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on Regulation |
| By: | Martin Besfamille; Nicolás Figueroa; León Guzmán |
| Abstract: | We consider a model featuring a single-product natural monopoly, which faces evaders, i.e., individuals that may not pay the price. By exerting a costly effort, the firm can deter evasion. To maximize the total surplus, a regulator sets the price, the level of deterrence effort, and socially costly transfers to ensure the monopoly’s participation. We obtain a modified Ramsey formula, which clearly shows that the mere existence of evaders dampens the use of the price as a mean to finance the firm’s deficit. The regulated price is always below the monopoly price and, under sufficient conditions, also below marginal cost. Then, we generalize the model to incorporate moral hazard. Finally, we undertake an empirical application of our results, which shows quantitatively that the downward tendency of regulated prices in a context of high evasion is significant. |
| Keywords: | regulation, natural monopoly, evasion and marginal cost of public funds |
| JEL: | D42 H2 L43 L51 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:576&r=reg |
| By: | Victor Ajayi; Michael G. Pollitt |
| Keywords: | Total factor productivity, incentive regulation, corporate reorganisations, gas networks, data envelopment analysis |
| JEL: | C23 D24 L51 L94 |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg2214&r=reg |
| By: | Diakoulakis, Giorgos N. |
| Abstract: | In this article, we theoretically explore monopolistic pricing when a (representative) consumer exhibits multiple goals. |
| Keywords: | monopolistic firm, personalized pricing, goal-driven consumers |
| JEL: | D42 D90 D21 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:284924&r=reg |
| By: | Martinez-Espiñeira, Roberto; Pérez Urdiales, María |
| Abstract: | Standard water affordability measures that only account for expenditure on piped water are unlikely to adequately capture the situation of all consumers in developing countries, who often experience water service quality issues and must rely on coping strategies. We construct and compare a series of water affordability ratios including coping costs, and we also adjust these ratios by normative judgements about the need for coping strategies. We use nationally representative household-level data from 18 countries in Latin America and the Caribbean, providing, for the first time, a regional perspective on water affordability. We show that the share of income devoted to water expenses substantially increases when we consider coping costs, particularly affecting the bottom 20% of the income distribution. These findings should be of interest to policy makers aiming at promoting access to safe and affordable water as we also identify the characteristics associated with water affordability issues. |
| Keywords: | water affordability;water quality issues;regulation;Latin America and the Caribbean;water tariff design;water and sanitation tariffs;drinking water quality |
| JEL: | Q21 Q23 Q25 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:13395&r=reg |
| By: | Karsten Neuhoff |
| Keywords: | Price cap, security of supply, gas saving, consumer welfare |
| JEL: | D30 D47 D61 L95 |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg2212&r=reg |
| By: | Paul Simshauser |
| Keywords: | Electricity, regulated utilities, dividend policy |
| JEL: | D25 D80 G32 L51 Q41 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg2210&r=reg |
| By: | Qiuyu Lu; Noriaki Matsushima; Shiva Shekhar |
| Abstract: | This study explores the welfare impact of personalized pricing for consumers in a duopolistic two-sided market, with consumers single-homing and developers affiliating with a platform according to their outside option. Personalized pricing, which is private in nature, cannot influence expectations regarding the network sizes, inducing the platforms to offer lower participation fees for developers. Those lower fees increase network benefits for consumers, allowing the platforms to exploit these benefits through personalized pricing. Personalized prices are higher when the network value for developers is high, benefiting competing platforms at the expense of consumers. These findings offer policy insights on personalized pricing. |
| Keywords: | personalized pricing, uniform prices, two-sided market, content developers |
| JEL: | L13 D43 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10994&r=reg |
| By: | Schwartz, Demitrius; Batabyal, Amitrajeet |
| Abstract: | The potential of rooftop solar power has been identified as a main driver of clean energy adoption in an urban environment. While residential solar projects have lower capacity than commercial systems, residential solar represents most of the installation base for rooftop solar projects. Rooftop solar adoption in the commercial market lags residential solar installation. To better understand why this is the case, we conduct a case study of a small, manufacturing firm. Based on the firm's energy demand and the physical attributes of its location, we study a 25-kilowatt solar array using the National Renewable Energy Laboratory’s (NREL) System Advisor Model (SAM). Our empirical study is used to evaluate the economic prospects of a rooftop solar installation project for the firm under study. This analysis sheds light on the financial ramifications of the adoption of solar panels by small, commercial firms in New York state. |
| Keywords: | Decision-Making, Incentive, Photovoltaic System, Solar Energy, Small Business |
| JEL: | D81 M21 Q42 |
| Date: | 2023–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120361&r=reg |
| By: | Frédéric Gonand; Pedro Linares; Andreas Löschel; David Newbery; Karen Pittel; Julio Saavedra; Georg Zachmann |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:econpr:_49&r=reg |
| By: | Avichai Snir (Department of Economics, Bar-Ilan University, Israel); Daniel Levy (Department of Economics, Bar-Ilan University, Israel; Department of Economics, Emory University, USA; ICEA; ISET, TSU; Rimini Centre for Economic Analysis); Dudi Levy (Department of Economics, Bar-Ilan University, Israel); Haipeng Allan Chen (Tippie College of Business, University of Iowa, USA) |
| Abstract: | We report the results of surveys we conducted in the US and Israel in 2020, a time when many prices increased following the spread of the COVID-19 pandemic. To assess respondents’ perceptions of price increases, we focus on goods whose prices have increased during the pandemic, including some essential goods. Consistent with the principle of dual entitlement, we find that respondents perceive price increases as more acceptable if they are due to cost shocks than if they are due to demand shocks. However, we also find large differences across the two populations, as well as across goods. |
| Keywords: | Fairness Perceptions, Price Increases, The Pandemic, Dual Entitlement, Consumer Antagonism |
| JEL: | E31 E70 D90 M31 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:24-03&r=reg |
| By: | Jay Pil Choi (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); 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 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: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04470490&r=reg |
| By: | Hemant Bhargava; Antoine Dubus; David Ronayne; Shiva Shekhar |
| 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 cross-market 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 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10963&r=reg |
| By: | Tianyu Li; Ciwei Gao; Michael G. Pollitt; Tao Chen; Hao Ming |
| Keywords: | Power system reform (PSR), social cost benefit analysis (SCBA), electricity market, industrial and commercial electricity price |
| JEL: | L94 |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:enp:wpaper:eprg2213&r=reg |
| By: | Eric Langlais; Andreea Cosnita-Langlais; Tim Friehe |
| Abstract: | This paper shows how product liability rules influence merger incentives. Consumers’ misperception of product risk critically influences which liability rule induces the strongest merger incentives. When consumers overestimate product risk, merger incentives under negligence and strict liability are similar and weaker than under no liability. When consumers underestimate product risk, merger incentives under negligence are weaker than those under strict liability but stronger than those under no liability. |
| Keywords: | Liability; Merger; Cournot; Market Structure |
| JEL: | K13 L13 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2024-10&r=reg |
| By: | Bantle, Melissa |
| Abstract: | The paper uses a machine learning technique to build up a screen for collusive behavior. Such tools can be applied by competition authorities but also by companies to screen the behavior of their suppliers. The method is applied to the German retail gasoline market to detect anomalous behavior in the price setting of the filling stations. Therefore, the algorithm identifies anomalies in the data-generating process. The results show that various anomalies can be detected with this method. These anomalies in the price setting behavior are then discussed with respect to their implications for the competitiveness of the market. |
| Keywords: | Machine Learning, Cartel Screens, Fuel Retail Market |
| JEL: | C53 K21 L44 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hohdps:285380&r=reg |
| By: | Ebner, André; Westhoff, Christiane |
| Abstract: | We set out a stylised framework for the policies enacted to address the risks posed by systemically important institutions (SIIs) and to counter the too-big-to-fail (TBTF) problem, examining conceptually how far supervisory and resolution policies are complementary or substitutable. The Financial Stability Board (FSB) TBTF reforms comprise (i) a higher loss-absorbing capacity in the form of regulatory capital buffers for SIIs, (ii) more intensive and effective supervision and (iii) a recovery and resolution regime, including sufficient loss-absorbing and recapitalisation capacity in the form of capital and eligible liabilities, to deal with distressed or failing institutions. These reform strands are part of a fundamentally integrated concept, but were largely developed and implemented independently of each other. Therefore, they may fall short of fully taking interdependencies into account, rendering policies less effective and consistent than an integrated approach, which we outline as an alternative. The analysis discusses the regulatory interplay, its implications for policymaking based on the FSB TBTF reforms for banks and its operationalisation in the Basel framework at the global level and in the European Union. JEL Classification: G01, G28, G38 |
| Keywords: | financial regulation, financial stability, going concern, gone concern, macroprudential policy, resolution framework, systemically important institutions, systemic risk, too big to fail |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:srk:srkops:202425&r=reg |
| By: | Pak Hung Au; Mark Whitmeyer |
| Abstract: | We study the ramifications of increased commitment power for information provision in an oligopolistic market with search frictions. Although prices are posted and, therefore, guide search, if firms cannot commit to information provision policies, there is no active search at equilibrium so consumers visit (and purchase from) at most one firm. If firms can guide search by both their prices and information policies, there exists a unique symmetric equilibrium exhibiting price dispersion and active search. Nevertheless, when the market is thin, consumers prefer the former case, which features intense price competition. Firms always prefer the latter. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.11754&r=reg |