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on Regulation |
| By: | Martin Peitz |
| Abstract: | This article provides a guide to the world of digital attention intermediaries and concludes with a discussion of several policy issues with a focus on competition policy and consumer protection. It addresses the following questions: How do attention intermediaries operate in the real world? What are economic mechanisms that may contribute to understanding markets with digital attention intermediaries? Recent insights from the economics of platforms and media economics inform the replies to these questions. |
| Keywords: | Attention intermediaries, Two-sided platforms, Advertising, Market power, Digital markets, Limited attention |
| JEL: | L40 L82 L86 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_520&r=reg |
| By: | Serafica, Ramonette B.; Oren, Queen Cel A. |
| Abstract: | Across different metrics, the Philippines continues to demonstrate subpar performance in information and communications technology (ICT) compared to other members of the Association of Southeast Asian Nations and countries at the same level of development. The quality of the country’s ICT regulatory environment, composed of regulatory authority, regulatory mandate, regulatory regime, and competition model, is significantly below what is considered international best practice, consequently impeding the use of various technological solutions available to bridge the gap in digital inequality. Although significant policy changes have recently been introduced, more reforms are needed to achieve inclusive and accelerated digital connectivity. Priorities include reforming the licensing regime, formulating a spectrum policy and plan, and reinventing the National Telecommunications Commission to ensure regulatory independence. |
| Keywords: | ICT;telecommunications;digital;regulation;broadband;information and communications technology |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:phd:rpseri:rps_2024-02&r=reg |
| By: | Martin Peitz; Anton Sobolev |
| Abstract: | Biased recommendations arise naturally in markets with heterogeneous consumers. We study a model in which a monopolist offers an experience good to a population of consumers with heterogeneous tastes and makes personalized purchase recommendations. We provide conditions under which a firm makes welfare-reducing purchase recommendations with positive probability, resulting in inflated recommendations. We extend this insight to a setting in which an intermediary makes the recommendations, whereas a seller sets the retail price. Regulatory interventions that forbid inflated recommendations may lead to higher social welfare or may backfire. |
| Keywords: | recommendation bias, recommender system, asymmetric information, experience good, intermediation |
| JEL: | L12 L15 D21 D42 M37 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2022_336v2&r=reg |
| By: | Basaglia, Piero; Isaksen, Elisabeth; Sato, Misato |
| Abstract: | Carbon pricing is often paired with compensation to carbon-intensive firms to mitigate carbon leakage risk. This paper examines the causal impacts of compensation payments for indirect carbon costs embodied in electricity prices. We use confidential UK administrative microdata to exploit firm-level inclusion criteria in both difference-in-differences and regression discontinuity frameworks. Our findings suggest that compensated firms increased production and electricity use relative to uncompensated firms, with no significant effect on energy intensity. While compensation lowers leakage risk, it also implies large forgone opportunity costs of public funds and increased mitigation costs of meeting national emission targets. |
| Keywords: | carbon pricing; compensation schemes; competitiveness; electricity consumption |
| JEL: | Q52 Q58 Q40 Q41 H23 |
| Date: | 2024–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:122364&r=reg |
| By: | Panle Jia Barwick; Hyuk-Soo Kwon; Shanjun Li |
| Abstract: | Attribute-based subsidies (ABS) are commonly used to promote the diffusion of energy-efficient products, whose manufacturers often wield significant market power. We develop a theoretical framework for the optimal design of ABS to account for endogenous product attributes, environmental externalities, and market power. We then estimate an equilibrium model of China's vehicle market under ABS and conduct counterfactual simulations to evaluate the welfare impacts of various subsidy designs. Compared to the uniform subsidies, ABS lead to higher product quality and are more effective in mitigating quantity distortions, albeit with a modest environmental cost. Between 42% to 62% of welfare gains under ABS relative to uniform subsidies are attributed to more desirable product attributes, with the remainder explained by reductions in market power distortions. Allowing subsidy redistribution through product-level subsidies, as suggested by our theoretical model, further enhances welfare gains by an additional 34% to 62%. Among the ABS designs, China's notched subsidy design based on driving range leads to vehicle downsizing that undermines welfare benefits. Subsidies based on battery capacity, as implemented in the U.S., achieve the highest welfare gains by effectively balancing market power and environmental impacts. |
| JEL: | L13 L52 L62 Q58 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32264&r=reg |
| By: | Moez Kilani; André de Palma (Université de Cergy-Pontoise, THEMA) |
| Abstract: | We analyze spatial competition on a circle between firms that have multiple outlets and face quadratic transport costs. The equilibrium is a two-stage Nash game: first, firms decide on their locations and then set their prices. We are able to solve analytically simple multi-outlet cases, but for the general case, we require an algorithm to enumerate all non-isomorphic configurations. While price equilibria are explicit and unique, solving the full two-stage game requires numerical methods. In the location game, we consider two scenarios: either firms cannot jump one outlet over a competitors’ outlet, or firms have the flexibility to locate outlets anywhere on the circle. The solution involves a balance between cannibalization, market protection, and spatial monopoly power. We compare prices, profits, and transport costs for all possible configurations. With flexible locations, the firms’ market areas are contiguous. In this case, surprisingly, each firm acts as a spatial monopoly. If regulations enforce that each firm must set the same price for its outlets, head-to-head competition prevails, leading to decreased profits for the firms but to a better-off situation for consumers. |
| Keywords: | Spatial competition, circle, multi-product oligopoly, price-location equilibria, coin change problem |
| JEL: | L13 R32 R53 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ema:worpap:2023-18&r=reg |
| By: | Inkoo Cho; Noah Williams |
| Abstract: | We develop a model of algorithmic pricing that shuts down every channel for explicit or implicit collusion while still generating collusive outcomes. We analyze the dynamics of a duopoly market where both firms use pricing algorithms consisting of a parameterized family of model specifications. The firms update both the parameters and the weights on models to adapt endogenously to market outcomes. We show that the market experiences recurrent episodes where both firms set prices at collusive levels. We analytically characterize the dynamics of the model, using large deviation theory to explain the recurrent episodes of collusive outcomes. Our results show that collusive outcomes may be a recurrent feature of algorithmic environments with complementarities and endogenous adaptation, providing a challenge for competition policy. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2403.07177&r=reg |
| By: | Robert Addison; Giuseppa Ottimofiore; Costanza Caputi; Alberto Morales; Hamsini Shankar |
| Abstract: | To meet their international climate commitments and strengthen renewable energy production, many countries will require significant new investment in low emissions infrastructure. To deliver low emissions infrastructure at the necessary rate and scale, many countries recognise they need better ways of planning and regulating infrastructure and its value chains. This Working Paper describes the challenges and opportunities for using regulatory, stakeholder engagement and public procurement tools to help countries deliver more effective permitting. It provides international good practice case studies to help countries stimulate investment and reduce barriers for new, low emissions infrastructure so they can fulfil their international climate commitments while ensuring existing policy objectives. |
| Date: | 2024–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:oec:govaaa:68-en&r=reg |
| By: | Ohnishi, Kazuhiro |
| Abstract: | Nonpoint pollution arises from dispersed sources and lacks direct monitoring. Observing individual abatement levels or discharges is generally impractical. This paper addresses the economic incentives for controlling nonpoint pollution, which differs from point source pollution due to difficulties in monitoring individual polluting actions. The paper examines a mixed Bertrand duopoly model where there are two firms: a private firm and a partially privatized public firm that is jointly owned by the public and private sectors. The model of the paper uses ambient charges as a policy measure for reducing industrial nonpoint source pollution. This paper shows that ambient charges are an effective policy measure. |
| Keywords: | Ambient charge; Nonpoint pollution: Partial privatization; Price competition |
| JEL: | D21 L33 Q58 |
| Date: | 2024–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120531&r=reg |
| By: | Elias Asproudis (Department of Economics, Swansea University); Eleftherios Filippiadis (University of Macedonia, Greece) |
| Abstract: | This document delves into the Command-and-Control framework, specifically examining the timing of environmental policymaking within the context of regulating oligopolistic firms to reduce emissions. The regulator faces a crucial decision of implementing technological standards before (ex-ante timing) or after (ex-post timing) firms make production decisions. Geographical considerations also play a role, with regions adopting asymmetric anti-pollution technology standards. An innovative aspect is the inclusion of green trade unions, advocating for environmental conservation during negotiations with firms. The document conducts a comparative analysis of two games employing ex-ante and ex-post approaches, evaluating outcomes across various dimensions. The study emphasizes the significant impact of regulatory timing on environmental and economic outcomes, showcasing the advantages of a proactive (ex-ante) approach in fostering less-polluting technologies, higher production levels, increased profits, elevated social welfare, and reduced environmental damage. These insights contribute to the discourse on environmental policymaking, providing valuable considerations for policymakers, industry stakeholders, and researchers. |
| Keywords: | Command-and-Control, timing of policy, environmental technology, emissions, oligopoly |
| JEL: | D43 L13 Q5 |
| Date: | 2024–03–05 |
| URL: | http://d.repec.org/n?u=RePEc:swn:wpaper:2024-04&r=reg |
| By: | WATANABE Mariko; KUBO Kensuke |
| Abstract: | The licensing of standard-essential patents (“SEPs†) in the cellular communications field has been a contentious issue. In particular, Qualcomm’s licensing policies for cellular communication standards have been the subject of several lawsuits and episodes of government intervention. We evaluate the impact of the most drastic intervention to date: the Chinese government's 2015 decision to forcibly lower Qualcomm royalty rates by 1.23 – 1.75 percentage points. Using a simple theoretical model, we argue that such an intervention could have ambiguous effects on consumers. To quantify the policy's impact, we construct a structural econometric model of the Chinese smartphone and SoC markets which allows for strategic pricing in the two vertically-related markets. Counterfactual analysis using the estimated model allows us to quantify the intervention’s impact on smartphone manufacturers' marginal costs and product prices. Our simulation results indicate that the intervention caused an unequivocal increase in smartphone manufacturers' marginal costs (1.1 percent on average). However, this was more than offset by smartphone manufacturers' incentive to lower their prices under the reduced royalty rate, leading to a slight reduction in smartphone prices (0.6 percent on average). Taken together, these results suggest that the Chinese government's intervention had the intended effect on social welfare, although its magnitude was fairly limited. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:24042&r=reg |
| By: | Sergio Rebelo; Miguel Santana; Pedro Teles |
| Abstract: | We study a model where households make decisions according to a dual-process framework widely used in cognitive psychology. System 1 uses effortless heuristics but is susceptible to biases and errors. System 2 uses mental effort to make more accurate decisions. Through their pricing behavior, monopolistic producers can influence whether households deploy Systems 1 or 2. The strategic use of this influence creates a new source of price inertia and provides a natural explanation for the "rockets and feathers" phenomenon: prices rise quickly when costs increase but fall slowly when costs fall. Our model implies that price stability is not optimal. |
| JEL: | E31 E32 E52 E71 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32214&r=reg |
| By: | Avichai Snir; Daniel Levy; Dudi Levy; Haipeng Allan Chen |
| Abstract: | We report the results of surveys we conducted in the US and Israel in 2020, a time when many prices increased following the spread of the pandemic. To assess respondents perceptions of price increases, we focus on goods whose prices have increased during the pandemic, including some essential goods. Consistent with the principle of dual entitlement, we find that respondents perceive price increases as more acceptable if they are due to cost shocks than if they are due to demand shocks. However, we also find large differences across the two populations, as well as across goods. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2403.07617&r=reg |
| By: | Casey B. Mulligan |
| Abstract: | Prices are regulated in many markets, ranging from healthcare to labor to telecommunications. This paper reinterprets the variables in the basic supply-demand model so that both product-definition and quantity are equilibrium outcomes. Specifically, compliance with price controls is achieved by altering the production-factor mix along the supply chain. This approach yields surprising insights into the incidence of price regulations and their effects on the amount of trade. Furthermore, it reveals how many of the short-run effects of price controls can be opposite of what they are in the long run. The supply-chain framework also easily represents business-to-business price controls, which have been more prevalent in policy practice than price-theoretic analysis. |
| JEL: | D41 D57 K2 L51 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32216&r=reg |