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on Regulation |
| By: | Lou, H. K.; Pollitt, M. G.; Robinson, R.; Arcos, A. V. |
| Abstract: | European wholesale power prices increased to an unprecedented level during the energy crisis in 2022. To tackle the adverse impact on consumers, Spain and Portugal implemented the Iberian Exception (IE) in June 2022, intending to decouple power prices from the rest of Europe to reduce consumer energy bills. The IE posed challenges and questions, including the impact of foreign demand for Spanish electricity, whether the policy would subsidise French power prices, and whether it would reduce energy bills for consumers. Given that this was a policy implemented in the middle of a continental gas supply crisis, we focus on the direct impact of the policy on gas demand in Spain and in Europe. This is interesting because other aspects of the IE – such as reducing consumer bills - could have been, and in other countries were, addressed by other policies. The ‘exception’ was allowed by the European Commission (on behalf of the EU27) because it was deemed to be likely to have a limited pan-European impact on electricity prices. By contrast, Spain competes directly with other European countries for LNG supplies on the global gas market and hence large effects in Spain would necessarily spillover to gas prices in the rest of Europe. Our findings suggested that IE successfully lowered the fossil fuel bids with a secondary effect of decoupling the Spanish power markets from France. Decoupled observations increased by +59.2% compared with our reference period. Even the border between Spain and Portugal was decoupled slightly by +0.9%. Daily net outflow to France increased by 2.3 GWh daily. Daily net outflow to Morocco increased 32 times, and outflow to Andorra increased by 25%. The power outflow increased the domestic electricity price by 24.8%, relative to the effect in the absence of interconnection. We also simulated the counterfactual scenario by investigating wholesale electricity prices without the subsidy paid to gas generators. Our demand and supply adjustment scenario shows that the subsidy reduced Iberian electricity day-ahead prices by 35.3%. The model was further used to compare the gas-fired generation between June 2022 and February 2023, when the gas price was above the gas cap. Depending on the scenarios, IE increased the Iberian gas burnt by 19.2%; On the EU level, gas burnt also increased by 1.3%. The total Iberian foreign demand also increased gas for power burnt by +5.47% in Iberia (+0.81% across the EU), relative to the effect in the absence of interconnection. |
| Keywords: | Iberian Exception, Energy Crisis, Gas Price Cap, Electricity Market |
| JEL: | L94 |
| Date: | 2025–05–31 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2535 |
| By: | Franziska Klaucke; Karsten Neuhoff; Alexander Roth; Wolf-Peter Schill; Leon Stolle |
| Abstract: | To ensure security of supply in the power sector, many countries are already using or discussing the introduction of capacity mechanisms. Two main types of such mechanisms include capacity markets and capacity reserves. Simultaneously, the expansion of variable renewable energy sources increases the need for power sector flexibility, for which there are promising yet often under-utilized options on the demand side. In this paper, we analyze how a centralized capacity market and an advanced reliability reserve with a moderately high activation price affect investments in demand-side flexibility technologies. We do so for a German case study of 2030, using an open-source capacity expansion model and incorporating detailed demand-side flexibility potentials across industry, process heat, and district heating. We show that a centralized capacity market effectively caps peak prices in the wholesale electricity market and thus reduces incentives for investments in demand-side flexibility options. The advanced reliability reserve induces substantially higher flexibility investments while leading to similar overall electricity supply costs and ensuring a similar level of security of supply. The advanced reliability reserve could thus create a learning environment for flexibility technologies to support the transition to climate neutral energy systems. Additionally, an advanced reliability reserve could be introduced faster and is more flexible than a centralized capacity market. While concrete design parameters are yet to be specified, we argue that policymakers should consider the reliability reserve concept in upcoming decision on capacity mechanisms in Germany and beyond. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.14664 |
| By: | Cristian Chica; Yinglong Guo; Gilad Lerman |
| Abstract: | We introduce pricing formulas for competition and collusion models of two-sided markets with an outside option. For the competition model, we find conditions under which prices and consumer surplus may increase or decrease if the outside option utility increases. Therefore, neglecting the outside option can lead to either overestimation or underestimation of these equilibrium outputs. Comparing collusion to competition, we find that in cases of small cross-side externalities, collusion results in decreased normalized net deterministic utilities, reduced market participation and increased price, on both sides of the market. Additionally, we observe that as the number of platforms increases in the competition model, market participation rises. Profits, however, decrease when the net normalized deterministic utility is sufficiently low but increase when it is high. Furthermore, we identify specific conditions that quantify the change of price and consumer surplus when the competition increases. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.06109 |
| By: | Rausch, Sebastian; von Ditfurth, Jakob |
| Abstract: | For investors, the decision to install photovoltaic (PV) systems largely depends on whether the investment proves worthwhile. Subsidies play an important role in this context. Currently, the German subsidy programme is based on feed-in tariffs: Property owners are guaranteed a fixed price for 20 years at which the electricity they generate can be sold. This ZEW policy brief studies the German subsidy programme, considering the different effects on homeowners and landlords. Homeowner investors are will- ing to pay only 67 cents for every euro of total discounted future benefits from electricity production. Despite similar investment costs and feed-in revenues, landlords adopt considerably fewer PV installations systems for tenant electricity (Mieterstrom) due to high administrative costs. For purposes of economic policy, the undervaluation of future benefits from PV investments leads to an important conclusion: Had the investment costs been subsidised in advance, over one third of the subsidies spent in the past could have been saved. If landlords are to invest more, bureaucratic hurdles within the tenant electricity programme need to be removed - which would also result in cost savings. Electric vehicles and heat pumps are key elements of the energy tran- sition and crucial for achieving climate neutrality |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewpbs:319709 |
| By: | Jens-Uwe Franck; Mauro Hartl |
| Abstract: | The Digital Markets Act (DMA) accepts certain negative short-term effects on the welfare of users of core platform services in order to achieve fairness and contestability in the long run. In this paper, we illustrate and analyse the more critical case where the regulatory rigidity of the DMA leads to side effects that clearly run counter to these regulatory objectives, as the implementation of the DMA by one platform consolidates the entrenched position of another core platform service. We develop four theses in this regard: (i) such side effects are undesirable but do not justify a limited enforcement of a particular obligation; (ii) adopting specifying measures to prevent such effects would exceed the regulatory leeway granted to the Commission under Article 8(2) of the DMA; (iii) there may be indirect effects on the scope of other DMA provisions that mitigate undesirable effects; (iv) undesirable side effects need to be addressed through anttitrust and other regulatory instruments. As a paradigmatic example, we analyse how the ban on self-preferencing has been implemented by Google with regard to hotel search queries. In doing so, we consider several open questions regarding the ban on self-preferencing and show how the status quo of Google’s display of hotel search results (still) violates Article 6(5) of the DMA. |
| Keywords: | Digital Markets Act; Google Search; self-preferencing; specifying procedure; implementing acts; disintermediation; Booking.com |
| JEL: | K21 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_692 |
| By: | McCloskey, PJ; Malheiros Remor, Rodrigo |
| Abstract: | This paper evaluates the economic viability of decentralised solar systems in Abu Dhabi. By analysing levelised cost of electricity (LCOE), net present value (NPV), and internal rate of return (IRR) across customer groups, it finds that while rooftop solar generation is not yet cost-effective for heavily subsidised sectors, it remains viable for industrial and commercial users. The study suggests that subsidy reform could significantly improve the financial appeal of decentralised systems, aligning with Abu Dhabi’s decarbonisation targets under the UAE Energy Strategy 2050. |
| Keywords: | renewable energy, solar energy, decentralised solar, centralised solar, LCOE, Abu Dhabi |
| JEL: | Q2 Q42 Q47 Q58 |
| Date: | 2025–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124740 |
| By: | Gozlugol, Alperen |
| Abstract: | A gloomy narrative has recently surrounded the London Stock Exchange (‘LSE') and London's standing as an international financial centre, driven by declining IPOs, fewer listed companies, and high-profile delistings, with firms preferring the US market. This has triggered a major UK regulatory overhaul, spanning listing rules, audit, corporate governance, and capital raising, as regulation was widely blamed for this status quo. This article examines UK market developments and the motivations behind the overhaul, finding little evidence of a funding gap for firms. Instead, reforms appear aimed at preserving London's global financial stature. It argues that regulation has become a convenient scapegoat but was neither the root cause of the LSE's challenges nor will deregulation resolve them. Two analyses support this view: a UK–US regulatory comparison, which weakens claims of UK overregulation, and an assessment of the market ecosystem, which suggests structural issues beyond regulation are hindering the LSE’s competitiveness. |
| Keywords: | the London Stock Exchange; public equity markets; capital markets regulation; reform; listing rules |
| JEL: | F3 G3 |
| Date: | 2025–06–19 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128018 |
| By: | Kiho Yoon |
| Abstract: | With a multilateral vertical contracting model of media markets, we examine upstream competition and contractual arrangements in content provision. We analyze the trade of content by the Nash bargaining solution and the downstream competition by the Hotelling location model. We characterize the equilibrium outcomes and the contractual arrangements for various vertical structures. We show that the possibility of exclusive contracts rises when the value of the premium content increases, the degree of horizontal differentiation in the downstream market decreases, the importance of advertising revenue decreases, and the relative bargaining power of upstream firm decreases. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.15063 |
| By: | Krämer, Christine; Köder, Lea; Röder, Norbert; Rechenberg, Jörg; Walter, Anne-Barbara; Ehlers, Knut |
| Abstract: | As part of the European Union's Common Agricultural Policy (CAP), farmers who receive payments are obliged to comply with the standards for good agricultural and environmental condition of land (GAEC), among others. If farmers do not apply for payments, they no longer have to comply with GAEC standards, but only with the relevant regulatory law. Against the background of the abolition or reduction of direct payments, the question arises as to what extent the provisions of national regulatory law currently ensure a similar level of protection for the environment as the GAEC standards. The question arises as to what extent the provisions of national regulatory law currently ensure a similar level of protection for the environment as the GAEC standards. This study this question with regard to abiotic resource protection. The study is based on a very detailed comparison of the environmental protection arising from the GAEC standards and the applicable regulatory law (Lübke et al. 2025). This comparison includes the relevant legal foundations, case law and legal commentary. GAEC standards 1 (Maintenance of permanent Grassland), 2 (Protection of wetland and peatland), 4 (Establishment of buffer strips along water courses) and 5 (Tillage management, reducing the risk of soil degradation and erosion) are analysed, for which regulatory law exists at federal and state level. As a result, the comparison of the GAEC standards and the regulatory law in Germany shows a very differentiated picture of the various regulations. If society wishes to maintain the level of environmental protection ensured by these GAEC standards if direct payments are to be reduced, the regulatory law must be adapted. To this end, it generally makes sense to harmonize the definitions of terms in funding and regulatory law and to improve the congruence between regulatory and funding law. Irrespective of this, it must be ensured that when direct payments are ‘phased out’, adequate enforcement of regulatory law is guaranteed independently of funding law. |
| Keywords: | Agricultural and Food Policy |
| Date: | 2025–06–19 |
| URL: | https://d.repec.org/n?u=RePEc:ags:jhimwp:358867 |
| By: | Jian Jia; Ginger Zhe Jin; Mario Leccese; Liad Wagman |
| Abstract: | We examine how the GDPR affected transatlantic venture investment. Using investment data from 2014 to 2019, we find that the GDPR’s rollout in May 2018 led to a significant decline in US investor activity in the EU, evidenced by fewer deals and investment, especially for newer and data-related ventures. Investors shifted toward geographically closer ventures and relied more on syndication, particularly with EU-based lead investors. While the shift to local investing drove the overall decline, syndication partially offset it. The results highlight the role of digital policies in shaping investment strategies and influencing transatlantic capital flows. |
| JEL: | D8 G11 K20 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33909 |
| By: | Reid, Ysaline; Ferrando, Tomaso; Vecchione Gonçalves, Marcela |
| Abstract: | This policy brief explores how the EU Deforestation-Free Products Regulation (EUDR) plays out in real-world contexts across Brazil, Indonesia, and Colombia. Drawing on field-based research, it highlights the need to align implementation with local realities, rights, and aspirations. |
| Keywords: | deforestation, EUDR |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:iob:apbrfs:2025006 |
| By: | Tambini, Damian |
| Abstract: | This article examines the interplay between the ‘Netflix effect’ of media globalisation and the reassertion of ‘digital sovereignty’ through national competition, content, and industrial policy. Taking a case study approach the study is based on analysis of laws, codes and policy documents along with expert interviews and secondary data. The study finds that whilst OTT video has undermined revenues and audiences for national broadcasters in all the countries studied, there are differences in the nature of the impact and the response. Policymakers are reasserting digital sovereignty using a variety of broadcasting policy tools. All the countries feature policies including protection of domestic producers, consumers and public service media as well as competition law-based interventions. In some countries such as Australia and the UK, public service media protections have been updated. In others, such as Japan and Korea, policy has focused more on promotion of domestic content exports abroad. The article closes with discussion of the wider significance of these developments for media globalisation, soft power and digital sovereignty. |
| JEL: | R14 J01 |
| Date: | 2025–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127739 |
| By: | Whyte, Jamie |
| Abstract: | Debanking became a news story in 2023 when Nigel Farage alleged that Coutts had closed his account because its executives disapproved of his political opinions. A study by the Financial Conduct Authority (FCA) revealed that such ideologically motivated account closures are vanishingly rare. Nevertheless, debanking is a problem in the UK. In 2021/22, UK banks closed 343, 000 accounts. In about half of those cases, the reason was that the bank could not satisfy itself that the customer was not involved in money laundering or other financial crimes. The penalties for failing to comply with the government's anti-money laundering (AML) regulations can run into hundreds of millions or even billions of pounds. Certain kinds of customers present a relatively high prima facie risk of being involved in money laundering. But the cost of discovering whether they really are criminals would exceed the value of their business. So, banks close their accounts - even though most of those people are innocent. Other customers are also harmed. Complying with AML regulations costs UK banks £34 billion a year, twice what is spent on policing all other crimes put together. This cost is ultimately borne by bank customers. There is no evidence that AML regulations reduce crime, and the governments that impose them have not even tried to show that they do. With no evidence of benefits and the costs known to be massive, the AML regulations should be scaled back, for example by going back to the pre-2017 regulatory regime, if not further. That is unlikely to happen given politicians' enthusiasm for regulation and reluctance to admit error. In that case they should compensate banks for the compliance cost. This would remove the injustice of forcing bank customers to bear the cost of fighting crime. And it would make the extraordinary cost of AML regulations politically visible. |
| Keywords: | Money laundering, bank account, regulation, compliance costs, Great Britain |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ieadps:314025 |
| By: | Daron Acemoglu; Asuman Ozdaglar; James Siderius |
| Abstract: | We consider the political consequences of the use of artificial intelligence (AI) by online platforms engaged in social media content dissemination, entertainment, or electronic commerce. We identify two distinct but complementary mechanisms, the social media channel and the digital ads channel, which together and separately contribute to the polarization of voters and consequently the polarization of parties. First, AI-driven recommendations aimed at maximizing user engagement on platforms create echo chambers (or “filter bubbles”) that increase the likelihood that individuals are not confronted with counter-attitudinal content. Consequently, social media engagement makes voters more polarized, and then parties respond by becoming more polarized themselves. Second, we show that party competition can encourage platforms to rely more on targeted digital ads for monetization (as opposed to a subscription-based business model), and such ads in turn make the electorate more polarized, further contributing to the polarization of parties. These effects do not arise when one party is dominant, in which case the profit-maximizing business model of the platform is subscription-based. We discuss the impact regulations can have on the polarizing effects of AI-powered online platforms. |
| JEL: | L10 M37 P40 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33892 |
| By: | Joshua S. Gans |
| Abstract: | Building on recent advances in the literature on knowledge creation and innovation (notably Carnehl and Schneider (2025), we propose a novel general equilibrium model that explicitly incorporates artificial intelligence (AI) as a decision-enhancing technology capable of interpolating between known points of knowledge. Our framework formalises the trade-off between AI’s coverage— its ability to span wider knowledge gaps—and its accuracy, and reveals the surprising result that, beyond producing immediate productivity gains, AI fundamentally alters the novelty of research. Specifically, when AI systems offer sufficiently broad coverage, they incentivise exploratory research that taps into novel, distant areas of knowledge and accelerates long-run growth; conversely, limited coverage promotes incremental research that may boost short-term efficiency while dampening the overall advancement of new ideas. Moreover, our analysis uncovers that the type of knowledge—whether novel or dense—plays a critical role in determining both the growth and welfare implications of AI, charting a new path for understanding how knowledge influences research strategies. By also examining the roles of market structure, licensing arrangements, and regulatory frameworks, our work contributes new, policy-relevant insights that reconcile the immediate benefits of AI adoption with the demands of sustainable long-term economic expansion. |
| JEL: | O30 O31 O40 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33907 |
| By: | Yi-Chun Chen; Zhengqing Gui |
| Abstract: | We apply marginal analysis \`a la Bulow and Roberts (1989) to characterize the revenue-maximizing selling mechanism for a multiproduct monopoly. Specifically, we derive the revenue change due to a price perturbation on any subset of bundles holding the prices of other bundles fixed. In an optimal mechanism, total revenue must not increase with any small price change for bundles with positive demand, nor with a small price decrease for bundles with zero demand. For any symmetric two-dimensional type distribution satisfying mild regularity conditions, the marginal analysis fully characterizes the optimal mechanism, whether the buyer's valuations are additive or exhibit complementarity or substitutability. For general type distributions, the analysis identifies which bundles must carry positive or zero demand and provides conditions under which randomization is necessary. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.06763 |