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on Regulation |
| 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. |
| JEL: | C01 L0 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29291&r= |
| By: | Robin S. Lee; Michael D. Whinston; Ali Yurukoglu |
| Abstract: | This chapter presents an overview of advances in the structural analysis of contracting in vertical markets over the past fifteen years. We provide a discussion of theoretical models of contracting and bargaining that form the basis of recent empirical work, and then present common approaches used by researchers to take these models to the data. We also briefly survey the structural empirical literature on topics in vertical markets (including horizontal and vertical mergers, price discrimination, and nonlinear and exclusionary contracts), and conclude with a discussion of potential topics for future research. |
| JEL: | L1 L13 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29282&r= |
| By: | Mark J. TREMBLAY; Takanori ADACHI; Susumu SATO |
| Abstract: | Firms in traditional markets often compete in output `a la Cournot. In this paper, we consider Cournot platform competition in two-sided markets with single-, multi-, and mixed-homing allocations and find that the markup and markdown terms are distorted toward zero for (i) greater levels of platform competition and (ii) greater levels of singlehoming. Furthermore, we develop side specific conduct parameters that depend on the underlying platform conduct as well as the homing allocation; these effectively extend the monopoly platform Lerner indices from Armstrong (2006) and Weyl (2010) to the general case of platform competition. Finally, we show that, in utter contrast to the welfare results in traditional Cournot markets, greater Cournot platform competition often decreases welfare across all feasible homing allocations. |
| Keywords: | Two-sided markets, conduct parameter, network externality, Lerner index,single-homing, multi-homing, mixed-homing. |
| JEL: | D40 L10 L20 L40 |
| URL: | http://d.repec.org/n?u=RePEc:kue:epaper:e-21-004&r= |
| By: | Baiker, Laura; Bertola, Elena; Jelitto, Markus |
| Abstract: | Services is the fastest-growing sector of today's global economy and trade in services is the most dynamic segment of world trade. However, its potential remains constrained by a variety of barriers: trade costs are estimated to be almost double those in goods, and more than 40% of trade costs are accounted for by regulation-related factors. Regulatory measures related to the permission to supply a service, i.e. those related to licensing and qualifications requirements and procedures, and technical standards, can particularly affect service suppliers' ability to trade. With a view to mitigating the unintended trade-restrictive effects of such measures, since 2017, a group of Members has been negotiating a set of regulatory disciplines in the context of the Joint Initiative on Services Domestic Regulation. Since the launch of negotiations in the Joint Initiative at the margins of the 11th WTO Ministerial Conference, a number of delegations have approached the WTO Secretariat for assistance on assessing to what extent their domestic regulatory regimes are consistent with the disciplines on services domestic regulation that the Joint Initiative has developed ("SDR disciplines"), as well as to understand what potential benefits the implementation of such disciplines might bring to their economies. This Paper expands on the individual assistance provided to WTO Members and has the following three objectives: (i) to examine the prevalence of the SDR disciplines in regional and bilateral trade agreements; (ii) to evaluate to what extent Members have already implemented SDRrelated measures in their national regulatory frameworks; and (iii) to analyze the potential linkages between the application of the SDR disciplines and economic performance. Firstly, based on a sample of 74 agreements concluded by 151 Members, we show that the adoption of domestic regulatory disciplines in trade agreements is a fairly established practice, particularly among "new generation" agreements concluded after 2005. Almost 40% of the Members in our sample, across all income levels and regions, being participants of the Joint Initiative or not, have committed on average to at least half of the SDR disciplines. Secondly, we analyze the level of implementation of the SDR disciplines in national regulatory frameworks using a sample of 86 Members. Not only have Members signed on to the SDR disciplines in their trade agreements, but they have also undertaken substantive regulatory reforms that implement these measures at the national level. We find that more than half of the economies in our sample have implemented in their regulatory regimes at least two thirds of the SDR disciplines under study. Lastly, while our research does not claim to establish causal relationships, we provide initial insights on the potential linkages between the application of the SDR disciplines and various indicators of economic performance, including services value-added, share of services trade, participation in global value chains, and level of entrepreneurship. |
| Keywords: | services domestic regulation,trade in services,trade agreements,economic performance |
| JEL: | F13 F15 L8 K33 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wtowps:ersd202114&r= |
| By: | Chongwoo Choe (Department of Economics, Monash University); Jiajia Cong (School of Management, Fudan University); Chengsi Wang (Department of Economics, Monash University) |
| Abstract: | We study how a data-rich firm can benefit by unilaterally sharing its customer data with a data-poor competitor when the data can be used for price discrimination. By sharing data on consumers that are more loyal to the competitor while keeping the data on the competitor's most loyal consumers to itself, the firm can induce the competitor to raise its price for consumers it does not have data on. This makes both firms better off than without data sharing. |
| Keywords: | customer data sharing, price discrimination |
| JEL: | L11 L13 L40 M30 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2021-10&r= |
| By: | Todorova, Tamara |
| Abstract: | We stress some efficiency aspects of monopolistic competition justifying it on account of its tendency to innovate and the questionable excess capacity paradigm. Some further efficiency aspects revealed are product variety and transaction cost savings. We view the monopolistically competitive firm as an essential source of technological innovation, product variety and cost economies. While perfect competition is universally considered a benchmark and a social optimum, we consider it a strongly unrealistic theoretical setup where the monopolistically, rather than the perfectly, competitive firm turns out to be the true type of competition and social optimum in the real world of positive transaction costs. The monopolistically competitive firm not only offers product variety and innovation but is the optimal institutional arrangement under positive transaction costs. |
| Keywords: | efficiency; innovation; variety; monopolistic competition; perfect competition; transaction costs |
| JEL: | D23 D24 D43 L13 O3 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109919&r= |
| By: | Claude Crampes (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Yassine Lefouili (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | This paper investigates the trade-offs associated with the digitalization of the energy sector. Arguing that digitalization has both bright and dark sides, we study the extent to which it can help make energy systems efficient and sustainable. We first discuss how digitalization affects the responsiveness of demand, and explore its implications for spot pricing, load shedding, and priority service. In particular, we highlight the conditions under which digital technologies that allow demand to be more responsive to supply are likely to be used. We then turn to the way digitalization can contribute to the decarbonization of the energy sector, and discuss the promises and limitations of artificial intelligence in this area. Finally, we contend that policymakers should pay special attention to the privacy concerns raised by the digitalization of the energy sector and the cyberattacks that it enables. |
| Keywords: | Digitalisation,Dynamic pricing,Electricity,Artificial Intelligence |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03352748&r= |
| By: | Atabek Atayev |
| Abstract: | We analyze competition on nonlinear prices in homogeneous goods markets with consumer search. In equilibrium firms offer two-part tariffs consisting of a linear price and lump-sum fee. The equilibrium production is socially efficient as the linear price of equilibrium two-part tariffs equals to the production marginal cost. Firms thus compete in lump-sum fees, which are dispersed in equilibrium. We show that sellers enjoy higher profit, whereas consumers are worse-off with two-part tariffs than with linear prices. The competition softens because with two-part tariffs firms can make effective per-consumer demand less elastic than the actual demand. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.15198&r= |
| By: | Stefan Ambec (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Jessica Coria (Unknown) |
| Abstract: | We propose informational spillovers as a new rationale for the use of multiple policy instruments to mitigate a single externality. We investigate the design of a pollution standard when the firms' abatement costs are unknown and emissions are taxed. A firm might abate pollution beyond what is required by the standard by equalizing its marginal abatement costs to the tax rate, thereby revealing information about its abatement cost. We analyze how a regulator can take advantage of this information to design the standard. In a dynamic setting,the regulator relaxes the initial standard in order to induce more information revelation, which would allow her to set a standard closer to the first best in the future. Updating standards, though, generates a ratchet effect since a lowcost firm might strategically hide its cost by abating no more than required by the standard. We characterize the optimal standard and its update across time depending on the firm's abatement strategy. We illustrate our theoretical results with the case of NOx regulation in Sweden. We find evidence that the firms that pay the NOx tax experience more frequent standard updates and more stringent revisions than those who are exempted. |
| Keywords: | Policy overlap,Multi-governance,Ratchet effect,Asymmetric information,Tax,Environmental policy,Pollution |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03352820&r= |
| By: | Turner, Ian R (Yale University) |
| Abstract: | We develop a theory of policymaking between an agent and an overseer, with a principal whose welfare is affected by agent-overseer interactions. The agent can increase the quality of policy outcomes through costly capacity investments. Oversight and agent bias jointly determine optimal agent capacity investments. We show that when oversight improves agent investment incentives the principal always benefits from an agent with biases opposite the overseer. Competing agent-overseer biases translate into higher quality policy outcomes than the principal could induce were she monitoring the agent. Effective oversight is necessary for these incentive effects. The results imply that political principals ought to consider the nature of the broader policymaking environment when appointing agents to make policy on their behalf and when designing managerial strategies aimed at motivating agents. |
| Date: | 2021–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:ebp5m&r= |
| By: | Hélia Costa; Giuseppe Nicoletti; Mauro Pisu; Christina von Rueden |
| Abstract: | Despite the rising importance and economy-wide effects of online platforms, the paucity of cross-country comparable data still hampers understanding of the structural and policy determinants of their diffusion. This study contributes to the understanding of multi-sided online platforms in three main ways. First, we build a harmonised international dataset of online platforms and their use across 43 OECD and G20 countries, covering the 2013-19 period and nine areas of activity. Second, we describe main trends in the use of platforms in the past years, and third, we investigate the structural and policy determinants of online platforms diffusion across countries and over time. |
| Keywords: | Data collection, digitalisation, online platforms |
| JEL: | C80 M20 O33 |
| Date: | 2021–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1683-en&r= |
| By: | Joshua W. Deutschmann; Jared E. Gars; Jean-François Houde; Molly Lipscomb; Laura A. Schechter |
| Abstract: | Privatization of a public good (the management of sewage treatment centers in Dakar, Senegal) leads to an increase in the productivity of downstream sewage dumping companies and a decrease in downstream prices of the services they provide to households. We use the universe of legal dumps of sanitation waste from May 2009 to November 2018 to show that legal dumping increased substantially following privatization–on average an increase of 61.7%, or an increase of about 14,000 cubic meters each month. This is due to increased productivity of all trucks, not just those associated with the company managing the treatment centers. Household-level survey data shows that prices of legal sanitary dumping decreased by ten percent following privatization, and DHS data show that diarrhea rates among children under five decreased in Dakar relative to secondary cities in Senegal following privatization with no similar effect on respiratory illness as a placebo. |
| JEL: | L42 L9 O1 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29295&r= |
| By: | Ait-Ali , Abderrahman (Swedish National Road & Transport Research Institute (VTI)); Lidén, Tomas (Swedish National Road & Transport Research Institute (VTI)) |
| Abstract: | Methods for economic assessment, e.g., cost-benefit analysis, are often used in the rail sector to evaluate large infrastructure investments such as building new high-speed railway lines. With larger railway networks and aging infrastructure, these methods can also be used for maintenance planning decisions. In this paper, we focus on basic maintenance and the newly introduced concept of maintenance windows in Sweden. These are pre-allocated slots in the annual train timetable dedicated to performing, among others, periodic/frequent maintenance activities such as inspections, maintenance and repairs. To justify the pre-allocation of such windows, this study presents a method to find minimal utilization rates depending on window designs and traffic situations. Using a cost-benefit approach, the maintenance windows are assessed using a total social cost including maintenance work costs, loss in traffic production and reliability gains in future traffic. Based on a case study from the Southern main line in Sweden, we study the minimal utilization rate in different test scenarios, i.e., night or day shifts, asset degradation functions and designs of maintenance windows. The results show that lower utilization rates (5-50%) can be accepted during low-volume traffic or for partial closures, while higher utilization rates (50-90%) are required for full closures during high-volume traffic. Whether the rates are measured as share of used window time or share of utilized windows is less important, especially when higher utilization is required. |
| Keywords: | Maintenance windows; Rail infrastructure; Cost-benefit analysis |
| JEL: | R42 |
| Date: | 2021–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2021_008&r= |
| By: | Atabek Atayev; Maarten Janssen |
| Abstract: | Consumers can acquire information through their own search efforts or through their social network. Information diffusion via word-of-mouth communication leads to some consumers free-riding on their "friends" and less information acquisition via active search. Free-riding also has an important positive effect, however, in that consumers that do not actively search themselves are more likely to be able to compare prices before purchase, imposing competitive pressure on firms. We show how market prices depend on the characteristics of the network and on search cost. For example, if the search cost becomes small, price dispersion disappears, while the price level converges to the monopoly level, implying that expected prices are decreasing for small enough search cost. More connected societies have lower market prices, while price dispersion remains even in fully connected societies. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.15288&r= |
| By: | Schnakenberg, Keith; Turner, Ian R (Yale University); Uribe-McGuire, Alicia |
| Abstract: | We present a model of executive-legislative bargaining over appointments to independent cen-tral banks in the face of an uncertain economy with strategic economic actors. The model highlights the contrast between two idealized views of Federal Reserve appointments. In one view, politicians prefer to appoint conservatively biased central bankers to overcome credible commitment problems that arise in monetary policy. In the other, politicians prefer to appoint allies, and appointments are well described by the spatial model used to describe appointments to other agencies. Both ideals are limiting cases of our model, which depend on the level of economic uncertainty. When economic uncertainty is extremely low, politicians prefer very conservative appointments. When economic uncertainty increases, politicians’ prefer central bank appointees closer to their own ideal points. In the typical case, the results are somewhere in between: equilibrium appointments move in the direction of politician’s preferences but with a moderate conservative bias. |
| Date: | 2021–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:b5zts&r= |
| By: | Glenk, Gunther; Reichelstein, Stefan |
| Abstract: | The cost and revenue earnings potential of alternative power generation sources has shifted considerably in recent years. Here we introduce the concept of Levelized Profit Margins (LPM) to capture the changing unit economics of both intermittent and dispatchable generation technologies. We apply this framework in the context of the California and Texas wholesale power markets. Our LPM estimates indicate that solar photovoltaic and wind power have both substantially improved their competitive position over the years 2012-2019, primarily due to falling life-cycle costs of production. In California, these gains far outweigh an emerging 'cannibalization' trend that results from substantial additions of solar power having made energy less valuable in the middle of the day. We also find the competitiveness of natural gas power plants to have either improved or held steady. For this generation technology, declining capacity utilization rates have effectively been counterbalanced by a 'dispatchability price premium' that reflects the growing market share of intermittent renewables. |
| Keywords: | Renewable Energy,Intermittency,Dispatchable Power,Levelized Cost,Profit Margins |
| JEL: | M1 O33 Q41 Q42 Q48 Q54 Q55 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:21065&r= |
| By: | Stuart-Hill, Sabine; Lukat, Evelyn; Pringle, Catherine; Pahl-Wostl, Claudia |
| Abstract: | This Briefing Paper presents one of six analyses of cross-sectoral coordination challenges that were conducted as part of the STEER research project and on which separate Briefing Papers are available. South Africa's water legislation is internationally recognised for its ambitious implementation of integrated water resource management (IWRM). IWRM is a concept that was developed to address complex water challenges by considering the connections between land and water, and widening the knowledge space to other water-using sectors and actors. Stakeholder participation and coordination - key aspects to IWRM - represent a network governance style, which contrasts with the hierarchical governance style that most governments embody. We find three challenges regarding the implementation of IWRM in South Africa: Firstly, a dual governance system: The landscape of South African organisations relevant to catchment management consists of organisations from the western administrative and traditional governance systems. The western administrative governance system includes organisations such as the Department of Water and Sanitation (DWS), which is mandated to manage water resources, and the Department of Cooperative Governance and Traditional Affairs, which mediates with traditional authorities regarding various issues, including land management. Currently, these organisations do not cooperate on land-water issues as needed. Secondly, a lacking implementation of water legislation: The South African National Water Act of 1998 outlines Catchment Management Agencies (CMA) as network governance structures that should manage the catchment at a local scale and include all water users. However, after more than 20 years, these structures have not been implemented. This is also due to a conflict in governance styles between the stakeholder-integrating CMAs and the expert-driven, hierarchical DWS. Thirdly, conflict between governance styles: In the absence of the CMA, several informal or non-statutory network governance structures have developed in the uMngeni catchment (e.g. Catchment Management Forums and the uMngeni Ecological Infrastructure Partnership). In several instances, actors representing these structures and government representatives are in conflict over the different approaches to knowledge management and decision-making; these differences are rooted in their respective governance styles. In the last few years, the DWS started the process of a Catchment Management Strategy, which requires stakeholders to participate and formulate their needs. This process could become a mediating tool for the conflicts that arise between the actors when using the different hierarchical and network governance styles. We propose the following recommendations: 1. Integrating traditional authorities into planning processes in a culturally sensitive way is crucial in supporting IWRM. 2. Network structures - designed by government or self-organised - may provide the social capital needed at the local and regional governance levels to implement IWRM. 3. In order to mediate between the existing hierarchical and network governance knowledge, management strategies should represent a hybrid governance style. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:diebps:212020&r= |
| By: | Schütze, Nora; Thiel, Andreas; Vidaurre, Rodrigo; Paneque, Pilar; Vargas, Jesús |
| Abstract: | Diese Veröffentlichung stellt eine von sechs Analysen sektorenübergreifender Herausforderungen für Wasser-Governance dar, die als Teil des STEER-Forschungsprojekts durchgeführt wurden und deren Resultate in separaten Analysen und Stellungnahmen vorliegen. Das Ziel der Wasserrahmenrichtlinie (WRRL) der Europäischen Union (EU) ist es einen 'guten Zustand' aller Gewässer bis 2027 zu erreichen. Spanien steht in diesem Zusammenhang vor erheblichen Wasserquantitätsproblemen, weshalb die Einhaltung des ökologischen Mindestwasserbedarfs von Oberflächengewässer sowie die Reduzierung übermäßiger Grundwasserentnahmen eine der größten Herausforderungen ist. Die Behörden müssen daher zwischen konkurrierenden Wassernutzungen, wie Bewässerung, städtische Wasserversorgung, Tourismus oder Umwelt vermitteln. Trotz wiederholter Forderungen von Wissenschaftler*innen und Zusagen politischer Entscheidungsträger*innen, die sektor- und ebenenübergreifende Koordination zur Lösung dieser Zielkonflikte zu verstärken, bestehen weiterhin Koordinationsdefizite. Diese Veröffentlichung untersucht Koordinations- und Implementierungsherausforderungen zwischen dem Wasser- und dem Landwirtschaftssektor in Bezug auf Wasserquantität bei der WWRL-Umsetzung im Guadalquivir in Südspanien. Diese sind (i) ausbleibende Überprüfung der Wasserrechte nach der Einführung der Tröpfchenbewässerung, (ii) Schwächen beim Monitoring der Wassernutzung und bei der Schließung illegaler Brunnen und (iii) begrenzter sektorübergreifender Austausch im Rahmen partizipativer Prozesse. Diese Herausforderungen sind mit der Schwierigkeit verbunden, unpopuläre Entscheidungen gegen den Willen mächtiger landwirtschaftlicher Akteur*innen durchzusetzen. Um den Herausforderungen zu begegnen, schlagen wir verschiedene Koordinationsinstrumente vor, die auf Anreizen, freiwilliger Zusammenarbeit, Überzeugungsarbeit und Informationsaustausch beruhen. Insbesondere empfehlen wir Folgendes: Erhöhung der finanziellen und personellen Ressourcen für die Neuregelung der Wasserrechte, für das Monitoring der Wassernutzung und die Schließung illegaler Brunnen. Förderung kooperativer Prozesse, um einen multisektoralen Konsens zu erreichen, wie und wo Wasserrechte eingeschränkt werden sollen. * Schaffung von Anreizen für ewässerungsgemeinschaften, um die Selbstkontrolle der Grundwassernutzung unter den Mitgliedern weiter zu stärken. Stärkung des sektorübergreifenden Austauschs unter den Stakeholdern durch partizipative Prozesse, insbesondere zwischen Umwelt- und landwirtschaftlichen Interessengruppen, und Verbesserung der Kommunikation mit den Bürger*innen. Nutzung integrativerer Möglichkeiten der Informationsvermittlung bei Planungsprozessen. Da die identifizierten Herausforderungen jedoch systemischer Natur sind und grundlegende Verteilungsfragen berühren, sind den Koordinierungsinstrumenten Grenzen gesetzt. Daher ist auch ein klareres Bekenntnis des politischen Willens erforderlich. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dieaus:162020&r= |
| By: | Rajni Kant Bansal; Pengcheng You; Dennice F. Gayme; Enrique Mallada |
| Abstract: | This paper proposes a storage cycle aware market mechanism for a multi-interval electricity market with generators and storage. Drawing ideas from linear supply function bidding, we propose for storage a cycle based cumulative supply function bidding form -- storage half-cycle depths as a function of cycle based prices. It allows storage to reflect their preference for cycling operations, which are directly associated with storage degradation, instead of power at each interval. The market clearing for associated economic dispatch based on bids (linear supply function for generators) yields traditional clearing prices for energy and specific clearing prices for storage cycling -- cycling prices on identified half-cycles. We show that price taking participants in such a market are all incentivized to reveal their truthful costs, thus leading to an efficient competitive equilibrium. Simulations for New York Independent System Operator (NYISO) data illustrate that linear supply function bid is insufficient to guarantee storage profitability. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.14596&r= |
| By: | Abrell, Jan; Rausch, Sebastian; Streitberger, Clemens |
| Abstract: | This paper examines how enhanced flexibility across space, time, and a regulatory dimension affects the economic costs and CO2 emissions of integrating large shares of intermittent renewable energy from wind and solar. We develop a numerical model which resolves hourly dispatch and investment choices among heterogeneous energy technologies and natural resources in interconnected wholesale electricity markets, cross-country trade (spatial flexibility), energy storage (temporal flexibility), and tradable green quotas (regulatory flexibility). Taking the model to the data for the case of Europe's system of interconnected electricity markets, we find that the appropriate combination of flexibility can bring about substantial gains in economic efficiency, reduce costs (up to 13.8%) and lower CO2 emissions (up to 51.2%). Regulatory flexibility is necessary to realize most of the maximum possible benefits. We also find that gains from increased flexibility are unevenly distributed and that some countries incur welfare losses. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:21064&r= |