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on Regulation |
| By: | Martin Peitz |
| Abstract: | In this chapter, we discuss how platforms manage the interaction between various users. First, we discuss and exemplify governance decisions by platforms that affect access and interactions of users regarding a platform service. Here, we investigate the choice of price structure and the choice of non-price strategies. We also address the horizontal and vertical scope of these platforms. Second, we consider platform decisions that generate spillovers to other platforms or channels, and we explore private incentives and welfare effects. Third, we discuss the role of government regulation in a broad sense, that is, the laws and regulations that constrain platforms and shape their incentives regarding their governance decisions. Emphasis is given to interventions against anti-competitive conduct and practices that may lead to consumer harm. |
| Keywords: | Platform governance, platform regulation, digital ecosystems, digital markets, competition policy, network effects |
| JEL: | L12 L13 L41 L42 D42 D47 K21 K23 M21 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_480&r=reg |
| By: | Joshua S. Gans |
| Abstract: | This paper robustly concludes that it cannot. A model is constructed under idealised conditions that presume the risks associated with artificial general intelligence (AGI) are real, that safe AGI products are possible, and that there exist socially-minded funders who are interested in funding safe AGI even if this does not maximise profits. It is demonstrated that a socially-minded entity formed by such funders would not be able to minimise harm from AGI that might be created by unrestricted products released by for-profit firms. The reason is that a socially-minded entity has neither the incentive nor ability to minimise the use of unrestricted AGI products in ex post competition with for-profit firms and cannot preempt the AGI developed by for-profit firms ex ante. |
| JEL: | L20 O33 O36 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31924&r=reg |
| By: | Joao Guerreiro; Sergio Rebelo; Pedro Teles |
| Abstract: | We consider an environment in which there is substantial uncertainty about the potential adverse external effects of AI algorithms. We find that subjecting algorithm implementation to regulatory approval or mandating testing is insufficient to implement the social optimum. When testing costs are low, a combination of mandatory testing for external effects and making developers liable for the adverse external effects of their algorithms comes close to implementing the social optimum even when developers have limited liability. |
| JEL: | H21 O33 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31921&r=reg |
| By: | Navajas Fernando |
| Abstract: | This paper reviews some critical issues for addressing the structure of electricity tariffs for ulterior purposes of policy research agenda. Starting from economic principles behind electricity tariff design, this paper asks what options ahead Latin America has in terms of improving electricity tariff design from a heterogeneous status quo, where trade-offs among cost recovery, cost reflectivity and affordability stand out. Options look like an avenue for improving cost recovery through better wholesale market design and regulation; move outside excess volumetric pricing and towards fixed and capacity charges; reduce excessive increasing block pricing; promote metering and regulatory flexibility for menu pricing with optional schemes and guaranteed bills; foster flexibility for new customer clustering and pricing to accommodate innovation in the energy transition; attend affordability with lump sum transfers through differentiated fixed charges and taxes and reform taxation to coordinate tariff format reform across different regulatory jurisdictions. Above all these dimensions, countries should coordinate on common information standards on the level and structure of electricity rates. |
| JEL: | L51 L94 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:aep:anales:4676&r=reg |
| By: | Daniel Albalate (Universitat de Barcelona & GiM-IREA, Spain.); Germà Bel (Universitat de Barcelona & GiM-IREA, Spain.); Francisco González-Gómez (University of Granada & Water Institute.); José C. Hernández-Gutiérrez (University of Granada & Water Institute.); Andrés J. Picazo-Tadeo (University of Valencia & INTECO.) |
| Abstract: | Remunicipalization is triggered primarily by disappointment with the outcomes of private management of local public services, but an ideological preference for public management might also play a role. Even though urban water delivery is the service most affected by remunicipalization in developed countries, little empirical evidence is available on its effects. Using a sample of Spanish municipalities, this paper assesses the change in the price of urban water following remunicipalization as compared to privatization. The main finding is that remunicipalization leads to smaller increases in price; this outcome is, however, due to a few atypical municipalities with abnormally low prices for water before the policy reform. Once these influential observations are controlled for, the question of whether the reform consists of remunicipalization or privatization makes no difference regarding the change in prices. It is also found that remunicipalization is much more likely in local councils governed by extreme left-wing parties. |
| Keywords: | Local public services; Prices; Remunicipalization; Urban water. JEL classification: D49; G18; L33; L95. |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:202319&r=reg |
| By: | Benedict Guttman-Kenney; Paul D. Adams; Stefan Hunt; David Laibson; Neil Stewart; Jesse Leary |
| Abstract: | We run a field experiment and a survey experiment to study an active choice nudge. Our nudge is designed to reduce the anchoring of credit card payments to the minimum payment. In our field experiment, the nudge reduces enrollment in Autopaying the minimum from 36.9% to 9.6%. However, the nudge does not reduce credit card debt after seven payment cycles. Nudged cardholders tend to choose Autopay amounts that are only slightly higher than the minimum payment. The nudge lowers Autopay enrollment resulting in increasing missed payments. Finally, the nudge reduces manual payments by cardholders enrolled in Autopay. |
| JEL: | G5 H0 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31926&r=reg |
| By: | Patrice Bougette (Université Côte d'Azur; GREDEG CNRS); Oliver Budzinski (Technische Universität Ilmenau); Frédéric Marty (Université Côte d'Azur, France; GREDEG CNRS) |
| Abstract: | Mergers and acquisitions shape industry competition. Effective merger remedies are important for market efficiency and consumer welfare. This paper explores the need for more flexible remedies to address changing markets after mergers. While the EU permits some flexibility with less restrictive remedies, we conceptually advance the design elements of a dual-phase, bifurcated merger control system. This system integrates ex-ante processes with more systematic and comprehensive ex-post measures. Such an approach can address the shortcomings of the current system and, consequently, holds the potential to enhance merger control in dynamic markets. |
| Keywords: | merger remedies, competition authorities, market dynamics, dynamic competition, oligopolies, innovation effects, European Union |
| JEL: | L41 K21 L13 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2023-17&r=reg |
| By: | Pierre Picard (DEM, Université du Luxembourg); Alessandro Tampieri (University of Florence. IT); Xi Wan (Nanjing Audit University, CN) |
| Abstract: | We investigate the presence of inefficiency in slot allocation when a coordinator al- locates slots on destination markets served by monopoly and duopoly airlines, and the number of available peak-time slots is constrained by airport capacity. When an airport maintains regulated per-passenger fees, we observe the emergence of allocative inefficiency. Conversely, in scenarios where an airport has the autonomy to set fees, we find that, in line with empirical evidence, fee deregulation resolves these allocative inefficiencies by increasing per-passenger fees. However, the improvement in allocation efficiency may be counterbalanced by the rise in fees, potentially impacting overall welfare. |
| Keywords: | Slot allocation, Endogenous fee, Airport capacity. |
| JEL: | R41 H21 H23 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:luc:wpaper:23-14&r=reg |
| By: | Danon Alejandro M.; Diaz-Campo Cecilia S.; Gars Jared; Kestelman Borges Mariana; Zulli Lourdes |
| Abstract: | Understanding how electricity demand responds to price shocks is a key question for a number of actors along the electricity supply chain as well as policy makers, albeit its estimation present several challenges. In this paper, we exploit a natural experiment to estimate the short-run impact of a price shock on residential electricity consumption. In particular, in January of 2021 the utility company adopted a new tariff schedule whereby the fixed component of the tariff was organized in four tiers based on households’ annual moving average consumption, which we exploit in a regression-discontinuity design. Despite the large average price increases at each fixed-cost cutoff, we find no significant effect of the tariff change on subsequent electricity consumption around the three thresholds. This lack of demand response to prices suggests that non-price instruments may be more effective at influencing residential electricity consumption. |
| JEL: | L95 D12 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:aep:anales:4639&r=reg |
| By: | Bonan, Jacopo; Cattaneo, Cristina; D'Adda, Giovanna; Galliera, Arianna; Tavoni, Massimo |
| Abstract: | Policymakers and firms use behavioral interventions to promote sustainable development in various domains. Correctly evaluating the impacts of a nudge on behavior and satisfaction requires looking beyond the targeted domain and assessing its interactions with similar interventions. Existing evidence on these aspects is limited, leading to potential misestimation of the cost-effectiveness of this type of intervention and poor guidance on how to design them best. Through a large-scale randomized controlled trial implemented with a multi-resource utility company, we test the impact of a social information campaign to nudge water conservation over two years. We find that the water nudge significantly decreases water and electricity usage but not gas. The effect is driven by customers who do not receive nudges targeting the other resources. Customers receiving the water report are also significantly less likely to deactivate their gas and electricity contracts, regardless of whether they receive other reports. Our results suggest that multiple nudges strain users’ limited attention and ability to enact conservation efforts. Users’ constraints in attending to multiple stimuli pose important challenges for designing policy interventions to foster sustainable practices. |
| Date: | 2023–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-23-46&r=reg |
| By: | Spektor Stanislav (Department of Economics, Lomonosov Moscow State University); Nazarova Ekaterina (Department of Economics, Lomonosov Moscow State University); Akhtemzyanov Rafael (Department of Economics, Lomonosov Moscow State University) |
| Abstract: | The distinction between the concepts of market power and bargaining power is not only a methodological, but also a practical problem. The paper describes the currently existing approaches to understanding these phenomena. An attempt has been made to include not only market power, but also bargaining power in the theoretical model. In addition, game-theoretic models of interaction between market participants with an asymmetric distribution of market power and bargaining power between them are considered. Also in the work in the context of the ratio of bargaining power between agents one of the classical economic experiments is considered. The article describes real situations in which a correct understanding of market power and bargaining power was very important for making a decision on the need to apply antitrust regulation measures. Antimonopoly regulation is currently focused on considering only market power, however, when determining the justification for the use of certain influences, it should be borne in mind that manifestations of market power may be similar to the effects of asymmetry in the distribution of bargaining power, and it is also necessary to clearly distinguish between these phenomena. At the same time, an individual approach is required for each case to assess the impact on public welfare of both the phenomena themselves and the regulatory influences applied. Length: 33 pages |
| Keywords: | market power, bargaining power, antitrust policy, competition, bilateral monopoly, experimental economics |
| JEL: | K21 L40 L41 L50 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:upa:wpaper:0059&r=reg |
| By: | Yukihide Kurakawa (Kanazawa Seiryo University.); Makoto Tanaka (National Graduate Institute for Policy Studies.) |
| Abstract: | This study demonstrates how market power in the day-ahead electricity market influences the balancing cost in incentive-based demand response (DR) programs. The marginal cost of DR in an incentive-based DR program corresponds to the marginal benefit of energy services that might be provided under baseline electricity consumption. We analyze a stylized Cournot oligopoly model and demonstrate that distortion of an imperfectly competitive day-ahead market generates additional social cost (welfare loss) in the balancing period by increasing the cost of DR. We further investigate the case where some firms in the day-ahead market can also benefit from power generation in the balancing period and demonstrate that the strategic behavior of these firms further decreases total supply in an imperfectly competitive day- ahead market. The results indicate that procompetitive policies in the day-ahead market will lower the cost of DR, which makes demand more flexible and yields additional welfare gains, thereby lowering the balancing cost during the balancing period. |
| Keywords: | Incentive-based demand response, Market power, Day-ahead electricity market, Demand-side flexibility |
| JEL: | L13 Q41 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:was:dpaper:2303&r=reg |
| By: | Jean-Marc Zogheib |
| Abstract: | Two digital firms compete in prices and information disclosure levels. A consumer signing up to one firm's service decides how much personal information to provide. We find that firms essentially trade-off between consumer valuations and disclosure levels to determine their business strategies when consumers single-home. Under multi-homing, business strategies are more complex to assess and may completely shift compared to single-homing. All things being equal, implementing a strict privacy regime with no data disclosure can be optimal under single-homing, while a soft privacy regime with data disclosure may be preferred under multi-homing. |
| Keywords: | competition, online privacy, information disclosure, multi-homing. |
| JEL: | D11 D40 L21 L41 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2023-34&r=reg |
| By: | Raúl Bajo-Buenestado; Markus Kinateder; Raul Bajo-Buenestado |
| Abstract: | We present a general and tractable oligopoly model of multi-sided platforms with endogenous side and platform choices of heterogeneous end-users, considering any mix of single-homing and multi-homing platforms and in which participating on one side could preclude doing so on others. We show the existence of a unique equilibrium number of end-users and characterize optimal platform pricing. Using the equilibrium conditions, we formally derive (across sides and platforms) switching effects that distort optimal pricing, which can lead to markups exceeding the Lerner index and rule out the classical “cross-subsidization” result. We then provide a unifying framework to analyze multi-sided platform mergers, which rationalizes mixed results from the previous literature by providing, based on the switching effects, a set of conditions that predict the upward pricing pressure post-merger. We show that while optimal pricing is determined by the nature of end-users’ side choices, their platform choices are crucial for merger analysis. |
| Keywords: | multi-sided markets, heterogeneous end-users, endogenous side choice, mergers of platforms, digital platforms |
| JEL: | D43 G34 L11 L13 L22 L86 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10818&r=reg |
| By: | Marco Catola; Alessandra Chirco; Marcella Scrimitore |
| Abstract: | By developing a linear model in a two-country framework of international price competition, we show how the degree of product differentiation and the cross-country distribution of private firms affect the strategic privatization choices made by governments concerned with their own country’s welfare. More particularly, the work points out that sufficiently low product differentiation may lead public ownership to be optimally chosen to restrict competition in the country with the larger number of firms, and privatization to be global welfare enhancing in this case. |
| Keywords: | Mixed oligopoly, price competition, strategic privatization, internationalmarkets |
| JEL: | F23 L13 L32 |
| Date: | 2023–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:pie:dsedps:2023/301&r=reg |
| By: | Nese, Annamaria (University of Salerno); O'Higgins, Niall (ILO International Labour Organization); Sbriglia, Patrizia (University of Campania-Luigi Vanvitelli) |
| Abstract: | One disputed topic in Organization and Management economics is how leadership and collusive agreements are set and maintained in industries where firms are characterised by similar technological opportunities and structures. This topic is particularly important to analyse online and digital markets, which can be regarded as networks where managers share information and where there are no structural differences among firms. In this paper we claim that strategic advantages may be the outcome of repeated interaction among managers and can be driven by two (in some cases) competing forces, information and reciprocity. In fact, on one side, full information on all firms' strategies, help agents to coordinate their decisions and drive the final outcomes towards more profitable solutions. On the other side, when information is limited only to their direct opponents, competitive advantages are maintained when each competitor views the individuals' share of profits as a "fair" allocation. Thus, pricing behaviour is affected both by the willingness to reciprocate the opponent behaviour and the willingness to imitate best strategies observed in other markets. Both pricing behaviours lead to different profit outcomes. We test our hypotheses with a lab experiment on a sequential pricing game. We find a striking difference in pricing behaviour across treatments, and a significant difference also in the ability of the second movers to establish and keep their leadership. Specifically, individuals are highly competitive when information on other players' prices is limited, and only in few markets we observe second movers' advantages. When information on prices on all markets is provided, the picture is entirely different, and prices are very close to the sub-game equilibrium level. Overall, reciprocity can explain the results, however, full information reduces negative reciprocity and competition. |
| Keywords: | price competition, learning direction theory, trust and reciprocity |
| JEL: | C90 C91 L1 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16637&r=reg |
| By: | Ahmed S. Alahmed; Lang Tong |
| Abstract: | We analyze the overall benefits of an energy community cooperative game under which distributed energy resources (DER) are shared behind a regulated distribution utility meter under a general net energy metering (NEM) tariff. Two community DER scheduling algorithms are examined. The first is a community with centrally controlled DER, whereas the second is decentralized letting its members schedule their own DER locally. For both communities, we prove that the cooperative game's value function is superadditive, hence the grand coalition achieves the highest welfare. We also prove the balancedness of the cooperative game under the two DER scheduling algorithms, which means that there is a welfare re-distribution scheme that de-incentivizes players from leaving the grand coalition to form smaller ones. Lastly, we present five ex-post and an ex-ante welfare re-distribution mechanisms and evaluate them in simulation, in addition to investigating the performance of various community sizes under the two DER scheduling algorithms. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.18792&r=reg |
| By: | Adrian Nerja |
| Abstract: | Privatization and commercialization of airports in recent years are drawing a different picture in the aeronautical industry. Airport benchmarking shows the accommodation and performance of airports in the evolution of the market and the new requirements that they have to face. AENA manages a wide and heterogeneous network of airports. There are 46 airports divided into three categories and with particularities due to their geographical location or the competitive environment where they are located. This paper analyzes the technical efficiency and its determinants of the 39 commercial airports of the AENA network between the years 2011-2014. To do this, two benchmarking techniques, SFA and DEA, are used, with a two-stage analysis. The average efficiency of the network is between 75-79\%. The results with the two techniques are similar with a correlation of 0.67. With regard to the commercial part of the network, AENA has a high margin for improvement because it is below the world and European average. AENA must focus on the development of the commercial area and the introduction of competition within the network to improve the technical efficiency of regional airports mainly. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.16156&r=reg |
| By: | Stern, Lennart |
| JEL: | R40 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277667&r=reg |
| By: | Christophe Midler (i3-CRG - Centre de recherche en gestion i3 - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique, Académie des Technologies); Marc Alochet (i3-CRG - Centre de recherche en gestion i3 - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | In China, Europe and the United States, the transition from thermal to battery electric vehicles is ongoing under the effect of technology forcing regulations. We investigate whether and how those related to high voltage batteries could shape the future of the automotive industry. Wile China is leading the way, Europe and the United States, with very high levels of funding, are racing against time to catch up and develop a sustainable battery value chain controlled by local champions. As the U.S. resorts to protectionism, we hypothesize that we may see the emergence of three geographic production hubs, ending the globalization of the battery industry. |
| Keywords: | High voltage battery, zero emission vehicle, regulation, China, Europe, United States, Battery manufacturing, battery supply chain, localization |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04303575&r=reg |
| By: | Sarah Johnston; Yifei Liu; Chenyu Yang |
| Abstract: | Generators applying to connect to the U.S. power grid go through an interconnection queue. Most wind and solar generators that begin the process do not complete it. Using new data, we find that a long queue increases the average waiting time, and high interconnection costs are a key factor in a generator’s decision to withdraw. We develop and estimate a dynamic model of the queue and quantify the effects of policy reforms. Our simulations indicate that reducing waiting times can significantly increase completions. An alternative queuing mechanism can therefore increase completed capacity by removing certain generators to reduce congestion. A flat entry fee has a similar effect. We also quantify the effects of reforming how interconnection costs are assessed. These policy reforms lead to a substantial reduction in carbon emissions. |
| JEL: | D02 L0 Q00 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31946&r=reg |
| By: | Massimo Florio (DEMM, Universita' di Milano); Raffaele Articolo (CSIL Centre for Industrial Studies) |
| Abstract: | This working paper investigates the role of CBA in the decision-making process of EU-27 member states. While the role of CBA at the EU decision-making level is well known and analysed, there is a gap in the analysis of the practices of the different member states in the use of this appraisal tool. The study is based on a survey sent to EU-27 country experts from public sector, private sector and academia. It investigates various aspects related to CBA, such as the legal requirements behind it, its preparation stage, the roles and responsibilities of the actors performing the study and its overall impact on the decision-making process. The analysis of the institutional framework governing CBA is fundamental because it influences the way it is conducted, its reliability and potential to improve the decision-making processes. The survey responses show the significant role of CBA within the EU-27. In most countries, there is a legal requirement to conduct CBA, and it is typically conducted at the pre-feasibility stage when project alternatives are still under consideration. All EU-27 countries dispose of guidelines to conduct CBA, and most of the countries’ experts reported an impact of CBA on the efficiency and effectiveness of projects under assessment. The results also reveal that EU-27 countries lack a consistent institutional framework for determining who conducts CBA, posing a risk of varying study quality. Additionally, they reported not regularly conducting ex-post CBA, representing a missed opportunity for policy learning purposes |
| Keywords: | Cost-Benefit Analysis, legal requirements, preparation stage, Social Discount Rate, project appraisal, capital expenditures, decision-making processes |
| JEL: | H43 D61 |
| Date: | 2023–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:mst:wpaper:202301&r=reg |