|
on Regulation |
| By: | Mark J. Tremblay |
| Abstract: | Platforms often use fee discrimination within their marketplace (e.g., Amazon, eBay, and Uber specify a variety of merchant fees). To better understand the impact of marketplace fee discrimination, we develop a model that allows us to determine equilibrium fee and category decisions that depend on the extent of fee discrimination available to the platform and we highlight how our fee discrimination strategies can be derived in practice using data from airbnb.com. In addition, we find that greater fee discrimination allows the platform to serve more markets in its marketplace but also increases fees in high surplus markets. However, if the platform enters into retail, then the platform reduces its fees and generates greater retail competition. These effects mitigate distortions from fee discrimination and improve welfare. In terms of policy, we show that (1) banning fee discrimination and platform entry is detrimental to welfare, (2) a vertical merger within a retail market mitigates fee distortions but is often worse than an equilibrium with platform entry into retail, and (3) taxing the platform in retail (not merchants) levels the retail playing field and can generate a Pareto improvement upon a policy that bans platform retail entry. |
| Keywords: | platforms, platform retail entry, price discrimination, vertical integration, intermediary |
| JEL: | L11 L12 L40 H21 L50 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9440&r= |
| By: | Dirk Bergemann (Cowles Foundation, Yale University); Benjamin Brooks (Dept. of Economics, University of Chicago); Stephen Morris (Dept. of Economics, MIT) |
| Abstract: | We characterize the revenue-maximizing information structure in the second price auction. The seller faces a classic economic trade-o¤: providing more information improves the efficiency of the allocation but also creates higher information rents for bidders. The information disclosure policy that maximizes the revenue of the seller is to fully reveal low values (where competition will be high) but to pool high values (where competition will be low). The size of the pool is determined by a critical quantile that is independent of the distribution of values and only dependent on the number of bidders. We discuss how this policy provides a rationale for conflation in digital advertising. |
| JEL: | D44 D47 D83 D84 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2318&r= |
| By: | Ashenfelter, Orley (Princeton University); Card, David (University of California, Berkeley); Farber, Henry S (Princeton University); Ransom, Michael R. (Brigham Young University) |
| Abstract: | This paper summarizes the results of nearly a dozen new papers presented at the Sundance Conference on Monopsony in Labor Markets held in October 2018. These papers, to be published as a special issue of the Journal of Human Resources, study various aspects of monopsony and failures of competition in labor markets. It also reports on the new developments in public policies associated with widespread concerns about labor market competition and efforts to ameliorate competitive failures. The conference papers range from studies of the labor supply elasticity individual firms face to studies of local labor market concentration to studies of explicit covenants suppressing labor market competition. New policies range from private and public antitrust litigation to concerns about the effect of mergers and inter-firm agreements on labor market competition. We provide a detailed discussion of the mechanics of the Silicon Valley High Tech Worker conspiracy to suppress competition based on Court documents in the case. Non-compete agreements, which are not enforceable in three states already, have also come under scrutiny. |
| Keywords: | monopsony, labor market power |
| JEL: | J0 J2 J3 L4 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14872&r= |
| By: | Andrea Galeotti; Benjamin Golub; Sanjeev Goyal; Eduard Talam\`as; Omer Tamuz |
| Abstract: | Suppliers of differentiated goods make simultaneous pricing decisions, which are strategically linked due to consumer preferences and the structure of production. Because of market power, the equilibrium is inefficient. We study how a policymaker should target a budget-balanced tax-and-subsidy policy to increase welfare. A key tool is a certain basis for the goods space, determined by the network of interactions among suppliers. It consists of eigenbundles -- orthogonal in the sense that a tax on any eigenbundle passes through only to its own price -- with pass-through coefficients determined by associated eigenvalues. Our basis permits a simple characterization of optimal interventions. For example, a planner maximizing consumer welfare should tax eigenbundles with low pass-through and subsidize ones with high pass-through. We interpret these results in terms of the network structure of the market. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.08153&r= |
| By: | Kasberger, Bernhard; Woodward, Kyle |
| Abstract: | We study multi-unit auctions in which bidders have limited knowledge of opponent strategies and values. We characterize optimal prior-free bids; these bids minimize the maximal loss in expected utility resulting from uncertainty surrounding opponent behavior. Optimal bids are simply computable despite bidders having multi-dimensional private information, and in certain cases admit closed-form solutions. In the pay-as-bid auction the minimax-loss bid is unique; in the uniform-price auction the minimax-loss bid is unique if the bidder is allowed to determine the quantities for which they bid, as in many practical applications. Payments to the seller may be higher in either auction format, but minimax-loss bids are never uniformly higher in the pay-as-bid auction. |
| Keywords: | Auctions; multi-unit auctions; loss minimization; non-Bayesian approaches |
| JEL: | D44 D81 |
| Date: | 2021–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111185&r= |
| By: | Breuer, Matthias; Leuz, Christian; Vanhaverbeke, Steven |
| Abstract: | We investigate the impact of reporting regulation on corporate innovation. Exploiting thresholds in Europe's regulation and a major enforcement reform in Germany, we find that forcing firms to publicly disclose their financial statements discourages innovative activities. Our evidence suggests that reporting regulation has significant real effects by imposing proprietary costs on innovative firms, which in turn diminish their incentives to innovate. At the industry level, positive information spillovers (e.g., to competitors, suppliers, and customers) appear insufficient to compensate the negative direct effect on the prevalence of innovative activity. The spillovers instead appear to concentrate innovation among a few large firms in a given industry. Thus, financial reporting regulation has important aggregate and distributional effects on corporate innovation. |
| Keywords: | Innovation,Regulation,Disclosure,Financial Reporting,Patents,Growth |
| JEL: | K22 L51 M41 M42 M48 O43 O47 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:675&r= |
| By: | Alberto Bracci; J\"orn Boehnke; Abeer ElBahrawy; Nicola Perra; Alexander Teytelboym; Andrea Baronchelli |
| Abstract: | Online marketplaces are the main engines of legal and illegal e-commerce, yet the aggregate properties of buyer-seller networks behind them are poorly understood. We analyze two datasets containing 245M transactions (16B USD) that took place on online marketplaces between 2010 and 2021. The data cover 28 dark web marketplaces, i.e., unregulated markets whose main currency is Bitcoin, and 144 product markets of one regulated e-commerce platform. We show how transactions in online marketplaces exhibit strikingly similar patterns of aggregate behavior despite significant differences in language, lifetimes available products, regulation, oversight, and technology. We find remarkable regularities in the distributions of (i) transaction amounts, (ii) number of transactions, (iii) inter-event times, (iv) time between first and last transactions. We then show how buyer behavior is affected by the memory of past interactions, and draw on these observations to propose a model of network formation able to reproduce the main stylized facts of the data. Our findings have implications for understanding market power on online marketplaces as well as inter-marketplace competition. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.09065&r= |
| By: | Pengcheng You; Yan Jiang; Enoch Yeung; Dennice F. Gayme; Enrique Mallada |
| Abstract: | This paper focuses on the operation of an electricity market that accounts for participants that bid at a sub-minute timescale. To that end, we model the market-clearing process as a dynamical system, called market dynamics, which is temporally coupled with the grid frequency dynamics and is thus required to guarantee system-wide stability while meeting the system operational constraints. We characterize participants as price-takers who rationally update their bids to maximize their utility in response to real-time schedules of prices and dispatch. For two common bidding mechanisms, based on quantity and price, we identify a notion of alignment between participants' behavior and planners' goals that leads to a saddle-based design of the market that guarantees convergence to a point meeting all operational constraints. We further explore cases where this alignment property does not hold and observe that misaligned participants' bidding can destabilize the closed-loop system. We thus design a regularized version of the market dynamics that recovers all the desirable stability and steady-state performance guarantees. Numerical tests validate our results on the IEEE 39-bus system. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.05811&r= |
| By: | Geraci, Andrea; Nardotto, Mattia; Reggiani, Tommaso (Cardiff Business School); Sabatini, Fabio |
| Abstract: | We study the impact of broadband penetration on social capital in the UK. Our empirical strategy exploits a technological feature of the telecommunication infrastructure that generated substantial variation in the quality of Internet access across households. The speed of a domestic connection rapidly decays with the distance of a userÕs line from the networkÕs node serving the area. Merging information on the topology of the network with geocoded longitudinal data about individual social capital from 1997 to 2017, we show that access to fast Internet caused a significant decline in civic and political engagement. Overall, our results suggest that broadband penetration crowded out several dimensions of social capital. |
| Keywords: | ICT, broadband infrastructure, networks, Internet, social capital, civic capital. |
| JEL: | D91 L82 Z13 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2021/32&r= |
| By: | Claire Greene; Ellen A. Merry; Joanna Stavins |
| Abstract: | The COVID-19 pandemic has caused large changes in consumer spending, including how people make their payments. We use data from a nationally representative survey of U.S. consumers collected before COVID in 2018 and 2019 and during COVID in 2020 to analyze changes in consumer payment behavior during the pandemic. We find that compared with their payment behavior in 2019, consumers had shifted some of their purchases from in person to online by fall 2020, significantly lowered their use of cash for purchases, and shifted their person-to-person (P2P) payments away from paper (cash and checks). Those changes are consistent with what we might expect, as many people were less able or willing to shop in person. The adoption of electronic P2P increased, especially the use of payment apps such as PayPal, Venmo, and Zelle. Consumers who worked exclusively from home during COVID made significantly higher shares of their payments online or through mobile devices and were less likely to use cash at all compared with those who worked at least partly in person, even after we control for income and education levels. In contrast, payment-behavior changes that took place from 2018 to 2019 were smaller in magnitude and largely insignificant, suggesting that COVID likely accelerated any longer-term trends. Although it is too soon to determine whether these changes will persist for the longer term, we observed them several months after the onset of the pandemic, so they certainly were not just temporary shifts. |
| Keywords: | consumer payments; consumer surveys; payment behavior; COVID-19 |
| JEL: | D12 D14 I12 I18 L81 |
| Date: | 2021–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:93548&r= |
| By: | Ozili, Peterson K |
| Abstract: | This article discusses some policy options that central banks may find useful in dealing with climate change risk in the financial sector. The effect of climate change on the financial sector are indirect but severe when they occur. Central banks play an important role in regulating the financial sector and in managing its inherent risks, yet there are no studies that suggest policy solutions to help central banks and other financial sector regulators deal with the risk that climate change pose to the financial sector. Five policy options are proposed in the paper, which includes: imposing a climate change capital surcharge; impose a fixed-rate risk capital - based on Tier 2 capital; a reduction in lending to industries whose activities destroy the environment and climate; creating a climate bank; and, requiring financial institutions to relocate their important assets to areas less prone to climate change events. Several policy experiments are needed to identify the best policy option that works best for each country while taking into account the unique financial sector, financial system and climate change history of each country |
| Keywords: | climate change, financial risk, financial institutions, central bank, financial system, financial sector, banks, capital surcharge, climate change risk, climate bank, bank regulation |
| JEL: | G21 G28 Q01 Q54 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111217&r= |
| By: | Neville Arjani; Fuchun Li; Zhentong Lu |
| Abstract: | In this paper, we develop a discrete choice framework to quantify the economic benefits of payments modernization in Canada. Focusing on Canada’s large-value transfer system (LVTS), we first estimate participants’ preferences for liquidity cost, payment safety and the network effect by exploiting intraday variations in the relative choice probabilities of the two substitutable sub-systems in the LVTS (i.e., Tranches 1 and 2). Then, with the estimated model, we conduct counterfactual simulations to calculate the changes in participants’ welfare when the LVTS is replaced by a real-time gross settlement system (RTGS), like Lynx (as an important part of the payments modernization initiative). The results show that, first, compared to the old system, Lynx has higher liquidity costs but is more secure, while the former is considered a more important factor by system participants. Second, when over 90% of current LVTS payments migrate to Lynx, there is an overall welfare gain; however, it maybe difficult to achieve such a high migration ratio in the new market equilibrium. Third, accounting for equilibrium adjustment, about a 75% service level improvement is needed to generate overall net economic benefits to participants. Among other things, adopting a liquidity savings mechanism and reducing risks in the new system could help achieve this improvement. Finally, the welfare changes are quite heterogeneous, especially between large and small participants. |
| Keywords: | Financial institutions; Financial system regulation and policies; Payment clearing and settlement systems |
| JEL: | C3 E42 G1 G28 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:21-64&r= |
| By: | Murat Seker (Turkish Airlines Headquarter, Istanbul); Mehmet Fatih Ulu (Koc University, Istanbul) |
| Abstract: | The regulatory environment in a country is an important factor that affects firm performance. This study investigates the impact of a particular regulation – license requirements for certain firm activities – on the innovation performance of Indian firms in the 1990s. Using a unique firm-level panel data set, it shows that the removal of license requirements led to an eight percentage points higher innovation rate within two years following the reform. We measure innovation as the introduction of new product varieties that had not been produced by the firm before. It takes a longer time for firms to innovate in industries in which they were not producing before. The conclusions in this study are also robust to the inclusion of controls for other policy reforms that occurred during the period of licensing reform. They also persist in tests with different subgroups of firms and with the use of alternative estimation methods. |
| Keywords: | Innovation, research and development, regulatory environment, regulations, industrial policy, India. |
| JEL: | L11 L52 O14 O31 O3 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:2201&r= |
| By: | Ozili, Peterson K |
| Abstract: | This paper reviews the recent advances in central bank digital currency research in a way that would help researchers, policy makers and practitioners to take a closer look at central bank digital currency (CBDC). The review shows a general consensus that a central bank digital currency is a liability of the issuing central bank and it has cash-like attributes. The review also presents the motivation and benefits of issuing a central bank digital currency such as the need to improve the conduct of monetary policy, the need to enhance the efficiency of digital payments and the need to increase financial inclusion. The review also shows that many central banks are researching the potential to issue CBDCs due to its many benefits. However, a number of studies have called for caution against over-optimism about the potential benefits of CBDC due to the limiting nature of CBDC design and its inability to meet multiple competing goals. Suggested areas for future research are identified such as the need to find the optimal CBDC design that meets all competing objectives, the need for empirical evidence on the effect of CBDC on the cost of credit and financial stability, the need to undertake country-specific and regional case studies of CBDC design, and the need to find a balance between limiting the CBDC holdings of users and allowing users to hold as much CBDC as they want. The implication of the findings of this review is that central bankers need to pay more attention to the design features of CBDC. Central bankers need to first identify the goals they want to achieve with CBDC, and design the CBDC to have those features. Where possible, there should be opportunities to re-design and re-invent the CBDC to meet changing central bank objectives. |
| Keywords: | Keywords: Digital currency, Money, Central bank digital currency, CBDC, Digital finance, Cryptocurrency, Financial inclusion, CBDC design, Blockchain, Distributed ledger technology. |
| JEL: | E42 E51 E52 E58 E59 G21 G28 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111389&r= |