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on Regulation |
| By: | Paolo Piselli; Carla Scaglioni |
| Abstract: | According to the European Regulatory Framework in Telecommunications sector, one of the main tasks required from the NRAs is to promote efficient investment and innovation in the field. The aim of this paper is to estimate the relevance of regulation for the growth of investment across 16 EU Countries. This is done estimating how regulation affects revenues and investment elasticity to incumbents’ market power. To do so, we use the panel structure of our data and the timing of the introduction of regulation to carry out two “quasi experiments”, where incumbents are ideally splitted in two groups, according to whether they are subject to a specific regulation or not. We consider a sample of 16 EU countries from 1997 to 2011. The results seem to to suggest that New Regulatory Framework has little reduced the impact of market share on firm’s revenues and investment in the recent years. Over a longer time span instead, being a regulated country does not imply lower revenues and investment by telecommunication companies. Instead, in regulated countries it is likely that the telecom sector benefits from a better economic and institutional environment, which makes firms more productive for a given level of market power. Finally, in countries with a long-lasting regulatory tradition, an increase in market share represents a more significant increase in firm’s market power than in a nonregulated country, so that in regulated countries, elasticity of investment to market share turns to be higher |
| Keywords: | telecommunications, regulated industries, investment, European Union |
| JEL: | C21 L43 L51 O52 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp192014&r=reg |
| By: | Langestraat, R. (Tilburg University, School of Economics and Management) |
| Abstract: | In this thesis we model and analyze several environmental policies in an existing mathematical representation of a perfectly competitive electricity market. We contribute to the literature by theoretically and numerically establishing a number of effects of environmental policies on investment strategies and prices. We provide a theoretical benchmark for environmental regulators aiming to achieve certain policy goals, and present a way to use numerical tools in case a complete theoretical analysis cannot be obtained. Two policies that charge firms for their carbon emissions, namely cap-and-trade and carbon taxation, are modeled into both a stylized deterministic and a two-stage stochastic framework. In the former we characterize equilibria, leading to key results on the dispatching order of technologies and identification of unused technologies. The latter framework is analyzed through a sampling study and focuses on the effectiveness of the policies in the presence of network limitations. We successively study a renewable energy obligation, which indirectly subsidizes electricity production from renewable resources through green certificates. We additionally explore the effects of technology banding, meaning that different renewable technologies are eligible for a different number of certificates. To account for some of the drawbacks of the existing UK technology banding system, we introduce an alternative banding policy. Finally, a feed-in tariff (FIT) is a direct subsidy on electricity production from renewable resources. In a stochastic framework we derive analytically that under linear cost assumptions, this price based instrument cannot guarantee that quantity based policy targets are met. Assuming non-linear convex cost, we find that the opposite holds and that a regulator has the freedom to set FITs in such a way that any desired mixture of renewable technologies can be attained at equilibrium. These FITs are derived analytically or, when necessary, estimated using the numerical tools that we propose. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:8c1d6907-e2ab-40ea-abcc-7b2e9d57ad7b&r=reg |
| By: | Boom, Anette (Department of Economics, Copenhagen Business School); Buehler, Stefan (University of St. Gallen) |
| Abstract: | We study the role of vertical structure in determining generating capacities and retail prices in the electricity industry. Allowing for uncertain demand, we compare three market configurations: (i) integrated monopoly, (ii) integrated duopoly with wholesale trade, and (iii) separated duopoly with wholesale trade. We find that equilibrium capacities and retail prices are such that welfare is highest (lowest) under separated (integrated) duopoly. The driving force behind this result is the risk of rent extraction faced by competing integrated generators on the wholesale market. Our analysis suggests that vertical structure plays an important role in determining generating capacities and retail prices. |
| Keywords: | Electricity; Investments; Generating Capacities; Vertical Integration; Monopoly and Competition |
| JEL: | D42 D43 D44 L11 L12 L13 |
| Date: | 2014–03–14 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2014_002&r=reg |
| By: | Atkeson, Andrew; Hellwig, Christian; Ordoñez, Guillermo |
| Abstract: | In all markets, firms go through a process of creative destruction: entry, random growth and exit. In many of these markets there are also regulations that restrict entry, possibly distorting this process. We study the public interest rationale for entry taxes in a general equilibrium model with free entry and exit of firms in which firm dynamics are driven by reputation concerns. In our model firms can produce high-quality output by making a costly but efficient initial unobservable investment. If buyers never learn about this investment, an extreme `"lemons problem" develops, no firm invests, and the market shuts down. Learning introduces reputation incentives such that a fraction of entrants do invest. We show that, if the market operates with spot prices, entry taxes always enhance the role of reputation to induce investment, improving welfare despite the impact of these taxes on equilibrium prices and total production. |
| Keywords: | entry regulation; firm dynamics; quality investments; reputation concerns |
| JEL: | D83 L51 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10080&r=reg |
| By: | Bjørndal, Endre (Dept. of Business and Management Science, Norwegian School of Economics); Bjørndal, Mette (Dept. of Business and Management Science, Norwegian School of Economics); Cai, Hong (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | This paper investigates a pricing model for an electricity market with a hybrid congestion management method, i.e. part of the system applies a nodal pricing scheme and the rest applies a zonal pricing scheme. The model clears the zonal and nodal pricing areas simultaneously. The nodal pricing area is affected by the changes in the zonal pricing area since it is directly connected to the zonal pricing area by commercial trading. The model is tested on a 13-node power system. Within the area that is applying nodal pricing, prices and surpluses given by the hybrid pricing model match well with those given by the full nodal pricing model. Part of the network is better utilized compared to the solutions given by the full zonal pricing model. However, the prices given by the hybrid system may send wrong economic signals which triggers unnecessary generation from existing capacities, exacerbates grid congestion, and induces higher re-dispatching costs. |
| Keywords: | Congestion Management; Nodal Pricing; Zonal Pricing; Electricity Market |
| JEL: | Q00 |
| Date: | 2014–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2014_027&r=reg |
| By: | Johannes Schmidt (Institute for Sustainable Economic Development, Department of Economics and Social Sciences, University of Natural Resources and Applied Life Sciences, Vienna. Programa de Planejamento Energético / Universidade Federal de Rio de Janeiro); Rafael Cancella (Programa de Planejamento Energético / Universidade Federal de Rio de Janeiro); Amaro Olímpio Pereira Junior (Programa de Planejamento Energético / Universidade Federal de Rio de Janeiro) |
| Abstract: | Brazil has to quickly expand its power generation capacities due to significant growth of demand. Government plans aim at adding hydropower capacities in Northern Brazil, additional to wind and thermal power generation capacities. However, new hydropower may affect environmentally and socially sensitive areas in the Amazon region negatively while thermal power generation produces greenhouse gas emissions. We therefore assess how future greenhouse gas emissions from electricity production in Brazil can be minimized by optimizing the daily dispatch of photovoltaic, wind, thermal, and hydropower plants. Using a simulation model, we additionally assess the risk of loss of load. Results indicate that at doubled demand, only 2% of total power production has to be provided by thermal power plants. Existing reservoirs of hydropower plants are sufficient to balance variations in renewable electricity supply at an optimal mix of around 37% of PV, 9% of wind, and 50% of hydropower generation. In a hydro-thermal only scenario, the risk of deficit increases tenfold, and thermal power production four-fold. A sensitivity analysis shows that the choice of meteorological data sets used for simulating renewable production affects the choice of locations for PV and wind power plants, but does not significantly change the mix of technologies. |
| Keywords: | Brazil, greenhouse gas emissions, photovoltaic, wind, optimization |
| JEL: | Q42 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:sed:wpaper:572014&r=reg |
| By: | Corrado Di Maria (School of Economics, University of East Anglia); Ian Lange (Division of Economics and Business, Colorado School of Mines); Emiliya Lazarova (School of Economics, University of East Anglia) |
| Abstract: | This paper analyzes theoretically and empirically how upstream markets are affected by deregulation downstream. Deregulation tends to increase the level of uncertainty in the upstream market. Our theoretical analysis predicts that deregulated firms respond to this increase in uncertainty by writing more rigid contracts with their suppliers. Using the restructuring of the electricity market in the U.S. as our case study, we find support for our theoretical predictions. Furthermore, we investigate the impact this change in procurement contracts has on efficiency. Focusing on coal mines, we find that those selling coal to plants in restructured markets are significantly more productive than their counterparts working with regulated plants. On the other hand, we also find that transaction costs may have increased as a consequence of deregulation. |
| Keywords: | Energy Policy, Electricity Market Restructuring, Deregulation, Procurement Contracts, Risk, Efficiency |
| JEL: | L14 L15 Q31 Q48 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:mns:wpaper:wp201412&r=reg |
| By: | Hakenes, Hendrik; Schnabel, Isabel |
| Abstract: | One explanation for the poor performance of regulation in the recent financial crisis is that regulators had been captured by the financial sector. We present a micro-founded model with rational agents in which banks capture regulators by their sophistication. Banks can search for arguments of differing complexity against tighter regulation. Finding such arguments is more difficult for weaker banks, which the regulator wants to regulate more strictly. However, the more sophisticated a bank is, the more easily it can produce arguments that a regulator does not understand. Reputational concerns prevent regulators from admitting this, hence they rubber-stamp weak banks, which leads to inefficiently low levels of regulation. Bank sophistication and reputational concerns of regulators lead to capture, and thus to worse regulatory decisions. |
| Keywords: | banking regulation; complexity; financial stability; regulatory capture; reputational concerns; sophistication; special interests |
| JEL: | G21 G28 L51 P16 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10100&r=reg |
| By: | Fumitoshi Mizutani (Graduate School of Business Administration, Kobe University); Shuji Uranishi (Graduate School of Economics, Osaka City University); Eri Nakamura (Graduate School of Business Administration, Kobe University) |
| Abstract: | This paper has aimed to provide information useful to policy makers involved in planning for the management of postal service. Five countries were selected?the UK, France, Germany, US and Japan?and the characteristics of their postal services were described in terms of regulation, liberalization, governance, and strategies. Variations were noted in regulatory structures and liberalization policies. Governance structure and corporate strategies were deemed to be of increasing importance as postal service providers adopt a more corporate company style. The important points made in this paper are summarized as follows. First, variations have been observed in the liberalization of postal services among countries. Two important factors are ownership and competition. Provision by the private sector through privatization is more productive-efficiency-oriented, and it is necessary to introduce competition in situations where monopolistic organizations exist. The general trend in liberalization is toward privatization and competition, with the UK and Germany in the vanguard. Second, it is necessary to maintain the universal service obligation (USO), but procuring financial backing is problematic. Among various financing methods, the USO fund seems reasonable. Third, the governance structure of postal service provider varies from country to country, according to corporate law. As for company type, postal organizations are divided into three groups: the single corporation type (e.g. Deutsche Post DHL and La Poste), the holding company type (e.g. Royal mail and Japan Post), and the public corporation type (e.g. the USPS). Last, as for internationalization strategy, Deutsche Post DHL, La Poste and Royal Mail have taken steps to expand their operations internationally, while the USPS and Japan Post have been slower to make inroads abroad. |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:kbb:dpaper:2014-38&r=reg |