nep-reg New Economics Papers
on Regulation
Issue of 2020‒09‒14
ten papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Network goods, price discrimination, and two-sided platforms By BELLEFLAMME, Paul,; PEITZ, Martin,
  2. The effect of local monitoring on nuclear safety and compliance: Evidence from France By Bizet, Romain; Bonev, Petyo; Leveque, Francois
  3. Effects of Carbon Tax on Electricity Price Volatility: Empirical Evidences from the Australian Market By Nicola Comincioli; Sergio Vergalli
  4. The tension between market shares and profi t under platform competition By Paul Belleflamme; Martin Peitz; Eric Toulemonde
  5. Price Transparency and Market Screening By Ayca Kaya; Santanu Roy
  6. From local to global: The role of knowledge, transfer, and capacity building for successful energy transitions By Michel, Hanno
  7. Modelling multi-period carbon markets using singular forward backward SDEs By Chassagneux Jean-Francois; Chotai Hinesh; Crisan Dan
  8. Market transparency and consumer search - Evidence from the German retail gasoline market By Martin, Simon
  9. Intermediation and Competition in Search Markets: An Empirical Case Study By Tobias Salz
  10. Firm Behavior under Unanticipated Change in Regulation: Power Plant Emissions During the 2018-2019 Federal Government Shutdown By Zhang, Ruohao; Li, Huan; Khanna, Naha

  1. By: BELLEFLAMME, Paul, (CORE, Université catholique de Louvain); PEITZ, Martin, (Universität Mannheim)
    Abstract: A monopolist sells a network good to a set of heterogeneous users who all care about total participation. We show that the provider of the network good effectively becomes a two-sided platform if it can condition prices on some user characteristics. This still holds true if the network operator cannot obsoerve consumer characteristics but induces user self-selection when it offers screening contracts. In our setting, all incentive constraints are slack The use of freemium strategies emerges as a special case of versioning. Here, a base version is offered at zero price and a premium version at a positive price. Overall, the paper illustrates the close link between price discrimination in the presence of a network good and pricing by a two-sided platform.
    Keywords: network goods, two-sided markets, platform pricing, group pricing, menu pricing
    JEL: D62 L12 L82 L86
    Date: 2020–07–01
  2. By: Bizet, Romain; Bonev, Petyo; Leveque, Francois
    Abstract: WWe estimate the effect of local monitoring and information disclosure on safety and compliance with self-reporting standards in the French nuclear sector. We use a novel dataset on deviations from safety, radiological and environmental standards recorded in the French nuclear fleet since 1978. We find that while local monitoring and information increases significantly compliance, it has little or no direct effect on safety.
    Keywords: Monitoring, compliance, safety regulation, reporting, cuclear safety
    JEL: D22 L51 M42 Q42 Q48 Q58
    Date: 2020–09
  3. By: Nicola Comincioli (University of Brescia and Fondazione Eni Enrico Mattei); Sergio Vergalli (University of Brescia and Fondazione Eni Enrico Mattei)
    Abstract: Among the wide variety of policy options adopted worldwide to control carbon emissions, one of the most environmentally effective and economically efficient is represented by carbon tax, that aims to recoup the damage arising from polluting production processes. In this paper, we focus on the Australian Carbon Pricing Mechanism (CPM) and on the effects that its introduction had on the electricity market. The most relevant effect is the reduction of the level of electricity price’s volatility. This effect has been investigated after having removed, from electricity data time series, the periodic behavior, through a multiple linear regression. Then, to study volatility dynamics, we fit a two-states Markov-switching model to represent a high-volatility and a low-volatility states of the world. This model highlighted that in both states the level of volatility is lower and that the persistence of the second state is increased by the presence of the CPM. This result is particularly important in investment evaluation: knowing the different dynamics of price volatility in presence of a carbon tax or not, can provide crucial information in investment decision and its timing.
    Keywords: Carbon Tax, Seasonality and Volatility of Electricity Price
    JEL: C51 Q41 Q48
    Date: 2020–08
  4. By: Paul Belleflamme; Martin Peitz; Eric Toulemonde
    Abstract: We introduce asymmetries across platforms in the linear model of competing two-sided platforms with singlehoming on both sides and fully characterize the price equilibrium. We identify market environments in which one platform has a larger market share on both sides while obtaining a lower profit than the other platform. This platform enjoys a competitive advantage on one or both sides. Our finding raises further doubts on using market shares as a measure of market power in platform markets.
    Keywords: Two-sided platforms, market share, market power, oligopoly, network effects, antitrust
    JEL: D43 L13 L86
    Date: 2020–08
  5. By: Ayca Kaya (University of Miami); Santanu Roy (Southern Methodist University)
    Abstract: We consider repeated trading by sellers with persistent private information in dynamic lemons markets. We compare the outcomes of a transparent market where past trading prices are public to those of an opaque market, where they are private. We characterize the upper bound of trading surplus in an opaque market and construct a class of equilibria in a transparent market that improves upon this bound. We conclude that price transparency is beneficial in a repeated trading environment. The advantage of price transparency is indirect and operates through the strategic tools it provides the sellers of high quality to sustain high payoffs.
    Keywords: Repeated sales, adverse selection, lemons market, price transparency.
    JEL: D82 C73 D61
    Date: 2020–07
  6. By: Michel, Hanno
    Abstract: Germany has set the challenging goal of reducing its greenhouse gas emissions by 40 percent by the year 2020 as compared to 1990 (BMUB 2014). This German Energiewende (energy transition) has led to significant changes in the electricity sector, such as a continuously increasing percentage of renewable energies, supported by corresponding governance and political efforts. However, despite these political and economic efforts, the 2020 goal will most likely only be reached due to the tremendous unplanned effects of the COVID-19 pandemic on energy usage for transport and mobility (Agora Energiewende 2020). In addition to technological advances, a change in individual and collective behavior seems highly necessary to achieve future transition goals. The aim of this discussion paper is to summarize the state of research on how people's behavior in the context of climate change and energy transitions is shaped, and to put forward potential avenues for further research and action. The paper departs at a local level by looking at factors that guide citizens' individual energy-related actions and thus impact their energy-saving behavior. Knowledge about climate change and energy is generally believed to influence a person's energyrelated behavior, although its measured effects vary significantly in different studies examining it. This may partly be due to the fact that knowledge is often assessed in a declarative way in these studies, instead of looking at knowledge-in-use (i.e. applying that knowledge to solve a problem in a meaningful way instead of simply stating that knowledge). This working paper thus argues for moving from climate and energy knowledge towards climate and energy literacy, with literacy involving knowledge, skills, and attitudes. With a climate and energy literacy perspective, as well as existing frameworks for how energy-related behavior can be modelled and explained, it theorizes how individual climate-friendly behavior can lead to collective action regarding energy transitions. As knowledge transfer and capacity building play a big role when scaling local solutions to a global level, the discussion paper advocates for concentrated efforts in interdisciplinary capacity building and lays out potential directions for future research.
    Keywords: energy transitions,education,knowledge transfer,capacity building
    Date: 2020
  7. By: Chassagneux Jean-Francois; Chotai Hinesh; Crisan Dan
    Abstract: We introduce a model for the evolution of emissions and the price of emissions allowances in a carbon market such as the European Union Emissions Trading System (EU ETS). The model accounts for multiple trading periods, or phases, with multiple times at which compliance can occur. At the end of each trading period, the participating firms must surrender allowances for their emissions made during that period, and additional allowances can be used for compliance in the following periods. We show that the multi-period allowance pricing problem is well-posed for various mechanisms (such as banking, borrowing and withdrawal of allowances) linking the trading periods. The results are based on the analysis of a forward-backward stochastic differential equation with coupled forward and backward components, a discontinuous terminal condition and a forward component that is degenerate. We also introduce an infinite period model, for a carbon market with a sequence of compliance times and with no end date. We show that, under appropriate conditions, the value function for the multi-period pricing problem converges, as the number of periods increases, to a value function for this infinite period model, and that such functions are unique.
    Date: 2020–08
  8. By: Martin, Simon
    Abstract: We study a novel trade-off in market transparency regulation by estimating a structural model of the German retail gasoline market. Transparent environments enable easy price comparisons and match findings. Restricting transparency such that only the cheapest offers are shown induces firms to compete for attention, but matching is inefficient. We find that there is an inverse u-shaped relationship between consumer welfare and market transparency. Consumer welfare is maximal when only the first 20% of prices are shown, which decreases consumer expenditures by 1.2%. Our framework allows estimating games of incomplete information with very lax data requirement.
    Keywords: market transparency,consumer search,awareness,consideration sets,retail gasoline prices
    JEL: D22 D43 D83 L13 L50
    Date: 2020
  9. By: Tobias Salz
    Abstract: Intermediaries in decentralized markets can affect buyer welfare both directly, by reducing expenses for buyers with high search cost and indirectly, through a search-externality that affects the prices paid by buyers that do not use intermediaries. I investigate the magnitude of these effects in New York City’s trade-waste market, where buyers can either search by themselves or through a waste broker. Combining elements from the empirical search and procurement-auction literatures, I construct and estimate a model for a decentralized market. Results from the model show that intermediaries improve welfare and benefit buyers in both the broker and the search markets.
    JEL: D43 D44 L0 L13 L81 L97
    Date: 2020–08
  10. By: Zhang, Ruohao; Li, Huan; Khanna, Naha
    Keywords: Research Methods/ Statistical Methods, Resource /Energy Economics and Policy
    Date: 2020–08

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