nep-reg New Economics Papers
on Regulation
Issue of 2022‒03‒07
nineteen papers chosen by
Christopher Decker
Oxford University

  1. Incentive regulation, productivity growth and environmental effects: the case of electricity networks in Great Britain By Victor Ajayi; Karim Anaya; Michael Pollitt
  2. Where next for the electricity distribution system operator? Evidence from a survey of European DSOs and National Regulatory Authorities By Karim Anaya; Monica Giulietti; Michael Pollitt
  3. Oligopoly under incomplete information: on the welfare effects of price discrimination By Daniel F. Garrett; Renato Gomes; Lucas Maestri
  4. Liberalization, Technology Adoption, and Stock Returns: Evidence from Telecom By Rabah Arezki; Vianney Dequiedt; Rachel Fan; Carlo Rossotto
  5. Are EU Climate and Energy Package 20-20-20 targets achievable and compatible? Evidence from the impact of renewables on electricity prices By Juan Ignacio Pe\~na; Rosa Rodriguez
  6. Default Supply Auctions in Electricity Markets: Challenges and Proposals By Juan Ignacio Pe\~na; Rosa Rodriguez
  7. Wind, water and wires: evaluating joint wind and interconnector capacity expansions in hydro-rich regions By Newbery, D.
  8. Rooftop solar PV and the peak load problem in the NEM’s Queensland region By Paul Simshauser
  9. The Levelised Cost of Frequency Control Ancillary Services in Australia’s National Electricity Market By Joel Gilmore; Tahlia Nolan; Paul Simshauser
  10. Renewable entry costs, project finance and the role of revenue quality in Australia’s National Electricity Market By Nicholas Gohdes; Paul Simshauser
  11. Double trouble: concurrently targeting water and electricity using normative messages in the Middle East By Ramli, Ukasha; Laffan, Kate
  12. Visa's Abandoned Plan to Acquire Plaid: What Could Have Been a Textbook Case of a Killer Acquisition By Frédéric Marty; Thierry Warin
  13. Using Bid Rotation and Incumbency to Detect Collusion: A Regression Discontinuity Approach By Kei Kawai; Jun Nakabayashi; Juan Ortner; Sylvain Chassang
  14. Monopoly Persistence under the Threat of Supply Function Competition By Saglam, Ismail
  15. Third-Degree Price Discrimination in the Age of Big Data By Charlson, G.
  16. The arrival of RegTech on the compliance market: between legal and managerial logics By Gurvan Branellec; Stéphane Onnee
  17. A New Era of Midnight Mergers: Antitrust Risk and Investor Disclosures By John M. Barrios; Thomas G. Wollmann
  18. Regulated Revenues and Hospital Behavior: Evidence from a Medicare Overhaul By Tal Gross; Adam Sacarny; Maggie Shi; David Silver
  19. The Ethics of Nudge: Towards a governance structure for the ethical use of nudge theory by Governments By Raj, Vijay

  1. By: Victor Ajayi (EPRG, CJBS, University of Cambridge); Karim Anaya (EPRG, CJBS, University of Cambridge); Michael Pollitt (EPRG, CJBS, University of Cambridge)
    Keywords: Total factor productivity, incentive regulation, electricity networks, emissions
    JEL: D24 H23 L43 L94
    Date: 2021–11
  2. By: Karim Anaya (EPRG, CJBS, University of Cambridge); Monica Giulietti (Loughborough University); Michael Pollitt (EPRG, CJBS, University of Cambridge)
    Keywords: distribution system operator, DSO, Electricity Regulation
    JEL: L94 L21
    Date: 2022–01
  3. By: Daniel F. Garrett (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); Renato Gomes (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); Lucas Maestri (FGV-EPGE - Universidad de Brazil)
    Abstract: We study competition by firms that simultaneously post (potentially nonlinear) taris to consumers who are privately informed about their tastes. Market power stems from informational frictions, in that consumers are heterogeneously informed about firms' oers. In the absence of regulation, all firms oer quantity discounts. As a result, relative to Bertrand pricing, imperfect competition benefits disproportionately more consumers whose willingness to pay is high, rather than low. Regulation imposing linear pricing hurts the former but benefits the latter consumers. While consumer surplus increases, firms' profits decrease, enough to drive down utilitarian welfare. By contrast, improvements in market transparency increase utilitarian welfare, and achieve similar gains on consumer surplus as imposing linear pricing, although with limited distributive impact. On normative grounds, our analysis suggests that banning price discrimination is warranted only if its distributive benefits have a weight on the societal objective.
    Keywords: Asymmetric information,Informational frictions,Linear pricing,Nonlinear pricing,Oligopoly
    Date: 2021
  4. By: Rabah Arezki; Vianney Dequiedt (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Rachel Fan; Carlo Rossotto
    Abstract: The paper investigates the pace of technology adoption in telecom technology post liberalization and its effect on stock returns using a new global panel dataset. Results are twofold. First, evidence points to the complementarity between telecom liberalization and regulatory independence in driving a sustained pace of technology adoption. Second, results show a positive and economically significant effect of telecom adoption on stock returns pointing to significant spillovers of telecom to the rest of the economy.
    Keywords: Liberalization,Technology adaption,Telecom,Regulation,Stock returns
    Date: 2021–02
  5. By: Juan Ignacio Pe\~na; Rosa Rodriguez
    Abstract: This paper studies the realizability and compatibility of the three CEP2020 targets, focusing on electricity prices. We study the impact of renewables and other fundamental determinants on wholesale and household retail electricity prices in ten EU countries from 2008 to 2016. Increases in production from renewables decrease wholesale electricity prices in all countries. As decreases in prices should promote consumption, an apparent contradiction emerges between the target of an increase in renewables and the target of a reduction in consumption. However, the impact of renewables on the non-energy part of household wholesale electricity prices is positive in six countries. Therefore, decreases in wholesale prices, that may compromise the CEP2020 target of decrease in consumption, do not necessarily translate into lower household retail prices.
    Date: 2022–02
  6. By: Juan Ignacio Pe\~na; Rosa Rodriguez
    Abstract: This paper studies premiums got by winning bidders in default supply auctions, and speculation and hedging activities in power derivatives markets in dates near auctions. Data includes fifty-six auction prices from 2007 to 2013, those of CESUR in the Spanish OMEL electricity market, and those of Basic Generation Service auctions (PJM-BGS) in New Jersey's PJM market. Winning bidders got an average ex-post yearly forward premium of 7% (CESUR) and 38% (PJM-BGS). The premium using an index of futures prices is 1.08% (CESUR) and 24% (PJM-BGS). Ex-post forward premium is negatively related to the number of bidders and spot price volatility. In CESUR, hedging-driven trading in power derivatives markets predominates around auction dates, but in PJM-BGS, speculation-driven trading prevails.
    Date: 2022–02
  7. By: Newbery, D.
    Abstract: Countries or regions with a high share of storage hydro and good renewables resources may be able to interconnect to less well-endowed neighbours. To maximise joint benefits, coordinating interconnector and renewables investment is desirable. Suitable long-term contracts ensure that beneficiaries pay and jointly cover the highly dispersed costs and benefits. The article develops a simple model calibrated for Tasmania that demonstrates how this can be quantified and various counterfactuals tested. The key to the simplification is that the value of water is both stable over time and the key driver of outcomes. The economic attraction of proposed wind and interconnector investment depends sensitively on the value placed on CO2 reductions.
    Keywords: Hydro-storage, wind, interconnectors, carbon benefits
    JEL: D47 D61 F18 H23 Q25 Q42
    Date: 2022–02–17
  8. By: Paul Simshauser (Griffith Business School, Griffith University)
    Keywords: rooftop solar PV, renewables, power generation, energy-only markets, peak load problem
    JEL: D25 D80 G32 L51 Q41
    Date: 2021–11
  9. By: Joel Gilmore (Centre for Applied Energy Economics & Policy Research, Griffith University); Tahlia Nolan (Iberdrola Australia); Paul Simshauser (Griffith Business School, Griffith University)
    Keywords: Frequency control ancillary services, electricity markets, battery storage
    JEL: D25 D80 G32 L51 Q41
    Date: 2022–01
  10. By: Nicholas Gohdes (Queensland University of Technology); Paul Simshauser (Griffith Business School, Griffith University)
    Keywords: Renewable Energy, PPAs, Project Finance, Counterparty Credit, Cost of Capital
    JEL: D25 D80 G32 L51 Q41
    Date: 2022–01
  11. By: Ramli, Ukasha; Laffan, Kate
    Abstract: Personalised normative messages have been shown to be effective at encouraging both electricity and separately water savings. As use of this approach to promote resource savings becomes increasingly widespread, an important question is whether providing such feedback on consumption of the two resources together can yield reductions in both areas. In a field experiment with over 200,000 households in the Middle East, we send households personalised normative messages regarding both their water and electricity consumption on a monthly basis. This intervention saw a statistically significant reduction of around 1.2% for electricity but not for water consumption. Furthermore, we test different ways of concurrently presenting normative messages of both water and energy, including presenting it as a combined eco score. Local treatment effects of these were around 1.2% reduction. Our findings contribute towards nexus thinking around how (not) to concurrently achieve energy and water savings using normative feedback.
    Keywords: eco-feedback; energy usage; pro-environmental; social norms; water usage
    JEL: L81
    Date: 2022–06–01
  12. By: Frédéric Marty; Thierry Warin
    Abstract: The applicability of the notion of killer acquisition to digital platforms has long been debated. The case of the proceedings brought by the U.S. Department of Justice against Visa in November 2020 (before their joint dismissal in January 2021) is even more interesting insofar as it makes it possible to illustrate and discuss its different facets ranging from the notion of competition suppression to that of consolidation and extension of the dominant position. Even if the acquisition project was eventually withdrawn, the complaint analysis also makes it possible to question inter-digital ecosystem competition and shed light on the issues related to monitoring acquisitions undertaken by dominant companies. L'application de la notion d'acquisition tueuse aux plateformes numériques fait depuis longtemps l'objet de débats. Le cas de la procédure engagée par le Département de la Justice américain contre Visa en novembre 2020 (avant leur rejet conjoint en janvier 2021) est d'autant plus intéressant qu'il permet d'illustrer et de discuter de ses différentes facettes allant de la notion de suppression de la concurrence à celle de consolidation et d'extension de la position dominante. Même si le projet d'acquisition a finalement été retiré, l'analyse de la plainte permet également de s'interroger sur la concurrence au sein de l'écosystème interdigital et de mettre en lumière les enjeux liés au contrôle des acquisitions réalisées par les entreprises dominantes.
    Keywords: mergers control,killer acquisitions,digital ecosystems,foreclosure,damage to innovation,fintech, contrôle des fusions,killer acquisitions,écosystèmes numériques,verrouillage,dommages causés à l'innovation,fintech
    JEL: L12 L25 L41
    Date: 2021–10–26
  13. By: Kei Kawai (UC Berkeley); Jun Nakabayashi (Kindai University); Juan Ortner (Boston University); Sylvain Chassang (Princeton University)
    Abstract: Cartels participating in procurement auctions frequently use bid rotation or incumbency priority to allocate market shares. However, establishing a tight link between observed allocation patterns and firm conduct has been difficult: there are cost-based competitive explanations for such behavior. We show that by focusing on the set of auctions in which the winning and losing bids are very close, it is possible to distinguish allocation patterns reflecting cost differences across firms from patterns reflecting noncompetitive behavior. We apply our tests to two datasets: the sample of Ohio school milk auctions studied in Porter and Zona (1999), and a sample of municipal procurement auctions held in Japan.
    Keywords: procurement, collusion, backlog, incumbency, regression discontinuity, antitrust
    JEL: D40 D43
    Date: 2021–12
  14. By: Saglam, Ismail
    Abstract: Can a monopoly persist by expanding its operation to a new market after strategically bidding for an exclusive license under the threat of supply function competition with a potential entrant? The answer may be yes or no depending on how the monopolist's existing product and the new product are related. The monopolist can win the bidding for the new market and thus expand its operation if the marginal cost (to produce a unit output) is sufficiently low with respect to the degree of product differentiation, while its likelihood of winning is higher if the two products are substitutes than if they are complements.
    Keywords: Monopoly persistence; supply function competition; strategic bidding.
    JEL: D42 D43 L13
    Date: 2022–02–04
  15. By: Charlson, G.
    Abstract: A platform holds information on the demographics of its users and wants maximise total surplus. The data generates a probability over which of two products a buyer prefers, with different data segmentations being more or less informative. The platform reveals segmentations of the data to two firms, one popular and one niche, preferring to reveal no information than completely revealing the consumer's type for certain. The platform can improve profits by revealing to both firms a segmentation where the niche firm is relatively popular, but still less popular than the other firm, potentially doing even better by revealing information asymmetrically. The platform has an incentive to provide more granular data in markets in which the niche firm is particularly unpopular or in which broad demographic categories are not particularly revelatory of type, suggesting that the profit associated with big data techniques differs depending on market characteristics.
    Keywords: Strategic interaction, network games, interventions, industrial organisation, platforms, hypergraphs
    JEL: D40 L10 L40
    Date: 2021–08–19
  16. By: Gurvan Branellec (Brest Business School, LEGO - Laboratoire d'Economie et de Gestion de l'Ouest - IMT - Institut Mines-Télécom [Paris] - IMT Atlantique - IMT Atlantique Bretagne-Pays de la Loire - IMT - Institut Mines-Télécom [Paris] - IBSHS - Institut Brestois des Sciences de l'Homme et de la Société - UBO - Université de Brest - UBS - Université de Bretagne Sud - UBL - Université Bretagne Loire - UBO - Université de Brest); Stéphane Onnee (VALLOREM - Val de Loire Recherche en Management - UT - Université de Tours - UO - Université d'Orléans)
    Abstract: Faced with the phenomenon of the arrival of RegTech as a new entrant in the ecosystem of regulation, we have started a research aiming on the one hand to contribute to enrich the definition and description of RegTech and on the other hand to identify the legal and managerial logics that underlie its development. Our study highlights the different managerial and legal issues raised by RegTech and adress some proposals.
    Abstract: Face au phénomène de l'arrivée des RegTech comme nouvel entrant dans l'écosystème de la régulation, nous avons débuté une recherche visant d'une part à contribuer à enrichir la définition et la description des RegTech et d'autre part à identifier les logiques juridiques et managériales qui sous-tendent son développement. Notre étude met en évidence les différents enjeux tant managériaux que juridiques soulevés par les RegTech et propose des pistes de réflexion.
    Keywords: Regulation,Regtech,regulation ecosystem,compliance,Régulation,écosystème de la régulation
    Date: 2021
  17. By: John M. Barrios; Thomas G. Wollmann
    Abstract: Antitrust authorities search public documents to discover anticompetitive mergers. Thus, investor disclosures may alert them to deals that would otherwise escape scrutiny, creating disincentives for managers to divulge transactions. We study this behavior in publicly traded US companies. First, we estimate a regression discontinuity that exploits mandatory disclosure thresholds stipulated by securities law. We find that releasing information to investors poses antitrust risk. Second, we present a method for measuring undisclosed merger activity that relies on financial accounting reporting requirements. We find that undisclosed mergers total $2.3 trillion between 2002 and 2016.
    JEL: G3 G34 L0 L4 L40 M4
    Date: 2022–01
  18. By: Tal Gross (Boston University); Adam Sacarny (Columbia University); Maggie Shi (Columbia University); David Silver (Princeton University)
    Abstract: We study a 2008 policy reform in which Medicare revised its hospital payment system to better reflect patients’ severity of illness. We construct a simulated instrument that predicts a hospital’s policy-induced change in reimbursement using pre-reform patients and post-reform rules. The reform led to large persistent changes in Medicare payment rates across hospitals. Hospitals that faced larger gains in Medicare reimbursement increased the volume of Medicare patients they treated. The estimates imply a volume elasticity of 1.2. To accommodate greater volume, hospitals increased nurse employment, but also lowered length of stay, with ambiguous effects on quality.
    Keywords: Medicare, healthcare
    JEL: I12
    Date: 2021–10
  19. By: Raj, Vijay
    Abstract: This paper explores the use of nudge theory within governments and performs a pragmatic evaluation of its adoption by policymakers from an ethical point of view. While most critics argue against the use of nudge theory by governments from an academic or philosophical standpoint, this paper examines the use of nudge theory as one of the many tools available for policymakers and adopts a pragmatic approach. The paper concludes by calling for a governance structure that addresses the ethical concerns and ensures the ethical application of nudge theory through the development of an ethical nudge.
    Date: 2021–11–22

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