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on Regulation |
| By: | Simon Cowan |
| Abstract: | General conditions that are sufficient for mergers in symmetric Cournot industries to be profitable or unprofitable are found and applied. If inverse demand curvature is weakly higher than the number of firms then all mergers are profitable. The same condition implies that outputs are strategic complements locally. If demand is log-concave, so inverse demand curvature is at most 1, two-firm mergers are unprofitable. Log-concavity of demand implies that outputs are strategic substitutes. The issue of the profitability of mergers in Cournot was first addressed by Salant, Switzer, and Reynolds (1983) in a model with linear demand. |
| Date: | 2024–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:1041&r=reg |
| By: | Ganglmair, Bernhard; Krämer, Julia; Gambato, Jacopo |
| Abstract: | The EU General Data Protection Regulation (GDPR) of 2018 introduced stringent transparency rules compelling firms to disclose, in accessible language, details of their data collection, processing, and use. The specifics of the disclosure requirement are objective, and its compliance is easily verifiable; readability, however, is subjective and difficult to enforce. We use a simple inspection model to show how this asymmetric enforceability of regulatory rules and the corresponding firm compliance are linked. We then examine this link empirically using a large sample of privacy policies from German firms. We use text-as-data techniques to construct measures of disclosure and readability and show that firms increased the disclosure volume, but the readability of their privacy policies did not improve. Larger firms in concentrated industries demonstrated a stronger response in readability compliance, potentially due to heightened regulatory scrutiny. Moreover, data protection authorities with larger budgets induce better readability compliance without effects on disclosure. |
| Keywords: | data protection, disclosure, GDPR, privacy policies, readability, regulation, text-as-data, topic models |
| JEL: | C81 D23 K12 K20 L51 M15 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:289447&r=reg |
| By: | Filip Abraham; Yannick Bormans; Jozef Konings; Werner Roeger |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:asx:nugsbd:2024-24&r=reg |
| By: | Daniel Krähmer |
| Abstract: | The paper studies the canonical hold-up problem with one-sided investment by the buyer and full ex post bargaining power by the seller. The buyer can covertly choose any distribution of valuations at a cost and privately observes her valuation. The main result shows that in contrast to the well-understood case with linear costs, if investment costs are strictly convex in the buyer’s valuation distribution, the buyer’s equilibrium utility is strictly positive and to- tal welfare is strictly higher than in the benchmark when valuations are public information, thus alleviating the hold-up problem. In fact, when costs are mean-based or display decreas- ing risk, the hold-up problem may disappear completely. Moreover, the buyer’s equilibrium utility and total welfare might be non-monotone in costs. The paper utilizes an equilibrium characterization in terms of the Gateaux derivative of the cost function. |
| Keywords: | Information Design, Hold-Up Problem, Unobservable Information |
| JEL: | C61 D42 D82 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_523&r=reg |
| By: | Rhodes, Andrew; Zhou, Jidong |
| Abstract: | This paper studies consumers’ privacy choices when firms can use their data to make personalized offers. We first introduce a general framework of personalization and privacy choice, and then apply it to personalized recommendations, personalized prices, and personalized product design. We argue that due to firms’ reaction in the product market, consumers who share their data often impose a negative externality on other consumers. Due to this privacy-choice externality, too many consumers share their data relative to the consumer optimum; moreover, more competition, or improvements in data security, can lower consumer surplus by encouraging more data sharing. |
| Keywords: | personalization; consumer data; privacy; personalized pricing; personalized recommendations; personalized product design |
| JEL: | D43 D82 L13 |
| Date: | 2024–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:129289&r=reg |
| By: | Davi-Arderius, Daniel (University of Barcelona and Chair of Energy Sustainability, Barcelona Institute of Economics (IEB), Spain. Copenhagen School of Energy Infrastructure (CSEI), Copenhagen Business School, Denmark); Jamasb, Tooraj (Department of Economics, Copenhagen Business School); Rosellon, Juan (Centro de Investigación y Docencia Económicas, German Institute for Economic Research (DIW Berlin), Center for Energy Studies, Rice University, and Chair of Energy Sustainability, Barcelona Institute of Economics (IEB), Spain) |
| Abstract: | Operating a reliable power system requires respecting strict safety and security criteria such as avoiding grid congestion, minimum levels of inertia, maintaining voltage levels, and having minimum adequacy reserves. However, large scale integration of intermittent renewables is transforming grid operation by creating new operational challenges. When operational security criteria are not met in parts of the network, system operators use ancillary services (redispatching) to activate or curtail specific generation units to manage the flows. In Spain, the volumes and costs of redispatching have multiplied by two and nine times between 2019 and 2023, respectively. In 2023, volumes peaked at 16.5TWh and the costs to 2.1b€. A similar picture is emerging in other countries. We investigate the determinants of network constraints associated with redispatched volumes after the day-ahead and intraday markets. To our knowledge, this is the first study to examine this topic in detail at national level. We use the seasonal autoregressive ARIMA time-series estimator method with hourly operational and market data (2019-2023). We find that actions to alleviate network congestion represent one-third of the redispatched volumes, though increasing every year. After day-ahead markets, most redispatched volumes are aimed at voltage problems, which aggravates when demand decreases, or generation from wind and photovoltaics (power electronics generation) increases. After intraday-markets, two thirds of the redispatched volumes were related to insufficient adequacy reserves, which calls for backup fossil fuel plants. We provide operational and regulatory recommendations aimed at minimizing volumes of these network constraints and the need for corrective actions. |
| Keywords: | Network operation; Renewable integration; Redispatching; Synchronous generation; Power electronics; Network congestion; Voltage issues; Reliability criteria |
| JEL: | L51 L94 Q41 Q42 |
| Date: | 2024–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2024_008&r=reg |
| By: | Simplice A. Asongu (Oxford, UK); Sara le Roux (Oxford, UK) |
| Abstract: | The study investigates the role of governance (i.e., ‘voice & accountability’, political stability/no violence, regulatory quality, government effectiveness, corruption-control and the rule of law) in the incidence of short-term debt services on infrastructure development in the perspective of telecommunication infrastructure and access to electricity. The focus of the study is on 52 African countries for the period 2002-2021. The generalized method of moments is employed as estimation strategy and the following findings are established. Debt service has a negative unconditional effect on access to electricity and telecommunication infrastructure. Governance dynamics moderate the negative effect of debt service on infrastructure dynamics. Effective moderation is from regulatory quality and corruption-control for access to electricity and from government effectiveness, regulatory quality, corruption-control and rule of law, for telecommunication infrastructure. Policy implications are discussed. |
| Keywords: | Debt service, governance; information technology; access to electricity; Africa |
| JEL: | F34 H63 O10 O40 O55 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:24/003&r=reg |
| By: | François Pannequin (CEPS, ENS Paris-Saclay, Université Paris-Saclay); Anne Corcos (CURAPP-ESS UMR 7319, CNRS, Université de Picardie Jules Verne) |
| Abstract: | Using a principal-agent framework, we extend the insurance monopoly model (Stiglitz, 1977) to self-insurance opportunities. Relying on a two-part tariff contract as an analytical tool, we show that an insurance monopoly can achieve the same equilibrium as a competitive insurer. However, in the monopoly situation, the insurer captures all the insurance market surplus. Yet, compared to a monopoly market with insurance only, self-insurance opportunities act as a threat to the insurer, resulting in a cut of the insurer's market power and an increase in the policyholders' welfare. Moreover, within our principal-agent framework, we show that while insurance and self-insurance are substitutes, compulsory self-insurance, and compulsory insurance have non-equivalent effects. Although compulsory self-insurance reduces the market size of the insurer, it has no impact on the policyholder's well-being. On the other hand, mandatory insurance favors the insurer and makes policyholders worse off. The implications of these public policies are discussed. |
| Keywords: | self-insurance, insurance, monopoly, compulsory insurance, public regulation |
| JEL: | D86 D42 G22 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:eve:wpaper:23-02&r=reg |
| By: | Joel Waldfogel |
| Abstract: | Regulators around the world are discussing, or taking action to limit, self-preferencing by large platforms. This paper explores Amazon's search rankings of its own products as the European Union's Digital Markets Act (DMA) was coming into effect. Using data on over 8 million Amazon search results at 22 Amazon domains in the US, Europe, and elsewhere, I document three things. First, conditional on rudimentary product characteristics, Amazon's own products receive search ranks that are 24 positions better on average throughout the sample period. Second, the Amazon rank differential is large in comparison with the differential for 142 other popular brands. Third, shortly after the EU designated Amazon a “gatekeeper” platform in September 2023, the Amazon rank differential fell from a 30 position advantage to a 20 position advantage, while other major brands' rank positions were unaffected. The changed Amazon search rankings appear in both Europe and other jurisdictions. |
| JEL: | L40 L50 L81 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32299&r=reg |
| By: | Kang, Gusang (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Hyok Jung (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Jonghyuk (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kwon, Hyuk Ju (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Sung, Won (Economic Research Institute, Bank of Korea) |
| Abstract: | 본 연구에서는 지난 20년간 미국 대형 디지털플랫폼이 수많은 중소기업을 대상으로 수행한 기업결합 행위가 해당 디지털플랫폼의 성과에 미친 영향을 혁신 및 수익성 관점에서 분석하였다. 또한 이 연구는 그와 같은 기업결합 거래 중 대형 디지털플랫폼이 자사의 잠재 경쟁자로 성장할 수 있는 혁신기업을 인수함으로써 미래 시장 경쟁을 완화하려는 목적으로 수행하는 ‘킬러 인수’를 식별하고, 해당 기업결합 행위가 디지털플랫폼의 혁신에 미친 영향을 살펴보았다. 이를 통해 본 연구는 디지털플랫폼을 대상으로 한 한국 공정거래위원회의 기업결합 심사에 대한 관련된 정책 시사점을 도출하였다. This study analyzes the impact of the large U.S. digital platforms such as GAFAM (Google, Apple, Facebook, Amazon, Microsoft) on their performance in terms of innovation and sales, focusing on their mergers and acquisitions (M&A) activities targeting numerous small and medium-sized enterprises over the past 20 years. It also identifies ‘killer acquisitions’, where these platforms acquire innovative companies that could become potential competitors, thereby potentially reducing future market competition. The study provides insights and policy implications for the Korean Fair Trade Commission’s merger review process for digital platforms. Chapter 2 reviews the literature on the relationship between M&A and innovation and discusses the motives for M&A in the digital platform market, including ‘killer acquisitions’. Traditional M&A motives such as economies of scale and scope, acquisition of unique technologies or new distribution channels, and increased market dominance are contrasted with those in the digital platform industry, which include securing core assets like technology, processes, and intellectual property. Recent literature has raised concerns about ‘killer acquisitions’ that may reduce or eliminate future competition, although the definition of ‘particularly competitive future competitors’ and the limited pre-emptive merger policy pose challenges. Chapter 3 examines the types, characteristics, and status of M&As conducted by GAFAM, categorizing them into vertical, horizontal, and conglomerate mergers. Despite the unique characteristics of the digital platform industry, most M&As have been approved by the U.S. competition authorities. However, this has led to criticism of high market concentration. Recent arguments suggest the need to actively incorporate data characteristics in assessing the competitive restraints of M&A.(the rest omitted) |
| Keywords: | Competition policy; intellectual property rights; business combination; innovation; digital platform; Killer Acquisition; competition policy |
| Date: | 2023–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kieppa:2023_005&r=reg |
| By: | Laureen de Barsy; Axel Gautier |
| Abstract: | In the past 20 years, large digital platforms have made many acquisitions, mainly young and innovative startups. Few of them have been reviewed by competition authorities and little is known on their evolution after acquisition. This paper intends to fill in this gap by looking at the development of the technologies owned by the acquired firms. We focus on technologies protected by a patent and we investigate whether an acquisition by a big tech contributes to their development. For this analysis, we use patent citations as a proxy for the innovation effort by the acquirer. Our main result is to show that acquisition increases the innovation effort of the acquirer but only temporarily. After 1.5 year, there is no longer a significant impact of the acquisition on the acquirer’s innovation effort. This decline is relatively larger when the acquired patent belongs to a core technology field of the acquiring firm or to a large patent portfolio. On the contrary, citations by the rest of the industry are not negatively affected by acquisition, which does not corroborate the idea that the acquired technology has reached its maturity. |
| Keywords: | mergers, digital, big techs, innovation, patents, killer acquisitions |
| JEL: | D43 G34 K21 L40 L86 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11025&r=reg |
| By: | Jack (Peiyao) Ma; Andrea Mantovani; Carlo Reggiani; Annette Broocks; Néstor Duch-Brown |
| Abstract: | Dominant platforms such as Booking.com and Amazon often impose Price Parity Clauses to prevent sellers from charging lower prices on alternative sales channels. We provide quasi experimental evidence on the removal of these price restrictions in France in 2015 for three major international hotel groups. First, our analysis reveals limited and non-significant effects on room prices sold through channels visible to consumers, such as the hotels’ websites or Online Travel Agencies. Second, we document a significant price reduction on sales channels not visible to consumers, such as the hotels’ direct offline channel. Third, we identify a significant shift in sales share from online travel agencies to the hotels’ direct offline channel. |
| Date: | 2024–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:1043&r=reg |
| By: | Gasmi, Farid; Berté, Isacco; Demoury, Louise; Kouakou, Dorgyles; Patzig, Niklas; Recuero Virto, Laura |
| Abstract: | Using data on telecommunications from 1985 to 2022 in 103 countries, this article provides evidence of a robust nonlinear relationship between privatization and corruption showing that the latter has an inverted U-shape effect on the former. Using the Bayesian Corruption Index as a proxy for corruption, we find that the threshold beyond which higher levels of corruption do no longer foster privatization is slightly above 50% of the maximum value of this index. The complexity of the relationship between privatization and corruption points to the need to develop sophisticated strategies to effectively combat corruption, the negative effects of which on social welfare have been widely discussed in the literature. |
| Keywords: | Privatization; Corruption; Telecommunications; Nonlinearity |
| JEL: | L33 D73 L96 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:129283&r=reg |
| By: | Srichander Ramaswamy (The South East Asian Central Banks (SEACEN) Research and Training Centre) |
| Abstract: | The view that cryptocurrencies can be a substitute for fiat currencies in an interconnected and digitised world appears to be gaining some traction. Such views are reinforced by the high fee banks charge on cross-border money transfers and for certain other financial services. The belief that cryptocurrencies will define the future of money is entrenched among millennials, and this belief has been driving up the demand for cryptocurrencies. Stablecoins in this ecosystem has taken on the role of the unit of account for crypto assets and is instrumental in providing liquidity as well as in facilitating trading of crypto assets. To play this role, stablecoins are being extensively used as collateral in crypto transactions with trading platforms holding such collateral in omnibus accounts. The global regulatory community is taking note of this and has expressed concerns that as the market for stablecoins and cryptocurrencies grow, potential risks to the broader financial system from runs on stablecoins can be damaging. This paper reviews these developments and provides some suggestions for policy drawing on the regulatory debates and initiatives from standard setters to address the risks identified. |
| Keywords: | Central banks, collateral, cryptocurrencies, financial stability, regulation, stablecoins |
| JEL: | E42 E58 G21 G23 G28 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:sea:wpaper:wp54&r=reg |
| By: | Marco de Pinto (University of Applied Labour Studies); Laszlo Goerke (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University); Alberto Palermo (University of Roehampton) |
| Abstract: | Entry in a homogeneous Cournot oligopoly can be excessive if there is business stealing. Since this excessive entry prediction has been established, a variety of circumstances have been identified which allow for insufficient entry, despite the business stealing externality. This paper shows that most of them rely on the same mechanism and, therefore, constitute a special case of a general set-up. To establish this insight, we survey the pertinent contributions and classify the circumstances, which are invoked to establish the possibility of insufficient entry into four categories. Importantly, they all imply that the oligopolists pay a rent, which reduces profits and deters entry. Since rents are welfare-neutral, insufficient entry will occur if the rent is high enough. |
| Keywords: | : Business stealing, Cournot oligopoly, Economic rent, Excessive entry, Insufficient entry, Literature survey |
| JEL: | D43 D62 L13 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:iaa:dpaper:202402&r=reg |
| By: | Pan-Yang Su; Chinmay Maheshwari; Victoria Tuck; Shankar Sastry |
| Abstract: | The rise of advanced air mobility (AAM) is expected to become a multibillion-dollar industry in the near future. Market-based mechanisms are touted to be an integral part of AAM operations, which comprise heterogeneous operators with private valuations. In this work, we study the problem of designing a mechanism to coordinate the movement of electric vertical take-off and landing (eVTOL) aircraft, operated by multiple operators each having heterogeneous valuations associated with their fleet, between vertiports, while enforcing the arrival, departure, and parking constraints at vertiports. Particularly, we propose an incentive-compatible and individually rational vertiport reservation mechanism that maximizes a social welfare metric, which encapsulates the objective of maximizing the overall valuations of all operators while minimizing the congestion at vertiports. Additionally, we improve the computational tractability of designing the reservation mechanism by proposing a mixed binary linear programming approach that is based on constructing network flow graph corresponding to the underlying problem. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2403.18166&r=reg |
| By: | van Leuvensteijn, Michiel; Huljak, Ivan; de Bondt, Gabe |
| Abstract: | This paper extends Boone (2008) by introducing a competition measure at the individual firm level rather than for an entire market segment. It is based on the elasticity between profits and efficiency and called marginal relative profitability (MRP). Its intuition is that when a small change in efficiency derived from marginal costs can cause a large change in profits, a firm exercises pressure on its peers and gains profits. The MRP is embedded in the theoretical framework of Boone and measures competition vis-à-vis other market participants. We apply this extended Boone indicator to individual bank-level competition in the loan market in the four largest euro area countries and Austria. The MRP distribution is skewed to the left and many banks have a MRP below one, indicating that those banks have little incentive to enhance their efficiency to increase their profits. The MRP approach is shown to be a powerful tool to test the efficient-structure, structure-conduct performance, and ‘quiet life’ hypotheses and to detect comparatively weak non-competitive banks. Our new measure of firm-level competition enriches and complements other competition measures and provides a promising starting point for future market power analyses. JEL Classification: D4, L16, G21 |
| Keywords: | banks, competition, firm level |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20242925&r=reg |
| By: | Daniel Ofori-Sasu (University of Ghana Business School); Elikplimi Komla Agbloyor (University of Ghana Business School); Dennis Nsafoah (Niagara University); Simplice A. Asongu (Johannesburg, South Africa) |
| Abstract: | This study examines the effect of regulatory independence of the central bank in shaping the impact of electoral cycles on bank lending behaviour in Africa. It employs the dynamic system Generalized Method of Moments (SGMM) Two-Step estimator for a panel dataset of 54 African countries over the period, 2004-2022. The study found that banks lend substantially higher during election years, and reduce lending patterns thereafter. The study shows that countries that enforce monetary policy autonomy of the central bank induce a negative impact on bank lending behaviour while those that apply strong macro-prudential independent action and central bank independence reduce lending in the long term. The study provides evidence to support that regulatory independence of the central bank dampens the positive effect of elections on bank lending around election years while they amplify the reductive effects on bank lending after election periods. There is a wake-up call for countries with weak independent central bank regulatory policy to strengthen their independent regulatory policy frameworks and political institutions. This will enable them better strategize to yield a desirable outcome of bank lending to the real economy during election years. |
| Keywords: | Political Economy; Political Credit Cycles, Electoral Cycle; Central Bank Regulatory Independence; Bank lending Behaviour |
| JEL: | D7 D72 G2 G3 E3 E5 E61 G21 L10 L51 M21 P16 P26 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:24/002&r=reg |