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on Regulation |
| By: | Kao, Andrew; Genakos, Christos; Kretschmer, Tobias |
| Abstract: | Do firms strategically confuse their customers? Using a detailed dataset covering virtually all mobile phone tariffs and their handsets in the UK between January 2010 and September 2012, we examine the co-evolution of prices with the differentiation and overlap of operators' product portfolios. Incorporating the fact that mobile tariffs are multidimensional and hard to compare but easy to imitate and cheap to launch, we argue that firms introduced a large number of dominated tariffs as an obfuscation strategy. We show that the increase in dominated tariffs correlates with the increase in average prices despite converging product portfolios. This exploratory study is one of the first to offer suggestive evidence of the existence and role of obfuscation as a firm strategy. |
| Keywords: | words; competitive strategy; obfuscation; mobile telecommunications industry |
| JEL: | L10 L20 L96 |
| Date: | 2021–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113835&r= |
| By: | Martin Peitz; Lily Samkharadze |
| Abstract: | Platform competition can be intense when offering non-differentiated services. However, competition is somewhat relaxed if platforms cannot set negative prices. If platforms collude they may be able to implement the outcome that maximizes industry profits. In an infinitely repeated game with perfect monitoring, this is feasible if the discount factor is sufficiently large. When this is not possible, under some condition, a collusive outcome with one-sided rent extraction along the equilibrium path can be sustained that leads to higher profits than the non-cooperative outcome. |
| Keywords: | Two-sided markets, tacit collusion, cartelization, price structure, platform competition |
| JEL: | L41 L13 D43 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2022_331v2&r= |
| By: | Griffith, Rachel; Van Reenen, John |
| Abstract: | We examine the economic analysis of the relationship between innovation and product market competition. First, we give a brief tour of the intellectual history of the area. Second, we examine how the Aghion-Howitt framework has influenced the development of the literature theoretically and (especially) empirically, with an emphasis on the "inverted U": the idea that innovation rises and then eventually falls as the intensity of competition increases. Thirdly, we look at recent applications and development of the framework in the areas of competition policy, international trade and structural Industrial Organization. |
| Keywords: | words; competition; innovation; creative destruction; ES/M010147/1; Programme On Innovation and Diffusion |
| JEL: | O31 L13 O32 B20 L40 |
| Date: | 2021–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113816&r= |
| By: | Shota Ichihashi; Byung-Cheol Kim |
| Abstract: | We study competition for consumer attention, in which platforms can sacrifice service quality for attention. A platform can choose the “addictiveness” of its service. A more addictive platform yields consumers a lower utility of participation but a higher marginal utility of allocating attention. We provide conditions under which increased competition can harm consumers by encouraging platforms to offer low-quality services. In particular, if attention is scarce, increased competition reduces the quality of services because business stealing incentives induce platforms to increase addictiveness. Restricting consumers’ platform usage may decrease addictiveness and improve consumer welfare. A platform’s ability to charge for its service can also decrease addictiveness. |
| Keywords: | Economic models |
| JEL: | D40 L51 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:22-16&r= |
| By: | Justus Haucap; Christina Heldman; Holger A. Rau |
| Abstract: | Many cartels are formed by individual managers of different firms, but not by firms as collectives. However, most of the literature in industrial economics neglects individuals’ incentives to form cartels. Although oligopoly experiments reveal important insights on individuals acting as firms, they largely ignore individual heterogeneity, such as gender differences. We experimentally analyze gender differences in prisoner’s dilemmas, where collusive behavior harms a passive third party. In a control treatment, no externality exists. To study the influence of social distance, we compare subjects’ collusive behaviour in a within-subjects setting. In the first game, subjects have no information on other players, whereas they are informed about personal characteristics in the second game. Results show that guilt-averse women are significantly less inclined to collude than men when collusion harms a third party. No gender difference can be found in the absence of a negative externality. Interestingly, we find that women are not sensitive to the decision context, i.e., even when social distance is small they hardly behave collusively when collusion harms a third party. |
| Keywords: | collusion, cartels, competition policy, antitrust, gender differences |
| JEL: | C92 D01 D43 J16 K21 L13 L41 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9614&r= |
| By: | Trost, Michael |
| Abstract: | Meanwhile, the Industrial Organization literature gives several reasons why retailers adopt competition clauses (CCs) such as price matching or price beating guarantees. The motivations underlying the CCs might affect their forms and spread. In this paper, we unravel the spreading pattern of CCs in markets where they are used as a device to facilitate tacit collusion. It turns out that in homogeneous markets with capacity-constrained retailers, the retailers with the largest capacities are most inclined to adopt CCs. Our finding is in line with results of earlier studies on the formation of price leadership, which suggest that the retailers with the largest capacities take on the leadership position. On the other side, we find that in some market instances, retailers have to resort to CCs of non-conventional forms (i.e., of forms uncommon in real commercial life) to induce the most robust collusion. However, it turns out that this peculiar finding can be resolved for markets with additional characteristics. For example, if there exist market dominant retailers or the residual market demand is specified by efficient rationing, the most resilient collusion can also be enforced by CCs of conventional forms. |
| Keywords: | Wettbewerbsverhalten |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hohdps:012022&r= |
| By: | Pinto, Ricardo; Henriques, Sofia; Brockway, Paul; Heun, Matthew; Sousa, Tânia |
| Abstract: | In the coming renewables-based energy transition, global electricity consumption is expected to double by 2050, entailing widespread end-use electrification, with significant impacts on energy efficiency. We develop a long-run, worldwide societal exergy analysis focused on electricity to provide energetic insights for this transition. Our 1900-2017 electricity world database contains the energy carriers used in electricity production, final end-uses, and efficiencies. We find world primary-to-final exergy (i.e. conversion) efficiency increased rapidly from 1900 (6%) to 1980 (39%), slowing to 43% in 2017 as power station generation technology matured. Next, despite technological evolution, final-to-useful end-use efficiency was surprisingly constant (~48%), due to “efficiency dilution”, wherein individual end-use efficiency gains are offset by increasing uptake of less efficient end uses. Future electricity efficiency therefore depends on the shares of high efficiency (e.g. electrified transport and industrial heating) and low efficiency (e.g. cooling and low temperature heating) end uses. Our results reveal past efficiency increases (carbon intensity of electricity production reduced from 5.23 kgCO2/kWh in 1900 to 0.49 kgCO2/kWh in 2017) did little to decrease global electricity-based CO2 emissions, which rose 380-fold. The historical slow-pace of transition in generation mix and electric end-uses suggest strong, urgent incentives are needed to meet climate goals. |
| Keywords: | Energy efficiency, electricity, Carbon intensity, decarbonisation, energy history, energy end-uses |
| JEL: | Q40 |
| Date: | 2022–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:112487&r= |
| By: | Liu, Xueying (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)) |
| Abstract: | With the increased adoption of solar photovoltaics (PV) and batteries, and the use of electronics and appliances powered by direct current (DC), e.g. heat pumps, and electric vehicles (EVs), DC technologies offer higher energy efficiency compared to the entrenched alternating current (AC) technologies. However, the adoption of DC infrastructure is limited due to path dependency and lock-in effects of the currently dominant electric infrastructure based on AC technology. Efficiency gains in energy communities and for households may facilitate the wider-scale adoption of DC technologies. In this study, we simulate 600 household load profiles based on twelve different representative household types and estimate the possible energy cost savings of a DC architecture compared to an AC architecture under various electricity prices and feed-in-tariff levels. This is done for different combinations of battery and PV sizes, and for the case of a peer-to-peer (P2P) trading community. The results show that the DC home yields cost savings of around €90 p.a. for the median household when compared to an AC home. Moreover, we find that neither the share of DC load nor household characteristics impacts cost savings significantly, while the total load remains the most important factor influencing the cost-saving potential. In addition, while cost savings do not necessarily increase with larger PV and battery sizes, they do increase with the possibility of households to engage in P2P trading. The results yield an improved understanding regarding the cost-saving potentials of DC homes and their expected diffusion in Germany. This is especially relevant for future large-scale adoption of solar PV, batteries, and EVs in the future, thus helping both policy-makers and companies alike to better assess the market potential of DC homes. |
| Keywords: | DC technology; Choice of Technology; Diffusion; Industrial policy; Path dependence |
| JEL: | O14 O25 O33 O52 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ris:fcnwpa:2021_007&r= |
| By: | Thuy Doan (UHERO and Department of Economics, University of Hawai'i at Manoa); Matthias Fripp (UHERO); Michael J. Roberts (UHERO and Department of Economics, University of Hawai'i at Manoa) |
| Abstract: | Interstate natural gas transmission and storage infrastructure is facilitated using regulated, private transactions. Pipeline companies obtain long-term contracts from producers and wholesale purchasers, typically local distribution companies (LDCs). Historically, the Federal Energy Regulatory Commission (FERC) accepted these counterparty contracts as sufficient justification of need. Typically the LDCs are themselves regulated firms, which sometimes possess affiliations with pipeline companies. But with contracted costs largely passed through to retail customers via regulated prices, it is unclear whether contracting parties face sufficient competition or otherwise possess an incentive to find least-cost alternatives. To aid evaluation of past and future investments, we develop a national-level optimization model that can assess the need for new interstate pipeline and storage facilities. The model takes production and demand pathways as fixed and minimizes the infrastructure and operation costs of transport and storage in order to balance supply and demand on each day in each state. Transport of gas can be achieved using pipeline transmission of dry gas, or using truck or ship transport of liquefied natural gas (LNG), and optimal placement of liquefaction and gasification facilities. The model also accounts for international imports and exports of both dry gas and LNG. Three underground drygas storage facilities are considered, as well as LNG storage. We compare the model’s optimized plan with observed outcomes as the sector grew rapidly with hydraulic fracturing. We find that the U.S. has built 38 percent more pipeline and 27 percent more underground storage than necessary, amounting to roughly $179 billion in excess investment. It would have been more economic to expand pipeline far less than observed and instead satisfy critical-peak demands for gas using LNG, plus necessary liquefaction and gasification facilities. Differences between optimized and observed investments vary across the interstate network, while flows between states and into and out of storage bear a close resemblance to observed outcomes. |
| Keywords: | C61, L52, Q49 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:hae:wpaper:2022-2&r= |
| By: | Jean-Christophe Poudou (MRE - Montpellier Recherche en Economie - UM - Université de Montpellier); Wilfried Sand-Zantman (ESSEC Business School and THEMA (UMR 8184) - Economics Department - Essec Business School - THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université) |
| Abstract: | We address the need to regulate Internet infrastructure usage to take into account environmental externalities. We model the interactions between a monopoly ISP and different types of content providers in settings where the former chooses the network size and the latter influences congestion on the network. We first show that current net neutrality regulation does not provide agents the right incentives to cope with the environmental externality issue. Then, we study several alternatives, including laissez-faire, price-based regulation, and norm-based regulation. We derive conditions under which these alternatives fare better than net neutrality. In particular, the two types of regulations are useful tools to accommodate consumer interest and environmental concerns. |
| Date: | 2022–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03608708&r= |
| By: | Malte Jansen; Philipp Beiter; Iegor Riepin; Felix M\"usgens; Victor Juarez Guajardo-Fajardo; Iain Staffell; Bernard Bulder; Lena Kitzing |
| Abstract: | Offshore wind energy is rapidly expanding, facilitated largely by competitive procurement schemes (such as auctions) run by governments. We provide a detailed quantified overview of these schemes, including geographical spread, volumes, results, and design specifications. Our comprehensive global dataset reveals that procurement schemes are designed heterogeneously. Although most remuneration schemes provide some form of revenue stabilisation, their policy design varies and includes feed-in tariffs, one-sided and two-sided contracts for difference, mandated power purchase agreements, and mandated renewable energy certificates. We review the schemes used in eight jurisdictions across Europe, Asia, and North America and evaluate the bids in their jurisdictional context. We comment on whether bids are reportedly cost competitive, the likeliness of timely construction, whether strategic bidding may have been involved, and other jurisdictional aspects that might have influenced the procurement results. We find that offshore wind energy farms in different jurisdictions and over time are exposed to market price risks to a varying extent, with less mature markets tending toward lower-risk schemes. Our data confirm a coincidence of declining procurement costs and growing diffusion of competitive procurement regimes. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.12548&r= |
| By: | Olukunle O. Owolabi; Kathryn Lawson; Sanhita Sengupta; Yingsi Huang; Lan Wang; Chaopeng Shen; Mila Getmansky Sherman; Deborah A. Sunter |
| Abstract: | Hydroelectric power (hydropower) is unique in that it can function as both a conventional source of electricity and as backup storage (pumped hydroelectric storage) for providing energy in times of high demand on the grid. This study examines the impact of hydropower on system electricity price and price volatility in the region served by the New England Independent System Operator (ISONE) from 2014 - 2020. We perform a robust holistic analysis of the mean and quantile effects, as well as the marginal contributing effects of hydropower in the presence of solar and wind resources. First, the price data is adjusted for deterministic temporal trends, correcting for seasonal, weekend, and diurnal effects that may obscure actual representative trends in the data. Using multiple linear regression and quantile regression, we observe that hydropower contributes to a reduction in the system electricity price and price volatility. While hydropower has a weak impact on decreasing price and volatility at the mean, it has greater impact at extreme quantiles (> 70th percentile). At these higher percentiles, we find that hydropower provides a stabilizing effect on price volatility in the presence of volatile resources such as wind. We conclude with a discussion of the observed relationship between hydropower and system electricity price and volatility. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2203.02089&r= |
| By: | Langella, Monica; Manning, Alan |
| Abstract: | There has been increasing interest in recent years in monopsony in labour market. This paper discusses how we can measure monopsony power combining insights from models based on both frictions and idiosyncrasies. It presents some evidence from the UK and the US about how monopsony power varies across the wage distribution within markets, over the business cycle and over time. |
| Keywords: | monopsony; labour market competition |
| JEL: | J42 J31 |
| Date: | 2021–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113925&r= |
| By: | Shanglyu Deng |
| Abstract: | A speculator can take advantage of a procurement auction by acquiring items for sale before the auction. The accumulated market power can then be exercised in the auction and may lead to a large enough gain to cover the acquisition costs. I show that speculation always generates a positive expected profit in second-price auctions but could be unprofitable in first-price auctions. In the case where speculation is profitable in first-price auctions, it is more profitable in second-price auctions. This comparison in profitability is driven by different competition patterns in the two auction mechanisms. In terms of welfare, speculation causes private value destruction and harms efficiency. Sellers benefit from the acquisition offer made by the speculator. Therefore, speculation comes at the expense of the auctioneer. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2203.03044&r= |
| By: | Alcantara Mata, Antonio; Ruiz Mora, Carlos |
| Abstract: | In day-ahead electricity markets based on uniform marginal pricing, small variations in the offering and bidding curves may substantially modify the resulting market outcomes. In this work, we deal with the problem of finding the optimal offering curve for a risk-averse profit-maximizing generating company (GENCO) in a data-driven context. In particular, a large GENCO's market share may imply that her offering strategy can alter the marginalprice formation, which can be used to increase profit. We tackle this problem from a novel perspective. First, we propose a optimization-based methodology to summarize each GENCO's step-wise supply curves into a subset of representative price-energy blocks. Then, the relationship between the market price and the resulting energy block offering prices is modeled through a Bayesian linear regression approach, which also allows us to generate stochastic scenarios for the sensibility of the market towards the GENCO strategy, represented by the regression coefficient probabilistic distributions. Finally, this predictive model is embedded in the stochastic optimization model by employing a constraint learning approach. Results show how allowing the GENCO to deviate from her true marginal costs renders significant changes in her profits and the market marginal price. Furthermore,these results have also been tested in an out-of-sample validation setting, showing how this optimal offering strategy is also effective in a real-world market contest. |
| Keywords: | Stochastic Programming; Constraint Learning; Data-Driven Optimization; Electricity Market; Optimal Pricing Strategy |
| Date: | 2022–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:cte:wsrepe:34605&r= |
| By: | Sedai, Ashish Kumar (Asian Development Bank Institute) |
| Abstract: | The disproportionate burden of water collection, maintenance, and service for women in developing economies calls for a juxtaposition of water infrastructure and gender differences at the household level. We use spatiotemporal data from the largest gender disaggregated human development survey in India (2005–2012) and carry out econometric analyses using individual fixed effects, conditionally exogenous village fixed effects, and instrumental variable regressions to study the effect of indoor piped drinking water (IPDW) on employment and earnings by gender, the self-reported health of women, the prevalence of diarrhea, and children’s absence from school. Among others, the results show that a 0.1% increase in village access to IPDW increases the likelihood of women’s overall employment by 0.33 percentage points and women’s wage/salary employment by 0.39 percentage points, comparatively more than for men. Women’s earnings with IPDW increase by 9.9%, their health improves, and children’s health and education outcomes improve. Our study recommends evaluating the social demand curve for a piped water supply and/or the consideration of a piped water supply as a right as part of a broader strategy to reduce gender differences. |
| Keywords: | piped water; gender; employment; health; education; India |
| JEL: | J16 J21 Q25 R11 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:1273&r= |
| By: | Aghion, Philippe; Bergeaud, Antonin; Lequien, Matthieu; Melitz, Marc J.; Zuber, Thomas |
| Abstract: | We decompose the "China shock" into two components that induce different adjustments for firms exposed to Chinese exports: a horizontal shock affecting firms selling goods that compete with similar imported Chinese goods, and a vertical shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm-level, we show that the horizontal shock is detrimental to firms' sales, employment and innovation. Moreover, this negative impact is concentrated on low-productivity firms. By contrast, we find a positive effect - although often not significant - of the vertical shock on firms' sales, employment and innovation. |
| Keywords: | competition shock; patent; firms; import |
| JEL: | F14 O19 O31 O33 O34 |
| Date: | 2021–08–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113915&r= |