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on Regulation |
| By: | Elisabetta Iossa (Unknown); Patrick Rey (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); Michael Waterson (Unknown) |
| Abstract: | The paper studies competition for the market in a setting where incumbents (and, to a lesser extent, neighboring incumbents) benefit from a cost advantage. The paper first compares the outcome of staggered and synchronous tenders, before drawing the implications for market design. We find that the timing of tenders should depend on the likelihood of monopolization. When monopolization is expected, synchronous tendering is preferable, as it strengthens the pressure that entrants exercise on the monopolist. When instead other firms remain active, staggered tendering is preferable, as it maximizes the competitive pressure that comes from the other firms. |
| Keywords: | Dynamic procurement,incumbency advantage,local monopoly,competition,asymmetric auctions,synchronous contracts,staggered contracts |
| Date: | 2021–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03551028&r= |
| By: | Schneider, Nathan (University of Colorado Boulder) |
| Abstract: | At a time when regulators are seeking new responses to the dilemmas of world-spanning digital platforms, forms of community ownership such as cooperatives and trusts offer attractive benefits for workers and other users. Yet if economic democracy is to provide a counterweight to investor ownership in the online economy, it will require an appropriate policy framework. This paper argues that such a framework can come from radically generalizing and expanding on pre-digital successes in local and industry-specific policies from various countries and contexts—including policies for incorporation, financing, and coordination. Policy should use community ownership not just to solve specific problems but as a universal means of organizing innovation. It should also seek to repair past injustices to communities marginalized through under-investment. Community ownership could thereby become at least as available to the online economy as investor ownership has been. |
| Date: | 2021–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:cp459&r= |
| By: | Lin Han; Ivor Cribben; Stefan Trueck |
| Abstract: | Electricity markets are significantly more volatile than other comparable financial or commodity markets. Extreme price outcomes and their transmission between regions pose significant risks for market participants. We examine the dependence between extreme spot price outcomes in the Australian National Electricity Market (NEM). We investigate extremal dependence both in a univariate and multivariate setting, applying the extremogram developed by Davis and Mikosch (2009) and Davis et al. (2011, 2012). We measure the persistence of extreme prices within individual regional markets and the transmission of extreme prices across different regions. With both 5-minute and 30-minute price data, we find that extreme prices are more persistent in the market with a higher share of intermittent renewable energy. We also find that persistence of extreme prices is more prevalent in more concentrated markets. We also show significant extremal price dependence between different regions, which is typically stronger between physically interconnected markets. The dependence structure of extreme prices shows asymmetric and time-dependent patterns. Applying the extremograms, we further show the effectiveness of the Australian Energy Market Commission's 2016 rebidding rule with respect to reducing the share of isolated price spikes that are often considered as an indication of strategic bidding. Our results provide important information for hedging decisions of market participants and for policy makers who aim to reduce market volatility and extreme price outcomes through effective regulations which guide the trading behaviour of market participants as well as improved network interconnections. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.09970&r= |
| By: | Mohammadi, Mohammad Ali |
| Abstract: | In this work, the dynamic competition between firms providing internet services is studied. The framework is Markov equilibrium whereby structural parameters are obtained using two-step estimations, allowing for analyzing the situation in case of subsidies for service upgrade. The results show that such subsidy has little effect on the number of firms while increasing the number of fast firms. |
| Keywords: | Structural estimation, dynamic competition, Markov perfect equilibrium, investment in Internet provision, subsidies |
| JEL: | C73 L13 L50 L86 |
| Date: | 2021–07–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111962&r= |
| By: | Schönfisch, Max (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)) |
| Abstract: | This paper analyses the impact of supply technology choices and costs on structures and prices on the emerging low-carbon hydrogen market using a novel, integrated natural gas and hydrogen market model. It shows that natural gas-based low-carbon hydrogen production pathways predominate in technology-neutral scenarios in 2050. In scenarios where hydrogen production is gas-based, hydrogen is produced close to the point of consumption. Natural gas prices determine local hydrogen prices. In scenarios characterised by high shares of RES-based low-carbon hydrogen production, long-distance, cross-border trade in pure hydrogen becomes an economically viable proposition due to the heterogeneous distribution of low-cost RES potentials and significant hydrogen price spreads between countries with high hydrogen demand but poor RES potentials, and countries that are well endowed with cost-competitive RES. Trade is conducted almost exclusively via pipeline. The analysis finds the most significant potential for cross-border trade in and around Europe. It suggests that it would be economical for Europe to import substantial quantities of low-carbon hydrogen from North Africa. |
| Keywords: | Hydrogen |
| JEL: | Q40 Q42 Q49 |
| Date: | 2022–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:ris:ewikln:2022_003&r= |
| By: | Angela Köppl; Stefan Schleicher (Austrian Institute of Economic Research); Jean-Yves Caneill (European Roundtable on Climate Change and Sustainable Transition) |
| Abstract: | The EU Emissions Trading System (EU ETS) is intended to be the flagship instrument of EU climate policy. Key aspects in this cap-and-trade scheme are the target path as well as the market price for emission allowances which results from supply and demand for these allowances. The recent pronounced price movements on the market for emission allowances raise the question what causes these fluctuations and what could be the carbon price's role for stimulating and guiding the transformation of the EU economy towards the 2030 emission target, which aims at a reduction of greenhouse gases of at least 55 percent compared to 1990 levels. This research brief collects evidence about the market stringencies that result from demand and supply and that prevailed in the third trading period between 2013 and 2020 and discusses potential drivers for the carbon price in the current trading period up to 2030. We conclude that aligning the EU ETS with the "Fit for 55" framework, the expected radical innovation efforts needed in particular for the hard-to-abate industries together with changing market behaviour due to hedging and speculative trading will likely keep the EU ETS carbon price volatile. |
| Date: | 2022–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:rbrief:y:2022:i:7&r= |
| By: | Edmond Baranes (MRE - Montpellier Recherche en Economie - UM - Université de Montpellier); Hung Cuong Vuong (MRE - Montpellier Recherche en Economie - UM - Université de Montpellier) |
| Abstract: | This paper aims at investigating the impacts of introducing cost asymmetry in horizontal merger analysis. In the absence of efficiency gains, previous literature states the negative competitive effects of a merger between symmetric firms. We go beyond the literature and show that the result is only likely to hold for a low level of asymmetry. In particular, we build a tractable model with three firms in which one of them has a different cost structure. After merging two symmetrical firms, the outsider always reduces (increases) price (investments), while the insiders choose the opposite strategies. In particular, if the outsider's cost is sufficiently low, the increase in its investment could outweigh the decreases in those of the merged entity, leading to higher total investments post-merger. Similarly, consumer surplus could be improved thanks to the decrease in the outsider's price. |
| Date: | 2021–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03547206&r= |
| By: | Yeon-Koo Che (Columbia University [New York]); Elisabetta Iossa (University of Rome TorVergata); Patrick Rey (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: | Procuring an innovation involves motivating a research effort to generate a new idea and then implementing that idea efficiently. If research efforts are unveriable and implementation costs are private information, a trade-off arises between the two objectives. The optimal mechanism resolves the trade-off via two instruments: a cash prize and a follow-on contract. It primarily uses the latter, by favoring the innovator at the implementation stage when the value of the innovation is above a certain threshold and handicapping the innovator when the value of the innovation is below that threshold. A cash prize is employed as a supplementary incentive only when the value of innovation is sufficiently high. These features are consistent with current practices in the procurement of innovation and the management of unsolicited proposals. |
| Keywords: | Contract rights,Innovation,Prizes,Procurement and R&D |
| Date: | 2021–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03544026&r= |
| By: | Hiroshi Ohashi (Faculty of Economics, The University of Tokyo); Toshiyuki Yamamoto (Kansai Transmission and Distribution, INC) |
| Abstract: | This paper focuses on the mechanism of balancing electricity market with a particular emphasis on the market reform in Japan. It compares the cost and benefit of two typical balancing mechanisms (decentralized system exemplified by Germany and centralized system by PJM in the United States). To avoid blackout, imbalance of electricity has to be resolved either by demand-side (i.e., a supplier) or supply-side (a transmission system operator), or both. This paper argues that decentralized system, which Japanese electricity market is currently aiming at, may not work well if it does not impose appropriate imbalance charges on suppliers. Otherwise, the system will be essentially degenerated to the centralized system. We consider several elements unique to Japan, including (1) the network connected solely within the domestic market; (2) high proportion of pump-up hydro in supply resources; and (3) long lead-time taken to carry fossil fuels. We conclude that we should keep the option of centralized market mechanism for future reform of balancing market in and after 2024, when the current market reform completes. |
| URL: | http://d.repec.org/n?u=RePEc:tky:jseres:2022cj303&r= |
| By: | Avezum, Lucas (Tilburg University, School of Economics and Management) |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:ecf0bc59-8366-46c4-bdfa-8f09123dcaee&r= |
| By: | Gajendran Raveendranathan; Georgios Stefanidis |
| Abstract: | We show how a rate cap can be designed to improve both consumer and lender welfare in the credit card market. We analyze transition paths resulting from different rate caps in a model with revolving credit lines, search frictions, and lender market power. Our analysis shows that if a rate cap only applies to new credit card issuance and not existing accounts, it can improve lender welfare. Incumbent lenders benefit because they can retain their customers for a longer time. New issuers are not affected as long as the posting of credit offers is competitive (zero expected profits in equilibrium). Consumers benefit because of lower interest rates. The rate cap that maximizes consumer welfare leads to gains to consumers and lenders that are equivalent to a onetime transfer worth 0.44 percent of disposable income. The gains to consumers amount to 73 percent of the value of credit access. |
| Keywords: | revolving credit; credit search; rate cap; welfare |
| JEL: | E21 E44 E65 G28 G50 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2022-03&r= |
| By: | Stéphane Auray (CREST-Ensai and ULCO, France); Aurélien Eyquem (Université Lumière Lyon2, France) |
| Abstract: | We introduce heterogeneous mark-ups through Bertrand competition in a two-country model with endogenous firms' entry and tradability à la Ghironi and Melitz (2005). Bertrand competition generates a distribution of mark-ups according to which firms that are larger and more productive charge lower prices, attract larger market shares and extract larger mark-ups. First, we characterize first-best allocations and their implementation. We find that they are independent from the degree of mark-ups' heterogeneity, suppress the dispersion of mark-ups and imply zero distortions on labor as well as substantial subsidies to preserve firm's incentives to enter. Second, second-best alternative policies with a restricted number ofi nstruments and a balanced budget significantly reduce the potential welfare gains from fiscal policies. Third, the total welfare losses from passive policies are lower under heterogeneous mark-ups than under homogeneous mark-ups: while th edispersion of mark-ups has negative effects on the intensive margin, output per firm, it also raises expected profits for potential entrants and raises the extensive margin, the number of firms in both domestic and export markets, pushing them closer to their efficient levels. Fourth, we also investigate the dynamic properties of allocations under passive and optimal policies considering aggregate productivity shocks and trade liberalization experiments. |
| Keywords: | Heterogeneous firms, Endogenous Entry, Open economy, Strategic pricing, Optimal taxation |
| JEL: | D4 E20 E32 |
| Date: | 2021–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2021-17&r= |
| By: | Xiao, Leon Y. (IT University of Copenhagen); Henderson, Laura L.; Newall, Philip Warren Stirling (University of Warwick) |
| Abstract: | Loot boxes are purchased to obtain randomised rewards in video games. These mechanics are frequently implemented, including in children’s games, and are psychologically akin to gambling. Emulating gambling harm reduction measures, disclosing the probabilities of obtaining loot box rewards is a consumer protection measure that may reduce overspending. Presently, this has been adopted as law only in China, where a 95.6% disclosure rate was previously observed. In other countries, the industry has generally adopted this measure as self-regulation. This study assessed the compliance rate of self-regulation amongst the 100 highest-grossing UK iPhone games to be 64.0%, significantly lower than that of Chinese legal regulation. Additionally, only 6.7% of games containing first-party implemented loot boxes made reasonably prominent disclosures. Non-enforced Western self-regulation needs substantial improvements before it can be as effective as legal regulation: until then, uniform and prominent disclosures should be required by law to maximise their consumer protection benefits. |
| Date: | 2021–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:g5wd9&r= |
| By: | Fabrice Etilé (INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Sébastien Lecocq (Université Paris-Saclay); Christine Boizot-Szantai (Université Paris-Saclay) |
| Abstract: | Market heterogeneity may affect the distributional incidence of nutritional taxes if households sort by income across markets with different characteristics. We use scanner data to analyse the distributional incidence of the 2012 French soda tax on Exact Price Indices that measure consumer welfare from the price and availability of softdrinks at a local level. While the average pass-through was small-about 45 per cent-, tax incidence was significantly higher in low-income and less-competitive markets. Market heterogeneity ultimately has substantial distributional effects: it accounts for at least 33 per cent of the difference in welfare variation between low-and high-income consumers. |
| Keywords: | consumer price index,market structure,inequality,tax incidence,soft-drink tax,France |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03553704&r= |
| By: | Harding, Robin; Prem, Mounu; Ruiz, Nelson A.; Vargas, David L. |
| Abstract: | While existing work has demonstrated that campaign donations can buy access to benets such as favorable legislation and preferential contracting, we highlight another use of campaign contributions: buying reductions in regulatory enforcement. Specically, we argue that in return for campaign contributions, Colombian mayors who rely on donor-funding (compared to those who do not) choose not to enforce sanctions against illegal deforestation activities. Using a regression discontinuity design, we show that deforestation is signicantly higher in municipalities that elect donor-funded as opposed to self-funded politicians. Further analysis shows that only part of this eect can be explained by dierences in contracting practices by donor-funded mayors. Instead, evidence of heterogeneity in the eects according to the presence of alternative formal and informal enforcement institutions, and analysis of re clearance, support the interpretation that campaign contributions buy reductions in the enforcement of environmental regulations. |
| Keywords: | Campaign donations; Deforestation; Regulatory enforcement |
| Date: | 2022–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:tse:iastwp:126766&r= |
| By: | Da Silva, Filipe; Núñez Reyes, Georgina |
| Abstract: | La economía datificada ha planteado retos que van más allá del alcance de las políticas de competencia y marcos regulatorios tradicionales. En el centro del debate se ubica el impacto que generan los modelos de negocio basados en plataformas y las mismas plataformas digitales. En este contexto, muchas empresas, especialmente las pequeñas, deben hacer frente a la competencia desleal de las empresas nativas digitales. Por otro lado, la digitalización de la economía, el modelo de negocio de plataformas y la explotación intensiva de datos también crean oportunidades para las empresas y los gobiernos. La creación de mercados de datos y la eliminación de barreras al libre flujo de datos pueden impulsar las innovaciones y la productividad en la manufactura. Por lo tanto, comprender el papel de los datos y asignarles precios es crucial, desde el punto de vista tributario, para cerrar las brechas y garantizar una competencia en igualdad de condiciones. Asimismo, de la asignación de precios a las bases de datos se beneficiarán principalmente las empresas emergentes y las disruptivas. |
| Keywords: | ECONOMIA BASADA EN EL CONOCIMIENTO, TECNOLOGIA DIGITAL, MERCADOS, BASES DE DATOS, COMERCIALIZACION, ESTRATEGIA EMPRESARIAL, TECNOLOGIA DE LA INFORMACION, TECNOLOGIA DE LAS COMUNICACIONES, BANCOS, OPERACIONES BANCARIAS, COMPETENCIA, INTERNET, KNOWLEDGE-BASED ECOMOMY, DIGITAL TECHNOLOGY, MARKETS, DATABASES, MARKETING, CORPORATE STRATEGIES, INFORMATION TECHNOLOGY, COMMUNICATION TECHNOLOGY, BANKS, BANKING, COMPETITION, INTERNET |
| Date: | 2021–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecr:col022:47540&r= |
| By: | Banal Estanol, Albert (Universitat Pompeu Fabra); Siciliani, Paolo (Bank of England); Yoon, Kyoungsoo (Bank of Korea) |
| Abstract: | We investigate the relationship between profitability and financial leverage for US listed non-financial corporations by taking into account the degree of product similarity among competing firms, which can drive intense pricing rivalry thus undermining the sustainability of high price-cost mark-ups. We find that in markets characterized by high price-cost mark-ups notwithstanding high product similarity, the relationship between profitability and financial leverage is negative. Instead, in the rest of the markets we find a positive relationship, consistent with the dynamic trade-off theory of corporate finance, whereby firms increase their degree of financial leverage in response to profitability improvements. Not only do firms exposed to comparatively higher degree of product substitutability make less use of financial leverage, but they also rely relatively less on long-term debt. The difference is especially attributable to the period after the great financial crisis. |
| Keywords: | Financial leverage; competition; profitability |
| JEL: | D21 G32 L13 L41 |
| Date: | 2022–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0962&r= |
| By: | Ali-Yrkkö, Jyrki; Mattila, Juri; Pajarinen, Mika; Ylhäinen, Ilkka |
| Abstract: | Abstract This study examines mergers and acquisitions and their economic impact on companies. The study examined which companies in Finland become the targets of acquisitions, how the economic activities of the target companies develop after the change of ownership and whether there is a difference between domestic and foreign acquisitions in these respects. The study was conducted using firm-level data that included nearly 2,000 acquisitions, supplemented by a qualitative review of 19 research interviews. The results of the study show that companies’ innovation activities have a positive relation to the likelihood of being acquired, especially by foreign buyers. However, foreign acquisitions did not have a significant impact on the development of the value added, productivity, profitability or employment of target companies when compared with the control group. |
| Keywords: | Mergers and acquisitions, M&A, Impact, Foreign ownership, Foreign company, Productivity |
| JEL: | D22 F23 G34 O30 |
| Date: | 2022–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:rif:report:125&r= |