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on Regulation |
| By: | Martin Besfamille; Nicolás Figueroa; Léon Guzmán |
| Abstract: | We consider a model featuring a single-product natural monopoly, which faces evaders, i.e., individuals that may not pay the price. By exerting a costly effort, the firm can deter evasion. To maximize the total surplus, a regulator sets the price, the level of deterrence effort, and socially costly transfers to ensure the monopoly’s participation. We obtain a modified Ramsey formula, which clearly shows that the mere existence of evaders dampens the use of the price as a mean to finance the firm’s deficit. The regulated price is always below the monopoly price and, under sufficient conditions, also below marginal cost. Then, we generalize the model to incorporate moral hazard. Finally, we undertake an empirical application of our results, which shows quantitatively that the downward tendency of regulated prices in a context of high evasion is significant. |
| Keywords: | regulation, natural monopoly, evasion and marginal cost of public funds |
| JEL: | D42 H20 L43 L51 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10732&r=reg |
| By: | Andor, Mark Andreas; Dehos, Fabian; Gillingham, Kenneth; Hansteen, Sven; Tomberg, Lukas |
| Abstract: | The pricing of public transportation is a frequently debated subject, and a notable current trend is leaning towards flat-rate pricing. In the previous year, Germany introduced a flat-rate ticket, enabling individuals to access public transportation across the entire country for just 9 euros per month during the months of June through August. In this paper, we first examine the extent to which the 9-Euro Ticket policy was able to induce a shift from cars to public transport. To this end, we evaluate the policy's impact on mobility behavior and emissions, and compare our results with other analyses of the policy that use different empirical approaches. The combined evidence shows that the flat-rate access induced only a marginal shift from car to public transport. The 9-Euro Ticket has primarily been used to expand personal mobility rather than to substitute between modes of transportation. In a further step, we subject the 9-Euro Ticket to a cost-benefit analysis based on its achieved carbon reduction. When compared to other climate policies, the costs appear disproportionately high. We use these results as a starting point to discuss flat-rate pricing for public transport in conjunction with evidence from programs in other European cities and insights from economic theory. Synthesizing the collected sources, we conclude that there are better options. Instead of a flat-rate ticket, we call for a cheap and dynamic public fare system that prices peak times higher than off-peak times to avoid overcrowding during peak hours. At the same time, a dynamic road pricing system should be introduced. This would further reduce the negative externalities of driving, generate revenues to support public transport, and provide a stronger incentive to switch from car to public transport. |
| Keywords: | Public transport, dynamic pricing, congestion charging, road pricing, flat-rate tariffs, 9-Euro ticket |
| JEL: | R48 Q48 Q51 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:279544&r=reg |
| By: | Luigi Viola (University of Campinas, Campinas-SP, Brazil); Saeed Nordin (KTH Royal Institute of Technology, Stockholm, Sweden); Daniel Dotta (University of Campinas, Campinas-SP, Brazil); Mohammad Reza Hesamzadeh (KTH Royal Institute of Technology, Stockholm, Sweden); Ross Baldick (University of Texas at Austin, Austin, TX, USA); Damian Flynn (University College Dublin, Dublin, Ireland) |
| Abstract: | The expansion of variable generation has driven a transition toward a 100\% non-fossil power system. New system needs are challenging system stability and suggesting the need for a redesign of the ancillary service (AS) markets. This paper presents a comprehensive and broad review for industrial practitioners and academic researchers regarding the challenges and potential solutions to accommodate high shares of variable renewable energy (VRE) generation levels. We detail the main drivers enabling the energy transition and facilitating the provision of ASs. A systematic review of the United States and European AS markets is conducted. We clearly organize the main ASs in a standard taxonomy, identifying current practices and initiatives to support the increasing VRE share. Furthermore, we envision the future of modern AS markets, proposing potential solutions for some remaining fundamental technical and market design challenges. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.02090&r=reg |
| By: | Daron Acemoglu; Ali Makhdoumi; Azarakhsh Malekian; Asuman Ozdaglar |
| Abstract: | We build a model of online behavioral manipulation driven by AI advances. A platform dynamically offers one of n products to a user who slowly learns product quality. User learning depends on a product’s “glossiness, ’ which captures attributes that make products appear more attractive than they are. AI tools enable platforms to learn glossiness and engage in behavioral manipulation. We establish that AI benefits consumers when glossiness is short-lived. In contrast, when glossiness is long-lived, users suffer because of behavioral manipulation. Finally, as the number of products increases, the platform can intensify behavioral manipulation by presenting more low-quality, glossy products. |
| JEL: | D83 D90 D91 L86 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31872&r=reg |
| By: | Gómez, Liverca Altagracia; Rodríguez Núñez, Juan Bautista; Mesa Candelario, Nathanael; Morbán Gómez, Fernando Miguel; García Read, Zoraya Esther |
| Abstract: | Antitrust law plays a fundamental role in promoting efficient markets and safeguarding consumer interests. In this regard, economic analysis has become a crucial tool for assessing firms' conduct and the potential anticompetitive effects of their actions in markets and consumer welfare. This essay will examine the significance of economic analysis in competition law, emphasizing its relevance in detecting and evaluating anticompetitive practices policymaking and regulation decision-making. |
| Keywords: | Antitrust law, Economic Analysis, Anticompetitive Practices |
| JEL: | D4 D40 K21 L4 P16 |
| Date: | 2023–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119067&r=reg |
| By: | Heczko, Alexander; Kittsteiner, Thomas; Ott, Marion |
| Abstract: | In a lab experiment, we analyze the benefits of increasing competition on auction platforms hosting multiple auctioneers of a homogeneous good. We find that increasing competition by merging separated individual auctions increases market efficiency and also buyers' payoffs, while there is no evidence of an increase in the auctioneers' expected revenues. Furthermore, competing auctioneers decrease reserve prices significantly when the number of competitors increases. Then, auctioneers' revenues decrease whereas buyers' payoffs and efficiency are enhanced. Different to previous findings for the monopolistic seller case, competing auctioneers do not increase reserve prices significantly when the number of buyers increases. For our theoretical model, we provide closed-form equilibrium reserve-price functions of competing auctioneers. |
| Keywords: | Competing auctions, merging markets, parallel auctions, reserve price, experiment |
| JEL: | D44 D47 D82 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:279549&r=reg |
| By: | Kurt R. Brekke (Norwegian School of Economics (NHH), Department of Economics,); Odd Rune Straume (NIPE/Center for Research in Economics and Management, University of Minho, Portugal; and Department of Economics, University of Bergen, Norway); Lars Sørgard (Norwegian School of Economics (NHH), Department of Economics, Helleveien 30, 5045 Bergen, Norway; and Centre for Applied Research at NHH) |
| Abstract: | Energy markets are undergoing a radical shift towards renewable energy and network integration. We study the effects of integrating regions with storable (hydro) and intermittent (wind) energy sources in the presence of market power. Based on a two-period model with price fluctuations in the wind power region and bottlenecks in transmission of energy between regions, we show that a dominant firm (facing a competitive fringe) has an incentive to reallocate more hydropower production to the low-price period in order to induce higher prices in the high-price period. This incentive might be so strong that the bottleneck in the low-price period is removed and the two regions become de facto integrated. Paradoxically, we find that higher hydropower production capacity and/or larger transmission capacity can lead to higher (average) prices in the hydropower region due to the strategic responses by the dominant firm. Moreover, we find that the presence of market power in many cases enables the dominant firm to appropriate a larger share of the surplus from trade without harming domestic consumers, implying that stronger competition in the hydropower region might not be welfare improving. |
| Keywords: | Hydropower, trade, market power |
| JEL: | L13 L94 Q41 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:10/2023&r=reg |
| By: | Duthie, Mike; Ankel-Peters, Jörg; Mphasa, Carly; Bhat, Rashmi |
| Abstract: | High hopes are pinned to mini-grids for rural electrification, especially in remote and sparsely populated areas. This note presents new evidence from a large evaluation of a US Millennium Challenge Corporation investment into mini-grids in Indonesia. We find that, a few years after commissioning, many mini-grids in the program do not operate properly, corroborating older concerns about the sustainability of mini-grids and off-grid energy systems that have been voiced for several years. Operational costs are typically high and electricity demand low. Minigrid programs should take these structural challenges into account, and especially abstain from overly optimistic electricity demand projections. |
| Keywords: | Energy access, sustainability, infrastructure, mini-grids |
| JEL: | H54 O13 O21 Q48 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:279545&r=reg |
| By: | Nkosingizwile Mazwi Mchunu; George Okechukwu Onatu; Trynos Gumbo |
| Abstract: | This paper discusses the impact of electricity blackouts and poor infrastructure on the livelihood of residents and the local economy of Johannesburg, South Africa. The importance of a stable electricity grid plays a vital role in the effective functioning of urban infrastructure and the economy. The importance of electricity in the present-day South Africa has not been emphasized enough to be prioritized at all levels of government, especially at the local level, as it is where all socio-economic activities take place. The new South Africa needs to redefine the importance of electricity by ensuring that it is accessible, affordable, and produced sustainably, and most of all, by ensuring that the energy transition initiatives to green energy take place in a planned manner without causing harm to the economy, which might deepen the plight of South Africans. Currently, the City of Johannesburg is a growing spatial entity in both demographic and urbanization terms, and growing urban spaces require a stable supply of electricity for the proper functioning of urban systems and the growth of the local economy. The growth of the city brings about a massive demand for electricity that outstrips the current supply of electricity available on the local grid. The imbalance in the current supply and growing demand for electricity result in energy blackouts in the city, which have ripple effects on the economy and livelihoods of the people of Johannesburg. This paper examines the impact of electricity blackouts and poor infrastructure on the livelihood of residents and the local economy of Johannesburg, South Africa. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.08929&r=reg |
| By: | Atayev, Atabek |
| Abstract: | In markets where sellers' marginal costs of production have a common component, they have informational advantage over buyers regarding those costs. This information asymmetry between sellers and buyers is especially relevant in markets where buyers have to uncover prices through costly search. We propose a theoretical model of simultaneous search that accounts for such information asymmetry. Our main finding is that informing buyers about marginal costs may harm them by deterring search and, hence, softening competition. This result has important implications on policy regulations and voluntary information sharing. |
| Keywords: | Information Asymmetry, Consumer Search, Price Competition |
| JEL: | D43 D83 L13 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:279810&r=reg |
| By: | Sara Amoroso (DIW Berlin); Benedikt Herrmann (Joint Research Centre, European Commission); Alexander S. Kritikos (DIW Berlin, CEPA, University of Potsdam, IZA, IAB) |
| Abstract: | High growth firms (HGFs) are important for job creation and considered to be precursors of economic growth. We investigate how formal institutions, like product- and labor-market regulations, as well as the quality of regional governments that implement these regulations, affect HGF development across European regions. Using data from Eurostat, OECD, WEF, and Gothenburg University, we show that both regulatory stringency and the quality of the regional government influence the regional shares of HGFs. More importantly, we find that the effect of labor- and product-market regulations ultimately depends on the quality of regional governments: in regions with high quality of government, the share of HGFs is neither affected by the level of product market regulation, nor by more or less flexibility in hiring and firing practices. Our findings contribute to the debate on the effects of regulations by showing that regulations are not, per se, “good, bad, and ugly”, rather their impact depends on the efficiency of regional governments. Our paper offers important building blocks to develop tailored policy measures that may influence the development of HGFs in a region. |
| Keywords: | High growth firms, Regulation, Quality of regional governments, Regions |
| JEL: | L50 L25 H11 O43 R11 R50 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:pot:cepadp:71&r=reg |
| By: | Giorgio Fabbri (Univ.Grenoble Alpes, CNRS, INRIA, Grenoble INP, GAEL, Grenoble, France); Silvia Faggian (Department of Economics, University Of Venice Ca' Foscari, Italy); Giuseppe Freni (Department of Business and Economics, University of Naples "Parthenope", Naples, Italy.) |
| Abstract: | We study the dynamics of the exploitation of a natural resource distributed among and flowing between several nodes connected via a weighted, directed network. The network represents both the locations and the interactions of the resource nodes. A regulator decides to designate some of the nodes as natural reserves where no exploitation is allowed. The remaining nodes are assigned (one-to-one) to players, who will exploit the resource at the node. We show how the equilibrium exploitation and the resource stocks depend on the productivity of the resource sites, on the structure of the connections between the sites, and on the number and the preferences of the agents. The best locations to host nature reserves are identified according to the model's parameters, and we find that they correspond to the most central (in the sense of eigenvector centrality) nodes of a suitably redefined network that considers the nodes' productivity. |
| Keywords: | Harvesting, spatial models, differential games, nature reserve |
| JEL: | Q28 C72 Q23 C61 R12 Q20 R11 C73 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2022:03&r=reg |