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on Regulation |
| By: | Dirk Bergemann (Cowles Foundation, Yale University); Alessandro Bonatti |
| Abstract: | We propose a model of intermediated digital markets where data and heterogeneity in tastes and products are defining features. A monopolist platform uses superior data to match consumers and multiproduct advertisers. Consumers have heterogenous preferences for the advertisers' product lines and shop on- or off-platform. The platform monetizes its data by selling targeted advertising space that allows advertisers to tailor their products to each consumer's preferences. We derive the equilibrium product lines and advertising prices. We identify search costs and informational advantages as two sources of the platform's bargaining power. We show that privacy-enhancing data-governance rules, such as those corresponding to federated learning, can lead to welfare gains for the consumers. |
| Keywords: | Data, Privacy, Data Governance, Digital Advertising, Competition, Digital Platforms, Digital Intermediaries, Personal Data, Matching, Price Discrimination |
| JEL: | D18 D44 D82 D83 |
| Date: | 2022–08 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2343&r=reg |
| By: | Pedro H. Perico E Santos (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles); Olivier Massol (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School, University of London [London], Université Paris-Saclay) |
| Abstract: | In Europe, a significant adaptation of the existing power distribution sector is necessary to support the transition toward low-carbon energy systems and facilitate the massive deployment of low-carbon distributed power technologies. This report first examines the current organization of that industry and highlights the country-specific and diverse nature of the industry structures and the institutional organizations governing the distribution sector. We then discuss the new tasks and roles assigned to Distribution System Operators (DSOs) and shed light on the emerging challenges facing these DSOs. Finally, we highlight and discuss a few emerging research topics on the sector's industrial and institutional arrangements that have important implications for assisting the rapid decarbonization and digitization of European power systems. |
| Keywords: | Regulation, Industrial organization., Electricity distribution |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03897936&r=reg |
| By: | Conleigh Byers; Brent Eldridge |
| Abstract: | The system operator's scheduling problem in electricity markets, called unit commitment, is a non-convex mixed-integer program. The optimal value function is non-convex, preventing the application of traditional marginal pricing theory to find prices that clear the market and incentivize market participants to follow the dispatch schedule. Units that perceive the opportunity to make a profit may be incentivized to self-commit (submitting an offer with zero fixed operating costs) or self-schedule their production (submitting an offer with zero total cost). We simulate bidder behavior to show that market power can be exercised by becoming a price taker. Agents can learn to increase their profits via a reinforcement learning algorithm without explicit knowledge of the costs or strategies of other agents. We investigate different non-convex pricing models over a multi-period commitment window simulating the day-ahead market and show that convex hull pricing can reduce producer incentives to deviate from the central dispatch decision. In a realistic test system with approximately 1000 generators, we find strategic bidding under the restricted convex model can increase total producer profits by 4.4% and decrease lost opportunity costs by 2/3. While the cost to consumers with convex hull pricing is higher at the competitive solution, the cost to consumers is higher with the restricted convex model after strategic bidding. |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2212.10234&r=reg |
| By: | Emeric Henry (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, CEPR - Center for Economic Policy Research - CEPR); Marco Loseto (University of Chicago); Marco Ottaviani (Bocconi University [Milan, Italy], BIDSA - Bocconi Institute for Data Science and Analytics - Bocconi University [Milan, Italy], CEPR - Center for Economic Policy Research - CEPR, IGIER) |
| Abstract: | We analyze the optimal mix of ex ante experimentation and ex post learning for the dynamic adoption of activities with uncertain payoffs in a two-phase model of information diffusion. In a first preintroduction phase, costly experimentation is undertaken to decide whether to adopt an activity or abandon experimentation. In a second stage following adoption, learning can continue possibly at a different pace while the activity remains in place; the withdrawal option is exercised following the accumulation of sufficiently bad news. We compare from a law and economics perspective the performance of three regulatory frameworks commonly adopted to govern private experimentation and adoption incentives: liability, withdrawal, and authorization regulation. Liability should be preempted to avoid chilling of activities that generate large positive externalities consistent with the preemption doctrine. Liability should be used to discourage excessive experimentation for activities that generate small positive externalities. Authorization regulation should be lenient whenever it is used consistent with the organization of regulation in a number of areas, ranging from product safety to antitrust. |
| Keywords: | Authorization regulation,Liability,Withdrawal,Experimentation,Preemption doctrine |
| Date: | 2022–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03874153&r=reg |
| By: | Luigi Zingales |
| Abstract: | Digital markets are global in nature and prone to "tipping". The combination of these two factors makes the distortions of the inevitable monopolies in these markets very large, but it also undermines any effort at dealing with these distortions at a national level. I argue that the problem can only be solved by structural interventions that restore conditions for competition. Yet, no national regulator will have the ability to do so. Regulation can only arise in an international context. Paradoxically, the increasing international tension can create political opportunities for such international regulation. |
| Keywords: | Big tech, regulation, market power |
| JEL: | L5 L86 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1063&r=reg |
| By: | Nam, Rachel J. |
| Abstract: | With open banking, consumers take greater control over their own financial data and share it at their discretion. Using a rich set of loan application data from the largest German FinTech lender in consumer credit, this paper studies what characterizes borrowers who share data and assesses its impact on loan application outcomes. I show that riskier borrowers share data more readily, which subsequently leads to an increase in the probability of loan approval and a reduction in interest rates. The effects hold across all credit risk profiles but are the most pronounced for borrowers with lower credit scores (a higher increase in loan approval rate) and higher credit scores (a larger reduction in interest rate). I also find that standard variables used in credit scoring explain substantially less variation in loan application outcomes when customers share data. Overall, these findings suggest that open banking improves financial inclusion, and also provide policy implications for regulators engaged in the adoption or extension of open banking policies. |
| Keywords: | Open banking,FinTech,Marketplace lending,P2P lending,Big data,Customer data sharing,Data access,Data portability,Digital footprints |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:364&r=reg |
| By: | Christopher Teh (UNSW Sydney); Dyuti Banerjee (Department of Economics, Monash University); Chengsi Wang (Department of Economics, Monash University) |
| Abstract: | We study the impact of a dominant incumbent’s acquisition on entry and R&D incentives in a model with multiple start-ups. The incumbent’s acquisition directly suppresses entry and can distort the non-target start-up’s R&D incentives by creating a kill zone. The reduced threat of entry can also cause the incumbent to shelve the acquired technology. Despite these negative effects, acquisitions generally affect consumer welfare ambiguously due to synergy benefits. We study the design of merger policies aimed at minimizing acquisition-related harms. We also show that entry-for-buyout may not be a valid defense for start-up acquisitions when accounting for non-target start-ups. |
| Keywords: | Acquisitions, Innovation, Start-ups, Merger Policy, Remedies |
| JEL: | G34 L12 L41 O31 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2022-24&r=reg |
| By: | Keith Head (UBC - University of British Columbia); Thierry Mayer (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Constant elasticity of substitution (CES) demand for monopolistically competitive firm-varieties is a standard tool for models in international trade and macroeconomics. Inter-variety substitution in this model follows a simple share proportionality rule. In contrast, the standard toolkit in industrial organization (IO) estimates a demand system in which cross-elasticities depend on similarity in observable attributes. The gain in realism from the IO approach comes at the expense of requiring richer data and greater computational challenges. This paper uses the dataset of Berry et al. (1995), who established the modern IO method, to simulate counterfactual trade policy experiments. We use the CES model as an approximation of the more complex underlying demand system and market structure. Although the CES model omits key elements of the data generating process, the errors are offsetting, leading to reasonably accurate counterfactual predictions. For aggregate outcomes, it turns out that incorporating non-unitary pass-through matters more than fixing oversimplified substitution patterns. We do so by extending the commonly used methods of Exact Hat Algebra and tariff elasticity estimation to take into account oligopoly. |
| Keywords: | Constant Elasticity of Substitution, Industrial Organization, Oligopoly, Trade, Tariffs, Counterfactual analysis |
| Date: | 2022–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:spmain:hal-03799563&r=reg |
| By: | Bialek, Sylwia; Gregory, Jack; Revesz, Richard L. |
| Abstract: | While vintage differentiation is a highly prominent feature of various regulations, it can induce significant biases. We study these biases in the context of New Source Review-a program within the US Clean Air Act imposing costly sulfur dioxide (SO2) abatement requirements on new boilers but not existing ones. In particular, we empirically investigate how the differential treatment of coal boil- ers shaped the generation landscape by affecting unit utilization, retirement, and emissions. Leveraging a novel dataset covering state-level sulfur dioxide regula- tions for power plants, we show that the differentiation continued to have a strong effect even 30 years after its passage, raising the probability of surviving another year by 1.5 percentage points for grandfathered boilers and increasing their op- erations by around 800 hours annually. We estimate exempted units would have emitted a third fewer emissions per year, had they been subject to NSR. We run back-of-the-envelope calculations to assess the societal damages associated with the delayed retirements, higher utilization and higher emission rates of the grand- fathered boilers. Focusing solely on the additional SO2 emissions, we estimate annual costs of up to $ 65 billion associated with the vintage differentiation in New Source Review. |
| Keywords: | grandfathering, regulation design, Clean Air Act, power plants, coal |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:svrwwp:052022&r=reg |
| By: | Han, Minsoo (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Jang, Yungshin (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Yoon, Sang-Ha (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Oh, Taehyun (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Subin (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | 전 세계 주요국의 상위 1%의 소득비중은 증가하고 있으며 불평등지수도 증가세를 보이고 있다. 기존 연구들은 세계화, 숙련편향적 기술진보, 디지털전환등을 불평등 심화의 요인으로 지적한 바 있다. 하지만 보다 최근에는 이러한 요인들과 함께 시장경쟁의 약화 및 산업집중도 심화가 불평등 심화의 주요한 요인으로 주목받고 있다. 같은 맥락에서 시장경쟁을 촉진하는 경쟁정책의 역할에대해서도 기존의 전통적인 시각을 넘어서 불평등 심화에 대한 대응책으로서 고민해보아야 할 시점이다. 이러한 배경하에 본 연구는 주요국의 사례조사와 실증분석을 수행하고, 이를 통해서 우리 정부가 추구하고 있는 포용적 혁신성장을 달성하기 위한 경쟁정책 방향을 제안하고자 한다. The share of income possessed by the top 1% in major countriesis increasing, together with a rise in the inequality index. Previousstudies have pointed out globalization, skill-biased technologicalprogress, and digital transformation as factors for deepeninginequality. More recently, however, weakening market competitionand deepening industrial concentration along with these factorshave been noted as major factors in deepening inequality. In thesame context, the role of competitive policies in promoting marketcompetition should also be considered as a countermeasureagainst deepening inequality beyond the traditional view. Againstthis backdrop, this study conducts case studies and empirical analysis of major countries and proposes a competitive policy directionto achieve inclusive and innovative growth pursued by the Koreangovernment. First, in Chapter 2, we looked at changes in the industry concentration of the US and the EU—the former which enacted theSherman Act, the first antitrust law in the world, and the latter another pillar in the history of global competition policy—then examined recent trends of policies in both regions. In both the USand the EU, industrial concentration has generally increased alongwith the recent proliferation of the digital economy. In addition, as the enforcement of competition laws in these regions is strengthened, the direction of competition policy is changing toward regulating not only anti-competitive actions that directly affect consumer welfare but also actions that can indirectly affect consumerwelfare. For example, the US has issued an Executive Order onPromotion Competition in the American Economy, calling for awhole-of-government effort to prevent damage to workers, entrepreneurs, and consumers across the industry, promote profits,and promote competition. (the rest omitted) |
| Keywords: | 경쟁정책; 산업정책; Competition policy; industrial policy |
| Date: | 2021–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kieppa:2021_019&r=reg |
| By: | John List; Matthias Rodemeier; Sutanuka Roy; Gregory Sun |
| Abstract: | While non-price interventions ("nudges") have grown from academic curiosity to a bona fide policy tool, their relative economic efficiency remains under-researched. We develop a unified framework to estimate welfare effects of both nudges and taxes. We showcase our approach by creating a database of more than 300 carefully hand-coded point estimates of non-price and price interventions in the markets for cigarettes, influenza vaccinations, and household energy. While nudges are effective in changing behaviour in all three markets, they are not necessarily the most efficient policy. We find that nudges are more efficient in the market for cigarettes, while taxes are more efficient in the energy market. For influenza vaccinations, nudges may offer similar welfare gains to optimal vaccine subsidies. Importantly, two key factors govern the difference in results across markets: i) the standard deviation of the behavioral bias, and ii) the magnitude of the average externality. Nudges dominate taxes whenever i) exceeds ii). |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:feb:framed:00765&r=reg |
| By: | Ozili, Peterson K |
| Abstract: | This article explores some of the difficult issues in financial regulation for financial stability. Noting the lack of prior academic work in the topic, this article presents a discussion of some difficult issues in financial regulation for financial stability. Some of the difficult issues include: the difficulty in breaking too-big-to-fail financial institutions into small insignificant parts; the difficulty in regulating executive compensation in the financial sector without limiting the ability of financial institutions to attract and reward executive talent; the difficulty in instilling strict financial regulation and supervision without limiting the ability of financial institutions to exploit emerging profitable opportunities; the difficulty in ensuring that financial institutions increase lending during a recession or in bad times; the rarity of having a female CEO and Chair in a major financial institution; the difficulty in making central banks independent from the influence of the federal government; the difficulty in making financial institutions become relevant in the ever-changing digital technology environment; and the difficulty in preventing financial institutions from taking excessive risks when strict regulations are loosened under a light-touch regulatory regime. The implication of the findings is that financial regulation for financial stability is not an easy task. There will be issues that financial regulation can address, and there will be issues that financial regulation cannot address. Acknowledging that such difficulties exist on the path to financial stability is the first step to addressing these issues. |
| Keywords: | financial regulation, financial stability, bank supervision, crisis, central bank, banks, financial institutions, financial innovations, banking and finance. |
| JEL: | G21 G28 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:115783&r=reg |