|
on Regulation |
| By: | de Cornière, Alexandre; Jerath, Kinshuk; Taylor, Greg |
| Abstract: | This paper analyzes seller-side tying on digital platforms, where access to a core intermediation service is conditioned on sellers using an ancillary service (e.g., fulfillment or payments). We model a monopoly platform matching consumers and competing sellers across many product categories, with consumers valuing the ancillary service heterogeneously. When adoption is voluntary, sellers under adopt because asymmetric adoption creates vertical differentiation that softens price competition, raising prices and reducing platform participation. Tying restores high adoption, intensifies competition, and increases consumer surplus. A ban on tying or structural separation lowers adoption and can harm consumers. |
| Date: | 2026–04–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131671 |
| By: | Shiva Madadkhani; Nils Sturma; Mathias Drton; Svetlana Ikonnikova |
| Abstract: | Electricity markets are changing, driven by large-scale renewable integration and rising demand from electrification and digitalisation. This raises fundamental questions about how electricity prices form as the relationships among key price determinants evolve. Here we apply causal discovery to characterise these dynamics across major supply- and demand-side drivers of wholesale electricity prices in Texas, where rapid renewable growth intersects with surging demand. We show that wind generation has become the dominant causal driver of day-ahead electricity prices with effects more than 3 times larger than those of natural gas prices, overturning the view of the Texas market as gas-price-driven. Wind reduces prices locally but redistributes congestion costs across regions in seasonally varying patterns. Natural gas prices remain causally relevant, though their influence is modest and the dominant gas benchmark changes over time. Electricity demand also shows region- and period-specific causal effects. These findings highlight the need for causal models that capture time-varying relationships across both supply and demand to guide system planners and market participants navigating the ongoing transition. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.14257 |
| By: | Bellodi, L.; Morelli, M.; Spenkuch, J. L.; Teso, E.; Vannoni, M.; Xu, G. |
| Abstract: | We combine comprehensive data on the rulemaking activities of the U.S. federal government with individual-level personnel and voter registration records to study delegation and principal-agent frictions in the development of new regulations. We present three main results. First, even important pieces of new regulation are frequently delegated to career bureaucrats who are politically misaligned with the president. Second, rules that are overseen by misaligned regulators take systematically longer to complete, are more verbose, generate more negative feedback from the public, and are more likely to be challenged in court. Third, in assigning regulators to rules, agency leaders of-ten face a sharp trade-off between political alignment and expertise. Agency frictions notwithstanding, they tend to resolve this trade-off in favor of expertise. |
| Date: | 2026–02–28 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2622 |
| By: | Simshauser, P.; Gilmore, J. |
| Abstract: | Electricity prices across Europe, North America and Asia -Pacific surged following the outbreak of the Russia-Ukraine war, driven by severe spikes in LNG and coal prices. In Australia, average household electricity tariffs in the National Electricity Market were ~23c/kWh in 2021. By 2025 tariffs had increased by 33% to ~30c/kWh, and provides an interesting case study of predictable policy aftershocks. Australians were told renewables would be cheaper, yet electricity bills had risen sharply. Are renewables cheaper? In this article, we focus on the wholesale market component of retail electricity tariffs in Australia and examine a counterfactual policy scenario – a world where market entrants over the past two decades were constrained to coal- and gas-fired generation, rather than renewables. We compare these results to the NEM’s transitioning plant stock, with ever -rising levels of wind, utility-scale and rooftop solar, along with the emergent firming fleet, viz. batteries, pumped hydro and new entrant gas turbines. Our counterfactual policy scenario would result in wholesale market costs and prices ~30-50% higher. Coal and gas were once unambiguously the NEM’s lowest cost entrants. That period has ended. Structurally high coal plant costs and export -parity gas prices means renewables and firming assets represent the dominant new entrants to meet demand growth, and supply gaps created by aging coal plant exits. |
| Keywords: | Renewables, Coal, Natural Gas, Dispatchable Plant Capacity |
| JEL: | D52 D53 G12 L94 Q40 |
| Date: | 2025–11–30 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2626 |
| By: | Vera Lubbersen |
| Abstract: | Payment card markets are globally dominated by a few large card networks, which give significant rebates to issuing banks. Policy makers are concerned about rising merchant fees and the overreliance on these networks’ payment services. A common assumption is that profitable entry is blockaded by the entry costs to set up the payment system and network, resulting in a monopolistic or duopolistic market structure. The question analyzed in this paper is under which conditions a card network sets rebates at a higher level such that competitors cannot profitably enter the market. Deterrence becomes more profitable for a large card network when transaction benefits increase - especially if issuing banks pass rebates through to cardholders. At the same time, entry becomes more blockaded if issuing banks face costs to switch their card issuance to a different card network - indicating that large card networks may use rebates to increase switching costs. These lock-in effects explain why domestic card networks are pushed aside and new card networks struggle to gain ground and may have important implications for payment regulation. |
| Keywords: | Payment cards; Rebates; Entry deterrence; Interchange fee; Card networks |
| JEL: | L12 L13 L14 L20 L21 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:856 |
| By: | Bălașa, M.; Pollitt, M. G. |
| Abstract: | There is limited research investigating the impact of zonal electricity prices on industrial location decisions. This paper analyses the consequences of the Swedish 2011 electricity market reform which divided the country into four bidding zones. Such changes are often expected to lead to industrial relocations towards the cheaper electricity zones. We examine the macro and micro levels of this reconfiguration, using country - and firm-level data. Both levels of analysis show an initially limited impact of t he reform on industrial location choices, with only one relocation to the northern part of the country. However, we find that the electricity intensities of the existing and emerging industries are different. By distinguishing between these two types of industries, we identify that many up-and-coming ones such as low-carbon steel, green ammonia, green hydrogen, e-methanol as well as data centres are increasingly locating in the bidding zones with lower electricity prices. For these, the share of electricity costs in the total cost of production is much higher compared to the traditional, fossil -based heavy industries. However, even if they are energy -intensive, these industries are not job-intensive at all, such that the location choices of the new firms do not significantly impact the labour market, which also suffers from significant shortages in the northern region. These location decisions may, in time, reduce the electricity surplus in the north of the country, and thus exert upward pressure on the price in the long-term. The findings have implications for understanding industrial (re-)locations, electricity market reconfigurations, and industrial decarbonisation. |
| Keywords: | Electricity Market Reform, Industrial Decarbonisation, Industrial Policy, Industrial Relocation, Zonal Electricity Prices |
| JEL: | O14 R11 Q41 L94 |
| Date: | 2026–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2615 |
| By: | Mark L. Egan; Gregor Matvos; Amit Seru; Lulu Wang; Vincent Yao |
| Abstract: | We use novel data on the composition and cost of payments across U.S. merchants to quantify consumer redistribution in the payment system. Cards charge interchange fees to merchants to fund consumer rewards. When merchants raise prices for all consumers in response to these costs, users of low-cost payment methods (e.g., cash and debit) cross-subsidize high-reward credit card users who shop at the same merchant. This standard mechanism implicitly assumes that consumers using different payment methods shop at the same merchants and that merchants face similar fees. We show instead that incidence depends on the joint distribution of payment choices across merchants. We document two key forces that shape redistribution. First, consumer sorting—where consumers who use different payment methods shop at different merchants—limits the exposure of cash and debit users to the effects of high interchange fees. Second, interchange fees vary across merchants; where users of different payment methods overlap, such as at large grocery stores, fees are lower due to sector discounts and private negotiations. We embed these forces in a sufficient-statistics framework that maps observed heterogeneity directly into redistribution. We estimate that interchange fees transfer approximately $30 billion every year from cash and debit users to credit card users. Consumer sorting and merchant fee heterogeneity reduce the magnitude of this regressive transfer by 25%, but do not eliminate it. Finally, we show that both the Durbin Amendment and the rise of premium credit cards have been regressive, highlighting how policy and innovation can reshape the incidence of platform fees. |
| JEL: | D14 E42 G0 G2 G5 L11 L81 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35067 |
| By: | Pragya Kakani; Eric Yde; Genevieve Kanter; Richard G. Frank; Amelia M. Bond |
| Abstract: | We provide evidence of strategic transfer pricing by vertically integrated health care firms in response to insurer profit regulations. Insurers increased prices at vertically integrated pharmacies by 9.5% following the introduction of caps on insurer profits in Medicare Part D. We detect larger price increases by insurers that were at greatest risk of exceeding the allowable profit level. More than one-fifth of these higher prices were borne by the federal government. Our analysis illustrates that vertically integrated firms can evade profit regulation by “tunneling” profits to unregulated subsidiaries, undermining regulatory intent and increasing health care spending. |
| JEL: | I11 I13 I18 L14 L22 L41 L51 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35043 |
| By: | Pollitt, M. G.; Duma, A.; Covatariu, A.; Nillesen, P. |
| Abstract: | Electricity and gas distribution system operators (DSOs) are expected to play a crucial role in the energy transition. Hence, incentivizing innovation in this sector, which displays natural monopoly features, is becoming increasingly relevant. Measuring in novation is notoriously difficult, as both the inputs (funding innovative activities) and outputs (patents, publications or new adopted technologies and processes) are imprecisely measured and challenging to compare across countries. To address this, we take a text analysis approach to measuring innovation in DSOs, based on occurrences of innovation signaling words. Starting from a sample of 194 electricity DSOs and 73 gas DSOs, this paper measures innovation intensity based on DSO corporate reporting. The results are compared across different DSO characteristics like size, performance, structure, ownership and geographic location. |
| Keywords: | Distribution System Operators, Energy Transition, Innovation |
| JEL: | L94 |
| Date: | 2026–03–11 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2616 |
| By: | Marc Deschamps (Université Marie et Louis Pasteur); Dongshuang Hou (Department of Applied Mathematics, Northwestern Polytechnical University); Aymeric Lardon (Université Jean Monnet Saint-Étienne, CNRS, Université Lyon 2, GATE Lyon Saint-Étienne); Christian Trudeau (Department of Economics, University of Windsor) |
| Abstract: | We consider a homogeneous Cournot oligopoly where the inverse demand function is obtained by the utility maximization of a representative consumer, and firms may operate at different marginal costs. Assuming that some firms make a cartel while others remain independent, we introduce three new classes of TU-games, referred to as welfare TU-games, each corresponding to consumer surplus, total profit, and total welfare, respectively. Our results show that the games associated with consumer surplus and total welfare are monotonically decreasing and concave, highlighting a snowball effect of cartel formation on these two welfare measures. In contrast, the game associated with total profit is never superadditive, but it is monotonically increasing and concave when the number of firms is sufficiently small. Furthermore, we apply allocation methods, including the Shapley value and the serial method, to determine ex ante fair fines that firms must pay for participating in the cartel, allowing to differentiate fines both on the order of arrival in the cartel and on the technologies of the firms. For instance, in certain scenarios, some inefficient firms may receive lower fines for joining the cartel due to cost synergies. |
| Keywords: | Cournot competition; Cartel; Welfare; Shapley value; Antitrust. |
| JEL: | C71 D43 K21 L40 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:wis:wpaper:2601 |
| By: | Simshauser, P. |
| Abstract: | During 2016-2018, Australia’s National Electricity Market (NEM) experienced the adverse effects of two sequential and sudden coal plant closures, viz. sharply rising wholesale spot prices, structural hedge shortages and deteriorating system strength. More recently, a slowing rate of renewable project entry has led governments to intervene by delaying scheduled coal plant closures. An intervention to delay a scheduled coal plant closure helps maintain short term reliability but inadvertently undermines investor confidence in new entry through a transient depression in near-term forward prices. Above all, interventions risk reinforcing a cycle of stalled renewable entry and further delays to scheduled coal plant closures. This article analyses a transient strategic reserve, a deliberately temporary, out of market "waiting room" for dispatchable capacity to break the circularity. By assembling and temporarily underwriting a targeted reserve of dispatchable plant prior to coal closure dates, policymakers can maintain price stability and resource adequacy while substantially preserving the integrity of the energy only market design. Using a dynamic, security constrained electricity market model, outcomes across scenarios show the transient reserve produces a more orderly transition path, materially reduces the risk of price volatility and reliability breaches at relatively low cost, while improving investment incentives for intermittent renewables and dispatchable plant capacity. Findings suggest "the waiting room" is a tractable, low intrusion mechanism capable of supporting scheduled coal closures without institutionalising a capacity market. |
| Keywords: | Strategic Reserve, Energy-Only Markets, Resource Adequacy |
| JEL: | D52 D53 G12 L94 Q40 |
| Date: | 2026–01–31 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2627 |
| By: | Huisheng Wang; H. Vicky Zhao |
| Abstract: | Herding, where investors imitate others' decisions rather than relying on their own analysis, is a prevalent phenomenon in financial markets. Excessive herding distorts rational decisions, amplifies volatility, and can be exploited by manipulators to harm the market. Traditional regulatory tools, such as information disclosure and transaction restrictions, are often imprecise and lack theoretical guarantees for effectiveness. This calls for a quantitative approach to regulating herding. We propose a regulator-leader-follower trilateral game framework based on optimal control theory to study the complex dynamics among them. The leader makes rational decisions, the follower maximizes utility while aligning with the leader's decisions, whereas the regulator designs a mechanism to maximize social welfare and minimize regulatory cost. We derive the follower's decisions and the regulator's mechanisms, theoretically analyze the impact of regulation on decisions, and investigate effective mechanisms to improve social welfare. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.11100 |
| By: | Torres, Ana Paula Gonzalez |
| Abstract: | We studied the regulation of emerging technologies through the European Union’s General-Purpose AI Code of Practice drafting process, asking when and why do actors prefer greater legal certainty or greater legal uncertainty. Consistent with economic theories of regulation, we found that smaller firms preferred legal certainty, whereas larger and influential AI developers often preferred greater legal uncertainty. Information asymmetry also explained differences in preferences. However, economic theories assume the availability of information, whereas emerging technologies entail Knightian factual uncertainty. To account for this, we put forward a complementary sociological explanation for actors’ regulatory preferences, which we term asymmetric legal uncertainty: a situation in which all actors are equally ill-informed, but some, due to a perceived expertise, are given a de facto degree of control over the factual narrative on which legal consequences hinge. We argue that, in such a situation, legal uncertainty allows actors to speculate about future legal outcomes. |
| Date: | 2026–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:tykag_v1 |
| By: | Thomas Drechsel; Ko Miura |
| Abstract: | Bank regulation supports financial stability, but might constrain economic activity. This paper estimates the macroeconomic effects of bank regulation using a high-frequency identification approach. We measure market surprises in a bank stock price index during a narrow time window around Federal Reserve speeches that discuss the US banking system and its regulation. We then develop a sign restriction procedure to elicit the variation in these market surprises that can be interpreted as news about bank regulation. News that bank regulation will be tighter than expected mitigates risk in the banking sector, but reduces economic activity by increasing banks' funding costs and tightening loan supply. A 10 basis point regulation-induced peak reduction in bank risk premiums is accompanied by a 15 basis point peak increase in the unemployment rate. Compared to previous studies, these magnitudes suggest a relatively high macroeconomic cost of tightening bank regulation, at least in the short run. |
| JEL: | E44 E51 E52 E58 G28 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35071 |
| By: | Wade, Brendan; Carthy, Philip; Farrell, Niall |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:esr:wpaper:wp824 |
| By: | Seongjin Kim; Jin Hyuk Choi |
| Abstract: | We develop a multi-period Kyle-type model that incorporates both mandatory disclosure of informed trades and imperfect competition among market makers. We prove the existence and uniqueness of a linear equilibrium and show that the liquidity-enhancing effect of disclosure is fundamentally linked to the degree of market-making competition. Disclosure lowers trading costs by reducing price impact, and its marginal benefit is strictly larger when competition is weak. We empirically validate this prediction using the 2002 Sarbanes-Oxley Act disclosure reform as a natural experiment. A difference-in-differences analysis of U.S. equities confirms that the spread reduction following enhanced disclosure is significantly larger for stocks with fewer active market makers. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.10194 |
| By: | Kammourieh, Sima; Devie, Jules |
| Abstract: | Emerging markets and developing economies continue to face significant economic and financial challenges. The world bank’s 2024 international debt statistics highlight persistent negative external transfers impacting sovereign debt worldwide, driven mainly by high interest rates. Lower middle-income countries are most affected, but more integrated markets feel these pressures, too. Global uncertainty—like us trade policies and potential interest rate hikes—adds further complexity. As discussions around the cost of capital in developing countries (Africa especially) have come to the fore, one key question has gained renewed focus in recent times, namely: did the changes to the regulatory regime of commercial banks enacted after the Global Financial Crisis (GFC) play a role in changing the quantity and quality of private financial flows to EMDEs? |
| Keywords: | Banking, Capital Markets, Emerging Markets, Financial Flows, Prudential Regulation |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpm:notfdl:2510 |
| By: | Lavee, Doron; Steidl, Florian |
| Abstract: | Over the past years, governments have made substantial progress in tobacco control through higher taxes, advertising bans, and public smoking restrictions. Yet, in many advanced economies, smoking rates have stopped falling despite these strong measures. This stagnation suggests that traditional approaches, focused solely on discouraging all nicotine use, may have reached their limits. Simultaneously, the emergence of novel nicotine delivery systems - such as e-cigarettes, heated tobacco products, and nicotine pouches - has introduced a new dynamic. Although these products are not risk-free, they are generally associated with a significant reduction in toxicant exposure relative to conventional cigarettes. Policy responses to this technological development vary: some countries have adopted regulatory frameworks that differentiate products based on their relative health risks, while others apply uniform restrictions across all nicotine-containing products. This study analyzes the effect of these divergent regulatory frameworks on smoking prevalence across a cohort of 42 highly developed countries (Human Development Index (HDI) > 0.83). Using Ordinary Least Squares (OLS) regression models controlling for development levels (measured by HDI index) and taxation levels, the findings indicate that countries adopting a differentiated, risk-proportionate policy exhibit smoking rates approximately 7 percentage points lower than those maintaining non-differentiated regulatory regimes. Furthermore, the analysis reveals that in this high-HDI cohort, differences in taxation levels alone no longer explain the variance in smoking prevalence, highlighting the importance of product substitution toward lower-risk nicotine products in sustaining progress in tobacco control. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:kitwps:340002 |
| By: | Carthy, Philip; Farrell, Niall; Harold, Jason; Timmons, Shane |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:esr:wpaper:wp820 |
| By: | Alisher Aldashev; Alexander M. Danzer |
| Abstract: | Ceremonies are central to social life, yet the pressure to conform to community spending norms traps households in a collectively suboptimal equilibrium, imposing severe financial burdens. Using nationally and regionally representative longitudinal data from Tajikistan and Kyrgyzstan, we document that ceremonial expenditures are sizeable, display striking income inelasticities, and are strongly shaped by local spending norms, making celebrations disproportionately burdensome for poorer households. We evaluate two distinct regulatory approaches through separate natural experiments: a top-down legal ban on lavish wedding celebrations in Tajikistan and a bottom-up, community-driven norm agreement in Kyrgyzstan—interventions with close analogues in Afghanistan, China, India, and Pakistan. Both yield reductions in ceremonial spending, with household savings larger under the bottom-up approach, but they operate through fundamentally different compliance mechanisms. The top-down reform hinges on external monitoring and credible sanctions, while the bottom-up intervention relies on social trust and norm internalization. These findings identify external enforcement and social trust as the key compliance mechanisms underlying top-down and bottom-up consumption regulations respectively, with broader implications for the design of policies targeting socially motivated expenditures. |
| Keywords: | ceremonial spending, conspicuous consumption, compliance, monitoring, trust, anti-poverty policy |
| JEL: | D12 D04 H31 O17 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12610 |
| By: | Xiao Dong; Paul Koh; Devesh Raval; Dominic Smith; Brett Wendling |
| Abstract: | Antitrust authorities frequently rely on structural divestitures to address competitive concerns raised by mergers. Using census-level establishment data and proprietary transaction records from the U.S. grocery sector, we provide systematic evidence on the long-run effects of such remedies. Divested stores experience an average 31 percent decline in employment over five years, driven by elevated exit rates and persistent contraction among surviving establishments. Sales similarly decline. Transaction-level evidence indicates that divested assets are systematically weaker and are often transferred to lower-capability buyers. These findings suggest that structural remedies may be less effective when the implementation of divestitures allows merging parties substantial discretion over the assets and buyers involved. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.15045 |