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on Regulation |
| By: | Ruiz, Miguel Haro; Schult, Christoph; Wunder, Christoph |
| Abstract: | This study employs synthetic control methods to estimate the effect of the Iberian exception mechanism on wholesale electricity prices and consumer inflation, for both Spain and Portugal. We find that the intervention led to an average reduction of approximately 40% in the spot price of electricity between July 2022 and June 2023 in both Spain and Portugal. Regarding overall inflation, we observe notable differences between the two countries. In Spain, the intervention has an immediate effect, and results in an average decrease of 3.5 percentage points over the twelve months under consideration. In Portugal, however, the impact is small and generally close to zero. Different electricity market structures in each country are a plausible explanation. |
| Keywords: | Iberian exception mechanism, inflation, policy evaluation, synthetic controls, wholesale electricity prices |
| JEL: | E31 L51 Q41 Q48 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwhdps:283618&r=reg |
| By: | Dirk Bergemann (Yale University); Alessandro Bonatti (MIT); Nicholas Wu (Yale University) |
| Abstract: | We ask how the advertising mechanisms of digital platforms impact product prices. We present a model that integrates three fundamental features of digital advertising markets: (i) advertisers can reach customers on and off-platform, (ii) additional data enhances the value of matching advertisers and consumers, and (iii) bidding follows auction-like mechanisms. We compare data-augmented auctions, which leverage the platformÕs data advantage to improve match quality, with managed campaign mechanisms, where advertisersÕ budgets are transformed into personalized matches and prices through auto-bidding algorithms. In data-augmented second-price auctions, advertisers increase off- platform product prices to boost their competitiveness on-platform. This leads to socially efficient allocations on-platform, but inefficient allocations off-platform due to high product prices. The platform-optimal mechanism is a sophisticated managed campaign that conditions on-platform prices for sponsored products on off-platform prices set by all advertisers. Relative to auctions, the optimal managed campaign raises off-platform product prices and further reduces consumer surplus. |
| Date: | 2023–07 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2367&r=reg |
| By: | Agnese Bafundi (Bank of Italy); Antonio Sparacino (Bank of Italy) |
| Abstract: | This paper analyses the relationship between the procurement methods adopted by Italian municipalities for the purchase of electricity and gas and the cost per capita incurred for these supplies. It empirically evaluates the effect of centralized purchasing for these expenditure categories. Using a unique dataset including payments made by Italian municipalities between 2019 and 2022, recorded on the Siope+ platform, we find that purchasing through Consip or regional procurement centres is associated with cost savings compared with direct procurement. Our analysis confirms the effectiveness of centralized procurement in the context of energy expenditures and highlights the potential efficiency gains associated with the ongoing increase in the rate of adoption of such systems. |
| Keywords: | centralization, procurement, energy expenses, local public finance |
| JEL: | H57 H76 K23 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_826_23&r=reg |
| By: | E. Zigah; M. Barry (Service de dermatologie [Bordeaux] - Université Bordeaux Segalen - Bordeaux 2 - CHU Bordeaux - Hôpital Haut-Lévêque [CHU Bordeaux] - CHU Bordeaux, Histologie et Pathologie Moléculaire - Université Bordeaux Segalen - Bordeaux 2, Department of Mathematics and Statistics [Boston] - BU - Boston University [Boston], Service de dermatologie Hôpital Saint-André Bordeaux - CHU Bordeaux, Inserm U1312 - BRIC - BoRdeaux Institute in onCology - UB - Université de Bordeaux - INSERM - Institut National de la Santé et de la Recherche Médicale); Anna Creti (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | While it is commonly acknowledged that mini-grids are the new pathway to bridging the high electricity access deficit in Sub-Saharan Africa (SSA), comparably few studies have assessed how existing regulations and tariff policies in SSA affect their potentials to attract the number of private investments required to scale-up deployments. Private investors' participation is particularly crucial to meet the annual electrification investment needs of $120 billons in SSA. We study the regulatory framework, the tariff structure, and the subsidy schemes for mini-grids in Tanzania. Additionally, using an optimization technique, we assess the profitability of a mini-grid electrification project in Tanzania from a private investment perspective. We find that the approved standardized small power producers' tariffs and subsidy scheme in Tanzania still do not allow mini-grid for rural electrification projects to be profitable. A further study is required to identify successful business models and strategies to improve mini-grids profitability. |
| Keywords: | Electricity access, Mini-grids, Africa, Clean energy policy, Energy regulation, Pricing |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04439989&r=reg |
| By: | Rodrigo Moita; Halisson Rodrigues; Thiago Rodrigues; Claudio Lucinda; Renata Lopes; Camila Stefanello; Thais Chaves |
| Abstract: | This paper aims to examine the key factors influencing default rates among residential electricity consumers in Brazil. To achieve this, we use a unique dataset comprising monthly electricity bills, and we combine it with several administrative data sources. By leveraging the policy designs adopted by the regulator, we employ a causal inference approach to identify the effects of tariff changes and enforcement actions implemented by electricity distributors on default rates. Our findings indicate that an increase in electricity tariffs raises the likelihood of default. Furthermore, the results reveal that power cuts represent the primary tool for combating default, and allowing such cuts can reduce the default duration by up to 9%. These findings contribute to the understanding of the factors influencing household default behavior and their implications for ensuring electricity affordability. |
| Keywords: | electricity tariff; electricity bill default; power cuts |
| JEL: | L94 L51 G50 |
| Date: | 2024–02–16 |
| URL: | http://d.repec.org/n?u=RePEc:spa:wpaper:2024wpecon5&r=reg |
| By: | Hemant Bhargava (University of California, Davis); Antoine Dubus (ETH Zurich); David Ronayne (ESMT Berlin); Shiva Shekhar (Tilburg School of Economics and Management) |
| Abstract: | Large, generalist, technology firms—so-called “big-tech” firms—powerful in their primary market, routinely enter secondary markets consisting of specialist firms. Naturally, one might expect a specialist firm to be fiercely protective of its data as a way to maintain its market position in the secondary market. Counter to this intuition, we demonstrate that a specialist firm willingly shares its market data with an intruding tech generalist. We do so by developing a model of crossmarket competition in which data collected via consumer usage in each market is a factor of product quality in both markets. We show that a specialist firm shares its data to strategically create co-dependence between the two firms, thereby softening competition and transforming the generalist firm from a traditional competitor into a co-opetitor. For the generalist intruder, data from the specialist firm substitute for its own investments in product quality in the secondary market. As such, the act of sharing data makes the intruder a stakeholder in the valuable data collected by the specialist, and consequently in the specialist’s continued success. Moreover, while the firms benefit from data sharing, consumers can be worse off from the weaker price competition and lower investments in innovation. Our results have managerial and policy implications, notably on account of backlash against data collection and the market power of big tech firms. |
| Keywords: | data-driven quality improvements; externalities; co-opetition; data sharing; |
| Date: | 2024–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:498&r=reg |
| By: | Dirk Bergemann (Yale University); Tibor Heumann (Pontificia Universidad Catolica de Chile); Michael C. Wang (Yale University) |
| 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: | 2024–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2376&r=reg |
| By: | Frederico A. Turolla; Moises D. Vassallo; Alessandro V. M. Oliveira |
| Abstract: | This paper presents a test of intermodal interaction between coaches and airlines in Brazil in order to check for the efficacy of recent liberalization measures designed to promote competition in both industries. Interstate travel service in the country is heavily provided by coaches, and the system is fully operated by the private sector under public delegation through permits and authorizations. Agency-based regulation was introduced in 2002 along with a price cap regime aimed at enhancing the flexibility to change fares in response to demand and cost conditions. By making use of a reaction function-based model of coach operators' pricing decisions in the interstate travel market, we then estimate the sensitivity of the changes in coach fares to the changes in airline fares in a simultaneous-equation framework. Intermodal interaction among coach operators and airlines is found to be highly significant and probably due to the competition for a small but increasing set of premium, quality-sensitive, coach passengers. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.07125&r=reg |
| By: | Milena Almagro (University of Chicago); Felipe Barbieri (University of Pennsylvania); Juan Camilo Castillo (University of Pennsylvania); Nathaniel Hickok (MIT); Tobias Salz (MIT) |
| Abstract: | We characterize optimal urban transportation policies in the presence of congestion and environmental externalities and evaluate their welfare and distributional effects. We present a framework of a municipal government that implements different transportation equilibria through its choice of public transit policies—prices and frequencies—as well as road pricing. The government faces a budget constraint that introduces monopoly-like distortions. We apply this framework to Chicago, for which we construct a new dataset that comprehensively captures transportation choices. We find that road pricing alone leads to large welfare gains by reducing externalities, but at the expense of consumers (travelers), whose surplus falls even if road pricing revenues are fully rebated. The largest losses are borne by middle income consumers, who are most reliant on cars. We find that the optimal price of public transit is close to zero and goes along with a reduction in the frequency of buses and an increase in the frequency of trains. Combining these transit policies with road pricing eliminates budget constraints. This allows the government to implement higher transit frequencies and even lower prices, in which case consumer surplus increases after rebates. |
| Keywords: | Urban transportation, public transit subsidy design, road pricing, spatial equilibrium, Ramsey pricing |
| JEL: | L91 L5 L13 H23 R41 R48 |
| Date: | 2024–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:24-004&r=reg |
| By: | Rafael Rocha Oliveira; Claudio Lucinda |
| Abstract: | Little attention has been given in the literature to the effects of the exit of a potential competitor. The extant papers usually analyze the incumbent response only in markets directly affected. They do not explore the effects of reduced competition in markets threatened by entry. Aiming to fill this gap this work evaluates the extent of a threat potential competitors are in terms of price and quantity supplied. We used the bankruptcy of Avianca, the fourth-largest airline in the Brazilian airline sector as a case study. We find evidence the main incumbents respond with a price increase. When analyzing the quantity supplied, we find no evidence of an incumbent response regarding the number of flights or the number of seats. |
| Keywords: | Threat; Potential competition; Exit; Bankruptcy; Airline companies; Tariffs airlines |
| JEL: | L13 L93 L43 |
| Date: | 2024–02–16 |
| URL: | http://d.repec.org/n?u=RePEc:spa:wpaper:2024wpecon4&r=reg |
| By: | Mert Demirer; Diego J. Jiménez Hernández; Dean Li; Sida Peng |
| Abstract: | By regulating how firms collect, store, and use data, privacy laws may change the role of data in production and alter firm demand for information technology inputs. We study how firms respond to privacy laws in the context of the EU’s General Data Protection Regulation (GDPR) by using seven years of data from a large global cloud-computing provider. Our difference-in-difference estimates indicate that, in response to the GDPR, EU firms decreased data storage by 26% and data processing by 15% relative to comparable US firms, becoming less “data-intensive.” To estimate the costs of the GDPR for firms, we propose and estimate a production function where data and computation serve as inputs to the production of “information." We find that data and computation are strong complements in production and that firm responses are consistent with the GDPR, representing a 20% increase in the cost of data on average. Variation in the firm-level effects of the GDPR and industry-level exposure to data, however, drives significant heterogeneity in our estimates of the impact of the GDPR on production costs. |
| JEL: | D22 L11 L51 L86 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32146&r=reg |
| By: | David Lowing; Léa Munich; Kevin Techer |
| Abstract: | Accurate cost allocation is a challenge for both public service operators and regulatory bodies, given the dual objectives of ensuring essential public service provision and maintaining fair competition. Operators have the obligation to provide essential public services for all individuals, which may incur additional costs. To compensate this, the operators receive state aids, which are determined by an assessment of the net cost associated with these obligations. However, these aids introduce the risk of distorting competition, as operators may employ them to subsidize competitive activities. To avoid this risk, a precise cost allocation method that adequately assess the net cost of these obligations becomes necessary. Such a method must satisfy specific properties that effectively prevent cross-subsidization. In this paper, we propose a method grounded in cooperative game theory that offers a solution for allocating common costs between activities and obligations in public service provision. We adopt a normative approach by introducing a set of desirable axioms that prevent cross-subsidization. We provide two characterizations of our proposed solution on the basis of these axioms. Furthermore, we present an illustration of our method to the allocation of common costs for a public service operator. |
| Keywords: | Cooperative game theory; Cost allocation; Public service; Cross-subsidization. |
| JEL: | C71 L51 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2024-03&r=reg |
| By: | Omar Bamieh (University of Vienna); Andrea Cintolesi (Bank of Italy); Mario Pagliero (University of Turin and Collegio Carlo Alberto) |
| Abstract: | We estimate the monetary returns to occupational licensing of Italian lawyers. To enter the legal profession in Italy, lawyers must pass a written and an oral exam featuring sharp discontinuities in the passing grade. Focusing on a subgroup of Italian law graduates taking the bar exam in Turin (a city in Northwest Italy), we exploit the sharp discontinuity generated by the bar exam to compare individuals who marginally pass and fail the bar exam and compare their earnings up to 19 years since their first attempt at the bar exam. We find that individuals with a licence to practice law earn, on average, euro 21, 000 gross more per year than individuals without a license. These returns are positive in each year of the analysis, increase up to the tenth year and then decrease. |
| Keywords: | labour market regulation, occupational licensing, earnings, legal market, bar exam |
| JEL: | J08 J44 L84 L50 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1440_24&r=reg |
| By: | Maurizio Trapanese (Banca d'Italia); Sabrina Bellacci (Banca d'Italia); Marcello Bofondi (Banca d'Italia); Giuseppe DE Martino (Banca d'Italia); Sebastiano Laviola (Single Resolution Board); Valerio Vacca (Banca d'Italia) |
| Abstract: | This paper explains the essential features of the too-big-to-fail regulatory framework finalized after the financial crisis of 2007-08 and explores whether the current large banks' prudential and resolution frameworks work as originally intended and whether there is room for further improvements. The aim is to identify the policy areas whose effectiveness could be enhanced through a greater integration between the prudential and the resolution policies. We focus on the banks of the European Banking Union classified as significant. We find that there is a substantial integration between the prudential and resolution frameworks. However, some further improvements could be achieved with reference to: 1) the consistency between the assessments of a bank's systemic importance and its resolvability; 2) the coordination between the recovery and the resolution plans; 3) the interaction between capital buffers and minimum requirements; 4) the information sharing between the micro-prudential and resolution authorities and the macro-prudential ones. In developing our analysis, we make also reference to the recent episodes of banking crises and to the work under way at the international level to draw initial lessons from these episodes. |
| Keywords: | financial crises, banks, financial policy and regulation, crisis management JEL Classification: G01, G21, G28, H12 |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_807_23&r=reg |