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on Regulation |
| By: | Bouvard, Matthieu; Jullien, Bruno |
| Abstract: | We consider the price-cap regulation of a monopolistic network operator when the regulator has limited commitment. Operating the network requires xed investments and the regulator has the opportunity to unilaterally revise the price cap at random times. When the regulator maximizes consumer surplus, he has an incentive to lower the price cap once the operator's xed investments are sunk. This hold-up problem gives rise to two types of ineciencies. In one type of equilibrium, the operator breaks even but strategically under-invests to induce the regulator to maintain the price cap. In another type of equilibrium the operator makes strictly positive prots and periods of high investment and high prices are followed by periods of low prices and capacity decline. Overall, the model suggests that the regulator's lack of commitment limits the deployment of network infrastructures. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130871 |
| By: | Brennan, Tim (Resources for the Future) |
| Abstract: | A low-cost method for increasing transmission capacity is to use grid-enhancing technologies (GETs). Setting transmission rates on the basis of cost may lead transmission providers to choose to install lines at greater cost than GETs. Price cap regulation (PCR) adjusts rates over time on the basis of inflation and expected (but not actual) cost reductions, thus giving the regulated firm an incentive to reduce costs, such as by adopting GETs. Allowed rates are likely to eventually diverge from costs enough to warrant regulatory recalibration, reducing the advantages of PCR. PCR is also not designed to incentivize quality, such as resilience. PCR can handle the multiplicity of rates over different nodes and times, but it will likely take more time for such rates to converge to efficient levels than it would take for regulators to adjust the rates accordingly. Because new transmission lines will likely be required, regulators will have to set an initial price for PCR, reintroducing rates based on cost. Nevertheless, regulators should consider PCR, given the importance of maximizing the efficiency of the transmission system and the use of GETs to achieve that efficiency. |
| Date: | 2025–02–28 |
| URL: | https://d.repec.org/n?u=RePEc:rff:report:rp-25-04 |
| By: | Nocke, Volker; Rhodes, Andrew |
| Abstract: | We develop a framework to study horizontal mergers when the parties can propose remedies to an antitrust authority. Remedies are modeled as asset divestitures, which make the firm receiving the assets more efficient at the expense of the merged firm. We consider both the case where the merger affects a single market and where it affects multiple markets. Solving for the merging firms’ optimal proposal, we investigate when it involves remedies—and if so, which assets should be divested, and to whom, and how this depends on market characteristics such as the level of competitiveness. |
| Keywords: | Antitrust; horizontal mergers; structural remedies; divestitures; data |
| JEL: | L13 L40 D43 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130888 |
| By: | Chengqing Li; Junjie Zhou |
| Abstract: | We examine price regulation for monopolists in networks with demand spillovers. The Pareto frontier of the profit-surplus set is characterized using a centrality-based price family. Under typical price regulation policies, regulated outcomes are generically Pareto inefficient at fixed spillover levels but become neutral as spillovers grow, with relative profit loss and surplus changes vanishing. Welfare impacts of banning price discrimination under strong spillovers depend solely on the correlation between intrinsic values and network summary statistics. In networks with two node types (e.g., coreperiphery or complete bipartite), intrinsic value averages across node types suffice for welfare comparisons. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.17301 |
| By: | Enache, Andreea; Rhodes, Andrew |
| Abstract: | Many platforms have used a Price Parity Clause (PPC) to prevent sellers charging lower prices on other sales channels. PPCs are often considered anti-competitive and have been banned in some jurisdictions. We provide a novel rationale—centered on how PPCs affect platforms’ data acquisition—for why a complete ban on PPCs may harm buyers and sellers. |
| Keywords: | Price Parity Clauses; Platforms; Data; Product Discovery |
| JEL: | D43 D83 L13 L42 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130889 |
| By: | Robertson, Molly (Resources for the Future); Mirzapour, Omid; Palmer, Karen (Resources for the Future) |
| Abstract: | Grid-scale storage can play an important role in providing reliable electricity supply, particularly on a system with increasing variable resources like wind and solar. Economics, public policies, and market rules all play a role in shaping the landscape for storage development. In this report, we offer an overview of these factors, drawing on the relevant literature and ongoing policy dialogue. We explore the potential role these factors have played in shaping the growth of storage across the United States. |
| Date: | 2025–04–18 |
| URL: | https://d.repec.org/n?u=RePEc:rff:report:rp-25-09 |
| By: | Mehdi Davoudi; Junjie Qin; Xiaojun Lin |
| Abstract: | This study investigates market-driven long-term investment decisions in distributed solar panels by individual investors. We consider a setting where investment decisions are driven by expected revenue from participating in short-term electricity markets over the panel's lifespan. These revenues depend on short-term markets equilibria, i.e., prices and allocations, which are influenced by aggregate invested panel capacity participating in the markets. We model the interactions among investors by a non-atomic game and develop a framework that links short-term markets equilibria to the resulting long-term investment equilibrium. Then, within this framework, we analyze three market mechanisms: (a) a single-product real-time energy market, (b) a product-differentiated real-time energy market that treats solar energy and grid energy as different products, and (c) a contract-based panel market that trades claims or rights to the production of certain panel capacity ex-ante, rather than the realized solar production ex-post. For each, we derive expressions for short-term equilibria and the associated expected revenues, and analytically characterize the corresponding long-term Nash equilibrium aggregate capacity. We compare the solutions of these characterizing equations under different conditions and theoretically establish that the product-differentiated market always supports socially optimal investment, while the single-product market consistently results in under-investment. We also establish that the contract-based market leads to over-investment when the extra valuations of users for solar energy are small. Finally, we validate our theoretical findings through numerical experiments. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.07203 |
| By: | Niuniu Zhang |
| Abstract: | The rise of autonomous pricing systems has sparked growing concern over algorithmic collusion in markets from retail to housing. This paper examines controlled information quality as an ex ante policy lever: by reducing the fidelity of data that pricing algorithms draw on, regulators can frustrate collusion before supracompetitive prices emerge. We show, first, that information quality is the central driver of competitive outcomes, shaping prices, profits, and consumer welfare. Second, we demonstrate that collusion can be slowed or destabilized by injecting carefully calibrated noise into pooled market data, yielding a feasibility region where intervention disrupts cartels without undermining legitimate pricing. Together, these results highlight information control as a lightweight yet practical lever to blunt digital collusion at its source. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.02800 |
| By: | Hellenkamp, Detlef |
| Abstract: | The 2025+ regulatory agenda presents the European banking sector with a significant convergence of complex requirements, including the finalisation of Basel III (CRR III/CRD VI), the Digital Operational Resilience Act (DORA), the Markets in Crypto-Assets Regulation (MiCAR), the new Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) package with the establishment of the AMLA, and the ongoing implementation of ESG regulations (CSRD/ESRS, EU Taxonomy). The results of this work show that, despite the undeniable need to strengthen the resilience and integrity of the sector, the aggregated regulatory complexity, the considerable implementation costs and potential normative inconsistencies constitute substantial challenges for the competitiveness and innovative capacity of institutions. In particular, interactions in the context of digital transformation, ensuring regulatory proportionality and handling large volumes of data in compliance with data protection regulations require precise calibration in the sense of differentiated and coherent (‘smarter’) regulation. The supervisory priorities of the European Central Bank (ECB) and the European Banking Authority (EBA) reflect these challenges and require far-reaching. The outlook points to a persistently high regulatory dynamic that will be increasingly characterised by the need to systematically manage the complex interactions between financial stability-related objectives, technological innovation capability and sustainability-oriented requirements. |
| Keywords: | AI-Act, AML/CFT-Paket (AMLA), Aufsichtspriorität, Basel III (CRR III/CRD VI), CSRD, Digitalisierung, Digital Operational Resilience Act (DORA), Digitale Transformation, ESG-Regulierung, ESRS, Markets in Crypto-Assets Regulation (MiCAR), Proportionalität, RegTech, Smart-Regulation, SupTech |
| JEL: | G21 G28 K23 |
| Date: | 2025–04–26 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125915 |
| By: | Medzini, Rotem |
| Abstract: | The ‘assurance problem’ has traditionally centred around verifying that ‘tangible’ products and services comply with legal or regulatory standards through state-led, self-regulatory, or third-party assurances. Its modern accounts focus on proving the trustworthiness of digital services, especially AI-powered ones. This paper applies the regulatory intermediation framework to assess whether third-party assurances, especially those provided by the European New Approach to Technical Harmonisation and Standards, effectively provide assurances, including digital assurances, compared to centralised, state-led authorities. It addresses three key questions: (1) Who are the regulatory intermediaries providing assurance for digital services under the New Approach? (2) How does reliance on these intermediaries differ across three regimes, specifically, the Medical Device Regulation, certifications under the General Data Protection Regulation, and the regulation of high-risk AI under the AI Act? (3) How do these intermediaries perceive the strengths and weaknesses of relying on third-party assurance under the New Approach in providing effective assurances when compared to centralised state-led approaches? This paper utilises document analysis, expert interviews, and stakeholder workshops to identify four key intermediary groups involved in standard setting and conformity assessment, and maps how the three regimes assign responsibilities to them to provide assurances to varying degrees. The paper then demonstrates how intermediaries perceive the strengths and weaknesses of these third-party assurances compared to centralised state-led assurances. It argues that their familiarity and knowledge regarding procedures, interactions, organisational structures, and routines related to their responsibilities can lead to more effective assurances, especially digital ones, with them acting as protectors of fundamental rights, health, and safety. |
| Date: | 2025–08–29 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:dmsk2_v1 |
| By: | Agostino Capponi; Garud Iyengar; Bo Yang; Daniel Bienstock |
| Abstract: | In the Day-Ahead (DA) market, suppliers sell and load-serving entities (LSEs) purchase energy commitments, with both sides adjusting for imbalances between contracted and actual deliveries in the Real-Time (RT) market. We develop a supply function equilibrium model to study how virtual trading-speculating on DA-RT price spreads without physical delivery-affects market efficiency. Without virtual trading, LSEs underbid relative to actual demand in the DA market, pushing DA prices below expected RT prices. Virtual trading narrows, and in the limit of large number traders can eliminates, this price gap. However, it does not induce quantity alignment: DA-cleared demand remains below true expected demand, as price alignment makes the LSE indifferent between markets and prompts it to reduce DA bids to avoid over-purchasing. Renewable energy suppliers cannot offset these strategic distortions. We provide empirical support to our main model implications using data from the California and New York Independent System Operators. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.11979 |
| By: | Thibaut Mastrolia; Hao Wang |
| Abstract: | We study the optimal liquidation problem in both lit and dark pools for investors facing execution uncertainty in a continuous-time setting with market impact. First, we design an optimal make--take fee policy for a large investor liquidating her position across both pools, interacting with small investors who pay trading fees. We explicitly characterize the large investor's optimal liquidation strategies in both lit and dark pools using BSDEs under a compensation scheme proposed by an exchange to mitigate market impact in the lit venue. Second, we consider a purely competitive model with major--minor traders in the absence of regulation. We provide explicit solutions to the associated HJB--Fokker--Planck system. Finally, we illustrate our results through numerical experiments, comparing market impact under a regulated market with a strategic large investor to that in a purely competitive market with both small and large investors. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.03916 |
| By: | Robertson, Molly (Resources for the Future); Krupnick, Alan (Resources for the Future); Look, Wesley (Resources for the Future); Ko, Eunice; Bambrick, Conor; Perez, Celeste; Bautista, Eddie |
| Abstract: | New York State is working to implement policies that will decarbonize the state’s economy and meet the full requirements of the Climate Leadership and Community Protection Act (CLCPA). The CLCPA requires the state to reduce statewide greenhouse gas (GHG) emissions by 40 percent by 2030 and 85 percent by 2050 (relative to 1990 levels) and to achieve net-zero GHG emissions economy-wide. Additionally, the state must direct at least 35 to 40 percent of climate investments and benefits to disadvantaged communities, as defined by the Climate Justice Working Group.Since 2023, the state has been designing a cap-trade-and-invest (CTI) program to help meet its emissions reduction requirements. CTI would encourage decarbonization by pricing emissions and increasing the costs of using fossil fuels while also subsidizing (the “invest” side) the adoption of low-carbon technologies, such as heat pumps and electric vehicles. The program would establish an auction for emissions allowances and require emitting entities to purchase allowances based on their emissions.Analyses from the New York State Energy Research and Development Authority (NYSERDA) and Resources for the Future (RFF) offer evidence that a CTI program, alongside other emissions reduction investments and policies the state has adopted or is considering, can significantly reduce GHG and conventional air pollution emissions in New York State, compared with both a business-as-usual scenario and the historical baseline of emissions (NYSERDA and DEC 2024; Krupnick et al. 2024). Additional work by RFF has found that program guardrails like facility-specific caps can further reduce harmful emissions near disadvantaged communities and improve air quality across much of the state without adding significantly to costs (Krupnick et al. 2024; Robertson et al. 2024a, 2024b).Despite the air quality and health improvements that could result from a CTI program (Krupnick et al. 2024; Robertson et al. 2024a, 2024b; NYSERDA and DEC 2024), some state policymakers and business groups, expressing concern about the affordability of the program and the additional costs that New York households could incur, have argued for dampening the program’s ambition on emissions reductions to ensure lower costs (Marcus 2024). This paper analyzes the affordability of CTI for different income groups and communities by exploring how the program may affect the cost of fossil fuels and deliver benefits to households in the form of program subsidies and what we call “dividends”—payments not tied to particular energy-saving behaviors or investments.We investigate how different allowance-funded investment and dividend strategies can affect transportation and residential energy costs (both gross and net) faced by New York households. We analyze two allowance price ceilings (informed by Scenarios A and C in the NYSERDA and DEC 2024 analysis) and potential strategies for distributing revenues and decarbonization incentives. Across these scenarios, we consider how different distributions from the Consumer Climate Action Account (CCAA) could affect average costs for low- and middle-income households. We find the following:A CTI program can financially benefit households across most income groups and geographies in New York State.New Yorkers across income groups could pay less to operate an electrified household than to operate a household that runs on fossil fuels.Compared with a low allowance price (NYSERDA-DEC Scenario C), a high allowance price (NYSERDA-DEC Scenario A) could make many New Yorkers better off by increasing the revenue available for dividends to households.Targeting dividends by geography and income can help cover costs and create more savings for households earning up to $200, 000 per year.The electrification observed in our study is largely driven by existing federal and state policies, but investment of CTI revenues can lower costs for households transitioning to heat pumps for heating and cooling and electric vehicles. Investments to reduce structural barriers that prevent certain households from electrifying could encourage further heat pump adoption.A high allowance price (Scenario A) would result in significantly greater reductions in GHG and copollutant emissions (i.e., SO2, NOX, and direct PM2.5) compared with the low allowance price scenario (Scenario C). |
| Date: | 2025–01–13 |
| URL: | https://d.repec.org/n?u=RePEc:rff:report:rp-25-01 |
| By: | Yueran Ma; Benjamin Pugsley; Haomin Qin; Kaspar Zimmermann |
| Abstract: | We present new facts about the largest American companies over the past century. In manufacturing, top firms in the 1910s, 1950s, and 2010s predominantly date back to around 1900. Even as this special generation persists, turnover among top firms has been substantial. In contrast, in retail and wholesale, we do not observe a special generation among top firms. We show in a model of firm dynamics that a special generation can arise from an industrial revolution, through the adoption of a scalable technology and learning-by-doing. Top firm turnover is matched by standard idiosyncratic productivity shocks. Time-varying market size growth rates or entry costs are not sufficient to explain the facts. Among retailers and wholesalers, learning appears absent, so a special generation would be harder to sustain. Our results highlight the potential for lasting nonstationarity among the dynamics of top firms, which can result from the long echoes of technological change. |
| JEL: | D2 E2 L1 M1 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34194 |