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on Regulation |
| By: | Pourkhanali, Armin (School of Economics, Finance and Marketing, Royal Melbourne Institute of Technology, Australia); Khezr, Peyman (School of Economics, Finance and Marketing, Royal Melbourne Institute of Technology, Australia); Nepal, Rabindra (Faculty of Business and Law, School of Business, University of Wollongong, Australia); Jamasb, Tooraj (Department of Economics, Copenhagen Business School) |
| Abstract: | Fuel price caps are one of the potential regulatory tools for controlling wholesale electricity prices when fuel prices are volatile. In this paper, we introduce a theoretical model to study the effects of such caps on firms’ bidding behavior and clearing prices in spot market auctions. We then use data from the Australian National Electricity Market (NEM), which recently implemented such caps, to empirically test and compare their effectiveness in three different states. Our theoretical findings suggest that fuel price caps can be binding, especially when electricity demand is lower and competition among generators is higher. When demand is high, alternative policy tools, such as market price caps, may be more effective in controlling auction prices. Our empirical analysis employs various techniques, such as Generalized Additive Models (GAM) and machine learning algorithms, to test the effectiveness of price caps in the NEM. We find mixed results regarding the effectiveness of fuel price caps in different states. Specifically, fuel price caps reduced wholesale electricity prices in Queensland and New South Wales, while they were not effective in controlling wholesale prices in Victoria. |
| Keywords: | Electricity markets; Price caps; Fuel price |
| JEL: | D40 L51 L94 |
| Date: | 2023–09–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2023_006&r=reg |
| By: | David Robinson; Angel Arcos-Vargas; Micheael Tennican; Fernando N\'u\~nez |
| Abstract: | This paper offers an independent assessment of certain economic effects of the Iberian Exception (IE) which was introduced in June 2022 by the Spanish and Portuguese governments. Their stated aim was to reduce wholesale spot electricity prices (which were rising alarmingly due to tight international gas markets related to Russia s invasion of Ukraine) and thereby reduce retail electricity prices for consumers whose prices were linked to that wholesale market. Another aim was to reduce Spanish inflation, which was linked to a regulated electricity retail price indexed to the wholesale spot market. Using hourly data on the wholesale electricity market for the first 100 days of the IE, the authors question the Spanish Governments estimate of the beneficial effects of the measure for affected consumers, which included over 10 million small consumers as well as many large ones. They argue that the estimated effect of the IE on retail prices depends on the assumed counterfactual. Although counterfactuals are always difficult to construct, the government s counterfactual ignores demand elasticity, and this inflates their estimate of immediate consumer benefits. Alternative counterfactuals that include demand elasticity reduce the estimated benefits for consumers and may even lead to the conclusion that the latter would have paid less had the IE not been introduced. The authors identify several other potential short and long-term effects of the IE that deserve further study, including increased margins for fossil fired generators, reduced margins for decarbonized inframarginal plant, heightened regulatory risk for investors, weakened incentives for efficient consumption, higher carbon emissions and gas prices and ultimately higher costs for consumers. |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2309.02608&r=reg |
| By: | Volker Nocke; Nicolas Schutz |
| Abstract: | We propose a framework for merger analysis with multiproduct firms under generalized CES (GCES) and generalized multinomial logit (GMNL) demand. Despite allowing for arbitrary firm and product heterogeneity, we obtain the type aggregation property: All relevant information about a firm's product portfolio can be summarized in a uni-dimensional sufficient statistic, the firm's type. Indeed, GCES and GMNL are shown to be the only IIA demand systems giving rise to that property. Relative to standard CES and MNL demand, our generalization implies that prices, locally, can be strategic complements or substitutes, depending on the local behavior of the curvature of indirect utility. In turn, this distinction is shown to determine whether competition authorities should be more or less strict on mergers in more competitive industries. We obtain further results on the static and dynamic consumer surplus effects of mergers, the aggregate surplus and external effects of mergers, and on the relationship between the market power effect of a merger and the merger-induced change in the Herfindahl index. |
| Keywords: | multiproduct firms, aggregative game, oligopoly pricing, IIA demand, type aggregation, horizontal merger, Herfindahl index, generalized CES demand, generalized multinomial logit demand |
| JEL: | L13 L40 D43 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_459&r=reg |
| By: | Lyu, Chenyan (Department of Economics, Copenhagen Business School); Do, Hung Xuan (School of Economics and Finance, Massey University, New Zealand); Nepal, Rabindra (Faculty of Business and Law, School of Accounting, Economics and Finance, University of Wollongong, Australia); Jamasb, Tooraj (Department of Economics, Copenhagen Business School) |
| Abstract: | This paper investigates price volatility and spillover effects in the Nordic electricity wholesale markets, comprising Sweden, Finland, Denmark, and Norway. Utilizing both the Time-Varying Parameter Vector Autoregressive (TVP-VAR) and Rolling Window-based VAR (RW-VAR) approaches, we analyze the integration dynamics among these regional markets and the impact of carbon prices on volatility spillovers. The study employs a rich dataset of 107, 352 hourly prices spanning from January 2010 to March 2022. The novelty of this research is three-fold. Firstly, we adopt a connectedness approach to explore volatility interactions among the four Nordic markets, contributing to the scarce literature on volatility in this market. Secondly, we segment the Norwegian market into southern and northern regions, revealing differences in volatility spillover patterns. Lastly, we investigate the influence of carbon prices on volatility spillovers, shedding light on its role in market dynamics. We find significant connectedness between the Nordic markets, with an average volatility Total Connectedness Index of 52.4% and 50.9%. Sweden emerges as the sole net volatility spillover transmitter, while Denmark experiences the largest shocks from the system. We further find that carbon prices exert a 5% significant impact on the volatility spillover index, as estimated by the 200-days rolling window VAR. |
| Keywords: | Electricity Markets; Price Volatility; Nord Pool; Carbon Market; Renewable Energy |
| JEL: | D00 D50 L10 L90 |
| Date: | 2023–09–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2023_005&r=reg |
| By: | Megan R. Bailey; David P. Brown; Blake C. Shaffer; Frank A. Wolak |
| Abstract: | We use a field experiment to measure the effectiveness of financial incentives and moral suasion “nudges” to shift the timing of electric vehicle (EV) charging. We find EV owners respond strongly to financial incentives, while nudges have no statistically discernible effect. When financial incentives are removed, charge timing reverts to pre-intervention behavior, showing no evidence of habit formation and reinforcing our finding that “money matters”. Our charge price responsiveness estimate is an order of magnitude larger than typical household electricity consumption elasticities. This result highlights the greater flexibility of EV charging over other forms of residential electricity demand. |
| JEL: | Q4 Q41 Q5 R48 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31630&r=reg |
| By: | Maxwell L. Brown; Jon M. Becker; Jared Carbone; Teagan Goforth; James McFarland; Destenie Nock; Kristina Pitman; Daniel C. Steinberg |
| Abstract: | We evaluate distributional and efficiency consequences of the bulk power clean electricity tax credits authorized by the 2022 Inflation Reduction Act. To do so, we link detailed electricity capacity expansion, computable general equilibrium, data-rich microsimulation, and air pollution models to estimate the policy incidence in terms of economic welfare and health impacts across a wide range of demographic groups. We evaluate the tradeoff between policy efficiency and income progressivity by comparing the tax credits to cap-and-trade policies that vary revenue recycling approaches. Under the scenarios analyzed the bulk power tax credits lead to increased clean electricity technology deployment resulting in a reallocation of capital from elsewhere in the economy, higher prices for capital and other goods, lower power prices, and lower emissions. The tax credits yield progressive outcomes for both economic welfare and health impacts. The health benefits exceed total policy costs and provide greater benefits for low-income and historically-marginalized households given the coincidence of household and emission source locations. |
| JEL: | Q43 Q48 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31621&r=reg |
| By: | Jeroen Hinloopen (CPB Netherlands); Sander Onderstal (University of Amsterdam); Adriaan Soetevent (University of Groningen) |
| Abstract: | This special issue marks the 25th anniversary of the introduction of a leniency program for antitrust in the EU and contains five original papers: Each paper examines the effects of design parameters of leniency programs on their performance. Before introducing each contribution separately, we put them in perspective by introducing readers to the existing theoretical, empirical, and experimental literature on corporate leniency programs for antitrust. |
| Keywords: | Leniency programs, antitrust, competition policy, cartel. |
| JEL: | L41 L44 |
| Date: | 2023–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20230045&r=reg |
| By: | Jeon, Doh-Shin; Lefouili, Yassine; Li, Yaxin; Simcoe, Timothy |
| Abstract: | Motivated by several examples, including Internet of Things patent licensing, we develop a tractable model of multi-product ecosystems, where one or more plat- forms provide inputs to a set of devices linked through demand-side externalities. Prices depend on each device's Katz-Bonacich centrality in a network dened by the externalities, and we show how the relevant network diers for an ecosystem monop- olist, a social planner, or a group of complementary platforms. We use the model to revisit Cournot's analysis of complementary monopolies in a platform setting, and to analyze a partial (one-sided) merger of complementary platforms. |
| Keywords: | Multi-sided Market, Complementary Platforms, Network, Centrality, ; IoT, Licensing |
| Date: | 2023–09–13 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:128468&r=reg |
| By: | Srivastav, Sugandha; Zaehringer, Michael |
| Abstract: | Fossil fuels are the world's greatest source of greenhouse gas emissions and must be curtailed to achieve temperature targets. Technology-specific mitigation policies such as coal phaseouts may be required for reasons including limited success with carbon pricing, administrative ease, high salience, and ability to tackle a range of environmental and social externalities. Coal investors and communities that rely on mining may resist policies that increase costs such as direct taxation. Instead, compensation for early closure may be a more politically feasible route, especially given concerns around achieving a just transition. Compensation decided via a negotiated approach suffers from asymmetric information. Competitive auctions can help discover efficient compensation payments and order of closure. However, successful auctions require considering: 1. additionality and interaction with existing climate policies, 2. dynamic incentives, and 3. system-wide effects and security of supply. In the absence of being able to implement an auction, strengthened incentives for scrappage and repurposing of assets could be options. |
| Keywords: | Coal phaseouts, auctions, asymmetric information, compensation, climate policy, net zero, Germany |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:amz:wpaper:2023-17&r=reg |
| By: | Cave, Jonathan (University of Warwick); Waterson, Michael (University of Warwick, CAGE); Battisti, Giuliana (University of Warwick) |
| Abstract: | This paper aims to examine quantitatively and qualitatively the impact of five key general-purpose technologies in order to gain insights into what factors may arise in relation to 5G as a potential example. We first attempt a definition of what constitutes a general-purpose technology, providing a potential framework for analysis of impact mechanisms then take this to the five case studies. It is difficult to capture the impacts of such technologies because their scope is broad and commonly a suitable base case from which to measure impact is missing. In addition, there are in each case antecedents and complementary developments which influence their impact. However, our analysis points to a range of factors that must be considered in relation to potential new candidate technologies, including a range of potential governmental interventions. |
| Keywords: | JEL Classification: |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:669&r=reg |
| By: | John Nellis (Former World Bank staff member and former senior fellow; Center for Global Development) |
| Abstract: | This is a review of the World Bank’s use of privatization as a means to improve the performance of state-owned enterprises (SOEs) in its client countries. SOEs became matters of great concern to client governments of the World Bank in the 1970s and early 1980s, as their financial losses and poor quantity and quality of production mounted. The World Bank first approached the problem through policy, financial, and managerial reforms in SOEs and their supervising agencies. Most efforts were short of ownership change; privatization was only tentatively discussed. Positive results were modest and, more important, generally unsustainable. The World Bank—and indeed much of the world—turned to divestiture in the mid-1980s, and especially in the period 1990-2005. By the end of the 1990s, over half of World Bank SOE-related operations contained a privatization component. In the ensuing period, privatization lost its luster; the number and scope of World Bank-sponsored privatization actions declined greatly. The World Bank then employed, far more extensively than in the previous period, corporate governance actions, competition enhancement measures and SOE financing reforms. This paper describes the course of the rise and fall of privatization in the World Bank. While acknowledging that privatization was far more difficult than anticipated to implement correctly, particularly in low-income and institutionally weak countries, the continuing difficulty of applying technical fixes to still large, still underperforming, and still capital-short SOE sectors justifies a renewed attempt at privatization. |
| Date: | 2021–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:592&r=reg |