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on Regulation |
| By: | OECD |
| Abstract: | This paper covers the interactions between competition authorities and sector regulators, formally and in practice, in the most frequent situation when the competition authority is a stand-alone body that enforces competition law in all sectors. In addition, it focuses on enforcement cases, describing procedural set-ups and the interplay of competition and regulation in these cases. It was prepared as background material for a discussion on the topic held during the 2022 OECD Global Forum on Competition. |
| Date: | 2022–10–25 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:285-en |
| By: | Michael G Pollitt |
| Keywords: | Optimal tax theory, road user charges, energy taxation, electricity reform |
| JEL: | H21 R48 Q48 L94 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2409 |
| By: | Michael G Pollitt |
| Keywords: | Incentive regulation, vertical integration, emissions markets, electricity liberalisation |
| JEL: | L43 L51 Q53 Q54 L94 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2410 |
| By: | Michael G Pollitt; Daniel Duma; Andrei Covatariu |
| Keywords: | Uncertainty, energy regulation, net zero |
| JEL: | L51 L94 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2411 |
| By: | Bobtcheff, Catherine; De Donder, Philippe; Salanié, François |
| Abstract: | We set up a static model of electricity provision in which delivery to consumers is only imperfectly reliable. Blackouts can be either rolling or systemic; in both cases a price cap has to be imposed on the wholesale market. We characterize optimal allocations and we show that for any given value of the price cap on the wholesale market, one can decentralize these allocations thanks to two types of regulatory instruments: a retail tax, and capacity subsidies. Some properties follow. If demand is affected by multiplicative shocks only, capacity subsidies are exactly financed by the revenues from the retail tax. If moreover the distribution of systemic blackouts is exogenous, a price cap is sufficient, provided it is set at the value of lost load. In all other cases, all instruments are needed, and capacity subsidies need to be differentiated, based on the correlation between available capacity and its social value. |
| Keywords: | Electricity; Reliability; Renewables; Climate Change |
| JEL: | D24 Q41 Q42 Q48 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129615 |
| By: | OECD |
| Abstract: | This paper explores the longer- and shorter-term challenges of the energy markets and their competition policy implications. It considers why wholesale natural gas and electricity prices have risen so much and the public policy responses to high energy prices. It was prepared as a background note for discussions on “Competition in Energy Markets” held at the November 2022 session of the OECD Competition Committee’s Working Party No. 2 on Competition and Regulation. |
| Date: | 2022–11–24 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:290-en |
| By: | Duradi, Ali; Weigt, Hannes (University of Basel) |
| Abstract: | The electricity sector plays a key role in achieving zero-emission targets. The required transition will lead to substantial changes in the supply, demand, and distribution of electricity but also in stakeholder roles. Future market designs may change substantially to accommodate these changes, address challenges, and take advantage of new opportunities. This paper reviews the characteristics of future carbon-neutral electricity systems and electricity market design options. To provide a guiding framework for the literature review, we transfer the complexity of electricity systems into a three-layer structure: firstly, we analyze the papers that rely on techno-economic modeling of the physical electricity system. As a case study, we analyze various studies focusing on a decarbonized European electricity system in 2050. Secondly, we review papers that investigates the economic behavior and effects of self interest-seeking stakeholderssuch as producers, network operators, and consumers. Finally, we review papers focusing on policy and market design questions that guide policymakers to achieve a target physical asset combination while considering the behavior of stakeholders. We highlight common trends and disagreements in the literature, review the main drivers of future markets, and finally provide a mapping between those drivers, challenges, and opportunities. The review concludes that the most promising next step toward a fully comprehensive assessment approach is to combine the existing approaches across topical and disciplinary boundaries. |
| JEL: | L94 Q4 |
| Date: | 2024–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:bsl:wpaper:2024/06 |
| By: | Franziska Flachsbarth; Anna Pechan; Martin Palovic; Matthias Koch; Dierk Bauknecht; Gert Brunekreeft |
| Abstract: | The electricity grid includes multiple network areas managed by different operators, with transmission system operators (TSOs) handling high-voltage areas and distribution system operators managing mid- to low-voltage areas. These areas are interconnected and synchronized, creating classical external effects where one operator's actions impact others. Recently, high voltage direct current (HVDC) lines have been introduced, offering operators greater flexibility and control over power flows compared to conventional alternating current (AC) lines, thereby reducing congestion and losses. However, HVDC lines can significantly affect neighbouring grids, potentially leading to strategic behaviour by network operators. This paper examines the strategic use of HVDC lines, using a model-based approach on projected 2030 market data in the German electricity system. It finds that without explicit coordination mechanisms most hours result in incentives for non-cooperative outcomes, with only three hours within one year showing incentives for a cooperative outcome. Despite lower overall system costs with cooperation, asymmetric distribution of cooperation benefits prevents long-term cooperation. Thus, cost-revenue- sharing schemes are needed to promote cooperation and balance benefits. |
| Keywords: | TSO coordination, strategic behaviour, game theory, simulation |
| JEL: | L51 L94 L43 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bei:00bewp:0048 |
| By: | Mats Kröger |
| Abstract: | Public support systems and private investments in renewable energy are increasingly existing side-by-side and are both emphasized in policy proposals on the European and national levels. This paper assesses the interaction between the two approaches with respect to cream-skimming, i.e., the potential for low-cost projects to sign private contracts that increase the costs of publicly supported renewable energy. This paper uses a stylized microeconomic model and a numerical simulation to assess this question. It finds that the incentive to cream-skimming exists when governments employ any form of resource differentiation in their renewable energy contracts. The numerical analysis shows that, at current price levels, cream-skimming could increase power prices by 2-6% depending on the PPA’s mark-up. The effect is larger for a wider cost-distribution of renewable energy projects, which might occur as the energy transition proceeds. |
| Keywords: | Climate policy, renewable energy, distributional consequences, creamskimming, contracts for differences |
| JEL: | D44 Q42 Q48 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2092 |
| By: | Javier Donna (University of Florida); Pedro Pereira (Autoridade da Concorrência, Lisbon) |
| Abstract: | The 2023 Merger Guidelines (MGs) change the Agencies’ narrative regarding non-horizontal mergers. They follow a four-pronged approach: (1) They blend horizontal and non-horizontal mergers. (2) They simplify the narrative about non-horizontal mergers. (3) They consolidate and broaden the theories of harm in non-horizontal mergers. (4) They blend economics and law analysis. In this article, we elaborate on these points. We discuss how the MGs’ anticompetitive presumptions apply to non-horizontal mergers, relate them to the economics literature, and provide examples. We finish discussing the economic rationale of the structural presumption involving rivals’ exit concerns due to the exercise of market power and propose a path forward. |
| Keywords: | Antitrust, 2023 Merger Guidelines, Vertical Mergers, Rivals’ Exit, Double Marginalization, Merger Evaluation, Competition Policy |
| JEL: | K21 K41 L42 L44 L52 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:331 |
| By: | Hannes Ullrich; Jonas Hannane; Christian Peukert; Luis Aguiar; Tomaso Duso |
| Abstract: | Tracking online user behavior is essential for targeted advertising and is at the heart of the business model of major online platforms. We analyze tracker-specific web browsing data to show how the prediction quality of consumer profiles varies with data size and scope. We find decreasing returns to the number of observed users and tracked websites. However, prediction quality increases considerably when web browsing data can be combined with demographic data. We show that Google, Facebook, and Amazon, which can combine such data at scale via their digital ecosystems, may thus attenuate the impact of regulatory interventions such as the GDPR. In this light, even with decreasing returns to data small firms can be prevented from catching up with these large incumbents. We document that proposed data-sharing provisions may level the playing field concerning the prediction quality of consumer profiles. |
| Keywords: | Prediction quality, Web Tracking, Cookies, Data protection, Competition Policy, Internet Regulation, GDPR |
| JEL: | C53 D22 D43 K21 L13 L4 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2091 |
| By: | Paolo Bertoletti; Federico Etro |
| Abstract: | We study entry in markets with monopolistic competition under quasi-linear preferences, with homogeneous and heterogeneous firms. For common demand systems with a price aggregator that is a demand shifter, we show that entry tends to be insufficient: namely that, given market pricing, the business stealing effect of entry cannot dominate the consumer surplus effect. We then identify preferences that deliver efficient production and selection of firms (including the isoelastic demand case), confirming the insufficient entry result also compared to first-best allocations, and discuss a specification (which includes the Logit case) that also delivers efficient entry. Finally, we introduce more general quasi-linear preferences (nesting those of Spence, Melitz-Ottaviano and other cases) that generate flexible demand systems depending on a price aggregator. In this framework, we show that competitive effects of entry on prices actually strengthen the case for insufficient entry, and discuss conditions for its emergence. |
| Keywords: | Entry, Monopolistic competition, Business stealing, Heterogeneous |
| JEL: | D11 D43 L11 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:mib:wpaper:543 |
| By: | OECD |
| Abstract: | By mapping theories of harm that have been applied in recent digital merger cases and considering the analyses that have already been undertaken, this note explores the question of whether existing theories of harm are well suited or should be further adapted to comprehensively capture competitive harms arising from mergers in these markets. Or alternatively, whether new theories of harms are needed and if so, what they might look like. It was prepared as a background note for discussions on “Theories of Harm for Digital Mergers” taking place at the June 2023 session of the OECD Competition Committee. |
| Date: | 2023–05–03 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:293-en |
| By: | Tomaso Duso; Lea Bernhardt; Joanna Piechucka |
| Abstract: | We discuss the main Theories of Harm in EU merger control and their evolution since the 1990s. We present stylised facts and trends using data extracted from EU merger decisions by natural language processing tools. EU merger policy has adapted over time, both in terms of legislation and theories of harm, as well as in terms of the investigative tools and evidence used. The introduction of the new Merger Regulation in 2004, which led to a change in the substantive test, also brought about significant changes in the use of Theories of Harm. Unilateral theories are now used more frequently and have developed further, in particular in relation to the assessment of closeness of competition. Non-horizontal conglomerate and vertical Theories of Harm focusing on foreclosure issues are now much more common and are a standard tool in most in-depth investigations. More novel Theories of Harm related to innovation and digital markets have been developed and implemented since the 2010’s. While market shares remain a central tool for merger assessment, the use of internal documents has increased, accompanied by the use of quantitative tools. With respect to Commission interventions, structural remedies are used more frequently, although behavioural remedies are also increasingly deployed, especially in Phase II. |
| Keywords: | Merger control, theories of harm, unilateral effects, coordinated effects, non-horizontal effects, foreclosure, innovation, ecosystem, digital, market shares, internal documents, structural remedies, behavioural remedies |
| JEL: | K21 L40 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2090 |
| By: | OECD |
| Abstract: | Fighting poverty remains a top priority and a key challenge to many countries including in Latin America and the Caribbean (LAC). Although LAC countries have strengthened their competition policy in the past decade, poverty has increased in the region, mostly as effect of the recession which followed the Covid-19 pandemic. Given these factual circumstances, it seems relevant to address the role of competition policy in poverty reduction, including the question on how competition authorities can contribute to fighting poverty. This background note highlights the main issues regarding the role competition authorities can play in fighting poverty. For this purpose, it presents the interplay between competition policy and poverty reduction, then focuses on the role of competition authorities from both the enforcement and the advocacy perspectives. The final remarks point that competition authorities may help a broader policy to reduce poverty, particularly by prioritising its work to markets that have a greater impact on the poorest (e.g. markets of essential goods and services).This note was prepared as a background note for a discussion held on the topic during the 2023 OECD-IDB Latin American and Caribbean Competition Forum held in September 2023 in Ecuador. |
| Date: | 2023–05–03 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:292-en |
| By: | OECD |
| Abstract: | This background note considers how competition contributes to lower inflation, despite its unsuitability as a short-term anti-inflationary tool. It explains why competition is important for optimal inflation and summarises some of the empirical evidence of this relationship. It then considers how inflation affects competition, for example by creating conditions for firms to coordinate or by increasing the search costs of consumers. It was prepared as a background note for discussions on “Competition and Inflation” taking place at the November 2022 session of the OECD Competition Committee. |
| Date: | 2022–10–26 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:286-en |
| By: | OECD |
| Abstract: | Data screening tools in competition investigations are empirical methods that use datasets to evaluate markets and firms’ behaviour in them, identify patterns and draw conclusions based on specific tested parameters. This paper focuses on screens aimed at detecting cartels, as these are by far the most prevalent. It was prepared for discussions on “Data Screening Tools for Competition Investigations” held at the November 2022 session of the OECD Competition Committee’s Working Party No. 3 on Co-operation and Enforcement. |
| Date: | 2022–10–18 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:284-en |
| By: | Gambato, Jacopo; Sandrini, Luca |
| Abstract: | In this study, we analyze the incentives of a streaming platform to bias consumption when products are vertically differentiated. The platform offers mixed bundles of content to monetize consumer interest in variety and pays royalties to sellers based on the effective consumption of the generated content. When products are not vertically differentiated, the platform has no incentive to bias consumption in equilibrium. With vertical differentiation, royalties can differ, and the platform biases recommendations in favor of the cheapest content, hurting consumers and high-quality sellers. Biased recommendations, if unconstrained, eliminate sellers' incentives to increase the quality of their content, but if constrained, may lead to the inefficient allocation of R&D efforts. |
| Keywords: | platform economics, media economics, content aggregator, recommendation bias, innovation |
| JEL: | D4 L1 L5 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:300272 |
| By: | Sandrini, Luca; Somogyi, Robert |
| Abstract: | We build a model of the news market where advertisers allocate their ads between a social media platform and a news website. Our objective is to evaluate policy interventions aimed at fostering news creation by transferring revenues from social media to news websites already introduced in Australia, Canada, and Indonesia). We show that social media may voluntarily contribute to news development, but only suboptimally. Beyond a certain level of state-mandated transfer, the social media platform can credibly threaten to remove news content. We provide some guidance on how to design a policy that improves welfare by promoting news creation. |
| Keywords: | social media, news quality, platform regulation, news media bargaining code, online advertising |
| JEL: | D43 D62 L13 L51 M37 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:300268 |
| By: | Jason Allen; Michael Boutros; Benedict Guttman-Kenney |
| Abstract: | We study a government policy that restricts repayment choices with the aim of reducing credit card debt. The policy requires the minimum payment on credit card balances in Quebec to be at least 2% of the statement balance for cards opened before August 2019 and at least 5% for cards opened after August 2019. The rest of Canada is unaffected. We estimate this policy’s effects by applying a difference-in-differences methodology to comprehensive, Canadian consumer credit-reporting data. The policy causes a persistent increase in minimum payments. The policy has trade-offs: reducing revolving debt comes at a cost of reducing credit access, and potentially increasing delinquency. |
| Keywords: | Credit and credit aggregates; Financial system regulation and policies |
| JEL: | D18 E21 G28 G51 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:24-26 |
| By: | OECD |
| Abstract: | This note was prepared as a background note for a discussion held on the topic during the 2023 OECD-IDB Latin American and Caribbean Competition Forum held in September 2023 in Ecuador. |
| Date: | 2023–05–05 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:306-en |
| By: | Paul Heidhues (Heinrich Heine University Düsseldorf); Mats Kösters (Central European University, Vienna); Botond Kőszegi (University of Bonn) |
| Abstract: | We develop a model of digital ecosystems based on the assumption that a multimarket firm can use a sale in or data from one market to steer users toward its products in other markets. Due to this “cross-market leverage, ” a market leader at an “access point” (where users begin their online journeys) has a high value from offering services in connected markets (where users continue their journeys), and can thus make profitable takeovers. Indeed, because the firm has the threatening outside option of acquiring, and steering users toward, its target’s competitor, it can take over the target at a discount. In contrast, other firms have no or smaller incentives for takeovers, explaining why ecosystems grow out of market leaders at access points. Conversely, cross-market leverage also implies that once an ecosystem has grown, it has an increased value of controlling access points, so it may go to great lengths to dominate these markets. Our theory’s logic suggests that ecosystems have mixed implications for consumer welfare. Under plausible assumptions, a to-be ecosystem takes over market leaders, and this consolidation of good services across markets benefits consumers in the short run. But an ecosystem’s takeovers and dominance of access points lower incentives for entry and innovation, and lower the efficiency of access-point markets with superior alternatives. Hence, the long-run welfare implications of ecosystem growth are often negative. |
| Keywords: | Digital ecosystems, takeover, contestability, entry, envelopment, default effects, steering |
| JEL: | L41 L86 L22 D43 D83 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:329 |
| By: | Joshua Budlender |
| Abstract: | South Africa frequently experiences rolling blackouts ('load shedding') due to shortfalls in electricity generation. This is a common problem across the developing world, and yet the developmental impacts of insufficient and unstable electricity supply, and the benefits of mitigating this, are poorly understood. I use the introduction of a unique load shedding reduction policy in parts of South Africa's second-largest city, Cape Town, to investigate the mortality effects of load shedding and its mitigation. |
| Keywords: | Electricity, Mortality, Synthetic control method, South Africa |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:unu:wpaper:wp-2024-44 |