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on Regulation |
| By: | Davi-Arderius, Daniel (University of Barcelona); Jamasb, Tooraj (Department of Economics, Copenhagen Business School) |
| Abstract: | With the increasing participation of renewable sources, prices of energy commodity in the day-ahead markets have been decreasing and in increasing number of hours to zero or even negative prices. However, in hours with prices and charges equal or below zero, end-users may still pay significant prices for the ‘free’ electricity, which presents a paradox. This paper analyses the zero-negative price paradox in a highly decarbonized electricity market. We use Seasonal ARIMA methods with hourly data from the Spanish power system (2021-2024). We find that non-energy system costs increase when day-ahead prices decrease. Thus, customers do not receive efficient price signals to adjust their consumption when more renewables are available. In other words, some benefits of lower prices seem to be traded-off with this “price paradox”. Similar results can be anticipated in other countries with increasing share of renewables. Future studies of welfare impact of electricity prices should consider how to minimize these increasing non-energy costs. |
| Keywords: | Energy-only market; Day-ahead electricity markets; Negative prices; Renewables; Decarbonization; Ancillary services |
| JEL: | L10 L50 L94 Q41 |
| Date: | 2024–08–17 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:cbsnow:2024_013 |
| By: | Arnab Bhattacharjee; Max Mosley; Adrian Pabst |
| Abstract: | Transforming the single point Energy Price Cap into a variable (or sliding) price cap where the price per unit of energy used increases with usage would help solving the cost-of-living crisis, according to latest research by the National Institute of Economic and Social Research (NIESR). The effect of such sliding price cap would be to reduce energy bills for lower-income households in the country while higher earners, who consume more energy, bear a commensurate share of the higher costs. As energy use is strongly correlated with household income, making units of energy more expensive for those who use it the most affects higher-income households while making usage cheaper for lower-income households. When compared to other policy proposals – specifically freezing energy bills – our proposal has a number of advantages. First of all, it is more cost effective as freezing energy bills has been predicted to cost around £100bn over the winter period. Although there is evidence to suggest that such a substantial approach is affordable, we propose a way to achieve the same goal without such a cost to the Exchequer and ultimately the taxpayer. |
| Date: | 2022–09 |
| URL: | https://d.repec.org/n?u=RePEc:nsr:niesrp:34 |
| By: | Pollitt, M. G.; Duma, D.; Covatariu, A. |
| Abstract: | In this paper we focus on suggestions on how energy regulation needs to change in the light of the likely ongoing and possibly increasing uncertainty which the path to net zero involves. We argue that there are things that regulators can do in the circumstances (and that their governments could encourage them to do). We begin with a discussion of the uncertainty problem of regulation on the path to net zero. Next, we consider what regulation for net zero should focus on. We then move on to the role of regulation within the national governance system for the energy sector. After this we outline how best practice regulation should evolve in the light of both theory and experience. Theories of regulation suggest key roles for both learning and for trade-offs in regulation. We advocate for the development of a ‘learning regulator’ which simultaneously learns from the past (dynamic regulation), in the present (responsive regulation) and anticipates future learning points (adaptive regulation). While current best practice regulation involves the first two types of learning, the third remains a work in progress. Finally, we introduce some possible regulatory lessons from other sectors, namely water, autonomous vehicles and airports. |
| Keywords: | Uncertainty, energy regulation, net zero |
| JEL: | L51 L94 |
| Date: | 2024–07–15 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2444 |
| By: | Navarra, Federico; Pino, Flavio; Sandrini, Luca |
| Abstract: | We study a hybrid marketplace where a vertically integrated platform competes with a seller in a horizontally differentiated downstream market. The platform has a data advantage and can price discriminate consumers, whereas the seller cannot. Our analysis shows that, by properly setting the per-unit transaction fee, the platform can always avoid head-to-head competition with the seller, regardless of the level of horizontal differentiation. Mandating data-sharing, which allows the seller to also price discriminate, does not seem to solve this problem and, in fact, aggravates it further, generally benefiting the platform. The seller is better off only if it is less efficient than the platform, whereas consumers are worse off. We propose that preventing the platform from adjusting the fee after the data-sharing mandate is not enough to reinstate competition in the downstream market. We then show that banning the hybrid business model and forbidding the use of data for price discrimination increase consumer surplus, even if the seller becomes a monopolist. In other words, we propose that the harm to competition comes from the platform's business model rather than from its information advantage. |
| Keywords: | hybrid platforms, data-sharing, vertical integration, price discrimination |
| JEL: | D42 L12 L41 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:300680 |
| By: | Paul S. Koh |
| Abstract: | Antitrust authorities routinely rely on concentration measures to evaluate the potential negative impacts of mergers. Using a first-order approximation argument with logit and CES demand, I show that the welfare effect of a merger on consumer surplus is proportional to the change in the Herfindahl-Hirschman index, where the proportionality coefficient depends on price responsiveness parameter, market size, and the distribution of merging firms' shares. This paper elucidates how HHI measures inform the market power effects of mergers. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.12924 |
| 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 L40 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11240 |
| By: | Braithwaite, Jo |
| Abstract: | Authorised Push Payment (APP) fraud occurs where bank customers are tricked into transferring money from their account. As this article shows, this type of fraud is a growing threat, catalysed by the rise of remote banking. However, long-standing legal and regulatory rules leave most victims without a route to redress, as recently confirmed by the UK Supreme Court’s 2023 decision in Philipp v Barclays. Through this lens, the article examines a new and ‘world first’ UK regulatory response, which includes a mandatory reimbursement scheme for APP fraud victims in certain circumstances. The article finds that the UK’s new loss allocation scheme is valuable, but also that its specific coverage is problematic given the broad nature of this threat. Overall, the article argues that the priority for UK regulators should be to develop a more ‘joined-up’ response to APP fraud, and it offers generally applicable insights into effective regulatory responses to this evolving threat. |
| Keywords: | APP fraud; banks; banking; Quincecare; payments; payment infrastructure; OUP deal |
| JEL: | K22 G28 G21 |
| Date: | 2024–07–18 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:123798 |
| By: | Alistair Milne |
| Abstract: | Supply disruptions, in particular the reduced supply of gas following the Russian invasion of Ukraine, has triggered the major energy crisis across all of Europe. This threatens a severe economic downturn with substantially reduced real incomes, widespread business closures and – especially in the UK with its heavy reliance on natural gas for domestic heating – many households pushed into 'fuel poverty', choosing between adequate nutrition and heating for their homes. This note discusses the economic mechanisms driving this crisis and the policy tools available to address it. The principal message is that in a crisis such as this quantities matter. The new UK government is introducing a near complete suspension of price mechanism in domestic energy markets, freezing both household and wholesale prices. Government across Europe will take similar measures. These seem necessary to protect households and businesses. But they are only sticky plasters. There is a near-binding constraint on the overall supply of gas in Europe. Without prices allocating supply, further measures are needed to decide who gets how much gas. So, the policy response must address quantities, turning to administrative management of the physical flows of gas, to secure supply and reduce demand (through public appeal, voluntary proposed consumption reductions and where unavoidable rationing). In practical terms this means, going beyond the price caps (i) negotiating, bilaterally, with Norway as the principal supplier of gas to Europe to ensure energy security, obtaining allocations of gas at below elevated wholesale market prices; and (ii) within the resulting envelope of supply, implement standing plans e.g. in the UK those of BEIS and the National Grid, for allocating limited energy resources in a supply crisis. From the policies announced and discussed so far it appears that the UK government, and its counterparts across Europe, believe that the physical deficit of energy in Europe can be closed by spending unlimited amounts of money. But the underlying problem is a shortage of physical supply. Spending more money, without controlling quantity, drives prices ever higher. This policy stance is reminiscent of the Major government in Black Wednesday 1992. Like that policy it is not sustainable. Turning to administrative management of the quantities of gas deals directly with the supply deficit and will bring the cost of energy closer to normal levels. This is not without economic costs. Low priority consumers will consume less gas than they would like to purchase. Imports of liquid natural gas LNG must still be paid for at a premium price. But much less money than currently announced is needed for protecting households and businesses. No need to burden the taxpayer. |
| Date: | 2022–09 |
| URL: | https://d.repec.org/n?u=RePEc:nsr:niesrp:35 |
| By: | Kangle Mu; Zongyun Xie; Igor Kadota; Randall Berry |
| Abstract: | With the increasing demand for wireless services, spectrum management agencies and service providers (SPs) are seeking more flexible mechanisms for spectrum sharing to accommodate this growth. Such mechanisms impact the market dynamics of competitive SPs. Prior market models of spectrum sharing largely focus on scenarios where competing SPs had identical coverage areas. We depart from this and consider a scenario in which two competing SPs have overlapping but distinct coverage areas. We study the resulting competition using a Cournot model. Our findings reveal that with limited shared bandwidth, SPs might avoid overlapping areas to prevent potential losses due to interference. Sometimes SPs can strategically cooperate by agreeing not to provide service in the overlapping areas and, surprisingly, customers might also benefit from such cooperation under certain circumstances. Overall, market outcomes exhibit complex behaviors that are influenced by the sizes of coverage areas and the bandwidth of the shared spectrum. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.20909 |
| By: | Kai A. Konrad |
| Abstract: | Three regimes of technology leadership are compared. Firstly, technological innovation in a unipolar world with one dominant coun try that can sell its technology to a set of small countries. Secondly, competition for leadership between two large countries, with small countries that are independent. Thirdly, a decoupled world in which all small countries are allied with one or the other big country. Small nations fare best when they are independent and large nations engage in leadership competition. Great power nations prefer unipolar leader ship. If there are two big nations, they prefer a decoupled world that is partitioned into zones of ináuence, compared to competing with each other. |
| Keywords: | US-China conáict, technology war, technology dominance, unipolar leadership: bipolar competition, decoupling |
| URL: | https://d.repec.org/n?u=RePEc:mpi:wpaper:tax-mpg-rps-2023-12 |
| By: | Welker, Carl B. |
| Abstract: | Since the first bitcoins were mined in 2009, a large number of blockchains and a vast number of different tokens have been created on the basis of distributed ledger technologies (DLT). The Web3 ecotope, with its essential characteristics such as decentralized transactions and anonymity, is functioning and is preparing to attract billions of dollars in further demand and absorb investor funds. For companies that want to become active on the web3, there is also the question of a generally applicable and enforceable legal framework that covers the most diverse fields of application of the token economy, blockchains with their smart contracts, tokens as universally usable economic objects, token emissions and token trading. A DLT Act was enacted for the first time in the Principality of Liechtenstein in 2019: The "Token- und VTDienstleister-Gesetz" (TVTG, Token and DLT Service Provider Act). In 2023, the EU followed suit with Regulation (EU) 2023/1114 "Markets in Crypto-Assets Regulation, MiCAR" as a template for legislative amendments in all EEA countries. This discussion paper examines the aforementioned laws in terms of how they reflect new Web3 realities, whether they are suitable in terms of their objectives and approach to promote new digital markets and how tokens are understood as legal objects. |
| Keywords: | Web3, Distributed Ledger Technologies, Blockchain, Tokenization, Regulation |
| JEL: | G18 G20 K22 K23 K24 L26 M13 O32 O33 O35 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iubhbm:301160 |
| By: | Suguru Otani |
| Abstract: | I investigate how explicit cartels, known as ``shipping conferences", in a global container shipping market facilitated the formation of one of the largest globally integrated markets through entry, exit, and shipbuilding investment of shipping firms. Using a novel data, I develop and construct a structural model and find that the cartels shifted shipping prices by 20-50\% and encouraged firms' entry and investment. In the counterfactual, I find that cartels would increase producer surplus while slightly decreasing consumer surplus, then may increase social welfare by encouraging firms' entry and shipbuilding investment. This would validate industry policies controlling prices and quantities in the early stage of the new industry, which may not be always harmful. Investigating hypothetical allocation rules supporting large or small firms, I find that the actual rule based on tonnage shares is the best to maximize social welfare. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.15147 |
| By: | Thiemo Fetzer |
| Abstract: | In response to the energy crisis amidst a wider cost of living crisis (see Harari et al, 2022), the UK government put in place the Energy Price Guarantee (EPG) on 8 Sept 2022, which caps the unit price of energy for all consumers. This policy is now, following a statement by the new Chancellor Jeremy Hunt on 17 Oct 2022, due to remain in place until April 2023 after which new longer-term policies for supporting consumers will be considered. In advance of the Medium-Term Fiscal Plan, set for 31 October, this briefing outlines the main shortcomings of the EPG and proposes alternative measures to address these issues. |
| Date: | 2022–10 |
| URL: | https://d.repec.org/n?u=RePEc:nsr:niesrp:36 |
| By: | Fausto Hern\'andez Trillo; C. Vladimir Rodr\'iguez-Caballero; Daniel Ventosa-Santaul\`aria |
| Abstract: | This paper posits the decline in market capitalization following a monopoly breakup serves as a means to gauge how financial markets assess market power. Our research, which employs univariate structural time series models to estimate the firm's value without the breakup and juxtapose it with actual post-divestiture values, reveals a staggering drop in AT&T's value by 65% and AMX's by 32% from their pre-breakup levels. These findings underscore the contemporary valuation of monopoly rents as perceived by financial markets, highlighting the significant impact of monopoly breakup on market capitalization and the need for a deeper understanding of these dynamics. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.09695 |
| By: | Ferreira, Daniel; Li, Jin; Nikolowa, Radoslawa |
| Abstract: | We develop a theory of blockchain governance. In our model, the proof-of-work system, the most common set of rules for validating transactions in blockchains, creates an industrial ecosystem with specialized suppliers of goods and services. We analyze the interactions between blockchain governance and the market structure of the industries in the blockchain ecosystem. We show that the proof-of-work system may lead to a situation in which some large firms in the blockchain industrial ecosystem—blockchain conglomerates—capture the governance of the blockchain. |
| Keywords: | governance; blockchain conglomerates; industrial ecosystem; proof-of-work |
| JEL: | G30 L13 M20 |
| Date: | 2023–04–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:115618 |
| By: | Paul S. Koh |
| Abstract: | Market definition holds significant importance in antitrust cases, yet achieving consensus on the correct approach remains elusive. As a result, analysts routinely entertain multiple market definitions to ensure the resilience of their conclusions. I propose a simple framework for conducting organized sensitivity analysis with respect to market definition. I model candidate market definitions as partially ordered and use a Hasse diagram, a directed acyclic graph representing a finite partial order, to summarize the sensitivity analysis. I use the Shapley value and the Shapley-Shubik power index to quantify the average marginal contribution of each firm in driving the conclusion. I illustrate the method's usefulness with an application to the Albertsons/Safeway (2015) merger. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.12774 |