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on Regulation |
| By: | Chiara Fumagalli; Massimo Motta |
| Abstract: | The European Commission (EC) has recently announced its intention to issue Guidelines on exclusionary abuses. In this paper, we explain how economics can and should be used to inform a sound and effects-based approach in the enforcement of Article 102 TFEU. In particular, the EC should be guided only by a consumer welfare standard; exclusive dealing and exclusivity rebates should be subject to a (rebuttable) presumption of harm; price-cost tests are meaningful only for predation and other practices which do not reference rivals; essentiality of the input should not be a requirement for vertical foreclosure cases of any type, but such cases should be limited only to dominant firms that satisfy certain criteria. |
| JEL: | K21 L12 L13 L41 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1431&r=reg |
| By: | Jean Tirole (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) |
| Abstract: | Tech giants' dominance does not confront us with an unpalatable choice between laissez-faire and populist interventions. This article takes stock of available knowledge, considers desirable adaptations of regulation in the digital age, and draws some conclusions for policy reform. |
| Keywords: | Regulation, Antitrust, Fairness, Industrial policy, Contestability, Mergers |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04464905&r=reg |
| By: | Emanuela Cerrato (Bank of Italy); Enrica Detto (Bank of Italy); Daniele Natalizi (Bank of Italy); Federico Semorile (Bank of Italy); Fabio Zuffranieri (Bank of Italy) |
| Abstract: | Technology providers have taken on the crucial role in supporting the financial sector, enabling firms – even small ones – to become more efficient and keep pace with innovation. Yet, the interdependencies between such providers and financial entities may pose new systemic risks, deserving the attention of financial regulators and overseers. This paper presents the authorities’ point of view, focusing on the payments sector; it demonstrates how numerous initiatives at international and national level have made a consistent and dynamic effort to create a regulatory and policy framework aimed at balancing security with innovation. |
| Keywords: | payment system, market infrastructure, third parties, digital operational resilience, DORA, regulation, oversight |
| JEL: | E42 G32 G38 O33 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wpmisp:mip_047_24&r=reg |
| By: | J.P. Chaves; R. Cossent; T. Gómez San Román; P. Linares; M. Rivier |
| Keywords: | Electricity market, energy transition, renewables |
| JEL: | Q41 L51 L94 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg2305&r=reg |
| By: | Michael G. Pollitt |
| Keywords: | LMPs, nodal pricing, electricity markets |
| JEL: | L94 |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg2318&r=reg |
| By: | Peter Gibbard; Kevin Remmy |
| Abstract: | We estimate a structural model of electricity retailer choices accommodating various sources of consumer inertia, including inattention, limited information, switching costs, and product differentiation. The model disentangles the relative importance of different frictions. We estimate our model using individual-level data of all retailer switches and queries on a price comparison website in New Zealand. We find that price comparison tools strongly impact market structure and consumer surplus. However, mandating all consumers search for alternatives has stronger effects on market structure and consumer surplus gains. Our results help policymakers design policies that improve consumer choices and effective competition in retail markets. |
| Keywords: | consumer inertia, consumer search, retail electricity markets, structural demand estimation |
| JEL: | D12 D83 L13 L94 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_516&r=reg |
| By: | Stefan Bergheimer; Estelle Cantillon; Mar Reguant |
| Abstract: | Wholesale electricity markets solve a complex allocation problem: electricity is not storable, demand is uncertain, and production involves dynamic cost considerations and indivisibilities. The New Zealand wholesale electricity market attempts to solve this complex allocation problem by using an indicative price and quantity discovery mechanism that ends at dispatch. Can such a market mechanism without commitment provide useful information? We document that indicative prices and quantities are increasingly informative of the final prices and quantities and that bid revisions are consistent with information-based updating. We argue that the reason why the predispatch market is informative despite the lack of commitment is that it generates private benefits in terms of improved intertemporal optimization of production plans. |
| Keywords: | Electricity markets, Price discovery, Pre-play communication, Non-trading mechanisms, Coordination, Intertemporal optimization |
| Date: | 2023–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/368728&r=reg |
| By: | Michael G. Pollitt |
| Keywords: | Energy crisis, single market in energy, wartime |
| JEL: | L94 L95 |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg2317&r=reg |
| By: | Nicholas Gohdes; Paul Simshauser; Clevo Wilson |
| Keywords: | PPAs, renewable energy, counterparty credit, project finance, cost of capital |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg2306&r=reg |
| By: | Rupayan Pal (Indira Gandhi Institute of Development Research); Sumit Shrivastav (Indian Institute of Science Education and Research Bhopal) |
| Abstract: | This article analyzes implications of privacy regulation on stability of tacit collusion. It shows that privacy regulation is likely to hurt consumers' economic benefits, through its competition dampening effect. A more effective broad scope privacy regulation makes collusion more likely to be stable, regardless of the level of consumers' cognitive ability. Whereas, if the scope of privacy regulation is narrow, (a) its effectiveness positively (does not) affect collusion stability under limited (unlimited) cognitive ability of consumers and (b) the likelihood of collusion stability is decreasing in the level of consumers' cognitive ability. Our insights are relevant for designing privacy regulation. |
| Keywords: | Privacy regulation, Limited cognitive ability, Behavior-based price discrimination, Stability of collusion, Level-k Thinkin |
| JEL: | D43 L13 L88 L86 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2024-004&r=reg |
| By: | Rupayan Pal (Indira Gandhi Institute of Development Research); Emmanuel Petrakis (Departamento de Econom¡a, Universidad Carlos III de Madrid) |
| Abstract: | This paper shows that in a duopoly a firm has no incentives to divest its passive shares in its rival when firms' strategies are strategic complements. This holds independently whether goods are substitutes or complements and whether firms engage in simultaneous or sequential move product market competition. However, if firms' strategies are strategic substitutes and are engaged in simultaneous move competition, it is optimal for both firms to fully divest their shares in their rivals under a private placement mechanism via independent intermediaries or under competitive bidding. Yet, in the sequential move game only the follower has such incentives. Notably, under a private placement mechanism via a common intermediary, there are circumstances under which there are partial or no firms' divestment incentives, highlighting that the divestment mechanism employed by firms may have a crucial role on their divestment incentives. |
| Keywords: | Cross-ownership, passive shares, strategic substitutes and complements, divestment incentives, market competition |
| JEL: | L13 L41 L2 D43 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2024-003&r=reg |
| By: | Renan P. de Oliveira; Alessandro V. M. Oliveira |
| Abstract: | This study discusses the literature on the convergence of business models of airlines in Brazilian air transport, focusing on the formation of flight networks. Initially, it analyzes the determinants of the network formation patterns of the "fundamental" business models (archetypes) of airlines in the first years after the sector's deregulation. Then, it discusses how the business models of Brazilian companies resemble these patterns. The literature highlights convergences between the network formation strategies of full-service companies in relation to older low-cost companies, in addition to business model redirections after mergers and acquisitions. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.11371&r=reg |
| By: | Bruno F. Oliveira; Alessandro V. M. Oliveira |
| Abstract: | This study aims to discuss the impacts of a low-cost airline on the air transport market and, especially, to present the most recent findings from specialized literature in the field. To this end, various works on this topic, published since 2015, were selected and analyzed. From this analysis, it was possible to categorize the main topics discussed in the papers into five groups: (i) the impacts of a low-cost airline on competing airlines; (ii) impacts on airports; (iii) general impacts on the demand for air transport; (iv) effects on passengers' choice process; and (v) general effects on a geographical region. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.11372&r=reg |
| By: | Jan K. Brueckner; Matthew E. Kahn; Jerry Nickelsburg |
| Abstract: | The durability of the transportation capital stock slows down the pace of decarbonization since newer vintages feature cutting-edge technology. If older vintages were to be retired sooner, the social cost of travel would decline. This paper analyzes and explores the viability of a potential cash-for-clunkers program for the airline industry, which would help to hasten decarbonization of US aviation. Our estimation and calculations show that airlines can be induced to scrap rather than sell older planes upon retirement with a payment that is less than the forgone carbon damage, yielding net social benefits. |
| JEL: | Q54 R49 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32205&r=reg |
| By: | Gilad Sorek |
| Abstract: | I study product-quality innovation under monopolistic competition with variable demand elasticity preferences and variable marginal cost. I characterize the free-entry equilibrium and the market size effect on product quality and markups. I then compare these results with the ones obtained in related studies of markets with process innovation and show that the market size effect on equilibrium markups depends on innovation type. Lastly, I show that the normative properties of the market equilibrium depend solely on the preferences characteristics, as in the canonical monopolistic competition framework with no innovation. |
| Keywords: | Quality Innovation; Variable Demand Elasticity; Monopolistic Competition |
| JEL: | L1 O30 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:abn:wpaper:auwp2024-05&r=reg |
| By: | Rumen Kostadinov |
| Abstract: | I study a dynamic model of durable-good monopoly where the seller cannot commit to future prices and is uncertain about the buyer’s value. I adopt a prior-free approach where the seller minimises lifetime regret against the worstcase type of the buyer. In the unique equilibrium the seller’s worst-case regret against types who purchase at any given time equals the worst-case regret against types who purchase at any other time. The seller cannot profitably deviate even if he could commit to his deviation. Despite this, the equilibrium does not match the commitment outcome. This is because the seller’s objective is endogenously determined by his optimal counterfactual behaviour against each type, which is time-inconsistent. The Coase conjecture holds: in the frequent-offer limit the good is sold immediately at a price equal to the lowest value. |
| Keywords: | durable-good monopoly; Coase conjecture; regret |
| JEL: | C73 D81 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2024-02&r=reg |