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on Regulation |
| By: | Georges V. Houngbonon; Marc Ivaldi; Emil Palikot; Davide Strusani |
| Abstract: | Nearly half the world remains offline, and capital scarcity stalls new network buildouts. Sharing existing mobile towers could accelerate connectivity. We assemble data on 107 tower-sharing deals in 28 low-income countries (2008-20) and estimate staggered difference-in-differences effects. Two years after a transaction covering over 1, 000 towers, the PPP-adjusted mobile-price index falls USD 1.60 (s.e. 1.10) from a baseline of USD 3.16, while data prices drop USD 1.00 (0.29), baseline USD 3.41 per GB. The number of mobile connections increases. Rural internet access increases by 4.7 pp and female-headed households by 3.6 pp. Tower-sharing agreements increase product market competition as measured by Herfindahl-Hirschman Index. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.19693 |
| By: | Bryan, Calvin; Donovan, Pierce; Kacker, Kanishka; Pham, Linh |
| Abstract: | Fabra and Imelda (2023) study how the method of payment for renewable energy can reduce the ability of energy producers to exert market power in electricity markets. Their theoretical model provides predictions for dominant and fringe firm behavior under incentives using fixed prices or market exposure. Across several reported specifications, they measure the price depressing effects under both economic instruments. The authors find that in the case of the Spanish electricity market, fixed prices for renewables mitigate market power more than exposure to market pricing. We successfully computationally reproduce 100% of the main claims of the paper. We then explore the robustness of these findings to a placebo event test and modeling choices concerning seasonality and sample selection. These robustness checks typically replicate the main findings of the original paper in sign, but consistently reduce the magnitude and statistical significance of measured results. |
| Keywords: | market power, forward contracts, arbitrage, renewables |
| JEL: | L13 L94 L98 Q42 Q48 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:i4rdps:258 |
| By: | Johannes Johnen; Shiva Shekhar |
| Abstract: | This paper proposes a simple yet useful framework for evaluating vertical mergers in digital markets by distinguishing between product-specific and ecosystem-specific network effects. Vis-a-vis no network effects, product-specific network effects amplify foreclosure and steering incentives, as a rival’s growth directly undermines the platform’s product value. Conversely, ecosystem-specific effects dampen foreclosure incentives, since rivals contribute to the overall value of the platform ecosystem. We develop a formal model illustrating how this distinction shapes platform behavior and competitive outcomes. We apply this distinction to real-world examples to illustrate its potential usefulness. Our distinction implies that regulators may want to adopt a stricter standard with no presumption of efficiencies where product-specific effects dominate. In contrast, when ecosystem-specific effects prevail, merger evaluation should mirror traditional vertical merger analysis. Thus, offering a more nuanced approach to merger evaluation by presenting a practical screening tool to identify problematic vertical mergers in markets featuring network effects. |
| Keywords: | network externalities, platforms, vertical integration |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12040 |
| By: | Lundin, Erik (Research Institute of Industrial Economics (IFN)) |
| Abstract: | I examine the pricing behavior of municipal and private firms in the unregulated Swedish district heating market, characterized by geographically bounded local monopoly networks. Conditional on exogenous cost factors, private firms charge on average seven percent higher prices compared to their municipal counterparts. Nearly all firms employ two-part pricing. Consistent with standard monopoly theory, the entire price difference can be explained by the fixed price component. Further, foreign-owned private firms charge an additional price premium relative to domestically owned private firms. A descriptive analysis of financial statements confirms that private firms achieve higher profit margins, despite municipal firms being legally required to operate in a business-like manner. These findings demonstrate that, in this market, private firms exercise more market power than public firms, and that the subsequent upward pressure on prices dominates any downward effects from the potential cost efficiencies associated with privatization. |
| Keywords: | Privatization; Two-part pricing; District heating; Natural monopoly; Market power; Network industries |
| JEL: | L12 L43 L97 P18 Q48 |
| Date: | 2025–08–15 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1532 |
| By: | Gamal Atallah; Aggey Simons (Department of Economics, University of Ottawa, Canada) |
| Abstract: | We analyze innovation incentives under price cap regulation by examining scenarios with endogenous price caps, both with and without regulatory commitment. In a setting without informational imperfections, our analysis reveals two principal conclusions. First, there is no trade-off between static and dynamic efficiency. Strengthening firm incentives by allowing it to charge higher prices, and thus realize greater profits, leads to less innovation because it reduces output. The optimal strategy to boost innovation and maximize welfare is to set a low price (and thus, a low profit) target, as innovation incentives are proportional to output. Second, the benefits of regulatory commitment for innovation and welfare are not unambiguously clear: commitment neither consistently outperforms nor underperforms non-commitment. Under demand uncertainty, when the firm is risk-averse, the static-dynamic efficiency trade-off reappears, and the firm may prefer non-commitment due to risk-shielding. Under asymmetric information about firm demand type, the trade-off between static and dynamic efficiency becomes inherent (due to information rents and contract distortions), and commitment becomes unambiguously crucial for fostering innovation by preventing the ratchet effect. |
| Keywords: | Price cap regulation; Regulation, Innovation, R&D, Dynamic efficiency; Commitment. |
| JEL: | D42 L12 L43 L51 O31 O38 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ott:wpaper:2504e |
| By: | Orr Shahar; Stefan Lessmann; Daniel Traian Pele |
| Abstract: | Relationships between the energy and the finance markets are increasingly important. Understanding these relationships is vital for policymakers and other stakeholders as the world faces challenges such as satisfying humanity's increasing need for energy and the effects of climate change. In this paper, we investigate the causal effect of electricity market liberalization on the electricity price in the US. By performing this analysis, we aim to provide new insights into the ongoing debate about the benefits of electricity market liberalization. We introduce Causal Machine Learning as a new approach for interventions in the energy-finance field. The development of machine learning in recent years opened the door for a new branch of machine learning models for causality impact, with the ability to extract complex patterns and relationships from the data. We discuss the advantages of causal ML methods and compare the performance of ML-based models to shed light on the applicability of causal ML frameworks to energy policy intervention cases. We find that the DeepProbCP framework outperforms the other frameworks examined. In addition, we find that liberalization of, and individual players' entry to, the electricity market resulted in a 7% decrease in price in the short term. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.12331 |
| By: | Gilbert E. Metcalf |
| Abstract: | Informational nudges to encourage energy conservation or load shifting have been tried in various contexts. This paper studies a program run by a small municipally owned electric utility to reduce demand on certain peak demand days. An email alert is sent out to residential customers who sign up for the alerts. Some recipients of those alerts forward the alerts to other customers or community groups, making it difficult to determine how broadly the alerts are disseminated. The alerts encourage load shifting and energy saving during specific hours on the following day. Using hourly load data for the utility, I estimate the reduction in electricity load caused by the alert emails. Using an instrumental variables approach, estimates suggest that load is reduced by roughly 0.7 MWs per hour during the hours covered by the alert. This works out to a reduction in load on the order of 2 percent. I calculate the cost savings to the municipal utility and discuss social and private benefits of the program. The private benefits of the peak alert program swamp the social benefits. |
| JEL: | Q41 Q48 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34089 |
| By: | Dirk Bergemann (Yale University); Marina Bertolini (University of Padova); Marta Castellini (Fondazione Eni Enrico Mattei and University of Padova); Michele Moretto (University of Padova); Sergio Vergalli (Fondazione Eni Enrico Mattei and University of Brescia) |
| Abstract: | A municipality (social planner) is seeking to establish a renewable energy community paying the initial investment costs, while also identifying the optimal management framework. In this context, two distinct modes of governance are analyzed: the private and the public one. In the first case, a private (or profit) aggregator oversees the energy community with a monopolistic behavior, while in the other the aggregator is a public owned, or controlled, company following the social approach advocated by the promoter, i.e the municipality. In both scenarios, the effective functioning of the community requires the collection of private data on membersÕ energy consumption. This process allows for optimal management of the community, but also results in a loss of privacy for members. The model incorporates this as a dis-utility, assuming that the members address the portion of their energy needs not covered by the communityÕs production by purchasing energy from the manager at a price determined on the basis of the information collected. In addition, the aggregator is allowed to sell the collected data to third parties for financial gain. By integrating the membersÕ energy valuation and incorporating uncertainty regarding the investment cost, we examine policy recommendations aimed at establishing a community size closer to the social optimum. |
| Date: | 2025–07–28 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2452 |
| By: | Ayushi Choudhary (Indira Gandhi Institute of Development Research); Rupayan Pal (Indira Gandhi Institute of Development Research) |
| Abstract: | This paper examines the implications of various forms of corruption-namely, grand corruption, petty corruption, and the cut-money culture-on the formulation and enforcement of regulatory policies. Focusing on quota regulation in the context of natural resource extraction, it demonstrates the following. In absence of cut-money culture, upward distortion in extraction quota in the equilibrium under only grand corruption is less (more) than that in case only petty corruption is possible, when the reduction in the firms' expected effective price under petty corruption is less (more) than the `discounted net marginal environmental damage' to price ratio under grand corruption. Interestingly, in absence of cut-money culture, petty corrupt never occurs in the equilibrium regardless of whether the policy maker is honest or corrupt. The threat of petty corruption induces the policy maker to inflate the quota, unless the policy maker is corrupt and he sufficiently discounts environmental damage due to extraction. Grand corruption occurs only in the later case. In contrast, when there is cut-money culture, corruption of at least one type always occur in the equilibrium. While the presence of cut-money culture reduces the equilibrium quota in some cases, in each of those cases it results in higher total extraction, greater environmental damage and lower welfare. Our r esults have important implications for designing corruption control mechanisms and the governance of natural resource extraction. |
| Keywords: | Quota Regulation, Grand Corruption, Petty Corruption, Cut-Money Culture, Natural Resource Extraction, Environmental Damage, Bribe |
| JEL: | D73 P28 P37 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:ind:igiwpp:2025-017 |
| By: | Jan Thomas Schäfer (Chair for Industrial Organization, Regulation and Antitrust, Department of Economics, Justus Liebig University Giessen) |
| Abstract: | The level of government support significantly influences the performance of European railways. However, prior analyses have largely focused on the sector as a whole, neglecting the distribution of public budget contributions between the upstream infrastructure manager and downstream service providers. This study employs a two-stage procedure involving Data Envelopment Analysis (DEA) and a second-stage regression analysis to evaluate railway efficiency and analyze the relationship between funding structures and performance. Using a dataset covering eight European countries from 2001 to 2022, the results indicate that railways achieve higher efficiency when the upstream infrastructure manager receives a larger share of government funds, while downstream subsidies are relatively limited. Moreover, total operating contributions consistently enhance efficiency, whereas the impact of investment grants varies depending on the specification. These findings underscore the importance of balanced funding strategies that prioritize upstream contributions to foster competition and promote efficient use of public resources. |
| Keywords: | Railway efficiency, Public contributions, Data Envelopment Analysis, Government support, Europe |
| Date: | 2025–06–24 |
| URL: | https://d.repec.org/n?u=RePEc:mar:magkse:202517 |
| By: | Santiago Alvarez-Blaser; Alberto Cavallo; Alexander MacKay; Paolo Mengano |
| Abstract: | We use a novel dataset of production costs, wholesale prices, and retail prices from a large global manufacturer to study markups and pricing behavior along the supply chain. We document several facts about markups covering the period July 2018 through June 2023, and we propose a model of supply chain pricing behavior that rationalizes key pat-terns in our data. We find substantial dispersion in markups across products at each supply chain level. Manufacturer and retail markups are negatively correlated in the cross section and over time. Despite time-series variation in firm-level markups, total markups—reflecting the relationship between retail prices and production costs—are stable over time, even when prices increased along with inflation in the United States in 2022. We apply our model to quantify factors that determine relative bargaining power between the manufacturer and retailers, leveraging variation across countries, products, and time. Finally, we consider the dynamics of cost pass-through and the mediating role of manufacturer-retailer bargaining in price dynamics, with implications for current policy debates, including trade policy and tariffs. |
| JEL: | D22 D40 E3 L11 L81 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34110 |
| By: | Jonathan Hambur (Reserve Bank of Australia); Owen Freestone (Competition Taskforce Division, Australian Treasury) |
| Abstract: | There is substantial evidence that the degree of competition in the Australian economy has declined over the decade or so leading up to the COVID-19 pandemic. This has the potential to weigh on productivity, and in turn incomes, and so the welfare of the Australian people. In this paper we calibrate the general equilibrium model from Edmond, Midrigan and Xu (2023) to Australian microdata to answer the following question: If the degree of competition in the Australian economy had not declined from mid-2000s levels, how much higher would aggregate productivity and GDP be due to resources being better allocated across firms throughout the economy? The answer, according to this model, is 1–3 per cent. The model also suggests even larger economic costs once we account for other channels through which rising mark-ups affect the economy, though these are less precisely estimated. |
| Keywords: | competition; productivity |
| JEL: | D24 D61 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbardp:rdp2025-05 |