nep-reg New Economics Papers
on Regulation
Issue of 2016‒11‒27
eleven papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Do Benefits from Dynamic Tariffing Rise? Welfare Effects of Real-Time Pricing under Carbon-Tax-Induced Variable Renewable Energy Supply By Christian Gambardella; Michael Pahle; Wolf-Peter Schill
  2. Analysis on lock-in effects by estimating for the switching costs in telecommunications bundles. By Hyungjin Kim; Hyunchul Kim
  3. Taxation and Privacy Protection on Internet Platforms * By Francis Bloch; Gabrielle Demange
  4. The Impact of Bunker Risk Management on CO2 Emissions in Maritime Transportation Under ECA Regulation By Gu, Yewen; Wallace, Stein W.; Wang, Xin
  5. Truth-telling and the regulator: Evidence from a field experiment with commercial fishermen By Drupp, Moritz A.; Khadjavi, Menusch; Quaas, Martin F.
  6. Electricity Consumption Scheduling with Energy Storage, Home-based Renewable Energy Production and A Customized Dynamic Pricing Scheme By Mitra, Krishnendranath; Dutta, Goutam
  7. Past Performance and Procurement Outcomes By Francesco Decarolis; Giancarlo Spagnolo; Riccardo Pacini
  8. Regulation of air pollution from wood-burning stoves By Thomas Bue Bjørner; Jørgen Brandt; Lars Gårn Hansen; Martin Groth Hjelmsø; Marianne Nygaard Källstrøm
  9. An Economic Analysis of U.S Airline Fuel Economy Dynamics from 1991 to 2015 By Matthew E. Kahn; Jerry Nickelsburg
  10. Some Like it Hot: The Role of Environmental Concern and Comfort Expectations in Energy Retrofit Decisions By Galassi, Veronica; Madlener, Reinhard
  11. The Evolution of Health Insurer Costs in Massachusetts, 2010-12 By Kate Ho; Ariel Pakes; Mark Shepard

  1. By: Christian Gambardella; Michael Pahle; Wolf-Peter Schill
    Abstract: Common intuition holds that retail real-time pricing (RTP) of electricity demand should become more beneficial in markets with high variable renewable energy (VRE) supply mainly due to increased price volatility. Using German market data, we test this intuition by simulating long-run electricity market equilibria with carbon-tax-induced VRE investment and real-time price responsive and nonresponsive consumption behavior. We find that the potential welfare gains from RTP are only partially explained by price volatility and are rather driven by opposing wholesale price effects caused by the technology portfolio changes from carbon taxation. Consequently, annual benefits from RTP actually change nonmonotonously with the carbon tax level, implying that increasing RTP at relatively high VRE shares can be both less and much more beneficial than without VRE supply. Nonetheless, as zero marginal cost supply becomes abundant with VRE entry, allocative efficiency increasingly depends on exposing more and more consumers to RTP
    Keywords: Real-time pricing; Electricity; Variable renewables; Carbon taxation; Welfare analysis; Partial equilibrium modeling
    Date: 2016
  2. By: Hyungjin Kim (Sungkyunkwan University); Hyunchul Kim (Sungkyunkwan University)
    Abstract: As digital convergence is spreading more than ever, the lock-in effects of bundled services in the broadcasting and telecommunication market are receiving considerable attention. Antitrust authorities have questioned whether lock-in effects impede competition in telecommunications markets. However, the answer to this question remains indecisive because few studies have attempted to quantify the switching costs in bundles. We use novel consumer level data to examine switching costs of bundled products. We use the mixed logit model to estimate the demand for bundled packages, which include mobile, Internet, and paid-TV services. We measure switching cost by the decrease in utility when consumers change their service providers from period t-1 to period t. The results show that consumers experience additional costs when they switch from bundles. Our estimates indicate that consumers pay 3,238 KRW (about 3 USD) per month for changing from Double Play Service (paid TV with Internet) to other services and 3,510 KRW for Triple Play Service. The estimates of switching costs are smaller for the bundles without any commitment period requirement. This implies that stipulated service period and penalty intensify the lock-in effects. In the counterfactuals where we remove the penalty for switching from bundles, we find that consumer surplus increases by 3,714 KRW per month. We proposed policies which reduce penalties for cancellations or shorter stipulated service periods in order to reduce switching costs.
    Keywords: Switching costs, Lock-in, Bundles, Mixed logit model
  3. By: Francis Bloch (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - École des Ponts ParisTech (ENPC) - CNRS - Centre National de la Recherche Scientifique); Gabrielle Demange (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - École des Ponts ParisTech (ENPC) - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper studies data collection by a monopolistic internet platform We show that the optimal strategy of the platform is either to cover the market or to choose the highest data exploitation level, excluding users with high privacy costs from the platform. For likely parameter values, the platform chooses an excessive level of data exploitation from the point of view of users. We study how different tax instruments can be used to reduce the level of data collection and analyze the effect of an opting-out option, letting users access the platform with no data collection. We show that a differentiated tax, taxing access revenues and data revenues at different rates is the most effective instrument and that the introduction of an opting-out option may harm users as it induces the platform to raise the level of data exploitation. JEL classification numbers: H23, L86, L50
    Keywords: Digital services,Privacy protection,Taxation,Opt-out option
    Date: 2016–10–13
  4. By: Gu, Yewen (Dept. of Business and Management Science, Norwegian School of Economics); Wallace, Stein W. (Dept. of Business and Management Science, Norwegian School of Economics); Wang, Xin (Department of Industrial Economics and Technology Management, Norwegian University of Science and Technology)
    Abstract: The shipping industry carries over 90 percent of the world’s trade, and is hence a major contributor to CO2 and other airborne emissions. As a global effort to reduce air pollution from ships, the implementation of the ECA (Emission Control Areas) regulations has given rise to the wide usage of cleaner fuels. This has led to an increased emphasis on the management and risk control of maritime bunker costs for many shipping companies. In this paper, we provide a novel view on the relationship between bunker risk management and CO2 emissions. In particular, we investigate how different actions taken in bunker risk management, based on different risk aversions and fuel hedging strategies, impact a shipping company’s CO2 emissions. We use a stochastic programming model and perform various comparison tests in a case study based on a major liner company. Our results show that a shipping company’s risk attitude on bunker costs have impacts on its CO2 emissions. We also demonstrate that, by properly designing its hedging strategies, a shipping company can sometimes achieve noticeable CO2 reduction with little financial sacrifice.
    Keywords: Bunker risk management; Maritime bunker management; CO2 emissions; Stochastic programming; ECA; Fuel hedging; Sailing behavior
    JEL: C44 C60
    Date: 2016–11–16
  5. By: Drupp, Moritz A.; Khadjavi, Menusch; Quaas, Martin F.
    Abstract: Understanding what determines the extent to which economic agents tell the truth to their regulating authority is of major economic importance, from banking to environmental protection. To this end, we examine truth-telling of German commercial fishermen in an artefactual field experiment. Their regulator, the European Union (EU), has recently enacted a ban on discarding unwanted fish catches to the sea, without yet increasing monitoring activities. The regulator thus depends on fishermen's truth-telling, while standard economic theory predicts substantial self-serving dishonesty. Using a coin- tossing task, we test whether truth-telling in a baseline setting differs from behavior in two treatments that exploit fishermen's widespread ill-regard of the EU. We find that fishermen misreport coin tosses to their advantage, albeit to a lesser extent than standard theory predicts. Misreporting is stronger among fishermen in a treatment where they are faced with the EU flag, suggesting that lying towards their ill-regarded regulator is more substantial. Yet, some fishermen are more honest in a control treatment where the source of EU research funding is revealed additionally. Our findings imply that regulators can influence truth-telling behavior by means of their regulatory approaches and communication strategies.
    Keywords: truth-telling,lying,field experiment,regulation,fishermen
    JEL: C93 D63 Q22 K32 K42 L51
    Date: 2016
  6. By: Mitra, Krishnendranath; Dutta, Goutam
    Abstract: In this paper we propose a scheduling model for electrical appliances in a dynamic pricing environment. Initially we have given a vector of price points for the next twenty four hours. We have developed an optimization model that minimizes cost to customer subject to operating time spans provided by the customer as per their requirements. The model is further modified to derive prices based on the consumption of electricity at the concerned time slot. We have also studied the effects of including energy storage and renewable energy generation at the consumer level. In this case we propose a linear price function that helps in automatically generating a price value for a time slot.
  7. By: Francesco Decarolis; Giancarlo Spagnolo; Riccardo Pacini
    Abstract: Reputational incentives may be a powerful mechanism for improving supplier performance. We analyze their role in contract awarding, exploiting an experiment run by a firm which introduced a new vendor rating system scoring suppliers' past performance and linking it to the award of future contracts. We study responses in both price and performance to the announcement of the switch from price-only to price-and-rating auctions. Across the 136 parameters scored, overall compliance improves from 25 percent to 80 percent. Improvements involve all parameters and suppliers, but are more pronounced for parameters receiving a higher weight in the announced scoring auction. Prices do not significantly change overall, but we find some evidence of lower prices right after the announcement when suppliers compete to win contracts to get scored, and of higher prices once they have established a good reputation. Even under an upper bound estimate for this price increase, however, the cost of the policy is below its lower bound benefit estimate, which derives from a reduction in fatal accidents driven by improvements on the subset of parameters involving worksite safety.
    JEL: D44 D47 D82 H54 H57 I18 K12 L22 L74
    Date: 2016–11
  8. By: Thomas Bue Bjørner (Danish Economic Councils); Jørgen Brandt (Department of Environmental Science, Aarhus University); Lars Gårn Hansen (Department of Food and Resource Economics, University of Copenhagen; Danish Economic Councils); Martin Groth Hjelmsø (Danish Economic Councils); Marianne Nygaard Källstrøm (Danish Economic Councils)
    Abstract: Air pollution is a major global challenge. Emissions from residential wood-burning stoves make a surprisingly large contribution to total air pollution related health costs. In Denmark, emissions from wood-burning stoves are calculated to cause almost 400 premature deaths each year within Denmark and additionally about 300 premature deaths in other parts of Europe. In this article, we present an integrated assessment of the net social benefit of different schemes for regulating wood-burning stoves including bans and taxes. The assessment uses high resolution air pollution emission inventory, and atmospheric dispersion and exposure models to estimate the health effects of imposing regulations on residential wood-burning. This is combined with an economic stove investment and use model to simulate reactions to regulations and evaluate compliance costs. We find that there are large net welfare gains from most types of regulation, but the largest gains result from imposing a differentiated tax or a general ban on older stoves. The results for Denmark suggest that there could be substantial welfare gains from regulating residential wood-burning stoves in other countries as well.
    Keywords: wood-burning stoves, particle emission, cost-benefit, regulation, integrated assessment
    JEL: I18 Q48 Q53 Q58
    Date: 2016–11
  9. By: Matthew E. Kahn; Jerry Nickelsburg
    Abstract: Airline transport generates a growing share of global greenhouse gas emissions but as of late 2016, this sector has not faced U.S. fuel economy or emissions regulation. At any point in time, airlines own and lease a set of durable vehicles and have invested in human and physical capital and an inventory of parts to maintain these vehicles. Each airline chooses whether to scrap and replace airplanes in their fleet and how to utilize and operate their fleet of aircraft. We model these choices as a function of real jet fuel prices. When jet fuel prices are higher, airlines fly fuel inefficient planes slower, scrap older fuel inefficient planes earlier and substitute miles flown to their more fuel efficient planes.
    JEL: L11 L62 R4
    Date: 2016–11
  10. By: Galassi, Veronica (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: This study investigates the role of environmental concern and comfort expectations in the decision to retrofit a dwelling and their implications for the rebound effect. We ex-ante elicit individual preferences for deep thermal energy-saving measures in residential buildings by means of a Discrete Choice Experiment (DCE) among 3,161 owner-occupiers and tenants in Germany. Besides room temperature, we include air quality, level of control over the system, noise reduction, and aesthetics of the dwelling as proxies for indoor comfort. Our model also accounts for monthly payments related to the implementation of the measure – and customized based on tenancy status, building type, and size of the dwelling – as well as technical energy cost savings. Econometric estimation provides significant results for most of the parameter coefficients. Findings show that thermal comfort preferences are heterogeneous: 33% of the respondents attach positive values to an increase in indoor temperature that would result from the deep retrofit, providing evidence in favor of a technical rebound effect. While environmental concern explains heterogeneity in most of the attributes, its interaction with thermal comfort is not significant. Thermal comfort is, however, the least important attribute in the analysis.
    Keywords: Rebound; Mixed logit; Residential buildings; Energy efficiency
    JEL: C25 D12 Q40 R20
    Date: 2016–09
  11. By: Kate Ho; Ariel Pakes; Mark Shepard
    Abstract: We analyze the evolution of health insurer costs in Massachusetts between 2010-2012, a period in which the use of physician cost control incentives spread among insurers. We show that the growth of costs and its relationship to the introduction of cost control incentives cannot be understood without accounting for (i) consumers’ switching between plans, and (ii) differences in cost characteristics between new entrants and those leaving the market. New entrants are markedly less costly than those leaving (and their costs fall after their entering year), so cost growth of those who stay in a plan is significantly higher than average per-member cost growth. Cost control incentives were used by Health Maintenance Organizations (HMOs). Relatively high-cost HMO members switched to Preferred Provider Organizations (PPOs) while low-cost PPO members switched to HMOs. As a result, the impact of cost control incentives on HMO costs is likely different from their impact on market-wide insurer costs.
    JEL: I11 I13 L10
    Date: 2016–11

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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