nep-reg New Economics Papers
on Regulation
Issue of 2023‒04‒10
fourteen papers chosen by
Christopher Decker
Oxford University

  1. Air passengers’ willingness to pay for ancillary services on long-haul flights By Paul Chiambaretto
  2. Calculating efficient Distribution use of System (DUoS) charges for Ireland: Indicative tariffs for residential, commercial and industrial consumers By Farrell, Niall
  3. Euro area consumers' payment behaviour and banking digitalisation By Justus Meyer; Federica Teppa
  4. Regulatory costs and market power By Singla, Shikhar
  5. Price convergence in the Central American regional electricity market By Walter Cont; Diego Barril; Agustín Carbó
  6. Estimating Digital Infrastructure Investment Needs to Achieve Universal Broadband By Mr. David Amaglobeli; Mr. Mariano Moszoro; Edward Oughton
  7. The place beyond the lines – efficient storage allocation in a spatially unbalanced power system with a high share of renewables By Czock, Berit Hanna; Sitzmann, Amelie; Zinke, Jonas
  8. Purchase or generate? An analysis of energy consumption, co-generation and substitution possibilities in energy intensive manufacturing plants under the Japanese Feed-in-Tariff By Aline Mortha; Toshi H. Arimura
  9. Strategic product compatibility in network industries By Domenico Buccella; Luciano Fanti; Luca Gori
  10. Market-based allocation of airport slots: the PAUSE auction mechanism and extensions By Eduardo Cardadeiro; João E. Gata
  11. Facilitating deep decarbonization via sector coupling of green hydrogen and ammonia By Ives, Matthew; Cesaro, Zac; Bramstoft, Rasmus; Bañares-Alcántara, René
  12. Reverse procedure in public procurement By Audinga Baltrunaite; Tommaso Orlando; Ivano Pizzolla; Valerio Ragozini; Gabriele Rovigatti
  13. Nonparametric Estimation of Sponsored Search Auctions and Impacts of AD Quality on Search Revenue By Dongwoo Kim; Pallavi Pal
  14. Regulation of petrol and diesel prices and their effects on GDP growth: evidence from China By Brueckner, Marcus; Hong, Haidi; Vespignani, Joaquin

  1. By: Paul Chiambaretto (Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School)
    Date: 2021–03–01
  2. By: Farrell, Niall
    Date: 2023
  3. By: Justus Meyer; Federica Teppa
    Abstract: This paper contributes to understanding consumers' payment behaviour and digitalisation in personal finances. We study individuals' payment choices, the availability of cashless payments in everyday situations and the use of banking apps in the euro area. Using the European Central Bank (ECB) Consumer Expectations Survey (CES), we find that most people prefer to use only one payment instrument, mostly cash, partly due to supply constraints in accepting non-cash payments. We also find substantial cross-country heterogeneity. Our results highlight the prominent role of demographic factors in choosing non-cash payment options and app-based tools in managing personal finances. While mobile banking is already popular among euro area consumers, using smart (device) payment methods remains very limited.
    Keywords: Consumer Payment Behaviour; Banking Digitalisation; Consumer Expectations Survey (CES)
    JEL: D12 C13 O33
    Date: 2023–03
  4. By: Singla, Shikhar
    Abstract: Industry concentration and markups in the US have been rising over the last 3- 4 decades. However, the causes remain largely unknown. This paper uses machine learning on regulatory documents to construct a novel dataset on compliance costs to examine the effect of regulations on market power. The dataset is comprehensive and consists of all significant regulations at the 6-digit NAICS level from 1970-2018. We find that regulatory costs have increased by $1 trillion during this period. We document that an increase in regulatory costs results in lower (higher) sales, employment, markups, and profitability for small (large) firms. Regulation driven increase in concentration is associated with lower elasticity of entry with respect to Tobin's Q, lower productivity and investment after the late 1990s. We estimate that increased regulations can explain 31-37% of the rise in market power. Finally, we uncover the political economy of rulemaking. While large firms are opposed to regulations in general, they push for the passage of regulations that have an adverse impact on small firms.
    Keywords: Market Power, Competition, Concentration, Machine Learning, Regulations
    JEL: L51 L11 C45 D4
    Date: 2023
  5. By: Walter Cont; Diego Barril; Agustín Carbó
    Keywords: Electricity prices, price convergence, SIEPAC, Regional Electricity Market
    JEL: Q40 Q48
    Date: 2021–11
  6. By: Mr. David Amaglobeli; Mr. Mariano Moszoro; Edward Oughton
    Abstract: We develop a detailed model to evaluate the necessary investment requirements to achieve affordable universal broadband. The results indicate that approximately $418 billion needs to be mobilized to connect all unconnected citizens globally (targeting 40-50 GB/Month per user with 95 percent reliability). The bulk of additional investment is for emerging market economies (73 percent) and low-income developing countries (24 percent). We also find that if the data consumption level is lowered to 10-20 GB/Month per user, the total cost decreases by up to about half, whereas raising data consumption to 80-100 GB/Month per user leads to a cost increase of roughly 90 percent relative to the baseline. Moreover, a 40 percent cost decrease occurs when varying the peak hour quality of service level from the baseline 95 percent reliability, to only 50 percent reliability. To conclude, broadband policy assessments should be explicit about the quantity of data and the reliability of service provided to users. Failure to do so will lead to inaccurate estimates and, ultimately, to poor broadband policy decisions.
    Keywords: Broadband; Digital Infrastructure; Public Investment; Sustainable Development Goals; cost decrease; investment requirement; infrastructure investment; cost sensitivity; data consumption; policy assessment; estimation metrics; cost driver; data traffic; infrastructure cost modeling; Digitalization; Infrastructure; Emerging and frontier financial markets; Sub-Saharan Africa; Global; Caribbean; Central Asia and the Caucasus; Asia and Pacific
    Date: 2023–02–10
  7. By: Czock, Berit Hanna (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Sitzmann, Amelie (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Zinke, Jonas (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: Increasing shares of wind and solar generation serve to decarbonize electricity generation; however, their temporal and spatial variability poses challenges in grid operation. While grid expansion is restricted in the medium term, storage technologies can potentially increase the power systems’ efficiency by temporally aligning generation and demand and increasing network utilization. This paper uses a theoretical and a numerical model to evaluate the optimal allocation of battery storage. In a case study for Germany, we find that batteries can reduce system costs when placed behind the north-south grid bottleneck and near solar power. The supply costs in a setting with uniform prices and a random battery distribution are 9.3% higher than in the theoretical first-best benchmark with nodal prices. An optimal allocation of batteries can reduce this efficiency gap by 0.7 percentage points to 8.6%. This corresponds to almost a doubling of the supply cost savings per euro spent on battery installation. Due to a lack of spatially differentiated investment incentives under the German uniform pricing scheme, batteries have to be allocated by additional policies. Simple allocation rules such as tying battery siting to solar capacity or explicitly identifying a limited number of suitable sites and auctioning capacity can approximate an optimal allocation.
    Keywords: Market Design; Electricity Markets; Nodal Pricing; Energy System Modeling; Renewable Energies; Storage; Flexibility; Batteries
    JEL: C61 D47 D61 Q40
    Date: 2023–03–23
  8. By: Aline Mortha; Toshi H. Arimura
    Abstract: To foster domestic electricity production, Japan introduced a Feed-in-Tariff policy in 2012, financed by a renewable levy. This paper examines the impact of this tax on industrial, energy intensive (EI) sectors using plant data from 2005 to 2018. We explore whether the introduction of the levy encouraged plants to substitute electricity purchased from the market with electricity generated on site and whether changes in energy consumption patterns triggered by the levy resulted in additional CO2 emissions from the plants. Our results show that a 1% increase in the levy rate results in a decrease in energy consumption, estimated to be around 3, 800 tCO2e per plant on average. However, we also showed that the tax increase also leads to a rise in 0.03pp in the share of electricity generated on site, reflecting a marginal level of substitution between the two energy sources. We identify plants from the chemical sector as those with substitution capacity, and that the substitution leads to increased coal and gas consumption. Our results shed light on the effects of electricity taxes, and highlight the need for carbon pricing. Our paper also contributes to explaining mechanisms behind inter-fuel substitution in the EI sector, with a special focus on electricity and fossil fuel through cogeneration.
    Date: 2023–03
  9. By: Domenico Buccella; Luciano Fanti; Luca Gori
    Abstract: The degree of compatibility is a crucial feature of network goods. This article considers the degree of product compatibility as a strategic variable in a Cournot duopoly with network consumption externalities. For doing this, it develops a non-cooperative “compatibility decision game” (CDG) in which choosing whether letting products being (in)compatible occurs at the first stage. When compatibility is costless, the unique (Pareto efficient) sub-game perfect Nash equilibrium (SPNE) of the CDG predicts that both firms choose product compatibility. When there exist quasi-fixed costs of compatibility, the spectrum of SPNE of the CDG greatly increases. The equilibrium outcomes change depending on whether the extent of product compatibility is endogenous (i.e., it is a profit-maximising variable) or exogenous (e.g., it is given by technical constraints) on the firm side. In the former case, the emerging SPNE implies ranging from a unique regime to multiple regimes of (in)compatibility allowing the emergence of different scenarios: deadlock, prisoner’s dilemma and coordination game. In the latter case, the CDG can also become an anti-coordination game. This allows us to provide a novel explanation for the well-known and widespread case according to which Apple products in the computer market (based on macOS) can also be used with Windows OS, but Microsoft products (based on Windows OS) cannot be used with macOS. The article also pinpoints the welfare outcomes corresponding to the SPNE.
    Keywords: Network externality, Product compatibility, Cournot duopoly, Quasi-fixed costs
    JEL: L1 L3 D4
    Date: 2023–03–01
  10. By: Eduardo Cardadeiro; João E. Gata
    Abstract: During the past several months, passenger air transport has been recovering from its significant retraction during the two years Covid pandemics. If the recent significant drop in air traffic due do the Covid pandemics acted as an external mitigating factor to airport traffic congestion in several major airports around the world, with the post-pandemics air traffic recovery it is likely that airport capacity will, once again, fall short of demand and not keep pace with the growth in air traffic. That is why close to two hundred major airports worldwide, most of them in Europe, face capacity constraints and are “coordinated”. Eurocontrol predicts Europe's capacity shortage in 2050 at 500, 000 flights/year in the baseline scenario, which could rise to 2.7 million in an optimistic scenario. The allocation of airport slots in Europe and elsewhere is still ruled by administrative processes, based on the IATA (International Air Transport Association) Worldwide Airport Slot Guidelines (WASG), which follow historical precedence and time adjustments of historical slots. Market mechanisms in slot allocation, as an alternative to administrative processes, are still rarely used. Several authors have highlighted the inefficiency of the current airport slot administrative allocation system, based on the IATA’s Guidelines. Several authors have suggested improvements in this administrative system, such as congestion pricing mechanisms and other market mechanisms involving auction procedures. Among the various auction mechanisms, scoring auctions and the PAUSE methodology have been suggested in the literature. In this paper, and following our previous work, we explore and extend the application of the PAUSE auction mechanism with bidding based on a score function for the auctioneer, that includes another variable in addition to the total revenue, where this variable can represent e.g., quality of the service provided. We study the application of this auction mechanism, in a gradual fashion, p.e. to the year round three level 3 international airports operating in Portugal. The different airlines using these airports would still follow the current IATA slot allocation guidelines in their use of other airports, including the slot exchange protocols. We show that some of PAUSE auction mechanism’s desirable properties, such as computability, transparency, absence of envy, and the mitigation of the “price-jump problem”, “threshold problem”, “exposure problem”, and “winner’s curse problem”, still hold.
    Keywords: Scoring auctions, PAUSE, air travel, airport slot, IATA slot allocation guidelines, market-based allocation mechanism, combinatorial auctions, score function, secondary market.
    JEL: D44 D47 L93 R41
    Date: 2023–02
  11. By: Ives, Matthew; Cesaro, Zac; Bramstoft, Rasmus; Bañares-Alcántara, René
    Abstract: Green hydrogen and ammonia are forecasted to have key roles in deep decarbonization, although national energy system models have yet to capture their full integration potential with sector coupling in future scenarios. In this study, the Power-to-X sector coupling potential of green hydrogen and ammonia is explored via a case study on the national-scale electricity grid of India in which the projected electricity demands for hydrogen and ammonia production account for nearly 25% of the total Indian electricity demand in 2050. Here we show that connecting the required fleets of electrolyzers to the grid and leveraging low-cost storage of ammonia with coupled sectors, such as shipping, steel, and agriculture, would provide valuable short-duration and long-duration load-shifting services. We find that this system design uses seasonal ammonia production patterns to reduce the levelized cost of hydrogen and ammonia, reduce curtailment, provide system resilience to interannual weather variations, and reduce the requirement for long duration energy storage or firm generating capacity while reducing total system cost.
    Keywords: sector coupling, Power-to-X, ammonia, hydrogen, India
    Date: 2023–03
  12. By: Audinga Baltrunaite (Bank of Italy); Tommaso Orlando (Bank of Italy); Ivano Pizzolla (Bank of Italy); Valerio Ragozini (Bank of Italy); Gabriele Rovigatti (Bank of Italy)
    Abstract: Verifying the paperwork of public tender bidders can be one of the most challenging phases of public procurement awarding procedures in terms of the time and resources needed. The so-called reverse procedure (‘inversione procedimentale’ in Italian) defers the verification of documents until after the ranking of bidders has been completed, so that only the eligibility of the winner needs to be verified. In this paper, we analyse the use and effectiveness of this procedure in Italian public tenders from 2019-22, after its temporary introduction in the regulatory system. Drawing from data on tenders for public works commissioned by municipal administrations, we find that the use of the reverse procedure has increased over time, especially in larger municipalities and in Central and Northern Italy, significantly reducing the duration of awarding procedures.
    Keywords: public procurement, public contracts
    JEL: H57 M4
    Date: 2023–03
  13. By: Dongwoo Kim; Pallavi Pal
    Abstract: This paper presents an empirical model of sponsored search auctions in which advertisers are ranked by bid and ad quality. We introduce a new nonparametric estimator for the advertiser’s ad value and its distribution under the ‘incomplete information’ assumption. The ad value is characterized by a tractable analytical solution given observed auction parameters. Using Yahoo! search auction data, we estimate value distributions and study the bidding behavior across product categories. We find that advertisers shade their bids more when facing less competition. We also conduct counterfactual analysis to evaluate the impact of score squashing (ad quality raised to power θ
    Keywords: sponsored search links, generalized second price auction, incomplete information, nonparametric estimation, bid shading, score quashing
    JEL: C57 D44 L86 M37
    Date: 2023
  14. By: Brueckner, Marcus (Research School of Economics, Australian National University, Australia); Hong, Haidi (Independent Competition and Regulatory Commission, Australia); Vespignani, Joaquin (Tasmanian School of Business & Economics, University of Tasmania)
    Abstract: This paper presents estimates of the effects that government regulation of diesel and petrol prices has on GDP growth. Theory suggests that when supply curves are convex, a decrease in the regulatory price has a larger effect on output than a tantamount increase in the regulatory price. Motivated by this theoretical insight, we specify VAR models with asymmetric effects of positive and negative changes in the regulatory prices of diesel and petrol. We estimate the VAR models on quarterly data from China’s national accounts statistics during the period Q1 1998 to Q4 2018. Our main findings are that: (i) negative growth rates of regulatory diesel and petrol prices significantly reduce GDP growth; (ii) positive growth rates of regulatory diesel and petrol prices have a positive, but quantitatively small and statistically insignificant effect on GDP growth.
    Keywords: GDP growth, energy price regulation
    Date: 2023

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