nep-reg New Economics Papers
on Regulation
Issue of 2018‒12‒17
twenty-two papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Revenue and efficiency in pollution permit allocation mechanisms By Peyman Khezr; Ian A. MacKenzie
  2. Reconciling Emissions Trading and the Promotion of Renewable Energy By Sebastian Schaefer
  3. Are Emission Performance Standards Effective in Pollution Control? Evidence from the EU's Large Combustion Plant Directive By Puja Singhal
  4. Small systems, big targets: power sector reforms and renewable energy development in small electricity systems By Rabindra Nepal; Lawrence Cram; Tooraj Jamasb; Anupama Sen
  5. Subsidizing Renewable Energy: Higher Welfare by lower depreciation costs for fossil power plants? By Sebastian Schaefer
  6. Distributional Impacts of Climate Mitigation Policies - a Meta-Analysis By Nils Ohlendorf; Michael Jakob; Jan Christoph Minx; Carsten Schröder; Jan Christoph Steckel
  7. Inter-industry differences in organisational eco-innovation: a panel data study By Jose García-Quevedo; Effie Kesidou; Ester Martínez-Ros
  8. Go for Gigabit? First Evidence on Economic Benefits of (Ultra-)Fast Broadband Technologies in Europe By Briglauer, Wolfgang; Gugler, Klaus
  9. Spectrum management for 5G: assignment methods for spectrum sharing By Beltrán, Fernando; Massaro, Maria
  10. Market Structure and Competition in Airline Markets By Ciliberto, Federico; Murry, Charles; Tamer, Elie
  11. “Major Reforms in Electricity Pricing: Evidence from a Quasi-Experiment” By Xavier Labandeira; Jose M. Labeaga; Jordi J. Teixidó
  12. Optimal Dynamic Auctions are Virtual Welfare Maximizers By Vahab Mirrokni; Renato Paes Leme; Pingzhong Tang; Song Zuo
  13. Benchmark Regulation of Multiproduct Firms: An Application to the Rail Industry By Wesley W. Wilson; Frank A. Wolak
  14. Prices versus Quantities Reassessed By Larry S. Karp; Christian P. Traeger
  15. Public Policy Targets in EU Broadband Markets: The Role of Technological Neutrality By Briglauer, Wolfgang; Stocker, Volker; Whalley, Jason
  16. Demographic variation in active consumer behaviour: Who searches most for retail broadband services? By Carthy, Philip; Lunn, Pete; Lyons, Sean
  17. Supply flexibility in electricity markets By Crampes, Claude; Renault, Jérôme
  18. WiFi4EU: Techno-economic analysis of a key European Commission initiative for public connectivity By Navío-Marco, Julio; Arévalo-Aguirre, Adrian; Pérez-Leal, Raquel
  19. Internet of Things, Virtual Networks and the Economics of Shared Mobility By Knieps, Günter
  20. Information Aggregation in Emissions Markets with Abatement By Cantillon, Estelle; Slechten, Aurélie
  21. Free Rider Problem in License Auctions By Biung-Ghi Ju, Seung Han Yoo
  22. The Impact of Broadband Internet on Employment in France By Houngbonon, Georges V.; Liang, Julienne

  1. By: Peyman Khezr (School of Economics, University of Queensland, Brisbane); Ian A. MacKenzie (School of Economics, University of Queensland, Brisbane)
    Abstract: The most contentious design issue within pollution markets is the choice of initial allocation mechanism. Within this debate, auctions have become the predominant method of initial permit allocation. Although auctions provide potential gains—such as revenue generation, allocative efficiency and clear price discovery—these benefits are rarely fully realized due to firms submitting non-truthful bids. We propose a mechanism that can improve on existing auctions. In our design the regulator determines the supply (up to an upper bound) once all bids have been submitted. This simple and applicable design incites truthful revelation of firms’ private abatement costs, maximizes revenue, and allocates the permits efficiently. This design is relevant to all existing permit auctions including those in the European Union Emissions Trading Scheme (EU-ETS), Regional Greenhouse Gas Initiative (RGGI), and the California Cap-and-Trade Program.
    Keywords: multi-unit auction, pollution permit
    JEL: D44 Q52
    Date: 2018–11–23
  2. By: Sebastian Schaefer (University of Siegen)
    Abstract: The EU emissions trading system (ETS) and the promotion of renewable energy are overlapping regulations. Although the resulting early development of renewables is associated with several advantages such an overlap may violate the path of optimal abatement. Subsidies may cause a too high share of renewables in electricity generation. This results in additional expenses and efficiency losses. We develop a control mechanism serving as thumb rule to limit additional expenses. Under optimal implementation the rule signicantly restricts additional expenses to a maximum of about 4 % of total abatement costs in worst case. This result holds for marginal abatement costs (MAC) approximated by any conical combination of weak convex power functions. This means high exibility of MAC leading to high validity of the results. Consequences of a non-optimal implementation of the mechanism are examined as well. An empirical application to German data shows that the promotion of renewable energy has not yet violated the path of optimal abatement. However, data is restricted because the ETS has not induced an additional emission reduction since 2010.
    Keywords: Overlapping Regulations, Promotion of Renewable Energy, Emissions Trading
    JEL: D61 H23 Q42 Q48 Q54
    Date: 2018
  3. By: Puja Singhal
    Abstract: This paper explores the extent to which the Large Combustion Plant (LCP) Directive succeeded in mitigating local air pollutants from thermal electricity generating plants in the European Union. Using yearly data on plant-level operations from the EEA, we investigate whether emissions limits on stack concentrations were effective in cleaning emissions from existing combustion plants and a catalyst for improved environmental performance of new installations. We take advantage of the discontinuities in regulation status to show that the emission performance standards led to sizeable declines in SO2, NOx, and particle dust concentrations at the stack level from older combustion plants. We also find suggestive evidence of anticipation effects from newer plants in response to tighter emission standards.
    Keywords: Air pollution, emission standards, large combustion plant, EU
    JEL: Q53 Q58 K32
    Date: 2018
  4. By: Rabindra Nepal (CDU Business School, Charles Darwin University); Lawrence Cram (Charles Darwin University); Tooraj Jamasb (Durham University Business School); Anupama Sen (Oxford Institute for Energy Studies)
    Abstract: The dominant focus of much policy attention of late has been on the suitability of electricity market reform carried out under the ‘standard’ or prescriptive approach – the end point of which is market liberalization – for the integration of intermittent renewables. There is now a growing consensus around the argument that traditional energy-only electricity markets where prices are based on system marginal cost cannot function efficiently with both fossil fuels and renewables, potentially resulting in market disruptions and price volatility. Consequently, most policy discussion has focused on finding ways to successfully integrate the two through adopting advanced competitive solutions (such as the use of capacity markets in addition to energy-only markets) in larger systems. We however argue that the effectiveness of competition is limited by the size of the system – i.e., there is a minimum threshold size (and other characteristics such as tropical locations, lack of access, and the prevalence of remote consumers) under which competition will not produce expected outcomes, and require distinctive policy solutions. This paper contributes to the policy discourse by discussing the reform of small electricity systems to integrate renewable energy via the means of three case studies: Nicaragua, El Salvador, and their application to Australia’s Northern Territory. The paper draws some policy lessons that can be considered for other small electricity systems in island economies and territories across Africa, the Caribbean, and the Asia-Pacific, that are pursuing a triad of objectives including electricity sector reform, large-scale renewables development and improving energy access.
    Keywords: Electricity, reforms, renewables, island economies, territories
    JEL: D04 L94 Q48 L51
    Date: 2017
  5. By: Sebastian Schaefer (University of Siegen)
    Abstract: There is a broad agreement that renewable energy sources (RES) will play an important role to abate CO2 emissions but there is a contentious debate about the economic sense to promote RES via subsidies. Many static analyses conclude that subsidizing RES ties up capital which could have been used more efficiently by other reduction strategies with lower marginal abatement costs (MAC). Dynamic models, in contrast, emphasize learning effects which lead to lower MAC of RES. In particular a start-up funding to induce an early market entry of RES may be advantageous to benefit from reduced MAC. To our knowledge there has been no attention so far to the effects of renewables’ promotion to the necessary shut down of power plants based on fossil energy sources (FES). With respect to the achievement of a certain long-term reduction objective an early market entry of RES allows a longer transition from FES to RES. This also means more time to shut down fossil-based power plants which can reduce respective depreciation costs. We use an endogenous growth model to focus on the trade off between the described decrease of depreciation costs and the capital tie-up of a subsidization of RES. We find that subsidizing RES can indeed lead to a higher welfare solely because of reduced depreciation costs. We conclude that an optimal strategy to reduce emissions should consider both the increase of renewable and the decrease of fossil electricity generation.
    Keywords: Renewable Energy, Transition Period, Welfare Effects
    JEL: H23 O21 O44 Q42 Q43 Q48
    Date: 2018
  6. By: Nils Ohlendorf; Michael Jakob; Jan Christoph Minx; Carsten Schröder; Jan Christoph Steckel
    Abstract: Understanding the distributional impacts of market-based climate policies is crucial to design economically efficient climate change mitigation policies that are socially acceptable and avoid adverse impacts on the poor. Empirical studies that examine the distributional impacts of carbon pricing and fossil fuel subsidy reforms in different countries arrive at ambiguous results. To systematically determine the sources of variation between these outcomes, we apply an ordered probit meta-analysis framework. Based on a comprehensive, systematic and transparent screening of the literature, our sample comprises 53 empirical studies containing 183 effects in 39 countries. Results indicate a significantly increased likelihood of progressive distributional outcomes for studies on lower income countries and transport sector policies. The same applies to study designs that consider indirect effects, behavioral adjustments of consumers or lifetime income proxies. Future research on different types of revenue recycling schemes and lower income countries would further contribute to the literature.
    Keywords: Meta-analysis, Environmental policies, Distributional impacts, Inequality, Climate change mitigation, Households, Environmental taxes, Redistribution, Poverty
    JEL: H23 Q52 Q58
    Date: 2018
  7. By: Jose García-Quevedo (Chair on Energy Sustainability, University of Barcelona & IEB); Effie Kesidou (University of Leeds); Ester Martínez-Ros (University Carlos III)
    Abstract: Building on insights from institutional theory, the resource-based view of the firm, and internationalisation, we seek to explain the variation in the adoption of organisational eco-innovations such as environmental management systems (EMS) across sectors in Spain in the period 2009–2014. Previous studies on eco-innovation report that regulatory pressures, technology-push, market-pull, and firm factors are drivers of this process. However, this literature pays relatively little attention to non-technological forms of eco-innovation, such as EMS. As a result, just how EMS adoption can be encouraged across sectors remains unclear in the innovation literature. Here, we seek to address this problem by combining data from the following sources: the Community Innovation Survey and the Spanish Technological Innovation Panel, the International Standardisation Organisation (ISO) survey, the Industry Survey, the Environmental Protection Survey, and the Air Emissions Account. The results of the econometric analysis of panel data reveal that, first, coercive institutional pressures are driving the adoption of EMS reflecting differences across sectors in energy and pollution intensity. Second, the adoption of ISO 9000 – a highly institutionalised system of quality management – increases the adoption of EMS in each industry because of complementarities between the two systems. Third, sectors with a high percentage of internationalised firms operate a higher number of EMS.
    Keywords: Eco-innovation, Institutional theory, Internationalisation, Panel data, EMS
    JEL: O30 Q50 Q58
    Date: 2018
  8. By: Briglauer, Wolfgang; Gugler, Klaus
    Abstract: The literature on the effects of telecommunications infrastructure investments find positive macroeconomic effects, however, it is severely constrained because it could hitherto only analyze investment up to "basic" broadband but not up to the newer generations of "fast" and "ultra-fast" broadband; in particular there is no such evidence available at the EU level so far. Utilizing a comprehensive panel dataset of EU27 member states for the period from 2003-2015, we estimate a small but significant effect of fiber-based ultra-fast broadband over and above the effects of basic broadband on GDP. Adoption of hybrid-fiber fast broadband is incrementally to basic broadband insignificant. Our cost-benefit analysis implies that policy intervention – as foreseen by the European Commission in its public policy targets – is only justified for coverage and adoption levels of around 50% of fast or ultra-fast broadband, whereas for 100% coverage levels we find net losses to society. Thus, it appears that – for the time being and according to the policy principle of "technological neutrality" – a combination of basic broadband, fast and ultra-fast broadband entails the largest economic net benefits to society.
    Date: 2018
  9. By: Beltrán, Fernando; Massaro, Maria
    Abstract: The current development of fifth generation of mobile communications technology, known as 5G, has triggered intense discussions about proper spectrum assignment procedures to accommodate 5G spectrum needs (LStelcom et al., 2017). In particular, spectrum scarcity and lengthy processes to remove and relocate low-intensity uses have led to a renewed interest in spectrum sharing (PCAST, 2012). Since access to radio spectrum for the provision of commercial mobile communications services, mostly cellular telephony and wireless broadband access, is generally granted by means of exclusive usage rights, a growing stream of research is recognising efficiency gains of allowing spectrum to be shared, questioning the primacy of exclusive access to spectrum (Beltran, 2017). Against this background, this paper aims to discuss recent international attempts to introduce some forms of spectrum sharing for the assignment of spectrum rights for the fourth generation (4G) of mobile communications technology, in the light of current challenges posed by the fifth generation (5G). Recently, three cases have called or are calling for the award of rights to the shared use of the spectrum. These cases reveal the rationales supporting National Regulatory Authorities' (NRAs) decisions that led or will lead to the assignment of shared spectrum rights. Furthermore, they also reveal specific assignment methods – either proposed or not fully deployed, which this paper uses for its main contribution. The three cases considered for the analysis are: the 800 MHz and 2.6 GHz bands auction planned by the UK regulator in 2013; the Licensed Shared Access (LSA) approach defined by the European Union (EU); and the 3.5 GHz ecosystem developed in the United States (US). Using an analytical framework for the identification of the adequate spectrum management approach, this paper undertakes a comparison of the abovementioned three cases to draw lessons applicable to the upcoming 5G services.
    Date: 2018
  10. By: Ciliberto, Federico; Murry, Charles; Tamer, Elie
    Abstract: We provide an econometric framework for estimating a game of simultaneous entry and pricing decisions in oligopolistic markets while allowing for correlations between unobserved fixed costs, marginal costs, and demand shocks. Firms' decisions to enter a market are based on whether they will realize positive profits from entry. We use our framework to quantitatively account for this selection problem in the pricing stage. We estimate this model using cross-sectional data from the US airline industry. We find that not accounting for endogenous entry leads to overestimation of demand elasticities. This, in turn, leads to biased markups, which has implications for the policy evaluation of market power. Our methodology allows us to study how firms optimally decide entry/exit decision in response to a change in policy. We simulate a merger between American and US Airways and we find that the post-merger market structure and prices depend crucially on how we model the characteristics of the post-merger firm as a function of the pre-merger firms' characteristics. Overall, the merged firm has a strong incentive to enter new markets; the merged firm faces a stronger threat of entry from rival legacy carriers, as opposed to low cost carriers; and, post-merger entry mitigates the adverse effects of increased concentration.
    Keywords: Entry; market power; market structure; merger; multiple equilibria; oligopoly; Self-selection
    JEL: C35 C51 D43 L13 L41 L44
    Date: 2018–11
  11. By: Xavier Labandeira (Rede, Universidade de Vigo and Economics for Energy); Jose M. Labeaga (Departamento de Análisis Económico II, UNED and Economics for Energy.); Jordi J. Teixidó (Department of Econometrics-Public Policy, Universitat de Barcelona)
    Abstract: The global energy mix is being redefined, and with it the power industry’s cost structure. In many countries, electricity-pricing systems are being revamped so as to guarantee fixed-cost recovery, often by raising the fixed charge of two-part tariff (TPT) schemes. However, consumer misperception of TPTs threatens to undermine the policy’s outcome and puts the sector’s much-needed transformation in jeopardy. We conduct a quasi-experiment with data from a major electricity price reform recently implemented in Spain and find robust evidence that consumers are failing to distinguish between fixed and marginal costs. As a result, the policy goal of cost recovery is not being achieved.
    Keywords: Fixed-cost recovery, Residential electricity demand, Renewables, quasi-experiment,two-part tariff. JEL classification:C99, D12, L11, L94, L98, Q41, Q48
    Date: 2018–12
  12. By: Vahab Mirrokni; Renato Paes Leme; Pingzhong Tang; Song Zuo
    Abstract: We are interested in the setting where a seller sells sequentially arriving items, one per period, via a dynamic auction. At the beginning of each period, each buyer draws a private valuation for the item to be sold in that period and this valuation is independent across buyers and periods. The auction can be dynamic in the sense that the auction at period $t$ can be conditional on the bids in that period and all previous periods, subject to certain appropriately defined incentive compatible and individually rational conditions. Perhaps not surprisingly, the revenue optimal dynamic auctions are computationally hard to find and existing literatures that aim to approximate the optimal auctions are all based on solving complex dynamic programs. It remains largely open on the structural interpretability of the optimal dynamic auctions. In this paper, we show that any optimal dynamic auction is a virtual welfare maximizer subject to some monotone allocation constraints. In particular, the explicit definition of the virtual value function above arises naturally from the primal-dual analysis by relaxing the monotone constraints. We further develop an ironing technique that gets rid of the monotone allocation constraints. Quite different from Myerson's ironing approach, our technique is more technically involved due to the interdependence of the virtual value functions across buyers. We nevertheless show that ironing can be done approximately and efficiently, which in turn leads to a Fully Polynomial Time Approximation Scheme of the optimal dynamic auction.
    Date: 2018–12
  13. By: Wesley W. Wilson; Frank A. Wolak
    Abstract: A number of formerly regulated multiproduct industries have a transitional or permanent residual regulatory mandate to protect consumers from "excessive" prices. The legislation that deregulated most rail rates contains a statutory mandate for the regulator to protect shippers from "excessive" prices. Fulfilling this mandate has been challenging because of the cost and administrative burden to shippers in obtaining regulatory relief. Moreover, as argued by Wilson and Wolak (2016), the existing rate relief mechanism is based on a cost concept that does not reflect the actual incremental cost of a shipment and it does not adequately address the question of what constitutes an "excessive" rate for a multiproduct firm with significant common costs. This paper analyzes a benchmark price approach to identifying "excessive" prices in multiproduct industries subject to residual price regulation. Our empirical analyses demonstrate how the mechanism can be used to fulfill the statutory mandate to protect shippers from "excessive" prices at substantially lower cost, with less administrative burden, and without significant adverse consequences for the long-term financial viability of the railroads.
    JEL: L5 L9 L92
    Date: 2018–11
  14. By: Larry S. Karp; Christian P. Traeger
    Abstract: “Prices versus quantities” (Weitzman 1974), a hugely influential paper, is widely cited (and taught) in current debates about the best policy to reduce greenhouse gas emissions. The paper’s criterion for ranking policies suggests that technological uncertainty favors taxes over cap and trade. Weitzman models a flow pollutant, but greenhouse gases are persistent. Stock pollutants require a fundamental change in the ranking criterion. Innovations’ persistence and their gradual diffusion both favor the use of cap and trade. Numerical results show that the case for cap and trade as a means of reducing greenhouse gas emissions is stronger than widely believed.
    Keywords: policy instruments, pollution, climate change, taxes, quantities, regulation, uncertainty, cap and trade, technology
    JEL: Q00 Q50 H20 D80
    Date: 2018
  15. By: Briglauer, Wolfgang; Stocker, Volker; Whalley, Jason
    Abstract: The European Commission has recently sought to substantially revise how it regulates the telecommunication industry, with a key goal being to incentivise investment in high-speed broadband networks. Ambitious goals have been set regarding the availability and quality of broadband across the European Union, initially in the 'Digital Agenda for Europe' and more recently in its 'Gigabit strategy'. These goals reflect the view of many that there are widespread and significant socio-economic benefits associated with broadband. Our analysis explores the consequence of target setting at a European level, in terms of encouraging investment and picking which technology should be adopted within the context of technological neutrality. We demonstrate that while public policy targets favour specific technologies, especially when the target is defined with regards to fast broadband speeds, the technological choices that occur within a Member State are shaped by the complex and dynamic interaction between a series of path dependencies that may vary significantly across as well as within Member States. Furthermore, taking into account the ecosystem's tremendous evolution, the technological choices that are made within markets reflect both demand and supply uncertainties. To assist with understanding the interaction between those forces that shape, to lesser or greater extent, the choice of one technology over another, we propose a four-phase framework. This framework is not a definitive statement of the relationships that we have identified, but rather serves as a mechanism that illustrates the challenges associated with adopting and then sticking with technological neutrality in policy making.
    Keywords: Broadband,technological neutrality,fibre networks,5G,path dependency,EU public policies
    JEL: L38 L50 L52 L96
    Date: 2018
  16. By: Carthy, Philip; Lunn, Pete; Lyons, Sean
    Abstract: Consumers who actively search for better broadband deals may benefit from lower prices or improved service quality compared to those who do not. If, however, consumers differ in their propensity to engage with the market and actively search, these potential benefits may not accrue equally. This paper investigates differences in consumer search activity for telecommunications services across small geographic areas. We exploit rich and novel data from a commercial price comparison site to explore the dispersion of consumer search in the Irish retail broadband market, while controlling for supply-side variations. By linking geo-coded searches to census data on small area socio-economic characteristics, we identify the areas where most search originates and can thus characterise the socio-economic and demographic groups to whom the benefits of search are most likely to accrue. We find evidence that areas populated by many highly educated, married people, commuters, mortgage holders, and retirees are among the most active in search. In contrast, those areas in which many older people, farmers, low-skilled workers and students reside give rise to significantly fewer consumer searches.
    Keywords: broadband services, consumer search behaviour, socio-economic effects, Ireland
    JEL: D12 D83 L86
    Date: 2018–12–04
  17. By: Crampes, Claude; Renault, Jérôme
    Abstract: The development of non-dispatchable renewable sources of energy requires more flexible reliable thermal equipment to match residual demand. We analyze the advantages of delaying production decisions to benefit from more precise information on states of the world, at the expense of higher production costs in a two-period framework where two technologies with different flexibility characteristics are available. We determine firstbest production levels ex ante and ex post, that is, when demand is still random and is known with certainty respectively. We then show that, under perfect competition, first best can be implemented indifferently either by means of ex post state-contingent markets or by means of a day-ahead market followed by adjustment markets. By contrast, when the industry is imperfectly competitive, the two market designs are not equivalent.
    JEL: C72 D24 L23 L94
    Date: 2018–07
  18. By: Navío-Marco, Julio; Arévalo-Aguirre, Adrian; Pérez-Leal, Raquel
    Abstract: This paper analyses the WiFi4EU initiative, the measures proposed by the European Commission (EC) to speed up public access to Wi-Fi throughout Europe in the coming years, ranging from rapid mechanisms to subsidising the infrastructure. We set out to analyse how these measures are incorporated into the EU policies for building a Digital Single Market and the EC's regulatory tradition, and what the impact of this initiative is likely to be. As this innovative initiative will have an effect upon the network deployments strategies of operators and countries and it has been drawn up in a climate of uncertainties and delays, the article puts all of this into the context of the current European regulation debate and conducts a techno-economic analysis to assess the expected impact of the initiative. We have observed a slight shift towards developmental models in the EC regulatory framework. Furthermore, the techno-economic analysis has revealed the limited extent of Community aid and the considerable variability of the equipment deployed and the expenditure involved. We have also highlighted the questionable formulation of the allocation mechanisms, and we have included certain examples or suggestions for optimisation.
    Keywords: WiFi4EU,network deployment,EC regulation,DSM,municipality
    Date: 2018
  19. By: Knieps, Günter
    Abstract: In this paper the potentials for shared mobility services based on ICT innovations are charac-terized, requiring a paradigm shift from intramodal transportation markets to intermodal shared mobility markets. Heterogeneous ICT innovations are described, entailing various combinations of app-based mobile communications, (camera-based) sensor networks and big data processing. The potentials of shared mobility concepts to avoid traffic collapse and sig-nificantly reduce congestion and pollution in cities are considered, referring to different simu-lation studies on the impact of complete or partial replacement of private vehicles in a city with shared mobility services. Furthermore, the changing role of regulations in the context of the transition from traditional intramodal transportation markets to intermodal shared mobility services markets is considered. Firstly, it is necessary to abolish legal entry barriers to the lo-cal taxi market and the public transit market. Secondly, competition for subsidies of politi-cally desired non-cost covering (shared) mobility services should be symmetrical for all active and potential providers of shared mobility services. Thirdly, technical regulation and con-sumer protection including privacy and cybersecurity for the shared mobility markets should be applied symmetrically and consistently. Finally, the role of pilot projects to establish shared mobility concepts are demonstrated.
    Date: 2018
  20. By: Cantillon, Estelle; Slechten, Aurélie
    Abstract: A key policy argument in favor of emissions markets (relative to command-and-control types of regulation) is their ability to aggregate dispersed information and generate price signals to guide firms' trading and abatement decisions. We investigate this argument in a multi-period model where firms receive noisy private signals about their current period emissions and privately observe their previous period emissions before this information is made public to the rest of the market. Firms respond to information by trading and abating emissions. We show that there exists a rational expectations equilibrium that fully aggregates firms' private information, justifying the policy argument in favor of emissions markets, in the absence of other frictions. We also derive predictions about how prices should be reacting to new private or public information and show that the possibility of abatement dampens the impact of shocks on prices. Finally, we show that the information aggregation result breaks down if firms' abatement costs are also private information.
    Keywords: Efficient Market Hypothesis; Emissions Trading; information aggregation; Price Formation
    JEL: D83 D84 D85 G14 Q58
    Date: 2018–11
  21. By: Biung-Ghi Ju, Seung Han Yoo (Department of Economics, Korea University, Seoul, Republic of Korea)
    Abstract: This paper examines the relationship between free riding and the role of heterogeneity of bidders in entry deterrence with a license auction. We show that the homogeneity of incumbents is a critical factor in deriving the free riding: a fully participating preemption may not arise without such symmetry. More interestingly, however, still, a partially participating preemption with some incumbents deterring can be prevailing even with asymmetry between incumbents.
    Keywords: License auctions, Free rider problem, Entry deterrence
    Date: 2018
  22. By: Houngbonon, Georges V.; Liang, Julienne
    Abstract: The impact of broadband Internet on employment is ambiguous, but empirical evidence is still limited. In this paper, we exploit data on a massive adoption of broadband Internet in France to investigate the impact of broadband Internet on employment. Using a fuzzy difference-in-difference estimation strategy, we find that broadband Internet destroy jobs, although the unemployment rate seems not to be affected. This job destruction occurs in manufacturing activities, contrary to the service sector where broadband Internet adoption creates jobs. In addition, we find that raising the level of education in urban areas tends to alleviate the negative impact of broadband Internet on employment.
    Keywords: Broadband Internet,Employment
    JEL: D31 L96 O15
    Date: 2018

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