|
on Regulation |
| By: | David Martimort (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, EHESS - École des hautes études en sciences sociales); Guillaume Pommey (Università degli Studi di Roma Tor Vergata [Roma]); Jerome Pouyet (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université, ESSEC Business School - Essec Business School) |
| Abstract: | Modern airports provide commercial services to passengers in addition to aeronautical services to airlines. We analyze how the airport's market power impacts the pricing of services when the airport also invests in the quality of its infrastructure. There is a need to regulate the airport and the optimal regulation can be implemented with a price-cap and a subsidy scheme targeted to the investment. The choice between a single-till and a dual-till approach does change neither the optimal regulation nor its implementation. We also investigate the consequences on the optimal regulation of the nature of the airport-airline relationship and of the observability of investment. |
| Keywords: | airports,regulation,commercial services,investment |
| Date: | 2021–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03328394&r= |
| By: | Jérôme Pouyet (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université, ESSEC Business School - Essec Business School); Thomas Trégouët (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université) |
| Abstract: | We analyze vertical integration between platforms providing operating systems to manufacturers of devices in presence of indirect network effects between buyers of devices and developers of applications. Vertical integration creates market power over non-integrated manufacturers and application developers. That market power provides the merged entity with the ability to coordinate pricing decisions across both sides of the market, which allows to better internalize network effects. Vertical integration does not systematically lead to foreclosure and can benefit all parties, even in the absence of efficiency gains. Its competitive impact depends on the strength and the structure of indirect network effects. |
| Keywords: | vertical integration,platform markets,network effects,foreclosure |
| Date: | 2021–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03328392&r= |
| By: | Beltrán, Fernando |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238009&r= |
| By: | Bielov, Constantine; Mitomo, Hitoshi; Hämmäinen, Heikki |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238011&r= |
| By: | David Martimort (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, EHESS - École des hautes études en sciences sociales); Jérôme Pouyet (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université, ESSEC Business School - Essec Business School); Thomas Trégouët (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université) |
| Abstract: | An incumbent seller contracts with a buyer and faces the threat of entry. The contract stipulates a price and a penalty for breach if the buyer later switches to the entrant. Sellers are heterogenous in terms of the gross surplus they provide to the buyer. The buyer is privately informed on her valuation for the incumbent's service. Asymmetric information makes the incumbent favor entry as it helps screening buyers. When the entrant has some bargaining power vis-à-vis the buyer and keeps a share of the gains from entry, the incumbent instead wants to reduce entry. The compounding effect of these two forces may lead to either excessive entry or foreclosure, and possibly to a fixed rebate for exclusivity given to all buyers. |
| Keywords: | foreclosure,excessive entry,exclusionary behavior,incomplete information |
| Date: | 2021–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03328387&r= |
| By: | Victor Aguirregabiria; Allan Collard-Wexler; Stephen P. Ryan |
| Abstract: | This survey is organized around three main topics: models, econometrics, and empirical applications. Section 2 presents the theoretical framework, introduces the concept of Markov Perfect Nash Equilibrium, discusses existence and multiplicity, and describes the representation of this equilibrium in terms of conditional choice probabilities. We also discuss extensions of the basic framework, including models in continuous time, the concepts of oblivious equilibrium and experience-based equilibrium, and dynamic games where firms have non-equilibrium beliefs. In section 3, we first provide an overview of the types of data used in this literature, before turning to a discussion of identification issues and results, and estimation methods. We review different methods to deal with multiple equilibria and large state spaces. We also describe recent developments for estimating games in continuous time and incorporating serially correlated unobservables, and discuss the use of machine learning methods to solving and estimating dynamic games. Section 4 discusses empirical applications of dynamic games in IO. We start describing the first empirical applications in this literature during the early 2000s. Then, we review recent applications dealing with innovation, antitrust and mergers, dynamic pricing, regulation, product repositioning, advertising, uncertainty and investment, airline network competition, dynamic matching, and natural resources. We conclude with our view of the progress made in this literature and the remaining challenges. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.01725&r= |
| By: | Johan Hombert (HEC Paris - Ecole des Hautes Etudes Commerciales); Jérôme Pouyet (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université, ESSEC Business School - Essec Business School); Nicolas Schutz (Universität Mannheim [Mannheim]) |
| Abstract: | We develop a model of vertical merger waves and use it to study the optimal merger policy. As a merger wave can result in partial foreclosure, it can be optimal to ban a vertical merger that eliminates the last unintegrated upstream firm. Such a merger is more likely to worsen market performance when the number of downstream firms is large relative to the number of upstream firms, |
| Date: | 2020–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03330587&r= |
| By: | Jeschonneck, Malte |
| Abstract: | The increased prevalence of pricing algorithms incited an ongoing debate about new forms of collusion. The concern is that intelligent algorithms may be able to forge collusive schemes without being explicitly instructed to do so. I attempt to examine the ability of reinforcement learning algorithms to maintain collusive prices in a simulated oligopoly of price competition. To my knowledge, this study is the first to use a reinforcement learning system with linear function approximation and eligibility traces in an economic environment. I show that the deployed agents sustain supra-competitive prices, but tend to be exploitable by deviating agents in the short-term. The price level upon convergence crucially hinges on the utilized method to estimate the qualities of actions. These findings are robust to variations of parameters that control the learning process and the environment. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:370&r= |
| By: | Simshauser, P.; Billimoria, F.; Rogers, C. |
| Abstract: | Australia’s National Electricity Market experienced significant growth in variable renewable energy (VRE) investment commitments over the period 2016-2021. A subset of projects experienced material entry frictions which stemmed from inadequate network hosting capacity. In this article we examine the development of non-regulated Renewable Energy Zones (REZ) as a means by which to help guide forward market commitments and produce greater coordination between generation and transmission plant investments. Using an optimisation model comprising 1500MW of transmission network infrastructure, we explore various definitions of a ‘fully subscribed REZ’ given the portfolio benefits associated with complementary wind and solar plant in Southern Queensland. We also examine the conditions by which various proponents would sponsor a non-regulated REZ. When maximising output forms the objective function, full subscription is achieved by developing ~3400MW of solar and wind in roughly equal proportions, accepting that some level of curtailment is an economic result. Conversely, full subscription in which the combined cost of the REZ and VRE plant is minimised is achieved at ~1800MW of VRE. If maximising net cashflows forms the objective function, VRE plant development is complicated by the dynamic nature of spot prices. Specifically, in early stages of VRE development solar is preferred but as its market share rises and value of output falls, wind investments dominate holding technology costs constant. |
| Keywords: | Renewable Energy Zones, renewable generation, transmission investment |
| JEL: | D25 D80 G32 L51 Q41 |
| Date: | 2021–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2164&r= |
| By: | Leandro Arozamena (Universidad Torcuato Di Tella / CONICET); Juan José Ganuza (Universitat Pompeu Fabra / Barcelona GSE); Federico Weinschelbaum (Universidad Torcuato Di Tella / CONICET) |
| 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) evenwhen 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: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:83&r= |
| By: | Hudson, Heather E.; McMahon, Rob; Murdoch, Bill |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238029&r= |
| By: | Elena Georgarakis; Thomas Bauwens; Anne-Marie Pronk; Tarek AlSkaif |
| Abstract: | While the potential for peer-to-peer electricity trading, where households trade surplus electricity with peers in a local energy market, is rapidly growing, the drivers of participation in this trading scheme have been understudied so far. In particular, there is a dearth of research on the role of non-monetary incentives for trading surplus electricity, despite their potentially important role. This paper presents the first discrete choice experiment conducted with prosumers (i.e. proactive households actively managing their electricity production and consumption) in the Netherlands. Electricity trading preferences are analyzed regarding economic, environmental, social and technological parameters, based on survey data (N = 74). The dimensions most valued by prosumers are the environmental and, to a lesser extent, economic dimensions, highlighting the key motivating roles of environmental factors. Furthermore, a majority of prosumers stated they would provide surplus electricity for free or for non-monetary compensations, especially to energy-poor households. These observed trends were more pronounced among members of energy cooperatives. This suggests that peer-to-peer energy trading can advance a socially just energy transition. Regarding policy recommendations, these findings point to the need for communicating environmental and economic benefits when marketing P2P electricity trading platforms and for technical designs enabling effortless and customizable transactions |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.02452&r= |
| By: | David Bounie (IP Paris - Institut Polytechnique de Paris); Antoine Dubus (ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]); Patrick Waelbroeck (Télécom Paris) |
| Abstract: | We analyze competition between data intermediaries collecting information on consumers, which they sell to firms for price discrimination purposes. We show that competition between data intermediaries benefits consumers by increasing competition between firms, and by reducing the amount of consumer data collected. We argue that merger policy guidelines should investigate the effect of the data strategies of large intermediaries on competition and consumer surplus in related markets. |
| Date: | 2021–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03336520&r= |
| By: | Hobbie, Hannes; Mehlem, Jonas; Wolff, Christina; Weber, Lukas; Flachsbarth, Franziska; Möst, Dominik; Moser, Albert |
| Abstract: | Integrating increasing shares of weather-dependent renewable energies into energy systems while maintaining high levels of security of supply constitutes a challenge for network utilities. Obtaining the goal of large shares of renewable-based generation sources on electricity supply requires an effective operation of electricity grids and efficient coordination among grid operators. Therefore, detailed modelling of grid operation has increasingly become important in recent years. Methods for modelling the operation of (extra) high-voltage grids are undergoing persistent enhancements in academia and energy industries. Existing approaches vary in data granularity and computational methods. Moreover, assumptions on technical details in grid models vary. Differences in input data and modelling methods likely have an impact on simulation results. This paper aims to identify the most relevant differences present in grid simulation models and methods for studying congestion management in a European context. Differences are studied based on a comparison of grid simulation models from eight German energy modelling institutions. The effects of model parameterization and formulation on congestion management results are further investigated with three different case studies focusing on outage simulation, line-constraint relaxation and the modelling of cross-border measures applying selected grid simulation models. Results indicate that data parametrization can have large impacts on model results about congestion management volumes and geographic distribution of necessary measures. Model key parameters must be calibrated thoroughly. The findings of this research will assist future grid modelers and power system planners in efficiently simulating congestion management and increases the validity and explorative power of grid simulation models. |
| Keywords: | Transmission grid,Sustainable development,Renewable energies,Model comparison,Congestion management,Optimal power flow |
| JEL: | Q40 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:240928&r= |
| By: | Pauline Pedehour (Université de Nantes); Lionel Richefort (Université de Nantes) |
| Abstract: | This study develops a model of water extraction with endogenous social norms. Many users are connected by a unique shared resource that can become scarce in case of over-exploitation. Preferences of individuals are guided by their extraction values and their taste for conformity to social norms which provide incentives to follow others. As the main result of this study, the uniqueness of the Nash equilibrium is established under a sufficient condition. Afterward, some comparative statics analysis shows the effects of change in individual heterogeneous parameters, conformism, and density of the network on the global quantity extracted. Welfare and social optimum properties are established to avoid the tragedy of the commons and sub-optimal consumptions of water. Lastly, this theoretical framework is completed by extensions to highlight levers of water preservation, including the calibration of social norm incentives. |
| Keywords: | Comparative statics, Conformism, Nash equilibrium, Network, Social norms, Water extraction |
| JEL: | D04 D80 Q01 Q25 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2021.20&r= |
| By: | Clémence Christin (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique); Jean-Philippe Nicolaï (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Jérôme Pouyet (THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université, ESSEC Business School - Essec Business School) |
| Abstract: | This paper examines, under imperfect competition, the effect of a cap-and-trade system on industry profits and the interaction between cap-and-trade system and the evolution of the market structure, both depending on the type of abatement technologies used by firms. Two extreme types are considered: end-of-pipe abatement technology-meaning, filtration and other mechanisms that are largely independent of production decisionsand process-integrated technology, which entails integrating cleaner or more energy-efficient methods into production. This paper prescribes that the distribution of free allocation should depend on the kind of abatement technologies. Finally, a reserve of pollution permits for new entrants is justified when the industry uses a process-integrated abatement technology, while a system with a preemption right may be justified in the case of end-of-pipe abatement technology. |
| Keywords: | cap-and-trade system,imperfect competition,end-of-pipe abatement,process-integrated abatement,reserve for entrants |
| Date: | 2021–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03328947&r= |
| By: | Meier, Felix D.; Quaas, Martin F. |
| Abstract: | This paper introduces endogenous technological change in a Hotelling-Herfindahl model of natural resource use to study the recent developments in the U.S. natural gas industry. We consider optimal forward-looking technology investments, and study implications for the order of extraction of conventional and shale gas, and a backstop technology, and characterize the development of gas prices. We find that technology investments increase during the extraction of conventional gas. Once production shifts towards shale gas, investments decline. Consistent with current trends, our theory explains how gas prices can follow a U-shaped path. The calibrated model suggests that U.S. shale gas production continues to grow and prices continue to decrease until 2050. We analytically and numerically show that the introduction of a carbon tax would reduce technology investments, and thus could drastically change the temporal patterns of U.S. shale gas extraction. The forward-looking behaviour of firms is crucial for such an effect, which does not occur in models that treat the improvement in extraction technology as an unanticipated shock to the industry. |
| Keywords: | shale gas,endogenous technological change,optimal order of extraction,natural gas prices,extraction costs,renewable backstop,optimal transition,carbon tax |
| JEL: | D25 Q30 Q55 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkie:240207&r= |
| By: | Alipranti, Maria; Petrakis, Emmanuel; Skartados, Panagiotis |
| Abstract: | We consider a vertically related market in which an upstream monopolist supplier trades, via interim observable two-part tariff contracts, with two differentiated goods' downstream Cournot competitors. We show that passive partial backward ownership (PPBO) may be pro-competitive and welfare enhancing. PPBO exacerbates the upstream's commitment problem and yields lower wholesale prices, and higher industry output, consumers surplus, and welfare than in the absence of PPBO. |
| Keywords: | Passive Partial Backward Ownership; Vertical Relations; Two-Part Tariffs; Interim Observable Contracts |
| JEL: | D43 L13 L14 |
| Date: | 2021–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:33271&r= |
| By: | Didier Laussel; Ngo Van Long; Joana Resende |
| Abstract: | A durable good monopolist faces a continuum of heterogeneous customers who make purchase decisions by comparing present and expected price-quality offers. The monopolist designs a sequence of price-quality menus to segment the market. We consider the Markov Perfect Equilibrium (MPE) of a game where the monopolist is unable to commit to future price-quality menus. We obtain the novel results that (a) under certain conditions, the monopolist covers the whole market in the first period (even when a static Mussa-Rosen monopolist would not cover the whole market), because this is a strategic means to convince customers that lower prices would not be offered in future periods, and that (b) this can happen only under the stage-wise Stackelberg leadership assumption (whereby consumers base their expectations on the value of the state variable at the end of the period). Conditions under which MPE necessarily involve sequentially trading are also derived. Un monopoleur de biens durables fait face à un continuum de clients hétérogènes qui prennent des décisions d'achat en comparant les offres qualité-prix actuelles et attendues. Le monopole conçoit une séquence de menus qualité-prix pour segmenter le marché. Nous considérons l'équilibre parfait de Markov (MPE) d'un jeu où le monopoleur est incapable de s'engager sur les futurs menus de qualité-prix. Nous prouvons que (a) dans certaines conditions, le monopoleur couvre l'ensemble du marché dans la première période (même lorsqu'un monopoleur statique de Mussa-Rosen ne couvrirait pas l'ensemble du marché), car c'est un moyen stratégique de convaincre les clients que des prix plus bas ne seraient pas proposés dans les périodes futures, et que (b) cela ne peut se produire que sous l'hypothèse de leadership par étapes de Stackelberg (dans laquelle les consommateurs fondent leurs attentes sur la valeur de la variable d'état à la fin de la période). Les conditions dans lesquelles le MPE implique nécessairement des échanges séquentiels sont également dérivées. |
| Keywords: | Intertemporal price discrimination,Durable goods monopoly,Product quality,Markov perfect equilibrium, Discrimination tarifaire intertemporelle,Monopoleur des biens durables,La qualité des produits,équilibre parfait de Markov |
| JEL: | C73 D42 L12 L15 |
| Date: | 2021–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2021s-31&r= |
| By: | Girich Maria (RANEPA); Levashenko Antonina (RANEPA); Valamat-Zade A. (RANEPA); Magomedov Rustam (RANEPA) |
| Abstract: | Online platforms play a key role in digital economy. They make a significant contribution to increasing productivity and development of innovations, facilitate the easing of foreign economic activity, create environment for social development by supporting new forms of employment, involving small and medium-sized enterprises (SMEs) in the economy. The OECD member countries, as well as the Organization’s partner countries (primarily China), strive to create conditions for the development of online platforms and ensure their competitiveness in global markets. Currently, the EU has adopted the most detailed regulation aimed, on the one hand, at creating conditions for developing digital platforms, and on the other, at protecting local consumers of goods and services provided by global digital platforms against misconduct. In order to improve the tools for protecting Russian users of the services provided by global online platforms, it is advisable to carefully analyze the EU experience in protecting the interests of consumers of digital platforms. |
| Keywords: | Russian economy, online platforms, digitalization, digital platforms |
| JEL: | O3 O31 O32 O33 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:gai:ppaper:ppaper-2021-1142&r= |