nep-reg New Economics Papers
on Regulation
Issue of 2020‒05‒11
fourteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Horizontal cooperation on investment: Evidence from mobile network sharing By Cojoc, Anca; Ivaldi, Marc; Maier-Rigaud, Frank P.; März, Oliver
  2. What Can We Learn from EU ETS? By Herman R. J. Vollebergh; Corjan Brink
  3. The welfare effects of persuasion and taxation: Theory and evidence from the field By Rodemeier, Matthias; Löschel, Andreas
  4. Commitments and sunk costs in private mobility: A study of Swiss households facing green transport choices By Jeremy van Dijk; Mehdi Farsi; Sylvain Weber
  5. The Hungarian utility cost reduction programme : An impact assessment By Csaba Weiner; Tekla S. Szép
  6. Residential Electricity Pricing in Texas’s Competitive Retail Market By Brown, David P.; Tsai, Chen-Hao; Woo, Chi-Keung; Zarnikau, Jay; Zhu, Shuangshuang
  7. The Politics of Platform Capitalism. A Case Study on the Regulation of Uber in New York By Seidl, Timo
  8. Improving renewable energy resource assessments by quantifying landscape beauty By McKenna, Russell; Weinand, Jann Michael; Mulalic, Ismir; Petrovic, Stefan; Mainzer, Kai; Preis, Tobias; Moat, Helen Susannah
  9. Vertical Integration and Capacity Investment in the Electricity Sector By Brown, David P.; Sappington, David E.M.
  10. Green New Deal Act 2020 By McGaughey, Ewan
  11. Partial privatization and subsidization in a time-consistent policy: output versus R&D subsidies By Lee, Sang-Ho; Muminov, Timur
  12. Multimarket Contact and Collusion in Online Retail By Poppius, Hampus
  13. Public Procurement - How open is the European Union to US firms and beyond? By Cernat, Lucian; Kutlina-Dimitrova, Zornitsa
  14. Cryptocurrency Market Reactions to Regulatory News By Raphael A. Auer; Stijn Claessens

  1. By: Cojoc, Anca; Ivaldi, Marc; Maier-Rigaud, Frank P.; März, Oliver
    Abstract: We present a structural model to investigate the effects of horizontal cooperation on investment in the context of telecommunication networks. More specifically, we estimate the effect of network sharing in the mobile telecommunications industry on prices, network quality and consumer welfare. The presented framework allows estimating the effects of different types of sharing agreements including common ownership of shared assets in a joint venture company or collaboration via geographical separation (geo-split principle). The proposed identification strategy relies on differences in the costs of network deployment of shared versus non-shared network infrastructure, with different costs affecting operators’ optimal choice of price and network quality. We apply the structural model to estimate the effects of a network sharing agreement in the Czech Republic, using a combination of unique datasets on prices, network quality measured as average download speed and operator’s costs of network deployment. The results of our model indicate that horizontal cooperation on investments may be beneficial for consumers. Specifically, the network sharing agreement under study generated cost savings for the sharing parties, which were passed-on to consumers in the form of lower prices and higher average download speed. Our findings are of relevance to the assessment of network sharing agreements, which, considering the substantial investment cost associated with the 5G technology, are likely to play an even greater role in the telecommunications industry in the future. The findings are also of relevance to the general literature on horizontal cooperation on investments.
    Keywords: mobile telecommunication networks; network sharing; cooperation on investment; 4G; 5G; horizontal cooperation; empirical industrial organization
    JEL: L11 L40 L96
    Date: 2020–05
  2. By: Herman R. J. Vollebergh; Corjan Brink
    Abstract: This paper discusses lessons that other regions could learn from European Union’s effort to implement carbon pricing through EU Emission Trading System (EU ETS). Our lessons are, first of all, that a cap-and-trade system like EU ETS is very helpful in guaranteeing a credible and binding reduction of emissions through its cap within the sectors subject to this regulation. Second, providing enough flexibility for trade, in particular intertemporal trade, is essential but should also be guided with care. The current quantity rules for the Market Stability Reserve to steer the abundancy of allowances seems a promising new feature for cap-and-trade policies, although price collars for newly designed systems create more transparency. Third, it is far from obvious why EU ETS should cover the entire carbon emissions base if other instruments, like (implicit) carbon taxes are already available. Finally, EU ETS seems at least partially responsible for the observed steady reduction of carbon emission within the EU ETS sectors. However, the gradual tendency to outsource emissions to other regions justifies carbon border adjustment mechanisms for selected sectors if other regions do not impose carbon pricing rules.
    Keywords: climate policy, carbon pricing, European Union Emission Trading System, Market Stability Reserve
    JEL: D47 D62 Q54 Q58
    Date: 2020
  3. By: Rodemeier, Matthias; Löschel, Andreas
    Abstract: How much information should governments reveal to consumers if consumption choices have uninternalized consequences to society? How does an alternative tax policy compare to information disclosure? We develop a price theoretic model of information design that allows empiricists to identify the welfare effects of any arbitrary information policy. Based on this model, we run a natural field experiment in cooperation with a large European appliance retailer and randomize information regarding the financial benefits of energy-efficient household lighting among more than 640,000 subjects. We find that full information disclosure strongly decreases demand for energy efficiency, while partial information disclosure increases demand. More information reduces social welfare because the increase in consumer surplus is outweighed by the rise in environmental externalities. By randomizing product prices, we identify the optimal tax vector as an alternative policy and show that sizable taxes on energy-inefficient products yield larger welfare gains than any information policy. We also document an important policy interaction: information provision dramatically reduces attention to pecuniary incentives and thereby limits the effectiveness of taxes.
    Keywords: persuasion,optimal taxation,internality taxes,field experiments,energy efficiency,behavioral public economics
    JEL: D61 D83 H21 Q41 Q48
    Date: 2020
  4. By: Jeremy van Dijk; Mehdi Farsi; Sylvain Weber
    Abstract: This paper experimentally investigates the existence of behavioural deviations from the oft-assumed rationality in private transport decisions, avoiding the selection-biases in revealed data. Through a choice experiment answered by 995 Swiss respondents, we explore the linkages between long- and medium-term travel investment decisions, and the choice of transport mode. We test the existence of commitment device usage in car and public transport pass purchases, and the sunk cost fallacy, as well as the impact of electric vehicles on mode choice. We find little evidence to support the existence of commitment devices, and no sunk cost fallacy. We further show that electric vehicle owners are equally likely to commute in their car, however use a greater mix of transport modes for leisure and long-distance trips. Our results support the importance of marginal travel costs in transport policy, as well as demonstrate the wide impact of rising EV consumption.
    Keywords: Transport, Behaviour, Choice experiment, Commitment, Sunk cost, Electric vehicles, Energy technology adoption, Environmental policy.
    Date: 2020–04
  5. By: Csaba Weiner (Institute of World Economics, Centre for Economic and Regional Studies); Tekla S. Szép (Faculty of Economics, University of Miskolc)
    Abstract: In Hungary, regulated energy prices have been crucial in supplying electricity, district heating and natural gas to households, and as a result of a utility cost reduction programme, implemented in several stages starting from 2013, a sharp decline has been seen in these prices. However, this state intervention was performed without a strong policy background and the energy policy documents were just later adjusted to the prevailing situation. This paper focuses on the direct and indirect effects of this programme. The logarithmic mean Divisia index (LMDI) method is applied to decompose the absolute change in residential energy consumption between 2010 and 2017. We calculate price, intensive structure, extensive structure, expenditure and population effects. The results are in line with our expectations that decreasing energy prices for households had a positive impact on their energy use in the first few years. Overall, it induced an additional energy use of as much as 18.9 PJ between 2013 and 2017, while residential energy consumption stood at 263 PJ in 2017. We find that the state intervention created a new situation where the ratio of residential expenditure on energy services to total expenditure significantly decreased, the inflation rate declined and the economic and income situation of the majority, especially that of the middle class, considerably improved. However, the efficiency of the applied measures is still doubtful and several negative effects have also been detected. The utility cost reduction programme discourages energy conservation and energy efficiency; erodes the competitiveness of renewables; reduces gross capital formation in the energy sector; deteriorates security of supply; and increases energy prices for non-household customers. Despite these drawbacks, the utility cost reduction programme is expected to continue with some adjustments at most.
    Keywords: utility cost reduction, decomposition, energy consumption, residential sector, energy prices, energy efficiency, energy poverty, energy policy, energy investment
    JEL: P22 P28 Q41 Q48
    Date: 2020–03
  6. By: Brown, David P. (University of Alberta, Department of Economics); Tsai, Chen-Hao (Midcontinent Independent System Operator); Woo, Chi-Keung (Education University of Hong Kong); Zarnikau, Jay (University of Texas at Austin); Zhu, Shuangshuang (Frontier Energy)
    Abstract: Using a large sample of residential retail electricity plans advertised on the Public Utility Commission of Texas’s Power-to-Choose website between during January 2014 to December 2018, our panel regression analysis finds changes in the projected wholesale price of electricity are not fully reflected as changes in these plans’ price quotes. The estimated rates of wholesale price pass-through range from 43% to 45%. Retailers tend to charge risk premia that increase with wholesale price volatility. Prepayment and time-of-use plans likely contain price premia. The price premia associated with higher-than-average renewable energy contents in the early years of our sample have largely vanished by 2018. Longer contract terms come at a higher price. Finally, increased customer switching tends to reduce retail price quotes, implying that Texas’s residential retail market can be made more price competitive through consumer education on plan choices and dissemination of credible price information.
    Keywords: Retail Electricity Pricing; Procurement Cost Pass-Through; Risk Premium; Renewable Premium; ERCOT
    JEL: D47 G12 Q31 Q41
    Date: 2020–04–27
  7. By: Seidl, Timo
    Abstract: In recent years, platform companies like Uber have caused much controversy. By disrupting markets and contesting regulatory regimes, they have come to epitomize both the promises and perils of platform capitalism. However, little attention has been paid to the politics of platform capitalism itself, that is, to the political processes in which platform are – or aren’t – regulated. This paper starts filling this gap by developing, testing, and defending a framework based on three conceptual pillars: coalitions, narratives and platform power. Using discourse network analysis and a case study on the regulation of Uber in New York, it shows that the success or failure of regulations depends on the ability of actors to mobilize broad coalition; that narratives affect the composition of these coalitions; and that platform companies have both unique political strengths and vulnerabilities. The paper contributes to the literatures on coalitional politics, ideational institutionalism, business power, and the politics of digital capitalism.
    Date: 2020–04–22
  8. By: McKenna, Russell; Weinand, Jann Michael; Mulalic, Ismir; Petrovic, Stefan; Mainzer, Kai; Preis, Tobias; Moat, Helen Susannah
    Abstract: A cost-efficient and sustainable energy transition requires reliable information about the distribution of renewable energy resources. Here we draw on over 1.5 million scenicness ratings of around 200,000 geotagged photographs from Scenic-Or-Not to quantify the aesthetic value of the landscapes in which onshore wind energy installations could be situated in Great Britain. An analysis of planning applications provides quantitative evidence that onshore wind projects are more likely to be rejected when proposed in more scenic areas. Exploiting further open data sources including OpenStreetMap, we build on these findings to generate new estimates of the feasible potential and costs for onshore wind in Great Britain, which we find to be around 1700 TWh and £280 billion respectively. We also uncover a strong spatial correlation between scenicness and the quality of the wind resource, implying inevitable trade-offs between cost-efficiency and public acceptance.
    Date: 2020
  9. By: Brown, David P. (University of Alberta, Department of Economics); Sappington, David E.M. (University of Florida)
    Abstract: We examine the incentives for and the effects of vertical integration in the electricity sector. We find that vertical integration generally reduces retail prices and increases industry capacity investment, consumer surplus, and total welfare. Unilateral vertical integration is pro table, so it arises in equilibrium. However, ubiquitous vertical integration can reduce aggregate industry pro fit.
    Keywords: Vertical Integration; Capacity Investment; Electricity Sector
    JEL: L51 L94 Q28 Q40
    Date: 2020–04–27
  10. By: McGaughey, Ewan (King's College, London)
    Abstract: This is a draft Green New Deal Act 2020, designed to decarbonise the economy, and make society wealthier and healthier, at next to zero cost to taxpayers. It includes provisions on: (1) establishing a Green New Deal commission to report on progress and recommend future changes to Parliament, (2) decarbonisation of transport, namely all buses, taxis, delivery vehicles, cars, and rail, limitation of plane flights, and golden shares in auto-manufacturers to switch production, (3) decarbonisation of energy generation, (4) a duty on the Coal, and Oil and Gas Authorities to eliminate the coal, oil and gas industries, and the creation of civil and criminal liability for climate damage, (5) a just transition with full employment, an income guarantee, and training for all affected workers, (6) changing agricultural subsidies to ensure carbon neutral practices, carbon traffic light labelling in all supermarkets, and recycling, (7) duties of the Bank of England, financial regulators, and all company directors to divest from fossil fuels and invest in clean energy, (8) empowerment of local government in transport, energy, building and agriculture, and (9) duties on the Secretary of State to negotiate for decarbonisation in all international agreements and military affairs. These statutory measures will ensure an end to climate damage by 2025.
    Date: 2020–03–27
  11. By: Lee, Sang-Ho; Muminov, Timur
    Abstract: This study revisits welfare comparisons between output and R&D subsidies for a mixed duopoly with partial privatization in a time-consistent policy framework. We show that an output subsidy is welfare-superior to an R&D subsidy policy only when the degree of privatization is high. We also show that the government has a lower incentive to privatize the public firm under the R&D subsidy but full nationalization with an R&D subsidy can decrease the welfare than full privatization with an output subsidy.
    Keywords: Partial privatization; R&D subsidy; Output subsidy; Time-consistenct policy
    JEL: H2 L13 L3
    Date: 2020–04
  12. By: Poppius, Hampus (Department of Economics, Lund University)
    Abstract: When firms meet in multiple markets, they can leverage punishment ability in one market to sustain collusion in another. This is the first paper to test this theory for multiproduct retailers that sell consumer goods online. With data on the universe of consumer goods sold online in Sweden, I estimate that multimarket contact increases prices. To more closely investigate what drives the effect, I employ a machine-learning method to estimate effect heterogeneity. The main finding is that multimarket contact increases prices to a higher extent if there are fewer firms participating in the contact markets, which is one of the theoretical predictions. Previous studies focus on geographical markets, where firms provide a good or service in different locations. I instead define markets as different product markets, where each market is defined by the type of good. This is the first paper to study multimarket contact and collusion with this type of market definition. The effect is stronger than in previously studied settings.
    Keywords: Tacit collusion; pricing; e-commerce; causal machine learning
    JEL: D22 D43 L41 L81
    Date: 2020–04–08
  13. By: Cernat, Lucian; Kutlina-Dimitrova, Zornitsa
    Abstract: A recent report on public procurement published by the United States Government Accounting Office (GAO) attempted to provide a range of estimates for the EU and the US, among others, and argued that the EU awarded a low share of public procurement contracts to US firms ($300 million) compared to a much higher value of US public procurement ($3 billion) awarded to EU firms (GAO 2019). However, the methodological approach used by GAO was partial and misrepresented the level of EU openness, as it only looked only at the ‘tip of the procurement iceberg’ and missed out other main avenues for international government procurement. Once these other two main procurement modes are taken into account, EU openness in procurement is much higher, vis-a-vis both for US and third countries. Overall, the EU has awarded over €50 billion worth of public contracts to foreign firms, out of which €11 billion to US firms. Comparable data across all modalities do not yet exist for the US, but we do have clear evidence that, since 2009, the US has introduced the largest number of protectionist procurement measures severely affecting international procurement. Against this background, this Policy Brief makes four basic points: i. Public procurement is a key area of trade negotiations, and the EU remains committed to promoting further non-discriminatory access to procurement markets both at home and abroad. ii. The existing levels of openness in procurement markets need to be assessed across all three procurement modalities and not only on direct cross-border procurement, which is not the main procurement avenue. According to a comprehensive approach, such as the one used in this brief, the EU market already has a high foreign penetration rate, including by US companies. iii. Unfortunately, similar procurement data (at both federal and sub-federal level) does not exist for the US market. But there is growing evidence of discriminatory measures introduced in recent years, which impede the ability of EU and other foreign firms to compete on a level-playing field in US procurement markets. iv. The importance of procurement as a key negotiating area requires better data and a greater analytical engagement internationally.
    Date: 2020–03
  14. By: Raphael A. Auer; Stijn Claessens
    Abstract: Cryptocurrencies are often thought to operate out of the reach of national regulation, but in fact their valuations, transaction volumes and user bases react substantially to news about regulatory actions. The impact depends on the specific regulatory category to which the news relates: events related to general bans on cryptocurrencies or to their treatment under securities law have the greatest adverse effect, followed by news on combating money laundering and the financing of terrorism, and on restricting the interoperability of cryptocurrencies with regulated markets. News pointing to the establishment of specific legal frameworks tailored to cryptocurrencies and initial coin offerings coincides with strong market gains. These results suggest that cryptocurrency markets rely on regulated financial institutions to operate and that these markets are segmented across jurisdictions.
    Keywords: digital currencies, cryptocurrencies, bitcoin, ethereum, distributed ledger technology, regulation, financial markets, event studies
    JEL: E42 E51 F31 G12 G28 G32 G38
    Date: 2020

This nep-reg issue is ©2020 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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