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on Regulation |
| By: | Bo Cowgill; Andrea Prat; Tommaso Valletti |
| Abstract: | Brandeis (1914) hypothesized that firms with market power will also attempt to gain political power. To explore this hypothesis empirically, we combine data on mergers with data on lobbying expenditures and campaign contributions in the US from 1999 to 2017. We pursue two distinct empirical approaches: a panel event study and a differential exposure design. Both approaches indicate that mergers are followed by large and persistent increases in lobbying activity, both by individual firms and by industry trade associations. There is also weaker evidence for an association of mergers with campaign contributions (PACs). We also find that mergers impact the extensive margin of political activity, for example, by impacting companies’ choice to establish their first in-house lobbying teams and/or first corporate PAC. We interpret these results within an oligopoly model augmented with endogenous regulation and lobbying. |
| JEL: | L19 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33255 |
| By: | Jonathan Elliott (JHU - Johns Hopkins University); Georges Vivien Houngbonon (World Bank Group); Marc Ivaldi (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); Paul T. Scott (NYU - New York University [New York] - NYU - NYU System) |
| Abstract: | We develop a model of competition in prices and infrastructure among mobile network operators. Although consolidation increases market power, it can lead to more efficient data transmission due to economies of scale, which we derive from physical principles. After estimating our model with French consumer and infrastructure data, equilibrium simulations reveal that while prices decrease with the number of firms, so do download speeds. Our framework also allows us to quantify the impact of spectrum allocation. The marginal social value of spectrum exceeds firms' willingness to pay in our model as well as observed prices in spectrum auctions. |
| Keywords: | Market structure, Scale efficiency, Antitrust policy, Infrastructure, Endogenous, Quality, Queuing, Mobile telecommunications |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04831225 |
| By: | Marc Ivaldi (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); Connie Lee (TSE-R - TSE-R Toulouse School of Economics – Recherche - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Is it the Advent of Fairness ? |
| Keywords: | European Union, United States of America, China, General antitrust, Competition policy, Consumer welfare, Consumer protection, All business sectors |
| Date: | 2024–11–13 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04823071 |
| By: | Kenneth S. Rogoff; Zhiheng He; Yang You |
| Abstract: | Digitalization led to a rapid expansion of loyalty tokens typically bundled as part of product price. An open question is whether issuers are incentivized to make loyalty tokens tradable, raising regulation issues for monetary and banking authorities. This paper argues that an issuer earns more revenue by making tokens non-tradable even though consumers would pay a higher price for tradable tokens. We further show that an issuer with stronger market power makes its revenue more token-dependent. We test the model’s predictions with data on airline mileage and hotel reward programs and document consistent empirical results that align with our theory. |
| JEL: | G12 G32 G51 M20 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33201 |
| By: | Yanlin Chen; Xianwen Shi; Jun Zhang |
| Abstract: | We study the welfare effects of price discrimination in a duopoly market with both captive and contested consumers. Using a unified information design approach, we characterize the best and worst market segmentations for producer surplus, consumer surplus, and social surplus. The firm-optimal segmentation, which divides the market into two nested segments, consistently harms consumers compared to uniform pricing. The consumer-optimal segmentation, which divides the market into a symmetric segment and a nested segment, sometimes leads to a Pareto improvement. Social surplus, if monotone in firm profit, is often maximized either by the firm-optimal or consumer-optimal segmentation. |
| Keywords: | Information Design, Market Segmentation, Firm-optimal Segmentation, Consumer-optimal Segmentation |
| JEL: | D43 D82 |
| Date: | 2025–01–16 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-790 |
| By: | Kim, Min Jung |
| Abstract: | Self-preferencing by online platforms encompasses a spectrum of conduct types, all with implications for both anti-competitive and pro-competitive effects. Therefore, it is desirable to maintain the current ex-post regulatory framework, which applies the rule of reason and intervenes only when such practices are deemed to be unjust or harmful to fair competition, rather than imposing a blanket ban. However, the timeliness and efficiency of enforcement mechanisms should be improved in light of the distinct characteristics of the online environments and self-preferencing conducts. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:kdifoc:308156 |
| By: | Mr. Serhan Cevik; Yueshu Zhao |
| Abstract: | European electricity markets are in the midst of unprecedented changes—caused by Russia’s invasion of Ukraine and the rise of renewable sources of energy. Using high-frequency data, this paper investigates volatility spillovers across 24 countries in the European Union (EU) during the period 2014–2024 to provide a better understanding of the transmission of risks in an international context. We develop both a static and a dynamic assessment of spillover effects and directional decomposition between individual countries. Our main findings show that about 73 percent of the forecast error variation is explained by cross-variance shares, which means only 27 percent can be attributed to shocks within each country. In other words, cross-border volatility spillovers dominate the behavior in national electricity markets in Europe—and this effect has grown over time. We also implement an augmented gravity model of bilateral volatility spillovers across power markets in the EU. Altogether, these results provide important insights to policymakers and regulators with regards to greater integration of electricity markets and infrastructure improvements that would also help with the transition to low-carbon sources of power generation and strengthen energy security in Europe. |
| Keywords: | Electricity prices; Volatility; Spillovers; Gravity model; Renewable energy; Electricity market reform; Europe |
| Date: | 2025–01–10 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/007 |
| By: | Edward Kong; Timothy Layton; Mark Shepard |
| Abstract: | Adverse selection is a classic market failure known to limit or “unravel”' trade in high-quality insurance and many other economic settings. While the standard theory emphasizes quality distortions, we argue that selection has another big-picture implication: it unravels competition among differentiated firms, leading to fewer surviving competitors—and in the extreme, what we call “un-natural” monopoly. Adverse selection pushes firms toward aggressive price cutting to attract price-sensitive, low-risk consumers. This creates a wedge between average and marginal costs that (like fixed costs in standard models) limits how may firms can profitably survive. We demonstrate this insight in a simple model of insurer entry and price competition, estimated using administrative data from Massachusetts' health insurance exchange. We find a large “selection wedge” of 20-30% of average costs, which (without corrective policies) unravels the market to monopoly. Our analysis suggests a surprising policy implication: interventions that limit price-cutting can improve welfare by supporting more entry, and ultimately lower prices. |
| JEL: | D4 I11 I13 L1 L40 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33187 |
| By: | Jose Azar (IESE Business School); Ioana Marinescu (University of Pennsylvania) |
| Abstract: | Labor economics often assumes that wages w are equal to the marginal revenue product of labor MRPL. However, recent literature has shown that firms’ market power allows them to pay wages substantially below marginal productivity. The markdown (MRPL − w)/w is our preferred measure of firms’ monopsony power, and captures the percent wage increase that would occur if monopsony power were eliminated. We derive the markdown across three classes of models, each embodying a distinct source of monopsony power. First, in oligopsony models, monopsony power arises from strategic interactions between large firms, and is related to labor market concentration. Second, in job differentiation models, monopsony power arises from workers’ heterogeneous preferences over jobs that differ in wages and amenities. Finally, in search and matching models, it arises from frictions that prevent workers from accessing all existing job vacancies. To identify the markdown, empirical studies often rely on estimating the firm-level labor supply elasticity and taking its inverse as a measure of the markdown. A few studies directly estimate MRPL using a production function approach. Across studies, the markdown typically ranges between 15% and 50% implying that wages would increase by 15 to 50% if firms’ monopsony power were eliminated. Finally, we analyze the policy implications of monopsony power in three areas, drawing on both theory and empirical analysis: merger control in antitrust policy, the regulation of non-competition agreements, and minimum wages. Monopsony power helps explain how mergers and noncompetition agreements can lower wages, and how minimum wages can increase employment. Overall, the literature shows that monopsony power is significant, and should be considered when analyzing policy and the sources of wage variation. |
| Keywords: | monopsony, oligopsony, markdown, wages, labor market concentration, labor supply elasticity, antitrust, mergers, imperfect competition, minimum wage |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2431 |
| By: | Diaz, Adriano |
| Abstract: | This article examines the phenomenon of "Bad Law" ("Mal Derecho") within Argentina's legal tradition, where laws are crafted based on idealistic conceptions of what the legal framework ought to be but lack the practical mechanisms necessary for effective enforcement. This disconnect between a law's design and its implementation fosters a dysfunctional legal system and widespread non-compliance. Rather than addressing the structural flaws within these laws, legal scholars often invoke the “Protective Hypothesis of Bad Law, ” attributing non-compliance to a moral failure of the populace instead of recognizing the inherent deficiencies in the legal framework. This issue is starkly illustrated by Law 27, 442 on Antitrust. Although ostensibly designed to promote competition and prevent market distortions, the law suffers from critical design flaws that render enforcement—both public and private—ineffective. Public enforcement is undermined by a lack of political incentives to establish the necessary enforcement authority, a shortcoming embedded within the law itself. Meanwhile, private enforcement remains largely theoretical, as potential plaintiffs are discouraged by the prohibitive complexity and costs of litigation. As a result, Argentina's competition law fails to achieve its intended objectives, leaving the country’s antitrust system largely ineffective and illusory. |
| Date: | 2025–01–04 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:t8j6g |
| By: | Grajzl, Peter; Ćorić, Bruno; Srhoj, Stjepan |
| Abstract: | Conventional wisdom suggests that when business regulation is excessive, deregulation should enhance efficiency. The liberalization of services markets in Croatia demonstrates that this is not necessarily the case, particularly when features of the reform process allow undue influence by those who stand to lose from the removal of regulatory barriers. To assess the effects of the Croatian reform, we determine the yearly volume of deregulation measures applicable to each affected sector and construct a sector-level panel dataset encompassing a wide range of outcomes. Exploiting within-sector, over-time variation in the volume of deregulation measures, we find that deregulation, on average, increased labor productivity but had no effect on entry, employment, or profit margins. While both new entrants and incumbents shared the labor-productivity gains, incumbents benefited more and also experienced an increase in profit margins. Heterogeneity analysis reveals that the reform was more effective in sectors with initial conditions indicative of weaker incumbent power. Our findings underscore the relevance of public-choice perspectives not only in understanding regulation, as emphasized by prior literature, but also in the context of deregulation. |
| Keywords: | deregulation, liberalization, services markets, heterogeneity, special interests |
| JEL: | L51 L80 D02 K20 P16 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1554 |
| By: | Marzia Sesini (Florence School of Regulation, European University Institute); Anna Cretì (Chaire économie du climat - Chaire économie du climat, Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique); Olivier Massol (IFPEN - IFP Energies nouvelles, IFP School, CentraleSupélec, City University of London) |
| Abstract: | The scaling up of renewable gases is now being presented as a critical and effective component of the EU's long-term decarbonization strategy. Yet, the support schemes implemented for biogas and biomethane are far less studied than the ones dedicated to renewable power generation (e.g., solar or wind). This work bridges this gap by reviewing the supporting policies implemented in the EU and conducting a retrospective comparative analysis of the mechanisms implemented in Germany, Denmark, and Italy. The analysis is based on primary data extracted from policy statements that have been harmonized. Results show that incentivizing the supply side lowers the risk associated with early investments and market development. Conversely, they highlight inhomogeneity among countries in accounting for demand and end-use in their policies. Finally, they point at the availability of feedstock and the geographic and economic structure of a country as factors influencing the development of a market for renewable gases. The analysis stresses the value of policy mix in promoting biogas and biomethane in the EU's energy mix, and it hinges on the importance of scrutinizing sectoral massification, novel business models, infrastructure integration, and enhanced financial accessibility to improve their competitiveness and market advancement within the energy landscape. |
| Keywords: | Renewable gas, Biomethane, Biogas, Policy mix, Subsidies, Comparative analysis |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04779838 |
| By: | Jeroen Hinloopen (Netherlands Bureau for Economic Policy Analysis and Tinbergen Institute); Stephen Martin (Purdue University); Sander Onderstal (University of Amsterdam and Tinbergen Institute); Leonard Treuren (KU Leuven) |
| Abstract: | Antitrust laws prohibit private firms to coordinate their market behavior, yet many types of interfirm cooperation are legal. Using laboratory experiments, we study spillovers from legal cooperation in one market to non-competitive prices in a different market. Our theoretical framework predicts that such cooperation spillovers are most likely to occur for intermediate levels of competition. Our experimental findings support this theoretical prediction. In addition, our experimental results show that repeated interaction and communication about prices in a market are not necessary to achieve non-competitive prices in that market, as long as subjects can form binding agreements in a different market. Results from additional treatments suggest that commitment and multimarket contact are necessary for cooperation spillovers to emerge. |
| Keywords: | Cartel; Communication; Cooperation spillovers; Antitrust; Experiment |
| Date: | 2024–12–20 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20240078 |
| By: | Jann Weinand; Tristan Pelser; Max Kleinebrahm; Detlef Stolten |
| Abstract: | Land use is a critical factor in the siting of renewable energy facilities and is often scrutinized due to perceived conflicts with other land demands. Meanwhile, substantial areas are devoted to activities such as golf, which are accessible to only a select few and have a significant land and environmental footprint. Our study shows that in countries such as the United States and the United Kingdom, far more land is allocated to golf courses than to renewable energy facilities. Areas equivalent to those currently used for golf could support the installation of up to 842 GW of solar and 659 GW of wind capacity in the top ten countries with the most golf courses. In many of these countries, this potential exceeds both current installed capacity and medium-term projections. These findings underscore the untapped potential of rethinking land use priorities to accelerate the transition to renewable energy. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.15376 |
| By: | Becker, Marco; Reinking, Ernst |
| Abstract: | Der EU-AI-Act markiert einen wichtigen ersten Schritt in der Regulierung von Künstlicher Intelligenz. Erstmals wird darin ein risikobasiertes Klassifikationssystem für KI-Anwendungen eingeführt, wobei unterschiedliche Folgewirkungen je nach Risikoklasse definiert werden. Die Einstufung von KI-Systemen in die entsprechende Risikoklasse ist somit von entscheidender Bedeutung. Im Folgenden wird ein neuartiges Schema zur systematischen Einstufung von Risikoklassen im Rahmen des EU-AI-Acts vorgestellt. Dieses strukturierte Vorgehensmodell zielt darauf ab, die Transparenz und Konsistenz bei der Risikobewertung von KI-Systemen zu verbessern. Es kann da-bei als praktische Grundlage für die Einhaltung des EU-AI-Acts dienen und fördert somit einen ver-antwortungsbewussten Umgang mit Künstlicher Intelligenz. |
| Abstract: | The EU AI Act is an important first step in the regulation of artificial intelligence. For the first time, it introduces a risk-based classification system for AI applications, with different consequences de-pending on the risk class. The classification of AI systems into the appropriate risk class is therefore of crucial importance. In the following, a novel scheme for the systematic classification of risk classes within the frame-work of the EU AI Act is presented. This structured procedural model aims to improve transparency and consistency in the risk assessment of AI systems. It can serve as a practical basis for compliance with the EU AI Act and thus promote the responsible use of artificial intelligence. |
| Keywords: | KI, Künstliche Intelligenz, AI, AI Act, EU AI Act, EU-AI-Act |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:308107 |
| By: | Aman Saggu; Lennart Ante; Kaja Kopiec |
| Abstract: | This study employs an event study methodology to investigate the market impact of the U.S. Securities and Exchange Commission's (SEC) classification of crypto assets as securities. It explores how SEC interventions influence asset returns and trading volumes, focusing on explicitly named crypto assets. The empirical analysis highlights significant adverse market reactions, notably returns plummeting 12% over one week post-announcement, persisting for a month. We demonstrate that the severity of market reaction depends on sentiment and asset characteristics such as market size, age, volatility, and illiquidity. Further, we identify significant ex-ante trading volume effects indicative of pre-announcement informed trading. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2412.02452 |
| By: | Keith M. Drake; Thomas McGuire |
| Abstract: | Drug patent litigation settlements containing brand-to-generic “reverse payments” are a decades old antitrust concern that has been estimated to cost drug purchasers billions of dollars per year. Most estimates of the harm rely on the Federal Trade Commission’s calculation that such payments delay generic entry by 17 months, which is based on 15-20-year-old data. This paper takes a different approach, using stock price movements to quantify the harm. Costs to purchasers from an anticompetitive agreement are approximately equal to the brand firm’s increase in profits. If new profits are capitalized into stock prices, the change in value upon a settlement announcement can be used to estimate the new profit flows. We assembled a list of 64 settlements announced during 2014-2023. Although the announcements did not describe explicit forms of reverse payment, 16 announcements described terms that may transfer value to the generic firms. We classified these settlements as having an indication of reverse payment. Consistent with prior research, settlement announcements with no indication of reverse payment had no significant effect on the stock prices of brand firms implying that they tended to meet traders’ expectations. Stock prices increased by approximately 3.5%, on average, after settlements with indication of reverse payment, implying they increased brand profits by delaying generic entry. We estimate that these increases correspond to a total increase in purchaser spending of $2.9-$3.0 billion per year. Because our sample is not a full census of settlements, the industry-wide increase in spending may be closer to $7 billion per year. |
| JEL: | I11 L41 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33196 |