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on Regulation |
| By: | Brown, David P. (University of Alberta, Department of Economics); Muehlenbachs, Lucija (University of Calgary) |
| Abstract: | To avoid electric-infrastructure-induced wildfires, millions of Californians have had their power cut for hours to days at a time. We show that rooftop solar-plus-battery storage systems increased in zip codes with the longest power outages. Rooftop solar panels alone will not help a household avert outages, but a solar-plus-battery-storage system will. Using this fact, we obtain a revealed preference estimate of the willingness to pay for electricity reliability, the Value of Lost Load, a key parameter for electricity market design. Our estimate, of around $4, 300/MWh, suggests California's wildfire-prevention outages resulted in losses from foregone consumption of $322 million to residential electricity consumers. |
| Keywords: | batteries; reliability; averting expenditures; power outages; Value of Lost Load |
| JEL: | Q40 Q54 Q58 |
| Date: | 2023–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2023_005&r=reg |
| By: | Michael Grubb (University College London, Institute of Sustainable Resources); Paul Drummond (University College London, Institute of Sustainable Resource); Serguey Maximov (University College London, Institute of Sustainable Resource) |
| Abstract: | This paper develops a detailed proposal for an efficient way to channel the value of large-scale renewables, which have become much cheaper than gas-driven wholesale electricity prices, to consumers at 'cost-plus' prices. This would reduce the fiscal pressure on governments for market-wide subsidies and offer more stable support for consumers most in need. We detail how this 'green power pool' approach could interact with the wholesale market to ensure firm power, also bringing transparency to the cost of balancing the variable renewables output, and maintaining incentives for efficient supply and demand responses. We illustrate the approach with reference to the cost and volume trajectories of UK renewables backed by government CfDs, targeted initially to particular consumer groups, as a first step in a wider transition towards direct consumer access to cheap renewables. |
| Keywords: | Electricity market design; energy crisis; renewable energy; CfD; long-run contracts; energy transition; energy poverty |
| JEL: | L16 L51 L94 L98 Q4 Q28 Q58 |
| Date: | 2022–11–09 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:inetwp193&r=reg |
| By: | Christian Bontemps; Cristina Gualdani; Kevin Remmy |
| Abstract: | We develop a two-stage game in which competing airlines first choose the networks of markets to serve in the first stage before competing in price in the second stage. Spillovers in entry decisions across markets are allowed, which accrue on the demand, marginal cost, and fixed cost sides. We show that the second-stage parameters are point identified, and we design a tractable procedure to set identify the first-stage parameters and to conduct inference. Further, we estimate the model using data from the domestic US airline market and find significant spillovers in entry. In a counterfactual exercise, we evaluate the 2013 merger between American Airlines and US Airways. Our results highlight that spillovers in entry and post-merger network readjustments play an important role in shaping post-merger outcomes. |
| Keywords: | Endogenous Market Structure, Networks, Airlines, Oligopoly, Product Repositioning, Mergers, Remedies |
| JEL: | D43 L14 L22 L40 L93 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_400&r=reg |
| By: | Pejman Bahramian (Department of Economics, Queens University, Kingston, Ontario, Canada); Glenn P. Jenkins (Department of Economics, Queens University, Kingston, Ontario, Canada and Cambridge Resources International Inc.); Frank Milne (Department of Economics, Queens University, Kingston, Ontario, Canada) |
| Abstract: | The Province of Ontario has had an aggressive program of introducing wind electricity generation technologies into its generation supply mix. This, combined with the rigid baseload production by nuclear and hydro plants, has created a situation where a surplus baseload electricity supply is projected for the next 20 years. Pumped hydro storage (PHS) is suggested as an economically viable technology for storing energy from non-dispatchable wind energy sources in the baseload period to be used the generate electricity in peak periods. An analytical framework has been developed to explore the feasibility of the PHS facility and to compare its cost with that of alternative gas power plants. Two situations are analyzed. First, the PHS plant uses only surplus energy for the first 20 years of operation and then is retired from the system. Second, an additional 20 years of PHS usefulness is added by making investments in wind electricity generation to provide energy for pumping. Given the capital costs of building PHS in Ontario, the conclusions of this study suggest that a PHS facility is not economically cost-effective for utilizing the projected off-peak surpluses. The economic analysis also illustrates that in the context of Ontario, the integration of PHS with wind power generation will have a further negative impact on the Canadian economy in all circumstances. This loss is borne mainly by the electricity consumers of Ontario. Even considering the cost of CO2 emissions from a world perspective, this investment is not cost-effective. It would be much better socially from a world perspective and economically from Canada's perspective if the surplus baseload electricity from Ontario were given away free to the USA. It could then be used to reduce generation by natural gas plants in the USA, hence reducing CO2 emissions globally, without any incremental economic cost to Canada. |
| Keywords: | Economic analysis, Electricity, Ontario, Pumped hydro storage, Wind power |
| JEL: | O55 D61 Q42 |
| Date: | 2023–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:qed:dpaper:4605&r=reg |
| By: | Jay Pil Choi (Michigan State University [East Lansing] - Michigan State University System); Doh-Shin Jeon (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) |
| Abstract: | We investigate how platform market power affects platforms' design choices in ad-funded two-sided markets, where platforms may find it optimal to charge zero price on the consumer side and to extract surplus on the advertising side. We consider design choices affecting both sides in opposite ways and compare private incentives with social incentives. Platforms' design biases depend crucially on whether they can charge any price on the consumer side. We apply the framework to technology adoption, privacy, and ad load choices. Our results provide a rationale for a tougher competition policy to curb market power of ad-funded platforms with free services. |
| Date: | 2022–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04018490&r=reg |
| By: | Lukas J\"urgensmeier; Bernd Skiera |
| Abstract: | Digital platforms use recommendations to facilitate the exchange between platform actors, such as trade between buyers and sellers. Platform actors expect, and legislators increasingly require that competition, including recommendations, are fair - especially for a market-dominating platform on which self-preferencing could occur. However, testing for fairness on platforms is challenging because offers from competing platform actors usually differ in their attributes, and many distinct fairness definitions exist. This article considers these challenges, develops a five-step approach to measure fair competition through recommendations on digital platforms, and illustrates this approach by conducting two empirical studies. These studies examine Amazon's search engine recommendations on the Amazon marketplace for more than a million daily observations from three countries. They find no consistent evidence for unfair competition through search engine recommendations. The article also discusses applying the five-step approach in other settings to ensure compliance with new regulations governing fair competition on digital platforms, such as the Digital Markets Act in the European Union or the proposed American Innovation and Choice Online Act in the United States. |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2303.14947&r=reg |
| By: | Shekhar, Shiva (Tilburg University, School of Economics and Management) |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:591d4e4d-f618-49bd-986f-ca4b7af37bd6&r=reg |
| By: | Theresa Graefe |
| Abstract: | In 2013, TSOs from the Central European Region complained to the Agency for the Cooperation of Energy Regulators because of increasing unplanned flows that were presumed to be caused by a joint German-Austrian bidding zone in the European electricity market. This paper empirically analyses the effects of the split of this bidding zone in 2018 on planned and unplanned cross-border flows between Germany, Austria, Poland, the Czech Republic, Slovakia, and Hungary. For all bidding zones, apart from the German-Austrian one, planned flows increased. Further, I find that around the policy intervention between 2017 and 2019, unplanned flows between Germany and Austria as well as for the Czech Republic and Slovakia decreased. However, for Poland increasing unplanned flows are found. |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2303.14182&r=reg |
| By: | Ambec, Stefan; Yang, Yuting |
| Abstract: | Trade reduces the effectiveness of climate policies such as carbon pricing when domestic products are replaced by more carbon-intensive imports. We investigate the impact of unilateral carbon pricing on electricity generation in a country open to trade through interconnection lines. We characterize the energy mix with intermittent renewable sources of energy (wind or solar power). Electricity trade limits the penetration of renewables due to trade-induced competition. A carbon border adjustment mechanism (CBAM) removes this limit by increasing the cost of imported power, or by deterring imports. The CBAM must be complemented by a subsidy on renewables to increase renewable generation above domestic consumption. The interconnection line is then used to export power rather than importing it when renewables are producing. We also look at network pricing and investment into interconnection capacity. A higher carbon price increases interconnection investment which further reduces the effectiveness of carbon pricing. In contrast, when renewable electricity is exported, a higher subsidy on renewables reduces further carbon emissions by expanding interconnection capacity. |
| Keywords: | Intermittent renewables; electricity interconnection; carbon pricing;; carbon border adjustment mechanism; renewable subsidy; carbon leakage |
| JEL: | D24 F18 F64 H23 Q27 Q48 Q54 |
| Date: | 2023–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:128018&r=reg |
| By: | Manish Gupta (Nottingham University Business School); Danny McGowan (University of Birmingham); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)) |
| Abstract: | We study how the introduction of a law protecting consumer data privacy affects the cost of credit in the US mortgage market. Our estimates reveal that the California Consumer Protection Act increases loan spreads charged by banks by 8 basis points but that it has no effect on the fixed origination costs charged to borrowers. In contrast, nonbanks do not charge more, possibly because they often resell to government-sponsored enterprises thereby minimizing their compliance costs. Banks also reduce their supply of credit more in lower-income areas, consistent with more informationally intense data collection practices there potentially exposing them to larger legal costs. In sum, our findings suggest that banks pass the CCPA compliance costs to borrowers through higher interest rates and reduce their legal exposure by curtailing credit where more data need to be collected. |
| Keywords: | Consumer Data Privacy, Shadow Banks, Mortgages, Regulatory Costs |
| JEL: | D12 G21 G23 G28 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2325&r=reg |
| By: | Chulyoung Kim (Yonsei University); Sang-Hyun Kim (Yonsei University); Jinhyuk Lee (Korea University); Jaeok Park (Yonsei University) |
| Abstract: | We consider a simple auction setting where there are three bidders and one of the bidders creates positive or negative externalities on the other two bidders. We theoretically and experimentally compare two auction formats, the first-price auction (FPA) and the second-price auction (SPA), in our setting. Using a refinement of undominated Nash equilibria, we analyze equilibrium bids and outcomes in the two auction formats. Our experimental results show that overbidding relative to equilibrium bids is prevalent, especially in the SPA, and this leads to higher revenues and lower efficiency in the SPA than in the FPA, especially under negative externalities. With incomplete information, we observe similar tendencies, while we obtain no evidence for learning effects. |
| Keywords: | auctions; externalities; experiments; overbidding; efficiency.; auctions; externalities; experiments; overbidding; efficiency. |
| JEL: | C91 D44 D62 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:yon:wpaper:2023rwp-214&r=reg |
| By: | Fleckinger, Pierre; Martimort, David; Roux, Nicolas |
| Abstract: | What is the most efficient way of designing incentives for a group of agents? Over the past five decades, agency theory has provided various answers to this crucial question. This line of research has argued that, depending on the specific organizational context, the best channel for providing incentives involves either relying on collective compen-sations or, on the contrary, employing relative performance evaluations. In the first scenario, cooperation among agents is the key aspect of the organization. In the second, competition among agents prevails. This paper provides a comprehensive overview of this extensive literature, with the aim of understanding the conditions under which one or the other type of incentive scheme is more desirable for the principal of the organiza-tion. To achieve this, we use a flexible workhorse model that is capable of addressing a wide range of scenarios characterized by different technologies, information constraints, and behavioral norms. |
| JEL: | D20 D86 J33 L23 M12 M50 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:127855&r=reg |
| By: | David H. Kreitmeir (SoDa Labs, Monash University); Paul A. Raschky (Department of Economics and SoDa Laboratories, Monash University) |
| Abstract: | We analyse the effects of the ban of ChatGPT, a generative pre-trained transformer chatbot, on individual productivity. We first compile data on the hourly coding output of over 8, 000 professional GitHub users in Italy and other European countries to analyse the impact of the ban on individual productivity. Combining the high-frequency data with the sudden announcement of the ban in a difference-in-differences framework, we find that the output of Italian developers decreased by around 50\% in the first two business days after the ban and recovered after that. Applying a synthetic control approach to daily Google search and Tor usage data shows that the ban led to a significant increase in the use of censorship bypassing tools. Our findings show that users swiftly implement strategies to bypass Internet restrictions but this adaptation activity creates short-term disruptions and hampers productivity. |
| Keywords: | chatgpt, productivity, internet, censorship, italy |
| JEL: | D72 D83 L86 L88 |
| Date: | 2023–04 |
| URL: | http://d.repec.org/n?u=RePEc:ajr:sodwps:2023-01&r=reg |
| By: | Boeri, Tito (Bocconi University); Garnero, Andrea (OECD); Luisetto, Lorenzo Giovanni (University of Michigan) |
| Abstract: | Non-compete clauses (NCCs) limiting the mobility of workers have been found to be rather widespread in the US, a flexible labour market with large turnover rates and a limited coverage of collective bargaining. This paper explores the presence of such arrangements in a rigid labour market, with strict employment protection regulations by OECD standards and where all employees are, at least on paper, subject to collective bargaining. Based on a representative survey of employees in the private sector, an exam of collective agreements and case law, we find that in Italy i) collective agreements play no role in regulating the use of NCCs while the law specifies only the formal requirements, ii) about 16% of private sector employees are currently bound by a NCC, iii) NCCs are relatively frequent among low educated employees in manual and elementary low paid occupations having no access to any type of confidential information, and iv) in addition to NCCs, a number of other arrangements limit the post-employment activity of workers. Many of the NCCs do not comply with the minimum requirements established by law and yet workers do not consider them as unenforceable and appear to behave as they were effective. Even when NCCs are unenforceable they appear to negatively affect wages when they are introduced without changing the tasks of the workers involved. Normative implications are discussed in the last section of the paper. |
| Keywords: | non-compete clauses, monopsony, labour market concentration |
| JEL: | J31 J41 J42 L40 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16021&r=reg |
| By: | Petar, Radanliev |
| Abstract: | The results of this study show that cybersecurity standards are not designed in close cooperation between the two major western blocks - US and EU. In addition, while the US is still leading in this area, the security standards for cryptocurrencies, internet-of-things, and blockchain technologies have not evolved as fast as the technologies have. The key finding from this study is that although the crypto market has grown into a multi-trillion industry, the crypto market has also lost over 70% since its peak, causing significant financial loss for individuals and cooperation’s. Despite this significant impact to individuals and society, cybersecurity standards and financial governance regulations are still in their infancy. |
| Keywords: | Cyber Risk Assessment; Cloud Cybersecurity Standards; Financial Governance, DeFi, NIST; ISO27001; IoT; Blockchain Technologies, Metaverse, Cryptocurrencies. |
| JEL: | A3 F3 F38 F5 F55 F6 G2 G21 G23 G28 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:116885&r=reg |