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on Regulation |
| By: | Natalia Fabra (Universidad Carlos III de Madrid); Imelda (IHEID, Graduate Institute of International and Development Studies, Geneva) |
| Abstract: | Given the critical role of renewable energies in current and future electricity markets, it is important to understand how they affect firms’ pricing incentives. We study whether the price-depressing effect of renewables depends on their degree of market price exposure. Paying renewables with fixed prices, rather than market-based prices, is more effective at curbing market power when the dominant firms own large shares of renewables, and vice-versa. Our empirical analysis leverages several short-lived changes to renewables regulation in the Spanish market and shows that switching from full-price exposure to fixed prices caused a 2-4 percent reduction in the average price-cost markup. |
| Keywords: | Market power; Forward contracts; Arbitrage; Renewables |
| JEL: | D47 L14 J52 Q20 |
| Date: | 2022–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp31-2022&r=reg |
| By: | Marianne Fay (The World Bank); David Martimort (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Stéphane Straub (TSE-R - 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: | Attracting private nancing is high on the agenda of policy makers concernedwith closing the infrastructure gap in developing countries. To date, however, private nance represents a minor share of overall infrastructure financing and the poorest countries struggle to attract any private investors. This paper develops a model that rationalizes these facts. We characterize the structure of financial and regulatory infrastructure contracts and derive conditions under which public and private finance coexist. This requires a combination of regulated prices and public subsidies sufficiently attractive for outside nanciers pointing at a fundamental trade-off between financial viability and social inclusion. While improvementsin the efficiency of bankruptcy procedures facilitate access to private finance, institutional changes l owering the cost of public funds make public finance more attractive. |
| Keywords: | Infrastructure, Private finance, Regulation |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseptp:hal-03166092&r=reg |
| By: | Paul, Arindam; De, Parikshit |
| Abstract: | We consider a vertically related differentiated product mixed duopoly market where a public and private firm compete in the downstream market. The public firm is partially privatized and a welfare maximizing regulator chooses the privatization level. The production of the final commodity requires a key input that is supplied by a foreign monopolist who in the upstream market can practice either uniform or discriminatory pricing. We show that with uniform pricing regime the privatization is always larger under Cournot competition while in case of discriminatory pricing regime, the privatization level under Bertrand competition is always larger. We also find that under discriminatory pricing regime, the Cournot-Bertrand ranking of other relevant variables are sensitive to the degree of substitutability. |
| Keywords: | D4, D6, H4, L1, L2 |
| JEL: | L1 L2 |
| Date: | 2022–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:116272&r=reg |
| By: | Dertwinkel-Kalt, Markus; Wey, Christian |
| Abstract: | We present a model to explain why a manufacturer may impose a minimum resale price (min RPM) in a successive monopoly setting. Our argument relies on the retailer having non-contractible choice variables, which could represent the price of a substitute good and/or the effort the retailer exerts for service provision or advertising. Our explanation for a min RPM is empirically distinguishable from alternative justifications for a min RPM that rely, for instance, on retailer competition and service free riding among retailers. Whether a min RPM benefits or harms consumers depends on-as we show-why a min RPM is implemented: if the goal is to soften competition with the substitute product, it tends to harm consumers, and if the goal is to secure service provision, it tends to benefit consumers. |
| Keywords: | Resale Price Maintenance, Vertical Restraints, Cost Pass-Through, Retailing |
| JEL: | L12 L41 D42 K21 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:395&r=reg |
| By: | Linde Kattenberg; Erdal Aydin; Dirk Brounen; Nils Kok |
| Abstract: | Using a natural experimental setting where a solar PV subsidy is assigned randomly to applying households, we estimate the impact of subsidy provision on the adoption of solar PV, installed capacity, timing of the adoption and energy consumption. The results imply that the provision of subsidy leads to an 11.9 percent increase in the probability of adopting solar PV among the households who applied for the subsidy. The findings also indicate that the households who are accepted to the subsidy program invest in an 8.9 percent larger installation as compared to rejected households, and adopt solar panels 55.9 percent faster. Finally, examining the subsequent electricity consumption of the applicants, we report that subsidy provision leads to a 3.74 percent decrease in households' electricity consumption as compared to the rejected applicant group after 1 year, and a 3.93 percent decrease after 5 years. |
| Keywords: | natural experiment; Residential Sector; solar PV; subsidy program |
| JEL: | R3 |
| Date: | 2022–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:2022_141&r=reg |
| By: | Francesca Andreolli (ECCO Climate Think Tank); Chiara D'Alpaos (Department of Department of Civil, Architectural and Environmental Engineering, University of Padova); Peter Kort (Department of Econometrics and Operations Research, Tilburg University) |
| Abstract: | Due to the deployment of distributed renewable energy sources (e.g., solar), the introduction of communication technologies, and the digitalization of the power system (e.g., smart meters, control devices), energy consumers are switching from passive to active in the management of their energy consumption, production, and storage patterns. In a consumer-centric energy market, Peer-to-Peer (P2P) trading allows consumers and prosumers to directly trade energy without any intermediation by traditional energy suppliers. In this paper, we investigate households’ decisions to invest in domestic PV plants coupled with battery storage, namely PV battery systems (PVBs), and to participate in a local energy community (EC), in which energy quotas can be exchanged among EC members via P2P trading. Thanks to storage and P2P, households can strategically decide their optimal course of action and their optimal energy production/consumption patterns and can actively offer services that other EC participants bid for. In detail, we examine whether P2P trading can increase the value of investments in PVBs and affect the decision on both the optimal investment timing and size. Following the real options approach, we develop a stochastic optimization model. Our results show that ceteris paribus, thanks to P2P trading opportunities, households accelerate investments and invest in larger plants compared to scenarios in which P2P trading in not permitted. According to our findings, at current market prices, it is never optimal to invest immediately and, as P2P traded energy increases, households invest earlier and in smaller plants. |
| Keywords: | PV Plants, Battery Storage, P2P Trading, Real Options, Dynamic Stochastic Optimization |
| JEL: | Q42 C61 D81 |
| Date: | 2023–02 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2023.02&r=reg |
| By: | Nthabiseng MOHLAKOANA; Peta WOLPE |
| Abstract: | South Africa’s electricity generation and transmission are currently dominated by the country’s vertical monopoly power utility, Eskom. Distribution is shared between 165 licenced municipalities and Eskom. The intention to divisionalise or unbundle Eskom will eventually affect the current distribution framework and the tariff structures in place, which in turn, could directly impact energy poverty within the country. Alongside this, South Africa recognises the dire and urgent need to address climate change and to transform into a low-carbon and climate-resilient country by lowering emissions and moving into a more sustainable energy future, which should be done within a just transition framework. That transition is premised on moving away from being fully dependent on fossil fuels for electricity generation to incorporating renewable energy. This paper attempts to find out if energy poverty alleviation strategies could emerge from a close examination of the distribution system and tariffs in the face of Eskom’s unbundling. In doing so it highlights that the tariff structure in place is to a large extent driven by the political economy of the country and without systemic changes will not, on its own, be a major driver in alleviating energy poverty. |
| Keywords: | Afrique du Sud |
| JEL: | Q |
| Date: | 2023–02–06 |
| URL: | http://d.repec.org/n?u=RePEc:avg:wpaper:en15044&r=reg |
| By: | Arvanitopoulos, Theodoros; Wilson, Charlie; Ferrini, Silvia |
| Abstract: | Local energy systems (LES) are designed to decarbonize, balance, and coordinate supply, storage and demand resources. Which local conditions enable LES to flourish? Using a unique dataset of 146 LES projects in the UK from 2010 to 2020, we apply econometric methods to identify energy, institutional and socio-economic conditions significantly associated with LES, but not other local energy forms. We show distributed power generation, low-carbon infrastructure firm activity, local government strategy and active energy efficiency markets are enablers of LES involving multiple actors, sectors and skill sets. These conditions describe a clear policy agenda for stimulating and supporting emerging local energy markets. |
| Keywords: | decarbonization; decentralization; digital skills; landscape transition; local energy systems; spatial econometric modelling; EP/S031863/1; EP/S031898/ 1; 101003083 |
| JEL: | C10 O33 Q40 R11 |
| Date: | 2022–11–14 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:117510&r=reg |
| By: | Alessio Tartaro; Adam Leon Smith; Patricia Shaw |
| Abstract: | Regulations and standards in the field of artificial intelligence (AI) are necessary to minimise risks and maximise benefits, yet some argue that they stifle innovation. This paper critically examines the idea that regulation stifles innovation in the field of AI. Current trends in AI regulation, particularly the proposed European AI Act and the standards supporting its implementation, are discussed. Arguments in support of the idea that regulation stifles innovation are analysed and criticised, and an alternative point of view is offered, showing how regulation and standards can foster innovation in the field of AI. |
| Date: | 2023–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2302.04110&r=reg |
| By: | OECD |
| Abstract: | Open banking allows users to access financial information and services through consent-based data portability. This paper brings together the views of private and public experts from a wide variety of countries to explore opportunities and challenges of open banking for financial regulation, privacy protection, and competition. It discusses the different approaches taken by jurisdictions across the globe, and the importance of regulation and standards. While open banking empowers users in sharing and re-using their data across digital services, online platforms, sectors and borders, uncertainty in the interactions with data protection and privacy regimes remains challenging. This paper informs OECD work to consider how cross-sectoral cooperation between financial, competition and data protection authorities could help further open banking. |
| Date: | 2023–02–16 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaab:348-en&r=reg |
| By: | Kurz, Konstantin; Bock, Carolin; Knodt, Michèle; Stöckl, Anna |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:136773&r=reg |
| By: | Daniil Larionov |
| Abstract: | I consider a repeated auction setting with colluding buyers and a seller who adjusts reserve prices over time without long-term commitment. To model the seller’s concern for collusion, I introduce a new equilibrium concept: collusive public perfect equilibrium (cPPE). For every strategy of the seller I define the corresponding “buyer-game†in which the seller is replaced by Nature who chooses the reserve prices for the buyers in accordance with the seller’s strategy. A public perfect equilibrium is collusive if the buyers cannot achieve a higher symmetric public perfect equilibrium payoff in the corresponding buyer-game. In a setting with symmetric buyers with private binary iid valuations and publicly revealed bids, I find a collusive public perfect equilibrium that allows the seller to extract the entire surplus from the buyers in the limit as the discount factor goes to 1. I therefore show that a patient, non-committed seller can effectively fight collusion even when she can only set reserve prices and has to satisfy stringent public disclosure requirements. |
| Keywords: | Repeated Auctions, Auction Design, Collusion, Full Surplus Extraction |
| JEL: | D44 D47 C73 |
| Date: | 2023–02 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_392&r=reg |
| By: | Julien Jacob (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Caroline Orset Orset (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | This literature review sheds light on the role of marketing authorisations and liabilities in controlling industry lobby behaviour aimed at enhancing the lobbyists' private interest to the detriment of the public interest. We present two political tools available to public authorities, marketing authorisation and liabilities (civil and criminal) to regulate firms that market products that could be harmful to society. We draw on the economic literature and contributions that study how these policy tools can be used to achieve three main objectives: providing incentives for risk mitigation, fostering innovation and the acquisition of information on unclear risks, and avoiding collusion between public bodies and the companies being regulated. We conclude with a brief discussion of the areas that require more in-depth research on this topic. |
| Keywords: | Industry risks, Information acquisition, Innovation, Liability rules, Lobby, Scientific uncertainty |
| Date: | 2022–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03966054&r=reg |
| By: | Sylvain Chabé-Ferret (TSE-R - 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, Institute for Advanced Studies - Institute for Advanced Studies); Philippe Le Coënt (BRGM - Bureau de Recherches Géologiques et Minières (BRGM)); Caroline Lefebvre (Laboratoire de Virologie [Toulouse] - CHU Toulouse [Toulouse]); Raphaële Préget (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro - Montpellier SupAgro - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement); François Salanié (TSE-R - 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); Subervie Julie (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier); Sophie S. Thoyer (CEE-M - Centre d'Economie de l'Environnement - Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - UM - Université de Montpellier) |
| Abstract: | Nudges are increasingly used to alter the behavior of economic agents as an alternative to monetary incentives. However, little is known as to whether nudges can backfire, that is, how and when they may generate effects opposite to those they intend to achieve. We provide the first field evidence of a nudge that is designed to encourage pro-environmental behavior, which instead backfires. We randomly allocate a social comparison nudge inviting winegrowers to adopt biological pest control as an alternative to chemical pesticide use. We find that our nudge decreases by half the adoption of biological pest control among the largest vineyards, where the bulk of adoption occurs. We show that this result can be rationalized in an economic model where winegrowers and winegrower-cooperative managers bargain over future rents generated by the adoption of biological pest control. This study highlights the importance of experimenting on a small scale with nudges aimed at encouraging adoption of virtuous behaviors in order to detect unexpected adverse effects, particularly in contexts where negotiations on the sharing of the costs of adoption are likely to occur. |
| Keywords: | Nudges, Behavioral Economics, Pesticides, Government Policy. |
| Date: | 2023–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpceem:hal-03971193&r=reg |
| By: | Marco Buso (Department of Economics and Management, University of Padova and Interuniversity Centre for Public Economics (CRIEP)); Cesare Dosi (Department of Economics and Management, University of Padova and Interuniversity Centre for Public Economics (CRIEP)); Michele Moretto (Department of Economics and Management, University of Padova and Interuniversity Centre for Public Economics (CRIEP)) |
| Abstract: | In a continuous-time setting, we study the design of a dynamic contract between a government and a private entity, wherein the latter commits to pay the government in return for the exclusive right to sell a service by operating a public facility. Private revenues are modelled as depending on the unobservable ability to seize market opportunities and on imperfectly correlated changes in consumers’ preferences. We show that optimal regulation requires an appropriate combination of fixed and variable payments to the government, acting together both as an information revelation mechanism and as a risk sharing device. |
| Keywords: | Public-private partnerships, Public franchises, Adverse selection, Dynamic contracts, Persistent demand shocks |
| JEL: | D81 D82 D86 H54 |
| Date: | 2023–02 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2023.03&r=reg |
| By: | Buchali, Katrin; Grüb, Jens; Muijs, Matthias; Schwalbe, Ulrich |
| Abstract: | Recent experimental simulations have shown that autonomous pricing algorithms are able to learn collusive behavior and thus charge supra-competitive prices without being explicitly programmed to do so. These simulations assume, however, that both firms employ the identical price-setting algorithm based on Q-learning. Thus, the question arises whether the underlying assumption that both firms employ a Q-learning algorithm can be supported as an equilibrium in a game where firms can chose between different pricing rules. Our simulations show that when both firms use a learning algorithm, the outcome is not an equilibrium when alternative price setting rules are available. In fact, simpler price setting rules as for example meeting competition clauses yield higher payoffs compared to Q-learning algorithms. |
| Keywords: | pricing algorithms, algorithmic collusion, reinforcement learning |
| JEL: | D43 D83 L13 L49 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hohdps:012023&r=reg |
| By: | Mayer, Fabian; Bofinger, Peter |
| Abstract: | We investigate monopolistic tendencies and the intensity of currency competition on the crypto market in the light of Hayek's "Denationalization of money". Interestingly, Hayek never considered differentiation and specialization by innovative private currencies could lead lasting currency competition instead of network effects. We argue that competition between private currencies could run on different functions of money, especially the function as a store of value and that as a means of exchange, which partly explains the differences in the set-up of private currencies that Hayek demanded and that of cryptocurrencies. Drawing on a large sample of 101 cryptocurrencies and a time frame from 2016 to 2022, we empirically examine the evolution and degree of competition on the crypto market, also taking changes in general crypto market structure into account. We find that competition is strong for unpegged cryptocurrencies that mostly compete as a speculative store of value. Competition is also strong for stablecoins when competing as a stable store of value. Competition is much less pronounced for the function as a means of exchange and network effects and monopolistic tendencies are more likely to be present on this sub-market. |
| Keywords: | Hayek, Cryptocurrencies, Functions of Money, Currency Competition, NetworkEffects, Monopol |
| JEL: | B25 D40 E42 E50 E51 L11 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wuewep:103&r=reg |
| By: | Peter Csoka; Judit Hever (Magyar Nemzeti Bank) |
| Abstract: | Liquidity and market risk are key considerations in financial markets, especially in times of financial crises. For this reason, regulatory attention to and measures in these fields have been on the rise for the past years. Based on practical experience, regulations aiming at ensuring funding liquidity or, in general, reducing certain risky positions have the side effect of reducing market liquidity. To understand this effect, we extend a standard general equilibrium model with transaction costs of trading, endogenous market liquidity, and the modeling of regulation. We prove that higher regulatory requirements or divesting bad ESG assets reduces market liquidity. |
| Keywords: | Market liquidity, Market risk, Liquidity risk, General equilibrium model, Regulatory requirement, ESG related asset |
| JEL: | G11 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:mnb:wpaper:2023/1&r=reg |