nep-reg New Economics Papers
on Regulation
Issue of 2015‒01‒26
thirteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. The Effects of Wind Generation Capacity on Electricity Prices and Generation Costs: a Monte Carlo Analysis By Lynch, Muireann; Curtis, John
  2. An optimal trading problem in intraday electricity markets By Ren\'e A\"id; Pierre Gruet; Huy\^en Pham
  3. Minimum quality standards and compulsory labeling: More than the sum of its parts By Birg, Laura; Voßwinkel, Jan S.
  4. The Perverse Impact of Calling for Energy Conservation By J. Scott Holladay; Michael Price; Marianne Wanamaker
  5. How do drug prices respond to a change from external to internal reference pricing? Evidence from a Danish regulatory reform By Kaiser, Ulrich; Mendez, Susan J.
  6. Dispatching after Producing : The Supply of Non-Renewable Resources By Julien DAUBANES; Pierre LASSERRE
  7. Efficiency of Wind Power Production and its Determinants By Simone Pieralli; Matthias Ritter; Martin Odening;
  8. An Innovation Policy Framework: Bridging the Gap between Industrial Dynamics and Growth By Braunerhjelm, Pontus; Henrekson, Magnus
  9. Time Scale Externalities and the Management of Renewable Resources By Giannis Vardas; Anastasios Xepapadeas
  10. Analyzing the impacts of mandatory country of origin labeling in EU pork and poultry sectors on markets, cost of production and trade By Jongeneel, Roel; Baltussen, Willy H.M.
  11. The Hidden Cost of Regulation: Emotional Responses to Command and Control By Just, David; Hanks, Andrew
  12. Social Interaction Effects and Connection to Electricity: Experimental Evidence from Rural Ethiopia By Bernard, Tanguy; Torero, Maximo
  13. Incentives For Repeated Contracts In Public Sector: Empirical Study Of Gasoline Procurement In Russia By Andrei Yakovlev; Oleg Vyglovsky; Olga Demidova; Alexander Bashlyk

  1. By: Lynch, Muireann; Curtis, John
    Date: 2014–11
  2. By: Ren\'e A\"id; Pierre Gruet; Huy\^en Pham
    Abstract: We consider the problem of optimal trading for a power producer in the context of intraday electricity markets. The aim is to minimize the imbalance cost induced by the random residual demand in electricity, i.e. the consumption from the clients minus the production from renewable energy. For a simple linear price impact model and a quadratic criterion, we explicitly obtain approximate optimal strategies in the intraday market and thermal power generation, and exhibit some remarkable properties of the trading rate. Furthermore, we study the case when there are jumps on the demand forecast and on the intraday price, typically due to error in the prediction of wind power generation. Finally, we solve the problem when taking into account delay constraints in thermal power production.
    Date: 2015–01
  3. By: Birg, Laura; Voßwinkel, Jan S.
    Abstract: This paper studies the effect of a minimum quality standard, a compulsory labeling scheme, and the combination of both instruments in a vertical differentiation model when not all quality dimensions of products can be observed byconsumers. Both a minimum quality standard on the non-observable quality dimension and a labeling scheme that informs consumers about the non-observable quality dimension have no impact on the observable quality dimension, increase prices, and have no impact on demand. The combination of a minimum standard and a labeling scheme increases prices, reduces or enhances investment in the observable quality dimension, and alters market shares depending on the minimum quality level. Compared to the case of no regulation, social welfare may decrease or increase under the minimum quality standard, the compulsory labeling scheme or the combined scheme, depending on the level of the minimum quality standard and the market size.
    Keywords: minimum quality standards,labeling,vertical differentiation
    JEL: L13 L15 L51
    Date: 2014
  4. By: J. Scott Holladay (Department of Economics, University of Tennessee); Michael Price (Department of Economics, Georgia State University); Marianne Wanamaker (Department of Economics, University of Tennessee)
    Abstract: In periods of high energy demand, utilities frequently issue "emergency" appeals for conservation over peak hours to reduce brownout risk. We estimate the impact of such appeals using high-frequency data on actual and forecasted electricity generation, pollutant emission measures, and real-time prices. Our results suggest a perverse impact; while there is no significant reduction in grid stress over superpeak hours, such calls lead to increased off-peak generation, CO2 emissions, and price volatility. We postulate that consumer attempts at load shifting lead to this result.
    Keywords: Energy Demand, Air Pollution, Conservation, Media
    JEL: Q4 Q5 D8
    Date: 2014–10
  5. By: Kaiser, Ulrich; Mendez, Susan J.
    Abstract: We study the effects of a change in the way patient reimbursements are calculated on the prices of pharmaceuticals using quasi-experimental data for Denmark which switched from external (where reimbursements are based on prices of similar products in foreign countries) to internal reference pricing (where they are based on the cheapest domestic substitute). We analyze three therapeutic classes with different treatment durations and show that the reform led to substantial price decreases for our lifelong treatment and to less substantial price reductions for our medium duration treatment while we do not find significant effects on our acute treatment. Moreover, the reform did only affect generics and did not impact original products or parallel imports.
    Keywords: pharmaceutical markets,regulation,reference pricing,treatment duration
    JEL: I18 C23
    Date: 2015
  6. By: Julien DAUBANES; Pierre LASSERRE
    Abstract: There exists no formal treatment of non-renewable resource (NRR) supply, systematically deriving quantity as function of price. We establish instantaneous restricted (fixed reserves) and unrestricted NRR supply functions. The supply of a NRR at any date and location not only depends on the local contemporary price of the resource but also on prices at all other dates and locations. Besides the usual law of supply, which characterizes the own-price effect, cross-price effects have their own law. They can be decomposed into a substitution effect and a stock compensation effect. We show that the substitution effect always dominates: a price increase at some point in space and time causes NRR supply to decrease at all other points. This new but orthodox supply setting extends to NRRs the partial equilibrium analysis of demand and supply policies. The properties of restricted and unrestricted supply functions are characterized for Hotelling (homogenous) as well as Ricardian (non homogenous) reserves, for a single deposit as well as for several deposits that endogenously come into production or cease to be active.
    Keywords: allocating inventories, allocating reserves, supply theory, price effect, sub-stitution effect, stock compensation effect, green paradox, spatial leakage
    JEL: Q38 D21 H22
    Date: 2014
  7. By: Simone Pieralli; Matthias Ritter; Martin Odening;
    Abstract: This article examines the efficiency of wind energy production. We quantify production losses in four wind parks across Germany for 19 wind turbines with non-convex efficiency analysis. In a second stage regression, we adapt the linear regression results of Kneip, Simar, Wilson (2014) to explain electricity losses by means of a bias-corrected truncated regression. Our results show that electricity losses amount to 27% of the maximal producible electricity. These losses can be mainly traced back to changing wind conditions while only 6 % are caused by turbine errors.
    Keywords: wind energy, efficiency, free disposal hull, bias correction
    JEL: D20 D21 Q42
    Date: 2015–01
  8. By: Braunerhjelm, Pontus (Swedish Entrepreneurship Forum); Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: This paper examines policy measures that foster the creation of innovations with high inherent potential and that simultaneously provide the right incentives for individuals to create and expand firms that disseminate such innovations in the form of highly valued products. In so doing, we suggest an innovation policy framework based on two pillars: (i) the accumulation, investment, and upgrading of knowledge and (ii) the implementation of mechanisms that enable knowledge to be exploited such that growth and societal prosperity are encouraged. Knowledge is a necessary but far from sufficient condition for growth. To secure industrial dynamics and growth in the long term, institutions must be designed both to encourage sophisticated knowledge investments and to stimulate the creation, diffusion and productive use of knowledge in all sectors of the economy. We argue that the latter area has been overlooked in the policy discussion and that a coherent innovation policy framework must include tax policy, labor market regulation, savings channeling, competition policy, housing market regulation, and infrastructure to foster growth and future prosperity.
    Keywords: Entrepreneurship; Innovation; Institutions; Innovation policy; R&D; Technology transfer; University-industry relations
    JEL: J24 O31 O32 O57
    Date: 2015–01–12
  9. By: Giannis Vardas; Anastasios Xepapadeas
    Abstract: The evolution of renewable resources is characterized in many cases by different time scales where some state variables such as biomass, may evolve relatively faster than other state variables such as carrying capacity. Ignoring this time scale separation means that a slowly changing variable is treated as constant over time. Management rules designed without accounting for time scale separation will result in inefficiencies in resource management. We call this inefficiency time scale externality and we analyze renewable resource harvesting when carrying capacity evolves slowly, either in response to exogenous forcing or in response to emissions generated by the industrial sector of the economy. We study cooperative and non-cooperative solutions under time scale separation. Using singular perturbation reduction methods (Fenichel 1979), we examine the role of different time scales in environmental management and the potential errors in optimal regulation when time scale separation is ignored.
    Keywords: optimal resource harvesting, fast slow dynamics, singular perturbation, regulation, open loop, closed loop.
    JEL: D81 Q20
    Date: 2015–01–11
  10. By: Jongeneel, Roel; Baltussen, Willy H.M.
    Abstract: In this paper, we look at country of mandatory country of origin labelling (MCOOL) that is implemented for meat in the European Union (EU) as outlined in Regulation No 1169/2011 and might be extended to other products. A framework is developed to assess costs and benefits and market impacts (trade flows, competitiveness). The framework is applied to the EU meat case. Results indicate that the impact of origin labeling on costs range between 6€/t and 73€/t, while the impacts on net trade at member state level are in general limited, with a few exceptions (vary from 0.1 to 10.3 per cent).
    Keywords: country of origin labelling, meat sector, competitiveness, international trade, International Relations/Trade, Production Economics,
    Date: 2014–08
  11. By: Just, David; Hanks, Andrew
    Abstract: In economic models of behavior consumers are assumed to value the goods and services they purchase based on stable preferences over externally identifiable attributes such as quality. These models predict that consumers will respond to changes in price in a way that is independent of the source of the price change. Yet research in the behavioral sciences indicates that consumers that are emotionally attached to a consumption good or other behavior might respond with resistance when policies threaten their consumption or behavior. Moreover, policies that in fact validate some emotional attachments can stir a stronger preference for the good or behavior. Reviewing both survey and experimental data from the literature, we demonstrate how such emotional responses can create hidden costs to policy implementation that could not be detected using standard welfare economic techniques. Building upon Rabin’s work on fairness in games, we propose a partial equilibrium model of emotional response to policy whereby preferences are endogenous to policy choices. In accordance with evidence both from our own analysis and the field, we propose that confrontational policies (such as a sin tax) increase the marginal utility for a good, and that validating policies (such as a subsidy) also increases the marginal utility for a good. A social planner that ignores potential emotional responses to policy changes may unwittingly induce significant dead weight loss. Using our model, we propose a feasible method to determine if emotional deadweight costs exist, and to place a lower bound on the size of these costs.
    Keywords: Political Economy, Production Economics, Public Economics,
    Date: 2015
  12. By: Bernard, Tanguy; Torero, Maximo
    Abstract: This paper assesses the importance of social interactions in determining an individual’s choice to connect to an electrical grid, using an original dataset on a new rural electrification program in Ethiopia. Combining GPS information with random allocation of discount vouchers for connection to the grid, we show that neighbors’ connection behaviors have large effects on a household’s connection decision. This effect is also shown to decrease by distance: no peer effect is found for neighbors living farther than 100 meters away. Evidence also suggests that expectation interactions (through social learning of the benefits of electricity) or constraint interactions (through direct externalities of one’s connection on others’ wellbeing) are unlikely to fully account for these effects, and that preference interactions (through a ‘keeping up with neighbors’ type of mechanism) appear to be a plausible explanation. We discuss implications for further research and the design of development interventions.
    Keywords: Ethiopia, Rural Electrification, Social Interactions
    JEL: C9 C93 O12 O33
    Date: 2014–09
  13. By: Andrei Yakovlev (National Research University Higher School of Economics); Oleg Vyglovsky (National Research University Higher School of Economics); Olga Demidova (National Research University Higher School of Economics); Alexander Bashlyk (National Research University Higher School of Economics)
    Abstract: This paper analyzes the phenomenon of repeated procurements made by public sector customers from the same supplier. The previous surveys of “relational contracts” gave different explanations for the possible implications of such repeated procurements, but those surveys dealt mostly with goods and services, with quality difficult to verify at the point of delivery. This work studies the impact of repeated procurements on the price of a simple homogeneous product. We presume that the downward price shift of such a product during repeated procurements can be the consequence of transaction costs reduction in the framework of the bona fide behavior of a customer and supplier. An upward shift in the prices as compared to the market average can, on the contrary, be interpreted as an indirect indication of corrupt collusion between them. Using a huge dataset on procurements of AI-92 gasoline in Russia in 2011, we show that the price difference between repeated and one-time contracts can be explained by the type of procurement procedures providing different opportunities for corrupt behavior. Less transparent procedures (single-sourcing and requests for quotations) are more suitable for corrupt collusion. This might explain why the prices of repeat contracts in this case were higher. On the contrary, the prices of repeat contracts were lower compared to one-time procurement in the case of more transparent e-auctions.
    Keywords: public procurement, repeated contracts, relational contracting, corruption, e-auction
    JEL: H57 L14
    Date: 2014

This nep-reg issue is ©2015 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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