nep-reg New Economics Papers
on Regulation
Issue of 2021‒03‒01
fifteen papers chosen by
Natalia Fabra
Universidad Carlos III de Madrid

  1. Sweden's Energy Investment Challenge By Holmberg, Pär; Tangerås, Thomas
  2. Optimal dynamic regulation of carbon emissions market: A variational approach By Ren\'e A\"id; Sara Biagini
  3. Strategic Behavior and Market Design in Regional Climate Policy By Tarufelli, Brittany L.
  4. Two-sided platforms: dynamic pricing and multiple equilibria By Przemyslaw Rys; Maciej Sobolewski
  5. Trade as a channel for environmental technologies diffusion: The case of the wind turbine manufacturing industry By Grégoire Garsous; Stephan Worack
  6. Policy implications of the CSR in an international transportation market under subsidy By Xu, Lili; Lee, Sang-Ho
  7. To Pool or Not to Pool? Understanding the Time and Price Tradeoffs of OnDemand Ride Users – Opportunities, Challenges, and Social Equity Considerations for Policies to Promote Shared-Ride Services By Shaheen, Susan PhD; Lazarus, Jessica; Caicedo, Juan; Bayen, Alexandre PhD
  8. Governance of Data Sharing : a Law & Economics Proposal By Graef, Inge; Prüfer, Jens
  9. Short-windedness Would Weaken Effective Climate Policy By Rickels, Wilfried; Peterson, Sonja
  10. A review of challenges from increasing renewable generation in the Indian Power System By Debnath, R.; Mittal, V.; Jindal, A.
  11. How do laws and regulations affect competitiveness: The role for regulatory impact assessment By Paul Davidson; Céline Kauffmann; Marie-Gabrielle de Liedekerke
  12. Public vs. Private Investments In Network Industries By Jean-Marc Zogheib; Marc Bourreau
  13. Free Riding in Products with Positive Network Externalities: Empirical Evidence from a Large Mobile Network By Belo, Rodrigo; Ferreira, Pedro
  14. Technology Transfer and Innovation for Low-Carbon Development. By Miria A. Pigato; Simon J. Black; Damien Dussaux; Zhimin Mao; Miles Mckenna; Ryan Rafaty; Simon Touboul
  15. Consumption access and agglomeration: evidence from smartphone data By Yuhei Miyauchi; Kentaro Nakajima; Stephen J. Redding

  1. By: Holmberg, Pär (Research Institute of Industrial Economics (IFN)); Tangerås, Thomas (Research Institute of Industrial Economics (IFN))
    Abstract: Sweden faces a major challenge in the next decades because of a projected increase in electricity demand, aging supply infrastructure and the transition to an energy system with a substantial share of weather-dependent production. This paper discusses the incentives to invest in production capacity in the Swedish electricity market, the energy policies that drive the development and proposes changes in market design to cope with this energy investment challenge.
    Keywords: Energy policy; Energy transition; Market design; Reliability; Resource efficiency
    JEL: D25 D47 Q40 Q48
    Date: 2021–02–24
  2. By: Ren\'e A\"id; Sara Biagini
    Abstract: We consider the problem of reducing the carbon emissions of a set of firms over a finite horizon. A regulator dynamically allocates emission allowances to each firm. Firms face idiosyncratic as well as common economic shocks on emissions, and have linear quadratic abatement costs. Firms can trade allowances so to minimise total expected costs, from abatement and trading plus a quadratic terminal penalty. Using variational methods, we exhibit in closed-form the market equilibrium in function of regulator's dynamic allocation. We then solve the Stackelberg game between the regulator and the firms. Again, we obtain a closed-form expression of the dynamic allocation policies that allow a desired expected emission reduction. Optimal policies are not unique but share common properties. Surprisingly, all optimal policies induce a constant abatement effort and a constant price of allowances. Dynamic allocations outperform static ones because of adjustment costs and uncertainty, in particular given the presence of common shocks. Our results are robust to some extensions, like risk aversion of firms or different penalty functions.
    Date: 2021–02
  3. By: Tarufelli, Brittany L.
    Abstract: U.S. electricity markets vary by region and imperfectly overlap with regional climate policies. Although emissions leakage across emissions-regulated and -unregulated areas may depend on regional market design, and the extent of trading between market designs, previous studies of leakage from regional climate policies have focused on market power and market efficiency within only a centralized region following market rules. I develop a theoretical model which considers a second-best problem where a climate policy to correct for a negative externality from carbon emissions can be distorted by another market failure from the market design itself. My model allows for several types of non-overlapping climate policies and electricity market designs, and generates leakage predictions for these combinations.
    Date: 2021–02–15
  4. By: Przemyslaw Rys; Maciej Sobolewski (European Commission – JRC)
    Abstract: The static model of two sided markets proposed by Rochet and Tirole analyses optimal pricing of a monopolistic platform at the equilibrium point. Their framework implicitly assumes that for each prices set by the platform, the equilibrium number of users on each side will be unique. However, under general conditions, the uniqueness of market equilibrium is not guaranteed. Optimal static prices do not ensure convergence to the preferred full market outcome, as platform may face failure-to-launch or failure-to-grow problems. Hence, to study problems around multiplicity of equilibria, a different framework is required. We propose a dynamic model of monopolistic platform and demonstrate the effects of different dynamic pricing strategies for equilibrium selection and convergence. The main conclusion from the study is that emerging platform can reach the preferred equilibrium by using tariffs with subsidies for early stage users. We give examples of dynamically adjusting tariffs that minimize subsidies. Finally, the dynamic setting reveals a trade-off between the platform profits and social welfare, related to the speed of user base growth.
    Keywords: two-sided markets, dynamic pricing, multiplicity of equilibria, dynamic system, online platforms
    JEL: L12 C61 D42
    Date: 2020–12
  5. By: Grégoire Garsous; Stephan Worack
    Abstract: Only a small number of companies, located in a few countries, have specific technological expertise in wind turbine manufacturing. New quantitative analysis shows this expertise to be a significant driver of trade in wind turbines. Moreover, countries’ wind power generation efficiency is shown to depend on access to higher quality wind turbines available in international markets. Trade in wind turbines thus provides access to technologies with a level of efficiency that cannot be replicated domestically in importing countries. These results have important policy implications: i) barriers to trade in wind turbines are also barriers to the dissemination of key environmental technologies which are not otherwise widely available; ii) trade-discriminatory measures can also negatively impact non-manufacturing job creation in the renewable sector, as this relies on the continuous deployment of wind energy, which in turn depends on access to high quality turbines from international markets; and iii) policies should not focus on the creation of national champions, but rather on ensuring that domestic firms can apply their specific capabilities to new opportunities in the global value chains of renewables industries.
    Keywords: Environmental technologies, Patents, Trade, Wind energy
    JEL: F13 F18 O13 O33 O42
    Date: 2021–02–02
  6. By: Xu, Lili; Lee, Sang-Ho
    Abstract: This paper focuses on the international transportation market in which a high-speed rail (HSR) firm competes with both the domestic and foreign airline firms providing differentiated transport services. We investigate and compare two types of corporate social responsibility (CSR)—mandatory and voluntary CSR—imposed on HSR under a government subsidy policy. We show that, when the transport substitutability is high (low) in a domestic travel leg, mandatory CSR is lower (higher) than voluntary CSR, and the optimal subsidy under mandatory CSR is lower (higher) than that under voluntary CSR. We also examine the effect of privatization policy of the HSR with transposition subsidy on welfare. We show that full privatization with CSR activities always improves social welfare under an appropriate subsidy, independent of the transport substitutability and types of CSR activities.
    Keywords: High-speed rail, corporate social responsibility, transportation subsidy, privatization policy, mixed market
    JEL: D43 H25 L21 L33
    Date: 2021–02
  7. By: Shaheen, Susan PhD; Lazarus, Jessica; Caicedo, Juan; Bayen, Alexandre PhD
    Abstract: On-demand mobility services including transportation network companies (also known as ridesourcing and ridehailing) like Lyft and Uber are changing the way that people travel by providing dynamic mobility that can supplement public transit and personal-vehicle use. However, TNC services have been found to contribute to increasing vehicle mileage, traffic congestion, and greenhouse gas emissions. Pooling rides ⎯ sharing a vehicle by multiple passengers to complete journeys of similar origin and destination ⎯ can increase the average vehicle occupancy of TNC trips and thus mitigate some of the negative impacts. Several mobility companies have launched app-based pooling services in recent years including app-based carpooling services (e.g., Waze Carpool, Scoop) that match drivers with riders; pooled on-demand ride services (e.g., Uber Pool and Lyft Shared rides) that match multiple TNC users; and microtransit services (e.g., Bridj, Chariot, Via) that offer on-demand, flexibly routed service, typically in larger vehicles such as vans or shuttles. However, information on the potential impacts of these options is so far limited. This research employs a general population stated preference survey of four California metropolitan regions (Los Angeles, Sacramento, San Diego, and the San Francisco Bay Area) in Fall 2018 to examine the opportunities and challenges for drastically expanding the market for pooling, accounting for differences in emergent travel behavior and preferences across the four metropolitan regions surveyed. The travel profiles, TNC use patterns, and attitudes and perceptions of TNCs and pooling are analyzed across key socio-demographic attributes to enrich behavioral understanding of marginalized and price sensitive users of on-demand ride services. This research further develops a discrete choice model to identify significant factors influencing a TNC user’s choice to pool or not to pool, as well as estimating a traveler’s value of time (VOT) across different portions of a TNC trip. This research provides key insights and social equity considerations for policies that could be employed to reduce vehicle miles traveled and emissions from passenger road transportation by incentivizing the use of pooled on-demand ride services and public transit
    Keywords: Engineering, Demand responsive transportation, ridesourcing, shared mobility, stated preference, surveys, travel behavior, choice models
    Date: 2021–02–01
  8. By: Graef, Inge (Tilburg University, TILEC); Prüfer, Jens (Tilburg University, TILEC)
    Keywords: Data sharing; data-driven markets; economic governance; competition law; data protection; regulation
    Date: 2021
  9. By: Rickels, Wilfried; Peterson, Sonja
    Abstract: Most states have implemented quite strict measures designed to slow down the spread of the coronavirus among their populations. For most sectors, these measures have resulted in a significant reduction of economic activity, output, and hence also output-related emissions. Commitment to these measures, apparently regardless of the economic costs involved, is considered by some people to be a blueprint for the commitment required to mitigate climate change and to achieve the Paris climate targets. However, when it comes to devising an efficient climate policy, the differences between the two crises—cororonavirus and climate change—need to be taken more seriously than the similarities. Alarming have been the various calls to put a quick end to corona prevention measures and the restrictions they place on public and economic activity, indicative as they are of the priority accorded to high discount rates and the absence of precautionary thinking among policy-makers. Both the differences between the two crises themselves and the similarities in the reluctance to focus on achieving (more) long-term benefits emphasize once again the need for long-term commitment to climate policies in line with agreed targets.
    Keywords: climate policy,carbon prices,economic recovery,corona virus,lock-down
    Date: 2020
  10. By: Debnath, R.; Mittal, V.; Jindal, A.
    Abstract: About 70% of India’s current energy mix comprises of coal, and the increase in generation from renewable energy (RE) sources is affecting the health of the power system. We investigated this effect through a cross-sectional of asset utilisation, cost and the social disruption caused by accelerating RE into the Indian Power System. We also derived a challenge-roadmap for the power system using bibliometric analysis. The review-driven interpretivist results revealed that increasing RE generation is pushing the coal plants to operate in low-loading conditions, causing heightened wear and tear of the plant as they are not suitable for flexible operation. It had tremendously increased the operation and maintenance costs of the brownfield plants. While there is a growing scope for cross border trade of electricity, the existing regulatory mechanism poses severe implementation challenges. Social disruption due to shift from coal-economy illustrated a holistic view of the political economy of the Indian power system that can potentially cause large-scale conflict and disrupt the national economy at an unprecedented scale. Policy implications outlined by our study for the draft Electricity (Amendment) Bill 2020 include scoping a socio-technical framework which supports just energy transition through better financial support mechanisms for flexible operation of coal plants. Focusing on clean-up over shut-down of coal plants and facilitating investments in battery storage technologies and cross-border electricity trade as RE and conventional fuel reach market parity.
    Keywords: Power System, Flexibility, Coal economy, Social disruption, Energy Transition, Electricity Bill 2020
    JEL: Q4 Q42 Q48
    Date: 2020–11–17
  11. By: Paul Davidson (OECD); Céline Kauffmann (OECD); Marie-Gabrielle de Liedekerke (OECD)
    Abstract: The impacts of laws and regulations on competitiveness have strong implications for OECD economies, as they can lead to unforeseen negative externalities and considerable regulatory costs for businesses and citizens. Nevertheless, the use of regulatory policy to assess the impacts of regulations on competitiveness has seldom been examined. This paper fills this gap by reviewing OECD members’ regulatory impact assessment (RIA) frameworks and the extent to which the competitiveness effects are currently appraised. It categorises regulatory impacts on competitiveness into three strongly interrelated components – cost competitiveness, innovation, and international competitiveness – and builds upon the OECD’s expertise to examine how regulations affect each component of competitiveness in turn. In doing so, the paper proposes a more complete structure that regulators can use to define and assess the competitiveness impacts of regulation as part of their RIA processes framework.
    Keywords: competitiveness, regulatory impact assessment, Regulatory policy
    JEL: E61 F68 L51
    Date: 2021–02–03
  12. By: Jean-Marc Zogheib; Marc Bourreau
    Abstract: We study the competition between a private firm and public firms on prices andinvestment in new infrastructures. While the private firm maximizes its profits,public firms maximize the sum of their profits and consumer surplus, subject to abudget constraint. We consider two scenarios of public intervention, with a nationalpublic firm and with local public firms. In a monopoly benchmark, we find that thenational public firm has the highest coverage and charges a uniform price allowingcross-subsidies between high-cost and low-cost areas. Moreover, the private firmcovers as much as local public firms. In a mixed duopoly, a stronger competitivepressure drives firms' prices up while it drives down (up) the national public (private)firm's coverage.
    Keywords: public firms, investment, network industries, mixed duopoly.
    JEL: D43 H44 L20 L33
    Date: 2021
  13. By: Belo, Rodrigo; Ferreira, Pedro
    Abstract: We study the effect of peer influence on products that exhibit positive network externalities to non-adopters, i.e., products that benefit adopters' friends even if they do not adopt. Contrary to products that exhibit positive network externalities upon adoption, this structure of incentives likely results in negative peer influence: the more friends that adopted the product, the smaller the incentives to adopt. We measure this effect empirically by using observational data from a large mobile carrier serving 5.7 million users. We estimate the effect of peer influence across five different products of this type. A naive approach to do so results in a positive estimate for peer influence due to unobserved homophily. We follow two approaches to address this issue. First, we suggest using the number of friends that end up adopting the product as a proxy for unobserved user fixed effects. Second, we control for homophily by applying a shuffle test, i.e., we compare the effect of peer influence from the original data with the effect obtained from comparable randomly generated data without peer influence. We get negative estimates from both approaches, which provides robustness to our findings. Finally, we show that even for these products, the effect of peer influence associated with the first friends that adopt the product is positive, which arises because they still convey useful information about reducing uncertainty. The negative effect of peer influence arises only for the subsequent friends that adopt the product. These friends are unlikely to convey new information about the product, but each of them decreases the economic incentive to adopt, resulting in a negative aggregate effect of peer influence.
    Date: 2021–02–14
  14. By: Miria A. Pigato; Simon J. Black; Damien Dussaux; Zhimin Mao; Miles Mckenna; Ryan Rafaty; Simon Touboul (CERNA i3 - Centre d'économie industrielle i3 - CNRS - Centre National de la Recherche Scientifique - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - Université Paris sciences et lettres)
    Date: 2020–03–24
  15. By: Yuhei Miyauchi; Kentaro Nakajima; Stephen J. Redding
    Abstract: We provide new theory and evidence on the role of consumption access in understanding the agglomeration of economic activity. We combine smartphone data that records user location every 5 minutes of the day with economic census data on the location of service-sector establishments to measure commuting and non-commuting trips within the Greater Tokyo metropolitan area. We show that non-commuting trips are frequent, more localized than commuting trips, strongly related to the availability of nontraded services, and occur along trip chains. Guided by these empirical findings, we develop a quantitative urban model that incorporates travel to work and travel to consume non-traded services. Using the structure of the model, we estimate theoretically-consistent measures of travel access, and show that consumption access makes a sizable contribution relative to workplace access in explaining the observed variation in residents and land prices across locations. Undertaking counterfactuals for changes in travel costs, we show that abstracting from consumption trips leads to a substantial underestimate of the welfare gains from a transport improvement (because of the undercounting of trips) and leads to a distorted picture of changes in travel patterns within the city (because of the different geography of commuting and non-commuting trips).
    Keywords: agglomeration, urbanization, transportation
    JEL: O18 R12 R40
    Date: 2021–02

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