nep-reg New Economics Papers
on Regulation
Issue of 2014‒11‒28
fourteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. The impact of regulation and competition on the migration from old to new communications infrastructure: Recent evidence from EU27 member states By Briglauer, Wolfgang
  2. The Economics of Attribute-Based Regulation: Theory and Evidence from Fuel-Economy Standards By Koichiro Ito; James M. Sallee
  3. The Impact of Intermittent Renewable Production and Market Coupling on the Convergence of French and German Electricity Prices By Boureau, Charlotte; Le Pen, Yannick; PHAN, Sébastien; Keppler, Jan Horst
  4. How Do Natural Gas Prices Affect Electricity Consumers and the Environment? By Linn, Joshua; Anna Muehlenbachs, Lucija; Wang, Yshuang
  5. Regulation and Housing Supply By Joseph Gyourko; Raven Molloy
  6. Price disclosure rules and consumer price comparison By Stühmeier, Torben
  7. Costs for Swedish public transport authorities in tendered bus contracts By Vigren, Andreas
  8. The impact of local loop and retail unbundling revisited By Klein, Gordon J.; Wendel, Julia
  9. Indirect taxation, public pricing and price cap regulation: A synthesis By Valentini, Edilio
  10. How Effective Are Energy-Efficiency Incentive Programs? Evidence from Italian Homeowners By Massimo Anna Alberini; Andrea Bigano
  11. Electricity Market Price Volatility: The Importance of Ramping Costs By Werner, Dan
  12. Market driven network neutrality and the fallacy of a two-tiered Internet traffic regulation By Knieps, Günter; Stocker, Volker
  13. Influence of regulatory risks on private investments in wind energy — a financial investor’s perspective By Aleksandra Lukasik
  14. Spectrum policy and innovation: A Japanese perspective By Bourna, Maria; Mitomo, Hitoshi

  1. By: Briglauer, Wolfgang
    Abstract: Fibre-deployment of next-generation communications networks is currently a major challenge for investing firms as well as for national regulators and is also subject to hot debates at EU level. This work examines the role of regulatory policies and competition controlling for relevant supply and demand side factors. Our econometric model employs dynamic panel data methods that take into account potential endogeneity due to omitted heterogeneity, reverse causality and the dynamic investment specification. Our results indicate that relevant forms of previous broadband access regulations have had a negative impact on investment in new infrastructure. Furthermore, infrastructure-based competition from mobile operators and the replacement effect stemming from the incumbents' existing infrastructure exert a negative impact on ex ante investment incentives. As regards the dynamics of the adjustment process, we find that there are both short-term and long-term effects towards the desired infrastructure level.
    Keywords: next-generation communications networks,sector-specific regulation,infrastructure competition,investment conditions,adjustment process,EU27 panel data
    JEL: H5 L38 L43 L52
    Date: 2014
  2. By: Koichiro Ito; James M. Sallee
    Abstract: This paper analyzes "attribute-based regulations," in which regulatory compliance depends upon some secondary attribute that is not the intended target of the regulation. For example, in many countries fuel-economy standards mandate that vehicles have a certain fuel economy, but heavier or larger vehicles are allowed to meet a lower standard. Such policies create perverse incentives to distort the attribute upon which compliance depends. We develop a theoretical framework to predict how actors will respond to attribute-based regulations and to characterize the welfare implications of these responses. To test our theoretical predictions, we exploit quasi-experimental variation in Japanese fuel economy regulations, under which fuel-economy targets are downward-sloping step functions of vehicle weight. Our bunching analysis reveals large distortions to vehicle weight induced by the policy. We then leverage panel data on vehicle redesigns to empirically investigate the welfare implications of attribute-basing, including both potential benefits and likely costs. This latter analysis concerns a "double notched" policy; vehicles are eligible for an incentive if they are above a step function in the two-dimensional fuel economy by weight space. We develop a procedure for analyzing the response to such policies that is new to the literature.
    JEL: H23 L62 Q48
    Date: 2014–09
  3. By: Boureau, Charlotte; Le Pen, Yannick; PHAN, Sébastien; Keppler, Jan Horst
    Abstract: Interconnecting two adjacent areas of electricity production generates benefits in combined consumer surplus and welfare by allowing electricity to flow from the low cost area to the high cost area. It will lower prices in the high cost area, raise them in the low cost area and will thus have prices in the two areas converge. With unconstrained interconnection capacity, price convergence is, of course, complete and the two areas are merged into a single area. With constrained interconnection capacity, the challenge for transport system operators (TSOs) and market operators is using the available capacity in an optimal manner. This was the logic behind the “market coupling” mechanism installed by European power market operators in November 2009 in the Central Western Europe (CWE) electricity market, of which France and Germany constitute by far the two largest members. Market coupling aims at optimising welfare by ensuring that buyers and sellers exchange electricity at the best possible price taking into account the combined order books all power exchanges involved as well as the available transfer capacities between different bidding zones. By doing so, interconnection capacity is allocated to those who value it most.
    Keywords: Electricity market;
    JEL: L11 L94
    Date: 2014–10
  4. By: Linn, Joshua (Resources for the Future); Anna Muehlenbachs, Lucija (Resources for the Future); Wang, Yshuang
    Abstract: Between 2008 and 2012, the delivered price of natural gas to the U.S. power sector fell 60 percent. This paper addresses, in theory and in practice, the effects of this negative price shock on electricity consumers and the environment. We demonstrate with a simple model that the larger the effects of gas prices on consumer welfare, the smaller the effects on pollution emissions and the smaller the increase in profits of existing natural gas–fired generators. Using detailed data on electricity prices, fuel consumption, and fuel prices from 2001 to 2012, we confirm this hypothesis. Regions that experience greater reductions in pollution emissions experience smaller reductions in electricity prices and consumer welfare.
    Keywords: Electricity Demand, Natural Gas, Coal, Shale Gas, Pollution
    JEL: Q41 Q53
    Date: 2014–07–18
  5. By: Joseph Gyourko; Raven Molloy
    Abstract: A wide array of local government regulations influences the amount, location, and shape of residential development. In this chapter, we review the literature on the causes and effects of this type of regulation. We begin with a discussion of how researchers measure regulation empirically, which highlights the variety of methods that are used to constrain development. Many theories have been developed to explain why regulation arises, including the role of homeowners in the local political process, the influence of historical density, and the fiscal and exclusionary motives for zoning. As for the effects of regulation, most studies have found substantial effects on the housing market. In particular, regulation appears to raise house prices, reduce construction, reduce the elasticity of housing supply, and alter urban form. Other research has found that regulation influences local labor markets and household sorting across communities. Finally, we discuss the welfare implications of regulation. Although some specific rules clearly mitigate negative externalities, the benefits of more general forms of regulation are very difficult to quantify. On balance, a few recent studies suggest that the overall efficiency losses from binding constraints on residential development could be quite large.
    JEL: H70 R10 R14 R31
    Date: 2014–10
  6. By: Stühmeier, Torben
    Abstract: Search frictions are regarded as a major impediment to active competition in many markets. In some markets, such as financial and retail gasoline, governments and consumer protection agencies call for compulsory price reporting. Consumers could then more easily compare the firms' offers. We showthat for a given level of price comparison, mandatory price reporting indeed generally benefits consumers. Such regulation, however, feeds back into firms' strategies, resulting in lower levels of price comparison in equilibrium. This effect may dominate so that the regulation lead to higher expected market prices.
    Keywords: Mixed Strategies,Price Comparison,Regulation
    JEL: D83 L13 L51
    Date: 2014
  7. By: Vigren, Andreas (VTI)
    Abstract: The main objective of this paper is to investigate how different factors affect costs for Swedish Public Transport Authorities (PTA). A theoretical framework is presented for the empirics, a cross sectional regression analysis with cost and supply data from 20 Swedish counties for the year 2012. The most important results are that a one percentage increase in output yield a lower than one percentage increase in cost. The usage of incentives scheme contract do not increase total costs. Lastly, contracts operated by publicly owned operators seem to give higher costs for the PTAs.
    Keywords: Public Transport; Cost; Competitive Tendering; Public Transport Authority; Bus operators; Incentives contract; Fixed price contract; Incentives scheme
    JEL: H57 R48
    Date: 2014–11–06
  8. By: Klein, Gordon J.; Wendel, Julia
    Abstract: For more than a decade the unbundling of telecommunications networks has been used as a regulatory means to stifle competition. However, despite its assumed positive effects on market entry and competition intensity, the negative effects on network investment incentives are widely shown in the theoretical literature. Therefore broadband penetration might also be affected negatively. In our paper we concentrate on the impact of local loop unbundling and Bitstream access on broadband penetration. Using a panel of European countries for a time period of 17 years, we find that the effect of unbundling on penetration is positive when an intermediate level of broadband penetration has been achieved in a country. However, this impact turns negative if the initial level of broadband penetration is rather low or high. We argue that this confirms possible negative effects on investment incentives, but may successfully lower prices to foster demand. These are two findings which should be carefully considered by policy makers when deciding on unbundling policies.
    Keywords: Broadband Internet Penetration,Local Loop Unbundling,Bitstream Access,Policy Evaluation,Panel Data Analysis
    Date: 2014
  9. By: Valentini, Edilio
    Abstract: This paper provides a unified vision of a number of results that appeared in three separate streams of literature. The author emphasizes the strong parallelism between the results obtained in a number of papers that analyzed the relationships between price cap regulation, welfare maximization, welfare improvements, distributional preferences and poverty reduction and those originating from the well-established theories of optimal indirect taxation and tax reforms, as well as public pricing.
    Keywords: Price cap regulation,indirect taxation,public pricing
    JEL: D6 L5
    Date: 2014
  10. By: Massimo Anna Alberini (University of Maryland,USA); Andrea Bigano (CIP - Climate Impacts and Policy Division)
    Abstract: We evaluate incentives for residential energy upgrades in Italy using data from an original survey of Italian homeowners. In this paper, attention is restricted to heating system replacements, and to the effect of monetary and non-monetary incentives on the propensity to replace the heating equipment with a more efficient one. To get around adverse selection and free riding issues, we ask stated preference questions to those who weren’t planning energy efficiency upgrades any time soon. We argue that these persons are not affected by these behaviors. We use their responses to fit an energy-efficiency renovations curve that predicts the share of the population that will undertake these improvements for any given incentive level. This curve is used to estimate the CO2 emissions saved and their cost-effectiveness. Respondents are more likely to agree to a replacement when the savings on the energy bills are larger and experienced over a longer horizon, and when rebates are offered to them. Reminding about CO2 (our non-monetary incentive) had little effect. Even under optimistic assumptions, the cost-effectiveness of incentives of size comparable to that in the Italian tax credit program is generally not favorable.
    Keywords: Energy-efficiency incentives; Free riding; Adverse selection; Stated Preferences; CO2 emissions reductions; CO2 emissions reductions supply curves; residential energy consumption.
    JEL: Q41 Q48 Q54 Q51
    Date: 2014–11
  11. By: Werner, Dan
    Abstract: Although electricity market price behavior generally has been well studied in the last decade, the literature is sparse when discussing the importance of generator ramping costs to price volatility. This paper contributes to the literature by first formalizing the intuitive link between ramping costs and price volatility in a multi-period competitive equilibrium. The fundamental result of the model shows how price volatility rises with ramping costs. This notion is tested empirically using a pooled event study regression, a two-stage least squares (2SLS) specification, and a generalized autoregressive conditional heteroskedasticity (GARCH) model. The econometric results all confirm that price volatility is significantly decreased by additional natural gas capacity, which has comparatively low ramping costs. This marks the first rigorous study to quantify the pecuniary externalities within the New England market's generating profile, showing over a million dollars worth of price stability provided per year by each new natural gas generator. A simulation also explores how this value changes over time, noting that value of price stability from natural gas generators will increase with the proportion of non-dispatchable renewable generators.
    Keywords: price volatility, electricity market, ramping cost, natural gas, forward premium, resource planning, Demand and Price Analysis, Financial Economics, Resource /Energy Economics and Policy, Risk and Uncertainty, Q47, Q42, G13, G14, L94,
    Date: 2014
  12. By: Knieps, Günter; Stocker, Volker
    Abstract: Within a Generalized DiffServ architecture entrepreneurial flexibility for build-ing intelligent multipurpose traffic architectures enables the provision of a varie-ty of tailored traffic services for a wide range of heterogeneous application ser-vices. In order to solve the entrepreneurial traffic capacity allocation problem, we propose an incentive compatible pricing and quality of service (QoS) differ-entiation model for the Generalized DiffServ architecture resulting in market driven network neutrality. Optimal allocation decisions based on the opportunity costs of capacity usage require that all relevant traffic classes are taken into ac-count simultaneously, rather than 1) excluding traffic classes (by means of min-imum traffic quality requirements), 2) prescribing a maximum or minimum number of traffic classes or 3) arbitrarily including parameter specifications for or levels of QoS which are not reflected by demand side. It is particularly im-portant that the opportunity costs of capacity reservations for deterministic pre-mium traffic classes are interrelated with subsequent non-deterministic traffic classes. As a consequence, every form of market split would be artificial.
    Date: 2014
  13. By: Aleksandra Lukasik
  14. By: Bourna, Maria; Mitomo, Hitoshi
    Abstract: This paper investigates how spectrum policy affects the diffusion of innovation in the telecommunications sector, and is part of a general discussion on expanding spectrum policy aims to address sector innovativeness. We argue that innovation can be analytically depicted not only as the appearance of new technology, but also as physical network expansion of said technology, and adoption by end users. This definition is used in contrast with previous work on spectrum policy and innovation, which tends to use R&D or infrastructure investment as proxies for innovation, resulting in a more limited understanding of the innovation process. The study surveys the telecommunications industry in Japan over a period of 13 years (2001-2013), and discusses the effect of spectrum allocations and other regulatory acts on the expansion of the 3G mobile network. We found that spectrum policies excluding allocations had a negative effect on the expansion of the physical network, while the growth of said network correlated strongly with 3G penetration. This may suggest that the effect that spectrum policy has on innovation is most likely mediated by the role of competition in the infrastructure layer and is more pronounced in the contraction stage of the innovation life cycle. These results provide a preliminary basis for gaining a better understanding of the ways in which the policy environment relates to the evolutionary processes behind innovation.
    Keywords: Radio spectrum,Innovation,Japan,Telecommunications
    Date: 2014

This nep-reg issue is ©2014 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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