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on Regulation |
| By: | Mathias Dewatripont; Jean Tirole |
| Abstract: | Scholars and civil society have argued that competition erodes supplier morality. This paper establishes a robust irrelevance result, whereby intense market competition does not crowd out consequentialist ethics; it thereby issues a strong warning against the wholesale moral condemnation of markets and pro-competitive institutions. Intense competition, while not altering the behavior of profitable suppliers, however may reduce the standards of highly ethical suppliers or not-for-profits, raising the potential need to protect the latter in the marketplace. |
| Keywords: | Competition, consequentialism, replacement logic, non-profits, corporate social responsability, race to the ethical bottom |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/365277&r=reg |
| By: | Aghion, Philippe; Bergeaud, Antonin; Van Reenen, John |
| Abstract: | We present a framework that can be used to assess the equilibrium impact of regulation on endogenous innovation with heterogeneous firms. We implement this model using French firm-level panel data where there is a sharp increase in the burden of labor regulations on companies with 50 or more employees. Consistent with the model’s qualitative predictions, we find a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold. Furthermore, we find a sharp reduction in the positive innovation response of firms to exogenous demand shocks just below the regulatory threshold. Using the structure of our model we quantitatively estimate parameters and find that the regulation reduces aggregate equilibrium innovation (and growth) by 5.7% which translates into a consumption equivalent welfare loss of at least 2.2%, approximately doubling the static losses in the existing literature. |
| Keywords: | innovation; regulation; patents; firm size |
| JEL: | O31 L11 L51 J80 L25 |
| Date: | 2023–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:120206&r=reg |
| By: | Luttmann, Alexander; Ladd, Daniel |
| Abstract: | Over the past forty years, one of the most important datasets in industrial organization has been the Airline Origin and Destination Survey (DB1B). Most studies relying on these data remove tickets with fares less than $20, assuming that these are heavily discounted frequent flyer awards (FFAs). We investigate the validity of this approach by first defining the size of the frequent flyer market using annual Form 10-K filings. Exploiting a federal regulation, we then outline a novel approach to identify FFAs in the DB1B. Our method indicates that the $20 cutoff used by researchers is too high and may be lowered to $12 for tickets appearing in the DB1B after February 1, 2002. Using the FFAs we identify, we show how the characteristics of award tickets differ from paid tickets and how these characteristics have changed over time. We then demonstrate how various market and product quality characteristics influence the share of passengers traveling on FFAs. Finally, we find that price dispersion increases on routes with higher shares of frequent flyer passengers, implying that airline loyalty programs enhance market power. |
| Keywords: | Airlines, competition, loyalty rewards, frequent flyer tickets, product quality |
| JEL: | L11 L13 L14 L93 M31 R40 R49 |
| Date: | 2023–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119214&r=reg |
| By: | Jesper Akesson; Robert W. Hahn; Rajat Kochhar; Robert D. Metcalfe |
| Abstract: | Water suppliers are showing greater interest in using different mechanisms to promote conservation. One such mechanism is conducting home water audits, which involves assessing water use and providing tailored suggestions for conserving water for residential customers. Yet, very little is known about the economic impacts of these water audits. This paper helps fill this gap by implementing a natural field experiment in the United Kingdom. The experiment involves randomly allocating 45, 000 water customers to a control group or to treatment groups that receive different behavioral encouragements to take-up an online water audit. Our analysis yields three main findings. First, encouraging subjects to participate in an audit with financial incentives reduces household consumption by about 17 percent over two months. Furthermore, we find that the size of the financial incentive used to encourage conservation matters for take-up, but not conservation. Second, notwithstanding these improvements in water conservation, the per capita net benefits of the intervention are close to zero under a wide range of assumptions. We also implement a marginal value of public funds approach that considers benefits and costs and we reach a similar conclusion. Third, we find that targeting of high users could double the effectiveness of the financial incentive interventions. |
| JEL: | H0 Q25 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31831&r=reg |
| By: | Ivan Mužić (Croatian National Bank, Croatia); Ivan Žilić (Croatian National Bank, Croatia) |
| Abstract: | In this paper, we analyze the effects of a price control program designed to mitigate the inflation burden for households. In particular, as a part of a larger relief package, in September 2022 the Croatian government lowered and fixed the price of essential food products, including long-term milk. While selective price controls on food products have a social dimension, setting the price ceiling too low might lead to shortages and a decrease in consumer welfare. Applying a difference-in-difference identification strategy and using weekly data on milk availability and pricing across a number of stores in Croatia, Slovenia, and Bosnia and Herzegovina, we estimate the causal effects of the price-ceiling policy. We find that the regulated milk was around 35% cheaper than it would have been if there was no program, and we find no adverse effect on the regulated milk availability. We document that the price of substitutes (other types of milk) did not increase, but we do record an increase in the availability of close substitutes of the regulated milk type. While our back-of-the-envelope calculation indicates that the effect of milk price ceilings on overall inflation is negligible, we show that this inflation-soothing effect is more prominent for poorer households. |
| Keywords: | inflation, price controls, availability, substitution |
| JEL: | E31 G50 E64 |
| Date: | 2023–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:hnb:wpaper:71&r=reg |
| By: | Reimer, Julia; Doganoglu, Toker |
| JEL: | D42 L12 L13 L40 L81 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277683&r=reg |
| By: | Manuel Woersdoerfer |
| Abstract: | This article analyzes AI ethics from a distinct business ethics perspective, i.e., 'ordoliberalism 2.0.' It argues that the ongoing discourse on (generative) AI relies too much on corporate self-regulation and voluntary codes of conduct and thus lacks adequate governance mechanisms. To address these issues, the paper suggests not only introducing hard-law legislation with a more effective oversight structure but also merging already existing AI guidelines with an ordoliberal-inspired regulatory and competition policy. However, this link between AI ethics, regulation, and antitrust is not yet adequately discussed in the academic literature and beyond. The paper thus closes a significant gap in the academic literature and adds to the predominantly legal-political and philosophical discourse on AI governance. The paper's research questions and goals are twofold: First, it identifies ordoliberal-inspired AI ethics principles that could serve as the foundation for a 'digital bill of rights.' Second, it shows how those principles could be implemented at the macro level with the help of ordoliberal competition and regulatory policy. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.10742&r=reg |
| By: | Claudia Allende; Juan Pablo Atal; Rodrigo Carril; José Ignacio Cuesta; Andres Gonzalez-Lira |
| Abstract: | This paper examines the determinants of public procurement prices using comprehensive data on pharmaceutical purchases by the Chilean public sector. We start by estimating the extent to which different public agencies pay different prices for the same product. These buyer effects are sizable, and the difference between average prices paid by buyers at the 10th and 90th percentiles is 16%. Our main set of results is related to the role of market structure. The variation in market structure explains three times more variation in procurement prices than buyer effects. Moreover, using exogenous variation from patent expirations, we estimate that the entry of an additional vendor decreases average procurement prices by 11.7%, which is 72% of the gap between average prices paid by buyers at the 10th and 90th percentiles of the distribution of buyer effects. These results suggest that supply-side factors are key determinants of public procurement prices and that their quantitative importance may exceed that of demand-side factors previously emphasized in the literature. |
| Keywords: | Procurement, Bureaucracy, competition, pharmaceutical drugs |
| JEL: | D44 D73 H57 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1413&r=reg |
| By: | Almendra Awerkin; Paolo Falbo; Tiziano Vargiolu |
| Abstract: | The focus on Renewable Energy Communities (REC) is fastly growing after the European Union (EU) has introduced a dedicated regulation in 2018. The idea of creating local groups of citizens, small- and medium-sized companies, and public institutions, which self-produce and self-consume energy from renewable sources is at the same time a way to save money for the participants, increase efficiency of the energy system, and reduce CO$_2$ emissions. Member states inside the EU are fixing more detailed regulations, which describe, how public incentives are measured. A natural objective for the incentive policies is of course to promote the self-consumption of a REC. A sophisticated incentive policy is that based on the so called 'virtual framework'. Under this framework all the energy produced by a REC is sold to the market, and all the energy consumed must be paid to retailers: self-consumption occurs only 'virtually', thanks a money compensation (paid by a central authority) for every MWh produced and consumed by the REC in the same hour. In this context, two problems have to be solved: the optimal investment in new technologies and a fair division of the incentive among the community members. We address these problems by considering a particular type of REC, composed by a representative household and a biogas producer, where the potential demand of the community is given by the household's demand, while both members produce renewable energy. We set the problem as a leader-follower problem: the leader decide how to share the incentive for the self-consumed energy, while the followers decide their own optimal installation strategy. We solve the leader's problem by searching for a Nash bargaining solution for the incentive's fair division, while the follower problem is solved by finding the Nash equilibria of a static competitive game between the members. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.12055&r=reg |
| By: | Bottasso, Anna; Robbiano, Simone; Marocco, Paolo |
| Abstract: | We analyze a sample of consumer-electronics products sold by the US NewEgg online-retailer to study the impact of Price Matching Guarantees (PMGs) policies on prices. By applying aDifference-in-Differences approach, we find that prices of the policy-adopting retailer increase by 4.7% during the policy validity period and up to five days after the treatment, while those of the major non-adopting competitor are not affected. Results are mainly driven by highlyrated, visible and expensive products, while the policy does not affect low-rated, less visible and cheaper ones. Overall findings are consistent with the hypothesis that PMGs act as price discrimination tools. |
| Keywords: | Price Matching Guarantees, Online Retailing, User Generated Contents, Difference-in-Differences, Price Discrimination, Collusion, Signalling |
| JEL: | L11 L13 L15 L81 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1351&r=reg |
| By: | Shahid Hasan (King Abdullah Petroleum Studies and Research Center) |
| Abstract: | Many policymakers now see the use of low-carbon hydrogen as a strong contender in terms of how to achieve climate neutrality goals. Currently, hydrogen is used in refinery processing, ammonia production, or methanol production as feedstock, where no other alternatives exist. However, new uses for hydrogen are being explored in the industry, transport, and electricity sectors, which together account for approximately 85% of global energy-related CO2 emissions. |
| Keywords: | Battery storage, Benefits of electricity trade, Climate change |
| Date: | 2023–10–24 |
| URL: | http://d.repec.org/n?u=RePEc:prc:dpaper:ks--2023-dp22&r=reg |
| By: | Roman Le Goff Latimier (ENS Rennes - École normale supérieure - Rennes, SATIE - Systèmes et Applications des Technologies de l'Information et de l'Energie - ENS Rennes - École normale supérieure - Rennes - CNAM - Conservatoire National des Arts et Métiers [CNAM] - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique - ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay - Université Gustave Eiffel - CY - CY Cergy Paris Université); Hamid Ben Ahmed (ENS Rennes - École normale supérieure - Rennes, SATIE - Systèmes et Applications des Technologies de l'Information et de l'Energie - ENS Rennes - École normale supérieure - Rennes - CNAM - Conservatoire National des Arts et Métiers [CNAM] - HESAM - HESAM Université - Communauté d'universités et d'établissements Hautes écoles Sorbonne Arts et métiers université - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique - ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay - Université Gustave Eiffel - CY - CY Cergy Paris Université) |
| Abstract: | Driven by the energy transition and the development of distributed energy resources, peer-to-peer markets are the focus of much research. Because of their decentralised structure, they allow scaling up by multiplying the number of agents in a market. Moreover, they permit heterogeneous preferences between peers to introduce behaviours such as local exchanges or an environmentally friendly preference. Despite these attractive features, which make them good candidates for the evolution of power systems, they present several challenges that are still being investigated at present in order to become operationally viable. Supporting many agents is done by exchanging even more messages. Furthermore, integration with power systems requires adapting the interaction with the system operator. The aim is to ensure that the physical limits of the infrastructure are respected and to measure the completed trades. The decentralisation of the energy market also has an impact on the market for capacity reserves to deal with contingencies. Finally, the final challenge is how the enduser will deal with such a change. Despite these various difficulties, several pilot projects highlight the possibilities of these markets for the evolution of power systems. |
| Keywords: | peer to peer market, electricity market, distributed optimisation, grid control |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04268639&r=reg |
| By: | B. Kelsey Jack (University of California); Seema Jayachandran (Princeton University); Flavio Malagutti (University of California); Sarojini Rao (Virginia Department of Planning and Budget) |
| Abstract: | In addition to generating a negative environmental externality, a household’s water consumption entails another “market failure†: household members free-ride off each other and overconsume. The problem stems from consumption being billed at the household level and the difficulty of monitoring one another’s consumption. We document the importance of this phenomenon in urban Zambia by combining utility billing records and randomized person-specific price variation. We derive and empirically confirm the following prediction: Individuals with weaker incentives to conserve under the household’s financial arrangements reduce water use more when their person-specific price increases. Another prediction is that this overconsumption problem is more acute when the financial benefit of a lower utility bill is shared unevenly among household members. We show that households indeed seem more responsive to a change in the household-level price of water when their financial arrangements are more equal. Our results offer a novel explanation for the low price sensitivity of residential water (and electricity) consumption. |
| Keywords: | environmental externalities, intrahousehold decision-making, moral hazard, Pigouvian pricing, water use |
| JEL: | D10 H21 H23 O10 Q56 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:pri:econom:2023-13&r=reg |
| By: | Deger Saygin; Moongyung Lee |
| Abstract: | Green hydrogen, produced from water and renewable power through the electrolysis process, can play a crucial role in the low-carbon transition to achieve the net-zero emission targets. Currently, the production cost of green hydrogen is not competitive when compared to hydrogen produced from natural gas. High capital costs are a major factor constraining its cost-competitiveness. This working paper utilises financial market data to address the knowledge gap concerning the range of Weighted Average Cost of Capital (WACC) for green hydrogen projects. It also conducts a survey among investors and financiers to identify key risk factors contributing to the high WACC. The key risks that have been identified include offtaker risks, lack of credible offtakers, price uncertainty of green hydrogen, and the absence of hydrogen trading markets. These risks are closely connected to the available risk mitigation strategies and tools. The paper summarises key risk mitigation strategies identified through case studies of lighthouse green hydrogen projects that have either reached or are nearly point of reaching financial investment decisions. |
| Keywords: | cost competitiveness of green hydrogen, cost of capital, green hydrogen, industry decarbonisation, levelised cost of hydrogen |
| JEL: | L20 O14 O25 Q42 Q48 |
| Date: | 2023–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:oec:envaaa:227-en&r=reg |
| By: | Drolsbach, Chiara Patricia; Gail, Maximilian Maurice; Klotz, Phil-Adrian |
| JEL: | H23 L13 L91 Q48 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277655&r=reg |
| By: | Ian Ball; Xin Gao |
| Abstract: | A principal delegates decisions to a biased agent. Payoffs depend on a state that the principal cannot observe. Initially, the agent does not observe the state, but he can acquire information about it at a cost. We characterize the principal's optimal delegation set. This set features a cap on high decisions and a gap around the agent's ex ante favorite decision. It may even induce ex-post Pareto-dominated decisions. Under certain conditions on the cost of information acquisition, we show that the principal prefers delegating to an agent with a small bias than to an unbiased agent. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.11526&r=reg |