nep-reg New Economics Papers
on Regulation
Issue of 2014‒12‒08
fifteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Self-regulation and Health By Henry Saffer
  2. Investments in a Combined Energy Network Model: Substitution between Natural Gas and Electricity? By Jan Abrell; Hannes Weigt
  3. Analysis of regulatory, market and cost structure aspects for deployment of private or shared Mobile networks for high quality M2M communications By Markendahl, Jan; Ghanbari, Amirhossein; Sundquist, Mårten
  4. Cost Effectiveness of Alternative Policies to Induce Investment in Cellulosic Biofuels By Sesmero, Juan; McCarty, Tanner
  5. The impact of local loop unbundling revisited By Klein, Gordon; Wendel, Julia
  6. Policy experimentation, political competition, and heterogeneous beliefs By Antony Millner; Hélène Ollivier; Leo Simon
  7. Dynamics of Day-Ahead Trading of Electricity in India By Mathur, Kritika; Sinha, Pankaj
  8. Price Controls and Banking in Emissions Trading: An Experimental Evaluation By John K. Stranlund; James J. Murphy; John M. Spraggon
  9. EU climate and energy policy beyond 2020: Are additional targets and instruments for renewables economically reasonable? By Sijm, Jos; Lehmann, Paul; Chewpreecha, Unnada; Gawel, Erik; Mercure, Jean-Francois; Pollitt, Hector; Strunz, Sebastian
  10. Alternative operators investing in NGNs: A causal analysis of the case in Spain By Herrera-González, Fernando; García-Arribas, Gonzalo
  11. The cost of contract renegotiation: Evidence from the local public sector By Philippe Gagnepain; Marc Ivaldi; David Martimort
  12. Exclusion and sources of technological competition in mobile networks By Stylianou, Konstantinos
  13. Can the Market Stability Reserve Stabilise the EU ETS: Commentators Hedge Their Bets By William Acworth
  14. Wireless Access Policy for Electronic Communications Services (WAPECS): Collision between theory and practice By El-Moghazi, Mohamed; Whalley, Jason; Irvine, James
  15. Impact of broadband speed on economic outputs: An empirical study of OECD countries By Kongaut, Chatchai; Bohlin, Erik

  1. By: Henry Saffer
    Abstract: The purposes of this paper are to measure self-regulation, to investigate whether self-regulation differs across different health related choices, to estimate its effect on health choices and to estimate the effect of self-regulation on health-demographic gradients. The theory and empirical approach to self-regulation employed in this paper relies on a broad literature which includes economics, psychology and experimental studies. In addition, a novel empirical approach is employed to create a single measure of self-regulation that can vary across domains. A single measure of self-regulation in place of a set of proxy variables allows for the study of how self-regulation is correlated across different health choices. The results show that there is a high correlation in self-regulation for smoking, drinking, drug use, crime and gambling, but that self-regulation for BMI (body mass index) and obesity are different than self-regulation for the other outcomes. The results show that self-regulation has a significant negative effect on all choices. The results also show that self-regulation generally reduces the effect of education on health but education retains a negative and significant relationship with all outcomes. The research presented in this paper also raises questions about the effect of omitted individual heterogeneity in measuring the effects of public policy.
    JEL: I1
    Date: 2014–09
  2. By: Jan Abrell; Hannes Weigt (University of Basel)
    Abstract: Natural gas plays an important role in the future development of electricity<br />markets as it is the least emission intensive fossil generation option while<br />additionally providing the needed flexibility in plant operation to deal with<br />intermittent renewable generation. As both the electricity and the natural<br />gas market rely on networks, congestion on one market may lead to changes<br />on another. In addition, investments in one market have an impact in the<br />other and may even become substitutes for one another. The objective of this<br />paper is to develop a dynamic model representation of coupled natural gas<br />and electricity network markets to test the potential interaction with respect<br />to investments. The model is tested under simplified conditions as well as<br />for a stylized European network setting. The results indicate that there is<br />a potential for investment-substitution and significant market interactions<br />that warrants the application of coupled models especially with regard to<br />simulations of long term system developments.
    Keywords: Electricity network, Natural gas network, Europe, MCP
    JEL: L94 L95 Q4
    Date: 2014
  3. By: Markendahl, Jan; Ghanbari, Amirhossein; Sundquist, Mårten
    Date: 2014
  4. By: Sesmero, Juan; McCarty, Tanner
    Abstract: Over the past few years cellulosic biofuel production has continually fell short of the mandates set by the Renewable fuel standard. This has continued to happen despite positive predictions in the net present value of a cellulosic biofuel plants and government subsidy/assistance programs. The present study evaluates the impact of alternative policy instruments on the price that firms require to enter the market. Some policies aim at increasing the mean returns on investment without affecting uncertainty (annual subsidy and establishment cost subsidy), others are designed to reduce uncertainty without affecting the mean (long-term production contracts), and finally some instruments affect both (blending mandates and price supports). Results from a parameterized real options model analyzing and comparing the cost effectiveness of different policies show, on a per dollar basis, that not all policies are created equal when it comes to lowering the price premium required for entry into the industry. Our analysis finds that a biofuel price support constitute the most cost-effective policy option.
    Keywords: biofuel policy, cost effectiveness, entry, real options, Production Economics, Resource /Energy Economics and Policy,
    Date: 2014
  5. By: Klein, Gordon; Wendel, Julia
    Abstract: For more than 15 years, Local Loop Unbundling (LLU) has been introduced as a regulatory mean to overcome the bottleneck control over the last mile of copper cable owned by incumbent operators. However, despite its assumed positive effects on market entry and competition intensity, negative effects on network investment incentives and long run overall broadband penetration are expected. In our paper we concentrate on the potential effects of LLU on investment and penetration rates. In contrast to earlier studies, we not only consider the implementation of unbundling, but also include the tariffs of unbundling. Using a large panel, we find that unbundling itself does have a general positive effect on broadband penetration. However, if an interaction between the particular unbundling tariffs is introduced, the per se effect is even increased. Therefore, the overall effect depends strongly on the size of the tariff.
    Date: 2014
  6. By: Antony Millner (London School of Economics and Political Science - LSE); Hélène Ollivier (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Leo Simon (University of California - Berkeley - Department of Agricultural and Resource Economics)
    Abstract: We consider a two period model in which an incumbent political party chooses the level of a current policy variable unilaterally, but faces competition from a political opponent in the future. Both parties care about voters' payoffs, but they have different beliefs about how policy choices will map into future economic outcomes. We show that when the incumbent party can endogenously influence whether learning occurs through its policy choices (policy experimentation), future political competition gives it a new incentive to distort its policies - it manipulates them so as to reduce uncertainty and disagreement in the future, thus avoiding the costs of competitive elections with an opponent very different from itself. The model thus demonstrates that all incumbents can find it optimal to 'over experiment', relative to a counterfactual in which they are sure to be in power in both periods. We thus identify an incentive for strategic policy manipulation that does not depend on self-serving behavior by political parties, but rather stems from their differing beliefs about the consequences of their actions.
    Keywords: Beliefs; Learning; Political Economy
    Date: 2014–05
  7. By: Mathur, Kritika; Sinha, Pankaj
    Abstract: Electricity is a commodity and has a characteristic of being non-storable; it must be consumed once it is produced. In India, the Electricity Act (2003) tries to promote competition by unbundling and treating generation, transmission and distribution as separate entities. In order to address the needs of the power sector, the last decade has seen the setting up of markets for bilateral trading of electricity followed by trading of power on power exchanges in 2008. Power exchanges are able to mitigate risks arising from price volatility for the participants to a large extent. Power exchanges offer short term trading of electricity, of which day-ahead electricity trading on power exchanges forms a significant component. Day-ahead electricity markets allow exchange of contracts with delivery of electricity for the twenty four hours of the next day. The study examines the trading of day-ahead electricity contracts in India.
    Keywords: power exchanges, day- ahead electricity trading, trading mechanism
    JEL: D44 Q41 Q48
    Date: 2014–11–15
  8. By: John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst); James J. Murphy (Department of Economics, University of Alaska Anchorage; Institue of State Economy, Nankai University); John M. Spraggon (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: We present results from laboratory emissions markets designed to investigate the effects of price controls and permit banking on limiting permit price risk. While both instruments reduce between-period price volatility and within-period price dispersion, combining price controls and permit banking yields important benefits. Banking alone produces high permit prices in earlier periods that fall over time, but the combined policy produces lower initial prices and lower volatility. However, banking, price controls, and the combination all produce higher between-period emissions volatility. Hence, for emissions markets that seek to control flow pollutants with strictly convex damages, efforts to limit permit price risk can result in higher expected damage.
    Keywords: experimental economics, Emissions trading, Cap and trade, Laboratory experiments, Permit markets, Permit banking, Price controls, Price collars
    JEL: C91 L51 Q58
    Date: 2014–04
  9. By: Sijm, Jos; Lehmann, Paul; Chewpreecha, Unnada; Gawel, Erik; Mercure, Jean-Francois; Pollitt, Hector; Strunz, Sebastian
    Abstract: The European Council has proposed to stick to a more ambitious GHG target but to scrap a binding RES target for the post-2020 period. This is in line with many existing assessments which demonstrate that additional RES policies impair the cost-effectiveness of addressing a single CO2 externality, and should therefore be abolished. Our analysis explores to what extent this reasoning holds in a secondbest setting with multiple externalities related to fossil and nuclear power generation and policy constraints. In this context, an additional RES policy may help to address externalities for which firstbest policy responses are not available. We use a fully integrated combination of two separate models the top-down, global macro-economic model E3MG and the bottom-up, global electricity sector model FTT:Power - to test this hypothesis. Our quantitative analysis confirms that pursuing an ambitious RES target may mitigate nuclear risks and at least partly also negative non-carbon externalities associated with the production, import and use of fossil fuels. In addition, we demonstrate that an additional RES target does not necessarily impair GDP and other macro-economic measures if rigid assumptions of purely rational behaviour of market participants and perfect market clearing are relaxed. Overall, our analysis thus demonstrates that RES policies implemented in addition to GHG policies are not per se welfare decreasing. There are plausible settings in which an additional RES policy may outperform a single GHG/ETS strategy. Due to the fact, however, that i) policies may have a multiplicity of impacts, ii) the size of these impacts is subject to uncertainties and iii) their valuation is contingent on individual preferences, an unambiguous, "objective" economic assessment is impossible. Thus, the eventual decision on the optimal choice and design of climate and energy policies can only be taken politically.
    Keywords: climate policy,energy policy,EU,emissions trading scheme,policy mix,renewables
    JEL: C53 Q42 Q43 Q48 Q54 Q58
    Date: 2014
  10. By: Herrera-González, Fernando; García-Arribas, Gonzalo
    Abstract: The telecommunications market was completely open to competition in 1998 in Spain, as in most EU countries. The model for the liberalization of the market was based on the regulated use of the incumbent operators' network, so that new entrants could initially use these resources to allow for a soft entry in the market, by climbing a 'ladder of investment'. However, as late as 2011, no entrant operator had gone beyond the Unbundled Local Loop deploying its own access network. This changed in Spain in 2012, when Jazztel decided it would invest in deploying Fibre-to-the-Home. Later, Orange and Vodafone announced that they have reached an agreement to share the deployment of fibre to 6 Millions of households. This phenomenon has coincided in time with the lack of regulated wholesale access on Telefónica FTTH network for speeds above 30 Mbps. In this paper, we show the causality between both events (lack of actual regulated wholesale access to the fibre, deployment by alternative operators), by understanding competition as a process, in the Hayekian and Schumpeterian tradition.
    Date: 2014
  11. By: Philippe Gagnepain (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Marc Ivaldi (TSE - Toulouse School of Economics - Toulouse School of Economics); David Martimort (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA))
    Abstract: Economic theory claims that contracts renegotiation prevents from reaching the informationally constrained efficient solution that could have been obtained under full commitment. Assessing the cost of renegotiation compared to the full commitment scenario still remains an open issue from an empirical viewpoint. To address this question, we fit a structural principal-agent model with renegotiation on a set of contracts for urban transport services. The model captures two important features of the industry. First, only two types of contracts are used in practice (fixed-price and cost-plus). Second, subsidies are greater when a cost-plus contract was signed earlier on than following a fixed-price contract. We then compare a scenario with renegotiation and a hypothetical situation with full commitment. We conclude that the welfare gains from improving commitment would be significant but would accrue mostly to operators.
    Date: 2013
  12. By: Stylianou, Konstantinos
    Abstract: The degree of competition in a market is one of the key determinants of its health and the related need for regulatory remedies. Modern industrial economics and their legal counterpart, antitrust law, have distilled a set of factors to consider when assessing the competitive pressures firms face in the market. However, the economic aspects of competition are not enough to give the full picture of the sources of competitive pressures in technology-intensive industries such as mobile telecommunications. We present here an account of how the technological nature of mobile telecommunications alters our perception of the true competitive conditions actors face in the mobile telecommunications industry. This technological side of competition has remained so far either marginal or presented in an unsystematic way. It is only by considering all aspects of competition-economic and technological-that one can assess the need for regulatory intervention to make up for any perceived lack of competition.
    Date: 2014
  13. By: William Acworth
    Abstract: In response to an imbalance between the demand and supply of permits within the European Union Emissions Trading System (EU ETS), the European Commission has proposed the introduction of a Market Stability Reserve (MSR). The MSR represents a quantity based automatic adjustment mechanism, which is designed to tackle the current surplus and introduce a degree of flexibility, allowing the system to respond to future demand side shocks. While some positive features of the MSR have been highlighted, the design, effectiveness and institutional setting have also come under criticism.
    Date: 2014
  14. By: El-Moghazi, Mohamed; Whalley, Jason; Irvine, James
    Abstract: Fifty five years ago, Coase suggested in his seminal article 'The Federal Communications Commission' that spectrum assignments should be treated in a similar way to property rights where market forces allocate these flexible tradable rights to users with the highest valuations for it. While Coase's idea was appealing and gathered huge momentum in academia scene, the practice did not show much success. One of the first practical implementations was initiated in Europe in 2005 under the name 'Wireless Access Policy for Electronic Communication Services (WAPECS)'. WAPECS aimed at providing more flexibility in the European spectrum management framework by allowing using the spectrum on a technology and service neutral basis. At the international level, the European Conference of Postal and Telecommunications Administrations (CEPT) have been keen to introduce more flexibility at the international service allocation framework via different measures. The paper shows also that the international Radio Regulations (RR) can accommodate the WAPECS concept to a certain extent. Finally, the paper explains that the opposition from the other countries to the European attempts to introduce flexibility to the international service allocation framework is due to the potential implications at the national level.
    Date: 2014
  15. By: Kongaut, Chatchai; Bohlin, Erik
    Abstract: Due to the development of new innovations and technologies, broadband services currently require more transmission capacity to work properly and efficiently with new content. Higher quality video content and more complex applications on internet services also require faster broadband speed. Hence, policy-makers have implemented broadband policy to ensure that countries will have high speed broadband infrastructure for both wired and wireless services. Even though the importance of broadband speed has been recognised almost everywhere, there are only a few studies investigating this issue in the academic field, especially in empirical research. In the past, a number of studies have analysed the impacts of broadband penetration on economic growth and indicated that higher broadband penetration leads to greater economic impacts. Nevertheless, other characteristics of broadband services such as different speeds of transmission, type of connection, quality of service and service providers are becoming more important to determine the economic impacts, as they vary across countries. Hence, broadband penetration on its own may not be a good measurement of the impacts of broadband services on the economy. This study therefore aims to add knowledge from a speed transmission perspective and enrich the empirical evidence in broadband speed studies, which has so far been limited. Similarly to the studies on the effects of telecommunication services (computer, mobile telephony and broadband penetration) on economic outputs, the estimated regressions of the model between broadband speed and economic outputs such as GDP are likely to suffer from endogeneity bias. To reduce the endogeneity problem, this study compares different models to provide the robustness of the relationship between broadband speed and economic outputs. This study also further analyses and compares the relationship between high and low income OECD countries. This paper applies the data from 2008 to 2012, mainly from the OECD and World Bank statistics, for most of the variables and the Ookla website for the broadband speed variable. The outcomes of this study are that broadband speed contributes positively to economic outputs such as GDP. The effects of broadband speed are also greater in countries with lower income. The policy recommendation is therefore that countries should focus on and encourage high speed broadband infrastructure and adoption in their national broadband plans and policies, which will ultimately lead to economic development.
    Date: 2014

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