|
on Regulation |
| By: | Guerino Ardizzi (Banca d'Italia); Diego Scalise (Banca d'Italia); Gabriele Sene (Banca d'Italia) |
| Abstract: | We study the relationship between interchange fees and card transactions in a large panel of countries and assess the impact of the Interchange Fee Regulation, introduced in 2015 in the European Union, on card usage. For our purposes, we take advantage of a newly assembled dataset covering almost 50 countries in the last decade and carry out two econometric exercises. Firstly, we estimate the relationship between card transactions per capita and average interchange fees by means of a panel estimator including both country and year fixed-effects, thus exploiting the broad heterogeneity across countries over time. Our results point toward a negative and significant relationship between the number and the growth rate of card-based transactions per capita and the level of interchange fees. Secondly, we adopt a difference-in-difference approach and compare the change in card payments in EU member countries (the treated group), before and after the implementation of the Interchange Fee Regulation in 2015, with that observed in a group of comparable countries (control group), which did not experience any change in interchange fee setting regulations. We find a strong and significant one-off impact of the Regulation immediately after its introduction and considerable propagation effects in the following years. Overall, we support the view that policy actions aiming at containing, but not eliminating, interchange fees can significantly contribute to the diffusion of electronic payments. |
| Keywords: | Interchange fees, Regulation, card payments |
| JEL: | E42 G2 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_628_21&r= |
| By: | Volker Nocke; Patrick Rey |
| Abstract: | We study a model in which a monopoly seller decides which among a set of heterogeneous products to offer, and what prices to charge, and consumers engage in costly (random) sequential search to learn prices and valuations. We show that the equilibrium exhibits choice overload: The larger the product line, the fewer consumers start searching. We provide conditions under which the equilibrium size of the product line is socially excessive (or insufficient). We also characterize equilibria when the seller can position products, thereby allowing the possibility of directed search, and disclose product identity. We show that the best equilibrium for the seller may involve randomizing over product positioning and inducing inefficient search. Finally, we extend our analysis to that of a platform choosing which sellers to host. |
| Keywords: | sequential consumer search, product variety, choice overload, multiproduct firm, platform |
| JEL: | L12 L15 D42 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2021_315&r= |
| By: | Joshua S. Gans |
| Abstract: | This paper examines how a firm's choice of the type of experiment impacts on its potential exploitation of new technological opportunities. It does so in the context of the failure of successful firms (or disruption) where the literature has informally suggested that firms undertake errors in experimental choice (in particular, choosing experiments that involved biased signals). It is shown that firms will generically choose biased over unbiased experiments even when there are no differences in their relative costs. This is done to better inform decisions regarding the exploitation of technological opportunities. It is shown that these choices can differ between incumbents and entrants based on their fundamentals as well as because of the anticipation of competition between them. |
| JEL: | L26 O32 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29091&r= |
| By: | Nicholas Ryan (Cowles Foundation, Yale University) |
| Abstract: | Green energy is produced by relationship-speciï¬ c assets that are vulnerable to hold-up if contracts are not strictly enforced. I study the role of counterparty risk in the procurement of green energy using data on the universe of solar procurement auctions in India. The Indian context allows clean estimates of how risk affects procurement, because solar power plants set up in the same states, by the same ï¬ rms, are procured in auctions variously intermediated by either risky states themselves or the central government. I ï¬ nd that: (i) the counterparty risk of an average state increases solar energy prices by 10%; (ii) the intermediation of the central government eliminates this risk premium; (iii) higher prices due to risk reduce investment, because state demand for green energy is elastic. The results suggest that the risk of hold-up places developing countries at a disadvantage in the procurement of green energy. |
| JEL: | L14 O13 Q42 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2294&r= |
| By: | Raúl Gutiérrez-Meave; Juan Rosellón; Luis Sarmiento |
| Abstract: | The analysis of local environmental policies is essential when evaluating the consistency of national public policies vis-à-vis the compliance of global agreements to reduce climate change. This study explores one of these policies; the 2021 Mexican reform to change electric power dispatch from a marginal-cost-based to a command and control physical system prioritizing power generation from the state power company. The new law forces the dispatch of the state company power facilities before private power producers. We use the GENeSYS-MOD techno-economic model to determine the reform’s effect on the power system’s generation mix, cost structure, and anthropogenic emissions. For this, we optimize the model under three distinct scenarios; a business-as-usual scenario with no changes to the merit order, a model with the new physical order dispatch, and an additional case where in addition to the shift to the physical dispatch, we reduce the price of fuel oil below natural gas prices to simulate the current behavior of the power company. It is relevant to note that we optimize the energy system without any assumption regarding renewable targets or climate goals because of political uncertainty and the need of pinpoint the effect of the merit order change while avoiding possible variations in the state-space arising from other constraints. Our results show that by 2050, the new dispatch rule increases the market power of the state company to 99% of total generation and decreases the share of renewable technologies in the generation mix from 72% to 51%. Additionally, cumulative power sector emissions increase by 563 Megatons of CO2, which with the current cost of carbon in the European Emissions Trading System translates to around 36 billion Euros |
| Keywords: | Merit Order Rules; Power Sector; Energy Reform; Mexico; GENeSYS-MOD |
| JEL: | Q42 Q47 Q48 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1955&r= |
| By: | Giacomo Calzolari; Leonardo Felli; Johannes Koenen; Giancarlo Spagnolo; Konrad O. Stahl |
| Abstract: | We study how informal buyer-supplier relationships in the German automotive industry affect procurement. Using unique data from a survey focusing on these, we show that more trust, the belief that the trading partner acts to maintain the mutual relationship, is associated with both higher quality of the automotive parts and more competition among suppliers. Yet both effects hold only for parts involving unsophisticated technology, not when technology is sophisticated. We rationalize these findings within a relational contracting model that critically focuses on changes in the bargaining power, due to differences in the costs of switching suppliers. |
| Keywords: | Relational Contracts, Hold-up, Buyer-Supplier Contracts, Bargaining Power |
| JEL: | D86 L14 L62 O34 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2021_316&r= |
| By: | Katherine Di Lucido; Nicholas K. Tabor; Jeffery Y. Zhang |
| Abstract: | This paper provides a brief history of the U.S. financial regulatory perimeter, a legal cordon comprised of “positive†and “negative†restrictions on the conduct of banking organizations. Today’s regulatory perimeter faces a wide range of challenges, from disaggregation, to new commercial entrants, to new varieties of charters (and new uses of legacy charters). We situate these challenges in the longer history of American banking, identifying a pattern in debates about the nature, shape, and position of the perimeter: outside-in pressure, inside-out pressure, and reform and expansion. We also observe a shift in this pattern, beginning roughly three decades ago, which gradually made the perimeter broader, more complex, and arguably more permeable. We show this trend graphically in an animation accompanying this paper. |
| Keywords: | Regulatory perimeter; Banking regulation; Law and economics; Non-bank financial intermediation |
| JEL: | K20 K40 N20 N40 |
| Date: | 2021–08–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2021-51&r= |
| By: | Yosuke Uno (Bank of Japan); Akira Sonoda (Bank of Japan); Masaki Bessho (Bank of Japan) |
| Abstract: | This paper presents a survey of a field called the economics of privacy. Reflecting growing concerns worldwide about the handling of personal data on the Internet, the economics of privacy is developing rapidly, coinciding with recent efforts by privacy regulators to tighten regulations. The literature argues that it is difficult for market mechanisms to resolve problems such as how to determine the socially optimal level of privacy protection and how to avoid excessive privacy loss driven by negative data externalities. These insights should be useful for policymakers facing the question of how to deal with personal data issues and to ensure that people's privacy is protected. |
| JEL: | D62 D82 D83 K20 M31 M37 |
| Date: | 2021–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojwps:wp21e11&r= |
| By: | David S. Rapson; Erich Muehlegger |
| Abstract: | Electric vehicles (EVs) powered by renewable electricity are a centerpiece of efforts to decarbonize transportation. EV advocates also claim benefits from local pollution reductions, lower life-cycle costs to consumers, and improved energy security. We examine the theory and evidence behind these claims and evaluate when the market will produce the optimal path of EV adoption. Optimal EV policy is nuanced. While EVs driven in some locations reduce pollution, they increase pollution in others. While many consumers enjoy cost savings from EVs, some experience net benefits from choosing gasoline-powered cars, even after accounting for EV subsidies. And depending on the dynamic benefits of stimulating EV adoption today, optimal policy might front-load stimulus, even though the environmental benefits of EV adoption are likely to increase over time as electricity grids become cleaner. Reflecting these nuances, the policy landscape is complicated and often creates conflicting incentives for EV adoption in regions with ambitious adoption goals. We highlight several themes for policy design, including 1) promoting regional variation in EV policies that align private incentives with social benefits, 2) pursuing a time-path of policies that follows the trajectory of marginal benefits, and 3) rationalizing electricity and gasoline prices to reflect their social marginal cost. On the extensive margin, purchase incentives should ramp-down as learning-by-doing and network externalities that may exist diminish; on the intensive margin, gasoline should become relative more expensive than electricity (per mile traveled) to reflect cleaner marginal emissions from electricity generation. |
| JEL: | Q54 Q55 Q58 R4 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29093&r= |
| By: | Fayçal Sawadogo (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne, FERDI - Fondation pour les Etudes et Recherches sur le Développement International) |
| Abstract: | This study estimates the price elasticity of mobile voice communication in developed and developing countries using quarterly operator data from 2000 to 2017. Using a dynamic panel model through system-GMM, the study finds that the demand price elasticity is higher for operators in developed countries. Controlling for cross-price elasticity with internet data prices reveals that voice communication is a substitute for internet data usage in developed countries. Another important finding is that, for operators in developing countries, the price elasticity decreases with market development level, whereas it increases for those in developed countries. Demand for mobile voice communication is thus more sensitive to price changes in the less penetrated markets in developing countries and the mature markets in developed countries. Furthermore, over time, price elasticity has decreased across operators in developing countries, highlighting the need for updating regulatory frameworks for the telecommunications sector to reflect the sector's various developments. In addition, when formulating regulatory policies, some important economic factors, such as income level and domestic market characteristics, should be considered to avoid losses in consumer welfare. The high estimated price elasticities suggest that operators do not have an obvious interest in engaging in collusive behavior that would hinder competition. Moreover, since there is no differential effect due to operators' positions or market shares, asymmetric regulation of the dominant operators should be avoided. |
| Keywords: | Econometric demand model,Dynamic panel analysis,Telecommunications services,Comparative analysis |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-03293392&r= |
| By: | Zhijun Chen; Chongwoo Choe; Jiajia Cong; Noriaki Matsushima |
| Abstract: | This paper studies tech mergers that involve a large volume of consumer data. The merger links the markets for data collection and data application through a consumption synergy. The merger-specific efficiency gains exist in the market for data application due to the consumption synergy and data-enabled personalization. Prices fall in the market for data collection due to the merged firm's incentives to expand its outreach in the market for data application. But in the market for data application, prices generally rise as the efficiency gains are extracted away through personalized pricing, rather than being passed on to consumers. When the consumption synergy is large enough, the merger can result in monopolization of both markets, with further consumer harm when stand-alone competitors exit in the long run. We discuss policy implications including various merger remedies. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:1108r&r= |
| By: | Yizhou Jin; Shoshana Vasserman |
| Abstract: | New technologies have enabled firms to elicit granular behavioral data from consumers in exchange for lower prices and better experiences. This data can mitigate asymmetric information and moral hazard, but it may also increase firms’ market power if kept proprietary. We study a voluntary monitoring program by a major U.S. auto insurer, in which drivers accept short-term tracking in exchange for potential discounts on future premiums. Using a proprietary dataset matched with competitor price menus, we document that safer drivers self-select into monitoring, and those who opt in become yet 30% safer while monitored. Using an equilibrium model of consumer choice and firm pricing for insurance and monitoring, we find that the monitoring program generates large profit and welfare gains. However, large demand frictions hurt monitoring adoption, forcing the firm to offer large discounts to induce opt-in while preventing the unmonitored pool from unraveling given the competitive environment. A counterfactual policy requiring the firm to make monitoring data public would thus further reduce the firm’s incentive to elicit monitoring data, leading to less monitoring and lower consumer welfare in equilibrium. |
| JEL: | L0 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29096&r= |
| By: | Anna D'Annunzio; Antonio Russo |
| Abstract: | A large share of the ads displayed by digital publishers (e.g., newspapers and blogs) are sold via intermediaries (e.g., Google), that have large market power and reportedly allocate the ads in an opaque way. We study the incentives of an intermediary to disclose consumer information to advertisers when auctioning ad impressions. We show that disclosing information that enables advertisers to optimize the allocation of ads on multi-homing consumers is profitable to the intermediary only if advertising markets are sufficiently thick. In turn, we study how disclosure affects the incentives of publishers to outsource the sale of their ads to an intermediary, and relate these incentives to the extent of consumer multi-homing, the competitiveness of advertising markets and the ability of platforms to profile consumers. We show that, even when most consumers multi-home, the publishers may be worse off by outsourcing to the intermediary, in particular if they operate in thin advertising markets. Finally, we study how the intermediary responds to policies designed to enhance transparency or consumer privacy, and the implications of these policies for the online advertising market. |
| Keywords: | online advertising, intermediary, multi-homing, privacy, transparency |
| JEL: | D43 D62 L82 M37 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9199&r= |
| By: | Ruhnau, Oliver; Qvist, Staffan |
| Abstract: | In the context of 100% renewable electricity systems, prolonged periods with persistently scarce supply from wind and solar resources have received increasing academic and political attention. This article explores how such scarcity periods relate to energy storage requirements. To this end, we contrast results from a time series analysis with those from a system cost optimization model, based on a German 100% renewable case study using 35 years of hourly time series data. While our time series analysis supports previous findings that periods with persistently scarce supply last no longer than two weeks, we find that the maximum energy deficit occurs over a much longer period of nine weeks. This is because multiple scarce periods can closely follow each other. When considering storage losses and charging limitations, the period defining storage requirements extends over as much as 12 weeks. For this longer period, the cost-optimal storage capacity is about three times larger compared to the energy deficit of the scarcest two weeks. Adding other sources of flexibility for the example of bioenergy, the duration of period that defines storage requirements lengthens to more than one year. When optimizing system costs based on single years rather than a multi-year time series, we find substantial inter-annual variation in storage requirements with the most extreme year needing more than twice as much storage as the average year. We conclude that focusing on short-duration extreme events or single years can lead to an underestimation of storage requirements and costs of a 100 % renewable system. |
| Keywords: | Renewable energy,Wind and solar power,Inter-annual variability,Low-wind events,Dunkelflaute,Electricity system,Energy storage,Hydrogen,Batteries |
| JEL: | Q4 Q40 Q41 Q42 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:236723&r= |
| By: | Leandro Arozamena; Juan-José Ganuza; Federico Weinschelbaum |
| Abstract: | In order to make competition open, fair and transparent, procurement regulations often require equal treatment for all bidders. This paper shows how a favorite supplier can be treated preferentially (opening the door to home bias and corruption) even when explicit discrimination is not allowed. We analyze a procurement setting in which the optimal design of the project to be contracted is unknown. The sponsor has to invest in specifying the project. The larger the investment, the higher the probability that the initial design is optimal. When it is not, a bargaining process between the winning firm and the sponsor takes place. Profits from bargaining are larger for the favorite supplier than for its rivals. Given this comparative advantage, the favored firm bids more aggressively and then, it wins more often than standard firms. Finally, we show that the sponsor invests less in specifying the initial design, when favoritism is stronger. Underinvestment in design specification is a tool for providing a comparative advantage to the favored firm. |
| Keywords: | auctions, favoritism, auction design, renegotiation, corruption |
| JEL: | C72 D44 D82 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1275&r= |
| By: | Kalsbach, Oliver; Rausch, Sebastian |
| Abstract: | Economists tend to view a uniform emissions price as the most cost-effective approach to reducing greenhouse gas emissions. This paper offers a different view, focusing on economies where society values the well-being of future generations more than private actors. Employing analytical and numerical general equilibrium models, we show that a uniform carbon price is efficient only under restrictive assumptions about technology homogeneity and intertemporal decision-making. Non-uniform pricing spurs capital accumulation and benefits future generations. Depending on sectoral heterogeneity in the substitutability between capital and energy inputs, we find that optimal carbon prices differ widely across sectors and yield substantial welfare gains relative to uniform pricing. |
| Keywords: | Sectoral Carbon Pricing,Differentiated Carbon Taxes,Climate Policy,Social Discounting |
| JEL: | Q54 Q58 Q43 H23 C61 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:21060&r= |