nep-reg New Economics Papers
on Regulation
Issue of 2025–05–05
twenty papers chosen by
Christopher Decker, Oxford University


  1. Regulating Electricity Spot Markets during Extreme Events: The 2021 Texas Case By Danielian, Armen
  2. Do Water Audits Work? By Jesper Akesson; Robert Hahn; Rajat Kochhar; Robert Metcalfe
  3. Do High Power Prices Slow Electrification? Some Panel Data Evidence By Huntington, Hillard
  4. The optimum mix of storage and backup in a highly renewable, highly reliable European electricity grid By J. Dunsmore; L. M. Arthur; R. S. Kemp
  5. Network Externalities and Platform Strategy: Agency, Bundles Entry, and Integration By Axel Gautier; Leonardo Madio; Shiva Shekhar
  6. Self-Preferencing: An Economic Literature-Based Assessment Advocating a Case-by-Case Approach and Compliance Requirements By Patrice Bougette; Frédéric Marty
  7. The honest truth about true pricing By Canoy, Marcel; Kamphorst, Jurjen J.A.; Tichem, Jan
  8. Power Hungry: How AI Will Drive Energy Demand By Mr. Christian Bogmans; Patricia Gomez-Gonzalez; Ganchimeg Ganpurev; Mr. Giovanni Melina; Mr. Andrea Pescatori; Sneha D Thube
  9. The Role of Market Frictions in Demand for Prepaid Electricity By Megan Elizabeth Lang
  10. Market power and global public goods By Sebastian G. Kessing
  11. Production Regulation Principles and Tax Reforms By Laurence Jacquet; Etienne Lehmann
  12. Maximizing Battery Storage Profits via High-Frequency Intraday Trading By David Schaurecker; David Wozabal; Nils L\"ohndorf; Thorsten Staake
  13. Personalized Discounts and Consumer Search By Zikun Liu; Jiwoong Shin; Jidong Zhou
  14. Estimating the Value of Retargeting in the Online Advertising Market By Fang, Yuhan; Kawaguchi, Kohei
  15. Exposure to Regulation and Income Inequality in Local Labor Markets: Evidence from the U.S. over the Past Half-Century By Stoyanov, Andrey; Zubanov, Nick
  16. Distributional Consequences of Becoming Climate-Neutral By Hochmuth, Philipp; Krusell, Per; Mitman, Kurt
  17. California’s High-Speed Rail Yields the Greatest Accessibility Gains to the Most Vulnerable Communities By Ding, Kaijing; Hansen, Mark
  18. "Institutional Trusteeship and Competition Policy in the Age of Sustainability: Designing Markets for Public Value and Responsible Power" By Matsushima, Hitoshi
  19. Regulating land markets to achieve the EU sustainability agenda By Calo, Adam; Kay, Sylvia; Moreau, Eliaz
  20. Are financial regulations impairing the transition to net zero? By Ives, Matthew; Beinhocker, Eric; Gasparini, Matteo; Fry, Sophie; Carr, Ben

  1. By: Danielian, Armen
    Abstract: This paper discusses the economic and legal challenges of price regulation in spot electricity markets during extreme events, taking the 2021 Texas winter storm as an example. The dual role of spot electricity prices (resource allocation and overall system reliability) in ERCOT's energy-only market resulted in allocating system reliability costs to load-shed consumers and spot electricity buyers, implying that complementary tools for covering system reliability costs should be sought. Further nuances are highlighted through a comparative qualitative analysis of value-of-lost-load pricing and anti-gouging legislation in the event context.
    Keywords: Value of lost load; Anti-gouging laws; Extreme events; ERCOT; Electricity spot market design; Price regulation; System reliability
    JEL: D47 D82 Q41
    Date: 2025–01–06
    URL: https://d.repec.org/n?u=RePEc:pra:mprapa:123964
  2. By: Jesper Akesson; Robert Hahn; Rajat Kochhar; Robert Metcalfe
    Abstract: Water suppliers are showing greater interest in using different mechanisms to promote conservation. One such mechanism is conducting home water audits, which involves assessing water use and providing tailored suggestions for conserving water for residential customers. Yet, very little is known about the economic impacts of these water audits. This paper helps fill this gap by implementing a natural field experiment in the United Kingdom. The experiment randomly allocates 45, 000 water customers to a control group or to treatment groups that receive different behavioral encouragements to take-up an online water audit. Our analysis yields three main findings. First, encouraging subjects to participate in an audit with financial incentives reduces household consumption by about 17 percent over two months. Furthermore, we find that the size of the financial incentive used to encourage conservation matters for take-up, but not conservation. Second, although there are substantial improvements in water conservation for some interventions, they do not appear to yield net benefits of more than 1 pound per person under various sensitivity analyses. We also implement a marginal value of public funds approach that considers benefits and costs and reach a similar conclusion. Third, we find that targeting high users could double the effectiveness of the financial incentive interventions.
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:feb:natura:00820
  3. By: Huntington, Hillard
    Abstract: Electrifying household and economic activity remain a cornerstone of the transition towards deep decarbonization. This analysis conducts a cross-country evaluation through a pooled mean-group model based upon 33 OECD nations since 1980. Electrification is defined as electricity’s share of the total energy system. The results show that electrification would have decreased by approximately 13 to 31 percent below other countries if the electricity price level had increased above other countries by 100 percent. Additional sensitivities show that symmetry between this response between price increases and price decreases depends upon whether GDP is exogenous. These estimates highlight the critical importance of finding new generation, transmission and distribution technologies that both reduce emissions and remain cost competitive. They also emphasize that any successful transition pathway must price electric power competitively based upon the opportunity costs of providing power. Efforts to bundle costly social programs and other expenses into power prices should be avoided.
    Keywords: OECD electrification; electricity prices; cross-country panel analysis
    JEL: C23 L94 L98 Q41 Q48
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:pra:mprapa:124376
  4. By: J. Dunsmore; L. M. Arthur; R. S. Kemp
    Abstract: We estimate the variability of solar and wind energy generation potential in Europe over a 43 year period between 1980-2022 with the MERRA-2 reanalysis datasets. We compare the estimated supply potential to hourly demand data from 36 European countries to calculate the reliability of a highly renewable electricity grid in Europe. We find that in cost-optimised scenarios with onshore wind, solar and storage, but no natural gas, reliably meeting the last 1% of demand represents 36% of the entire system cost. Including small amounts of dispatchable natural gas drastically reduces the cost of a renewable, highly reliable grid: overall system costs fall by 31% when just 1% of total generation is permitted to come from natural gas. Large renewable overbuild factors (greater than $\times$4 peak demand) are required to meet modern grid reliability standards in all scenarios, and wind, rather than solar, dominates the generation mix.
    Date: 2025–03
    URL: https://d.repec.org/n?u=RePEc:arx:papers:2503.23604
  5. By: Axel Gautier; Leonardo Madio; Shiva Shekhar
    Abstract: We consider a market in which a platform hosts third-party monopolistic complementors. Users are segmented into single-use and multi-use consumers, and services exhibit network externalities. In the agency model, the presence of multi-use consumers leads complementors to set inefficiently high prices, reducing demand and the platform’s profits. Platform entry can resolve these pricing inefficiencies by targeting multi-use consumers with a bundled offering, but it then fragments the market, diminishing network benefits for consumers. We find that the platform opts to enter only when it has committed to a low commission fee, and network benefits are modest. Integration with a complementor reduces prices for consumers and enhances network benefits, thereby improving consumer welfare, but the pricing inefficiency is only partially mitigated.
    Keywords: platform, network externalities, platform strategy, hybrid business model
    JEL: L22 L86
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:ces:ceswps:_11711
  6. By: Patrice Bougette (UniCA - Université Côte d'Azur, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur); Frédéric Marty (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur)
    Abstract: Self-preferencing is widely perceived as a threat to competition. Within the European Union, it has led to prohibition decisions, such as the Google Shopping case in 2017, commitment-based decisions, such as the Amazon case in 2022, and regulatory initiatives, notably the Digital Markets Act (DMA). Self-preferencing can be understood as a form of discrimination and manifests in two primary ways. First, a dual-role platform may prioritize its own services, potentially foreclosing rivals or entrenching its dominance. Second, a non-vertically integrated platform may favor a specific downstream player to maximize fee-based revenues, thereby distorting competition. This contribution emphasizes four key points. First, economic literature suggests that the competitive impact of self-preferencing is highly context-dependent. Second, a case-by-case approach is crucial for effective competition law enforcement. Third, shifting the burden of proof onto the accused firm could enhance enforcement efficiency. Fourth, outright prohibiting platforms from operating as dual-role entities may generate excessive welfare costs; instead, compliance obligations – such as transparent access rules – could mitigate litigation risks while preserving competitive dynamics.
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:hal:journl:halshs-04982587
  7. By: Canoy, Marcel; Kamphorst, Jurjen J.A.; Tichem, Jan
    Abstract: True pricing has progressed from an abstract notion to a real life phenomenon as a way to make consumers aware of the genuine costs to society of products. Our paper analyzes the impact of true prices on competition. Our model uses a straightforward differentiated Bertrand set-up where consumers can choose to pay the true price or the normal price. There are consumers who strongly prefer not to cause externalities. These consumers will opt to pay the true price. Other consumers receive less disutility of causing externalities. They will pay the normal price. Our findings are that setting the true price can be an equilibrium strategy for one or both firms. True prices can be welfare enhancing, but it comes at a cost. True prices harm consumers that do not value external effects as it raises the normal price. A comparison of true prices with taxation of the external effect shows that both can be socially optimal. Taxation is better because it covers both types of consumers, and worse because it overcorrects in the presence of market power. The paper demonstrates the value of analyzing competitive effects of environmental initiatives.
    Keywords: True Price, Sustainability, Industrial Organization
    JEL: D62 D64 Q56
    Date: 2025–03–01
    URL: https://d.repec.org/n?u=RePEc:pra:mprapa:124417
  8. By: Mr. Christian Bogmans; Patricia Gomez-Gonzalez; Ganchimeg Ganpurev; Mr. Giovanni Melina; Mr. Andrea Pescatori; Sneha D Thube
    Abstract: The development and deployment of large language models like ChatGPT across the world requires expanding data centers that consume vast amounts of electricity. Using descriptive statistics and a multi-country computable general equilibrium model (IMF-ENV), we examine how AI-driven data center growth affects electricity consumption, electricity prices, and carbon emissions. Our analysis of national accounts reveals AI-producing sectors in the U.S. have grown nearly triple the rate of the private non-farm business sector, with firm-level evidence showing electricity costs for vertically integrated AI companies nearly doubled between 2019-2023. Simulating AI scenarios in the IMF-ENV model based on projected data center power consumption up to 2030, we find the AI boom will cause manageable but varying increases in energy prices and emissions depending on policies and infrastructure constraints. Under scenarios with constrained growth in renewable energy capacity and limited expansion of transmission infrastructure, U.S. electricity prices could increase by 8.6%, while U.S. and global carbon emissions would rise by 5.5% and 1.2% respectively under current policies. Our findings highlight the importance of aligning energy policies with AI development to support this technological revolution, while mitigating environmental impacts.
    Keywords: generative AI; data centers; energy and the macroeconomy; climate change and growth; CGE models
    Date: 2025–04–22
    URL: https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/081
  9. By: Megan Elizabeth Lang
    Abstract: Prepaid electricity contracts lower enforcement costs but may burden consumers, particularly when market frictions are present. This paper presents the results of a randomized control trial where 2, 000 randomly selected, rural Rwandese consumers were offered a line of credit for electricity payments. The line of credit lowered liquidity constraints and transaction costs. Twenty percent of consumers borrowed and demand for the credit was inelastic; however, the line of credit did not change average demand for electricity. Detailed administrative data reveal that consumers primarily used the line of credit to lower transaction costs, suggesting that rural consumers highly value convenience. The results highlight potential Pareto improvements from more flexible prepaid contracts.
    Date: 2025–04–09
    URL: https://d.repec.org/n?u=RePEc:wbk:wbrwps:11097
  10. By: Sebastian G. Kessing
    Keywords: global public goods, market power, climate policy, global warming, terms-of-trade, China, Inflation Reduction Act, Net-Zero Industry Act
    JEL: H41 D60 Q54
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:sie:siegen:198-25
  11. By: Laurence Jacquet; Etienne Lehmann
    Abstract: We propose a new approach to assess the impact of regulatory changes on the production sector such as competition policies, taxing intermediate goods, robots or AI, trade regulation, production of public firms or environmental standards for firms. Our framework covers multidimensional nonlinear taxation with multiple income sources, General Equilibrium (GE) adjustments and market failures. We clarify under which conditions on the tax system the production sector should be regulated only to increase aggregate output, a recommendation we label the Production Regulation principle. Under these conditions, regulatory changes can be combined with adequate GE-neutralizing tax reforms to offset the GE effects on taxpayers’ utility levels. This ensures that changes in the production sector’s regulation that increases aggregate output do not deteriorate individual welfare, thereby resulting in a Pareto improvement. We also provide formulas that balance the effects of regulatory changes on aggregate production and their pre-distributive impact, when a GE-neutralizing tax reform is not feasible. These formulas introduce new GE-multipliers, which also appear in our calculations for the impact of tax reforms, optimal income tax systems and identifying Pareto-improving tax reforms.
    Keywords: production efficiency, market frictions, nonlinear income taxation, several income sources, endogenous prices
    JEL: H21 H22 H23 H24 L50 F13
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:ces:ceswps:_11705
  12. By: David Schaurecker; David Wozabal; Nils L\"ohndorf; Thorsten Staake
    Abstract: Maximizing revenue for grid-scale battery energy storage systems in continuous intraday electricity markets requires strategies that are able to seize trading opportunities as soon as new information arrives. This paper introduces and evaluates an automated high-frequency trading strategy for battery energy storage systems trading on the intraday market for power while explicitly considering the dynamics of the limit order book, market rules, and technical parameters. The standard rolling intrinsic strategy is adapted for continuous intraday electricity markets and solved using a dynamic programming approximation that is two to three orders of magnitude faster than an exact mixed-integer linear programming solution. A detailed backtest over a full year of German order book data demonstrates that the proposed dynamic programming formulation does not reduce trading profits and enables the policy to react to every relevant order book update, enabling realistic rapid backtesting. Our results show the significant revenue potential of high-frequency trading: our policy earns 58% more than when re-optimizing only once every hour and 14% more than when re-optimizing once per minute, highlighting that profits critically depend on trading speed. Furthermore, we leverage the speed of our algorithm to train a parametric extension of the rolling intrinsic, increasing yearly revenue by 8.4% out of sample.
    Date: 2025–04
    URL: https://d.repec.org/n?u=RePEc:arx:papers:2504.06932
  13. By: Zikun Liu (Yale University); Jiwoong Shin (Yale University); Jidong Zhou (Yale University)
    Abstract: The growing availability of big data enables firms to predict consumer search outcomes and outside options more accurately than consumers themselves. This paper examines how a firm can utilize such superior information to offer personalized buy-now discounts intended to deter consumer search. However, discounts can also serve as signals of attractive outside options, potentially encouraging rather than discouraging consumer search. We show that, despite the firmÕs ability to tailor discounts across a continuum of consumer valuations, the firm-optimal equilibrium features a simple two-tier discount scheme, comprising a uniform positive discount when the consumer outside option is intermediate and no discount when the outside option is low or high. Furthermore, compared to a scenario where the firm lacks superior information, we find that the firm earns lower profits, consumers search more while their welfare remains unchanged, and total welfare declines.
    Date: 2025–04–22
    URL: https://d.repec.org/n?u=RePEc:cwl:cwldpp:2440
  14. By: Fang, Yuhan; Kawaguchi, Kohei
    Abstract: In response to growing privacy concerns, many browsers have implemented restrictions on third-party cookies and cross-site tracking in online advertising. Advertisers are concerned that such retargeting prohibition policies could lead to a reduction in ads' click probability, thereby affecting the bid values. This paper investigates the economic consequences of prohibiting retargeting in online advertising by analyzing data from a demand-side platform (DSP). Our analysis shows that the DSP's bid values for non-retargeted impressions on Google Chrome are more than 60\% lower than those for retargeted impressions. Yet this difference understates the true disparity in bid values, as retargeting status is observable only for internal auction winners. By modeling the internal auction process and estimating advertisers' valuations, we identify even larger differences between retargeted and non-retargeted impressions: 76.04% for Android and 71.40% for Windows. Our counterfactual simulations indicate that a complete ban on retargeting would substantially reduce expected bid values—by 30.06% for Android and 49.84% for Windows users. These results underscore the significant economic tradeoff between enhancing privacy protection and maintaining advertising market efficiency.
    Date: 2025–02–01
    URL: https://d.repec.org/n?u=RePEc:osf:socarx:j34t8_v3
  15. By: Stoyanov, Andrey (York University, Canada); Zubanov, Nick (University of Konstanz)
    Abstract: Existing evidence points to a positive correlation between specific regulations and income inequality at a country or regional level, but little is known about how overall regulatory burden affects inequality at the local labor market level. Our study fills this gap by measuring local exposure to regulation from the industry-relevant articles of U.S. Code of Federal Regulation linked to local industry employment structure in 741 commuting zones (CZs) in the U.S. over the period 1970-2019. Relating our exposure to regulation measure to the CZ-level income inequality, computed from the Census records, we find that heavier regulation is followed by higher income inequality, lower average income and higher unemployment in the affected CZs. The implied effect estimates are sizeable and robust to various checks. We contribute to inequality research by identifying previously unknown, local effects of regulation on income inequality, exploring mechanisms through which they may occur, and demonstrating how available data can be used to produce more granular measures of exposure to regulation.
    Keywords: regulation, income, inequality, employment, local labor market
    JEL: L5 D63 E24
    Date: 2025–04
    URL: https://d.repec.org/n?u=RePEc:iza:izadps:dp17820
  16. By: Hochmuth, Philipp (Oesterreichische Nationalbank); Krusell, Per (Stockholm University); Mitman, Kurt (Stockholm University)
    Abstract: The EU has embarked on an ambitious path toward climate neutrality. How difficult will this transition be for the population as a whole and different subsets of consumers? This paper investigates this question using a dynamic general equilibrium model that captures a key feature of energy consumption: the relative energy content in one's consumption basket falls significantly as a function of one's relative income. Thus, poorer consumers are expected to be hit harder by the higher energy prices that we anticipate over the next few decades. In the model, energy---a complementary input to capital and labor---can be produced either using fossil fuel or a "green'' technology. We represent the EU policy in terms of a tax on fossil fuel and show that the European Commission's Fit-for-55 package implies a 168% tax on the fossil-based technology. The output losses from this tax are substantial, and GDP is 9.3% lower in the new steady state. The burden falls primarily on the poor agent who is 50% more worse off than the rich agent. The output losses can be compensated for if the economy achieves a 1.49% annual increase in energy efficiency as outlined in the Fit-for-55 package.
    Keywords: inequality, green transition, Fit-for-55
    JEL: E61 Q43
    Date: 2025–04
    URL: https://d.repec.org/n?u=RePEc:iza:izadps:dp17861
  17. By: Ding, Kaijing; Hansen, Mark
    Abstract: A major criticism of California’s high-speed rail project is that it will mainly serve urban elites and that low-income people and people of color likely won’t be able to afford the fares.2 Also, the project may benefit the middle-income group the least since the proposed station locations, usually in or near city centers, will probably serve high- and low-income populations better than middle-income families.2 Besides these arguments, however, there are very few studies that have analyzed the equity impacts of California’s high-speed rail project. Current studies have either focused on benefits to California residents as a whole with little consideration to the specific opportunities for how high- speed rail will improve the lives of marginalized groups; or only studied the disproportionate adverse impacts received by marginalized groups.
    Keywords: Engineering
    Date: 2025–04–01
    URL: https://d.repec.org/n?u=RePEc:cdl:itsrrp:qt5m44m6zm
  18. By: Matsushima, Hitoshi (Faculty of Economics, The University of Tokyo)
    Abstract: Private institutional design by tech giants such as GAFA and the exclusion of non-price values, exemplified by the suppression of ESG-related disclosures, have revealed structural challenges that existing competition laws can no longer adequately address. This paper proposes a new design philosophy called institutional trusteeship, which embeds legitimacy into the internal architecture of institutions as a response to this institutional void. Institutional trusteeship is built upon four foundational pillars: public purpose, co-governance, accountability and transparency, and adaptability. It functions as a complementary framework to legal systems. The paper reinterprets the Japan Fair Trade Commission’s cease and desist order against Google from the perspective of institutional trusteeship, and explores its practical applicability through examples such as the Circular Economy Trusteeship Platform (CETP). Ultimately, it argues that institutions are sustained not by "correctness" but by "legitimacy, " and institutional trusteeship offers a new public architecture for embedding that legitimacy into institutional design.
    Date: 2025–04
    URL: https://d.repec.org/n?u=RePEc:tky:jseres:2025cj313
  19. By: Calo, Adam; Kay, Sylvia; Moreau, Eliaz
    Abstract: Rethinking the regulation of land markets is central to the agroecological transition in Europe. The EU has bold, evidenced-based policy objectives for food system and environmental transformation. Yet, absent a parallel process for regulating land, these policy objectives will remain watered down or impossible to obtain. The EU has shown commitments to invest in environmental policy experimentation because it knows the future wellbeing of the continent depends on sound land use management. However, there is no parallel movement towards reimagining European land governance. This status quo imperils the EU green agenda and threatens the legitimacy of desperately needed environmental policy. Identifying enticing policy options to inspire new land governance can help fulfil existing EU sustainability commitments and open meaningful pathways to scale agroecology. This research first uses existing evidence from the literature to show how current European land markets—governed by the main freedoms of the EU treaties—weakens the capacity to achieve generational renewal, the vitality of rural areas, and land based biodiversity maintenance. Then we reveal existing and potential opportunities for European land market regulation. Through this analysis we argue that agricultural land is a blind spot in European policies for the transition to agroecology, and thus reframe land regulation as an enabling tool to install young and new farmers, facilitate biodiverse landscapes, and build durable rural economies. Measures like transparency in land markets, public acquisition of agricultural land, establishing a first right of refusal, and taxation to facilitate access to land may unlock land for a new generation of agroecological farmers. Exploration of these policy cases calls for an imaginative expansion of public action on land markets to tackle food system challenges, and is aimed directly at policy makers.
    Date: 2025–04–21
    URL: https://d.repec.org/n?u=RePEc:osf:socarx:ajh4v_v1
  20. By: Ives, Matthew; Beinhocker, Eric; Gasparini, Matteo; Fry, Sophie; Carr, Ben
    Abstract: The discussions around the role of the financial system in fostering the green transition have been steadily growing. Companies are increasingly required to quantify and disclose climate risks. However, the influential role of existing accounting and financial reporting requirements, and broader financial regulation, are not commonly considered to be a significant driver in the transition. Analyzing data and classifications from the European Banking Authority, we test whether existing frameworks might inadvertently be disincentivizing divestments from brown assets. We find that a significant bias exists – differences in the provision coverage ratio (PCR) reveal banks have to account for nearly double loan loss provisions for lending to non-brown sectors as to brown. We argue that this bias could be present in other model-based regulations, such as capital requirements and possibly impact the ability of banks to fund green investments. Finally, we discuss the possible underlying drivers of this effect and some avenues for further research.
    Date: 2023–06
    URL: https://d.repec.org/n?u=RePEc:amz:wpaper:2023-11

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