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on Regulation |
| By: | Levi Marks; Charles F. Mason; Kristina Mohlin; Matthew Zaragoza-Watkins |
| Abstract: | New England is at the leading edge of an energy transition in which natural gas is playing an increasingly important role in the US electricity generation mix. In recent years, the region’s wholesale natural gas and electricity markets have experienced severe, simultaneous price spikes. While frequently attributed to limited pipeline capacity serving the region, we demonstrate that such price spikes have been exacerbated by some gas distribution firms scheduling deliveries without actually owing gas. This behavior blocks other firms from utilizing pipeline capacity, which artificially limits gas supply to the region and drives up gas and electricity prices. The firms observed to withhold pipeline capacity also own non-gas electricity generation assets in New England that benefit from their gas-fired competitors paying higher fuel input costs. We estimate that capacity withholding increased average gas and electricity prices by 38% and 20%, respectively, over the three-year period we study. As a result, customers paid $3.6 billion more for electricity. While the studied behavior may have been within the firms’ contractual rights, the significant impacts in both the gas and electricity markets show the need to consider improvements to market design and regulation as these two energy markets become increasingly interlinked. |
| Keywords: | vertical relations, pipelines, electricity markets |
| JEL: | D04 D40 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6687&r=reg |
| By: | Simone Moriconi; Pierre M. Picard; Skerdilajda Zanaj |
| Abstract: | This paper studies theoretically and empirically competition in commodity taxation and product market regulation between trading partner countries. We present a two-country general equilibrium model in which destination-based commodity taxes finance public goods, and product market regulation affects both the number of firms in the market and product diversity. We provide empirical evidence based on data for 21 OECD countries over the 1990-2008 period. Our results suggest that commodity taxation and product market regulation are interdependent policies. We find absence of strategic interaction in commodity taxation between governments. Furthermore, we show that domestic regulation has a negative effect on domestic commodity taxation. Finally, we demonstrate that product market regulation is a strategic complementary policy. |
| Keywords: | regulation, commodity tax, strategic interactions |
| JEL: | F00 H10 H70 H87 L50 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6345&r=reg |
| By: | Guy Meunier; Juan-Pablo Montero; Jean-Pierre Ponssard |
| Abstract: | Output-based allocations (OBAs) are typically used in emission trading schemes to mitigate leakage in sectors at risk. Recent work has shown they may also help to stabilize prices in markets subject to supply and demand shocks. We extend previous work to simultaneously include both leakage and volatility. Motivated by discussions on how to reform carbon markets around the world, and in Europe in particular, we use our model to revisit several critical issues in the design of these markets. In particular, we look at how different OBA schemes manage permit price uctuations and what are the implications of deducting OBA permits (the majority going to trade-exposed and carbon intensive sectors) from the overall permit allocation, so as to keep the global cap on emissions fixed (as it is the case in California and in the EU). |
| Keywords: | pollution markets, carbon price volatility, output-based allocations |
| JEL: | D24 L13 H23 L74 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6334&r=reg |
| By: | Tomaso Duso; Florian Szücs; Veit Böckers |
| Abstract: | In 2008, the European Commission investigated E.ON, a large and vertically integrated electricity company, for the alleged abuse of a joint dominant position by strategically withholding generation capacity. The case was settled after E.ON agreed to divest 5,000 MW generation capacity as well as its extra-high voltage network. We analyze the effect of these divestitures on German wholesale electricity prices. Our identification strategy is based on the observation that energy suppliers have more market power during peak periods when demand is high. Therefore, a decrease in market power should lead to convergence between peak and off-peak prices. Using daily electricity prices for the 2006 - 2012 period and controlling for cost and demand drivers, we find economically and statistically significant convergence effects after the implementation of the Commission’s decision. Furthermore, the price reductions appear to be mostly due to the divestiture of gas and coal plants, which is consistent with merit-order considerations. Placebo regressions support a causal interpretation of our results. |
| Keywords: | electricity, wholesale prices, EU Commission, abuse of dominance, ex post evaluation, E.ON |
| JEL: | K21 L41 L94 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6681&r=reg |
| By: | Christos Genakos; Tommaso M. Valletti; Frank Verboven |
| Abstract: | We study the dual relationship between market structure and prices and between market structure and investment in mobile telecommunications. Using a uniquely constructed panel of mobile operators’ prices and accounting information across 33 OECD countries between 2002 and 2014, we document that more concentrated markets lead to higher end user prices. Furthermore, they also lead to higher investment per mobile operator, though the impact on total investment is not conclusive. Our findings are not only relevant for the current consolidation wave in the telecommunications industry. More generally, they stress that competition and regulatory authorities should take seriously the potential trade-off between market power effects and efficiency gains stemming from agreements between firms. |
| Keywords: | mobile telecommunications, market structure, prices, investments, mergers |
| JEL: | K20 L10 L40 L96 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6509&r=reg |
| By: | Neumann, Karl-Heinz; Plückebaum, Thomas |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itse17:169488&r=reg |
| By: | Haoyong Chen; Lijia Han |
| Abstract: | The recent research report of U.S. Department of Energy prompts us to re-examine the pricing theories applied in electricity market design. The theory of spot pricing is the basis of electricity market design in many countries, but it has two major drawbacks: one is that it is still based on the traditional hourly scheduling/dispatch model, ignores the crucial time continuity in electric power production and consumption and does not treat the inter-temporal constraints seriously; the second is that it assumes that the electricity products are homogeneous in the same dispatch period and cannot distinguish the base, intermediate and peak power with obviously different technical and economic characteristics. To overcome the shortcomings, this paper presents a continuous time commodity model of electricity, including spot pricing model and load duration model. The market optimization models under the two pricing mechanisms are established with the Riemann and Lebesgue integrals respectively and the functional optimization problem are solved by the Euler-Lagrange equation to obtain the market equilibria. The feasibility of pricing according to load duration is proved by strict mathematical derivation. Simulation results show that load duration pricing can correctly identify and value different attributes of generators, reduce the total electricity purchasing cost, and distribute profits among the power plants more equitably. The theory and methods proposed in this paper will provide new ideas and theoretical foundation for the development of electric power markets. |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1710.07918&r=reg |
| By: | Godlovitch, Ilsa; Neumann, Karl-Heinz |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itse17:169463&r=reg |
| By: | Mitra, Manipushpak; Pal, Rupayan; Paul, Arindam; Sharada, P.M. |
| Abstract: | We consider a differentiated product duopoly where a regulated firm competes with a private firm. The instrument of regulation is the level of privatization. First, the regulator determines the level of privatization to maximize social welfare. Then both firms endogenously choose the mode of competition (that is, whether to compete in price or quantity). Finally, the two firms compete in the market. Under a very general demand specification, we show that when the products are imperfect substitutes (complements), there is co-existence of private and public (strictly partially privatized) firms. Moreover, in the second stage, the firms compete in prices. |
| Keywords: | Partially private firm, price (Bertrand) competition, quantity (Cournot) competition |
| JEL: | D4 L1 L2 |
| Date: | 2017–10–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:81802&r=reg |
| By: | Izabela Jelovac (University of Lyon, CNRS, GATE Lyon Saint-Etienne); Samuel Kembou Nzale (Aix-Marseille Univ. (Aix-Marseille School of Economics), CNRS, EHESS and Centrale Marseille) |
| Abstract: | We study optimal contracts in a regulator-agent setting with joint production, altruistic and selfish agents, and uneasy outcome measurement. Such a setting represents sectors of activities such as education and health care provision. The agents and the regulator jointly produce an outcome for which they all care to some extent that is varying from agent to agent. Some agents, the altruistic ones, care more than the regulator does while others, the selfish agents, care less. Moral hazard is present due to the agent’s effort that is not contractible. Adverse selection is present too since the regulator cannot a priori distinguish between altruistic and selfish agents. Contracts consist of a simple transfer from the regulator to the agents together with the regulator’s input in the joint production. We show that a screening contract is not optimal when we face both moral hazard and adverse selection. |
| Keywords: | altruism, Moral Hazard, adverse selection, regulator-agent joint production |
| JEL: | D64 D86 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1737&r=reg |
| By: | Lars Sorge; Anne Neumann |
| Abstract: | This paper analyzes the dynamic relationship between CO2 emissions, energy consumption, GDP, and trade-openness from 1971 to 2013, based on the Environmental Kuznets Curve (EKC) hypothesis for 70 WTO countries. Using recently developed secondgeneration panel data methods, the empirical results support the EKC hypothesis for the high-, middle-, and lower-income panels used. Concerning the energy consumption and economic growth nexus, the causality results support the conversion hypothesis for the high-income panel, whereas the neutrality hypothesis holds for the lower- and middle-income panels. Based on the causality results, trade-openness does not positively impact CO2 emissions, GDP leads CO2 emissions, and trade-openness causes energy consumption within any income panel. The net effect of economic growth, however, could help to stabilize future CO2 emissions within any income panel. |
| Keywords: | Environmental Kuznets Curve, CO2 emissions, energy consumption, economic growth, trade-openness, Granger causality, second-generation panel data methods |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1699&r=reg |
| By: | Mizuno, Keizo |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itse17:169485&r=reg |
| By: | Montoya Gómez, Ana Maria; Zimmer, Markus |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc17:168273&r=reg |
| By: | de Streel, Alexandre; Sibony, Anne-Lise |
| Abstract: | This CERRE Policy Report makes recommendations, on the basis of the most recent academic literature, to improve EU consumer protection rules for digital services. Digital services are defined broadly and cover the main current legal categories, i.e. the information society services, the provision of digital content, the electronic communications service and the audiovisual media services. The Report deals with the horizontal consumer protection rules which have just be evaluated by the European Commission as well as sector-specific rules whose some are currently reviewed by the EU legislator. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itse17:169509&r=reg |