nep-reg New Economics Papers
on Regulation
Issue of 2023‒09‒18
fourteen papers chosen by
Christopher Decker, Oxford University

  1. Efficiency vs. Equity Concerns in Regulatory Sandboxes By C. Crampes; Antonio Estache
  2. Manufacturer Collusion and Resale Price Maintenance By Matthias Hunold; Johannes Muthers
  3. Regulating Artificial Intelligence in the EU, United States and China - Implications for energy systems By Fabian Heymann; Konstantinos Parginos; Ali Hariri; Gabriele Franco
  4. Eigenschaften und Leistungsfähigkeit von NGA-Technologien By Plückebaum, Thomas
  5. Subsidies for Close Substitutes: Evidence from Residential Solar Systems By Abajian, Alexander; Pretnar, Nick
  6. Disadvantaging Rivals: Vertical Integration in the Pharmaceutical Market By Charles Gray; Abby E. Alpert; Neeraj Sood
  7. Strategic Money and Credit Ledgers By Markus K. Brunnermeier; Jonathan Payne
  8. Costs and Benefits of Congestion in Two-Sided Markets: Evidence from the Dating Market By Tobias Lehmann; Camille Terrier; Rafael Lalive
  9. Show Me the Money! Incentives and Nudges to Shift Electric Vehicle Charge Timing By Bailey, Megan R.; Brown, David P.; Shaffer, Blake; Wolak, Frank A.
  10. Using a Soft Deadline to Counter Monopoly By Masahiro Yoshida
  11. Antitrust enforcement increases economic activity By Babina, Tania; Barkai, Simcha; Jeffers, Jessica; Karger, Ezra; Volkova, Ekaterina
  12. Time Use and the Efficiency of Heterogeneous Markups By Albrecht, Brian C.; Phelan, Thomas; Pretnar, Nick
  13. Scalable Demand and Markups By Enghin Atalay; Erika Frost; Alan Sorensen; Christopher Sullivan; Wanjia Zhu
  14. Selling Subscriptions By Liran Einav; Benjamin Klopack; Neale Mahoney

  1. By: C. Crampes; Antonio Estache
    Abstract: The paper makes the case for a more systematic ex-ante assessment of the distribution of gains and losses from efficiency enhancing innovations that regulatory sandboxes are expected to test. It shows how a prior formal modelling of tests can inform the regulators on the possible need to control better upfront in the design of the sandbox for some otherwise underestimated but predictable distributional effects. Failing to do so is likely to lead to underestimate efficiency-equity trade-offs and other distributional issues, across stakeholders or within groups of stakeholders. Simple Industrial Organization models will often suffice to identify the potential issues at an early stage and allow better sandboxes designs and hence more reliable policy relevant results.
    Keywords: Regulatory sandboxes; innovation; governance; anti-trust; regulation; efficiency; equity; quality standards.
    Date: 2023–08
  2. By: Matthias Hunold; Johannes Muthers
    Keywords: resale price maintenance, collusion, retailing
    JEL: D43 K21 K42 L41 L42 L81
    Date: 2023
  3. By: Fabian Heymann (SFOE - Swiss Federal Office of Energy); Konstantinos Parginos (PERSEE - Centre Procédés, Énergies Renouvelables, Systèmes Énergétiques - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique); Ali Hariri (EPFL - Ecole Polytechnique Fédérale de Lausanne); Gabriele Franco (PANETTA Law Firm)
    Abstract: The growing prevalence and potential impact of artificial intelligence (AI) on society rises the need for regulation. In return, the shape of regulations will affect the application potential of AI across all economic sectors. This study compares the approaches to regulate AI in the European Union (EU), the United States (US) and China (CN). We then apply the findings of our comparative analysis on the energy sector, assessing the effects of each regulatory approach on the operation of a AI-based short-term electricity demand forecasting application. Our findings show that operationalizing AI applications will face very different challenges across geographies, with important implications for policy making and business development.
    Keywords: Artificial Intelligence, energy policy, load fore- casting, regulation
    Date: 2023–10–23
  4. By: Plückebaum, Thomas
    Abstract: In den Zugangsnetzen der nächsten Generation (Next Generation Access, NGA) hat sich seit den Zeiten der klassischen Kupferdoppeladern des Telefonnetzes viel getan und es wird sich auch noch viel tun, selbst wenn die Kupferdoppeladern letztlich alle auf Glasfaseranschlussnetze umgestellt sein werden. Diese Umstellung hat viele Implikationen auf die Netze und die darüber angebotenen Dienste, aber auch auf die Entwicklung des Wettbewerbs in den Telekommunikationsmärkten. Dieser Bericht konzentriert sich auf die technischen und Dienste orientierten Aspekte der unterschiedlichen Zugangstechnologien und Netze. Er fußt auf verschiedenen Arbeiten zu Breitbandzugangsnetzen der WIK bzw. der WIK-Consult GmbH aus den vergangenen Jahren und gibt einen Überblick über die grundlegenden technisch-funktionalen Rahmenbedingungen der verschiedenen Technologien und Topologien für die Anschlussnetze und ihre Bedeutung für die Nutzung in der Praxis. Eingangs wird auf das Entstehen der Breitband Übertragungsnetze als Ausgangssituation für die heutigen Netze eingegangen. Es folgen verschiedene Begriffsdefinitionen für Breitbandnetze bis hin zum Begriff VHCN (Very High Capacity Network) der Europäischen Kommission, die sicher noch nicht das Ende der Entwicklung darstellen. Wir differenzieren die unterschiedlichen Technologien nach Festnetzen, Kabel(-TV) Netzen und verschiedenen Funknetzen, über Mobilfunknetze, Fixed Wireless Access bis zu HAPS und Satellitennetzen, d.h. einer Versorgung aus der Luft. Ein tabellarischer Vergleich bildet den Abschluss. Der Bericht fokussiert auf die Darstellung der Technologien für Zugangsnetze und ihre wesentlichen Charakteristika, streift jedoch die unterschiedlichen und durchaus gleichfalls bedeutenden ökonomischen und regulatorischen Dimensionen der Zugangsnetze, wenn auch nur am Rande. Er verweist hierfür im Text und im Abschnitt 3 auf die umfangreiche begleitende Literatur aus der Feder des WIK.
    Date: 2023
  5. By: Abajian, Alexander; Pretnar, Nick
    Abstract: Policies promoting residential solar system adoption are designed assuming the associated generation displaces retail electricity purchases on a one-for-one basis. This assumption is not innocuous; electricity from residential solar systems is unlikely to be perfectly substitutable with grid electricity. We estimate a model of U.S. residential electricity demand allowing for spatial heterogeneity and imperfect substitution between forms of electricity to quantify the implications for green energy subsidization. We find subsidies inducing one kWh of residential solar electricity demand displace only 0.5 kWh of grid consumption. As an emissions reduction policy subsidies had national abatement costs of $332 per MTCO2 in 2018.
    Keywords: Residential PV systems, residential electricity demand, rebound effects, energy subsidies
    JEL: H23 Q42 Q48 R23
    Date: 2023–08–09
  6. By: Charles Gray; Abby E. Alpert; Neeraj Sood
    Abstract: The pharmaceutical market has experienced a massive wave of vertical integration between pharmacy benefit managers (PBMs) and health insurers in recent years. Using a unique dataset on insurer-PBM contracts, we document increasing vertical integration in Medicare Part D–vertically integrated insurers' market share increased from about 30% to 80% between 2010 and 2018. Next, we evaluate a large insurer-PBM merger in 2015 to assess the trade-offs of vertical integration–harms to competition due to input and customer foreclosure on the one hand and improved efficiency on the other. We find premium increases after the merger for insurers who bought PBM services from rivals, which is consistent with vertically integrated PBMs raising costs through input foreclosure.
    JEL: I1 I11 I13
    Date: 2023–08
  7. By: Markus K. Brunnermeier; Jonathan Payne
    Abstract: This paper studies strategic decision making by a private currency ledger operator, which faces competition from public money and/or other ledgers. A monopoly ledger operator can incentivize contract enforcement across the financial sector by threatening exclusion, but it can also impose markups through its pricing power. Currency competition limits rent extraction, but also makes coordinated contract enforcement more fragile. The emergent market structure bundles the provision of ledger and platform trading technologies. Regulation to ensure platform cooperation on contract enforcement and competition on markup setting is effective so long as agents can easily switch between platforms.
    JEL: E4 E42 E5 E50 E59 F39 G21 G23 L10 L13
    Date: 2023–08
  8. By: Tobias Lehmann (University of Lausanne); Camille Terrier (Queen Mary University London); Rafael Lalive (University of Lausanne)
    Abstract: Congestion is a widespread phenomenon in two-sided markets, but evidence on its costs and benefits is limited. Using data from an online dating platform, we document a large excess demand, or congestion, for some women. By exploiting exogenous variation in the number of men and women using the platform, we show that congestion slows down matching time for men. Congestion benefits women who screen men’s profiles quickly, by increasing their choice set. This asymmetry implies that policies aimed at reducing congestion can harm the side of the market that benefits from congestion.
    Keywords: Congestion, two-sided markets, online platforms
    JEL: D4 D47 D62 D83
    Date: 2023–08–31
  9. By: Bailey, Megan R. (University of Calgary); Brown, David P. (University of Alberta, Department of Economics); Shaffer, Blake (University of Calgary); Wolak, Frank A. (Stanford University)
    Abstract: We use a field experiment to measure the effectiveness of financial incentives and moral suasion “nudges” to shift the timing of electric vehicle (EV) charging. We find EV owners respond strongly to financial incentives, while nudges have no statistically discernible effect. When financial incentives are removed, charge timing reverts to pre-intervention behavior, showing no evidence of habit formation and reinforcing our finding that “money matters”. Our charge price responsiveness estimate is an order of magnitude larger than typical household electricity consumption elasticities. This result highlights the greater flexibility of EV charging over other forms of residential electricity demand.
    Keywords: Electric Vehicles; Demand Response; Nudges; Experiment
    JEL: Q41 Q48 Q55 Q58 R48
    Date: 2023–08–30
  10. By: Masahiro Yoshida (Faculty of Political Science and Economics, Waseda University)
    Abstract: A monopolist often exploits a hard deadline to raise their commitment power. I explore whether a group of buyers can employ a soft deadline to counter the monopoly. Using a simple durable goods monopolist model under a deadline, I show that the buyers’ imperfect commitment to an earlier exit may elicit a compromise from the monopolist and generate the buyers’ premium. The soft deadline partially restores the self-competition dynamics of Coase conjecture, which is previously constrained by the hard deadline. Only one soft deadline breaks the conventional link between the time horizon (or durability of goods) and monopoly power.
    Keywords: bargaining; durable goods monopoly; commitment; Coase conjecture; dead-line effect
    JEL: C78 C91
    Date: 2023–09
  11. By: Babina, Tania; Barkai, Simcha; Jeffers, Jessica; Karger, Ezra; Volkova, Ekaterina
    Abstract: We hand-collect and standardize information describing all 3, 055 antitrust lawsuits brought by the Department of Justice (DOJ) between 1971 and 2018. Using restricted establishment-level microdata from the U.S. Census, we compare the economic outcomes of a non-tradable industry in states targeted by DOJ antitrust lawsuits to outcomes of the same industry in other states that were not targeted. We document that DOJ antitrust enforcement actions permanently increase employment by 5.4% and business formation by 4.1%. Using an event-study design, we find (1) a sharp increase in payroll that exceeds the increase in employment, meaning that DOJ antitrust enforcement increases average wages, (2) an economically smaller increase in sales that is statistically insignificant, and (3) a precise increase in the labor share. While we cannot separately measure the quantity and price of output, the increase in production inputs (employment), together with a proportionally smaller increase in sales, strongly suggests that these DOJ antitrust enforcement actions increase the quantity of output and simultaneously decrease the price of output. Our results show that government antitrust enforcement leads to persistently higher levels of economic activity in targeted industries.
    Keywords: antitrust enforcement, economic activity, employment, business formation
    JEL: L4 E24 K21 J21
    Date: 2023
  12. By: Albrecht, Brian C.; Phelan, Thomas; Pretnar, Nick
    Abstract: A recent literature has provided empirical evidence that markups are increasing and are heterogeneous across firms. In standard monopolistic competition models, such heterogeneity implies inefficiency even in the presence of free entry. We enrich the standard model of monopolistic competition with heterogeneous firms to incorporate off-market time use that is non-separable with market consumption into the consumer problem. Within this framework the constancy of equilibrium markups is neither sufficient nor necessary for efficiency. Whether or not the competitive level of production and market concentration of firms are efficient depends on the degree to which consumption time and market goods are complements or substitutes. Such inefficiencies are the result of time use being misallocated toward home production at the expense of market production.
    Keywords: monopolistic competition, markups, efficiency, time use, home production, elasticity of substitution, concentration, selection, love for variety, heterogeneous firms
    JEL: D1 D4 D6 L1
    Date: 2023–08–02
  13. By: Enghin Atalay; Erika Frost; Alan Sorensen; Christopher Sullivan; Wanjia Zhu
    Abstract: We study changes in markups across 72 product markets from 2006 to 2018. A growing literature has documented a rise in markups over time using a production function approach; we instead employ the standard microeconomic method, which is to estimate demand and then invert firms’ first-order pricing conditions to infer their markups. To make the method scalable, we propose estimating nested logit demand models, using household panel data to automate the assignment of products to nests. Our results indicate an overall upward trend in markups between 2006 and 2018, with considerable heterogeneity across and within product markets. We find that changes in firms’ marginal costs and households’ price sensitivity are the primary drivers of markup increases with changes in firm ownership playing a much smaller role.
    Keywords: markups; demand estimation
    JEL: D12 D43 L11
    Date: 2023–08–07
  14. By: Liran Einav; Benjamin Klopack; Neale Mahoney
    Abstract: Retailers are increasingly selling goods and services via subscriptions instead of spot markets. In this paper, we study one benefit to the retailer of selling subscriptions: the possibility that – presumably because of inattention or inertia – consumers continue to pay for subscriptions after the flow benefit falls below its price. We use comprehensive data from a large payment card network and focus on credit and debit cards that get replaced (e.g., due to expiration). Replaced cards require an active subscription renewal decision, and we document that months during which cards are replaced are associated with much higher rates of cancellation for the ten subscriptions we study. We write down and estimate a stylized model of subscription renewals that allows us to recover the baseline degree of inattention. We find that estimated inattention is higher for consumers that took cash advances, a proxy for low financial sophistication. Relative to a counterfactual in which consumers are fully attentive, inattention raises seller revenues by between 14% and more than 200%. We use the estimated model to explore the quantitative impact of possible regulatory remedies.
    JEL: L50 L86
    Date: 2023–08

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