|
on Regulation |
| By: | Eicke, Anselm |
| Abstract: | The location of electricity generation assets within a power system involves a fundamental trade-off: is it better to place generators at sites where generation costs are low, or should generators be situated close to consumers? This question is particularly relevant for wind turbines and solar photovoltaics, whose availability strongly varies between regions. If market prices reflect network constraints, the prices provide a locational signal. This is not the case in zonal markets with uniform prices. There, regulators can intervene by other means, such as administratively determined network tariffs that vary by location and are paid by generators. In this work, I examine such regulatory locational instruments using a novel bi-level electricity market model. In the first stage, the regulator determines a locational signal. In the second stage, generators decide on investment and dispatch while accounting for the regulatory signal and the zonal electricity price. For an exemplary network, I find that the introduction of regulatory locational instruments significantly lowers the cost of electricity supply. |
| Keywords: | Locational signals,Investment incentives,OR in energy |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:261346&r= |
| By: | Catuti, Mihnea; Righetti, Edoardo; Egenhofer, Christian; Kustova, Irina |
| Abstract: | Clean hydrogen will offer decarbonisation solutions for sectors where direct electrification would be either technologically impossible or too costly, though future demand should not be overestimated. Hydrogen will most likely be used in hard-to-decarbonise industrial processes, some segments of the transport sector, as well as for long-term energy storage. For hydrogen to contribute to decarbonisation, it needs to be produced with minimal greenhouse gas emissions. Therefore, hydrogen obtained through electrolysis using renewable electricity will represent the priority for the EU. However, this does come with a set of trade-offs, all of which are explored at length in this report. A key challenge will be the interaction with the already-strained electricity market. New renewable energy installations are facing deployment obstacles, therefore the decarbonisation of the electricity mix and the deployment of renewable hydrogen need to be developed together to avoid tensions. This report also focuses on two other potential hydrogen sources. Nuclear hydrogen could create more opportunities for producing low-carbon hydrogen from electricity, whilst imports could cover potential supply deficits and provide further access to inexpensive renewable hydrogen for domestic consumption. Robust criteria will be needed for certifying the renewable nature of hydrogen, based on clear temporal and geographical connection requirements between the electrolyser and the renewable installations. However, the separate certification of low-carbon hydrogen produced from electricity that meets similar emissions savings requirements should also be established, without labelling it as renewable. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:eps:cepswp:34767&r= |
| By: | KANEMOTO Yoshitsugu |
| Abstract: | The electricity market reform in Japan aims to simultaneously achieve both energy security and economic efficiency by creating balancing and capacity markets in addition to the wholesale power market that already exists. Of the two markets, this paper focuses on the capacity market and analyzes its fundamental issues using a deterministic electricity network model. Ensuring security of electricity supply may require government intervention because of price caps that are used to alleviate market power and a variety of market failures that result in excessively high costs of electric power investment. The central task of this paper is to study how to design the capacity market to ensure there will be sufficient capacity to meet demand. Another major topic is the cost-benefit analysis of transmission investment in the presence of the capacity market. When there is no price cap and electricity prices are optimally determined, the revenue from price differences caused by transmission constraints equals the benefit of transmission expansion. We study how this must be changed when a capacity market is introduced. |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rdpsjp:22026&r= |
| By: | Marco Sebastian Breder; Felix Meurer; Michael Bucksteeg; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen) |
| Abstract: | Germany’s energy transition is associated with increasing congestion in the electricity transmission grids due to increasing infeed from renewable energy sources, especially from wind turbine installation at the periphery in coastal areas. Here, regional differences in generation and demand lead to grid bottlenecks from the northern to the southern parts of the country, thus leading to grid expansion requirements towards the load centers. However, long lead times for grid expansion in combination with the rapid expansion of renewables amplify the grid congestion. The provision of flexibility is one way to overcome this issue. In zonal markets, loadside flexibility can mitigate this situation, but it can also exacerbate it. Hence, adequate spatial incentives are crucial. To date, research has discussed possible market splits as a mid-term solution to improve congestion management, recognizing that the first-best solution of nodal prices is controversial in Europe. Nevertheless, adjusted bidding zones, e.g., by market splitting, can offer a solution. In the context of energy transition and ambitious decarbonization goals, hydrogen becomes important both as a storage option for renewable energy surplus and a green fuel for multiple usages. The German government already foresees 10 GW of electrolyser capacity by 2030, yet their locations will strongly affect congestion in the electricity grid. Therefore, this study investigated the impact of a possible market split on both the operation of and the investment in electrolysers. We apply an optimization approach including endogenous investment decisions linked to a detailed scheduling model. The investments are iteratively adjusted based on a Benders decomposition approach to study the impacts of market splitting on both the amount and the location of investments in terms of the electrolysers’ capacity and operation. In addition to conducting an analysis of spatial incentives, this study considered incentives through different CO2 prices. |
| Keywords: | Hydrogen, German Energy Transition, Electricity Market, Operations Research, Market Split |
| Date: | 2022–07 |
| URL: | http://d.repec.org/n?u=RePEc:dui:wpaper:2203&r= |
| By: | Jamasb, Tooraj (Department of Economics, Copenhagen Business School); Sen, Anupama |
| Abstract: | As renewable energy technologies mature, new industry configurations are also emerging with offshore wind and energy islands as notable examples. However, a clear conceptualisation of the role of the state and governance framework is lacking, alongside growing pressure for the state to define the path forward. This paper reviews recent developments in emerging EU offshore renewable energy regimes, highlighting three implications that show the need for new governance frameworks. First, there is a reconfiguration of energy industry structures around changing economics and policies, in a repeat of historical trends. Second, energy islands will increasingly represent features of a natural resource in fixed supply, with the economic nature of offshore energy gradually transiting from the sub-domain of renewable energy economics towards natural resource economics. Third, to realise their economic value, frameworks are needed to enable these resources to harmonise with other resources in fixed supply, such as the land on which they are sited, which is constitutionally under the stewardship of the state. Finally, the paper draws out a set of criteria for governance of emerging offshore renewables, to underpin the changing industry landscape and role of the new ‘energy state’ within |
| Keywords: | Offshore energy; Governance; Fiscal regime; Energy; Natural resources; Power |
| JEL: | L22 L24 L51 Q20 Q24 Q28 Q32 Q38 Q48 |
| Date: | 2022–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2022_005&r= |
| By: | Ghosh, Meenakshi |
| Abstract: | Two sellers trade vertically and horizontally differentiated goods on a platform which charges them a commission fee. Some consumers are naive and do not observe, or consider, add-on prices until after they commit to buying the base good from a seller. We address the following questions. First, how do consumer naivete and costs asymmetries (arising from differences in fees) influence pricing strategies. Second, we examine the welfare loss arising from sub-optimal decisions made by naive consumers who buy the bundle, but fail to factor in its total price at the outset. Third, how does naivete affect seller and platform payoffs. |
| Keywords: | add-on pricing, consumer naivete, cost asymmetry, horizontal differentiation, vertical differentiation, platform fee, cost pass-through |
| JEL: | L1 L11 |
| Date: | 2022–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:113548&r= |
| By: | Kotovskaia, Anastasia; Meier, Nicola |
| Abstract: | Large technology firms ("BigTechs") increasingly extend their influence in finance, primarily taking over market shares in payment services. A further expansion of their businesses into the territory of cryptocurrencies could entail new and unprecedented risks for the future, namely for financial stability, competition in the private sector and monetary policy. When creating a regulatory toolbox to address these risks, financial regulatory, antitrust, and platform-specific solutions should be closely intertwined in order to fully absorb all the potential threats and to take account of the complex risks these platform companies bear. This policy letter evaluates the solutions lately proposed by the European Commission, with specific focus on the upcoming regulation of Markets in crypto-assets (MiCA), but also the Digital Markets Act (DMA) and Digital services act (DSA), against the background of cryptocurrencies issued by BigTechs and sheds light on financial regulatory, competition and monetary law issues coming along with the possible designs of these cryptocurrencies. |
| Keywords: | Cryptocurrencies,Big Techs,MiCA,DMA,DSA,European Commision |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safepl:97&r= |
| By: | Ghosh, Meenakshi |
| Abstract: | We model a situation where a seller trades a base good, and a bundle of higher quality comprising of the base good with an add-on, through an intermediary which charges a flat commission fee each time it makes a sale. In addition, the add-on can also be bought elsewhere, i.e. from a different provider, on a stand-alone basis. Apart from differences in valuations of quality and their distance from the seller, consumers differ in their levels of sophistication. Specifically, we assume that there is a fraction of consumers who are naive and either unaware that add-ons can be purchased separately from a different provider, or unwilling to deviate (de-select) from the options that have been set for them by default by a seller. This paper examines the impact of regulation (proposed, for instance, by the Financial Conduct Authority in the UK), that requires intermediaries to prompt consumers regarding the availability of stand-alone alternatives. We find that, ironically, regulation that seeks to protect the interests of the naive consumers may sometimes be detrimental to their welfare. |
| Keywords: | add-on pricing, consumer naivete, regulation, platform fee, cost pass-through |
| JEL: | L11 L15 |
| Date: | 2022–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:113549&r= |
| By: | Boyer, Marcel |
| Abstract: | Traditionally, labour concerns have not been top-of-mind when considering competition policy, but the current approach to wage-fixing, anti-poaching, and anti-mobility agreements between firms has been one of the main reasons behind recent Parliamentary attention to competition policy and labour markets. Key stakeholders in academic and policy circles have called for more robust enforcement regarding monopsony / oligopsony power in labour markets, when assessing mergers and acquisitions for example, as well as regarding market power in labour representation (unions) and certification as entry barriers in labour markets. The objective here is to identify the numerous challenges and pitfalls in assessing the level of competition on labour markets, both supply and demand, and in addressing remedies if necessary. |
| JEL: | D43 K21 L12 L44 |
| Date: | 2022–07–12 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:127083&r= |
| By: | Mara Hammerle (Crawford School of Public Policy, Australian National University); Paul J. Burke (Crawford School of Public Policy, Australian National University) |
| Abstract: | Expanding access to solar photovoltaics (PV) may help to reduce the incidence of energy poverty. Yet little is known about the strength and magnitude of this relationship. This paper uses cross-sectional survey data from the Australian Bureau of Statistics to conduct a retrospective analysis of the effects of having rooftop solar PV for Australian households. As the main identification challenges are the potential for omitted variables and reverse causality, we present results for regressions controlling for potential confounders and also use an instrumental variable approach. The study finds that having solar PV is associated with a large decrease in the likelihood of experiencing energy poverty based on objective indicators that compare household incomes and energy bills. Having solar PV is also associated with a reduction in self-reported difficulty in paying bills on time, although this effect is less robust across estimations. The findings could inform future policies for promoting residential solar PV through an improved understanding of likely impacts. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:een:ccepwp:2203&r= |
| By: | M. T. Verónica Culós (Universidad Nacional de Cuyo); M. Florencia Gabrielli (Universidad Nacional de Cuyo/CONICET); Marcos Herrera Gómez (IELDE-UNSa/CONICET) |
| Abstract: | The liquid fuels market in Argentina is characterized by a high level of concentration, especially in local geographic areas. This paper studies the demand of the liquidfuels wholesale chain in Argentina, using the discrete choice approach, based on the premise that different firms offer differentiated goods, by virtue of the intrinsic characteristics of the good, and that such differentiation gives them the power to set prices above marginal production costs. The difference between prices and marginal costs determines the firm’s market power. Using a novel dataset, we provide new empirical evidence that quantifies market power across firms and regions. |
| Keywords: | Liquid Fuels; Market Power; Product Differentiation. |
| JEL: | C52 L13 L71 |
| Date: | 2022–07 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:157&r= |
| By: | Onur A. Koska (University of Canterbury) |
| Abstract: | In a duopoly model with network externalities, this paper studies Cournot and Bertrand firms’ optimal investments in network strength under passive and responsive consumer expectations, and looks at the welfare implications. The results suggest minimum sufficient threshold levels of initial network strength for which (i) the optimal investment levels by both Cournot and Bertrand firms are greater under responsive expectations; (ii) Cournot firms invest more than Bertrand firms under responsive expectations, whereas Bertrand firms invest more than Cournot firms under passive expectations. These threshold levels are also sufficient in that welfare is (i) greater under responsive expectations than under passive expectations for a given competition mode, and (ii) greater under Bertrand competition than under Cournot competition for a given type of consumer expectations. |
| Keywords: | Network strength, investment, consumer expectations, Cournot duopoly, Bertrand duopoly |
| JEL: | D43 L13 M21 |
| Date: | 2022–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:22/09&r= |
| By: | Michał Rubaszek; Karol Szafranek |
| Abstract: | Unprecedented increases in European natural gas prices observed in late 2021 and early 2022 raise a question about the sources of these events. In this article we investigate this topic using a time-varying parameters structural vector autoregressive model for crude oil, US and European natural gas prices. This flexible framework allows us to measure how disturbances specific to the analyzed markets propagate within the system and how this propagation mechanism evolves in time. Our findings are fourfold. First, we show that oil prices are hardly affected by shocks specific to natural gas markets, whether in the US or Europe. Second, we demonstrate that oil shocks have limited impact on US gas prices, which points to the decoupling of both markets. Third, we evidence that over longer horizons natural gas prices in Europe are still mostly determined by oil shocks, with idiosyncratic shocks leading to short-lived decoupling of both commodity prices. Fourth, we illustrate that along the gradual shift from oil price indexation to gas-on-gas competition, the contribution of idiosyncratic shocks to European natural gas prices has increased. Nonetheless, we discuss why the notion that EU natural gas and crude oil prices have decoupled might be premature. |
| Keywords: | Energy market, oil-gas relationship, TVP-VAR model, Bayesian inference. |
| JEL: | C11 C32 Q31 |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:sgh:kaewps:2022078&r= |
| By: | Ehrhart, Karl-Martin; Schlecht, Ingmar |
| Keywords: | gas market,Russia,European Union,game theory,external price cap |
| JEL: | F13 Q40 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:261345&r= |
| By: | Moreno, Diego; Petrakis, Emmanuel |
| Abstract: | In an economy in which firms exercise market power in the markets for consumption goods and inputs (labor), we show that a merger to monopoly is Pareto improving when the number of firms is below a threshold. This threshold is larger the larger is the elasticity of labor supply and the smaller is the consumers'preference for goods variety. Consequently, market concentration may have non-monotonic general equilibrium effects on wage mark downs, employment and welfare. |
| Keywords: | General Equilibrium; Market Power; Market Efficiency; Mergers |
| JEL: | D4 D5 D6 L1 L4 |
| Date: | 2022–07–22 |
| URL: | http://d.repec.org/n?u=RePEc:cte:wsrepe:35529&r= |
| By: | Bruno Baranek; L. Musolff; Vitezslav Titl |
| Abstract: | Collusion likely has adverse effects on social welfare. In this paper, we study collusion in the e-procurement market in Ukraine. We document that the bidding patterns in the data are incompatible with a competitive equilibrium. We develop a novel structural test to detect pairs and, thereby, networks of collusive firms. We validate the soundness of our collusion detection algorithm on a sample of 863 prosecuted collusive firms that participated in 23,515 tenders. |
| Keywords: | Public procurement, Collusion, Online markets |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:2111&r= |
| By: | Juan M. Ortner; Sylvain Chassang; Kei Kawai; Jun Nakabayashi |
| Abstract: | We propose an equilibrium theory of data-driven antitrust oversight in which regulators launch investigations on the basis of suspicious bidding patterns and cartels can adapt to the statistical screens used by regulators. We emphasize the use of asymptotically safe tests, i.e. tests that are passed with probability approaching one by competitive firms, regardless of the underlying economic environment. Our main result establishes that screening for collusion with safe tests is a robust improvement over laissez-faire. Safe tests do not create new collusive equilibria, and do not hurt competitive industries. In addition, safe tests can have strict bite, including unraveling all collusive equilibria in some settings. We provide evidence that cartel adaptation to regulatory oversight is a real concern. |
| JEL: | C57 C72 D44 H57 L4 |
| Date: | 2022–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30219&r= |
| By: | Marie-Laure Allain (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, X - École polytechnique, IPP - Institut des politiques publiques); Rémi Avignon (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique); Claire Chambolle (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Hugo Molina (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Each year, commercial negotiations highlight the tensions between retailers and their suppliers, and public authorities are regularly called upon to balance the relationship. In this context, buying groups – which allow several large competing retailers to negotiate jointly with their suppliers – are likely to strengthen retailers' buyer power. France experienced two waves of buying groups formation in 2014 and in 2018 and the law was changed to allow the French Competition Authority (CA) – the Autorité de la concurrence – to control the formation of such alliances. This policy brief proposes a framework to analyse the effects of the buying groups on the sector as a whole. After a brief assessment of the economic forces at play based on a review of the literature, we discuss the results of two studies conducted by the authors of this note. The first one adopts an empirical approach to study the effects of buying groups formation in 2014 in France in the bottled water industry. It shows that the introduction of buying groups modified profit sharing at the expense of suppliers but also led to a decline in prices which benefited consumers. The second study discusses the efficiency of excluding private labels from the scope of buying groups – as advocated by the Competition Authority – to protect small suppliers and maintain product variety. |
| Abstract: | Chaque année, les négociations commerciales mettent en lumière les tensions entre les détaillants et leurs fournisseurs, et les pouvoirs publics sont régulièrement appelés à équilibrer les relations. Dans ce contexte, les groupements d'achat - qui permettent à plusieurs grandes enseignes concurrentes de négocier conjointement avec leurs fournisseurs - sont susceptibles de renforcer la puissance d'achat des distributeurs. La France a connu deux vagues de formation de groupes d'achat en 2014 et en 2018, et la loi a été modifiée pour permettre à l'Autorité de la concurrence de contrôler la formation de ces alliances. Cette note de synthèse propose un cadre pour analyser les effets des centrales d'achat sur le secteur dans son ensemble. Après une brève évaluation des forces économiques en jeu basée sur une revue de la littérature, nous discutons les résultats de deux études menées par les auteurs de cette note. La première adopte une approche empirique pour étudier les effets de la formation de groupes d'achat en 2014 en France dans le secteur de l'eau embouteillée. Elle montre que l'introduction des groupes d'achat a modifié le partage des profits au détriment des fournisseurs mais a également conduit à une baisse des prix qui a bénéficié aux consommateurs. La seconde étude discute de l'efficacité de l'exclusion des marques de distributeurs du champ d'application des groupes d'achat - comme le préconise l'Autorité de la concurrence - pour protéger les petits fournisseurs et maintenir la variété des produits. |
| Keywords: | Eau minérale |
| Date: | 2022–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03693440&r= |
| By: | Fouquet, Roger; Hippe, Ralph |
| Abstract: | This paper investigates the structural transformation associated with the ‘twin transition’ of decarbonisation and digitalisation in European economies by placing it in a broader historical perspective. With this in mind, this paper analyses the long run trends in energy intensity and communication intensity since 1850. The evidence indicates that these economies experienced a coevolution of energy and communication intensities during their industrialisation phase, followed by a divergence in the energy and communication intensities associated with the development of high tech and ICT. Overall, this reflects the dematerialisation of these European economies. The paper also analyses the speed of historical energy transitions and communication technology transitions in these economies, finding that communication transitions appear to be substantially faster than energy transitions. The evidence suggests that twin transitions of the decarbonisation and digitalisation of economies are likely to experience a process of imbalanced structural transformation (with ICT continuing to forge ahead). This expectation should guide policy recommendations – increasing the need for low carbon industry to develop and create synergies between the two industries in order to avoid the new industrial revolution being high-carbon. |
| Keywords: | energy transitions; ICT; twin transition; energy intensity; historical; EP/R 035288/1; ES/R009708/1 |
| JEL: | N0 |
| Date: | 2022–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:115544&r= |
| By: | Boyer, Marcel |
| JEL: | D43 K21 L12 L44 |
| Date: | 2022–07–12 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:127084&r= |
| By: | Stephen Davies (Centre for Competition Policy and School of Economics, University of East Anglia) |
| Abstract: | This work addresses the widespread concern that the forces of competition are weakening worldwide. Much of the evidence for this comes from traditional concentration indices which are notoriously flawed: conceptually they derive from static theory and cannot discriminate between efficiency and market power; empirically, they employ over-aggregate market definitions and ignore international competition. This paper is the first in a programme of research with the objective of resolving some of these problems. The first part of the paper provides a succinct picture of the facts on the HHI index for over 300 UK industries at the 4-digit-level; given data constraints, these refer to producer concentration, ignoring imports and exports. We find that, on average, concentration rose steadily 1998-2011 and remained high thereafter, 2011-2018. About 30% of industries, defined at the 4-digit level, can be classified as “concentrated†or “highly concentrated†using traditional competition authority definitions. In the second part, we provide some indications of how this picture will likely change if we could recompute concentration indices at the more appropriate Anti-Trust Market level and incorporating information on trade competition and exports. High concentration is likely to be even more prevalent at the ATM level, but results might look very different for the sub-set of trade-intensive industries, if we could incorporate trade data into the concentration measures. In the third part, we turn to the major conceptual problem: how to measure competition avoiding the identification problems associated with concentration indices and incorporating a richer dynamic vision of competition as a process. Using an admittedly primitive measure (based on the persistence of leadership rankings within an industry), our early results suggest an increasing tendency for the largest firms to retain their leadership positions over this period. This points to reduced churn in market shares and weakening competition, especially as leadership persistence is found to be more pronounced in more concentrated industries. |
| Keywords: | Competition, concentration |
| Date: | 2022–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:uea:ueaccp:2021_11&r= |
| By: | Zita Vasas (Centre for Competition Policy and Norwich Business School, University of East Anglia) |
| Abstract: | As nudge interventions have become more popular, academic research is developing that aims to assess to what extent and under what circumstances these interventions are effective. My paper contributes to this stream of research in a specific context: collating and synthesising evidence on the effectiveness of nudge interventions that aim to increase consumer search and switching in retail financial markets. Following a systematic search strategy, I identified 33 papers containing relevant research, including qualitative studies, online laboratory experiments, field experiments and ex post data analyses, covering a wide range of retail financial products and a number of different types of nudges. The review of these papers results in two main contributions. First, it demonstrates that different study designs serve different purposes in evidence accumulation. In particular, qualitative studies and online lab experiments should not be used to ascertain the magnitude of the intervention’s impact. Second, based on over 400 estimates from the quantitative analyses in these papers, it establishes that the currently available evidence shows that nudges increase consumer search and switching in retail financial markets by 2-3 percentage points on average. The most effective interventions appear to be the ones that make the consumer’s life easier by taking some of the administrative burden over, and the ones that make a relatively major change in the structure of the decision-making environment. Disclosures, reminders, simplifications and informational nudges tend to have a smaller impact. In other words, nudges that change the choice architecture more profoundly have a higher impact on search and switching than nudges that only provide, simplify or highlight information. Overall, while nudge interventions may be efficient on a cost-benefit basis and can lead to large increase in relative terms (e.g. doubling switching rates from 1% to 2%), regulators cannot expect them to alter consumer behaviour to the extent that it would lead to a significant change in the competitive landscape. |
| Keywords: | Consumers, switching, financial markets |
| Date: | 2022–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:uea:ueaccp:2021_10&r= |
| By: | Vaziri, M. |
| Abstract: | In this paper, I study firms' strategic and anticompetitive behaviour, and the consequent role of antitrust law as a macroeconomic policy in promoting business dynamism. Over the past few decades, business dynamism has been declining in the US: firm entry has fallen, accompanied by a slowdown in the rate of productivity growth. Additionally, enforcement of antitrust law has been at historically low levels. Using firm-level and sector-level data from the US, I find that stronger antitrust enforcement is associated with higher entry and higher productivity growth but lower R&D investments. Next, I develop and structurally estimate a dynamic general equilibrium model with innovation and oligopolistic product market competition. The dynamic structure of the model allows rms to eliminate competition through strategic decision making. The model is calibrated to the recent US experience and quantitative exercises show that strengthening antitrust policies results in: (1) a higher firm entry rate, (2) a higher rate of productivity growth, (3) a larger labour share of GDP, and (4) a decline in the innovation rate. Overall, the model indicates that stronger antitrust policies are effective at restoring business dynamism and can deliver up to 16% higher welfare in consumption-equivalent terms. The improvement in welfare is mainly driven by an increase in the welfare of workers, without affecting the capitalists, suggesting that antitrust law has distributional implications, and therefore, has a potential role in reducing inequality. |
| Date: | 2022–07–18 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2243&r= |