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on Regulation |
| By: | Fischer, Christian; Rasch, Alexander; Wenzel, Tobias |
| Abstract: | This paper analyzes a market in which two horizontally differentiated firms compete by setting menus of two-part tariffs, and in which some consumers are not informed about the linear per-unit price component. We consider two regulatory interventions that limit firms' ability to price discriminate: (i) diminishing the range of contracts via a reduction in the number of two-part tariffs offered (which prohibits inter-group price discrimination), and (ii) a reduction in tariff complexity via the abolishment of linear fees (which prohibits inter- and intra-group price discrimination). We characterize the effects of these interventions on firm profits and (informed and uninformed) consumer welfare, and identify conditions for the optimal policy. Our results provide insights for the evaluation of recent policy interventions (e.g., the regulation of roaming charges in the EU market). |
| Keywords: | Two-part tariffs,Consumer attention,Policy intervention |
| JEL: | D43 L13 L42 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:20075&r=all |
| By: | Michael Ryan (University of Waikato) |
| Abstract: | This paper begins with a brief narrative on the close conceptual relationship between institutions and uncertainty, which motivates using uncertainty as a metric of institutional reform success in the subsequent econometric analysis. Our analysis, based on using uncertainty measures constructed on firm-level data in a Bayesian Structural AutoRegression model, suggests that while during the reform period uncertainty increased, New Zealand's wide-ranging institutional reform in the late 20th century (approximately 1984 to 1995) was eventually successful in lowering uncertainty from domestic institutional sources. We also contend that rising uncertainty immediately prior to reform could have been the spur to reform. Given New Zealand was one of many OECD countries that pursued market-oriented economic institutional reform over the period, our results have insights beyond just understanding the New Zealand experience. |
| Keywords: | Institutions; economic reform; uncertainty; New Zealand |
| JEL: | C32 E02 O43 O56 |
| Date: | 2021–01–12 |
| URL: | http://d.repec.org/n?u=RePEc:wai:econwp:20/11&r=all |
| By: | Wilson, Kyle; Xiao, Mo; Orazem, Peter F. |
| Abstract: | In a rapidly growing industry, potential entrants strategically choose which local markets to enter. Facing the threat of additional entrants, a potential entrant may lower its expectation of future profits and delay entry into a local market, or it may accelerate entry due to preemptive motives. Using the evolution of local market structures of broadband Internet service providers from 1999 to 2007, we find that the former effect dominates the latter after allowing for spatial correlation across markets and accounting for endogenous market structure. On average, it takes 2 years longer for threatened markets to receive their first broadband entrant. Moreover, this entry delay has long†run negative implications for the divergence of the U.S. broadband infrastructure: 1 year of entry delay translates into an 11% decrease on average present†day download speeds. |
| Date: | 2020–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genstf:202011290800001120&r=all |
| By: | Robert Hahn; Robert Metcalfe |
| Abstract: | Economic theory suggests that energy subsidies ca lead to excessive consumption and environmental degradation. However, the precise impact of energy subsidies is not well understood. We analyze a large energy subsidy: the California Alternate Rates for Energy (CARE). CARE provides a price reduction for low-income consumers of natural gas and electricity. Using a natural field experiment, we estimate the price elasticity of demand for natural gas to be about -0.35 for CARE customers. An economic model of this subsidy yields three results. First, the natural gas subsidy appears to reduce welfare. Second, the economic impact of various policies, such as cap-and-trade, depends on whether prices for various customers move closer to the marginal social cost. Third, benefits to CARE customers need to increase by 6% to offset the costs of the program. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:feb:natura:00724&r=all |
| By: | Gabrielsen, Tommy Staahl (University of Bergen, Department of Economics); Johansen, Bjørn Olav (University of Bergen, Department of Economics); Straume, Odd Rune (Department of Economics, University of Minho) |
| Abstract: | We study the incentives of national retail chains to adopt national (uniform) prices across local markets that differ in size and competition intensity. In addition to price, the chains may also compete along a quality dimension, and quality is always set locally. We show that absent quality competition, the chains will never use national pricing. However, if quality competition is sufficiently strong there exist equilibria where at least one of the chains adopts national pricing. We also identify cases in which national pricing benefits (harms) all consumers, even in markets where such a pricing strategy leads to higher (lower) prices. |
| Keywords: | National pricing; local pricing; retail chains; price and quality competition |
| JEL: | L11 L13 L21 |
| Date: | 2020–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bergec:2020_008&r=all |
| By: | Philippe Aghion; Antonin Bergeaud; John Van Reenen |
| Abstract: | Does regulation affect the pace and nature of innovation and if so, by how much? We build a tractable and quantifiable endogenous growth model with size-contingent regulations. We apply this to population administrative firm panel data from France, where many labor regulations apply to firms with 50 or more employees. Nonparametrically, we find that there is a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold. Further, a dynamic analysis shows a sharp reduction in the firm's innovation response to exogenous demand shocks for firms just below the regulatory threshold. We then quantitatively fit the parameters of the model to the data, finding that innovation at the macro level is about 5.4% lower due to the regulation, a 2.2% consumption equivalent welfare loss. Four-fifths of this loss is due to lower innovation intensity per firm rather than just a misallocation towards smaller firms and lower entry. We generalize the theory to allow for changes in the direction of R&D, and find that regulation's negative effects only matter for incremental innovation (as measured by citations and text-based measures of novelty). A more regulated economy may have less innovation, but when firms do innovate they tend to "swing for the fence" with more radical (and labor saving) breakthroughs. |
| Keywords: | innovation, regulation, patents, firm size |
| JEL: | O31 L11 L51 J8 L25 O31 L11 L51 J8 L25 O31 L11 L51 J8 L25 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1744&r=all |
| By: | Monica Maduekwe (Praia, Cabo Verde); Uduak Akpan (SPIDER Solutions, Akwa Ibom State, Nigeria); Salisu Isihak (Rural Electrification Agency, Abuja, Nigeria) |
| Abstract: | The “Avoid†, “Shift†and “Improve†(A-S-I) approach is an effective method for transforming an unsustainable transport system to a sustainable one. This study intends to examine the possible impact of the A-S-I policy measures in transforming the transportation system in Lagos - the most populous city and the commercial capital of Nigeria. The study employs the Long Range Energy Alternative Planning (LEAP) model to project future energy demand and greenhouse gas emissions to determine the most effective A-S-I option for the city. We construct a business-as-usual scenario for Lagos as well as sustainable road transport alternative policy scenarios. The results show that Lagos’ biggest obstacle to achieving its emission reduction target is the presence of very old vehicles on its roads. Our analysis shows that emission reduction in the road transport sector in Lagos is sensitive to vehicle survivability rate (i.e. the fraction of vehicles of a certain age still driven). We conclude that unless the age limit of vehicles in Lagos reduces from 40 years to 22 years, vehicle growth rate from 5% to 2% and mileage by 2% per year from 2020- 2032, Lagos may not achieve the target 50% emission reduction by 2032. |
| Keywords: | Road transport, energy consumption, greenhouse gas emissions, LEAP, Lagos, Nigeria |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:20/055&r=all |
| By: | Hiroshi Kitamura; Noriaki Matsushima; Misato Sato |
| Abstract: | We explore the supply chain problem of a downstream durable goods monopolist, who chooses one of the following trading modes: an exclusive supply chain with an incumbent supplier or an open supply chain, allowing the monopolist to trade with a new efficient entrant in the future. The expected retail price reduction in the future dampens the profitability of the original firms. An efficient entrant's entry magnifies such a price reduction, causing a further reduction of original firms' joint profits. In equilibrium, the downstream monopolist chooses the exclusive supply chain to escape further price reductions, although it expects efficient entry. |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:1115&r=all |
| By: | D\'avid Csercsik |
| Abstract: | In this paper we study the so-called minimum income condition order, which is used in some day-ahead electricity power exchanges to represent the production-related costs of generating units. This order belongs to the family of complex orders, which imply non-convexities in the market clearing problem. We demonstrate via simple numerical examples that if more of such bids are present in the market, their interplay may open the possibility of strategic bidding. More precisely, we show that by the manipulation of bid parameters, a strategic player may increase its own profit and potentially induce the deactivation of an other minimum income condition order, which would be accepted under truthful bidding. Furthermore, we show that if we modify the objective function used in the market clearing according to principles suggested in the literature, it is possible to prevent the possibility of such strategic bidding, but the modification raises other issues. |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2012.07789&r=all |
| By: | Rodrigo Carril |
| Abstract: | I study the trade-off between rules and discretion in the context of US federal procurement. Below an arbitrary threshold amount, contracts can be awarded using procedures that are subject to significantly fewer rules and less oversight. Leveraging a change in the threshold value, I document three key empirical findings. First, there is substantial bunching of contracts at the threshold. Second, the added scrutiny introduced by rules distorts the award amount of some contracts, while discouraging other purchases altogether. Third, contracts subject to more scrutiny perform worse ex post. I propose and estimate a stylized model of public procurement that is consistent with these findings. I find that, at current levels, the benefits from waste prevention are modest relative to the size of the compliance costs introduced by regulation. I find that the optimal threshold is substantially higher than the current one, and that a proposed increase in the threshold will leave the government better off. The model highlights the key role of incentive misalignment in bureaucracies, and shows quantitatively how increased discretion can be optimal as misalignment is reduced. |
| Keywords: | public procurement, Bureaucracy, discretion, Regulation, compliance |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1232&r=all |
| By: | Gu, Yiquan; Rasch, Alexander; Wenzel, Tobias |
| Abstract: | This paper examines the publication of quality indicators in service markets with public finance systems, such as education and healthcare markets. We provide a spatial model of product differentiation in which the reporting of such indicators increases consumers' decision weight on quality relative to other attributes (such as prices and horizontal match) and study the effects in two market environments: markets with regulated prices and markets with unregulated prices. We find that the publication of quality indicators increases quality investments by service providers, but also leads to higher prices and less product variety. Consumer and total welfare may decrease with such policies, in particular when consumers are heavily subsidised. |
| Keywords: | Service markets,Quality reporting,Variety,Entry,Regulation,Public finance |
| JEL: | L15 L51 I10 I20 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:20087&r=all |
| By: | Alina Wilke (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)); Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)) |
| Abstract: | Climate policy challenges reinforce the search for additional elements of renewable energy generation. Small-scale wind energy provides new opportunities for decentralized electricity production, while avoiding grid-dependence and transmission losses. This paper presents a potential analysis for urban wind energy production for two European cities. The simulation follows the framework presented by Rezaeiha et al. (2020) and extends it by using the reanalysis wind grid dataset MERRA2 by NASA (GES DISC, 2020). The dataset combines reliable and complete weather observations in a standardized manner on a global scale, mitigating observation gaps of meteorological stations. This allows us to provide a preliminary potential analysis, while avoiding inaccuracies based on long-distance interpolation. The analyzed cities show considerable urban wind energy farming potential. For the city of Lisbon, Portugal, the installation of only four VAWT on 264 buildings between 20 115 m throughout the city provides an annual wind energy production potential (AEPP) of 9,203 MWh, which approximately corresponds to the annual electricity consumption of 7,167 residents. In Hamburg, Germany, the AEPP amounts to 16,927 MWh produced by 2,840 turbines (four turbines on 710 buildings), which approximately corresponds to the annual electricity consumption of 10,932 residents. The AEEP can easily be increased by using more efficient HAWT, whereby technological advancements in recent years have made them applicable even in the urban environment setting. Additionally, small wind turbines could be installed on buildings of a height lower than 20 m, especially when the overall built environment of the city is rather flat, such as in Lisbon. |
| Keywords: | urban wind farming, MERRA2, wind energy potential, climate policy, regulation |
| JEL: | Q42 Q48 Q50 R11 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bwu:eiiwdp:disbei287&r=all |
| By: | Rodriguez Castelan, Carlos (World Bank); Araar, Abdelkrim (Université Laval); Malásquez, Eduardo A. (World Bank); Olivieri, Sergio (World Bank); Vishwanath, Tara (World Bank) |
| Abstract: | Understanding the economic and social effects of the recent global trends of rising market concentration and market power has become a policy priority. To fill this knowledge gap, this paper introduces a simple simulation method, the Welfare and Competition tool (WELCOM), to estimate with minimum data requirements the direct distributional effects of market concentration through the price channel. Using this simple yet novel tool, this paper illustrates the likely distributional effects of reducing concentration in two markets in Mexico that are known for their high level of concentration: mobile telecommunications and corn products. The results show that increasing competition from four to 12 firms in the mobile telecommunications industry and reducing the market share of the oligopoly in corn products would achieve a combined reduction of 0.8 percentage points in the poverty headcount as well as a decline of 0.32 points in the Gini coefficient. |
| Keywords: | poverty, inequality, market concentration, distributional effects, simulation, Mexico |
| JEL: | C15 D31 D42 D43 E37 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14043&r=all |
| By: | Gaetano Basso (Bank of Italy); Eleonora Brandimarti (University of Geneva); Michele Pellizzari (University of Geneva, CEPR and IZA.); Giovanni Pica (Università della Svizzera Italiana, LdA and CSEF.) |
| Abstract: | Entry in many occupations is regulated with the objective to screen out the least able producers and guarantee high quality of output. Unfortunately, the available empirical evidence suggests that in most cases these objectives are not achieved. In this paper we investigate entry into the legal profession in Italy and we document that such a failure is due to the combination of the incomplete anonymity of the entry exam and the intergenerational transmission of business opportunities. We use microdata covering the universe of law school graduates from 2007 to 2013 matched with their careers and earnings up to 5 years after graduation. Variation generated by the random assignment of the entry exam grading commissions allows us to identify the role of family ties in the selection process. We find that connected candidates, i.e. those with relatives already active in the profession, are more likely to pass the exam and eventually earn more, especially those who performed poorly in law school. When we simulate the process of occupational choice assuming family connections did not matter, we find that strong positive selection on ability would emerge. |
| Keywords: | Occupational Regulation, Licensing, Intergenerational Mobility. |
| JEL: | J24 J44 J62 |
| Date: | 2021–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:597&r=all |
| By: | Tom Worsley (University of Leeds) |
| Abstract: | This paper examines whether the results of cost-benefit analyses (CBA) for road and rail projects can be compared with each other. Road and rail projects address different transport needs and aim to solve different problems. This does not make comparisons between CBAs for each mode impossible, but requires a nuanced approach. |
| Date: | 2020–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaab:2020/29-en&r=all |
| By: | Chadi Abdallah; Kangni R Kpodar |
| Abstract: | We estimate the dynamic effects of changes in retail energy prices on inflation using a novel monthly database, covering 110 countries over 2000:M1 to 2016:M6. We find that (i) inflation responds positively to retail energy price shocks, with effects being, on average, modest and transitory. However, our results suggest significant heterogeneity in the response of inflation to these shocks owing to differences in factors related to labor market flexibility, energy intensity, and monetary policy credibility. We also find compelling evidence of asymmetric effects—under sufficiently large shocks—in the case of high-income and low-income countries, with increases in retail fuel prices inducing larger effects on inflation than decreases in fuel prices. |
| Keywords: | Fuel prices;Inflation;Energy prices;Oil prices;Personal income;WP,price,standard deviation,fuel price shock,spiral effects |
| Date: | 2020–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2020/093&r=all |