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on Regulation |
| By: | Claude Crampes (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Antonio Estache (ULB - Université libre de Bruxelles) |
| Abstract: | The paper makes the case for a systematic ex-ante assessment of the distributional impact of efficiency enhancing innovations regulatory sandboxes are expected to test. It shows how their prior formal modeling can inform on the possible need to control in the sandbox design for otherwise underestimated but predictable distributional effects. Failing to do so is likely to lead to underestimate efficiency-equity trade-offs and other distributional issues. This may influence the political sustainability of otherwise potentially welfare enhancing innovations. Simple industrial organization models will often suffice to identify the potential issues at the design stage |
| Keywords: | Regulatory sandboxes, Innovation, Governance, Anti-trust, Regulation, Efficiency, Equity, Quality standards |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04953563 |
| By: | Foster, Vivien; Gorgulu, Nisan; Straub, Stéphane; Vagliasindi, Maria |
| Abstract: | Policy makers have long used investing in public infrastructure as a means of reducing geographical disparities and promoting growth. The goal of this paper is to provide insights to development practitioners on designing interventions to maximize the development impact of infrastructure. For this, the paper presents a systematic qualitative overview of the literature, covering more than 300 studies conducted between 1983 and 2022, focusing on specific infrastructure sectors, namely digital, energy, and transport. The study also considers various dimensions of development impact, including output and productivity, poverty and inequality, labor market outcomes, human capital formation, and trade, to develop a nuanced understanding of the mechanisms through which infrastructure contributes to these development outcomes, focusing on low- and middle-income countries. As such, it is the most substantive effort of its kind to date. Overall, despite some mixed results, the overwhelming balance of evidence suggests that infrastructure improvements are critical in supporting the development process. Studies on digital infrastructure show that firm productivity, employment, and welfare increase with the arrival of broadband internet coverage. In addition, the availability of mobile phones improves coordination between producers and traders and hence reduces the price dispersion of agricultural products. Turning to rural electrification, significant literature documents the positive impact of infrastructure on household welfare, structural transformation, and human capital formation through increased labor force participation, more time spent on education, and increased indoor air quality. Investments in the reliability of power supply also contribute to firms’ productivity. However, studies based on randomized controlled trials have not tended to find a substantial short-term impact in the context of dispersed rural populations. Finally, there is rich literature on various transport infrastructure-to-development linkages, particularly for rural roads and for Sub-Saharan Africa. While households’ income and consumption benefit from the existence of rural roads, highways are also found to contribute to firms’ competitiveness. Similarly, public transportation, railways, and ports have positive impacts on the development process. |
| Date: | 2023–03–06 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10343 |
| By: | Dana Kirchem; Mario Kendziorski; Enno Wiebrow; Wolf-Peter Schill; Claudia Kemfert; Christian von Hirschhausen |
| Abstract: | Solar prosumers, residential electricity consumers equipped with photovoltaic (PV) systems and battery storage, are transforming electricity markets. Their interactions with the transmission grid under varying tariff designs are not yet fully understood. We explore the influence of different pricing regimes on prosumer investment and dispatch decisions and their subsequent impact on the transmission grid. Using an integrated modeling approach that combines two open-source dispatch, investment and grid models, we simulate prosumage behavior in Germany's electricity market under real-time pricing or time-invariant pricing, as well as under zonal or nodal pricing. Our findings show that zonal pricing favors prosumer investments, while time-invariant pricing rather hinders it. In comparison, regional solar availability emerges as a larger driver for rooftop PV investments. The impact of prosumer strategies on grid congestion remains limited within the scope of our model-setup, in which home batteries cannot be used for energy arbitrage. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.21306 |
| By: | Helena Perrone |
| Abstract: | This paper analyzes the Nvidia-Arm vertical merger through the lens of the recent literature in Industrial Organization. It explores potential competitive concerns surrounding market foreclosure, technological access, and exclusionary behavior, considering the dynamic semiconductor industry’s intricacies. Although limited public information is available due to the parties halting the merger during phase two, I propose four theories of competitive effects addressing issues such as vertical foreclosure in dynamic markets, stifling of innovation due to hold-up concerns, and the ecosystem effects of the merger. This discussion sheds light on the potential impact of this merger in the semiconductor industry on competition in innovative high tech markets such as CPUs, datacenters, gaming consoles, and assisted driving. |
| Keywords: | vertical merger, foreclosure, holdup, ecosystems, semiconductor industry |
| JEL: | L4 K2 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_647 |
| By: | Zhe Zhang; Young Kwark; Srinivasan Raghunathan |
| Abstract: | The use of sponsored product listings in prominent positions of consumer search results has made e-commerce platforms, which traditionally serve as marketplaces for third-party sellers to reach consumers, a major medium for those sellers to advertise their products. On the other hand, regulators have expressed anti-trust concerns about an e-commerce platform's integration of marketplace and advertising functions; they argue that such integration benefits the platform and sellers at the expense of consumers and society and have proposed separating the advertising function from those platforms. We show, contrary to regulators' concerns, that separating the advertising function from the e-commerce platform benefits the sellers, hurts the consumers, and does not necessarily benefit the social welfare. A key driver of our findings is that an independent advertising firm, which relies solely on advertising revenue, has same or lesser economic incentive to improve targeting precision than an e-commerce platform that also serves as the advertising medium, even if both have the same ability to target consumers. This is because an improvement in targeting precision enhances the marketplace commission by softening the price competition between sellers, but hurts the advertising revenue by softening the competition for prominent ad positions. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.08548 |
| By: | Doron Sayag (Bar-Ilan University [Israël], CBS - Bureau Central of Statistics, Jerusalem); Avichai Snir (Bar-Ilan University [Israël]); Daniel Levy (RCEA - Rimini Center for Economic Analysis, Emory University [Atlanta, GA], Bar-Ilan University [Israël], ICEA - International Centre for Economic Analysis, ISET - International School of Economics at TSU) |
| Abstract: | We test the predictions of the sticky information model using a survey dataset by comparing shoppers' accuracy in recalling the prices of regulated and comparable unregulated products. Because regulated product prices are capped, they are sold more than comparable unregulated products, while their prices change less frequently and vary less across stores and between brands, than the prices of comparable unregulated products. Therefore, shoppers would be expected to recall the regulated product prices more accurately. However, we find that shoppers are better at recalling the prices of unregulated products, in line with the sticky information model which predicts that shoppers will be more attentive to prices that change more frequently. |
| Keywords: | Sticky information, Price cap, Price regulation, Price control, Price adjustment, Sticky prices, Rigid prices, Cost and Benefit of Information, Asymmetric Information |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04961867 |
| By: | Tomic, Slobodan; Dragicevic, Ognjen |
| Abstract: | This article examines how the regulatory state in Serbia, a transitional country transition on the EU's semi-periphery, has evolved and whether it has solidified over the past two decades. Despite the proclaimed goal to develop a democracy based on market principles and sound regulatory principles, Serbia's regulatory state appears to remain unconsolidated. The research reveals deviations from the key principles of the regulatory state, such as the government's non-interference in markets and commitment to Better Regulation guidelines. During the transition period from 2001 to 2023, Serbia's regulatory approach has blended various elements, including features of the developmental state. To grasp the trajectory of the regulatory state's lack of consolidation, decay, reversal, and replacement, we need to consider a consolidation perspective in addition to the prevalent ‘modelling perspective’. The latter mainly distinguishes between the ‘Regulatory State of the South’ and the ‘Regulatory State of the Global North’. The observed lack of consolidation in Serbia's case study calls for a rethinking of theories on internationalisation and trends in global governance's transnationalisation. It implies the possibility of the rise of varied regulatory models, even in countries close to the Global North and within the EU's neighbourhood, diverging from the traditional regulatory state paradigm. This study adds to the conversation on regulatory state frameworks and sheds light on the intricate paths and potential futures of regulatory states in countries undergoing transition. |
| Date: | 2023–09–18 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:7g9zx_v1 |
| By: | Brüll, Eduard; Rostam-Afschar, Davud; Schlenker, Oliver |
| Abstract: | We study how the threat of entry affects service quantity and quality of general prac- titioners (GPs). We leverage Germany's needs-based primary care planning system, in which the likelihood of new GPs reduces by 20 percentage points when primary care coverage exceeds a cut-off. We compile novel data covering all German primary care regions and up to 30, 000 GP-level observations from 2014 to 2019. Reduced threat of entry lowers patient satisfaction for incumbent GPs without nearby com- petitors but not in areas with competitors. We find no effects on working hours or quality measures at the regional level including hospitalizations and mortality. |
| Keywords: | Entry regulation, general practitioners, healthcare provision, threat of entry, regression discontinuity design |
| JEL: | I11 I18 J22 L10 L22 R23 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312185 |
| By: | Veale, Michael (University College London) |
| Abstract: | August 2023 pre-print. To appear in: Maria Ioannidou, and Despoina Mantzari (eds.) Research Handbook on Competition Law and Data Privacy (Edward Elgar, forthcoming). Data has been seen as central to understanding privacy, informational power, and increasingly, digital-era competition law. Data is not unimportant, but it is misunderstood. I highlight several assumptions in need of challenge. Firstly, that data protection is distinct from privacy, and has a broader role correcting digitally-exacerbated power asymmetries. Secondly, contrary to economic received wisdom, data is not fully non-rivalrous due to the infrastructural implications of its integration. Thirdly, data can be less important than capacity for experimentation and intervention, which is not simple to ‘open up’. Lastly, data is increasingly unimportant due to large firms’ investments in confidential computing technologies, facilitating distributed analysis, learning, and even microtargeting. In the right conditions, data can be economically substituted for the ability to orchestrate a protocol — an infrastructural capacity unrecognised sufficiently in competition or other fields. This substitutability also requires the ability to force users to adhere to a protocol, bringing further privacy concerns. In sum, privacy, data protection and power need to be considered more closely entwined than at present, and all fields need to consider the infrastructural dimensions of large platforms, more than focussing on the data they accumulate. |
| Date: | 2023–08–07 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:z8tw6_v1 |
| By: | Alves, Julian; Serra Lorenzo, Bruno; Greenberg, Jason; Guo, Yaxin; Harjai, Ravija; Van Reenen, John |
| Abstract: | Monopsony power is an important feature of modern labour markets. We examine its impact on workers. We report the first representative survey of Non-Compete-Agreements (NCA) in the UK and find that about 26% of workers appear to be covered, a higher fraction than in comparable surveys in the US (18%) and Italy (16%). Although NCAs are more prevalent for skilled workers, a large number of low skilled workers are also subject to NCAs (e.g. over a fifth of plant operators). Moreover, although NCAs are associated with higher training (conditional on other measures of skills), we argue that such benefits are unlikely to justify their high prevalence. Finally, we examine the impact of over 2, 000 M& UK panel data between 1997 and 2022 (over 900, 000 observations). The data suggests that M&A tends to reduce employment growth in the merged entity (from 3% a year prior to the merger to about zero in the subsequent five years), particularly in target firms. However, there is no evidence of any falls in average wage growth (in acquirer or target) as monopsony would predict - if anything, average wages are higher. Nor does profitability or productivity change post-merger. |
| Keywords: | management practices; productivity; competition |
| JEL: | L2 M2 O32 O33 |
| Date: | 2024–01–29 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126835 |
| By: | Steve Lawford |
| Abstract: | I investigate how incumbents in the U.S. airline industry respond to threatened and actual route entry by Southwest Airlines. I use a two-way fixed effects and event study approach, and the latest available data from 1999-2022, to identify a firm's price and quantity response. I find evidence that incumbents cut fares preemptively (post-entry) by 6-8% (16-18%) although the significance, pattern, and timing of the preemptive cuts are quite different to Goolsbee and Syverson's (2008) earlier results. Incumbents increase capacity preemptively by 10-40%, up to six quarters before the entry threat is established, and by 27-46% post-entry. My results suggest a clear shift in firms' strategic response from price to quantity. I also investigate the impact of an incumbent's network structure on its preemptive and post-entry behaviour. While the results on price are unclear, a firm's post-entry capacity reaction depends strongly on its global network structure as well as the local importance (centrality) of the route. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.20418 |
| By: | Dirk Bergemann; Rahul Deb |
| Abstract: | We study the robust sequential screening problem of a monopolist seller of multiple cloud computing services facing a buyer who has private information about his demand distribution for these services. At the time of contracting, the buyer knows the distribution of his demand of various services and the seller simply knows the mean of the buyer's total demand. We show that a simple "committed spend mechanism" is robustly optimal: it provides the seller with the highest profit guarantee against all demand distributions that have the known total mean demand. This mechanism requires the buyer to commit to a minimum total usage and a corresponding base payment; the buyer can choose the individual quantities of each service and is free to consume additional units (over the committed total usage) at a fixed marginal price. This result provides theoretical support for prevalent cloud computing pricing practices while highlighting the robustness of simple pricing schemes in environments with complex uncertainty. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.07168 |
| By: | Alexander C. Abajian; Cassandra Cole; Kelsey Jack; Kyle C. Meng; Martine Visser |
| Abstract: | A near-catastrophic drought in Cape Town, South Africa illustrates three general implications of climate change for publicly-provided utility services. First, to reduce aggregate water demand, the public utility increased prices, leading to large demand reductions by richer households. Prior to the drought they use twice the public piped water of poorer households. At the peak of the drought, they use less. Second, some of the differential demand reduction comes from richer households substituting away from public water toward privately financed groundwater. This private adaptation both lowers the public utility's total revenue and shifts costs onto poorer households, consequences that persist after the drought abates. Third, policy interventions mitigate some of the fiscal and distributional impacts of private adaptation. These findings highlight how climate adaptation, in the context of publicly provided goods and services, can create pecuniary and environmental externalities with equity consequences. |
| JEL: | H42 O13 Q25 Q54 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33468 |
| By: | Veale, Michael (University College London); Matus, Kira; Gorwa, Robert |
| Abstract: | Artificial intelligence (AI) is a salient but polarizing issue of recent times. Actors around the world are engaged in building a governance regime around it. What exactly the “it” is that is being governed, how, by who, and why—these are all less clear. In this review, we attempt to shine some light on those questions, considering literature on AI, the governance of computing, and regulation and governance more broadly. We take critical stock of the different modalities of the global governance of AI that have been emerging, such as ethical councils, industry governance, contracts and licensing, standards, international agreements, and domestic legislation with extraterritorial impact. Considering these, we examine selected rationales and tensions that underpin them, drawing attention to the interests and ideas driving these different modalities. As these regimes become clearer and more stable, we urge those engaging with or studying the global governance of AI to constantly ask the important question of all global governance regimes: Who benefits? |
| Date: | 2023–05–31 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:ubxgk_v1 |
| By: | Chlond, Bettina; Goeschl, Timo; Kesternich, Martin; Werthschulte, Madeline |
| Abstract: | Many industrialized countries have recognized the need to mitigate energy cost increases faced by low-income households by fostering the adoption of energy-efficient technologies. How to meet this need is an open question, but "behavioral insights" are likely components of future policy designs. Applying well-established behavioral insights to low-income households raises questions of transportability as they are typically underrepresented in the existing evidence base. We illustrate this problem by conducting a randomized field experiment on scalable, low-cost design elements to improve program take-up in one of the world's largest energy efficiency assistance programs. Observing investment decisions of over 1, 800 low-income households in Germany's "Refrigerator Replacement Program", we find that the transportability problem is real and consequential: First, the most effective policy design would not have been chosen based on existing behavioral insights. Second, design elements favored by these insights either prove ineffective or even backfire, violating 'do no harm' principles of policy advice. Systematic testing remains crucial for addressing the transportability problem, particularly for policies targeting vulnerable groups. |
| Keywords: | Transportability, low-income households, field experiment, randomized controlled trial, governmental welfare programs, energy efficiency, technology adoption |
| JEL: | C93 D91 Q49 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312197 |
| By: | Cali, Massimiliano; Presidente, Giorgio |
| Abstract: | This paper unveils a novel externality of product market regulation in the labor market. It shows theoretically and empirically that higher barriers to entry in product markets translate into higher employers’ labor market power, measured by the wage markdown—the ratio between the marginal product of labor and the wage. The literature suggests that this wedge can distort factor allocation, resulting in lower aggregate output and employment, but also in higher inequality through a reduction in the labor share of national output. Using variation in investment restrictions across 346 manufacturing product markets in Indonesia, the analysis finds that wage markdowns increase by 25 percent in product markets that become subject to investment restrictions. The result is rationalized using a simple oligopsony model in which higher entry costs reduce the equilibrium number of firms, thereby limiting employment options for workers and, hence, their labor market power. Instrumental variable estimates support the model’s prediction that lower entry is the main driver of the positive relationship between investment restrictions and wage markdowns. |
| Date: | 2023–03–29 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10388 |
| By: | Seitz, William Hutchins; Kudo, Yuya; Azevedo, Joao Pedro Wagner De |
| Abstract: | Access to reliable electricity is a Sustainable Development Goal, and key for both economic growth and individual wellbeing. Yet, in the absence of sophisticated monitoring systems, policy makers in developing countries commonly rely on surveys to measure electricity reliability and prioritize investments. The accuracy of such survey-based methods is unclear. This study built a low-cost national electricity outage monitoring network, using off-the-shelf components in Tajikistan – a country with severe electricity service constraints. The system was introduced alongside a monthly household survey called Listening to Tajikistan, which allowed benchmarking the survey summary statistics against unbiased measures. The results show that although the two measures were well correlated, the survey data suffered from significant and systematic bias. Survey respondents (i) systematically underreported the incidence and severity of electricity outages on average, but (ii) systematically overreport ed the incidence of outages during a period of abnormally widespread service disruption of long duration. These findings suggest that bias in survey-based measures is sensitive to the salience of outages to the respondent, and that, where feasible, automated electricity monitoring can provide more accurate quality measurement. For survey settings, the results also suggest that estimates are more accurate over short (daily) reference periods. |
| Date: | 2023–04–25 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10423 |
| By: | Joel Kariel; Anthony Savagar |
| Abstract: | We present empirical evidence on the relationship between demand shocks and price changes, conditional on returns to scale. We find that in industries with decreasing returns to scale, demand increases (which raise costs) correspond to price increases. Whereas, in industries with increasing returns to scale, demand increases (which lower costs) correspond to stable prices. We interpret the results with a theory of imperfect competition and returns to scale. For prices to remain stable following a cost decrease, markups necessarily rise. For prices to increase as cost increases, it is not necessary for markups to change but does not preclude their role. From a macroeconomic perspective, our results imply that inflation dynamics and the effectiveness of monetary policy depend on market structures. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.05898 |
| By: | Frondel, Manuel; Niehues, Delia; Peetz, Valerie; Sommer, Stephan; Tomberg, Lukas |
| Abstract: | Based on randomized information treatments that were embedded in a large online survey among more than 6, 000 single-home owners from Germany, we investigate the malleability of attitudes towards water conservation and a variety of conservation policies. While the empirical results indicate that, generally, respondents have a positive attitude towards water conservation, this positive attitude is merely slightly lowered by information treatments that included either nuanced or negatively biased information about the necessity of water conservation. In addition, we find that respondents attribute a higher level of concern for water conservation to themselves than to both people in their personal environment and the population in general. Conservation policies, such as education campaigns, price increases for heavy consumers and comparison reports on water consumption are accepted by the majority of respondents and perceived as fair, whereas smart water tariffs and frequent price increases are largely rejected. |
| Abstract: | Auf der Grundlage von randomisierten Informationsbehandlungen, die in eine große Online-Umfrage unter mehr als 6.000 Einfamilienhausbesitzern in Deutschland eingebettet waren, untersuchen wir die Formbarkeit von Einstellungen zum Wassersparen und zu einer Reihe von Einsparungsmaßnahmen. Während die empirischen Ergebnisse darauf hindeuten, dass die Befragten im Allgemeinen eine positive Einstellung zum Wassersparen haben, wird diese positive Einstellung durch Informationsbehandlungen, die entweder nuancierte oder negativ verzerrte Informationen über die Notwendigkeit des Wassersparens enthielten, nur geringfügig gesenkt. Darüber hinaus stellen wir fest, dass die Befragten sich selbst ein höheres Maß an Sorge um die Wassererhaltung zuschreiben als den Menschen in ihrem persönlichen Umfeld und der Bevölkerung im Allgemeinen. Sparmaßnahmen wie Aufklärungskampagnen, Preiserhöhungen für Großverbraucher und Vergleichsberichte über den Wasserverbrauch werden von der Mehrheit der Befragten akzeptiert und als gerecht empfunden, während intelligente Wassertarife und häufige Preiserhöhungen weitgehend abgelehnt werden. |
| Keywords: | Information experiment, policy approval, water conservation policy |
| JEL: | D12 Q25 Q58 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:rwirep:311191 |
| By: | World Bank |
| Abstract: | This study offers the first consistent attempt to identify how energy sector decarbonization policies have affected the energy mix over the past four decades across more than 100 developing countries. It applies systematic regression analysis to five energy sector decarbonization outcomes and more than 75 policy instruments aggregated into seven policy packages. Combining instrumental variables with country interactions and country and time fixed effects in regional panels helps address potential endogeneity issues. Only a handful of energy policy packages significantly affect the decarbonization of developing countries' energy mix, and the packages more often achieve a negligible or opposite result than intended three years after implementation. Policies that address counterparty risk have the highest immediate effects. Effects of renewable policies on various decarbonization outcomes improve slightly five and seven years after their implementation. |
| Date: | 2023–02–28 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10329 |
| By: | Axel Gottfries; Gregor Jarosch |
| Abstract: | We model and analyze employer cartels that fix wages by committing to a wage ceiling. The setting is a frictional labor market with large employers that compete for workers via posted wages. Wage fixing reduces competition both inside and outside the cartel, leading to market-wide wage depression. Competition from outside employers disciplines the cartel and hence governs its wage impact and profitability. Consequently, wage-fixing schemes are more likely to emerge and remain stable when the labor market has slack, concentration is high, the span of control is small, product demand is elastic, and firms also collude in the product market. We describe a simple sufficient statistic to gauge the harm caused by a wage-fixing cartel. |
| JEL: | E0 J0 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33501 |
| By: | Bedoya Arguelles, Guadalupe; Das, Jishnu; Dolinger, Amy |
| Abstract: | This paper presents results from the first randomization of a regulatory reform in the health sector. The reform established minimum quality standards for patient safety, an issue that has become increasingly salient following the Ebola and COVID-19 epidemics. In the experiment, all 1, 348 health facilities in three Kenyan counties were classified into 273 markets, and the markets were then randomly allocated to treatment and control groups. Government inspectors visited health facilities and, depending on the results of their inspection, recommended closure or a timeline for improvements. The intervention increased compliance with patient safety measures in both public and private facilities (more so in the latter) and reallocated patients from private to public facilities without increasing out-of-pocket payments or decreasing facility use. In treated markets, improvements were equally marked throughout the quality distribution, consistent with a simple model of vertical differentiation in oligopolies. This paper thus establishes the use of experimental techniques to study regulatory reforms and, in doing so, shows that minimum standards can improve quality across the board without adversely affecting utilization. |
| Date: | 2023–03–28 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10386 |
| By: | Patrick M. Kline |
| Abstract: | This chapter reviews the theory of monopsonistic wage setting, its empirical implications, and some puzzles the framework has struggled to explain. We begin by examining the fundamentals of monopsonistic wage determination. The core of the theory is a mapping from the distribution of worker outside options to wages. We study non-parametric shape restrictions that ensure this mapping is unique. Building on these results, we introduce a menu of tractable parametrizations of labor supply to the firm, some of which are shown to emerge naturally from equilibrium search models. Next, we review why wage markdowns do not necessarily signal inefficiency and discuss some criteria for assessing misallocation in a monopsony model with search frictions. Turning to the model’s empirical implications, we examine how the magnitude of productivity-wage passthrough depends on the super-elasticity of labor supply to the firm and establish that compensating differentials for firm amenities depend on the curvature of the outside option distribution. We show that firm-specific shifts in either productivity or amenities can be used as instruments to identify labor supply elasticities and review strategies for estimating non-constant elasticities. We then consider extensions of the basic model involving third-degree wage discrimination and examine their ability to rationalize patterns of worker-firm sorting. Monopsony models traditionally assume that firms commit to posted wages. Relaxing this assumption, we develop a connection between the first-order conditions of the monopsony model and models of bargaining with incomplete information. These models explain why bilateral inefficiencies may persist in the presence of negotiation, yield predictions about the response of within-firm wage dispersion to productivity shocks, and suggest reasons why some productivity shifters may not constitute excludable instruments. Next, we endogenize productivity by allowing for efficiency wages, non-constant returns to scale, and price-cost markups. Empirical monopsony estimates often suggest that firms enjoy implausibly large profit margins. We argue that allowing for non-constant labor supply elasticities and firm adjustment costs can potentially resolve this difficulty. Finally, we review why the strong passthrough of minimum wages to product prices presents a challenging puzzle for standard monopsony models and discuss potential reconciliations to this puzzle involving firm heterogeneity, quality changes, and lumpy price adjustment. |
| JEL: | J30 J42 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33467 |
| By: | Zhiming Feng |
| Abstract: | The optimal bundling problem is the design of bundles (and prices) that maximize the expected virtual surplus, constrained by individual rationality and incentive compatibility. I focus on a relaxed, constraint-free problem that maximizes the expected virtual surplus with deterministic allocations. I show that when the difference of two virtual value functions for any pair of stochastic bundles is single-crossing, the minimal optimal menu for the relaxed problem is the set of all undominated bundles, where dominance refers to the natural comparison of virtual values across the type space. Under single-crossing differences, this comparison simplifies to comparisons on boundary types, enabling an algorithm to generate the minimal optimal menu. I further show that when the difference of two virtual value functions for any pair of stochastic bundles is monotonic, there exists an endogenous order among deterministic bundles. This order justifies that the minimal optimal menu for the relaxed problem is also optimal for the nonrelaxed problem. I also characterize the conditions under which consumers' valuation functions and distributions allow the virtual value functions to exhibit monotonic differences. This characterization, combined with the dominance notion, solves related bundling problems such as distributional robustness, bundling with additive values, and the optimality of pure, nested, and relatively novel, singleton-bundle menus. As a side result, I discover new properties of single crossing and monotonic differences in convex environments. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.07863 |
| By: | Huberts, N.F.D. (Tilburg University, School of Economics and Management); Wen, Xingang (Tilburg University, School of Economics and Management); Dawid, Herbert; Huisman, Kuno (Tilburg University, School of Economics and Management); Kort, Peter M. (Tilburg University, School of Economics and Management) |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiutis:25f53a76-94e0-4028-a8a5-6e0e226c6658 |