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on Regulation |
| By: | Patrice Bougette (Université Côte d'Azur, CNRS, GREDEG, France); Frédéric Marty (Université Côte d'Azur, CNRS, GREDEG, France) |
| Abstract: | This paper examines the interplay between transport and competition law within the EU, particularly focusing on case law in the context of liberalization. The transport sector, marked by natural monopolies, often requires specific regulation alongside competition law to address issues like exclusionary practices by incumbents. Despite liberalization efforts, dominant players may still hinder competition through control of essential infrastructure. The entry discusses legal and regulatory strategies to ensure fair market access and competition and considers broader socio-economic impacts such as regional development and environmental sustainability. |
| Keywords: | Competition Law, Liberalization, Natural Monopolies, Essential Infrastructure, Vertical Integration, Regulatory Frameworks |
| JEL: | L41 L43 K21 L51 R48 L92 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2024-28 |
| By: | Heid, Pascal; Remmy, Kevin; Reynaert, Mathias |
| Abstract: | The transition to electric vehicles (EVs) shifts the complementary market for passenger transport from oil to electricity. We develop and estimate a joint equilibrium model of the German electricity and automobile markets, emphasizing the timing of EV charging, as electricity generation costs and pollution vary intraday. Our results show that under Germany’s current electricity pricing scheme, EVs create a significant pecuniary externality: electricity expenses rise by €0.66 for every €1 spent charging. Exposing charging to wholesale price variation eliminates the pecuniary externality, makes EVs greener, and increases adoption—a triple dividend. |
| Keywords: | Electric vehicles; electricity markets; charging; complementary markets |
| JEL: | L5 L6 L9 Q4 Q5 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129899 |
| By: | Kreutz, Julian (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)); Kopp, Jan Hendrik (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)) |
| Abstract: | Climate-neutral hydrogen is set to play a crucial role in decarbonizing Europe by 2050. Yet, assumptions on hydrogen imports vary widely across existing studies — ranging from fully flexible to fixed import volumes — often neglecting the modalities of future hydrogen trade such as long-term contracts (LTC). This paper addresses this gap by investigating the implications of Take-or-Pay (TOP) rates in hydrogen LTCs on a decarbonized European energy system. We employ a numerical model that optimizes generation capacity, storage and infrastructure investment, and dispatch decisions for the European power and hydrogen sector in 2050, explicitly incorporating TOP obligations in hydrogen LTCs. Our findings show that varying TOP-rates induce significant shifts in cost-minimal infrastructure requirements of the energy system.These shifts underscore the necessity to account for the degree of import flexibility in planning assessments for future energy systems relying on hydrogen imports. Additionally, we show that reduced import flexibility imposed by high TOP rates is balanced predominantly by increased hydrogen storage and withdrawal capacity while import capacity decreases. By simulating dispatch decisions for 35 weather years for the energy systems planned with representative weather, we find that systems planned with high TOP-rates exhibit a lower reliability when weather characteristics during operation differ from the planning stage. Yet, the modalities of future hydrogen trade, for example via long-term contracts (LTC), are often neglected and existing research assumes imports to be completely flexible. |
| Keywords: | Energy System Modeling; Hydrogen Infrastructure; Hydrogen Storage; Hydrogen Long-Term-Contracts; Hydrogen and Electricity Markets |
| JEL: | C61 F10 Q27 Q40 Q41 Q48 |
| Date: | 2024–10–29 |
| URL: | https://d.repec.org/n?u=RePEc:ris:ewikln:2024_007 |
| By: | Jeanne Mouton (Université Côte d'Azur, CNRS, GREDEG, France; European Commission); Benoit Rottembourg (Inria, Regalia) |
| Abstract: | In a global context where competition authorities are investigating and sanctioning Amazon's marketplace for practices of self-preferencing at the expense of their business users and consumers (Italian AGCM 2021, EU Commission 2022, UK CMA 2024, US FTC on-going since 2023), we observe a trend of imposing remedies on dominant players in digital markets. In addition, the Digital Market Act, shifting from an ex-post enforcement approach to ex-ante obligations on designated gatekeepers, is strengthening auditing power over these gatekeepers, which risk heavier penalties in the event of non-compliance. Therefore, competition authorities and regulators need tools to audit the compliance of these dominant players in the e-commerce sector over the obligations and remedies they are imposing on dynamic, and personalized algorithms. Most of these algorithms embed Machine-Learning components, introducing opacity and potentially biases in the decision-making process. The aim of the paper is to explore the benefits of using black-box auditing techniques to provide insights into the behavior of these online algorithms. We anchor our research in the literature of product prominence from vertically integrated players, of choice ranking, and of the specific literature related to Amazon search ranking, automatic pricing and Buy Box 's algorithms. Through a study of the pricing and ranking of several thousand products on Amazon, from 2017 to 2023, we illustrate the potential of surrogate models. While our dataset only covers some categories on Amazon.fr, the large number of competitions allowed us to demonstrate, with a 94% accuracy, that the variable is Amazon, or variables correlated to it, had a positive effect on winning Buy Box before mid-2022, and that this positive effect has decreased after mid-2022. In our research, the machine learnings models revealed a significantly higher degree of accuracy and sensitivity compared to a logistic regression, opening the discussion on the added value and role of surrogate models based on machine learning techniques in guiding the auditor, as well as raising the question of their probative value in the regulatory context. |
| Keywords: | algorithms, ranking algorithms, digital markets, online marketplace, competition law, audit, machine learning |
| JEL: | K21 L41 L51 L81 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2024-27 |
| By: | Ajayi, Victor (Energy Policy Research Centre, University of Cambridge); Burlinson, Andrew (School of Economics and Sheffield Urban International Trade and Environmental Economic Group, University of Sheffield); Giulietti, Monica (Nottingham University Business School, University of Nottingham and UK Energy Research Centre); Waterson, Michael (CAGE research centre and Department of Economics, University of Warwick) |
| Abstract: | In April 2022, consumers in Great Britain (GB) witnessed a 54% increase in the energy price cap, as a result of Russia’s invasion of Ukraine on February 24th, which sent wholesale gas prices spiralling across Europe. We leverage high-frequency data collected by the Smart Energy Research Lab, a representative panel containing daily gas and electricity data for around 13, 000 households in Great Britain between January 2021 and December 2023 to investigate the implications. We exploit several datasets linked to the panel data which include time-varying and cross-sectional information. We rely on two price shocks: 1) in October 2021 a wave of energy retail suppliers leaving the industry. At this time over two million consumers on fixed contracts were forced to join a new supplier and pay a variable tariff, and 2) these consumers were exposed to a second price shock caused by the Ukraine-Russia conflict which fed through April 2022’s energy price cap. Exploiting this pseudo-natural experiment, we use a difference-in-difference framework to estimate average treatment effects on this group of consumers and find that they would have consumed an additional 10 percentage points more electricity and 16 percentage points more gas had their prices remained fixed. These estimates are robust to a battery of robustness checks and point towards a significant loss in welfare for consumers on variable tariffs in the early stages of the energy price crisis. |
| Keywords: | Difference-in-differences, energy consumption, energy crisis JEL Classification: L94, E31, D12, I19 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:cge:wacage:727 |
| By: | Shamim Homaei; Simon Roussanaly; Asgeir Tomasgard |
| Abstract: | In power markets, understanding the cost dynamics of electricity generation is crucial. The complexity of price formation in the power system arises from its diverse attributes, such as various generator types, each characterized by its specific fixed and variable costs as well as different lifetimes. In this paper, we adopt an approach that investigates both long-run marginal cost (LRMC) and short-run marginal cost (SRMC) in a perfect competition market. According to economic theory, marginal pricing serves as an effective method for determining the generation cost of electricity. This paper presents a capacity expansion model designed to evaluate the marginal cost of electricity generation, encompassing both long-term and short-term perspectives. Following a parametric analysis and the calculation of LRMCs, this study investigates the allocation of investment costs across various time periods and how these costs factor into the LRMC to ensure cost recovery. Additionally, an exploration of SRMCs reveals the conditions under which LRMCs and SRMCs converge or diverge. We observe that when there is a disparity between LRMC and SRMC, setting electricity generation prices equal to SRMCs does not ensure the complete recovery of investment and operational costs. This phenomenon holds implications for market reliability and challenges the pricing strategies that rely solely on SRMCs. Furthermore, our investigation highlighted the significance of addressing degeneracy in the power market modeling. Primal degeneracy in the SRMC model can result in multiple values for the dual variable representing SRMC. This multiplicity of values creates ambiguity regarding the precise SRMC value, making it challenging to ascertain the correct estimation. As a result, resolving degeneracy will ensure the reliability of the SRMC value, consequently enhancing the robustness and credibility of our analysis. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.15861 |
| By: | Nicola Giannelli (Department of Economics, Society & Politics, Università di Urbino Carlo Bo) |
| Abstract: | This paper examines the European Union's (EU) policy design for regulating Artificial Intelligence (AI), highlighting the comprehensive legislative approach adopted to balance innovation with the protection of fundamental rights. The EU’s AI Act and preceding regulatory efforts emphasize defining AI with flexibility and precision, ensuring transparency, and promoting trustworthiness. Central to this regulatory framework is the emphasis on human agency, technical robustness, privacy, transparency, and accountability. Military and academic use of AI is out of its scope.The paper explores the EU’s dual focus on economic growth and citizen protection, showcasing the role of the High-Level Expert Group on Artificial Intelligence (AI HLEG) in shaping ethical guidelines and management processes. By building on existing legislative frameworks, the EU addresses emerging risks and ethical dilemmas, ensuring that AI development aligns with societal values and public trust.1 The approach of the proposal is Risk-Based on the side human protection and market building on the side of innovation. The bill is 459 pages Act of Parliament that cannot be enforced without a lot of help from legal services. This should come a network of regulatory agencies, one for each member state, with an AI Office of the Commission at the European Level. Sandboxes that want to simulate the compliance of any new system with regulation framework will become necessary, like other legal counseling, for firms that want to avoid to be blocked in a Kafkian procedure. |
| Keywords: | Artificial Intelligence; European Union; Regulation Policy; Risk Management |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:urb:wpaper:24_02 |
| By: | Javier Asensio (Department of Applied Economics, Univ. Autonoma de Barcelona, 08193 Bellaterra, Spain); Anna Matas (EDepartment of Applied Economics, Univ. Autonoma de Barcelona, 08193 Bellaterra, Spain) |
| Abstract: | Spain regulates its intercity bus market by means of a ‘competition for the market’ mechanism, whose design has been modified several times in the last years. This implies that current services are operated under contracts whose conditions are heterogeneous. We take advantage of such fact to empirically measure the impact that regulatory designs may have on fares paid by the users. The results show very large differences between routes whose contracts were awarded under relatively open conditions compared to regionally regulated routes or very old contracts whose concessions were extended and have not been retendered. |
| Keywords: | intercity buses, prices, tendering, competition for the market. |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:uab:wprdea:wpdea2401 |
| By: | Kurdoglu, Berkay |
| Abstract: | This study explores the critical role of market definition in antitrust and competition law, where defining the relevant market is fundamental for assessing competition between firms, products, and markets. Traditional methods for market definition, such as the SSNIP test, Critical Loss Analysis, and cross-elasticity of demand, rely on econometric models to evaluate substitutability and price sensitivity. However, these models face limitations, including challenges with endogeneity, data requirements, and the time-consuming nature of the process. Given these constraints, there is a growing interest in more efficient, data-driven approaches. This research delves into the use of clustering algorithms as a modern tool to enhance market definition in antitrust cases. By leveraging these advanced methods, the study aims to offer new insights into competitive landscapes and the evolving dynamics of market structures, contributing to a deeper understanding of rivalry relationships in both traditional and digital marketplaces. |
| Keywords: | Antitrust, Competition law, Market definition, Clustering algorithm |
| JEL: | D40 K21 L4 |
| Date: | 2023–11–27 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122340 |
| By: | Andres, Pia |
| Abstract: | Low cost solar energy is key to enabling the transition away from fossil fuels. Despite this, the European Union followed the United States’ example in imposing anti-dumping tariffs on solar panel imports from China in 2013, arguing that Chinese panels were unfairly subsidised and harmed its domestic industry. This paper examines the effects of Chinese import competition on firm-level innovation in solar photovoltaic technology by European firms using a sample of 10, 137 firms in 15 EU countries over the period 1999–2020. I show that firms which were exposed to higher import competition innovated more if they had a relatively small existing stock of innovation, but less if their historical knowledge stock fell within the top 10th percentile of firms in the sample. This suggests that newer firms were more able to respond to increased competition by innovating, while firms with a large historical stock of innovation may have been locked into old technological paradigms. As firms with a smaller knowledge stock tended to innovate more overall, trade with China appears to have been beneficial in encouraging innovation among the most innovative firms. However, I also find evidence that import competition increased the probability of exit among firms in the sample. |
| JEL: | R14 J01 |
| Date: | 2024–10–07 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:125801 |
| By: | Oner Tulum (Academic-Industry Research Network); William Lazonick (Academic-Industry Research Network) |
| Abstract: | Mandated by the Inflation Reduction Act of 2022, the U.S. government through the Centers for Medicare and Medicaid Services (CMS) is negotiating with pharmaceutical companies over the "maximum fair price" of ten drugs in wide use by Medicare patients. Over the next few years, the number of drugs whose prices are subject to negotiations will increase. The pharmaceutical companies contend that a "fair" price would be a "value-based price" that enables the companies' shareholders to capture the value that the drug creates for society. Invoking the dominant "maximizing shareholder value" ideology, the argument for value-based pricing assumes that it is only a pharmaceutical company's shareholders who make the risky investments that fund drug innovation. Pharmaceutical executives and their lobbyists warn that a lowering of drug prices will reduce investments in new drugs. The purpose of this paper is to enable CMS negotiators to respond to these arguments by showing a) why drug-price regulation is required, given the relation between scale economies in supplying drugs and price inelasticity of drug demand; b) how the pharmaceutical companies with which they are negotiating prices are, in general, not using their profits from unregulated drug prices to fund drug innovation but rather to fund distributions to shareholders in the form of cash dividends and stock buybacks; c) that publicly listed pharmaceutical companies do not typically rely upon investment by shareholders to fund drug innovation; and d) that investment in drug innovation entails "collective and cumulative learning" in foundational and translational research that is both antecedent and external to the investments in clinical research that a pharmaceutical company may make to bring a safe and effective drug to market. |
| Keywords: | Inflation Reduction Act, drug prices, Medicare negotiations, investment in innovation, accessible and affordable medicines, foundational research, translational research, clinical research, collective and cumulative learning, stock buybacks, shareholder-value ideology, value-based pricing, value for society |
| JEL: | G30 G35 H40 H51 I10 I28 J24 L11 L12 L21 L50 L65 O30 P16 |
| Date: | 2024–09–09 |
| URL: | https://d.repec.org/n?u=RePEc:thk:wpaper:inetwp226 |
| By: | Tom Krebs (University of Mannheim); Isabella Weber (University of Massachusetts, Amherst) |
| Abstract: | In the wake of the global energy crisis, many European countries used energy price controls to fight inflation and to stabilize the economy. Despite its wide adoption, many economists remained skeptical. In this paper, we argue that price controls should be part of the policy toolbox to respond to shocks to systemically important sectors because not using them can have large economic and political costs. We put forward our arguments in two steps. In a first step, we analyze the impact on the German economy and society of the global energy crisis that followed Russia’s attack on Ukraine in February 2022. Our analysis shows that energy shocks matter. Specifically, the one-year GDP loss of the energy crisis 2022 amounts to 4 percent and is comparable to the short-run output losses during the COVID-19 crisis 2020 and the global financial crisis 2008. In addition, during the energy crisis 2022 inflation rates rose dramatically and real wages dropped more than in any other year in postwar Germany. There are also clear signs that the crisis is causing severe long-term economic damage (hysteresis effects). At the beginning of 2024, GDP is 7 percent and real wages are 10 percent below the pre-COVID-19 trend. We argue that the German government handled the immediate response to the energy shock well, but subsequently waited too long to introduce an energy price brake in 2022. This failure to act decisively in response to heightened economic insecurity coincided with a strong rise of the approval rates of the far-right AfD in the summer of 2022. We also show that the German energy price brake was an effective price stabilization policy for households, but did not protect the industrial base appropriately making it more likely that the German economy will continue to stagnate. In a final step, we turn to the use of price controls as an optimal policy response to an energy shock within a general equilibrium framework. We develop a simple production model with an energy sector and shows that price controls are socially optimal whenever self-fulfilling expectations generate endogenous price uncertainty in the wake of an energy shock. We also link our analysis to the so-called sunspot literature that was developed in the 1980s as a response to the rational-expectations revolution in macroeconomics. Finally, we use our theoretical analysis to shed some light on the economic policy debate and the resistance of German mainstream economists to the introduction of energy price controls in 2022. |
| Keywords: | Global energy crisis, German economy, endogenous uncertainty, price controls, inflation, stabilization policy |
| JEL: | D52 D84 E12 E32 E64 Q43 Q48 |
| Date: | 2024–03 |
| URL: | https://d.repec.org/n?u=RePEc:agz:wpaper:2403 |
| By: | Rabi Mohtar |
| Abstract: | The fundamental role that water resources play in human development has been highlighted in multiple ways; the United Nations SDGs underline 17 different goals and over a hundred targets to be achieved by 2030. Out of 169 SDG targets, 59 were found to have direct links and synergies with the water goal SDG6 (UN Water, 2016). Careful policy making and interventions need to be implemented to avoid conflict among sectors and tradeoffs must be well established. The Integrated Water Resources Management (IWRM – since 1992) was adopted by most countries and made significant strides in formulating a good foundation for policies and synergies between stakeholders. Nevertheless, IWRM concepts need to be adaptive and revisited to achieve the Agenda 2030 targets. This policy brief introduces water management as a system of interactions between water and other vital resources including food, energy, and health among others; it presents several concepts to bring about policy coherence and quantitative protocols for a more cohesive implementation of policies and tradeoffs in the water sector and beyond. |
| Date: | 2023–02 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:pbagri:pb_08_23 |