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on Regulation |
| By: | Joshua S. Gans |
| Abstract: | This paper investigates the alignment of existing securities regulations with the emerging landscape of crypto-tokens and blockchain technology. By examining the features of these digital assets, including decentralization, consensus mechanisms, and programmability, we analyze how they interact with existing financial rules. We compare approaches to regulation across countries, considering potential impacts on innovation. Furthermore, we explore the issues that may arise with blockchain networks, such as payment efficiency and market safety. The study aims to contribute to discussions about balancing innovation within the blockchain sphere and ensuring investor protection and market security, underlining areas that may necessitate regulatory improvements. |
| JEL: | K22 O38 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31301&r=reg |
| By: | Rey, Patrick; Chen, Zhijun |
| Abstract: | We present a theory of conglomerate mergers and explore the effect of portfolio differentiation due to the heterogeneity of consumption synergy derived from product bundling. The differentiation of product portfolios reduces competition and leads to higher prices for stand- alone products in highly concentrated markets. As a result, conglomerate mergers benefit consumers who purchase bundled products from the merged entity but can harm those who prefer to mix-and-match standalone products. We demonstrate that a conglomerate merger increases total consumer surplus if the merged firm continues to sell standalone products, but it can be detrimental to consumers if the firm commits to pure bundling. Our analysis provides important policy implications for assessing conglomerate merger cases. |
| Keywords: | Conglomerate mergers; Portfolio differentiation; Bundling |
| Date: | 2023–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:128159&r=reg |
| By: | Mr. David Coady; Samir Jahan; Fabiana Machado; Mengfei Gu |
| Abstract: | The setting of public utility prices involves balancing various competing government policy objectives, from equity concerns to ensuring the financial sustainability of providers and balancing public finances. In practice, public utility pricing often departs significantly from government objectives and tends to be characterized by unnecessarily complex price schedules, below cost-recovery tariff rates, and sectoral inefficiencies that contribute to large fiscal costs. Countries commonly embark on utility pricing reform in response to these heavy fiscal pressures. The paper discusses various reform options available to governments, with a focus on residential pricing schedules, highlighting their fiscal, financial, redistributive, and efficiency implications. |
| Keywords: | Public utility pricing; efficiency; equity; fiscal sustainability; subsidy reform |
| Date: | 2023–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2023/118&r=reg |
| By: | OECD |
| Abstract: | Protecting consumers when they are most vulnerable has long been a core focus of consumer policy. This report first discusses the nature and scale of consumer vulnerability in the digital age, including its evolving conceptualisation, the role of emerging digital trends, and implications for consumer policy. It finds that in the digital age, vulnerability may be experienced not only by some consumers, but increasingly by most, if not all, consumers. Accordingly, it sets out several measures to address the vulnerability of specific consumer groups and all consumers, and concludes with avenues for more research on the topic. |
| Date: | 2023–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaab:355-en&r=reg |
| By: | Simon Johnson; Lukasz Rachel; Catherine Wolfram |
| Abstract: | In December 2022, following Russia’s invasion of Ukraine, a G7-led coalition of countries imposed a $60 per barrel price cap on the sales of Russian oil that use western services. This paper provides a theoretical and quantitative analysis of this new tool. We build a tractable equilibrium model in which the financially constrained exporter of a non-renewable resource optimally exerts market power, and the price of the resource varies stochastically. An important insight from this framework is that the supply curve is inelastic and can even be downward sloping, rationalizing the patterns we observe in the data. Contrary to the fears that an introduction of the price cap will cause a damaging oil supply shock, the exporter may have strong incentives to increase extraction following the introduction of a binding price cap. In fact, when the producer is large and has market power, a price cap that applies to all or most sales significantly limits the degree to which market power is used in equilibrium and stabilizes world oil prices. But if the cap is poorly enforced, or if the sanctioned state has access to a non-compliant “shadow” fleet, the cap is less effective at stabilizing world prices. |
| JEL: | F51 L13 L71 Q41 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31347&r=reg |
| By: | ITF |
| Abstract: | New app-based mobility services have transformed urban passenger transport and goods delivery services. As elsewhere, they have boomed in Southeast Asia, where they have gone largely unregulated. This report investigates regulatory approaches to balance consumer and societal welfare. It looks at how to address safety issues and negative externalities without dissuading innovative business models. It also addresses the impact of Covid-19 on these mobility services to help countries develop their pandemic recovery strategies. This report presents a set of principles for the regulation of both passenger transport and delivery services in ASEAN member states. |
| Date: | 2023–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaac:112-en&r=reg |
| By: | Tetsuya Shinkai (School of Economics, Kwansei Gakuin University); Naoshi Doi (Otaru University of Commerce- Economics) |
| Abstract: | This article examines menu-pricing and quality decisions of a platform monopolist for two types of sellers and buyers on a two-sided market. Under the GPD (general Pareto distribution) valuation of buyers for transaction services, we show that unique optimal services fees exist for sellers and buyers. The two types of services (premium and spot) are offered to both sellers and buyers. An optimal premium membership fee and the quality service level are considered for the premium type of buyers in a platform optimization problem. Assuming that the unit cost of the product is fixed, we show that the optimal membership fee/the level of quality service for premium-type buyers decreases/increases as the service cost for premium-type sellers increases. However, if delivery fees charged by transport companies for spot-type sellers increase, the optimal membership fee/level of quality service increases/decreases. However, if the demand for services of the platform for both types of buyers increases, both the optimal membership fee and quality level of services increase. |
| Keywords: | Platform monopoly; Menu-pricing; Quality decisions; Two-sided market. |
| JEL: | D21 D43 L13 L15 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:252&r=reg |
| By: | Anna Pechan; Gert Brunekreeft; Martin Palovic |
| Abstract: | This article presents an approach to minimize the outage costs during power supply disruptions and, thus, to incentivize efficient resilience investment by network users. The central problem to be solved is the information asymmetry between network operators and network users on outage and backup costs. We present an auction of priority positions among network users based on the Vickrey-Clarke-Groves mechanism, using a numerical example, to solve the problem. Under the mechanism, each winning bidder pays for the externality exerted on the other bidders by holding a certain position, excluding her own bid, which induces truthful bidding. Minimizing the damage from power supply interruptions, the mechanism improves the resilience of the power system not only in the short term but also in the long term. |
| Keywords: | resilience, electricity, network, regulation, auction |
| JEL: | D44 K23 L94 |
| URL: | http://d.repec.org/n?u=RePEc:bei:00bewp:0045&r=reg |
| By: | (ENAC & Toulouse School of Economics, University of Toulouse Capitole, Toulouse, France.); Cristina Gualdani (Queen Mary University of London, London, United Kingdom); Kevin Remmy (University of Mannheim, Mannheim, Germany.) |
| Abstract: | We develop a two-stage game in which competing airlines first choose the networks of markets to serve in the first stage before competing in price in the second stage. Spillovers in entry decisions across markets are allowed, which accrue on the demand, marginal cost, and fixed cost sides. We show that the second-stage parameters are point identified, and we design a tractable procedure to set identify the first-stage parameters and to conduct inference. Further, we estimate the model using data from the domestic US airline market and find significant spillovers in entry. In a counterfactual exercise, we evaluate the 2013 merger between Amer-ican Airlines and US Airways. Our results highlight that spillovers in entry and post-merger network readjustments play an important role in shaping post-merger outcomes. |
| Keywords: | endogenous market structure, multiple equilibria, oligopoly, product reposition-ing, mergers, remedies, bankruptcy. |
| Date: | 2023–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:950&r=reg |
| By: | Simon Hirsch; Florian Ziel |
| Abstract: | Intraday electricity markets play an increasingly important role in balancing the intermittent generation of renewable energy resources, which creates a need for accurate probabilistic price forecasts. However, research to date has focused on univariate approaches, while in many European intraday electricity markets all delivery periods are traded in parallel. Thus, the dependency structure between different traded products and the corresponding cross-product effects cannot be ignored. We aim to fill this gap in the literature by using copulas to model the high-dimensional intraday price return vector. We model the marginal distribution as a zero-inflated Johnson's $S_U$ distribution with location, scale and shape parameters that depend on market and fundamental data. The dependence structure is modelled using latent beta regression to account for the particular market structure of the intraday electricity market, such as overlapping but independent trading sessions for different delivery days. We allow the dependence parameter to be time-varying. We validate our approach in a simulation study for the German intraday electricity market and find that modelling the dependence structure improves the forecasting performance. Additionally, we shed light on the impact of the single intraday coupling (SIDC) on the trading activity and price distribution and interpret our results in light of the market efficiency hypothesis. The approach is directly applicable to other European electricity markets. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.13419&r=reg |
| By: | Saglam, Ismail |
| Abstract: | This paper studies the optimal antitrust policies for vertical price restraints in an infinitely-lived non-green supply chain channel that emits air pollution during production. The channel involves a supplier and a retailer that can either engage in sequential (Stackelberg) price competition where the supplier moves first or engage in vertical price coordination where they choose the retail price to maximize their joint profits and choose the wholesale price using the generalized Nash bargaining. We first consider the absence of an antitrust authority and characterize a necessary and sufficient condition for the stability of coordination, which we call internal stability. Then, we characterize the socially optimal antitrust policies. The policies we consider involve the costly auditing of the channel to detect coordination at a fixed probability in each period and a penalty fee charged to the channel members in case coordination is detected. When coordination is internally unstable, it is socially optimal to prevent its formation if the relative abatement cost of collusive emissions is sufficiently large or if the minimum cost of auditing is sufficiently small. In the case where coordination is internally stable, destabilization is also an option for the antitrust authority. In this case, our necessary and sufficient conditions characterizing the optimal antitrust decisions imply that it is socially optimal to destabilize (allow) the vertical price coordination of the channel if both the minimum cost of auditing and the relative abatement cost of collusive emissions are sufficiently small (large) and to prevent it otherwise. |
| Keywords: | Supply chain; vertical price coordination; vertical price restraints; antitrust policy. |
| JEL: | D43 L11 L22 L42 Q52 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:117587&r=reg |
| By: | Auriol, Emmanuelle; Hjelmeng, Erling; Søreide, Tina |
| Abstract: | By combining approaches from the economic theory of crime and of industrial organization, this paper analyzes optimal enforcement for three different forms of corporate misconduct that harm competition. The analysis shows why corporate crime is more harmful in large markets, why governments have a disinclination to sanction firms whose crime materializes abroad, and why leniency for those who self-report their crime is a complement, and not a substitute, to independent investigation and enforcement. As public authorities rely increasingly on self-reporting by companies to detect cartels, the number of leniency applications is likely to decline, and this is borne out by data. Upon a review of 50 cases of corporate liability from five European countries, competition law enforcement, governed by a unified legal regime, is more efficient than enforcement in bribery and money laundering cases, governed by disparate criminal law regimes. Sanction predictability and transparency are higher when governments cooperate closely with each other in law enforcement, when there are elements of supra-national authority, and when the offense is regulated by a separate legal instrument. Given our results, Europe would benefit from stronger supra-national cooperation in regulation and enforcement of transnational corporate crime, especially for the sake of deterrent penalties against crime committed abroad. |
| Keywords: | Corporate liability; Corruption; Collusion; Antitrust; Money Laundering; Deterrence; Sanctions; Litigation |
| JEL: | K14 K21 K23 K42 L13 L41 H57 |
| Date: | 2023–06–06 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:128136&r=reg |
| By: | Filip Tokarski (Stanford University; Group for Research in Applied Economics (GRAPE)); Mohammad Akbarpour (Stanford University); Scott Duke Kominers (Harvard University); Piotr Dworczak (Northwestern University; Group for Research in Applied Economics (GRAPE)) |
| Abstract: | Due to surges in gas and electricity prices in Europe, many households will struggle to heat their homes this winter. This paper provides high-level guidance on designing a relief policy in a way that optimally trades off equity and efficiency. We argue that, contrary to conventional economic intuitions, an optimal policy may involve directly controlling prices. Because governments do not have perfect information about households' needs, price controls could improve the targeting of relief through screening out the most vulnerable by offering them discounts for reducing consumption. This could be achieved by “threshold price caps" that lower the price of all energy units below some consumption threshold and price units above the threshold at a higher rate. |
| Keywords: | equity-efficiency trade-off, market design, price control, energy pricing |
| JEL: | C78 D47 D61 D63 D82 |
| Date: | 2028 |
| URL: | http://d.repec.org/n?u=RePEc:fme:wpaper:81&r=reg |
| By: | Sourav Ray (Department of Marketing and Consumer Science, University of Guelph, Canada); Avichai Snir (Department of Economics, Bar-Ilan University, Israel); Daniel Levy (Department of Economics, Bar-Ilan University, Israel; Department of Economics, Emory University, USA; International Centre for Economic Analysis; ISET, Tbilisi State University, Georgia; Rimini Centre for Economic Analysis) |
| Abstract: | We study the price rigidity of regular and sale prices, and how it is affected by pricing formats (i.e., pricing strategies). We use data from three large Canadian stores with different pricing formats (Every-Day-Low-Price, Hi-Lo, and Hybrid) that are located within a 1 km radius of each other. Our data contains both the actual transaction prices and actual regular prices as displayed on the store shelves. We combine these data with two “generated” regular price series (filtered prices and reference prices) and study their rigidity. Regular price rigidity varies with store formats because different format stores treat sale prices differently, and consequently define regular prices differently. Correspondingly, the meanings of price cuts and sale prices vary across store formats. To interpret the findings, we consider the store pricing format distribution across the US. |
| Keywords: | Price Rigidity, Sticky Prices, Regular Prices, Sale Prices, Filtered Prices, Reference Prices, Temporary Price Changes, Transaction Prices, Price Cuts, Pricing Format, Pricing Strategy, Every-Day-Low-Price (EDLP), Hi-Lo, Hybrid |
| JEL: | E31 E52 D22 D40 L11 L16 M30 M31 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:23-10&r=reg |
| By: | Clayton, Christopher; Schaab, Andreas |
| Abstract: | We study allocative efficiency and optimal regulation in inefficient economies with misalloca-tion and pecuniary externalities. We characterize the allocative value of a market based on its price, cross-sectional misallocation among participants, and pecuniary externalities. With both complete and incomplete regulation, a social planner equalizes prices faced by fully regulated agents with the allocative value of markets. With incomplete regulation, the planner uses regu-lation of fully regulated agents to trade off correcting externalities against misallocation from regulatory arbitrage by unregulated agents. The planner uses partial regulation of unregulated agents to reduce misallocation from regulatory arbitrage. We leverage our framework to answer relevant policy questions, including: (i) the social value of a new unregulated agent is its profits plus a simple measure of social value of its activities; (ii) the social value of new regulation is summarized by its reduction in misallocation. We apply our theory to shadow bank institution regulation and capital flow management in a small open economy. We extend our theory to environments with multiple regulators and common agency. |
| Keywords: | Misallocation; regulatory arbitrage; unregulated finance; macroprudential regulation; capital flows; capital controls; pecuniary externalities |
| JEL: | F38 G28 D62 |
| Date: | 2023–06–08 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:128146&r=reg |
| By: | Stefano Colombo; Clara Graziano; Aldo Pignataro |
| Abstract: | We consider a duopoly model where firms can identify only a share of consumers, which is positively correlated with the consumer’ preferences. Firms charge personalized prices to the consumers they can recognize and a uniform price to the rest of consumers. The firms’ available information is given by the combination of two factors: the intensive margin, which determines the share of consumers the firms can recognize in each single location, and the extensive margin, which determines how many locations the firms can identify. Different market configurations emerge according to the size of these margins. We characterize the values of the intensive and extensive margins that maximize firms’ profits, and we show that profits are non-monotonic. We also show that the composition, in addition to the size, of the available information – i.e., the mix of these margins – affects firms’ profits significantly. Implications for regulatory policies concerning the protection of consumers’ information are finally discussed. |
| Keywords: | personalized pricing, price discrimination, privacy, margins of information |
| JEL: | D80 D43 L10 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10455&r=reg |
| By: | Flavien Moreau (IMF); Ludovic Panon (Bank of Italy) |
| Abstract: | We study the cost of cartels in an oligopoly model with heterogeneous firms, endogenous markups, and collusion. Cartels can amplify or dampen misallocation, by charging supracompetitive markups and reallocating demand towards non-colluding firms. We find that standard competitive oligopoly models understate the cost of markups under reasonable values for the intensity of collusion and cartel composition configurations. Using French micro data, our baseline calibration suggests that breaking down cartels would increase aggregate productivity by 1.1% and welfare by 2%. These numbers shed light on the aggregate importance of collusion. |
| Keywords: | competition, cartels, collusion, productivity, welfare, misallocation |
| JEL: | D43 K21 L13 L41 O47 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1413_23&r=reg |
| By: | Pranjal Rawat |
| Abstract: | This paper examines the impact of different payment rules on efficiency when algorithms learn to bid. We use a fully randomized experiment of 427 trials, where Q-learning bidders participate in up to 250, 000 auctions for a commonly valued item. The findings reveal that the first price auction, where winners pay the winning bid, is susceptible to coordinated bid suppression, with winning bids averaging roughly 20% below the true values. In contrast, the second price auction, where winners pay the second highest bid, aligns winning bids with actual values, reduces the volatility during learning and speeds up convergence. Regression analysis, incorporating design elements such as payment rules, number of participants, algorithmic factors including the discount and learning rate, asynchronous/synchronous updating, feedback, and exploration strategies, discovers the critical role of payment rules on efficiency. Furthermore, machine learning estimators find that payment rules matter even more with few bidders, high discount factors, asynchronous learning, and coarse bid spaces. This paper underscores the importance of auction design in algorithmic bidding. It suggests that computerized auctions like Google AdSense, which rely on the first price auction, can mitigate the risk of algorithmic collusion by adopting the second price auction. |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2306.09437&r=reg |
| By: | Bian, Lei |
| Keywords: | energy storage policy; belt and road initiative; green finance; development finance institutions |
| JEL: | E6 |
| Date: | 2023–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:119356&r=reg |
| By: | Thomas, Pinky; Khurana, Ritika; Etienne, Xiaoli L.; Collins, Alan R. |
| Keywords: | Resource/Energy Economics and Policy, Environmental Economics and Policy, Community/Rural/Urban Development |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea22:335717&r=reg |
| By: | Melkani, Aakanksha; Mieno, Taro; Hrozencik, Robert A.; Rimsaite, Renata; Brozovic, Nick; Kakimoto, Shunkei |
| Keywords: | Environmental Economics and Policy, Resource/Energy Economics and Policy, Agricultural and Food Policy |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea22:335606&r=reg |