genc (Department of Economics and Finance, University of Guelph)
    Abstract: We investigate price responsiveness of wholesale electricity customers in the hourly Ontario wholesale electricity market. We use detailed generator and market level data to calculate market power measures such as the Lerner Index, Residual Supplier Index, and Pivotal Supplier Index which are combined with the competition model to structurally estimate price elasticity of demand in peak hours of summer and winter seasons. We find that the hourly price elasticities are small and change over the peak hours of seasons and years. For instance, in 2008 the elasticity estimates are in the interval of (0.019, 0.083). Comparing high demand winter hours to summer hours indicates that consumers’ price responsiveness is lower in summer than in winter. We also employ these indices along with the estimated price elasticities to project the likely impacts of interconnection capacity expansions on market prices. Our calibrations show that even small amount of transmission investments (and hence trade activities) can result in substantial market price reductions.
    Keywords: Price elasticity of demand; market power measures; electricity market
    JEL: D22 D24 L13 L94 Q41
    Date: 2014
  2. By: Sebastian Petrick; Ulrich J. Wagner
    Abstract: We estimate the causal impact of the EU Emissions Trading Scheme on manufacturing firms using comprehensive panel data from the German production census. Semiparametric matching estimators yield robust evidence that the policy caused treated firms to abate onefifth of their CO2 emissions between 2007 and 2010 relative to non-treated firms. This reduction was achieved predominantly by improving energy efficiency and by curbing the consumption of natural gas and petroleum products, but not electricity use. We find no evidence that emissions trading lowered employment, turnover or exports of treated firms
    Keywords: carbon trading, EU Emissions
    JEL: Q56
    Date: 2014–03
  3. By: Mulder, Machiel; Haan, Marco A.; Dijkstra, Peter T. (Groningen University)
    Abstract: We study cartel stability in an industry that is subject to uniform yardstick regulation. In a theoretical model, we show that the number of symmetric firms does not affect collusion. In a laboratory experiment, however, we do find an effect. If anything, increasing the number of firms facilitates collusion. Our theory suggests that an increase in heterogeneity increases the regulated price if firms do not collude, but also makes collusion harder, rendering the net effect ambiguous. Our experiment suggests that the effect of collusion is stronger.
    Date: 2014
  4. By: Fiocco, Raffaele
    Abstract: We investigate the incentive for partial vertical integration, namely, partial ownership agreements between manufacturers and retailers, when the retailers are privately informed about their production costs and engage in differentiated good price competition. Partial vertical integration entails an “information vertical effectâ€: the partial misalignment of pro.t objectives within a partially integrated manufacturer-retailer hierarchy involves costs from asymmetric information that reduce the hierarchy’s profitability. This translates into an opposite “competition horizontal effectâ€: the partially integrated hierarchy commits to a higher retail price than under full integration, which strategically relaxes competition. The equilibrium degree of vertical integration trades o¤ the benefits of softer competition against the informational costs.
    Keywords: asymmetric information; partial vertical integration; product differentiation; vertical mergers; vertical restraints
    JEL: D82 L13 L42
    Date: 2014–03–09
  5. By: Alexander MacKay (University of Chicago, Department of Economics); Nathan H. Miller (Georgetown University, McDonough School of Business); Marc Remer (Economic Analysis Group, U.S. Department of Justice); Gloria Sheu (Economic Analysis Group, U.S. Department of Justice)
    Abstract: We show that, in general, consistent estimates of cost pass-through are not obtained from reduced-form regressions of price on cost. We derive a formal approximation for the bias that arises even under standard orthogonality conditions. We provide guidance on the conditions under which bias may frustrate inference.
    Date: 2014–02
  6. By: Hunt Allcott; Allan Collard-Wexler; Stephen D. O'Connell
    Abstract: Endemic blackouts are a particularly salient example of how poor infrastructure might reduce growth in developing economies. As a case study, we analyze how Indian textile plants respond to weekly “power holidays.” We then study how electricity shortages affect all Indian manufacturers, using an instrument based on hydroelectricity production and a hybrid Leontief/Cobb-Douglas production function model. Shortages reduce average output by about five percent, but because most inputs can be stored during outages, productivity losses are much smaller. Plants without generators have much larger losses, and because of economies of scale in generator capacity, shortages more severely affect small plants.
    JEL: D04 D24 L11 L94 O12 O13 Q41
    Date: 2014–03
  7. By: Carlos Augusto Olarte Bacares (Centre d'Economie de la Sorbonne)
    Abstract: The relationship between accessibility or the degree of improvement of urban transport and criminality has been underestimated and close to forgotten. This paper aims to reveal the importance of public transport policies in the evolution of crime configuration in a city. The hypothesis that the probability of transport improvements in a zone depends on some of its socio-economic characteristics is adopted. The use of the propensity score matching technique reveals that the presence of improvements of public transport in a zone of the city has a direct and significant impact on the increase of some types of crime. Likewise, spatial econometrics results expose that crime tends to be contagious in neighbouring zones. The presence of the Transmilenio system in Bogota may share out criminality to other zones of the city. Negative externalities like the better mobility of offenders and, then, their possible choice to expand their criminal activities to new zones, can spoil the positive effects of enhancement of public transport. Far from suggesting no developing public transport or isolating some “dangerous” neighbourhoods or inhabitants, this article shows that improvement of public transport may not only generate positive externalities; policy makers should take into consideration the mutation and shift of criminal behaviours in order to identify possible solutions such as the construction of more establishments providing health, welfare and sporting activities, as is evoked in the results. In this way, the “boomerang effect” of the improvement to transport will be reduced.
    Keywords: Urban public transports improvements, propensity score matching, crime contagion, spatial dependence.
    JEL: C31 K42 R12 R15
    Date: 2014–03

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