nep-reg New Economics Papers
on Regulation
Issue of 2023‒06‒12
twelve papers chosen by
Christopher Decker
Oxford University

  1. Summertime Sadness: Time Sensitivity of Electricity Savings from a Behavioral Nudge By Ekaterina Alekhanova
  2. Network Goods, Price Discrimination, and Two-sided Platforms By Paul Belleflamme; Martin Peitz
  3. How to Apply the Self-Preferencing Prohibition in the DMA By Martin Peitz
  4. Economic contribution to the debate on cost sharing policy By Edmond Baranes; Cuong Hung Vuong
  5. The Monetization of Innovation By Missaka Warusawitharana
  6. European Electricity Prices in Times of Multiple Crises By Mathias Mier
  7. Suspecting Collusion By Ceesay, Muhammed
  8. Price Discrimination with Redistributive Concerns By Daniel M A Barreto; Alexis Ghersengorin; Victor Augias
  9. Beyond "Horizontal" and "Vertical": The Welfare Effects of Complex Integration By Margaret Loudermilk; Gloria Sheu; Charles Taragin
  10. Antitrust and (Foreign) Innovation: Evidence from the Xerox Case By Robin Mamrak
  11. Sector-level economic effects of regulatory complexity: evidence from Spain By Juan S. Mora-Sanguinetti; Javier Quintana; Isabel Soler; Rok Spruk
  12. The Consequences of Fewer Banks in the U.S. Banking System: a speech at the Wharton Financial Regulation Conference, Philadelphia, Pennsylvania, April 14, 2023 By Michelle W. Bowman

  1. By: Ekaterina Alekhanova (Department of Economics, Carleton University)
    Abstract: The paper reports the results of evaluating the hourly impact of a behavioral intervention tested in a randomized controlled trial. Under the program, a randomly selected group of households in Alberta was provided visual information on their home heat loss. I find that the households conserve the same amount of electricity during peak and off-peak electricity demand hours, i.e. the intervention has failed to target peak times, so accounting for the intraday distribution of the electricity savings is not important when measuring the social benefits of the program. The most plausible reason for the flat savings profile could be the absence of hourly variation in retail electricity rates. As a policy recommendation, the study suggests implementing retail electricity prices fluctuating within a day.
    Keywords: Peak Electricity Demand, Behavior Nudge, Energy Efficiency, Randomized Controlled Trial
    Date: 2023–04–25
  2. By: Paul Belleflamme; Martin Peitz
    Abstract: A monopolist selling a network good to heterogeneous users is shown to become a twosided platform if it can condition prices on some user characteristics or if it cannot but induces user self-selection by offering screening contracts. This shows that the availability of sophisticated pricing instruments is essential to make a platform two-sided, not the ability to distinguish separate user groups. The use of freemium strategies (which consists of offering a base version at zero price and a premium version at a positive price) emerges as a special case of versioning.
    Keywords: Network goods, two-sided platforms, platform pricing, group pricing, versioning, freemium
    JEL: D21 D42 L12 L14
    Date: 2023–03
  3. By: Martin Peitz
    Abstract: Platforms in dual mode are concerned about the well-functioning of the ecosystem they manage. A regulator imposing a certain behaviour on platforms, which may amount to picking a particular market design, runs the risk of not acting in the best interest of consumers, especially in the long term, which is the ultimate goal of market contestability. When applying Art 6(5) DMA, the European Commission must make a judgement on the meaning and scope of self-preferencing; and has a discretionary power as to which possible/potential violations of the prohibition it will examine at all. This paper provides some guidance on how to determine which practices would fall under Art 6(5) DMA.
    Keywords: self-preferencing, contestability, fairness, Digital Markets Act
    JEL: K21 K23
    Date: 2023–05
  4. By: Edmond Baranes (MRE - Montpellier Recherche en Economie - UM - Université de Montpellier); Cuong Hung Vuong
    Keywords: digital platforms, externality, cost sharing
    Date: 2023–03–06
  5. By: Missaka Warusawitharana
    Abstract: We develop a dynamic model for digital service firms, which invest in monetization to generate revenues from services provided to customers for free. Our model captures and explains why such firms often build a large customer base and become highly valued while continuing to suffer losses—traditional models would struggle to explain this pattern. Counterfactual analysis reveals that monetization uncertainty slows technological advancement by diverting resources away from innovation. We also show that regulation aimed at protecting user privacy has sizable adverse effect on firm size and the quality of the offered service but, perhaps surprisingly, makes firms less unprofitable. On the other hand, regulation encouraging competition supports innovation.
    Keywords: monetization; data privacy; digital service firms; innovation; regulation
    JEL: O32 O31 G31 D21
    Date: 2022–12
  6. By: Mathias Mier
    Abstract: European energy crisis has three elements: skyrocketing prices for energy carriers such as natural gas, coal, as well as electricity, reduced nuclear power plant availability in France, and lower hydro power generation in Europe. This paper decomposes the effects of those elements on power markets and the EU ETS. Permanently higher natural gas prices reduce the canceling volume in the MSR by 425 million and prevent gas-CCS from being competitive in the long-run. Electricity prices are almost unaffected because gas-CCS is substituted by similarly competitive nuclear. Half of the 2022 European electricity price increase can be traced back to higher energy prices (from 36 to 143 e/MWh), whereas the other half (from 143 to 247 e/MWh) comes from French nuclear and European hydro problems. The decision to stretch the operation of three German nuclear power plants to counteract against those crises brings down European (German) electricity prices by 0.89% (2.47%) in 2023. Extending them for seven years after stretching, starting from September 2023, brings down electricity prices by 1.88% (4.8%) in 2024.
    Keywords: Electricity prices, natural gas prices, coal prices, nuclear power, hydro power, EU ETS, market stability reserve, power market modeling, intertemporal optimization
    JEL: C61 H21 H23 L94 Q41
    Date: 2023
  7. By: Ceesay, Muhammed
    Abstract: When collusion is analyzed for Independent private value auctions, it is implicitly assumed that ring presence is commonly known to colluding and non-colluding bidders. We drop this assumption and analyze a simple model of a first price Independent Private Value auction with uniformly distributed values where a single bidder knows privately of the existence of collusion by others. We show that this knowledge leads him to bid shading (weakly) in the first price auction compared to what he would have bid otherwise. This in turn yields the result that the second price auction dominates the first price auction in terms of seller revenue. This contrasts results from the literature showing that under our framework, when bidding is done while the presence of colluding bidders is common knowledge, the first price auction dominates the second price auction.
    Keywords: Almost-All-Inclusive-Ring, Informational Structures
    JEL: D44
    Date: 2023
  8. By: Daniel M A Barreto (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Alexis Ghersengorin (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, 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); Victor Augias (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Consumer data can be used to sort consumers into different market segments, allowing a monopolist to charge different prices at each segment. We study consumer-optimal segmentations with redistributive concerns, i.e., that prioritize poorer consumers. Such segmentations are efficient but may grant additional profits to the monopolist, compared to consumer-optimal segmentations with no redistributive concerns. We characterize the markets for which this is the case and provide a procedure for constructing optimal segmentations given a strong redistributive motive. For the remaining markets, we show that the optimal segmentation is surprisingly simple: it generates one segment with a discount price and one segment with the same price that would be charged if there were no segmentation.
    Keywords: Third-degree price discrimination, Information design, Redistribution, Inequality, Welfare
    Date: 2022–11–11
  9. By: Margaret Loudermilk; Gloria Sheu; Charles Taragin
    Abstract: We study the welfare impacts of mergers in markets where some firms are already vertically integrated. Our model features logit Bertrand competition downstream and Nash Bargaining upstream. We numerically simulate four merger types: vertical mergers between an unintegrated retailer and an unintegrated wholesaler, downstream "horizontal" mergers between an unintegrated retailer and an integrated retailer/wholesaler, upstream "horizontal" mergers between an unintegrated wholesaler and an integrated retailer/wholesaler, and integrated mergers between two integrated retailer/wholesaler pairs. We find that mergers that have both horizontal and vertical characteristics typically harm consumers. We apply the model to the Republic/Santek merger as a real-world example.
    Keywords: Bargaining models; Merger simulation; Vertical markets; Vertical mergers
    JEL: L13 L40 L41 L42
    Date: 2023–01–18
  10. By: Robin Mamrak (LMU Munich)
    Abstract: How does antitrust enforcement against patent-based monopolies affect innovation? I address this question by empirically studying the US antitrust case against Xerox, the monopolist in the market for plain-paper copiers. In 1975, Xerox was ordered to license all its copier-technology patents in the US and abroad. I show that this promoted innovation by other firms in the copier industry, measured by a disproportionate increase in patenting in technologies where Xerox patents became available for licensing. This positive effect is driven by increased innovation by Japanese competitors. They started developing smaller desktop copiers and their innovation became more diverse.
    Keywords: antitrust; innovation; patents; compulsory licensing; Japan; Xerox;
    JEL: O30 O34 L41 K21
    Date: 2023–05–12
  11. By: Juan S. Mora-Sanguinetti (Banco de España); Javier Quintana (Banco de España); Isabel Soler (EUROPEAN UNIVERSITY INSTITUTE (EUI)); Rok Spruk (UNIVERSITY OF LJUBLJANA)
    Abstract: This paper studies for the first time the impact on various measures of economic efficiency of regulatory complexity by sector in Spain. We base our analysis on an innovative database that classifies 206, 777 regulations by economic sector and region, which highlights the growing volume of regulation, as well as its diversity by sector, region and business cycle stage. This analysis first looks at the aggregate impacts of sectoral regulatory complexity on the employment-to-population ratio, total working hours, sectoral GDP shares, labour intensity and capital intensity. Secondly it delves into the heterogeneous impacts observed across firms of different sizes and ages, drawing on the MCVL (Continuous Work History Sample), a rich database at the enterprise level. On the first front, we estimate a set of multiple fixed-effects model specifications across 13 economic sectors, 23 regulatory sectors and 17 Spanish regions over the period 1995-2020. Our results suggest that greater regulatory complexity has a negative impact on the employment rate and on value added. The effect on employment is consistent with previous findings for the United States. In particular, ceteris paribus, each additional increase in the regulatory complexity index is associated with a 0.7 percent drop in the sector-level employment share. Furthermore, our findings suggest that several distortionary sector-level effects of increasing regulatory complexity are taking place. For instance, markedly lower labour intensity and decreased sector-level investment rates, which confirm that greater regulatory complexity entails non-trivial sector-level costs. Distortionary effects of regulatory complexity materialise through compositional differences, mainly in the form of reduced wages and a lower investment rate. On the second front, using data on employment by firms’ characteristics, we show that the negative impact of regulatory complexity is concentrated on smaller and younger firms. This finding supports the hypothesis that greater regulatory complexity imposes a burden that small and less experienced firms are less able to handle. At the sector level, the manufacturing sectors are the most negatively affected. This may be related to the higher investment required by these sectors.
    Keywords: sectoral regulation, regulatory complexity, economic sectors, structural policies, employment
    JEL: K2 R11 J00 E02
    Date: 2023–03
  12. By: Michelle W. Bowman
    Date: 2023–04–14

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