nep-reg New Economics Papers
on Regulation
Issue of 2022‒06‒20
23 papers chosen by
Christopher Decker
Oxford University

  1. Strategic confusopoly: evidence from the UK mobile market By Christos Genakos; Tobias Kretschmer; Ambre Nicolle
  2. Do nudges reduce borrowing and consumer confusion in the credit card market? By Adams, Paul; Guttman-Kenney, Benedict; Hayes, Lucy; Hunt, Stefan; Laibson, David; Stewart, Neil
  3. GDPR and the Lost Generation of Innovative Apps By Rebecca Janßen; Reinhold Kesler; Michael E. Kummer; Joel Waldfogel
  4. Governance and Renewable Energy Consumption in sub-Saharan Africa By Simplice A. Asongu; Nicholas M.Odhiambo
  5. Privatization of Vietnam Airlines: A successful Reform or A Timid Policy Step By Mai, Nhat Chi
  6. Unburdening regulation: the impact of regulatory simplification on photovoltaic adoption in Italy By Federica Daniele; Stefano Clò; Enza Maltese; Alessandra Pasquini
  7. Geopolitik des Stroms: Netz, Raum und Macht By Westphal, Kirsten; Pastukhova, Maria; Pepe, Jacopo Maria
  8. Voluntary Disclosure and Personalized Pricing By Nageeb Ali, S.; Lewis, Greg; Vasserman, Shoshana
  9. Innovation policy, regulation and the transition to net zero By Jan Fagerberg; Håkon Endresen Normann
  10. Has toughness of local competition declined? By Lan Dinh
  11. Anti-competitive Behavior in Providing Internet Service in Multi-Tenant Environments in the Philippines By Estavillo, Javea Maria
  12. Data and Market Power By Jan Eeckhout; Laura Veldkamp
  13. Intangibles and industry concentration: supersize me By Matej Bajgar; Chiara Criscuolo; Jonathan Timmis
  14. Tying under Double-Marginalization By Inderst, Roman; Griem, Fabian; Schaffer, Greg
  15. A multi-operator differentiated transport network model By Jolian McHardy
  16. Pricing with algorithms By Rohit Lamba; Sergey Zhuk
  17. Firm Competition and Cooperation with Norm-Based Preferences for Sustainability By Inderst, Roman; Sartzetakis, Eftichios S.; Xepapadeas, Anastasios
  18. Bargaining and International Reference Pricing in the Pharmaceutical Industry By Dubois, Pierre; Gandhi, Ashvin; Vasserman, Shoshana
  19. Third-Party Sale of Information By Evans, R., Park, I-U.; Park, I-U.
  20. Reaping efficiency gains through product market reforms in China By Margit Molnar
  21. Track Access Regime: The International Practices and Pakistan Railways By Saba Anwar
  22. Network Externalities, Dominant Value Margins, and Equilibrium Uniqueness By Jay Pil Choi; Christodoulos Stefanadis
  23. The anatomy of a hospital system merger: the patient did not respond well to treatment By Martin Gaynor; Adam Sacarny; Raffaella Sadun; Chad Syverson; Shruthi Venkatesh

  1. By: Christos Genakos; Tobias Kretschmer; Ambre Nicolle
    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: competitive strategy, obfuscation, mobile telecommunications industry
    Date: 2021–11–01
  2. By: Adams, Paul; Guttman-Kenney, Benedict; Hayes, Lucy; Hunt, Stefan; Laibson, David; Stewart, Neil
    Abstract: We study nudges that turn out to have precise null effects in reducing long-run credit card debt. We test nudges across two field experiments covering 183,441 UK cardholders. Our first experiment studies nudges added to monthly credit card statements. Our second experiment studies letters and email nudges (separate from monthly statements) sent to cardholders who signed up to automatically pay the minimum required payment.In a follow-up survey to our second experiment, we find that 96% of respondents underestimate the time it would take to fully repay a debt if the cardholder made only the minimum required payment. The nudges reduce this confusion, but underestimation remains overwhelmingly common.
    Keywords: ES/K002201/1; ES/V004867/1; ES/P008976/1; ES/N018192/1; RP2012-V-022
    JEL: F3 G3 N0 J1
    Date: 2022–05–03
  3. By: Rebecca Janßen; Reinhold Kesler; Michael E. Kummer; Joel Waldfogel
    Abstract: Using data on 4.1 million apps at the Google Play Store from 2016 to 2019, we document that GDPR induced the exit of about a third of available apps; and in the quarters following implementation, entry of new apps fell by half. We estimate a structural model of demand and entry in the app market. Comparing long-run equilibria with and without GDPR, we find that GDPR reduces consumer surplus and aggregate app usage by about a third. Whatever the privacy benefits of GDPR, they come at substantial costs in foregone innovation.
    JEL: O31 L82
    Date: 2022–05
  4. By: Simplice A. Asongu; Nicholas M.Odhiambo
    Abstract: The purpose of this study is to assess the nexus between governance and renewable energy consumption in sub-Saharan Africa. The focus is on 44 countries in Sub-Saharan Africa with data from 1996 to 2016. The empirical evidence is based on Tobit regressions. It is apparent from the findings that political and institutional governance are negatively related to the consumption of renewable energy in the sampled countries. The unexpected findings are clarified and policy implications are discussed in the light of sustainable development goals. This study extends the extant literature by assessing how political governance (consisting of political stability and “voice & accountability†) and institutional governance (entailing the rule of law and corruption-control) affect the consumption of renewable energy in sub-Saharan Africa.
  5. By: Mai, Nhat Chi
    Abstract: This study provides an overview about the privatization process of the national airlines in Vietnam, representing for a key large SOE which has been privatized. Therefore, it helps to reflect the process of the country in term of the government perspectives in general, through which to bring ideas or suggestion for more efficient policy to favor liberalization. Privatization of state-owned enterprises (SOEs) is one pillar of the structural reforms in addition to the deregulation and trade liberalization. As a necessity for development, Vietnam implemented privatization along with the Renovation policy to transfer from a centrally planned market to an open and market-oriented economy as a necessity for development. The privatization process in Vietnam is on-going and has begun in large SOEs. The privatization of Vietnam Airlines is a typical case of a large-scale concern undergoing privatization through equitization. This study is of particular interest for the Vietnam Airlines’ privatization in evaluating the success or failure of the equitization.
    Date: 2022–05–07
  6. By: Federica Daniele; Stefano Clò; Enza Maltese; Alessandra Pasquini
    Abstract: This paper measures the impact of a series of reforms enacted by a subset of Italian regions during 2009-2013 that dramatically simplified the authorisation procedure for investment into mid-sized to large sized photovoltaic plants, i.e. plants with capacity installed between 20 and 200 kW. We rely on georeferenced administrative data on nearly the universe of photovoltaic plants built in Italy, and employ a stacked border diff-in-diff around the time of the regional reforms and municipalities located close to the border of regions that implemented them. We find that simplification reforms increased by 29 percentage points the capacity installed in medium-to-large plants, which resulted into 12 extra MW installed per quarter, about 10% of average quarterly installations for the same category of plants during 2009-2013.
    Keywords: Photovoltaic investment, regulatory simplification, regions
    JEL: K32 Q42 H23 L51
    Date: 2022
  7. By: Westphal, Kirsten; Pastukhova, Maria; Pepe, Jacopo Maria
    Abstract: Die geopolitische Bedeutung von Strom wird unterschätzt, obwohl Stromnetze Räume konstituieren. Sie etablieren neue Einflusskanäle und Machtsphären in politischen Gemeinwesen und über sie hinaus. Im Kontinentalraum Europa-Asien treffen Verbundnetze und Interkonnektoren, also grenzüberschreitende Übertragungsnetzverbindungen, aufeinander. Interkonnektoren markieren neue, teilweise konkurrierende Integrationsvektoren, die Verbundnetze transzendieren. Dabei ist die Zugehörigkeit zum europäischen Netzverbund attraktiv, denn synchrone Netze sind Schicksalsgemeinschaften, in denen Sicherheit und Wohlfahrt geteilt werden. Deutschland und die EU müssen eine Strom-Außenpolitik entwickeln, um das europäische Stromnetz zu optimieren und modernisieren, zu verstärken und zu erweitern. Vor allem aber sind Deutschland und die EU gefordert, Interkonnektivität über das eigene Verbundnetz hinaus mitzugestalten. Chinas Strategie, mit seiner Belt and Road Initiative Infrastrukturen auf das Reich der Mitte auszurichten, wird auch beim Strom immer offensichtlicher. Dabei setzt Peking Standards und Normen und baut seine strategische Reichweite auch zum Vorteil der eigenen Wirtschaft aus. In der östlichen EU-Nachbarschaft dominiert die Geopolitik seit dem Ende des Ost-West-Konflikts die Konfiguration der Stromnetze. Eine Integrationskonkurrenz zwischen der EU und Russland ist unübersehbar. Das östliche Mittelmeer, der Kaspische Raum und Zentralasien wandeln sich von Peripherien in neue Verbindungsräume. Dort konkurrieren die EU, China, Russland und jenseits des Schwarzen Meeres auch Iran und die Türkei um Einfluss bei der Neukonfiguration der Stromnetze.
    Date: 2021
  8. By: Nageeb Ali, S. (Pennsylvania State University); Lewis, Greg (Microsoft Research); Vasserman, Shoshana (Stanford University Graduate School of Business and NBER)
    Abstract: Firms have ever increasing access to consumer data, which they use to personalize their advertising and to price discriminate. This raises privacy concerns. Policymakers have argued in response that consumers should be given control over their data, able to choose what to share and when. Since firms learn about a consumer’s preferences both from what they do and do not disclose, the equilibrium implications of consumer control are unclear. We study whether such measures improve consumer welfare in monopolistic and in competitive markets. We find that consumer control can improve consumer welfare relative to both perfect price discrimination and uniform pricing. First, consumers can use disclosure to amplify competitive forces. Second, consumers can disclose information to induce even a monopolist to lower prices. Whether consumer control improves welfare depends on the disclosure technology and market competitiveness. Simple disclosure technologies suffice in competitive markets. When facing a monopolist, a consumer needs partial disclosure possibilities to obtain any welfare gains.
    JEL: D4 D8
    Date: 2022–04
  9. By: Jan Fagerberg (Centre for Technology, Innovation and Culture, University of Oslo); Håkon Endresen Normann (The Nordic Institute for Studies of Innovation, Research and Education (NIFU))
    Abstract: This paper addresses the role of innovation policy, including regulation, in the transition to a society characterized by net zero emissions of climate gasses. A broad range of policy-actors, notably the European Union, have already publicly embraced this goal. Nevertheless, transforming the society to a state consistent with the net-zero objective is a very demanding task, and to succeed in this endeavour extensive change – including a lot of innovation - in the way energy is provided, distributed and used across all parts of society will be needed. A crucial question, therefore, is how policy – and particularly innovation policy – can contribute to mobilize innovation for this purpose. This paper critically examines the extant literature on the subject, and discusses examples of transformational change from policy practice, including onshore wind and solar in Denmark and Germany; offshore wind in the UK, Denmark and Norway; and the emerging quest for zero-emission ships.
    Date: 2022–05
  10. By: Lan Dinh
    Abstract: Recent evidence on rm-level markups and concentration raises a concern that market competition has declined in the U.S. over the last few decades. Since measuring competition is difficult, methodologies used to arrive at these findings have merits but also raise technical concerns which question the validity of these results. Given the significance of documenting how competition has changed, I contribute to this literature by studying a different measure of competition. Specifically, I estimate the toughness of local competition over time. To derive this estimate, I use a generalized monopolistic competition model with variable markups. This model generates insights that allows me to measure competition as the sensitivity of weighted-average markup to changes in the number of competitors using directly observable variables. Compared to firm-level markups estimation, this method relaxes the need to estimate production functions. I then use confidential Census data to estimate toughness of local competition from 1997 to 2016, which shows that local competition has decreased in non-tradable industries on average in the U.S. during this time period.
    Keywords: Market size, local competition, markups
    Date: 2022–05
  11. By: Estavillo, Javea Maria
    Abstract: Access to the internet has become a basic necessity. The Philippines already labors under low rates of access and slow connectivity, while two dominant internet service providers control nearly 80% of the market, rendering the market potentially vulnerable to anti-competitive conduct. An additional challenge is faced by consumers living in multi-tenant environments (MTEs), which accounts for more than 57% of households in Metro Manila. where developers can create a monopoly within the MTE through exclusive arrangements and other legal means. Recent decisions by the Philippine Competition Commission have struck down these arrangements as being uncompetitive and an abuse of market power. Low-income neighborhoods are most impacted by this lack of choice, where homeowners and tenants who are forced to engage with the monopolistic provider are unable to access the cheaper and more efficient fixed broadband internet services. Regulators should look into market concentration of internet service providers throughout various areas in the Philippines, and actively intervene when concentration leaves consumers little choice.
    Keywords: competition, anti-competitive behavior, competition policy, internet services, exclusive arrangements, Philippines
    JEL: K20 K21
    Date: 2022–05–16
  12. By: Jan Eeckhout; Laura Veldkamp
    Abstract: Might firms' use of data create market power? To explore this hypothesis, we craft a model in which economies of scale in data induce a data-rich firm to invest in producing at a lower marginal cost and larger scale. However, the model uncovers much richer interactions between data, welfare and market power. Data affects risk, firm size and the composition of the goods firms produce, all of which affect markups. The tradeoff between these forces depends on the level of aggregation at which markups are measured. Empirical researchers who measure markups at the product level, firm level or industry level come to different conclusions about trends and cyclical fluctuations in markups. Our results reconcile and re-interpret these facts. The divergence between product, firm and industry markups can be a sign that firms are using data to reallocate production to the goods consumers want most.
    JEL: D8 E3 L0
    Date: 2022–05
  13. By: Matej Bajgar; Chiara Criscuolo; Jonathan Timmis
    Abstract: This paper presents new evidence on the growing scale of big businesses in the United States, Japan and 11 European countries. It documents a broad increase in industry concentration across the majority of countries and sectors over the period 2002 to 2014. The rising concentration is strongly associated with intensive investment in intangibles, particularly innovative assets, software and data, and this relationship is magnified in more globalized and digital-intensive industries. The results are consistent with intangibles disproportionately benefiting large firms and enabling them to scale up and raise their market shares, increasingly over time.
    Keywords: competition, industry and entrepreneurship, innovation
    Date: 2021–10–28
  14. By: Inderst, Roman; Griem, Fabian; Schaffer, Greg
    Abstract: In a model of contractual inefficiencies due to double-marginalization, we analyze the practice of tied rebates that incentivizes retailers to purchase multiple products from the same manufacturer. We isolate two opposing effects: a surplus-sharing effect that enhances efficiency and a rent-extraction effect that reduces efficiency. The overall effect is more likely to be negative when the manufacturer has a particularly strong brand for which the retailers alternatives are much inferior. Foreclosure of a more efficient provider of the manufacturers weaker product is not a sufficient condition for a welfare loss. Our key positive implication relates to the seemingly inefficient introduction of weaker products by the owners of particularly strong brands.
    Keywords: contractual inefficiencies,double-marginalization,competition,surplus-sharing effect,rent-extraction effect,efficiency,brand strength
    JEL: L14 D43
    Date: 2022
  15. By: Jolian McHardy (Department of Economics, University of Sheffield, UK)
    Abstract: We develop a network model of differentiated transport services explicitly incorporating interchangeable and rival aspects, characteristic of many transport systems, allowing exploration of the implications of strategic interaction on pricing amongst multiple rival operators within and across modes. The model offers a framework for studying the impacts of alternative policy scenarios with a wide variety of applications across the transport sector in a way that is tractable and allows meaningful analysis. We illustrate some of the uses of the framework through a series of applications which demonstrate the importance of explicitly recognising the dual rival and interchangeable aspects across multiple operators. Amongst other things, we show that the base model, which we characterise as n = 2, and which has been widely employed in the transport literature, in some respects represents a special case and that the relative size of equilibrium profit, consumer surplus and welfare across regimes as well as the rankings of different regimes across these performance indicators are non-monotonic in n, hence justifying a framework which explicitly allows n to vary. One application examines the performance of the multi-operator ticketing card scheme under guidelines operating in the UK local bus sector. This features as a key part in the UK government’s local bus transport strategy but is also currently under statutory review. A calibration exercise shows this regime may offer higher profit, consumer surplus and welfare as well as a more extensive service provision than the ‘free-market’ case.
    Keywords: Multi-operator; Transport Networks; Pricing; Welfare
    JEL: D43 L13 L92 R48
    Date: 2022–06
  16. By: Rohit Lamba; Sergey Zhuk
    Abstract: This paper studies Markov perfect equilibria in a repeated duopoly model where sellers choose algorithms. An algorithm is a mapping from the competitor's price to own price. Once set, algorithms respond quickly. Customers arrive randomly and so do opportunities to revise the algorithm. In the simple game with two possible prices, monopoly outcome is the unique equilibrium for standard functional forms of the profit function. More generally, with multiple prices, exercise of market power is the rule -- in all equilibria, the expected payoff of both sellers is above the competitive outcome, and that of at least one seller is close to or above the monopoly outcome. Sustenance of such collusion seems outside the scope of standard antitrust laws for it does not involve any direct communication.
    Date: 2022–05
  17. By: Inderst, Roman; Sartzetakis, Eftichios S.; Xepapadeas, Anastasios
    Abstract: We analyze firms incentives to coordinate on the introduction of a more sustainable product variant when consumers preferences for greater sustainability depend on the perceived social norm, which in turn is shaped by average consumption behavior. Such preferences lead to multiple equilibria. If the more sustainable variant allows firms to sufficiently expand their aggregate market share, when a lenient legal regime makes this feasible they will coordinate on the more sustainable outcome. If their aggregate market share however does not expand sufficiently under the more sustainable variant, coordination can forestall a more sustainable outcome. Our analysis thus both confrms and qualifies the notion of a sustainability first-mover disadvantage as a justification for an agreement between competitors, which has gained traction in antitrust. We also provide empirical evidence for norm-based sustainability preferences.
    Keywords: Sustainability,Antitrust,Firm Cooperation
    JEL: A13 D11 D22 K21 L11
    Date: 2022
  18. By: Dubois, Pierre (Toulouse School of Economics, University of Toulouse Capitole,); Gandhi, Ashvin (UCLA Anderson School of Management); Vasserman, Shoshana (Stanford Graduate School of Business and the NBER)
    Abstract: The United States spends twice as much per person on pharmaceuticals as European countries, in large part because prices are much higher in the US. This fact has led policymakers to consider legislation for price controls. This paper assesses the effects of a US international reference pricing policy that would cap prices in US markets by those offered in reference countries. We estimate a structural model of demand and supply for pharmaceuticals in the US and reference countries like Canada where prices are set through a negotiation process between pharmaceutical companies and the government. We then simulate the counterfactual equilibrium under such international reference pricing rules, allowing firms to internalize the cross-country externalities introduced by these policies. We find that in general, these policies would result in much smaller price decreases in the US than price increases in reference countries. The magnitude of these effects depends on the number, size and market structure of references countries. We compare these policies with a direct bargaining on prices in the US.
    JEL: C51 C57 I11 I18 L11 L13 L22
    Date: 2022–04
  19. By: Evans, R., Park, I-U.; Park, I-U.
    Abstract: We study design and pricing of information by a monopoly information provider for a buyer in a trading relationship with a seller. The profit-maximizing information structure has a binary threshold character. This structure is inefficient when seller production cost is low. Compared with a situation of no information, the information provider increases welfare if cost is high but reduces it if cost is low. A monopoly provider creates higher welfare than a competitive market in information if the prior distribution of buyer valuations is not too concentrated. Giving the seller a veto over the information contract generates full efficiency.
    Keywords: Information Sale, Mechanism Design, Information Design
    JEL: D42 D61 D82 D83 L12 L15
    Date: 2022–05–18
  20. By: Margit Molnar
    Abstract: The impressive emergence of China’s economy is set to lose some momentum as the country catches up with more advanced economies and its rapid ageing also weighs on it. However, China can still reap the “reform dividend”, especially with measures to keep up the sustained growth of productivity. Reforms that enhance competition in product markets are among those that can potentially bring about significant productivity gains. China has been lowering the burden on start-ups and simplifying administrative procedures for a while already, achieving significant progress, though more procedures could go online and a one-stop shop is still to be implemented across the country. State ownership remains dominant in most network industries and there are many SOEs even in commercially-oriented industries such as retail or catering. SOEs enjoy implicit government guarantees and are the main beneficiaries of administrative monopolies, i.e. exclusive rights granted by regulations. In addition, they also benefit from various subsidies, sometimes leading to low-level, repetitious investment, excess capacity and waste of public money. A more level playing field would bring about efficiency-enhancing competition by private and foreign firms. Some network industries such as electricity and gas have recently accelerated their opening up and competition is developing in some segments. Digitalisation is a promising candidate to lift China’s long-term growth potential. Competition, in particular competitive pressure from foreign counterparts when there are few domestic players could be an important source of efficiency gains in digital services. China has been a frontrunner in business digitalisation for a while already, but the outbreak accelerated also the provision of e-government services. While strengthening of IPR protection and promoting innovative ways of financing are welcome steps to nurture innovative industries, generous tax exemptions – which by OECD standards do not constitute good tax policy - reduce the availability of public funds for other priority areas.
    Keywords: administrative monopolies, competition, digitalisation, e-commerce, industrial policy, innovation, private firms, product markets, regulation, state-owned enterprises, trade in services
    JEL: D40 H81 L11 L50 L63 L84 L90 O25 P20
    Date: 2022–05–19
  21. By: Saba Anwar (Pakistan Institute of Development Economics)
    Abstract: The “Track Access” or “Right of Access” agreements allow multiple train operators to provide rail services on a shared 2 infrastructure. These agreements are called ‘Network Statement’ in Europe and an ‘Access Undertaking’ in Australia. These “information packages” establish the ‘rules of the game’ between the two parties. Most of these agreements have a similar structure, dealing in turn with.
    Keywords: Track Access Regime, International, Practices, Pakistan Railways
    Date: 2021
  22. By: Jay Pil Choi; Christodoulos Stefanadis
    Abstract: We examine tippy network markets that accommodate price discrimination. The analysis shows that when a mild equilibrium refinement, the monotonicity criterion, is adopted, network competition may have a unique subgame-perfect equilibrium regarding the winner’s identity; the prevailing brand may be fully determined by its product features. We bring out the concept of the dominant value margin, which is a metric of the effectiveness of divide-and-conquer strategies. The supplier with the larger dominant value margin may always sell to all customers in equilibrium. Such a market outcome is not always socially efficient since a socially inferior supplier may prevail if has a stand-alone-benefit advantage and only a modest network-benefit disadvantage.
    Keywords: network externalities, equilibrium uniqueness, price discrimination, monotonicity criterion, dominant value margin, divide and conquer
    JEL: L13 L40 D43
    Date: 2022
  23. By: Martin Gaynor; Adam Sacarny; Raffaella Sadun; Chad Syverson; Shruthi Venkatesh
    Abstract: Despite the continuing US hospital merger wave, it remains unclear how mergers change, or fail to change, hospital behavior and performance. We open the "black box" of hospital practices through a mega-merger between two for-profit chains. Benchmarking the merger's effects against the acquirer's stated aims, we show they achieved some of their goals, harmonizing electronic medical records and sending managers to target hospitals. Post-acquisition managerial processes were similar across the merged chain. However, these interventions failed to drive detectable gains in performance. Our findings demonstrate the importance of organizations for merger research in health care and the economy more generally.
    Date: 2022–12

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