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on Regulation |
| By: | Briglauer, Wolfgang; Gugler, Klaus; Haxhimusa, Adhurim |
| Abstract: | This paper employs firm-level panel data of 57 incumbent and entrant firms for 23 European countries in the decade from 2003 to 2012. We examine the impact of service- and facility-based competition on firm-level investment as well as the strategic effects underlying infrastructure investment decisions. At the same time we explicitly model the structural dynamics of broadband investment by means of a flexible accelerator model. The empirical specification employs dynamic panel estimation techniques which allows us to account for various sources of endogeneity. We find that facility-based competition exerts a positive and significant impact on both incumbents and entrants implying that incumbents' and entrants' investment decisions are strategic complements. Moreover, we find that intermodal competition in terms of fixed-mobile substitution exerts different effects at the firm level. Finally, we show that service-based competition appears to have no significant impact on the investment decision of incumbents and entrants. However, with respect to the later phase of market liberalization, service-based competition exerts a negative impact on entrants' investment. Our results thus also provide relevant policy guidance on the role of service-based competition in regulating emerging high-speed broadband infrastructure. |
| Keywords: | investment dynamics,regulation,service-based competition,facility-based competition,strategic effects |
| JEL: | L43 L52 L96 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:15048&r=reg |
| By: | Nico Keyaerts; Leonardo Meeus |
| Abstract: | There is a trend in regulatory practice towards exceptional incentives for exceptional investments. Italy and the US have the longest experience with a regulatory framework for strategically important investments that deviates from the default framework. In these countries, the incentives provided to the project promoter are based on a case-by-case assessment of the project. Policy makers and regulatory authorities in countries that are considering setting up such a framework can learn from these experiences. In this paper, we therefore analyze them in detail. We find that the Italian scheme is simpler, which reduces the administration costs. The US scheme is more advanced in the case-by-case assessment of the requested incentives. However, both schemes have evolved, each becoming more sophisticated and complex. Countries that are considering the introduction of exceptional regulatory incentives for exceptional electricity transmission investments should note that this is a process that will require fine-tuning). |
| Keywords: | Electricity Transmission, Transmission grid, Interconnection, Incentive Regulation |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2015/44&r=reg |
| By: | Andrei V. Belyi; Andreas Goldthau |
| Abstract: | Gazprom, Russian's prime state owned gas producer, is facing severe pressure stemming from international gas market dynamics, EU regulation and the Ukraine crisis. Slowing gas demand coupled with shifting pricing models and a persisting transit issue pose significant challenges for Gazprom's business going forward. Domestic pressure emerges from competition arising from private companies, mainly Notatek, but also state owned rival Rosneft, and is reinforced by governmental moves toward more market oriented Russian gas sector organization. Gazprom's options include pivoting to alternative markets, notably China; reverting to international legal bodies and market principles to counter EU regulatory pressures; and to depoliticize gas trade in order to generate long term expectations on its prime market - Europe. We pose that neither of these options is likely to fully solve Gazprom's dilemma, whose competitive position will arguably further weaken both domestically and internationally. We believe that Gazprom's best option would be to aim for depoliticizing gas trade, by way of giving up its de facto monopoly on gas exports to Europe. |
| Keywords: | Energy security, gas markets, Gazprom, European Union, regulation |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2015/22&r=reg |
| By: | Xinying Fu (VU University Amsterdam, the Netherlands); Vincent van den Berg (VU University Amsterdam, the Netherlands); Erik T. Verhoef (VU University Amsterdam, the Netherlands) |
| Abstract: | There has been wide interest in private supply of roads as a solution to traffic congestion. We study its efficiency under demand uncertainty: we solve for equilibrium and optimum as benchmarks, and evaluate the efficiency of possible regulatory policies for private road operators. We obtain analytic solutions for simple networks and numerical simulation results for more complex ones. For two serial links and two parallel links, self-financing still holds in expected terms for the first-best case, even though the capacity is higher than the capacity for the deterministic demand equal to the expected value. When forced to apply the second-best optimal pricing, the private supplier makes an expected loss (profit) if there is an untolled substitute (complement) in the network. In contrast to the deterministic counterpart of the problem we study, regulation by competitiv e auction cannot replicate the second-best zero-profit result. For more complex networks, when private firms adds capacity one link at a time, entry by competitive auctions performs better than free entry. For the parameter range considered in the numerical simulation, entry by generalized auction performs better than entry by patronage auction. |
| Keywords: | Traffic Congestion; Road Pricing; Uncertain Demand; Road Network; Private Supply; Auction |
| JEL: | D63 H23 R41 R42 |
| Date: | 2015–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20150092&r=reg |
| By: | Damien Sans (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS); Sonia Schwartz (CERDI, Université d’Auvergne); Hubert Stahn (Aix-Marseille University (Aix-Marseille School of Economics), CNRS, & EHESS) |
| Abstract: | In this paper, we study an eco-industry providing an environmental service to a competitive polluting sector. We show that even if this eco-industry is highly concentrated, a standard environmental policy based on a Pigouvian tax or a pollution permit market reaches the first-best outcome, challenging the Tinbergen rule. To illustrate this point, we first consider an upstream monopoly selling eco-services to a representative polluting firm. We progressively extend our result to heterogeneous downstream polluters and heterogeneous upstream Cournot competitors. Finally, we underline some limits of this result. It does not hold under the assumption of abatement goods or downstream market power. In this last case, we obtain Barnett's result. |
| Keywords: | environmental regulation, eco-industry, Imperfect Competition, abatement services |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1533&r=reg |
| By: | Kempa, Karol; Moslener, Ulf |
| Abstract: | Across the globe climate policy is shifting away from a carbon price towards investment subsidies, such as grants, interest-subsidised loans or guarantees. This increases the risk of inefficient public spending. This paper shows how the main market imperfections related to the emission externality, knowledge spillovers and capital market imperfections negatively affect the risk-return-profile of a climate investment. To some extent these negative impacts can be compensated through different forms of investment subsidies. Minimising the risk of inefficient public spending is, however, challenging and requires detailed understanding of technologies and markets at the project level. The analysis provides guidance for the design of appropriate investment subsidy schemes. Carbon prices and investment subsidies are not perfect substitutes, and - at least for developed economies - a carbon price remains the single most efficient instrument. This price should, however, coexist with other instruments, e.g. investment support schemes, which can be tailored to address the non-emission market imperfections related to climate change. |
| Keywords: | climate finance,investment support,policy instruments,environmental externality,innovation spillover,capital market failure |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fsfmwp:219&r=reg |
| By: | Luis Angeles; Robin G. Milne |
| Abstract: | A major initiative of the Thatcher and Major Conservative administrations was that public sector ancillary and professional services provided by incumbent direct service organisations [DSOs] be put out to tender. Analyses of this initiative, in the UK and elsewhere, found costs were often reduced in the short run. However, few if any studies went beyond the first round of tendering. We analyze data collected over successive rounds of tendering for cleaning and catering services of Scottish hospitals in order to assess the long term consequences of this initiative. The experience of the two services was very different. Cost savings for cleaning services tended to increase with each additional round of tendering and became increasingly stable. In accordance with previous results in the literature, DSOs produced smaller cost reductions than private contractors: probably an inevitable consequence of the tendering process at the time. Cost savings from DSOs tended to disappear during the first round of tendering, but they appear to have been more permanent in successive rounds. Cost savings for catering, on the other hand, tended to be much smaller, and these were not sustained |
| Keywords: | Competitive Tendering; Scottish Hospitals; Cleaning services; Catering services. |
| JEL: | H11 H51 H57 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2015_11&r=reg |
| By: | Mario Mariniello; Francesco Salemi |
| Abstract: | Highlights - Mobile telecommunications markets are an important part of the European Commissionâ?? strategy for the completion of the European Union Digital Single. The use of mobile telecommunications â?? particularly mobile data access â?? is growingand becoming an increasingly important input for the economy. - The EU currently does not have a unified mobile telecommunications market. TheEU compares favourably to the United States in terms of prices and connectionspeed, but lags behind in terms of coverage of high-speed 4G wireless connections.â?¢ Europeâ??s long-term goal should be to make data access easier by increasing highspeedwireless coverage while keeping prices down for users. An increase incross-border competition could help to achieve that goal. The Commission has two important levers to help stimulate cross-border supply:(a) ensuring competition in intra-country mobile markets in order to provide anincentive for operators to expand into other jurisdictions, and (b) reducing mobileoperatorsâ?? costs of expansion into multiple EU countries. The further developmentof policies on international roaming and radio spectrum management will be centralto this effort. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:893&r=reg |
| By: | Özlem Bedre-Defolie (ESMT European School of Management and Technology); Gary Biglaiser (University of North Carolina) |
| Abstract: | We analyze whether the use of breakup fees by an incumbent might induce an inefficient allocation of consumers and possibly foreclose efficient entry where buyers are non-pivotal (infinitesimal) and have to pay switching costs if they switch from the incumbent to an entrant. When the entrants are competitive, in the unique equilibrium the incumbent induces the efficient outcome, so there is no inefficient foreclosure. When there is a single entrant, the incumbent cannot deter the entry if it is not allowed to use a breakup fee. In the equilibrium of this case there might be too much or too little entry depending on the entrant's cost advantage versus the highest level of switching costs. When the incumbent can use a breakup fee in its long-term contract, in the unique equilibrium the incumbent forecloses the entrant by a sufficiently high breakup fee. This result does not depend on the level of switching costs or the entrant's efficiency advantage. We extend the result to a situation where consumers do not face switching costs, but they get a lower match value from the entrant's product than the incumbent's. In this case the results differ only when there is a single entrant. There are no inter temporal effects without breakup fees and if the incumbent is allowed to use breakup fees, it forecloses the entrant if and only if the entrant's cost advantage is sufficiently low compared to the highest switching cost. All results are robust to allowing the incumbent to offer a spot price. |
| Date: | 2015–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:esm:wpaper:esmt-15-02&r=reg |