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on Regulation |
| By: | Emil Heesche (Danish Competition and Consumer Authority; Department of Food and Resource Economics, University of Copenhagen); Peter Bogetoft (Department of Economics, Copenhagen Business School) |
| Abstract: | Data Envelopment Analysis (DEA) based cost norms have attractive properties in the regulation of natural monopolies. However, they are also sensitive to the choice of cost drivers. When some of the cost drivers are discretionary, this may lead to suboptimal incentives. When a regulated firm compares the marginal change in its cost norm with its marginal cost of changing the discretionary output, the gains from adjusting the output will be very context specific. It is therefore unlikely that the regulation will induce socially optimal output levels. In this paper, we analytically and numerically examine the impacts of including a discretionary quality indicator in the benchmarking model used to regulate Danish water firms. We show that the eight-year catch-up period allowed in this regulation gives strong incentives to reduce costs since the firms can keep possible cost reductions for several years before the cost norm fully internalizes the cost reduction potentials. On the other hand, this scheme also provides very weak quality incentives since it takes eight years before the extra cost of increasing quality is fully internalized in the cost norm. |
| Keywords: | Data Envelopment Analysis; incentives; regulation; discretionary outputs; water sector |
| JEL: | C02 C14 C51 C52 C61 C67 L51 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:foi:wpaper:2021_04&r= |
| By: | Fritz Braeuer; Max Kleinebrahm; Elias Naber; Fabian Scheller; Russell McKenna |
| Abstract: | Involving residential actors in the energy transition is crucial for its success. Local energy generation, consumption and trading are identified as desirable forms of involvement, especially in energy communities. The potentials for energy communities in the residential building stock are high but are largely untapped in multi-family buildings. In many countries, rapidly evolving legal frameworks aim at overcoming related barriers, e.g. ownership structures, principal-agent problems and system complexity. But academic literature is scarce regarding the techno-economic and environmental implications of such complex frameworks. This paper develops a mixed-integer linear program (MILP) optimisation model for assessing the implementation of multi-energy systems in an energy community in multi-family buildings with a special distinction between investor and user. The model is applied to the German Tenant Electricity Law. Based on hourly demands from appliances, heating and electric vehicles, the optimal energy system layout and dispatch are determined. The results contain a rich set of performance indicators that demonstrate how the legal framework affects the technologies' interdependencies and economic viability of multi-energy system energy communities. Certain economic technology combinations may fail to support national emissions mitigation goals and lead to lock-ins in Europe's largest residential building stock. The subsidies do not lead to the utilisation of a battery storage. Despite this, self-sufficiency ratios of more than 90% are observable for systems with combined heat and power plants and heat pumps. Public CO2 mitigation costs range between 147.5-272.8 EUR/tCO2. Finally, the results show the strong influence of the heat demand on the system layout. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.11195&r= |
| By: | Belleflamme, Paul; Peitz, Martin; Toulemonde, Eric |
| 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: | Antitrust; market power; Market Share; network effects; oligopoly; Two-sided platforms |
| JEL: | D43 L13 L86 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15204&r= |
| By: | Sergio Tavella (Robert Bosch SPA Società Unipersonale); Michel Noussan (Fondazione Eni Enrico Mattei) |
| Abstract: | Buildings’ heating represents an important share of the total energy consumption in Italy, and to reach the challenging decarbonization targets set by the EU by 2050, a combination of measures and technologies will be required. This working paper presents an analysis of different scenarios comparing the penetration of buildings’ heating technologies for the residential sector in Italy. The objective of the research is to evaluate the potential contribution of different technologies, with a particular focus of the role that hydrogen may have to play, compared to other solutions, including heat pumps and renewable natural gas. The analysis compares the potential role of these technologies in reaching a decarbonized residential heating by 2050, by also discussing the main barriers and opportunities that lie ahead. The scenarios are defined starting from historical data of heating systems stock and sales, integrated with the know-how of experts of the sector to compare different pathways based on electrification or renewable gases. The results show that a combination of technologies will be in any case required in the heating sector, but also that other external factors will be of paramount importance, including the electricity decarbonization and energy efficiency measures on the building stock. |
| Keywords: | Heating, Residential Buildings, Hydrogen, Heat Pumps, Scenarios |
| JEL: | Q4 Q42 Q55 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2021.12&r= |
| By: | Gomes, Renato; Mantovani, Andrea |
| Abstract: | Online marketplaces, such as Amazon, or online travel agencies, such as Booking.com, greatly expand consumer information about market offers, but also raise firms' marginal costs by charging high commissions. To prevent show-rooming, platforms adopted price parity clauses, which restrict sellers' ability to offer lower prices in alternative sales channels. Whether to uphold, reform, or ban price parity has been at the center of the policy debate, but so far little consensus has emerged. In this paper, we investigate a natural alternative to lifting price parity; namely, we study how to optimally cap platforms' commissions. The optimal cap reflects the Pigouvian precept according to which the platform should not charge fees greater than the externality that its presence generates on other market participants. Employing techniques from extreme-value theory, we are able to express the optimal cap in terms of observable quantities. In an application to online travel agencies, we find that current average fees are welfare increasing only if platforms at least double consumers' consideration sets (relative to alternative ways of gathering information online). This suggests that, in some markets, regulation capping commissions should bind if optimally set. |
| Keywords: | commission caps; Extreme value theory; platforms; price parity; regulation |
| JEL: | D83 L10 L41 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15048&r= |
| By: | Genakos, Christos D.; Grey, Felix; Ritz, Robert |
| Abstract: | Economic policy and shifts in input market prices often have significant effects on the marginal costs of firms and can prompt strategic responses that make their impact hard to predict. We introduce "generalized linear competition" (GLC), a new model that nests many existing theories of imperfect competition. We show how firm-level cost pass-through is a sufficient statistic to calculate the impact of a cost shift on an individual firm's profits. GLC sidesteps estimation of a demand system and requires no assumptions about the mode of competition, rivals' technologies and strategies, or "equilibrium" . In an empirical application to the US airline market, we demonstrate GLC's usefulness for ex ante policy evaluation and identify the winners and losers of climate-change policy. We also show how GLC's structure, under additional assumptions, can be used for welfare analysis and to endogenize the extent of regulation. |
| Keywords: | Airlines; Carbon Pricing; Imperfect Competition; Pass-Through; political economy; regulation |
| JEL: | D43 H23 L51 L93 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15127&r= |
| By: | Newbery, David M G |
| Abstract: | Transport policy needs reform. Future Government investment and fiscal policy needs re-orienting to stimulate the economy after the Covid-19 lock-down. Prices used in project appraisal must include all external effects, committing to proper social cost-benefit analysis. In consequence, fuel duty rates need to be more than doubled as a prelude to proper road pricing. Transport investment needs to be increased even with proper road pricing and more allocated to walking and cycling, guided by benefit-cost ratios, following Eddington's recommendations. The paper gives five reasons for raising fuel duty rates, more on diesel than petrol, and estimates the desired levels. |
| Keywords: | fuel taxes; infrastructure investment; Road pricing; transport policy |
| JEL: | D62 H23 R41 R48 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15153&r= |
| By: | Stan Olijslagers (University of Amsterdam); Rick van der Ploeg (University of Amsterdam); Sweder van Wijnbergen (University of Amsterdam) |
| Abstract: | We analyse optimal abatement and carbon pricing strategies under a variety of economic, temperature and damage risks. Economic growth, convex damages and temperature-dependent risks of climatic tipping points lead to higher growth rates, but gradual resolution of uncertainty lowers them. For temperature-dependent economic damage tipping points, carbon prices are higher, but when the tipping point occurs, the price jumps downward. With only a temperature cap the carbon price rises at the risk-adjusted interest rate. Adding damages leads to a higher carbon price that grows more slowly. But as temperature and cumulative emissions get closer to their caps, the carbon price is ramped up ever more. Policy makers should commit to a rising path of carbon prices. |
| Keywords: | CO2 prices, growth uncertainty, tipping points, damages, gradual resolution of damage uncertainty, temperature caps |
| JEL: | H23 Q51 Q54 |
| Date: | 2021–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20210045&r= |
| By: | Template-Type: ReDIF-Paper 1.0; Takahiro Ishii (Graduate School of Economics, Osaka University) |
| Abstract: | The present study examines the effects of free technology sharing by a monopolistic final-good firm with other final-good firms. To this end, we consider two cases-first, where there exists one final-good firm in the final-good market and second, where there exist two final-good firms in the final-good market. Considering the free entry into the differentiated intermediate-goods market , the results of this study show that, when another firm enters the final-good market and transforms it into a two-firm oligopoly, cost efficiency improves because of an increase in the number of intermediate-goods firms. Furthermore, there is a possibility that the incumbent firm fs profits increases not only for a two-firm oligopoly, but also for an oligopoly with three or more firms. Thus, sharing technology for free could improve the profits of incumbent firms. |
| Keywords: | Monopolistic competition; Endogenous variety of intermediate goods; T echnology sharing; Intermediate goods; Technology transfer |
| JEL: | D43 L13 L16 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:2105&r= |
| By: | Harstad, Bård; Lancia, Francesco; Russo, Alessia |
| Abstract: | We characterize the optimal policy and policy instruments for self-enforcing treaties when countries invest in green technology before they pollute. If the discount factor is too small to support the first best, then both emissions and investments will be larger than in the first best, when technology is expensive. When technology is inexpensive, countries must instead limit or tax green investment in order to make future punishment credible. We also uncover a novel advantage of price regulation over quantity regulation, namely that when regulation is sufficiently flexible to permit firms to react to non-compliance in another country, the temptation to defect is reduced. The model is tractable and allows for multiple extensions. |
| Keywords: | climate change; compliance; environmental agreements; green technology; policy instruments; repeated games; self-enforcing treaties |
| JEL: | D86 F53 H87 Q54 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15044&r= |
| By: | Pöstges, Arne; Bucksteeg, Michael; Ruhnau, Oliver; Böttger, Diana; Haller, Markus; Künle, Eglantine; Ritter, David; Schmitz, Richard; Wiedmann, Michael |
| Abstract: | Climate target achievement has a crucial influence on the modelling and the decision processes in the energy sector. It induced the development of several policy instruments to mitigate greenhouse gas emissions, including administrative and market-based mechanisms for phasing out coal-fired generation technologies. In order to analyse such instruments, electricity market and energy system models are widely used. However, results and corresponding recommendations largely depend on the formulation of the respective model. This motivates a systematic comparison of five large-scale electricity market models which are applied to European scenarios considering the period until 2030. An evolved diff-in-diff approach is proposed to analyse the effects of two coal phase-out strategies. This contribution expands on that of earlier studies and provides some more general takeaways for both modellers and decision-makers. For instance, the evolved diff-in-diff analysis shows the influence of the reference scenario when evaluating a policy instrument. Furthermore, the importance of technical aspects such as constraints for combined heat and power plants are discussed and implications regarding three dimensions (economic, environmental, and security of supply) are presented. |
| Keywords: | model comparison,coal phase-out,electricity market model,energy policy |
| JEL: | P11 P28 Q4 Q48 Q51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:234102&r= |