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on Regulation |
| By: | Genakos, Christos; Lamprinidis, Andreas; Walker, James |
| Abstract: | This paper proposes a new algorithm with which to identify the potential effect of mergers by comparing the outcomes of interest in areas of overlap for the merging parties vis-a-vis areas of no overlap within a difference-in-differences estimation framework. Utilizing our proposed algorithm enables researchers and policymakers to perform retrospective merger evaluation studies that look at the effects of mergers on both price and non-price aspects. We demonstrate the applicability and value of our proposed methodology by examining the effects on price and product variety of four mergers of the late 1980s and the 1990s on the U.K. car market. |
| Keywords: | mergers; ex post policy evaluation; automobile industry |
| JEL: | L0 L1 L4 L5 |
| Date: | 2023–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121325&r=reg |
| By: | Dimitrakopoulou, Lydia; Genakos, Christos; Kampouris, Themistoklis; Papadokonstantaki, Stella |
| Abstract: | We examine how competition affects VAT pass-through in isolated oligopolistic markets as defined by the Greek islands. Using daily gasoline prices and a difference-in-differences methodology, we investigate how changes in VAT rates are passed through to consumers in islands with different market structure. We show that pass-through increases with competition, going from 50% in monopoly to around 80% in more competitive markets, but remains incomplete. We also discover a rapid rate of adjustment for VAT changes, as well as a positive relationship between competition and the rate of price adjustment. Finally, we document higher pass-through for products with more inelastic demand. |
| Keywords: | pass-through; tax incidence; gasoline; value added tax (VAT); market structure; competition; Greek islands |
| JEL: | H22 L1 |
| Date: | 2023–05–30 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121321&r=reg |
| By: | Llorca, Manuel (Department of Economics, Copenhagen Business School); Soroush, Golnoush (Department of Economics, Copenhagen Business School); Giovannetti, Emanuele (Faculty of Business and Law, Anglia Ruskin University, UK); Jamasb, Tooraj (Department of Economics, Copenhagen Business School); Davi-Arderius, Daniel (Càtedra de Sostenibilitat Energètica, Institut d'Economia de Barcelona, Universitat de Barcelona, Spain) |
| Abstract: | The green transition relies on electricity generation from intermittent renewable energy sources and the electrification of end-consumption such as heating, cooling, or mobility. At the same time, an increasing number of previously passive consumers are becoming active actors in the energy system, while the quantity of electric devices connected to the grid increases. These trends pose new operational, economic, and regulatory questions as the traditional roles of certain agents are mutating and multiplying. Digitalisation offers the possibility of implementing innovative solutions to the new challenges faced by grid operators, especially at the distribution grid level. In the EU Grid Action Plan, investments in grid digitalisation and real-time monitoring are deemed as crucial to achieve an efficient and fast energy transition. In this paper we present potential digital solutions to overcome the operational challenges posed by the ‘future-proof’ energy systems currently being devised and we address their economic implications. We also address some key aspects related to the digitalisation of the energy sector (efficiency and innovation, interoperability and standardisation, centralised vs decentralised solutions) from an economic perspective. Finally, a successful digitalisation of the sector requires adjustments in the regulatory frameworks. In the conclusion, we detail some recommendations needed for regulatory improvements. |
| Keywords: | Energy transition; Digitalisation; Standardisation and interoperability; Economic principles; Innovation; Regulation |
| JEL: | L10 L50 L90 Q40 |
| Date: | 2024–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2024_005&r=reg |
| By: | Catherine Hausman |
| Abstract: | Economists, energy experts, and policymakers have called for accelerating investment in the U.S. electricity transmission network. Additional transmission lines could better integrate markets, reducing the total cost of electricity generation. They could also allow for the better integration of renewable energy sources such as wind and solar, located in areas that traditionally did not have much generation capacity and that are far away from centers of demand. In this paper, I document the magnitude of static allocative inefficiencies induced by transmission congestion in two major U.S. electricity markets. I show that the allocative inefficiencies are rising over time, totaling more than $2 billion in 2022. Moreover, I document an important political economy dimension not yet explored in the literature: the magnitudes of gains and losses from this market integration at some individual firms is surprisingly large: four firms would have experienced a collective $1.6 billion drop in operating profits in 2022 had the market been integrated. I then tie some of these firms to reports of transmission hold-up in these markets. I argue that understanding firm-level gains and losses is just as important as understanding overall inefficiencies, particularly in an environment where incumbents may have the power to block new lines. |
| JEL: | L94 P18 Q41 Q42 Q48 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32091&r=reg |
| By: | Luis Guijarro; Vicent Pla; Jose Ramon Vidal |
| Abstract: | We analyze the effects of enforcing vs. exempting access ISP from net neutrality regulations when platforms are present and operate two-sided pricing in their business models. This study is conducted in a scenario where users and Content Providers (CPs) have access to the internet by means of their serving ISPs and to a platform that intermediates and matches users and CPs, among other service offerings. Our hypothesis is that platform two-sided pricing interacts in a relevant manner with the access ISP, which may be allowed (an hypothetical non-neutrality scenario) or not (the current neutrality regulation status) to apply two-sided pricing on its service business model. We preliminarily conclude that the platforms are extracting surplus from the CPs under the current net neutrality regime for the ISP, and that the platforms would not be able to do so under the counter-factual situation where the ISPs could apply two-sided prices. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.14791&r=reg |
| By: | Erwan Pierre; Lorenz Schneider (EM - emlyon business school) |
| Abstract: | Auctions of transmission rights between neighbouring countries are becoming increasingly active. In a parallel development, the introduction of market coupling frequently leads to smaller price differences between such countries. Indeed, if two countries are completely coupled, the price of a given hour of electricity will be identical in each country, resulting in a price spread of zero. Clearly, it is important to take this market coupling into account when evaluating transmission rights, as neglecting it would lead to a significant overvaluation of these rights. In order to address this issue, we introduce a general regime-switching mechanism that can be applied to many models in the literature. In particular, we focus on extending the model proposed by Cartea and González-Pedraz (2012). We describe the model estimation procedure in detail, and compare model and market prices of European spread options. We observe a dramatic paradigm shift in our data set at the end of the summer of 2021, and show that this shift has a strong effect on the model parameters. We also see that the reliable pricing and trading of spread options becomes problematic in such a volatile and uncertain market environment. |
| Keywords: | Electricity markets, Interconnectors, Market coupling, Spread options, Regime switching |
| Date: | 2024–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04411166&r=reg |
| By: | Claudio Ceccarelli (ISTAT, Italy); Antonio Cappiello (Consiglio Nazionale del Notariato) |
| Abstract: | The article passes in review the PMR indicators on notary regulation underscoring that the inhomogeneity of the cluster produces a large gap between minimum and maximum values. If we only consider “civil law notaries”, we can obtain more genuine picture of the reality. Since notaries exercise public functions within the administration of the justice (public good), they need a high level of regulation which is indeed empirically observed in the more homogeneous adjusted distribution (considering only notaries with comparable functions). In the case of notaries, in order to overcome market failure, higher regulation would be needed to ensure higher protection for the average consumer. The analysis of the legislative framework of Sweden, USA, Costa Rica and Israel clearly shows the inconsistency of the PMR notarial cluster (Sweden, USA and Israel adopt “notaries public”) as well incompatibilities with the OECD definitions of the notarial profession (because of the precondition of a lawyer’s licence in Israel and Costa Rica). Once sharpened the frontiers of the sample, excluding units belonging to a different distribution, notaries (intended as civil law notaries), presents homogenous higher distribution of the PMR “regulatory score”. The inverse relation between regulation (PMR) and “cost” and the positive correlation between PMR score and quality (Cappiello 2022) in conjunction with the EXCAS study on the better performances of the civil law notaries countries compared to countries using different systems (World Bank indicators of the property transfers of the civil law notaries, are used to make a comparison among countries), it seems to confirm the paternalistic need of the adoption of a civil law notary system. The analysis of the homogenous cluster of civil law notaries completely reverses the benchmark thresholds of the OECD PMR indexes. Contrary to the OECD PMR general vision that “less regulated is better”, the top five PMR average score (countries with lowest notarial regulation) is in fact associated with high average costs, while the highest five PMR average score (countries with highest notarial regulation) is associated with low average costs for the consumer. Therefore, if a country presents a notarial PMR value above the OECD AVG (a level of notarial regulation above the OECD average), it would be empirically considered an advantage (because it produces lower cost, efficiency and higher quality) rather than a signal for deregulation as actually proposed by OECD (see Tab 3). |
| Keywords: | professional services, competition, OECD PMR indicators, notaries, law & economics, common law, civil law |
| JEL: | K15 K21 K25 L4 L41 L43 L8 L84 L85 L86 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:afd:wpaper:2401&r=reg |
| By: | Héloïse Berkowitz (LEST - Laboratoire d'Economie et de Sociologie du Travail - AMU - Aix Marseille Université - CNRS - Centre National de la Recherche Scientifique, AMU - Aix Marseille Université); Antoine Souchaud (NEOMA - Neoma Business School, i3-CRG - Centre de recherche en gestion i3 - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Successive digital innovations create technologically-induced governance gaps that make public regulation quickly obsolete and that might be filled by sectoral governance. The literature has shown that most sectoral governance happens at the level of meta-organizations, organizations whose members are themselves organizations, although we lack a temporal understanding of this phenomenon. Further, while regulation is generally understood as a salient function of innovation intermediaries, the literature on innovation intermediaries has focused mostly on other functions such as idea sourcing, knowledge sharing, or capacity building. We know relatively little about regulatory innovation intermediaries, especially how they might evolve in response to the emergence of technologically-induced governance gaps. In this paper, we conduct an in-depth case study of the evolutions of the FinTech sector in France over almost 30 years, using more than 3000 minutes of interviews, 4500 pages of archives, and non-participant observations. We study three successive (non)digital financial innovations: business angels, crowdfunding platforms for SMEs, and blockchain technologies. We develop a meta-organizational analysis to investigate meta-organizations as regulatory innovation intermediaries. We describe the evolutions and interrelations of new technologies and meta-organizations, and unpack mechanisms of meta-organizational capacity building for multiple contributors, effects of innovation on organizationality and trajectories of meta-organizational filiation. |
| Keywords: | regulatory innovation intermediary, meta-organization, innovation, governance gap, technologically induced, innovation intermediaries, regulation, organizationality |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04228083&r=reg |
| By: | Dirk Bergemann; Tibor Heumann; Michael C. Wang |
| Abstract: | We analyze the welfare impact of a monopolist able to segment a multiproduct market and offer differentiated price menus within each segment. We characterize a family of extremal distributions such that all achievable welfare outcomes can be reached by selecting segments from within these distributions. This family of distributions arises as the solution to the consumer maximizing distribution of values for multigood markets. With these results, we analyze the effect of segmentation on consumer surplus and prices in both interior and extremal markets, including conditions under which there exists a segmentation benefiting all consumers. Finally, we present an efficient algorithm for computing segmentations. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.12366&r=reg |
| By: | Pollitt, M. G.; Dolphin, G. G. |
| Abstract: | This paper considers the current proposal to extend the EU ETS to cover CO2 emissions from the combustion of heating and road transport fuels. We argue that increased coverage of the EU ETS, together with a binding cap consistent with a net zero trajectory, would be a powerful dynamic incentive to efficient emissions reduction. In addition, it would complement standards-based policies currently enacted in these sectors in several ways. Distributional implications remain a serious challenge to such an extension but several mechanisms are available to alleviate them. |
| Keywords: | climate policy, emissions trading, EU, net zero |
| JEL: | Q52 Q54 Q58 |
| Date: | 2024–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2152&r=reg |
| By: | Martimort, David; Pouyet, Jérôme |
| Abstract: | Pay-TV firms compete both downstream to attract viewers and upstream to acquire broadcasting rights. Because profits inherited from downstream competition satisfy a convexity property, allocating rights to the dominant firm maximizes the industry profit. Such an exclusive allocation of rights emerges as a robust equilibrium outcome but may fail to maximize welfare. We analyze whether a ban on resale and a ban on package bidding may improve welfare. These corrective policies have no impact on the final allocation but lead to profit redistribution along the value chain. |
| Keywords: | Broadcasting rights; Upstream and downstream competition; Exclusivity |
| JEL: | L13 L42 |
| Date: | 2024–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:129026&r=reg |
| By: | Michel-Pierre Chélini (CREHS - Centre de Recherche et d'Etudes - Histoire et Sociétés - UA - Université d'Artois) |
| Abstract: | Prices are an essential component of markets and incorporate a lot of information about the products or services exchanged. From 1940 to 1986 there existed in France at the Ministry of the Economy and Finance a price control administration, the essential justification of which was France's propensity for inflation higher than that of its partners: 5.4 % on annual average from 1950 to 2000 compared to 4% for the United States or 2.8% for the FRG. The service was first called Economic Control, then evolved in stages until in 1986 it became Directorate-General for Competition, Consumption and Fraud Repression, gradually moving from vigilant monitoring of prices to their contractual regulation and finishing in competition policy |
| Abstract: | Les prix sont une composante essentielle des marchés et intègrent beaucoup d'informations sur les produits ou les services échangés. De 1940 à 1986 a existé en France auprès du ministère de l'Économie et des Finances une administration d'encadrement des prix, dont la justification essentielle était la propension de la France à une inflation supérieure à celle de ses partenaires : de 5, 4 % en moyenne annuelle de 1950 à 2000 contre 4 % pour les États-Unis ou 2, 8 % pour la RFA. Le service s'est d'abord appelé Contrôle économique, puis a évolué par étapes jusqu'à devenir en 1986 direction générale de la Concurrence, de la Consommation et de la Répression des Fraudes, passant progressivement d'une surveillance vigilante des prix à leur régulation contractuelle et finissant en politique de la concurrence |
| Keywords: | Prices regulation, Inflation policy, France 1940-1990 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04399936&r=reg |
| By: | William E. Bendinelli; Humberto F. A. J. Bettini; Alessandro V. M. Oliveira |
| Abstract: | This paper develops an econometric model of flight delays to investigate the influence of competition and dominance on the incentives of carriers to maintain on-time performance. We consider both the route and the airport levels to inspect the local and global effects of competition, with a unifying framework to test the hypotheses of 1. airport congestion internalization and 2. the market competition-quality relationship in a single econometric model. In particular, we examine the impacts of the entry of low cost carriers (LCC) on the flight delays of incumbent full service carriers in the Brazilian airline industry. The main results indicate a highly significant effect of airport congestion self-internalization in parallel with route-level quality competition. Additionally, the potential competition caused by LCC presence provokes a global effect that suggests the existence of non-price spillovers of the LCC entry to non-entered routes. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.09174&r=reg |
| By: | Heski Bar-Isaac; Justin P. Johnson; Volker Nocke |
| Abstract: | It is often argued that startups are acquired for the sole purpose of hiring specialized talent. We show that the goal of such acquihires might be to shut down the most relevant labor market competitor. This grants the acquirer monopsony power over specialized talent. As a consequence, acquihiring may harm employees and be socially inefficient. We explore the robustness of these effects, allowing for private benefits associated with working at a startup, varying bargaining protocols, multiple employees with and without complementarities, and private information. |
| Keywords: | Acquihiring, acquisitions, monopsony power, specialized labor markets, competition policy |
| JEL: | J42 L13 M12 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_500&r=reg |
| By: | Stöhr, Annika; Mendelsohn, Juliane |
| Abstract: | Zentraler Bestandteil der Modernisierung der deutschen Missbrauchsaufsicht und eines der meist diskutierten neuen Instrumente des GWB-Digitalisierungsgesetzes ist § 19a GWB. Dieser beinhaltet ein neues Machtkriterium - die Designation von Unternehmen mit sog. 'überragender marktübergreifender Bedeutung für den Wettbewerb' - sowie die Möglichkeit, ex-ante Maßnahmen zu erlassen, um zielgerichtet antikompetitive Verhaltensweisen zu unterbinden und wirksamen Wettbewerb zu ermöglichen. Dieser Beitrag untersucht die erste Fallpraxis des Bundeskartellamtes zu beiden Verfahrensstufen. Mit Einführung des § 19a GWB wurde eine zusätzliche Eingriffsmöglichkeit zur Adressierung von spezifischen Wettbewerbsproblemen innerhalb digitaler Ökosysteme geschaffen, welche ein effektives und schnelleres Eingreifen der Wettbewerbsbehörde bei der Ausnutzung von marktübergreifender Macht ermöglicht. Dennoch erfolgt die Prüfung der Kriterien des § 19a Abs. 1 GWB bisher noch recht unsystematisch, was durch eine Konkretisierung im Rahmen der weiteren Fallpraxis sowie ggf. entsprechenden Leitlinien adressiert werden sollte. Dies gilt insbesondere für den scheinbar weiter bestehenden Fokus auf die Feststellung von Marktmacht und die damit einhergehenden Herausforderungen hinsichtlich der Marktabgrenzung - gerade auch marktübergreifend - sowie die Kriterien zur Daten- und Finanzmacht, für deren tatsächliche Relevanz bzw. Auftreten bisher wenig empirische Evidenz vorliegt. Die ersten Verfahren nach § 19a Abs. 2 GWB haben bereits erste Erfolge in Form von Zusagen und zügigen Verhaltensänderungen zu verzeichnen. Zudem macht die mögliche Integration in laufende Verfahren § 19a GWB zu einem genuin neuen Kartellrechtsinstrument. Gleichzeitig fehlt es dem § 19a GWB aber an einem Durchsetzungs- und Sanktionsmechanismus, sollten keine Verpflichtungszusagen von den Unternehmen erfolgen.Insgesamt ist durchaus zu erwarten, dass das neue Instrument zu einem offeneren Wettbewerbsklima in digitalen Ökosystemen beitragen kann. Strukturelle Verbesserungen auf jenen Märkten sind allerdings weniger wahrscheinlich. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuiedp:281993&r=reg |
| By: | Daniel Krähmer (Universität Bonn) |
| Abstract: | The paper studies the canonical hold-up problem with one-sided investment by the buyer and full ex post bargaining power by the seller. The buyer can covertly choose any distribution of valuations at a cost and privately observes her valuation. The main result shows that in contrast to the well-understood case with linear costs, if investment costs are strictly convex in the buyer’s valuation distribution, the buyer’s equilibrium utility is strictly positive and to tal welfare is strictly higher than in the benchmark when valuations are public information, thus alleviating the hold-up problem. In fact, when costs are mean-based or display decreasing risk, the hold-up problem may disappear completely. Moreover, the buyer’s equilibrium utility and total welfare might be non-monotone in costs. The paper utilizes an equilibrium characterization in terms of the Gateaux derivative of the cost function. |
| Keywords: | Information Design, Hold-Up Problem, Unobservable Information |
| JEL: | C61 D42 D82 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:278&r=reg |
| By: | Kaufmann, Matteo; Schiereck, Dirk |
| Abstract: | We investigate the effect of corporate innovation on mergers and acquisitions (M&A). Using a sample of 786 public-to-public transactions in the U.S. technology sector, we show that acquirers are willing to pay higher premiums for more innovative target firms. This effect is amplified by the acquirer's own level of innovativeness as more innovative acquirers are willing to pay higher premiums for innovative targets than non-innovative acquirers. We further document significant strategic reactions of rival firms. In the aftermath of the M&A, all acquirer rivals increase their R&D spending but the effect is more pronounced for innovative rivals than for non-innovative ones. Innovative acquirer rivals are also more likely to acquire a technology firm in the aftermath of their competitor's M&A announcement than their non-innovative peers. The similarity between acquirers and their rivals shrinks in the post-acquisition period, which may be caused by rival firms extending the breadth of their technological search in response to the acquisition. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:142308&r=reg |
| By: | Davide Romelli |
| Abstract: | This paper presents an extensive update to the Central Bank Independence – Extended (CBIE) index, originally developed in Romelli (2022), extending its coverage for 155 countries from 1923 to 2023. The update reveals a continued global trend towards enhancing central bank independence, which holds across countries’ income levels and indices of central bank independence. Despite the challenges which followed the 2008 Global financial crisis and the recent re-emergence of political scrutiny on central banks following the COVID-19 pandemic, this paper finds no halt in the momentum of central bank reforms. I document a total of 370 reforms in central bank design from 1923 to 2023 and provide evidence of a resurgence in the commitment to central bank independence since 2016. These findings suggest that the slowdown in reforms witnessed post-2008 was a temporary phase, and that, despite increasing political pressures on central banks, central bank independence is still considered a cornerstone for effective economic policy-making |
| Keywords: | Central banking, central bank independence, central bank governance, legislative reforms. |
| JEL: | E58 G28 N20 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp24217&r=reg |
| By: | Joseph E. Stiglitz; Andrew Kosenko |
| Abstract: | We survey aspects of the intellectual development of the economics of information from the 1970s to today. We focus here on models where information is communicated indirectly through actions. Basic results, such as the failure of the fundamental theorems of welfare economics, the non-existence of competitive equilibrium, and the dependence of the nature of the equilibrium, when it exists, on both what information is available, and how information can be acquired, have been shown to be robust. Markets create asymmetries of information, even when initially none existed. While the earliest literature paid scarce attention to misinformation, subsequently it has been shown that governments can improve welfare, if disinformation is present, through fraud laws and disclosure requirements. Moreover, robust mechanism design enables agents and governments to better achieve their objectives, taking into account information asymmetries. On the other hand, market reforms that ignored their informational consequences may have lowered welfare. Surveying both theory and applications, we review the main insights of these literatures, and highlight key messages using nontechnical language. |
| JEL: | D82 D86 D9 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32049&r=reg |