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on Regulation |
| By: | Lion Hirth |
| Abstract: | In many power systems, wind and solar generation increasingly often exceeds electricity demand. Curtailing renewable generation in those hours matters both for prices and for the physical stability of the grid. Turning off wind turbines and solar panels is technically easier than ramping down a large power station, yet support schemes often give renewables an economic incentive to keep producing at negative prices. This paper studies wind and solar energy in Germany. For each cohort of generators it estimates, hour by hour, the incentive implied by two decades of support policy. It then sets those incentives against observed behavior, using a new estimate of market-based curtailment built from reanalysis weather data. I find that in 2025, at prices below -50 EUR/MWh, almost all wind generators had an incentive to stop producing, but only half of them did. Solar is the opposite case: nearly two thirds of the potential had no incentive to curtail at all, mostly because it receives a feed-in tariff that shields it from wholesale prices. Of the exposed remainder, just over a fifth cut production. Low exposure and response rates inflate subsidy payments and make the power system harder to operate safely. I conclude that a further expansion of wind and solar requires them to respond to price signals. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.10053 |
| By: | Laurenz Marstaller (University of Bonn) |
| Abstract: | This paper studies how platforms jointly choose fees and recommendations and their implications for fee regulation. A platform charges sellers a commission rate and ranks products based on price and match-value. The analysis shows that price-sensitive rankings intensify seller competition, allowing the platform to extract more surplus. Commission-rate caps constrain fees, but platforms may respond by making recommendations less price-sensitive, attenuating consumersurplus gains. By contrast, capped nominal fees can be more effective because they shift the platform’s incentives toward transaction volume rather than transaction value. Effective fee regulation must therefore account for how platforms adjust their recommendation policies in response. |
| Keywords: | Algorithm Design, DMA, Platform Regulation, Platforms, Recommendations, Search |
| JEL: | D43 D83 L13 L51 L86 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:430 |
| By: | Jens-Uwe Franck; Martin Peitz |
| Abstract: | Digital platforms allocate scarce attention through rankings, recommendations, defaults, and prominence. This article develops the concept of recommendation power as the point of intersection between two established concepts: information power and intermediation power, which is the capability to actively steer user choice by a platform that is a bottleneck for effective access. We propose a taxonomy of the objectives that typically guide platforms’ recommendation design, distinguishing an independent-advice benchmark from fifteen other objectives that may motivate systematic departures from it, grouped into direct commercial and data objectives, indirect and strategic objectives, and objectives relating to influence, welfare, and integrity. We then analyze how the EU’s Digital Markets Act (DMA) constrains recommender design, though it does not regulate recommendation power as such. Through obligations on ranking and data and transparency duties as well as through its anticircumvention provisions, the DMA protects certain user choices and access rights from the exercise of recommendation power. |
| Keywords: | recommender systems, recommendation bias, ranking, self-preferencing, gatekeepers, Digital Markets Act, platform regulation, steering |
| JEL: | K21 L15 L40 L51 L86 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_781 |
| By: | Buchholz, Wolfgang; Hattori, Keisuke |
| Abstract: | This paper studies how an outsider can strategically induce a merger between rival firms. The outsider's anticipated post-merger output expansion lets it capture part of the gains from the merger but can also make the merger unprofitable for the insiders. We show that the outsider can make the merger profitable by committing in advance to a weaker competitive position, while the softer competition following the merger can more than compensate it for its self-imposed handicap. A general framework identifies conditions under which the outsider optimally chooses the minimum merger-inducing handicap. Three Cournot models show that voluntary capacity reduction, withdrawal from a profitable market, and a credible increase in marginal cost can each strictly raise the outsider's profit above the no-handicap, no-merger benchmark. Merger synergies can also benefit the outsider by reducing the handicap required to induce the merger. The analysis highlights the need to account for endogenous outsider constraints in ex ante assessments of mergers. |
| Keywords: | horizontal mergers, strategic commitment, self-handicapping, merger paradox, Cournot competition |
| JEL: | D43 L13 L41 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:343613 |
| By: | Pradyumna Rao; Daniel T. Kaffine; Bri-Mathias Hodge |
| Abstract: | As US power markets contend with growing demand for firm generation, the nuclear industry has offered Small Modular Reactors (SMRs). However, how these concepts would fare in a rapidly evolving power grid is unclear, given the paucity of operational examples. Current literature, informed by substantial cost escalations for traditional nuclear plants, focuses on the investment costs SMRs need to achieve for private investment feasibility. However, this work finds that the operating and marginal costs of SMRs are more critical to economic feasibility in market environments. This work dispatches SMRs using a flexible operations model, considering revenue from two main electric markets, capacity and wholesale energy markets, with and without policy support. Manufacturer advertised costs for investment and operating costs are used, with fuel costs calculated from manufacturer provided design parameters. Results indicate that SMRs are uneconomical primarily because investment cost reductions are offset by increased marginal costs. As such, an environment of prices and subsidies beyond historic norms are necessary to attract private investment at manufacturer advertised cost benchmarks. Current SMRs are as profitable as advanced estimates of the AP1000 traditional nuclear reactor, and if investment costs escalate at the average rate for nuclear projects, they are similar to Vogtle 3 & 4. In projected future power markets, reductions in marginal cost may be more beneficial than those in investment costs. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.08929 |
| By: | Golder, Atoshi |
| Abstract: | Data center operators report water use as a facility-level question, disclosing on-site metrics while omitting the water consumed in generating the electricity they purchase — their Scope 2 water footprint. This paper quantifies that omission at the eGRID-subregion level and traces its consequences for a standardized data center load. Comparing EPA eGRID 2018 against eGRID 2023 on an identical pipeline, I find that generation-weighted national water intensity fell 17.1% over the five years in which data center electricity demand accelerated, but that the decline was uneven: several subregions gaining generation share fell more slowly than the national average, and SERC Virginia/Carolina — host to the largest data center market in the world by inventory — fell only 7.7%, less than half the national pace. Combining eGRID generation data with consumption-basis water coefficients, I estimate a total of 1, 350.6 billion gallons of operational water consumption embedded in contiguous-US electricity generation across all end uses in 2023, and show that an identical data center's embedded footprint varies approximately 3.2-fold by grid region under common technology-factor assumptions. I then construct a Water Dependency Index and adjust it by a territorial water-scarcity score built from the World Resources Institute's Aqueduct basin indicators, on the principle that identical consumption imposes different costs depending on where it occurs; the adjusted index ranks SERC Virginia/Carolina first in the nation. No widely adopted disclosure framework requires standardized, location-based reporting of electricity-embedded water. The paper proposes extending location-based Scope 2 carbon accounting, which is structurally analogous, to water. |
| Date: | 2026–09–03 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:kc5ad_v1 |
| By: | Imenkamp, Nico; Wey, Christian |
| Abstract: | We analyze resale price maintenance (RPM) in a successive monopoly framework. When the retailer faces decreasing average costs or shelf-space opportunity costs while the manufacturer's marginal costs increase, linear pricing forces wholesale prices below marginal cost, potentially causing trade to collapse. Minimum RPM restores efficiency if trade fails, but reduces welfare if trade remains viable. Under the Colgate doctrine, the manufacturer's right to refuse to deal sustains trade even under price-floor bans. Finally, incomplete contracts induce retailer opportunism, including pocketing trade allowances without supporting the product, or exploiting inflated margins to push sales. Strategic contract combinations minimize both margins simultaneously. |
| Keywords: | Successive Monopoly, Resale Price Maintenance, Trade Allowance, Retailer Opportunism |
| JEL: | L42 D86 L12 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:dicedp:343592 |
| By: | Holmes, Mark |
| Abstract: | This study evaluates whether the EU’s Audit Directive and Regulation (EU ADR) changed the relationship between auditor provided non-audit services (NAS) and auditor independence in the UK. While NAS can create economic bonding that suppresses negative reporting, it may also generate knowledge spillovers that improve the auditor’s client-specific knowledge and reporting quality. Using UK-listed, UK-headquartered non-financial firms from 2010-2020, we examine whether EU ADR implementation moderated NAS-related economic incentives across two reporting thresholds; qualified opinions and going-concern comments. Our study finds no evidence that NAS is associated with audit qualifications, nor that EU ADR changed this relationship. In contrast, we document a significant post-EU ADR shift in the NAS-going-concern comment relationship. Prior to the EU ADR, higher NAS was associated with a lower likelihood of going-concern comments; after implementation this negative association is significantly attenuated, that is consistent with reduced economic bonding in discretionary reporting. Similarly, probability-scale effects indicate economically meaningful changes in going-concern comment behaviour, while high-threshold, qualification decisions, remain largely unchanged. Results are robust to alternative specifications and audit firm heterogeneity. Overall, engagement-level NAS restrictions appear to matter primarily where auditors retain reporting discretion, informing debates on structural reforms such as the UK’s operational separation policy. |
| Date: | 2026–03–31 |
| URL: | https://d.repec.org/n?u=RePEc:akf:cafewp:41 |
| By: | Bryson Joanna; Danneels Lieselot; Di Marco Diletta (European Commission - JRC); Dobbe Roel; Grimmelikhuijsen Stephan; Janowski Tomasz; Janssen Marijn; Lindgren Ida; Medaglia Rony; Mikalef Patrick; Millard Jeremy; Nasi Greta; Nikiforova Anastasija; Tangi Luca (European Commission - JRC); Rodriguez Müller Paula (European Commission - JRC); Pieterson Willem; Thabit Gonzalez Sara (European Commission - JRC); Viale Pereira Gabriela |
| Abstract: | EU digital sovereignty has become an increasingly urgent priority for public administrations across the European Union, which must identify, assess, and manage the dependencies and vulnerabilities that constrain their autonomy. Building digital sovereignty requires action along four areas: people, markets and products, infrastructure, and governance. Achieving greater sovereignty requires the coordinated action of a diverse network of people, aligned toward the shared goal of more autonomous and resilient administrations. At market level, public administrations play a dual role as catalysts for local innovation and, through procurement-driven strategies, as drivers of more diversified markets that reduce overreliance on a narrow set of critical suppliers. At the infrastructural level, ensuring that digital assets are robust, secure, and compliant with EU regulations and values is essential to safeguarding this autonomy. Finally, governing digital sovereignty demands clear goal-setting, the development of steering capacity, and a rethinking of institutional priorities—calling for coordinated, value-driven institutions capable of acting decisively while remaining adaptable to a rapidly evolving digital landscape. Despite its growing relevance, the practical implications of EU digital sovereignty for public administration remain insufficiently understood. This brief enters the discussion by detailing reflections on the actions needed by public administrations to strengthen their digital sovereignty, and concludes with a research agenda to build a common, coherent approach across the Union. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc146997 |
| By: | Pasquale Della Corte; Robert Kosowski; Dimitris Papadimitriou; Nikolaos P. Rapanos |
| Abstract: | We develop a theoretical model that endogenizes the regulator's decision to impose short-selling bans to prevent large stock price declines. Empirically, we test the model's predictions using the cross-sectional variation in short-selling restrictions implemented across European countries in 2020. Consistent with our model, we find that bans had a detrimental effect on liquidity and failed to support the average price levels, but were effective in limiting large price drawdowns. Finally, we show that the effectiveness of the bans depends on the share of informed stockholders, a central variable in our framework, thus informing the design of more effective regulatory responses. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.08881 |
| By: | Bialek, J. W. |
| Abstract: | This paper provides a high-level analysis of the Iberian blackout and is aimed at a non-technical audience. It starts with quick tutorials on the relationship between reactive power and voltage and on power system oscillations as they are key to understanding the blackout. Then it proceeds with overviewing how the blackout evolved. The direct cause of the blackout was an unexpected interaction between oscillations and voltage stability compounded by inadequate voltage control arrangements in Spain. However the underlying cause is that Spain has concentrated in recent years on increasing the share of renewables but seems to have paid less attention to adapting power system operation and control to the changing needs. The rapidly increasing share of renewables in many power systems causes a profound change in the way power systems behave which we do not yet fully understand. Hence a significant interdisciplinary research effort of the academia and industry is required to overcome the challenges and prevent future blackouts |
| Keywords: | Power System Blackouts, Security of Supply, Iberian Blackout 2025 |
| JEL: | L94 L98 Q40 Q48 Q42 |
| Date: | 2026–08–18 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2670 |
| By: | Hall, David; Lobina, Emanuele; Gray, Conor |
| Abstract: | England and Wales’s privatised water system—unique in the world for its full divestment of water and sewerage assets—has failed on every major promise made at privatisation. The report shows that prices have more than doubled in real terms, environmental performance has deteriorated, and private owners have extracted vast sums while investing none of their own capital. As the document states, “the prices charged are now more than double in real terms their level before privatisation” and “shareholders have actually taken out over £95 billion since privatisation.” Water and sewerage systems were historically created and financed by municipalities, not private capital. The 1989 privatisation was justified on claims of efficiency, investment, and consumer benefit—none of which materialised. Instead, the government subsidised the new companies with £5.7bn in transferred profits, £6.5bn in debt write offs, and a £1.5bn “green dowry.” Ownership has since consolidated into opaque international financial groups, sovereign wealth funds, and private equity. UK pension funds hold just 1% of shares in the listed water groups. Privatisation abolished democratic oversight and replaced it with regulators structurally biased toward company profitability. OFWAT’s statutory duty prioritises ensuring company profits over consumer protection. The report highlights that OFWAT even granted companies 25 year notice periods before licences can be terminated—effectively “eternal” monopolies. Regulators have been weakened by government cuts and corporate capture, with a revolving door between OFWAT and water companies. Public trust has collapsed: only 23% of people believe companies act responsibly. OFWAT has approved a 36% real terms bill increase for 2025–30, front loaded with a 26% rise in the first year. Yet companies routinely underspend on capital investment while extracting dividends. Between 2020–25, £5.6bn was paid out; since 1990, £89.6bn has been extracted in dividends alone. Shareholders have not financed the investment. Instead, consumers have paid for nearly all capital expenditure, while companies have accumulated £75bn in debt—largely used to fund dividends. Under investment has driven widespread sewage pollution and chronic leakage. Sewage spills more than doubled to 3.6 million hours in 2023. Leakage remains high, with some companies, including Welsh Water, falsifying performance data. The report notes that overspills stem from “chronic under capacity of the English wastewater systems.” Globally, 90% of water systems are public. Scotland’s public model delivers higher investment, lower bills, and far lower financial waste. International remunicipalisation—from Paris to Berlin—demonstrates the advantages of democratic, non profit water management. Public ownership in England and Wales would eliminate financial extraction, restore democratic accountability, and enable long term planning for environmental resilience. The report outlines three viable routes to achieve public ownership: 1. Normalising licences and allowing them to expire within 1 year. 2. Special Administration, enabling transfer to public bodies without compensation. 3. Legislation, with compensation determined by Parliament—not market value. Andrea Egan, General Secretary of Unison, writes in her foreword: "This report exposes the structural weaknesses at the heart of privatisation: a model built on financial extraction, weak regulation, and a lack of democratic accountability. It also shows that this is not inevitable. Across much of the world, water services remain in public hands and are delivered more effectively, more transparently, and at lower cost. UNISON is committed to securing a system that works in the public interest—one that ensures safe, sustainable and affordable water for all. Central to that vision is public ownership, democratic oversight, and a properly resourced workforce delivering essential services. The debate on the future of water is now firmly in the public domain. This report provides the evidence base to inform that debate and to support the case for change. Doing nothing is not an option. It is time to act." |
| Keywords: | water; sewerage; public ownership; privatisation |
| Date: | 2026–08–25 |
| URL: | https://d.repec.org/n?u=RePEc:gpe:wpaper:54313 |
| By: | Hall, David |
| Abstract: | The paper fails to make a convincing case for mutualisation instead of public ownership of water companies in England and Wales. • It shows no awareness that when the same issue arose with the railway network 25 years ago, the Blair government tried creating Network Rail as a private not-for-profit ‘mutual’, which was later taken into public ownership because it did not deliver public control or economic efficiency. • Internationally, water co-ops are marginal, used in some countries for thinly populated rural areas. The largest water co-op in the world serves less than 1m. people, in the Bolivian city of Santa Cruz. • It mistakenly claims that Welsh Water and John Lewis are consumer mutuals, and fails to discuss the known governance problems of mutuals • The GGF paper misrepresents its own polling results as supporting mutuals as the only option, whereas almost all groups except Reform voters preferred public ownership. • It repeatedly assumes that public ownership would require compensation to the private owners, but somehow the shareholders would not demand compensation for mutualisation. • It argues that mutualisation can provide public control, but insists that control by elected councillors must be kept to a minority • It wrongly implies that public ownership would mean that costs would have to be covered out of taxes, whereas they would continue to be covered entirely by customer bills, as now. • The proposals are driven by a UK rule about the debt of public companies which treats it as government debt, and so a new operator must remain private. But this rule is not used by EU countries and the USA, which have significantly lower borrowing costs than the UK. • It makes proposals for ‘voluntary’ mutualisation, which could lead to company profits being used to pay shareholders instead of invested in water and sewer age systems. • It contains some useful suggestions, for example setting rules for the levels of breaches of duty which would lead to a company being taken into public ownership – yet if applied, it would lead to the automatic Special Administration of Welsh Water – which the GGF use as a model for their proposed mutuals. |
| Keywords: | water; privatisation; mutuals |
| Date: | 2026–09–03 |
| URL: | https://d.repec.org/n?u=RePEc:gpe:wpaper:54326 |
| By: | Benedict Guttman-Kenney; Walter W. Zhang |
| Abstract: | Buy Now, Pay Later (BNPL) has moved from a novelty product to mainstream consumer finance in the space of a few years. Before 2020, BNPL was a niche offering at the checkouts of online fashion merchants. BNPL then experienced substantial growth (Consumer Financial Protection Bureau, 2022; Salem & Udis, 2025), coinciding with increased online shopping since the onset of the COVID-19 pandemic in 2020. BNPL is now a pervasive payment option. In 2026, you can use BNPL to delay and split up payments for anything ranging from a pizza to your rent, and many items in between. As the market has grown, so has the academic literature. There is now sufficient research into BNPL to take stock and review what we have learned. In this article, we summarize insights from the economics, finance, and marketing academic literature. While we have learned a great deal about BNPL in the last few years, we also discuss many remaining open questions and current concerns impacting policy decisions. We start by explaining what BNPL products are and the business models of BNPL lenders. Then, we summarize the economics and psychology behind why some consumers use these products. Next, we describe the customer base that uses BNPL. We show the effects of BNPL on consumers, an area of research with substantial policy interest. Another area of policy interest is whether BNPL loans should be reported in a consumer's credit report. We explain why BNPL is typically not on credit reports and its implications. Finally, we offer some concluding thoughts. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.09323 |
| By: | Phillip McCalman; Andrew Walter |
| Abstract: | Many countries screen foreign direct investment through discretionary approval regimes that operate primarily through delay rather than outright prohibition. Because few transactions are blocked, governments describe screening as "light touch." We show that this characterization is misleading. When approval is costly to reverse and information arrives over time, screening functions as a real option: regulatory delay creates uncertainty that is capitalized into asset prices during review. Using Australian data, we estimate a 2.9% approval-event abnormal return for target firms, equivalent to around 20% of expected target-shareholder surplus. This measures the market value of resolving screening uncertainty for announced transactions. Aggregated across transactions, the implied valuation exposure is large relative to estimates of goods-trade barriers and rises further once deterred deals are considered. Screening also generates spillovers to rival firms and persistent valuation effects through repeated review of subsequent acquisitions by foreign-owned firms, with international spillovers particularly for Chinese investors. |
| Keywords: | foreign investment screening, foreign direct investment, cross-border mergers and acquisitions, regulatory uncertainty, real options, event studies |
| JEL: | F21 F13 G14 G34 L51 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12975 |