nep-reg New Economics Papers
on Regulation
Issue of 2016‒10‒09
fourteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Regulatory islanding parameters in battery based solar PV for electricity system resiliency By Alsayyed, Nidal; Zhu, Weihang
  2. Competition and vested interests in taxis in Ireland: a tale of two statutory instruments By Gorecki, Paul
  3. On the transition from nonrenewable energy to renewable energy By Yacoub Bahini; Cuong Le Van
  4. Barriers to electricity load shift in companies: A survey-based exploration of the end-user perspective By Mark Olsthoorn; Joachim Schleich; Marian Klobasa D
  5. Electoral Incentives and Firm Behavior: Evidence from U.S. Power Plant Pollution Abatement By Matthew Doyle; Corrado Di Maria; Ian Lange; Emiliya Lazarova
  6. Should we extract the European shale gas? The effect of climate and financial constraints By Fanny Henriet; Katheline Schubert
  7. Why does emissions trading under the EU ETS not affect firms' competitiveness? Empirical findings from the literature By Joltreau, Eugénie; Sommerfeld, Katrin
  8. Optimal Completeness of Property Rights on Renewable Resources in Presence of Market Power By Alexandre CROUTZET; Pierre LASSERRE
  9. Consumer confusion, obfuscation, and price regulation By Gu, Yiquan; Wenzel, Tobias
  10. Regulation versus Taxation By Hirte, Georg; Rhee, Hyok-Joo
  11. Broadband Mergers and Dynamic Bargaining: An Application to Netflix By Daniel Goetz
  12. Call of duty: Designated market maker participation in call auctions By Theissen, Erik; Westheide, Christian
  13. Paving the way for better telecom performance: Evidence from the telecommunication sector in MENA countries By Riham Ahmed Ezzat
  14. Does Public Competition Crowd Out Private Investment? Evidence from Municipal Provision of Internet Access By Kyle Wilson;

  1. By: Alsayyed, Nidal; Zhu, Weihang
    Abstract: Distributed battery based solar power photovoltaic (PV) systems have the potential to supply electricity during grid outages resulting from extreme weather or other emergency situations. As such, distributed PV can significantly increase the resiliency of the electricity system. In order to take advantage of this capability, however, the PV systems must be designed with regulatory parameters in mind and combined with other technologies, such as smart energy storage and auxiliary generation. Strengthening policy and regulatory support could encourage deployment of PV systems designed for resiliency and improve public safety to power during emergencies. This paper specifies the goals of power resiliency and explains the reasons that most distributed PV systems as installed today in the United States are technically incapable of providing consumer power during a grid outage. It presents the basics and regulatory parameters of designing distributed PV systems for resiliency, including the use of energy storage and Microgrids. The paper concludes with critical policy and regulatory considerations for encouraging the use of these distributed system designs.
    Keywords: Distributed power generation; Photovoltaic systems; Microgrids; Auxiliary transmitters; islanding detection.
    JEL: R2 R28
    Date: 2016–05–13
  2. By: Gorecki, Paul
    Abstract: This paper addresses, for the taxi market in Ireland, whether judicial, legislative and regulatory processes promote taxi users’ welfare or taxi license holders’ welfare. It is argued that the 2000 decision to remove quantitative restrictions on taxi numbers favoured taxi users; the 2010 decision to re impose such restrictions, with the exception of wheelchair accessible taxis) had the effect of favouring taxi license holders, while doing little to meet its declared object to increase the number of wheelchair accessible taxis and the ready availability of such vehicles for wheelchair customers. Whether the late 2000s/early 2020s will be a rerun of the late 1990s, with increasing waiting times for taxi users, is a moot point. An applicant refused a taxi license might, as in 2000, successfully bring a High Court case contesting the legal basis for the present quantitative restrictions. The Competition and Consumer Protection Commission might spark debate on taxi regulatory policy, while the Minister for Transport, Tourism and Sport might issue a policy direction to the National Transport Authority, the taxi regulator, requiring it to clarify the objectives and benchmarks for success of its existing prohibition on taxi licenses and to consider how best to create incentives for those with wheelchair accessible taxis to use them to service wheelchair users.
    Keywords: regulation; taxi; wheelchair accessible
    JEL: L5
    Date: 2016–10–01
  3. By: Yacoub Bahini (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Cuong Le Van (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, VCREME - VanXuan Center of Research in Economics, Management and Environment - VanXuan Center of Research in Economics, Management and Environment, IPAG - Business School)
    Abstract: In this paper we use the CMM model (Chakravorty et al., 2006) in discrete time and obtain more results concerning the exhaustion time of Non-Renewable Resource (NRE), the dynamic regimes of energy prices, of the stocks of pollution. We show that NRE is exhausted in finite time and is directly influenced by the initial stock of NRE and the costs of NRE and RE. Higher is the initial stock of NRE, far is the time of exhaustion of NRE. Higher is the cost of NRE (resp. the difference of unit costs between RE and NRE), far is the time of exhaustion of NRE. Furthermore, we show that the abatement intervenes, when necessary, not more than two periods. We also show that, when the unit extraction cost of RE is not very high, the stocks of emissions will never be binding if and only if, the initial stock of NRE is less than a critical value.
    Keywords: dynamic optimization,natural resources,energetic transition,environment
    Date: 2015–05
  4. By: Mark Olsthoorn (MTS - Management Technologique et Strategique - Grenoble École de Management (GEM)); Joachim Schleich (Virginia Polytechnic Institute and State University [Blacksburg], MTS - Management Technologique et Strategique - Grenoble École de Management (GEM), Fraunhofer ISI - Fraunhofer Institute for Systems and Innovation Research - Fraunhofer Institute for Systems and Innovation Research); Marian Klobasa D (Fraunhofer ISI - Fraunhofer Institute for Systems and Innovation Research - Fraunhofer Institute for Systems and Innovation Research)
    Abstract: As countries move toward larger shares of renewable electricity, the slow diffusion of active electricity load management should concern energy policy makers and users alike. Active load management can increase capacity factors and thereby reduce the need for new capacity, improve reliability, and lower electricity prices. This paper conceptually and empirically explores barriers to load shift in industry from an end-user perspective. An online survey, based on a taxonomy of barriers developed in the realm of energy efficiency, was carried out among manufacturing sites in mostly Southern Germany. Findings suggest that the most important barriers are risk of disruption of operations, impact on product quality, and uncertainty about cost savings. Of little concern are access to capital, lack of employee skills, and data security. Statistical tests suggest that companies for which electricity has higher strategic value rate financial and regulatory risk higher than smaller ones. Companies with a continuous production process report lower barrier scores than companies using batch or justin- time production. A principal component analysis clusters the barriers and multivariate analysis with the factor scores confirms the prominence of technical risk as a barrier to load shift. The results provide guidance for policy making and future empirical studies.
    Keywords: load management,barriers,load shift
    Date: 2015
  5. By: Matthew Doyle (Division of Economics and Business, Colorado School of Mines); 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: Researchers have utilized the fact that many states have term limits (as opposed to being eligible for re-election) for governors to determine how changes in electoral incentives alter state regulatory agency behavior. This paper asks whether these impacts spill over into private sector decision-making. Using data from gubernatorial elections in the U.S., we find strong evidence that power plants spend less in water pollution abatement if the governor of the state where the plant is located is a term-limited democrat. We show that this evidence is consistent with compliance cost minimization by power plants reacting to changes in the regulatory enforcement. Finally, we show that the decrease in spending has environmental impacts as it leads to increased pollution.
    Keywords: Political Economy, Electoral Incentives, Term Limits, Environmental Policy, Pollution Abatement, Compliance Costs, Power Plants, Water Pollution, Regression Discontinuity
    JEL: H32 H76 Q25 Q53 Q58
    Date: 2016–10
  6. By: Fanny Henriet (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Katheline Schubert (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In the context of the deep contrast between the shale gas boom in the United States and the recent ban by France of shale gas exploration, this paper explores whether climate policy justifies developing more shale gas, taking into account environmental damages, both local and global, and addresses the question of a potential arbitrage between shale gas development and the transition to clean energy. We construct a Hotelling-like model where electricity may be produced by three perfectly substitutable sources: an abundant dirty resource (coal), a non-renewable less polluting resource (shale gas), and an abundant clean resource (solar). The resources differ by their carbon contents and their unit costs. Fixed costs must be paid for shale gas exploration, and before solar production begins. Climate policy takes the form of a ceiling on atmospheric carbon concentration. We show that at the optimum tightening climate policy always leads to bringing forward the transition to clean energy. We determine conditions under which the quantity of shale gas extracted should increase or decrease as the ceiling is tightened. To address the question of the arbitrage between shale gas development and the transition to clean energy, we assume that the social planner has to comply to the climate constraint without increasing energy expenditures. We show that when the price elasticity of electricity demand is low, a binding financial constraint leads to an overinvestment in shale gas and postpones the switch to the clean backstop. We calibrate the model for Europe and determine whether shale gas should be extracted, depending on the magnitude of the local damage, as well as the potential extra amount of shale gas developed because of a financial constraint, and the cost of a moratorium on extraction.
    Keywords: shale gas,global warming,non-renewable resources,energy transition
    Date: 2015–06
  7. By: Joltreau, Eugénie; Sommerfeld, Katrin
    Abstract: Environmental policies may have important consequences for firms' competitiveness or profitability. However, the empirical literature shows that hardly any statistically significant effects on firms can be detected for the European Union Emissions Trading Scheme (EU ETS). On the basis of existing literature, we focus on potential explanations for why the empirical literature finds hardly any significant competitiveness effects on firms, least not during the first two phases of the scheme (2005-2012). We also reason why the third phase (2013-2020) could reveal similar results. We show that the main explanations for this finding are a large over-allocation of emissions ertificates leading to a price drop and the ability of firms to pass costs onto consumers in some sectors. Cost pass-through, in turn, partly generated windfall profits. In addition, the relatively low importance of energy costs indicated by their average share in the budgets of most manufacturing industries may limit the impact of the EU ETS. Finally, small but significant stimulating effects on innovation have been found so far. These different aspects may explain why the empirical literature does not find significant effects from the EU ETS on firms' competitiveness.
    Keywords: Cap and Trade system,EU ETS,firm-level competitiveness
    JEL: Q52 Q58 D22
    Date: 2016
  8. By: Alexandre CROUTZET; Pierre LASSERRE
    Abstract: There are many instances where property rights are imperfectly defined, incomplete, or imperfectly enforced. The purpose of this normative paper is to address the following question:are there conditions under which partial property rights are economically efficient in a renewable resource economy? To address this question, we treat the level of completeness of property rights as a continuous variable in a renewable resource economy. By design, property rights restrict access to the resource, so that they may allow a limited number of firms to exercise market power. We show that there exists a level of property rights completeness that leads to first-best resource exploitation; this level is different from either absent or complete property rights. Complete rights are neither necessary nor sufficient for efficiency in presence of market power. We derive an analytic expression for the optimal level of property rights completeness and discuss its policy relevance and information requirements. The optimal level depends on i) the number of firms; ii) the elasticity of input productivity and iii) the price elasticity of market demand. We also find that a greater difference between the respective values of input and output requires stronger property rights. In fact, high profits both imply a severe potential commons problem and may be the expression of market power; strong property rights limit the commons problem; their incompleteness offsets market power. Biology also impacts the optimal quality of property rights: when the stock of resource is more sensitive to harvesting efforts, optimal property rights need to be more complete.
    Keywords: institutions, property rights, entry, market power oligopoly, common access
    JEL: K L1 Q2 Q3
    Date: 2016
  9. By: Gu, Yiquan (Management School, University of Liverpool); Wenzel, Tobias (Department of Economics, University of Bath)
    Abstract: This paper studies firms’ obfuscation choices in a duopoly setting where two firms differ in their marginal costs of production. We show that the high-cost firm chooses maximum obfuscation while the lowcost firmchooses minimal (maximal) obfuscation if the cost advantage is large (small). We argue that price regulation might be a useful policy in such an environment for two reasons: Introducing a price cap benefits consumers as it i) makes pricing more competitive and ii) reduces firms’ incentives to obfuscate. Moreover, a price cap benefits social welfare as it shifts production to the more efficient low-cost firm.
    Keywords: Obfuscation, Consumer Protection, Price Cap
    JEL: D18 L13 L51
    Date: 2015–05–24
  10. By: Hirte, Georg; Rhee, Hyok-Joo
    Abstract: We examine the working mechanisms and efficiencies of zoning (regulation of floor area ratios and land-use types) and fiscal instruments (tolls, property taxes, and income transfer), and extend the instrument choice theory to include the congestion of road and nonroad infrastructure. We show that in the spatial model with heterogeneous households the standard first-best instruments do not work because they trigger distortion of spatial allocations. In addition, because of the household heterogeneity and real estate market distortions, zoning could be less efficient than, as efficient as, or more efficient than pricing instruments. However, when the zoning enacted deviates from the optimum, zoning not only becomes inferior to congestion charges but is also likely to reduce welfare. In addition, we provide a global platform that extends the instrument choice theory of pollution control to include various types of externalities and a wide range of discrete policy deviations for any reasons beyond cost–benefit uncertainties.
    Keywords: infrastructure congestion,zoning,road tolls,property tax,instrument choice,heterogeneity,Infrastruktur,Verkehrsstau,Zoning,Maut,Grundsteuer,Heterogenität
    JEL: H21 R52
    Date: 2016
  11. By: Daniel Goetz (Princeton University, Department of Economics, Fisher Hall, Princeton, NJ, 08540)
    Abstract: I measure how mergers in the market for broadband internet service affect short-run welfare. Mergers between internet service providers (ISPs) with non-overlapping markets may decrease welfare by increasing ISP bargaining leverage against content providers. However, study of this welfare channel has been stymied by a lack of data on interconnection fees between content and internet service providers. I estimate an industry model of demand, plan choice, pricing and interconnection bargaining using data on plan prices, consumer choice sets and bargaining delays between major U.S ISPs and the leading purveyor of streaming video content, Netflix. Intuitively, if delaying agreement over interconnection degrades quality of service to subscribers, then the opportunity cost of lost subscriptions identifies the fee. To map disagreement times and ISP competition into interconnection fees, I develop a multilateral dynamic bargaining model with asymmetric information. ISPs make take-it-or-leave it offers to learn about Netflix's benefit from interconnection, while simultaneously competing for subscribers who value Netflix quality of service. I structurally estimate the model and recover fixed interconnection fees ranging from 44 to 69 million USD. I find that a proposed merger between TimeWarner and Comcast that was challenged by the Federal Communications Commission would have slightly raised interconnection fees and bargaining length, reducing consumer welfare by 1.9 percent.
    Keywords: mergers; streaming video; dynamic games of incomplete information; two-sided markets;
    JEL: C7 L41 L96
    Date: 2016–09
  12. By: Theissen, Erik; Westheide, Christian
    Abstract: Many equity markets employ designated market makers to supply additional liquidity for small and mid caps, and they use a hybrid trading system that combines continuous trading sessions and call auctions. We use data from Germany's Xetra system to analyze designated market maker activity in the call auctions. We find that their participation rates are negatively related to the liquidity of the stocks, that they are more active at times of elevated volatility, that they stabilize prices, and that they earn positive trading profits. These results imply that designated market makers provide a valuable service to the market, and that they charge an implicit price for that service.
    Keywords: Designated market makers,Call auctions
    JEL: G10
    Date: 2016
  13. By: Riham Ahmed Ezzat (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, FEPS - Faculty of Economics and Political Science)
    Abstract: Since the 1980s, developing countries started adopting telecom reforms due to pressures from international institutions. However, Middle East and North African (MENA) countries lagged in adopting such reforms. Even after introducing telecom reforms in the MENA region beginning in 1995, not all countries became better off in terms of various performance indicators. Therefore, this paper empirically assesses the effects of regulation, privatization and liberalization reforms, as well as their simultaneous presences, in the telecommunication sector on the sector's performance using a sample of 17 MENA countries for the period 1995-2010. We assume that different reforms are affected by institutional, political and economic variables with respect to the level of democracy, the legal origin, the natural resources rents per country and the year of independence from colonization. We correct for the endogeneity of telecom reforms, and we use IV-2SLS (Instrumental Variable-Two Stages Least Squares) estimation to analyze their effect on telecom performance in terms of access, productivity and affordability. We find that the privatization of the main incumbent operator and the fixed-line market's liberalization affect the sector's performance negatively in terms of fixed access and affordability. Moreover, we find that the simultaneous presence of an independent regulator and a privatized incumbent helps to eliminate the drawbacks on the sector performance resulting from privatization. However, the simultaneous presences of the other reforms in terms of regulation-competition and privatization-fixed competition do not help to improve the sector's performance.
    Keywords: regulation,privatization,competition,Telecom industry,MENA region
    Date: 2015–04
  14. By: Kyle Wilson (University of Arizona, Department of Economics, McClelland Hall 401, PO Box 210108, Tucson, AZ 85721-0108);
    Abstract: Government investment in infrastructure may crowd out private investment that would have otherwise occurred. But, the threat of government intervention may also induce private firms to invest preemptively in infrastructure, in order to maintain their market position. This leaves the net effect of public competition on private investment unclear. This paper investigates the tension between these competing effects by providing evidence from the setting of internet service provision. Using household survey data and a novel data set of internet plan characteristics, I provide nationwide estimates of demand for internet technologies. I then use these results to estimate a dynamic oligopoly model of private and public internet service providers’ entry and technology adoption decisions, where private firms are driven by profits and municipalities by some (as yet) unknown combination of profits and consumer welfare. Finally, I simulate firms’ actions under a ban on public provision and find evidence that public competition partially, but not completely, crowds out private investment. Ultimately, I find that a ban on municipal provision in 30 states would result in a loss in consumer welfare of $1.11 billion over 20 years.
    Keywords: broadband, demand, dynamic, public, crowding out access
    JEL: L13 L21 L33 L96 H32 H44
    Date: 2016–10

This nep-reg issue is ©2016 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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