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on Regulation |
| By: | Darryl Biggar; Mohammad Reza Hesamzadeh |
| Abstract: | Electric power systems are increasingly turning to energy storage systems to balance supply and demand. But how much storage is required? What is the optimal volume of storage in a power system and on what does it depend? In addition, what form of hedge contracts do storage facilities require? We answer these questions in the special case in which the uncertainty in the power system involves successive draws of an independent, identically-distributed random variable. We characterize the conditions for the optimal operation of, and investment in, storage and show how these conditions can be understood graphically using price-duration curves. We also characterize the optimal hedge contracts for storage units. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.21327 |
| By: | Fuente, David (University of South Carolina and Environment for Development-Kenya); Mulwa, Richard (Environment for Development-Kenya and University of Nairobi); Mwaura, Mbutu (Nairobi City Water and Sewerage Company); Gitu, Josiah (Nairobi City Water and Sewerage Company); Cook, Joseph (Environment for Development-Kenya and Washington State University) |
| Abstract: | Energy and water utilities need financial resources to maintain existing infrastructure, increase in capacity to meet growing demand, meet environmental regulations, and invest in climate resilience. Considerable attention has been paid to innovative means of financing the transition to universal access to water and sanitation services and the global transition to a clean energy future. This paper examines the foundation of utility finance – customer bill payment. We partner with Nairobi City Water and Sewerage Company to test the impact of an unconditional arrears forgiveness program on customer bill payment behavior. To our knowledge, this is the first study to experimentally test the impact of an arrears management program. We find that providing customers unconditional arrears forgiveness was not effective at improving customer bill payment and, in fact, made bill payment worse in the short run. Customers in our treatment group were less likely to make a payment towards their bill, less likely to pay their full bill on time, and accumulated more arrears over the six months following our intervention than untreated households. Our results suggest that one-off debt amnesty may inadvertently reduce compliance, and that utilities should consider conditional or alternative assistance measures. |
| Keywords: | Water; sanitation; utility policy; RCT; arrears; bill payment |
| JEL: | C93 |
| Date: | 2025–12–10 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:gunefd:2025_012 |
| By: | Bagnoli, Lisa Serena; Balza, Lenin; Belmar, José; Matías, David |
| Abstract: | Changing weather patterns pose a fundamental challenge to electricity systems reliant on water resources. Using two decades of plant-level generation and fuel input data matched to hydrological basins in Chile, we show that local droughts reduce hydro output by about 20% on average and trigger sharp increases in thermal generation among plants with spare capacity. This substitution cushions short-run losses in supply and guarantees reliability of the system but creates a double burden for affected regions, which face both water scarcity and increases in local pollution. At the aggregate level, emissions from high-capacity thermal plants rise by roughly 34% during system-wide droughts, corresponding to about 1.4--1.8% of annual national emissions and 5.5--6.5% of the power sector's total. We also document that prolonged droughts were followed by expansions in thermal capacity, consistent with long-run lock-in of high-carbon-intensity technologies. Together, these results provide quantitative benchmarks for infrastructure planning, highlight the risk of path dependence in investment under climatic stress, and underscore the importance of ensuring sufficient capacity, diversification, and resilience in power system planning. |
| Keywords: | Droughts;Hydropower generation;Thermal generation;Electricity systems;emissions;Latin America and the Caribbean |
| JEL: | Q54 Q41 Q25 O54 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14412 |
| By: | Natasha Aggarwal (TrustBridge Rule of Law Foundation); Satyavrat Bondre (Dono Consulting); Amrutha Desikan (TrustBridge Rule of Law Foundation); Bhavin Patel (TrustBridge Rule of Law Foundation); Dipyaman Sanyal (Dono Consulting) |
| Abstract: | This paper critically examines the opportunities and challenges of using technology, in particular Large Language Models (LLMs), to assist regulatory order writing in quasi-judicial settings, with a focus on the Indian context. The paper proposes augmenting rather than replacing human decision-makers, aiming to improve regulatory order writing practice through responsible use of LLMs. It identifies the core principles of administrative law that must be upheld in these settings — such as application of mind, reasoned orders, non arbitrariness, rules against bias, and transparency — and analyses how inherent limitations of LLMs, including their probabilistic reasoning, opacity, potential for bias, confabulation, and lack of metacognition, may undermine these principles. The paper reviews international frameworks and case studies from various jurisdictions, highlighting common design principles like human oversight, transparency, nondiscrimination, and security. It proposes a comprehensive Problem-Solution-Evaluation (PSE) framework for responsibly integrating LLMs into order writing processes. This framework maps specific technical, design, and systemic solutions to each identified risk, and outlines evaluation strategies — end-to-end, component-wise, human-in-theloop, and automated — to ensure ongoing alignment with legal standards. The article concludes with practical recommendations for the development and deployment of LLM-based systems in regulatory environments. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bjd:wpaper:16 |
| By: | Robin Ng |
| Abstract: | This paper examines how two-sided platforms develop their recommender systems to be precise about value-for-money. On each platform, more precise recommendations generate ranking and screening effects: they steer demand toward high value-for-money products, intensifying price competition among firms which drives out lower-quality firms. Thus, more precise recommendations benefit consumers but reduce platform’s per-transaction revenue. A monopolist platform still prefers precise recommendations, as this expands demand. Competing platforms choose even more precise recommendations. However, when consumers search across platforms or recommender systems are overly complex, recommendations become less precise. This shows that market power is only one potential explanation for 'ensh*ttification'. |
| Keywords: | Digital economy, Recommender systems, Two-sided platforms |
| JEL: | D21 L10 L86 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_718 |
| By: | Hong Lee (Korea Institute for Industrial Economics and Trade) |
| Abstract: | Over the last three decades, global airlines have joined hands in cooperative efforts that have transformed the industry. Code sharing opened the door to the formation of broader alliances; these groups eventually sought and obtained antitrust immunity (ATI) to lawfully coordinate pricing and schedules on international routes. Today, the apotheosis of industrial collaboration is represented by an especially integrated form of cooperation known as the profit‑sharing, metal‑neutral joint venture (JV).<p> Typically, national competition authorities review the legality of these schemes on a case-by-case basis. JVs allow partners to coordinate fares, schedules, and capacity across routes in a manner that, in some markets, approximates the competitive consequences of a merger, while also promising greater efficiencies in terms of network alignment.<p> Theoretically, the net pro- or anti-competitive effect of any given JV is ambiguous. On the one hand, coordination can reduce costs and resolve double marginalization on connecting itineraries: when two carriers price sequential segments without coordination, each imposes a markup on the through itinerary; a JV internalizes this externality and can lower end‑to‑end fares.<p> On the other hand, joint control over schedules and capacity on overlapping routes can soften competition and allow for higher prices, particularly on gateway‑to‑gateway corridors with concentrated supply. The empirical literature reflects this ambiguity, with studies reporting both fare decreases on connecting flows and fare increases on nonstop overlaps. A key reason for the mixed evidence is methodological: most studies take the JV as a single binary treatment, implicitly averaging over distinct mechanisms that work in opposite directions. This paper opens the black box by separating shared marketing from shared operations at the itinerary level and estimating their separate effects on fares.<p> Using a difference‑in‑differences (DiD) design on transatlantic two‑segment connecting itineraries observed before (2004 to 2006) and after (2014 to 2016) the wave of JV approvals that occurred from 2008 to 2010, we find that each additional JV‑marketing segment is associated with a fare reduction from roughly 8.4 to 10.6 percent, whereas each additional JV‑operating segment is associated with a fare increase from 4.5 to 8.1 percent. In a typical case, where one segment is both marketed and operated within a JV, the implied net effect is a decrease of three to four percent. These mechanism‑specific results explain why average JV effects vary across contexts and provide a more robust foundation for antitrust scrutiny. |
| Keywords: | joint ventures; airline industry; antitrust immunity; ATI; competition policy; monopoly policy; collusion; price collusion; fair competition; South Korea |
| JEL: | D43 D62 |
| Date: | 2025–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kieter:021805 |
| By: | Michale R. Baye; Dan J. Kovenock; Casper G, de Vries |
| Abstract: | We show that MRPM can increase manufacturer profits and total output even in the absence of traditional justifications based on point-of-sale services, retailer effort, or free-riding. The key insight is that MRPM mitigates channel conflict by altering how retailers balance extracting surplus from loyal customers and competing for price-sensitive shoppers. When a manufacturer optimally chooses a wholesale price and MRPM policy, this can intensify competition and create systematic distributional effects: prices fall for loyal consumers but rise for shoppers, and the profits of smaller, shopper-dependent retailers decline. We characterize the conditions under which MRPM raises output, benefits a majority of consumers, and reallocates surplus among the manufacturer, retailers, and different consumer segments. The model helps explain why the political economy of MRPM varies across jurisdictions: even when it increases output, it creates predictable winners and losers, and there is no guarantee that the median consumer or retailer - or the median voter - benefits when minimum resale prices are imposed. These results suggest that the welfare and distributional effects of MRPM are inherently context-dependent and that its legal evaluation is best approached through a rule-of-reason framework that accounts for demand structure, retailer asymmetries, and the composition of consumer types. |
| Keywords: | resale price maintenance, vertical restraints, price competition |
| JEL: | D4 D8 M3 L13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12299 |
| By: | Xiao Ling; Sourav Ray; Daniel Levy |
| Abstract: | Much like small ripples in a stream, which get lost in the larger waves, small changes in retail prices often fly under the radar of public perceptions, while large price changes appear as marketing moves associated with demand and competition. Unnoticed, these could increase consumers’ out-of-pocket expenses. Indeed, retailers could boost their profits by making numerous small price increases or by obfuscating large price increases with numerous small price decreases, thereby bypassing the consumer’s full attention and consideration, and triggering consumer fairness concerns. Yet only a handful of papers study small price changes. Extant results are often based on a single retailer, limited products, short time span, and legacy datasets dating back to the 1980s and 1990s – leaving their current practical relevance questionable. Researchers have also questioned whether the reported observations of small price changes are artifacts of measurement errors driven by data aggregation. In a series of analyses of a large dataset (almost 79 billion weekly price observations from 2006 to 2015, covering 527 products, and about 35, 000 stores across 161 retailers), we find robust evidence of asymmetric pricing in the small (APIS), where small price increases outnumber small price decreases, but no such asymmetry is present in the large. We also document the reverse phenomenon (APIS-R), where small price decreases outnumber small price increases. Our results are robust to several possible measurement issues. Importantly, our findings indicate a greater current relevance and generalizability of such asymmetric pricing practices than the existing literature recognizes. |
| Keywords: | Asymmetric pricing, Asymmetric Price Adjustment, Dynamic pricing, Rational inattention, Consumer inattention, Price rigidity, Price flexibility, Rigid prices, Sticky prices, Small price changes, Small price increases, Small price decreases, Inflation |
| JEL: | E31 L16 L11 D91 M31 M21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:333236 |
| By: | Herrera Caicedo, Alejandro (University of Wisconsin-Madison); Jeffers, Jessica (HEC Paris); Prager, Elena (University of Rochester) |
| Abstract: | This paper studies whether common leadership, defined as two firms sharing executives or board directors, contributes to collusion. Using an explicit measure of labor market collusion from unsealed court evidence, we find that the probability of collusion between two firms increases by 12 percentage points after the onset of common leadership, compared to a baseline rate of 1.2 percent in the absence of common leaders. These results are not driven by closeness of product or labor market competition. Our findings are consistent with the increasing attention toward common leadership under Clayton Act Section 8. |
| Keywords: | Leadership; Clayton Act Section 8 |
| JEL: | D20 |
| Date: | 2025–06–02 |
| URL: | https://d.repec.org/n?u=RePEc:ebg:heccah:1580 |
| By: | Lozano, Francisco Javier |
| Abstract: | This study presents causal evidence elucidating the impact of urban regulations on housing prices through two opposing mechanisms: land value capitalization and construction cost efficiencies. Utilizing instrumental variables and transaction-level data, the research reveals that a 1% increase in building height results in a 0.10% reduction in prices, whereas the floor-area ratio leads to a 0.25% increase. Additionally, density (-0.16%) contributes to price reductions, aligning with efficient land utilization, while lot coverage operates as a price-increasing variable (0.13%). These effects demonstrate significant heterogeneity across urban contexts, with complete sign reversals contingent upon location and income. For example, the price-reducing effect of height is predominantly observed in low-value land and areas with high accessibility, yet it reverses to a price-increasing effect in peripheral locations. The study identifies notable complementarities among regulations, emphasizing developers’ strategic packaging of norms, particularly in the triple interaction between height, lot coverage, and floor-area ratio. The findings challenge uniform regulatory approaches, suggesting that policies aimed at affordability should advocate for strategic combinations of height and density, tailored to local market contexts. |
| Keywords: | Urban economics, Housing prices, Land-use regulation, Causal inference |
| JEL: | R14 R31 R38 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127133 |
| By: | Omar Abdelrahman; Josef Schroth |
| Abstract: | When a bank holds a lot of safe assets, it is well situated to deal with funding stress. But when all banks hold a lot of safe assets, a pecuniary externality implies that their (wholesale) funding costs increase. This reduces banks’ ability to hold capital buffers and thus, paradoxically, increases the frequency of funding stress. |
| Keywords: | Business fluctuations and cycles; Credit and credit aggregates |
| JEL: | E4 E44 E6 G2 G21 G28 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocsan:25-28 |
| By: | Hernan Huwyler |
| Abstract: | Organizations investing in artificial intelligence face a fundamental challenge: traditional return on investment calculations fail to capture the dual nature of AI implementations, which simultaneously reduce certain operational risks while introducing novel exposures related to algorithmic malfunction, adversarial attacks, and regulatory liability. This research presents a comprehensive financial framework for quantifying AI project returns that explicitly integrates changes in organizational risk profiles. The methodology addresses a critical gap in current practice where investment decisions rely on optimistic benefit projections without accounting for the probabilistic costs of AI-specific threats including model drift, bias-related litigation, and compliance failures under emerging regulations such as the European Union Artificial Intelligence Act and ISO/IEC 42001. Drawing on established risk quantification methods, including annual loss expectancy calculations and Monte Carlo simulation techniques, this framework enables practitioners to compute net benefits that incorporate both productivity gains and the delta between pre-implementation and post-implementation risk exposures. The analysis demonstrates that accurate AI investment evaluation requires explicit modeling of control effectiveness, reserve requirements for algorithmic failures, and the ongoing operational costs of maintaining model performance. Practical implications include specific guidance for establishing governance structures, conducting phased validations, and integrating risk-adjusted metrics into capital allocation decisions, ultimately enabling evidence-based AI portfolio management that satisfies both fiduciary responsibilities and regulatory mandates. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.21975 |
| By: | Elacqua, Gregory; Kutscher, Macarena; Nascimento, Danielle; Dias, Isabella; Margitic, Juan Francisco |
| Abstract: | Despite improvements in access to information, digital platforms, and centralized school admission systems, many parents continue to choose seemingly lower-quality schools, often prioritizing proximity over academic performance. We examine the role of information provision in this context through a randomized controlled trial (RCT) within the centralized admission platform of Recife, Brazil testing whether personalized school recommendations influence parental choice. Specifically, we implemented two treatment arms: one offering recommendations that ranked schools by quality within a defined distance (quality treatment), and another ranking schools solely by proximity (distance treatment). While the overall impact of the treatments was limited, we do find meaningful positive effects among users who actively engaged (”compliers”) with the recommendations (1424% of families). Compliers in the quality treatment were more likely to select higher-performing schools, particularly among first-grade applicants and families without strong prior preferences. These findings underscore both the promise of digital nudges in improving school choices and the challenges of deploying such tools in recently centralized systems, where many families enter with preset preferences and limited familiarity with the process. |
| Keywords: | school choice;Information Provision;Digital Nudges;Randomized Controlled Trials;Centralized Admission Systems;Parental School Choice Behavior;Digital Nudges and Engagement;Challenges in Centralized Admission;Decision.making;Education, childhood, equality |
| JEL: | I21 I24 I28 D83 C93 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14420 |