nep-reg New Economics Papers
on Regulation
Issue of 2016‒02‒23
sixteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Cooperative investment in next generation broadband networks: A review of recent practical cases and literature By Balmer, Roberto E.
  2. Balancing Roam Like At Home political objective with structural cost differences between domestic provision of mobile services By Jaunaux, Laure; Deniau, Philippe; Lebourges, Marc
  3. Historic and potential technology transition paths of grid battery storage: Co-evolution of energy grid, electric mobility and batteries By Manuel Baumann
  4. Facility- and Service-based Competition and Investment in Fixed Broadband Networks: Lessons from a Decade of Access Regulations in the European Union Member States By Briglauer, Wolfgang; Gugler, Klaus; Haxhimusa, Adhurim
  5. Can Energy Efficiency Standards Reduce Prices and Improve Quality? Evidence from the US Clothes Washer Market By Arlan Brucal; Michael Roberts
  6. Broadband Infrastructure and Entrepreneurship: Evidence from German Municipalities By Falck, Oliver; Mazat, Andreas; Stockinger, Bastian
  7. Intermodal competition: studying the pricing strategy of the French rail monopoly By Patricia Perennes
  8. Broadening benefits from natural resource extraction: Housing values and taxation of natural gas wells as property By Weber, Jeremy G.; Burnett, J.Wesley; Xiarchos, Irene M.
  9. China's regional industrial energy efficiency and carbon emissions abatement costs By Ke Wang; Yi-Ming Wei
  10. Local mixed companies: the theory and practice in an international perspective By Nuno F. da Cruz; Rui Cunha Marques; A. Marra; C. Pozzi
  11. The drivers of the substitution of individual services for bundled services: The case of Spain By Urueña López, Alberto; Gijón, Covadonga; Castro García-Muñoz, Raquel; Ureña Fernández, Olga; Feijóo, Claudio
  12. Coordinating Cross-Country Congestion Management By Friedrich Kunz; Alexander Zerrahn
  13. Enforcement spillovers: Lessons from strategic interactions in regulation and product markets By Mary F. Evans; Scott M. Gilpatric; Jay P. Shimshack
  14. The impacts of the EU ETS on Norwegian plants' environmental and economic performance By Klemetsen, Marit E.; Rosendahl, Knut Einar; Lund Jakobsen, Anja
  15. Contracting with Endogenous Entry By Marco Pagnozzi; Salvatore Piccolo
  16. An Assessment of the Energy-Efficiency Gap and Its Implications for Climate Change Policy By Todd D. Gerarden; Richard G. Newell; Robert N. Stavins; Robert C. Stowe

  1. By: Balmer, Roberto E.
    Abstract: Alternative telecommunications operators have continuously invested in their own infrastructure in recent years. After more than a decade since liberalization, competitive conditions have substantially changed, especially in urban areas. European regulatory authorities have acknowledged this development by starting regional deregulation. Additionally, different forms of cooperative investments in next generation broadband have appeared on the market. The effects of such schemes on competition, investment and welfare crucially depend on the fine details of implementation. For instance, in the case of joint ventures, it matters how investment costs are shared and how internal and external access prices are determined. In the case of long-term access agreements, it is essential to consider how access tariffs are structured, whether they can adapt to market developments ex-post and whether contracts are signed before or after the investment takes place. Generally, many of these agreements allow some extent of risk sharing, offering the possibility to increase investment incentives when firms are not risk neutral. This article reviews the theoretical and empirical literature on co-investments in next generation broadband networks as well as practical cases. It is suggested that regulators consider introducing regulated co-investment agreements complementing current regulation or in some cases even substituting for it.
    Keywords: next generation access,co-investment models,cooperative investment,investment sharing,investment cooperation
    Date: 2015
  2. By: Jaunaux, Laure; Deniau, Philippe; Lebourges, Marc
    Abstract: This paper analyses the consequences on European markets of the introduction of “Roam Like At Home” (RLAH) obligation. Regulatory authorities have two main preoccupations when implementing RLAH obligation: the sustainability at retail level for home markets and the sustainability of RLAH at wholesale level for visited markets. We demonstrate that wholesale roaming regulation cannot be led by a roaming retail cost recovery principle as roaming retail services within RLAH obligation cannot be considered anymore as an autonomous economic activity. It is essential for regulation to ensure that roaming providers are able to recover full costs of providing wholesale roaming services. However, wholesale roaming regulation can be justified only if the market is not competitive. Competitive wholesale roaming markets would not erase the heterogeneity of mobile service provisions costs between European Member States, which implies that either some national mobile market may be subject to increase of domestic price or to depart from pure RLAH and allow RLAH+, that is a limited charge on top of domestic price, above a given level of roaming usages.
    Date: 2015
  3. By: Manuel Baumann (IET/CICS.NOVA, Universidade Nova de Lisboa, Faculdade de Ciências e Tecnologia, and ITAS, Karlsruhe Institute of Technology)
    Abstract: Scarcity of fuels, changes in environmental policy and in society increased the interest in generating electric energy from renewable energy sources (RES) for a sustainable energy supply in the future. The main problem of RES as solar and wind energy, which represent a main pillar of this transition, is that they cannot supply constant power output. This results inter alia in an increased demand of backup technologies as batteries to assure electricity system safety. The diffusion of energy storage technologies is highly dependent on the energy system and transport transition pathways which might lead to a replacement or reconfiguration of embedded socio-technical practices and regimes (by creating new standards or dominant designs, changing regulations, infrastructure and user patterns). The success of this technology is dependent on hardly predictable future technical advances, actor preferences, development of competing technologies and designs, diverging interests of actors, future cost efficiencies, environmental performance, the evolution of market demand and design and evolution of our society.
    Keywords: Renewable energy, Electric energy, Transition pathways, Batteries
    JEL: O31 R40
    Date: 2015–01
  4. 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 using dynamic panel estimation techniques. 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, this strategic complementarity is much more pronounced with respect to the entrants. Finally, we show that service-based competition appears to have no significant impact on the investment decision of incumbents and entrants and that there is no supportive evidence for the so-called “ladder of investment” hypothesis. With respect to the later phase of market regulation, service-based competition exerts a negative impact on entrants’ investment.
    JEL: L43 L52 L96
    Date: 2015
  5. By: Arlan Brucal (UH-Manoa Department of Economics, University of Hawaii Economic Research Organization); Michael Roberts (UH-Manoa Department of Economics and University of Hawaii Economic Research Organization)
    Abstract: We examine the e↵ect of energy efficiency standards on the clothes washers market using a constant-quality price index constructed from same-model price changes for a significant majority of clothes washer models sold in the United States between 2001 and 2011. We find constant-quality prices fell over time, while quality increased, particularly around times energy standards changed. We estimate total welfare changes by assuming the di↵erence between average price and constant-quality price indicates average quality. Further examination shows product entry and exit are associated with changes federal standard for energy efficiency. With policy changes implicitly coordinating entry and exit, average vintage sharply falls when standards change. Controlling for individual model and time e↵ects, we find that lower average vintage is associated with more rapidly falling prices, an e↵ect we attribute to increased competition. We also find a strong relationship between clothes washer prices and average vintage of the same manufacturer, which indicates cannibalism explains much of the declining price of clothes washers over time. We apply the same methodology to other appliances (clothes dryer, room air conditioners and refrigerators) which did not experience simultaneous efficiency standard changes between 2001 and 2011. We see the same cannibalism in the market for clothes dryers, but not for room air conditioners or refrigerators. We also find notable improvements both in the characteristics of clothes washers that directly improve energy efficiency and those that promote convenience and space-saving. Energy efficiency standards appear to facilitate more rapid innovation and price declines.
    JEL: H51 I12 Q51 Q53
    Date: 2015–06
  6. By: Falck, Oliver; Mazat, Andreas; Stockinger, Bastian
    Abstract: Policy makers in many places regularly call for broadband infrastructure deployment to foster regional development. While some empirical studies deal with the productivity impact of broadband Internet availability, few hard facts are known about its relation to establishment start-up. This paper contributes to closing the gap, providing causal evidence on the impact of broadband Internet availability on establishment start-up. We apply an instrumental variables approach, exploiting technological peculiarities of the preexisting voice telephony network that impeded high-speed Internet availability to circumvent endogeneity bias. We find that Internet effects on establishment start-up might take some time to realize and are likely heterogeneous across sectors, establishment size and knowledge intensity.
    Date: 2015
  7. By: Patricia Perennes (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In most countries, passengers' rail transportation is characterized by a monopoly. Nevertheless, it does not mean that the monopolist-usually the national company-does not face competition, in the form of intermodal competition (planes, cars). This article focuses on the French national rail company (SNCF) that still has a monopoly on national passenger traffic. It analyses SNCF's pricing behavior on most of the origin/destination pairs it operates with high speed trains to/from Paris. It takes into account the fact SNCF enjoys a limited leeway to set its prices because ticket prices are still regulated in France. The existence of such a price cap regulation is an opportunity for an economist to analyse how a transportation company facing intermodal competition sets its prices. Usually, such an analysis is hard to conduct since transport prices are set following yield management principles.
    Abstract: Dans de nombreux pays, l'industrie ferroviaire est organisée de façon monopolistique. Cela ne signifie toutefois pas que l'entreprise en monopole, généralement une entreprise d'Etat, ne soit pas soumise à une forme de pression concurrentielle du fait de la concurrence intermodale du transport aérien et des véhicules personnels. Cet article s'intéresse à l'opérateur national ferroviaire français, la SNCF, qui est aujourd'hui encore en monopole sur le segment du transport national de passagers. Il étudie le comportement tarifaire de la SNCF sur la plupart des dessertes grande vitesse qu'elle opère depuis/en direction de Paris. Il prend en compte le fait que la SNCF ne bénéficie que d'une liberté restreinte pour fixer ses tarifs, car les prix des billets de train sont toujours régulés en France. L'existence d'une telle régulation, qui prend la forme d'un plafonnement de prix, permet à l'économiste d'étudier comment une entreprise de transport qui fait face à une concurrence intermodale détermine ses prix. Habituellement, une telle étude est difficile à entreprendre car le prix des services de transport sont régis par les principes du yield management.
    Keywords: Railroad,pricing strategy,intermodal competition
    Date: 2014–04–14
  8. By: Weber, Jeremy G.; Burnett, J.Wesley; Xiarchos, Irene M.
    Abstract: We study the effects of the property tax base shock caused by natural gas drilling in the Barnett Shale in Texas–a state that taxes oil and gas wells as property. Over the boom and bust in drilling, housing appreciation closely followed the oil and gas property tax base, which expanded the total tax base by 23 percent at its height. The expansion led to a decline in property tax rates while maintaining or increasing revenues to schools. Overall, each $1 per student increase in the oil and gas property tax base increased the value of the typical home by $0.15. Some evidence suggests that the cumulative density of wells nearby may lower housing values, indicating that drilling could reduce local welfare without policies to increase local public revenues.
    Keywords: Shale Gas; Property Taxes; Housing Values
    JEL: H71 Q32 Q33
    Date: 2016–01–18
  9. By: Ke Wang; Yi-Ming Wei (Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology)
    Abstract: Evaluating the energy and emissions efficiency, measuring the energy saving and emissions reduction potential, and estimating the carbon price in China at the regional level are considered a crucial way to identify the regional efficiency levels and efficiency promotion potentials, as well as to explore the marginal abatement costs of carbon emissions in China. This study applies a newly developed Data Envelopment Analysis (DEA) based method to evaluate the regional energy and emissions efficiencies and the energy saving and emissions reduction potentials of the industrial sector of 30 Chinese major cities during 2006-2010. In addition, the CO2 shadow prices, i.e., the marginal abatement costs of CO2 emissions from industrial sector of these cities are estimated during the same period. The main findings are: (i) The coast area cities have the highest total factor industrial energy and emissions efficiency, but efficiency of the west area cities are lowest, and there is statistically significant efficiency difference between these cities. (ii) Economically well-developed cities evidence higher efficiency, and there is still obviously unbalanced and inequitable growth in the nationwide industrial development of China. (iii) Fortunately, the energy utilization and CO2 emissions efficiency gaps among different Chinese cities were decreasing since 2006, and the problem of inequitable nationwide development has started to mitigate. (iv) The Chinese major cities could have, on average, an approximately 19% or 17% efficiency increase on energy utilization or CO2 emissions during 2006-2010. (v) Promoting the industrial energy utilization efficiency is comparatively more crucial for Chinese cities at the current stage, and the efficiency promotion burdens on the west area cities are the heaviest among all Chinese cities. (vi) An N-shaped Environmental Kuznets Curve (EKC) exists between the level of industrial CO2 emissions efficiency and income, and the inflection point the EKC is located between 12052-12341 US$ of GDP per capita, indicating that an accelerated CO2 emissions efficiency increase will accrue when this income level is reached. (vii) In 2010, the industrial total energy saving and CO2 emissions reduction potentials for Chinese major cities were 41 million tce and 143 million tCO2, respectively. (viii) The average industrial CO2 emissions abatement cost for Chinese major cities is 45 US$ during 2006-2010, and the existence of large gap on CO2 shadow prices between different Chinese regions provide a necessity and possibility for establishing a regional carbon emissions trading system in China.
    Keywords: CO2 emissions, energy efficiency, abatement cost, shadow price, DEA
    JEL: Q40 Q58
    Date: 2014–08–01
  10. By: Nuno F. da Cruz; Rui Cunha Marques; A. Marra; C. Pozzi
    Abstract: Several factors have been contributing to the growing use of public private-partnership (PPP) arrangements by local governments, such as, the need for new investments on infrastructure (e.g. decentralization of responsibilities, regulatory requirements demanding better quality and environmental protection, renovation of the networks), imposition of strict debt limits to the localities, and local government reform policies/programs. Whereas contractual PPP arrangements, such as concession contracts, can be seen as an extension of traditional public procurement (with additional complexities in contract design and management) and are currently better handled by contracting authorities, institutionalized PPPs (mixed companies) are still quite puzzling for both practitioners and academics. In fact, the following questions deserve further investigation: When are mixed companies expected to depict a higher performance than other options? What are the risks involved and how should they be allocated and mitigated? How should mixed companies be monitored and evaluated? The articles in this Special Issue provide insightful answers to these and many other relevant questions to policy makers.
    Keywords: institutionalized public-private partnerships; local government; partial privatization
    JEL: N0 J50
    Date: 2014–03
  11. By: Urueña López, Alberto; Gijón, Covadonga; Castro García-Muñoz, Raquel; Ureña Fernández, Olga; Feijóo, Claudio
    Abstract: In 2007, Spanish telecoms companies began to offer bundled services. Operators started by offering phone plus broadband and phone plus broadband plus pay television bundles, and in doing so, were able to reduce aggregated prices for consumers. In addition to monetary incentives, this study examines the causes that lead consumers (individuals) and households (as economic agents) to replace individual contracts with bundled contracts including more (or fewer) services from those previously subscribed to individually. A model of demand of access to household and individual services was estimated for three services: landline phone, Internet, and pay television using a representative panel of telecoms consumers in Spain. The results show –in decreasing order- the influence of previous experience with particular services, followed by factors related to usage and factors linked with socio-demographic characteristics. Monetary incentives -contrary to common belief- play a significant but minor role.
    Keywords: telecoms bundles,substitution,landline phone,broadband Internet,pay tv,triple play,random effects model
    Date: 2015
  12. By: Friedrich Kunz; Alexander Zerrahn
    Abstract: We employ a detailed two-stage model to simulate the operation of the Central Eastern European electricity market and network. Implementing different cases of coordination in congestion management between national transmission system operators, numerical results show the beneficial impact of closer cooperation. Specific steps comprise the sharing of network and dispatch information, cross-border counter-trading, and multilateral redispatch in a flow-based congestion management framework. Efficiency gains are accompanied by distributional effects. Closer economic cooperation becomes especially relevant against the background of changing spatial generation patterns, deeper international integration ofnational systems, and spillovers of national developments to adjacent systems.
    Keywords: Electricity, congestion management, network modeling, Europe
    JEL: C63 L51 L94
    Date: 2016
  13. By: Mary F. Evans (The Robert Day School of Economics and Finance, Claremont McKenna College); Scott M. Gilpatric (Department of Economics, University of Tennessee); Jay P. Shimshack (Frank Batten School of Leadership and Public Policy, University of Virginia)
    Abstract: We explore mechanisms driving enforcement spillovers - when sanctions at one entity influence behavior at other entities. Our model illustrates when spillovers arise from a regulatory channel and when they arise from a channel not emphasized in the existing literature: product markets. Using facility-by-month data from Clean Water Act manufacturers, we find that penalties generate strong positive spillovers for other facilities facing the same authority. We find suggestive evidence that penalties generate negative spillovers for facilities in the same industry but facing a different authority. Results are consistent with spillovers driven by strategic interactions in both regulation and product markets.
    Keywords: general deterrence, strategic substitutes, strategic complements, pollution policy
    JEL: E32 R10
    Date: 2015–08
  14. By: Klemetsen, Marit E. (University of Oslo/Statistics Norway); Rosendahl, Knut Einar (School of Economics and Business, Norwegian University of Life Sciences); Lund Jakobsen, Anja (School of Economics and Business, Norwegian University of Life Sciences)
    Abstract: This paper examines the impacts of the EU Emissions Trading System (ETS) on the envi- ronmental and economic performance of Norwegian plants. The EU ETS is regarded as the cornerstone climate policy both in the EU and in Norway, but there has been considerable de- bate regarding its eects due to low quota prices and substantial allocation of free allowances to the manufacturing industry. Both quota prices and allocation rules have changed signicantly between the three phases of the ETS. The rich data allow us to investigate potential eects of the ETS on several important aspects of plant behavior. The results indicate a weak tendency of emissions reductions among Norwegian plants in the second phase of the ETS, but not in the other phases. We nd no signicant eects on emissions intensity in any of the phases, but positive eects on value added and productivity in the second phase. Positive eects on value added and productivity may be due to the large amounts of free allowances, and that plants may have passed on the additional marginal costs to consumers.
    Keywords: Tradable emissions quotas; emissions intensity; productivity; propensity score matching; dierence-in-dierences
    JEL: C23 C54 D22 Q54 Q58
    Date: 2016–02–10
  15. By: Marco Pagnozzi (Università di Napoli Federico II and CSEF); Salvatore Piccolo (Università Cattolica del Sacro Cuore di Milano and CSEF)
    Abstract: A principal contracts with an agent who is privately informed about his production cost. Before contracting, the agent learns his probability of having a low cost – his ex ante “type” – and decides whether to pay an entry fee. We show that the entry game has two equilibria that determine the possible types of the agent who contract with the principal. Contrasting with standard intuition, in the equilibrium that is “risk dominant” for the agent, an increase in the entry fee increases the mass of types who enter and the expected cost of the entrant. Public policies that increase entry barriers may be welfare improving.
    Keywords: Entry, Vertical Contracting, Asymmetric Information
    JEL: D43 D82 L13 L51
    Date: 2016–01–22
  16. By: Todd D. Gerarden (Harvard University); Richard G. Newell (Duke University); Robert N. Stavins (Harvard University); Robert C. Stowe (Harvard University)
    Abstract: Improving end-use energy efficiency—that is, the energy-efficiency of individuals, households, and firms as they consume energy—is often cited as an important element in efforts to reduce greenhouse-gas (GHG) emissions. Arguments for improving energy efficiency usually rely on the idea that energy-efficient technologies will save end users money over time and thereby provide low-cost or no-cost options for reducing GHG emissions. However, some research suggests that energy-efficient technologies appear not to be adopted by consumers and businesses to the degree that would seem justified, even on a purely financial basis. We review in this paper the evidence for a range of explanations for this apparent “energy-efficiency gap.” We find most explanations are grounded in sound economic theory, but the strength of empirical support for these explanations varies widely. Retrospective program evaluations suggest the cost of GHG abatement varies considerably across different energy-efficiency investments and can diverge substantially from the predictions of prospective models. Findings from research on the energy-efficiency gap could help policy makers generate social and private benefits from accelerating the diffusion of energy-efficient technologies—including reduction of GHG emissions.
    Keywords: Energy Efficiency, Climate Change Policy
    JEL: Q4 Q48 Q5 Q55
    Date: 2015–03

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