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on Regulation |
| By: | Fiona M. Scott Morton |
| Abstract: | The DMA raises tantalising opportunities for app stores innovation, making it the most exciting area of digital regulation. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:bre:wpaper:node_9690&r=reg |
| By: | Mertens, Matthias; Mottironi, Bernardo |
| Abstract: | Several models posit a positive cross-sectional correlation between markups and firm size, which characterizes misallocation, factor shares, and gains from trade. Accounting for labor market power in markup estimation, we find instead that larger firms have lower product markups but higher wage markdowns. The negative markup-size correlation turns positive when conditioning on markdowns, suggesting interactions between product and labor market power. Our findings are robust to common criticism (e.g., price bias, non-neutral technology) and hold across 19 European countries. We discuss possible mechanisms and resulting implications, highlighting the importance of studying input and output market power in a unified framework. |
| Keywords: | markups; markdowns; market power; firm size |
| JEL: | L11 L13 L25 J42 |
| Date: | 2023–09–21 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121283&r=reg |
| By: | Mark Glick (University of Utah); Gabriel A. Lozada (University of Utah); Pavitra Govindan (University of Utah); Darren Bush (University of Houston Law Center) |
| Abstract: | The Department of Justice and Federal Trade Commission Merger Guidelines (the "Merger Guidelines"), including the much improved latest revision in 2023 (the "New Merger Guidelines"), have continued to perpetrate what we call in this paper the horizontal merger efficiency fallacy. The fallacy arises because in the Guidelines the term "efficiencies" has become unmoored from its foundations in economic theory and has been reduced to the business school construct of cost savings. We show that cost savings can only be considered universally socially beneficial by acceptance of what is termed "the Consumer Welfare Standard" (antitrust) or "the surplus theory of welfare" (economics), a theory that has been discredited and abandoned by welfare economists. In economic theory, efficiency means Pareto Efficiency. We explore the various attempts to tether the cost savings definition of efficiency to Pareto Efficiency and explain why these attempts have failed. We conclude that there is no sound way to theoretically reconcile cost savings with the economic meaning of efficiencies. We then move beyond the efficiency fallacy and show how modern welfare economics can be used to integrate Congressional antitrust goals into the New Merger Guidelines. This requires abandoning the unsupported "standard deduction" for efficiencies and replacing it with an evidence-based assessment of how a specific merger under review potentially impacts Congressional antitrust goals. This change renders the present efficiency rebuttal section of the New Merger Guidelines superfluous, and we provide specific reasons why this section as currently drafted is flawed and should be jettisoned. |
| Keywords: | Antitrust, Efficiency, Consumer Welfare, Merger Regulation, Merger Guidelines |
| JEL: | D4 D6 L4 L5 |
| Date: | 2023–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:inetwp212&r=reg |
| By: | Jose Aurazo |
| Abstract: | Sub-acquirers, also known as payment facilitators, have played a vital role in fostering merchant digital payments acceptance, particularly in developing countries. To provide access to digital payments (ie card acceptance) to merchants, sub-acquirers do not have a direct connection with the card network but through the acquirer. This paper aims to study the optimal pricing in the payments industry when: i) the sub-acquirers and acquirers compete in the same downstream market, and ii) the sub-acquirers enter niche markets that are not covered yet (eg micro and small-sized merchants). In the first scenario, a conflict arises as the acquirer might have incentives to deter entry by charging prohibitive access fees. In the second scenario, the acquirer obtains an extra profit from granting access to the card network for the sub-acquirers, and welfare increases. That said, the regulator can play a relevant role in the first scenario by setting an access fee to allow socially but not privately desirable entry. |
| Keywords: | access pricing, interchange fees, payment cards, payment facilitators, two-sided markets |
| JEL: | G21 L11 L4 L5 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1163&r=reg |
| By: | Anna Pechan; Marius Buchmann |
| Abstract: | The market-based procurement of system services for network operators is gaining momentum in the current debate about the future market design in the energy sector. Since current sources of reactive power are primarily fossil-fuel power plants which will not be available in a carbon neutral energy system, reactive power will be sources from distributed assets in the electricity networks. The German regulator has proposed new rules for reactive power procurement, which are based on three pillars: The technical connection agreements, fully integrated network components owned by the network operators and market-based procurement. While this approach is primarily aiming at the reactive power demand on the transmission grid level, assets from the medium voltage grid can participate in this process as well. We evaluate this approach from an economic perspective and conclude that while such a three-pillar system can secure an effective provision of reactive power, the efficiency heavily depends on the regulatory system and that it provides the correct incentives for the network operator. |
| Keywords: | resilience, reactive power, electricity, network, market design |
| JEL: | D47 L51 L94 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:bei:00bewp:0046&r=reg |
| By: | Alessandro V. M. Oliveira; Thiago Caliari; Rodolfo R. Narcizo |
| Abstract: | The modernization of an airline's fleet can reduce its operating costs, improve the perceived quality of service offered to passengers, and mitigate emissions. The present paper investigates the market incentives that airlines have to adopt technological innovation from manufacturers by acquiring new generation aircraft. We develop an econometric model of fleet modernization in the Brazilian commercial aviation over two decades. We examine the hypothesis of an inverted-U relationship between market concentration and fleet modernization and find evidence that both the extremes of competition and concentration may inhibit innovation adoption by carriers. We find limited evidence associating either hubbing activity or low-cost carriers with the more intense introduction of new types of aircraft models and variants in the industry. Finally, our results suggest that energy cost rises may provoke boosts in fleet modernization in the long term, with carriers possibly targeting more eco-efficient operations up to two years after an upsurge in fuel price. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.06876&r=reg |
| By: | Quentin Hoarau (SONDRA - Sondra, CentraleSupélec, Université Paris-Saclay - ONERA - CentraleSupélec - Université Paris-Saclay); Etienne Lorang (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CEC - Chaire Economie du Climat - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres) |
| Abstract: | This paper investigates the design of a recent regulatory proposal aimed at favoring the emergence of a battery recycling industry in Europe. Electric mobility is deemed necessary to cut CO2 emissions in the transport sector but the industrial and environmental impacts of lithium-ion battery manufacturing are controversial. A recent regulatory proposal from the European Commission introduces the obligation to attain a series of minimum thresholds of recycled materials for the new batteries to be manufactured after 2030. This paper discusses the conditions required for that obligation to be fulfilled. It develops a material flow model that projects battery wastes and their recycling potential. Our findings indicate that the feasibility of proposed thresholds is not very sensitive to changes of material intensities from battery technology shifts, recycling efficiencies, or the faster uptake of demand. On the contrary, battery lifetimes are the most crucial parameters for recycling potential. We believe that this result could jeopardize avenues for extending battery lifetimes such as second-battery usage. Our policy recommendations are twofold. First, we recommend lower thresholds to improve the regulation credibility. Second, the regulation should integrate other objectives that address the lifetime of batteries. |
| Keywords: | Recycling, Lithium-ion batteries, Electric vehicles, Environmental policy |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03727762&r=reg |
| By: | Brausewetter, Lars; Ludolph, Melina |
| Abstract: | We study the impact of stricter and more harmonized banking regulation along the income distribution using household survey data for 25 EU countries. Exploiting country-level heterogeneity in the implementation of European Banking Union directives allows us to control for confounders and identify effects. Our results show that these regulatory reforms aimed at increasing financial system resilience affected households heterogeneously. More stringent regulation reduces income growth for low-income households due to employment exits. Yet it tends to increase growth rates at the top of the distribution both for employee and self-employed income. |
| Keywords: | distributional effects, EU-SILC microdata, financial regulation, income inequality |
| JEL: | D31 G21 G28 G50 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwhdps:281193&r=reg |
| By: | Li, Jianpei; Zhang, Wanzhu |
| Abstract: | Personal data protection regulations typically require a seller to obtain consumers' explicit consent before processing their information. We model this requirement as an anonymous option, allowing consumers to maintain their anonymity when purchasing a product from a seller. We analyze a monopolist's incentive to offer such an option in a model of repeated purchases and limited commitment. Although collecting information implies full consumer surplus extraction in the second period, the seller is better off by offering the anonymous option. This is because it enables the seller to commit to a high second-period price for unrecognized consumers and prevents the consumers' strategic delay of consumption in the first period. In contrast, consumers are worse off because of increased prices and reduced demand. Consequently, privacy regulations mandating a compulsory anonymous option may actually fail to protect consumers' welfare. |
| Keywords: | anonymous option; personalized pricing; privacy concern |
| JEL: | D4 D8 L1 |
| Date: | 2024–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120010&r=reg |
| By: | Ziran Ding; Jose Garcia-Louzao; Valentin Jouvanceau |
| Abstract: | This paper characterizes the power dynamics of firms in both product and labor markets in Lithuania between 2004 and 2018. We first show that both markets are not perfectly competitive, as both price markups and wage markdowns are far from unitary and homogeneous. Interestingly, we unveil that the dynamics of these margins followed different patterns. On the one hand, both the dispersion and the economy-wide markup have increased, indicative of an increase in product market power. On the other hand, we document a decline in monopsony power, as both the heterogeneity and the aggregate level of markdowns have declined. Altogether, our results underline the importance of jointly analyzing product and labor markets when assessing firms’ market power. |
| Keywords: | firm heterogeneity, monopoly, markups, monopsony, markdowns |
| JEL: | D40 E20 J30 L10 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10883&r=reg |
| By: | Julian Alves; Jason Greenberg; Yaxin Guo; Ravija Harjai; Bruno Serra; John Van Reenen |
| Abstract: | Monopsony power is an important feature of modern labour markets. We examine its impact on workers. We report the first representative survey of Non-Compete-Agreements (NCA) in the UK and find that about 26% of workers appear to be covered, a higher fraction than in comparable surveys in the US (18%) and Italy (16%). Although NCAs are more prevalent for skilled workers, a large number of low skilled workers are also subject to NCAs (e.g. over a fifth of plant operators). Moreover, although NCAs are associated with higher training (conditional on other measures of skills), we argue that such benefits are unlikely to justify their high prevalence. Finally, we examine the impact of over 2, 000 M& UK panel data between 1997 and 2022 (over 900, 000 observations). The data suggests that M&A tends to reduce employment growth in the merged entity (from 3% a year prior to the merger to about zero in the subsequent five years), particularly in target firms. However, there is no evidence of any falls in average wage growth (in acquirer or target) as monopsony would predict - if anything, average wages are higher. Nor does profitability or productivity change post-merger. |
| Keywords: | management practices, productivity, competition |
| Date: | 2024–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1976&r=reg |