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on Regulation |
| By: | Joshua S. Gans |
| Abstract: | Mobile app commissions paid by app developers to a monopolist device maker/app store operator are examined. Three results are demonstrated. First, unregulated app commissions are set at a level that maximises consumer surplus. Second, eliminating app commissions will lead to higher device prices. Third, requiring a menu of options for consumers as to how device makers receive subsidies from app developers constrains app commissions in a way that provides a more equal balance between consumer versus app developer interests. |
| JEL: | L11 L40 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32339&r= |
| By: | Davi-Arderius, D.; Jamasb, T.; Rosellon, J. |
| Abstract: | The 2022 energy crisis highlighted the dependence of Europe electricity sector on imported gas and the need to accelerate the connection of renewables to the power system. However, the allocation of generation and demand in electricity markets is not always technically viable and, where needed, system operators must activate or curtail specific generators not cleared in the day-ahead markets to ensure system reliability. This is a well-known operational, but under-researched, issue related to high integration of renewables. In Spain, most activated units are combined cycle or coal, while an equivalent volume of scheduled renewables (wind) must be curtailed to balance generation and consumption. Most of these actions are not used to alleviate congestion or grid bottlenecks, but to ensure system stability which highlights new challenges, but little empirically analyzed, in efficient integration of renewables. These actions impact on social welfare since all customers bear the costs of these actions, resulting in additional gas imports and CO2 emissions. We estimate how these actions could evolve under different scenarios. We find that additional renewables have increased the costs and CO2 emissions related to network operational needs. Moreover, the installation of small generation behind the meter might become a regressive policy since all customers will bear the additional operational costs. Finally, higher electricity consumption decreases the costs of solving operational needs, which highlights another social welfare benefit associated with the electrification of demand. Until the renewable or storage technologies evolve further, conventional generators (coal, combined cycle or nuclear) are needed for safe operation of systems with high rate of renewables, and countries need to assess when they disconnect them from the network. |
| Keywords: | Renewables, decarbonization, generation mix, redispatching, renewable curtailment, synchronous generators, day-ahead market, network constraints, gas crisis, system operator, smart grids, digitalization |
| JEL: | L51 L94 Q41 Q42 |
| Date: | 2024–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2421&r= |
| By: | Ignatenko, Anna (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | This paper documents price discrimination by transport companies, revealing their market power. Larger shipments of similar products sharing a container receive lower prices. A trade model with non-linear pricing of transportation rationalizes this with economies of scale and price discrimination, highlighting their distinct policy implications. To distinguish them, I test for the effect of competition on freight price variation specific to price discrimination. Using unexpected water level changes to instrument for competition in river transportation, I find increased competition causes steeper discounts for larger shipments. Thus, market power in transportation is less distortionary for larger firms gaining additional cost advantages. |
| Keywords: | price discrimination; quantity discounts; transportation; competition; economies of scale; mark-ups; market power |
| JEL: | D22 D43 F10 F12 F14 |
| Date: | 2024–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2024_006&r= |
| By: | Jessica Coria; Jūratė Jaraitė |
| Abstract: | This study examines how the impact of Tradable Green Certificates (TGC) on profitability and investment behavior varies depending on the vertical integration status of regulated firms. Our theoretical model predicts that vertical integration does not lead to higher profits when internal pricing aligns with market values for green certificates. However, it stimulates greater investment in renewable electric capacity since it reduces the costs of the sourced certificates. Empirical analysis of the Swedish TGC system confirms these findings, revealing that vertically integrated firms did not experience profit increases. Instead, they exhibited distinct investment patterns, prioritizing cost-effective technologies like hydro and thermal capacity over more expensive renewables, in contrast to non-integrated firms. |
| Keywords: | renewable energy, tradable green certificates, vertical integration, firm-level data, causal effects, profits, investments, Sweden |
| JEL: | L10 L50 Q58 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11079&r= |
| By: | Djankov, Simeon; Luksic, Igor; Zhang, Eva (Yiwen) |
| Abstract: | We find some evidence of regulatory convergence in four distinct areas of business activity over the 2005–2019 period. This convergence is most pronounced for countries in the French and German civil law tradition. |
| Keywords: | change; income; legal tradition; regulation |
| JEL: | F3 G3 J1 |
| Date: | 2022–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:115270&r= |
| By: | OECD |
| Abstract: | Recent global developments, and a number of serious crises, have led to large government interventions in many jurisdictions, driving a debate on whether there is a need to rethink the role of industrial policy in modern economies. This paper explores how to use industrial policy and make it pro-competitive. Competition authorities can play a crucial role in strengthening the impact of industrial policy: by ensuring that competition principles remain a cornerstone of carefully designed industrial policy. Moreover, competition enforcement keeps markets more competitive, laying a good foundation for industrial policy. |
| Date: | 2024–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dafaac:309-en&r= |
| By: | Li, Zehang; Elías, Antonio; Morales, Juan M. |
| Abstract: | Gathering knowledge of supply curves in electricity markets is critical to both energy producers and regulators. Indeed, power producers strategically plan their generation of electricity considering various scenarios to maximize profit, leveraging the characteristics of these curves. For their part, regulators need to forecast the supply curves to monitor the market’s performance and identify market distortions. However, the prevailing approaches in the technical literature for analyzing, clustering, and predicting these curves are based on structural assumptions that electricity supply curves do not satisfy in practice, namely, boundedness and smoothness. Furthermore, any attempt to satisfactorily cluster the supply curves observed in a market must take into account the market’s specific features. Against this background, this article introduces a hierarchical clustering method based on a novel weighted-distance that is specially tailored to non bounded and non-smooth supply curves and embeds information on the price distribution of offers, thus overcoming the drawbacks of conventional clustering techniques. Once the clusters have been obtained, a supervised classification procedure is used to characterize them as a function of relevant market variables. Additionally, the proposed distance is used in a learning procedure by which explanatory information is exploited to forecast the supply curves in a day-ahead electricity market. This procedure combines the idea of nearest neighbors with a machine-learning method. The prediction performance of our proposal is extensively evaluated and compared against two nearest-neighbor benchmarks and existing competing methods. To this end, supply curves from the markets of Spain, Pennsylvania-New Jersey-Maryland (PJM), and West Australia are considered. |
| Keywords: | Clustering; Forecasting; Supply curve; Electricity market |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:cte:wsrepe:43805&r= |
| By: | Aline Mortha (Waseda University); Toshi H. Arimura (Waseda University) |
| Abstract: | Partial energy taxation, such as fuel or electricity taxes, is gaining momentum in recent years, but such taxes may result in additional demand for non-taxed, substitute energy goods. In this research, we analyze the effect of the Japanese renewable levy, a prime example of implicit carbon pricing, introduced in 2012. Using data on Japanese plants between April 2004 to March 2020, we utilize the existence of a partial exemption scheme from the tax, and instruments for identification. Our results show that the levy had undesirable consequences, as it is associated with a rebound in emissions for certain sectors where electricity and fuels are substitute (iron & steel, +52%; pulp &paper, +13%). This rebound is explained by a greater share of electricity generated onsite, powered by fossil fuel. We show that the levy provided an incentive for plants to switch from clean (gas) to dirty (coal, oil) fuels. While the tax is generally correlated with gains in electricity and energy efficiency, these efforts are not enough to offset there bound in emissions. Our results shed light on the effect of partial energy taxation on the manufacturing industry, and suggest the need for explicit and complete forms of carbon pricing. |
| Keywords: | Implicit Carbon Pricing; Renewable levy; Energy-intensive industry; Interfuel substitution |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:wap:wpaper:2404&r= |
| By: | Li, Shuo (Faculty of Business and Economics, The University of Hong Kong, Hong Kong, China); Wang, Min (China Center for Economic Research, National School of Development, Peking University, Beijing, China) |
| Abstract: | The paper provides a comprehensive investigation of the effects of environmental regulations on Chinese firms’ extensive margins. Using registration information of all firms in 35 industries from 1991 to 2010, we show that environmental regulations deter firm entry, increase firm exit and reduce the net entry of firms. Specifically, in response to such regulations, large, long-lived and private entrants are less likely to enter the market, and small and long-lived incumbents are more likely to exit. This concentrates the market and expands the state sector in pollution-intensive industries. Moreover, the entrants are more heavily regulated than incumbents. We also find evidence that, in response to environmental regulations, firms in regulated locations are more likely to create new firms in pollution-intensive industries in unregulated areas. However, these spatial spillover effects are negligible, posing little threat to the estimation of environmental regulatory impacts on firm entry in our setting and therefore alleviating the concern of pollution relocation. |
| Keywords: | Environmental Regulation; Firm Entry; Firm Exit; Equity Investment; Spatial Spillover; Inter-city Investment |
| JEL: | L51 O44 Q52 Q58 R38 |
| Date: | 2022–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunefd:2022_015&r= |
| By: | Kasy, Maximilian (University of Oxford) |
| Abstract: | Most definitions of algorithmic bias and fairness encode decisionmaker interests, such as profits, rather than the interests of disadvantaged groups (e.g., racial minorities): Bias is defined as a deviation from profit maximization. Future research should instead focus on the causal effect of automated decisions on the distribution of welfare, both across and within groups. The literature emphasizes some apparent contradictions between different notions of fairness, and between fairness and profits. These contradictions vanish, however, when profits are maximized. Existing work involves conceptual slippages between statistical notions of bias and misclassification errors, economic notions of profit, and normative notions of bias and fairness. Notions of bias nonetheless carry some interest within the welfare paradigm that I advocate for, if we understand bias and discrimination as mechanisms and potential points of intervention. |
| Keywords: | AI, algorithmic bias, inequality, machine learning, discrimination |
| JEL: | J7 O3 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16944&r= |
| By: | Giuseppe Dari-Mattiacci (University of Amsterdam); Sander Onderstal (University of Amsterdam); Francesco Parisi (University of Minnesota); Ram Singh (Department of Economics, Delhi School of Economics) |
| Abstract: | It is well known that sellers have a general obligation to disclose “negative” information about hidden defects of their products. In contrast, buyers usually do not have a binding obligation to disclose “positive” information about the hidden qualities of the products. The leading explanation for the asymmetric treatment of the two sides - buyers and sellers - is provided by appealing to incentives to invest in relevant information. It is argued that the imposition of disclosure duties on buyers would undermine their incentives to acquire socially useful but costly information ex-ante. This explanation is unsatisfactory. First, the failure to correct asymmetric information problems ex-post would cause, as we will show, an inverse adverse selection problem ex-ante. This would lead to the uninformed sellers’withdrawal from the market. Consequently, resources would not move to (informed)buyers with higher valuations. In this paper, we develop a model to balance the benefits of information acquisition, on the one hand, with the costs of asymmetric information, on the other hand. We use the framework to study the incentives created by different defaultdisclosure and non-disclosure - rules. We examine the optimum default rules by showing that the choice of alternative disclosure rules makes a difference when parties can contract around defaults at a moderate cost. Unlike disclosure rules, non-disclosure default rules yield partially separating equilibria that preserve the buyers’ incentives to acquire information and foster trade opportunities between expert and uninformed sellers. JEL Code: D44, D82, D86, K12 |
| Keywords: | asymmetric information, penalty default rules, inverse adverse selection |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:cde:cdewps:346&r= |
| By: | Mary Amiti; Sebastian Heise |
| Abstract: | The increasing dominance of large firms in the United States has raised concerns about pricing power in the product market. The worry is that large firms, facing fewer competitors, could increase their markups over marginal costs without fear of losing market share. In a recently published paper, we show that although sales of domestic firms have become more concentrated in the manufacturing sector, this development has been accompanied by the entry and growth of foreign firms. Import competition has lowered U.S. producers’ share of the U.S. market and put smaller, less efficient domestic firms out of business. Overall, market concentration in manufacturing was stable in recent decades, though import penetration has greatly altered the makeup of the U.S. manufacturing sector. |
| Keywords: | concentration; markups; import competition |
| JEL: | E2 F0 |
| Date: | 2024–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:98182&r= |
| By: | Otieno, Jackson (Athi Water Works; and Environment for Development Kenya); Cook, Joseph (School of Economic Sciences, Washington State University, USA); Fuente, David (School of the Ocean, Earth and the Environment, University of South Carolina, USA) |
| Abstract: | We investigate the price responsiveness of commercial and industrial water users in Nairobi, Kenya using billing data from 32, 793 commercial and industrial customers over five years that includes 663, 000 billing records with usable, metered water use data. We examine water demand before and after a relatively substantial tariff increase in 2015 that collapsed the increasing block tariff from four blocks to three and created a new zero-cost ”lifeline” block of seven cubic meters. Rather than estimate an instrumental variables approach, we use a simple price specification that we believe fits the available evidence on price perception from the household demand literature: lagged average total price. Pooling all data, we find inelastic demand: a 10% increase in average total price is associated with a 1.1% reduction in monthly water use. Firms that have a lower mean monthly water use are more price responsive than firms with moderate water use. We find no price effect among the largest water users. Finally, we estimate separate demand models for various types of businesses, finding inelastic demand in six of seven categories (construction, garages, industrial users, markets/retail, and small office buildings). Large office buildings are not price responsive, and we find wrong-signed price elasticities for restaurants. |
| Keywords: | Water Demand; Commercial firms; Water Elasticity; Kenya |
| JEL: | L20 Q25 Q31 Q51 |
| Date: | 2023–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunefd:2023_004&r= |
| By: | Nazam Maqbool (Pakistan Institute of Development Economics) |
| Abstract: | Cities in Pakistan are increasingly faced with problems of erratic supply of piped water and unsafe and declining levels of groundwater. Additionally, over one-third (35 to 40 percent) of piped water is wasted through leakages and theft in the water distribution networks.[1] By 2050, the country’s urban population is expected to double in size (from 81 million in 2022 to 160 million in 2050 or from 37.7 percent of the total population to 52.2 percent) (see table 1). Providing water for these citizens is a challenging task; finding money to pay for the provision of that water is at least as daunting. Urban water tariffs are low and infrequently adjusted, even with current efforts at reform. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:pid:kbrief:2024:115&r= |
| By: | Pablo D. Azar; Adrian Casillas; Maryam Farboodi |
| Abstract: | The decentralized nature of blockchain markets has given rise to a complex and highly heterogeneous market structure, gaining increasing importance as traditional and decentralized (DeFi) finance become more interconnected. This paper introduces the DeFi intermediation chain and provides theoretical and empirical evidence for private information as a key determinant of intermediation rents. We propose a repeated bargaining model that predicts that profit share of Ethereum market participants is positively correlated with their private information, and employ a novel instrumental variable approach to show that a 1 percent increase in the value of intermediaries’ private information leads to a 1.4 percent increase in their profit share. |
| Keywords: | financial intermediation; oligopoly; blockchain; decentralized finance; cybersecurity |
| JEL: | G23 D82 L14 L22 G14 D43 |
| Date: | 2024–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:98219&r= |
| By: | Yulin Liu; Luyao Zhang |
| Abstract: | Decentralized Autonomous Organizations (DAOs), utilizing blockchain technology to enable collective governance, are a promising innovation. This research addresses the ongoing query in blockchain governance: How can DAOs optimize human cooperation? Focusing on the Network Nervous System (NNS), a comprehensive on-chain governance framework underpinned by the Internet Computer Protocol (ICP) and liquid democracy principles, we employ theoretical abstraction and simulations to evaluate its potential impact on cooperation and economic growth within DAOs. Our findings emphasize the significance of the NNS's staking mechanism, particularly the reward multiplier, in aligning individual short-term interests with the DAO's long-term prosperity. This study contributes to the understanding and effective design of blockchain-based governance systems. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.13768&r= |