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on Regulation |
| By: | Leigh, Andrew (Parliament of Australia) |
| Abstract: | Artificial intelligence has the potential to be a valuable competitive force in product and service markets. Yet AI may also pose competitive problems. I identify five big challenges that AI poses for competition. (1) Costly chips. (2) Private data. (3) Network effects. (4) Immobile talent. (5) An 'open-first, closed-later' model. These are not just issues for our competition regulators, but also for competition reformers. Just as antitrust laws needed to be updated to deal with the misbehaviour of the oil titans and rail barons of nineteenth century America, so too we may need to make changes in competition laws to address the challenges that AI poses. |
| Keywords: | competition, antitrust, artificial intelligence |
| JEL: | L40 L63 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izapps:pp209&r=reg |
| By: | Gautam Gowrisankaran; Ashley Langer; Mar Reguant |
| Abstract: | Natural gas has replaced coal as the dominant fuel for U.S. electricity generation. However, U.S. states that regulate electric utilities have retired coal more slowly than others. We build a structural model of rate-of-return regulation during an energy transition where utilities face tradeoffs between lowering costs and maintaining coal capacity. We find that the current regulatory structure retires only 45% as much coal capacity as a cost minimizer. A regulated utility facing a carbon tax does not lower carbon emissions immediately but retires coal similarly to the social planner. Alternative regulations with faster transitions clash with affordability and reliability goals. |
| JEL: | L51 L94 Q48 Q50 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32088&r=reg |
| By: | Ribeiro, Beatriz Couto (Technical University of Berlin (TUB) and University of Campinas (UNICAMP)); Jamasb, Tooraj (Department of Economics, Copenhagen Business School) |
| Abstract: | With the rise of renewable and distributed energy sources, electricity distribution and transmission utilities are facing increasing demand by regulators to innovate and adopt new technologies and transit to smart grids. However, these regulated natural monopolies often lack economic incentives to develop and adopt new technologies. To overcome this barrier, some regulatory authorities have introduced the so-called "innovation-stimuli" regulations to foster experimentation, technological adoption, and innovative solutions. We analyze and compare the effectiveness of two different innovation-stimuli regulations, the cost-pass through and WACC approaches, in the UK and Italy, respectively. To assess the impact of these different regulations on innovation, we use synthetic control (SC) and synthetic difference-in-differences (SDID) methods, which constitute causal inference techniques for small-n case study design and, for the first time, are employed to assess the impact of regulations on innovation outputs. Our panel data encompasses 13 European countries covering 1995 to 2013 and used smart grid projects and patent applications as dependent variables. Differently from what one might expect, not every innovation-stimuli regulation effectively supports innovation outputs. Meanwhile, cost-pass-through significantly and positively affected patent applications in the UK. In Italy, WACC did not affect patent applications, and European Commission-funded projects mostly drove the increases in smart-grid projects. |
| Keywords: | Innovation; Electricity sector; Regulation |
| JEL: | K23 O31 Q48 |
| Date: | 2024–02–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2024_007&r=reg |
| By: | Jason D. Hartline; Sheng Long; Chenhao Zhang |
| Abstract: | Consider sellers in a competitive market that use algorithms to adapt their prices from data that they collect. In such a context it is plausible that algorithms could arrive at prices that are higher than the competitive prices and this may benefit sellers at the expense of consumers (i.e., the buyers in the market). This paper gives a definition of plausible algorithmic non-collusion for pricing algorithms. The definition allows a regulator to empirically audit algorithms by applying a statistical test to the data that they collect. Algorithms that are good, i.e., approximately optimize prices to market conditions, can be augmented to contain the data sufficient to pass the audit. Algorithms that have colluded on, e.g., supra-competitive prices cannot pass the audit. The definition allows sellers to possess useful side information that may be correlated with supply and demand and could affect the prices used by good algorithms. The paper provides an analysis of the statistical complexity of such an audit, i.e., how much data is sufficient for the test of non-collusion to be accurate. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.15794&r=reg |
| By: | Rangrang Zheng (University of Hawaii); Greg Schivley (Princeton University); Patricia Hidalgo-Gonzalez (University of California San Diego); Matthias Fripp (Environmental Defense Fund); Michael J. Roberts (University of Hawaii) |
| Abstract: | Solar and wind power are cost-competitive with fossil fuels, yet their intermittent nature presents challenges. Significant temporal and geographic differences in land, wind, and solar resources suggest that long-distance transmission could be particularly beneficial. Using a detailed, open source model, we analyze optimal transmission expansion jointly with storage, generation, and hourly operations across the three primary interconnects in the United States. Transmission expansion offers far more benefits in a high-renewable system than in a system with mostly conventional generation. Yet while an optimal nationwide plan would have more than triple current interregional transmission, transmission decreases the cost of a 100% clean system by only 4% compared to a plan that relies solely on current transmission. Expanding capacity only within existing interconnects can achieve most of these savings. Adjustments to energy storage and generation mix can leverage the current interregional transmission infrastructure to build a clean power system at a reasonable cost. |
| Keywords: | Decarbonization, renewable energy, intermittency, transmission, trade, optimization |
| JEL: | Q42 Q52 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:hae:wpaper:2024-2&r=reg |
| By: | Christian Bach; Robert Edwards; Christian Jaag |
| Abstract: | We introduce limited consumer attention into a two-sided market model to investigate optimal platform pricing for the postal mail sector. Two types of senders – advertisers and nonadvertisers – derive value from attention paid to their mail. Consumers pay more attention to each mail item if they receive less mail and pay more attention to advertising mail if they receive more non-advertising mail. We show that a postal monopolist subsidises non-advertising prices, which increases the value of mail to advertisers, thus inflating advertising prices. Advertisers that are most nuisance or attention-consuming for recipients face high prices. Competitive entry for delivering advertising mail cannibalises the advertising mail market and the cross-subsidisation of prices is shut down. However, if the entrant price-matches rather than competes, all postal operators, mail senders and recipients can benefit. This insight suggests that competition amongst postal operators does not necessarily benefit consumers, especially if the entrant is more efficient. Based on our findings, we argue that Universal Service Obligation policies are not as demanding as traditionally viewed. |
| URL: | http://d.repec.org/n?u=RePEc:liv:livedp:202318&r=reg |
| By: | Saruta, Fuyuki |
| Abstract: | This study examines the degree and manner by which first-party selling by a platform affects the profits of a third-party seller and a competing platform. After developing a model in which a third-party seller distributes goods through two competing platforms, with only one platform able to have a private label, we analyze first-party selling effects in both monopoly and duopoly platform cases. Our findings demonstrate the following. In a monopoly case, a platform consistently reduces the seller fee when introducing a private label. In a duopoly case, the two platforms will jointly raise or lower fees upon private label introduction. Additionally, first-party selling can either positively or negatively affect the competing platform's profit. Results suggest that competition among platforms might upset the influence of first-party selling on commission fees. Consequently, platforms might opt for first-party selling as a strategy to weaken commission fee competition and retail competition. |
| Keywords: | First-party selling; Platform competition; Marketplaces; Agency contracts; Wholesale contracts |
| JEL: | D21 L13 L22 |
| Date: | 2023–12–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119585&r=reg |
| By: | Claire Chambolle; Morgane Guignard |
| Abstract: | Our article investigates the impact of vertical integration (without foreclosure) on innovation. We compare cases where either (i) two manufacturers or (ii) a manufacturer and a vertically integrated retailer invest. Then, the independent manufacturer( s) and the retailer bargain over non-linear contracts before selling to consumers. We show that vertical integration always increases the incentives to invest on the integrated product which stifles (resp. spurs) the investment of the independent manufacturer when spillovers are low (resp. high). In contrast, when investments are sequential, if the buyer power is high, the leader independent manufacturer invests more (resp. less) to discourage the integrated retailer’s investment when spillovers are low (resp. high). Furthermore, vertical integration is always profitable even when it is not desirable for the industry and welfare. Overall, vertical integration is only desirable for the industry when the buyer power is high and may damage welfare when both the buyer power and spillovers are low. |
| Keywords: | Vertical integration, Investment, Buyer power, Spillovers |
| JEL: | L13 L14 L42 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp2071&r=reg |
| By: | Juan S. Mora-Sanguinetti; Andrés Atienza-Maeso |
| Abstract: | The achievement of an environmentally sustainable growth model is a fundamental issue in economic analysis and is a substantial part of the public debate. However, a different question is at what pace this concern has been translated into regulation, fostering or hindering the development of new markets or “green” technologies. This paper proposes a rigorous empirical study identifying and quantifying, through text analysis, all regulations related to four different subject blocks associated with “green growth” and climate change (renewable energies, sustainable transportation, pollution and energy efficiency) over the period 2000-2022 for Spain (at the national and regional levels) and France. This research thus constructs a database in panel data format. The results show that regulation is diverse by subject matter, reflects significant regional diversity and has increased over time, especially in more recent years. From the comparison of French and Spanish regulations on renewable energy matters, it can be concluded that Spain shows a greater volume (and a greater regional disaggregation) in its regulation. This database could help develop future research projects on the impacts of “green” regulation on certain economic or institutional variables (such as “green” innovation or environmental conflicts). |
| Keywords: | Energy Efficiency, Renewable Energies, Sustainable Transport, Pollution, Regulation, Regulatory Complexity, Text Mining |
| JEL: | K32 Q5 O13 O44 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:937&r=reg |
| By: | Babina, Tania (Columbia University); Bahaj, Saleem (Bank of England); Buchak, Greg (Stanford University); De Marco, Filippo (Bocconi University); Foulis, Angus (Bank of England); Gornall, Will (University of British Columbia); Mazzola, Francesco (ESCP Business School); Yu, Tong (Imperial College London and Financial Conduct Authority) |
| Abstract: | Open banking (OB) empowers bank customers to share transaction data with fintechs and other banks. 49 countries have adopted OB policies. Consumer trust in fintechs predicts OB policy adoption and adoption spurs investment in fintechs. UK microdata shows that OB enables: i) consumers to access both financial advice and credit; and ii) small and medium‑sized enterprises to establish new fintech lending relationships. In a calibrated model, OB universally improves welfare through entry and product improvements when used for advice. When used for credit, OB promotes entry and competition by reducing adverse selection, but higher prices for costlier or privacy-conscious consumers partially offset these benefits |
| Keywords: | Open banking; entrepreneurship; fintech; financial innovation; data access; data rights; data portability; Big Data; financial regulation; financial sector; banks |
| JEL: | G21 G28 |
| Date: | 2024–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:1059&r=reg |
| By: | Koenraadt, Jeroen; Leung, Edith |
| Abstract: | Despite calls for regulation in the crypto utility token market, it is unclear how crypto tokeninvestors value current regulatory proposals. We find that on average, investors react negatively to news thatincreases the likelihood of securities and transparency-related regulation. We also find that this negativereaction is attenuated for tokens rated higher on quality and transparency by intermediaries, those thathave higher levels of disclosure, and listed on more liquid exchanges. The observed variation in tokentransparency and this muted reaction suggest investors perceive disclosure costs to be lower for tokens inmore transparent environments, suggesting that transparency matters to investors. |
| Keywords: | regulation; transparency; cryptocurrencies; financial markets; crypto tokens |
| JEL: | G10 |
| Date: | 2022–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121614&r=reg |
| By: | Pablo Blanchard (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía) |
| Abstract: | In this paper, we recover and decompose markups, and estimate the pass-through rates from cost to prices in small and medium retail stores for oil, tomato sauce, and rice in Uruguay using a structural model of demand and assumptions about the competitive behavior of producers. The market power for these products has been under the Commission of Promotion and Defence of Competence study since 2016, and the proposed methodology allows for deepening in the measure and the understanding of the origin of that market power. In addition to providing a fundamental input for competition defense policies in Uruguay, this study enhances the international academic literature by contributing evidence on cost-to-price pass-through in a developing economy with potentially greater market power than that found in developed countries. The markups for oil and tomato sauce are around 25% for Nash Bertrand competition assumption, and 50% for the collusion assumption, while for rice are 36% and 75% respectively. For its part, about 65% of the market power under Nash Bertrand assumption is explained by the ability of firms to differentiate products and 35% for the ownership structure in the case of oil and sauce. In the case of rice, 49% are explained for differentiation and 51% for ownership structure. Finally, the pass-through rates are low for the three products, being under both behavioral assumptions lower than 55% for the three products. |
| Keywords: | market power, cost pass-through, discrete choice models, product differentiation |
| JEL: | D43 L11 L81 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:ulr:wpaper:dt-20-23&r=reg |
| By: | Kenneth R. Ahern; Lei Kong; Xinyan Yan |
| Abstract: | Concentration is a single summary statistic driven by two opposing forces: the number of firms in a market and the evenness of their market shares. This paper introduces a generalized measure of concentration that allows researchers to vary the relative importance of each force. Using the generalized measure, we show that the widely-cited evidence of increasing industrial employment concentration is driven by the Herfindahl Index's over-weighting of evenness and under-weighting of firm counts. We propose an alternative, equally-weighted measure that has an equivalent economic meaning as the Herfindahl Index, but possesses superior statistical attributes in typical firm size distributions. Using this balanced measure, we find that employment concentration decreased from 1990 to 2020. Finally, decomposing aggregate diversity into meaningful geographic and industry subdivisions reveals that concentration within regional markets has fallen, while concentration between markets has risen. |
| JEL: | C46 D40 L11 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32057&r=reg |
| By: | Claire Borsenberger (Groupe La Poste); Helmuth Cremer (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Denis Joram (Groupe La Poste); Jean-Marie Lozachmeur (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique); Estelle Malavolti (ENAC-LAB - Laboratoire de recherche ENAC - ENAC - Ecole Nationale de l'Aviation Civile) |
| Abstract: | We study how consumers' environmental awareness (CEA) affects the design of environmental policy in the e-commerce sector. We also examine if there is a need for regulation requiring delivery operators to reveal their emissions. We consider a model with two retailers who sell a differentiated product and two parcel delivery operators. Delivery generates CO2 emissions and their total level creates a global (atmosphere) externality. We assume that it is more expensive for the delivery operator to use less polluting technologies. We consider different scenarios reflecting the type of competition and the vertical structure of the industry. We shown that CEA mitigates the inefficiency of the equilibrium by bringing the level of emissions closer to its optimal level. This is true under perfect and imperfect competition. This efficiency enhancing effect of CEA also affects the design of emissions taxes, which leads to an amended Pigouvian rule. Under perfect competition the tax is reduced by exactly the level of CEA expressed in monetary terms. Under imperfect competition the adjustment exceeds this level. |
| Keywords: | Consumers' environmental awareness, Pigouvian rule, Emission taxes, E-commerce, Parcel delivery operators, Vertical integration |
| Date: | 2023–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03613363&r=reg |
| By: | Joseph E. Stiglitz; Andrew Kosenko |
| Abstract: | The paper surveys the recent work on economics of information with endogenous information structures where individuals can directly communicate information with each other. We consider the theoretical work on cheap talk, Bayesian persuasion, and information design, and review the implications of information control and information abundance for mis and disinformation. The relationship between information and market power is particularly important when social media can amplify and maintain harmful fictions that lead to polarization and undermine not only markets, but democratic discourse. We review both the “rational” decision-making paradigm, as well as departures from it, such as cases where decision makers can choose what to know, can allocate their attention in different ways or have behavioral biases that influence their information processing. We note some important connections to legal and media studies and highlight key messages in nontechnical language. |
| JEL: | D82 D86 D9 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32050&r=reg |
| By: | ITF |
| Abstract: | This report assesses the current state of water transport employment in Europe and links it to water transport governance. Authorities generally consider the skillset required by employees in water transport strategically important. However, evolving governance frameworks might have undermined the possibility of maintaining these skills in Europe. This report assesses incoherence in government policies and provides recommendations for reform to ensure the relevant skills needed in water transport can be maintained. |
| Date: | 2023–08–10 |
| URL: | http://d.repec.org/n?u=RePEc:oec:itfaac:119-en&r=reg |
| By: | Xi Sun; Karsten Neuhoff |
| Abstract: | We investigate policies for increasing recycling to facilitate decarbonization within the basic material sector, including market-based policies, such as carbon pricing, advanced disposal fee and minimum recycled content requirement, and non-market policies, such as product design standard. We develop an analytical model to assess the role of these policy instruments for recycling related choices of manufacturing industry, consumers, and waste management. We find that individual policy instruments can deliver some benefits in terms of emission reductions and welfare improvements, but that a package of policy instruments is necessary to reach the welfare maximum and effective scale of emission reductions and resource saving. |
| Keywords: | Industry decarbonization, market failure, high-quality recycling, policy package |
| JEL: | D62 H23 Q53 Q54 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp2069&r=reg |
| By: | Alden, Christopher; Martin, Mary; Chan, Kenddrick |
| Abstract: | This policy brief highlights the challenges in attaining effective global digital governance. These include uncertainty regarding the ethical, operational, and strategic implications of digital technologies, and limited avenues for private sector expertise. The G20 is well-placed to effect meaningful change in global digital governance. The brief proposes three recommendations: (1) the establishment of a scientific advisory committee, which is intended to be an honest (knowledge) broker and fill gaps in subject matter expertise; (2) the formation of a public-private partnership task force to stuck and provide recommendations based on previous experiences with multilateralism and global governance that have successfully incorporated private sector expertise; and (3) the launch of a new Sherpa Track initiative that will serve as a platform for senior leaders to discuss global digital governance topics. By adopting these recommendations, the G20 can effectively enhance global digital governance efforts and contribute to a more stable and secure world. |
| JEL: | L81 |
| Date: | 2023–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121603&r=reg |