|
on Regulation |
| By: | Lancieri, Filippo Maria; Valleti, Tommaso |
| Abstract: | We discuss the design of an effective merger review policy for the 21st century. We argue that the practice of the past decades is inadequate and propose a move towards much stronger rebuttable structural presumptions. These presumptions establish that all mergers above certain thresholds are illegal unless the merging parties can prove that merger-specific efficiencies will be shared with consumers and yield tangible welfare gains. These presumptions are grounded on solid economics and also acknowledge the real-world limitations in enforcement resources and information asymmetries between companies and regulators. We outline how to establish such presumptions in practice, defending the implementation of an ex-ante system that selects in advance (rather than per transaction) which companies and markets are subject to the presumption. Finally, we outline which merger-related efficiencies can rebut the presumption. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:302563 |
| By: | Debasis Mishra; Sanket Patil |
| Abstract: | We study undominated mechanisms with transfers for regulating a monopolist who privately observes the marginal cost of production. We show that in any undominated mechanism, there is a quantity floor, which depends only on the primitives, and the regulator's operation decision is stochastic only if the monopolist produces at the quantity floor. We provide a near-complete characterization of the set of undominated mechanisms and use it to (a) provide a foundation for deterministic mechanisms, (b) show that the efficient mechanism is dominated, and (c) derive a max-min optimal regulatory mechanism. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2408.09473 |
| By: | Martimort, David; Pouyet, Jérôme |
| Abstract: | A retailer may boost demand for a manufacturer’s product through unobservable promotional efforts. Fixed fees cannot be used to freely allocate profit within the vertical structure. When manufacturers have market power, the equilibrium wholesale contract features a retail price below cost together with a rebate for incremental units bought by the retailer when effort has succeeded in boosting sales. Loss leading emerges as an incentive device in such an incomplete contracting scenario. A ban on below-cost pricing leads to a higher retail price and a lower promotional effort. |
| Keywords: | Vertical restraints; loss leading; promotional allowances; below-cost; pricing |
| JEL: | L11 L42 L81 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129692 |
| By: | Eshwar Ram Arunachaleswaran; Natalie Collina; Sampath Kannan; Aaron Roth; Juba Ziani |
| Abstract: | There has been substantial recent concern that pricing algorithms might learn to ``collude.'' Supra-competitive prices can emerge as a Nash equilibrium of repeated pricing games, in which sellers play strategies which threaten to punish their competitors who refuse to support high prices, and these strategies can be automatically learned. In fact, a standard economic intuition is that supra-competitive prices emerge from either the use of threats, or a failure of one party to optimize their payoff. Is this intuition correct? Would preventing threats in algorithmic decision-making prevent supra-competitive prices when sellers are optimizing for their own revenue? No. We show that supra-competitive prices can emerge even when both players are using algorithms which do not encode threats, and which optimize for their own revenue. We study sequential pricing games in which a first mover deploys an algorithm and then a second mover optimizes within the resulting environment. We show that if the first mover deploys any algorithm with a no-regret guarantee, and then the second mover even approximately optimizes within this now static environment, monopoly-like prices arise. The result holds for any no-regret learning algorithm deployed by the first mover and for any pricing policy of the second mover that obtains them profit at least as high as a random pricing would -- and hence the result applies even when the second mover is optimizing only within a space of non-responsive pricing distributions which are incapable of encoding threats. In fact, there exists a set of strategies, neither of which explicitly encode threats that form a Nash equilibrium of the simultaneous pricing game in algorithm space, and lead to near monopoly prices. This suggests that the definition of ``algorithmic collusion'' may need to be expanded, to include strategies without explicitly encoded threats. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.03956 |
| By: | Peter Cramton (University of Maryland & Max Planck Institute for Research on Collective Goods Bonn); Axel Ockenfels (University of Cologne & Max Planck Institute for Research on Collective Goods Bonn) |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkpbs:062 |
| By: | Carlos A. Arango-Arango; Yanneth Rocío Betancourt-García |
| Abstract: | In this paper, we study the coexistence of cash and electronic payments introducing some distortions in the payments markets to understand the widespread use of cash, specially in emerging countries. Following Lagos and Wright (2005) we model explicitly some frictions in the exchange process considering money as essential. We introduce in this theoretical framework, theft and informality (measured by tax evasion), as factors affecting cash usage and, therefore competition with an electronic payment method. In this paper, segmentation in the payments market is considered by introducing heterogeneity in the seller's side, assuming different levels of productivity to explain the preference for cash or for electronic payments. Considering the above, the provision of the electronic payment platform is modeled under three different market structures to identify the effects of the distortions comparing the results with the social planner solution. In the first case, the electronic payment platform is provided by a public firm as a free service; in the second case a private monopoly provides the platform at a positive cost, and in the third case the conditions for the existence of a mixed duopoly are derived. The existence of a public provider in the electronic payments market could lead private networks to provide these services at a lower cost than in the monopoly case, increasing the coverage of digital payments and reducing cash usage, which implies gains in social welfare. This paper gives a theoretical basis and key insights to the discussions regarding public provision of new payment services when the market is already served by private suppliers. **** RESUMEN: Este artículo analiza teóricamente la coexistencia de dos medios de pago, como el efectivo y los pagos electrónicos, considerando algunas distorsiones en el mercado de pagos. Siguiendo a Lagos y Wright (2005), se modelan explícitamente algunas fricciones existentes en el proceso de intercambio. En este marco teórico, que considera al dinero como esencial, se introduce el robo y la informalidad (medida por la evasión fiscal), como factores que afectan el uso de efectivo y, por tanto, la competencia con otro medio de pago. Adicionalmente, se considera la segmentación en el mercado de pagos mediante la heterogeneidad en el lado de los vendedores, suponiendo diferentes niveles de productividad, para explicar la preferencia por el efectivo o por los pagos electrónicos. Los efectos de estas distorsiones se modelan bajo tres estructuras de mercado diferentes en la provisión de los pagos electrónicos, las cuales se comparan con los resultados del planificador social. En el primer caso, la plataforma de pago electrónico es proporcionada por una empresa pública como un servicio gratuito; en el segundo caso, un monopolio privado proporciona la plataforma a un costo positivo, y en el tercer caso se analiza la existencia de un duopolio mixto en la provisión de estos servicios de pago. Se demuestra teóricamente que la existencia de un proveedor público en el mercado de pagos podría llevar a las redes privadas a proporcionar estos servicios a un costo menor que en el caso de un monopolio privado, aumentando la cobertura de los pagos digitales y reduciendo el uso de efectivo, lo que implica ganancias en el bienestar social. Este artículo proporciona una base teórica que puede ayudar a los debates actuales sobre la provisión pública de nuevos servicios de pago cuando el mercado ya cuenta con proveedores privados. |
| Keywords: | Cash, payment methods, payments services, electronic payments, instant payments, Efectivo, medios de pago, instrumentos de pago, servicios de pago, pagos electrónicos, pagos instantáneos, duopolio mixto. |
| JEL: | E40 E41 E42 E44 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:bdr:borrec:1280 |
| By: | Hernán Bejarano (Bureau of Economic and Business Research (BEBR), University of Florida); Pedro Hancevic (Division of Economics, CIDE); Hernán Bejarano (Division of Economics, CIDE) |
| Abstract: | We propose an empirical model to evaluate firms' choices in electric tariff contracting. By combining novel data from the Non-residential Electricity Consumption Survey (ENCENRE) with utility billing data from the national utility company, we analyze two pathological situations revealed by the electric bills of commercial and service SMEs in Aguascalientes, Mexico, during 2019 and 2020. First, despite being banned, many firms pay the residential tariff. Among these firms, some pay the regular subsidized rate, while others pay the high-demand rate, which is higher than the corresponding business rate. Additionally, for another group of companies, there are two competing business tariffs, many of which are misclassified and thus must be re-categorized to afford less expensive electric bills. A rich set of explanatory variables is used to quantify the two biases, explain the wrong decisions, estimate hidden costs and subsidies at the national level, and provide valuable policy implications. |
| Keywords: | tariff misclassification, firm behavior, electricity consumption, self- selection, suboptimal choice, illegal behavior. |
| JEL: | L1 Q4 D22 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:emc:wpaper:dte637 |
| By: | Albrecht, James (Georgetown University); Cai, Xiaoming (Peking University); Gautier, Pieter A. (Vrije Universiteit Amsterdam); Vroman, Susan (Georgetown University) |
| Abstract: | This paper considers competitive search equilibrium in a market for a good whose quality differs across sellers. Each seller knows the quality of the good that he or she is offering for sale, but buyers cannot observe quality directly. We thus have a "market for lemons" with competitive search frictions. In contrast to Akerlof (1970), we prove the existence of a unique equilibrium, which is separating. Higher-quality sellers post higher prices, so price signals quality. The arrival rate of buyers is lower in submarkets with higher prices, but this is less costly for higher-quality sellers given their higher continuation values. For some parameter values, higher-quality sellers post the full-information price; for other values these sellers have to post a higher price to keep lower-quality sellers from mimicking them. In an extension, we show that if sellers compete with auctions, the reserve price can also act as a signal. |
| Keywords: | competitive search, signaling |
| JEL: | C78 D82 D83 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17246 |
| By: | Donna, Javier; Walsh, Anita |
| Abstract: | n 2020, an antitrust lawsuit was filed against the Pork Integrators alleging a §1 Sherman Act violation. At the center of the Lawsuit, there is an alleged exchange of atomistic information about the Pork integrators’ operations using Agri Stats, Inc. as a clearinghouse. We use the Supreme Court benchmark in American Column & Lumber to discuss two questions that arise from the Lawsuit. The first is whether the association of Pork Integrators and Agri Stats, Inc., resulted in the restraint of interstate commerce, the main specific issue at stake in the pork Lawsuit. The second is whether information-exchange agreements using clearinghouses like Agri Stats, Inc., lessen competition and offend U.S. antitrust law, a more general issue beyond the pork Lawsuit. We find that there appears to be ample evidence in the Lawsuit to merit prosecution regarding both trade restraints and information-sharing agreements. We conclude by discussing the role of the Agencies in setting the standards in information-exchange agreements. |
| Keywords: | antitrust, price-fixing, competition, information sharing, cartel, pork industry |
| JEL: | K21 L12 L13 L41 L42 L66 |
| Date: | 2023 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121649 |
| By: | Gianluca Antonecchia (KU Leuven); Ajay Bhaskarabhatla (Erasmus School of Economics); Enrico Pennings (Erasmus School of Economics) |
| Abstract: | This paper develops a novel theory linking quantity discounts to bargaining power in scenarios where retailers, organized as a trade association, negotiate uni- form wholesale prices with suppliers. Our theory predicts that suppliers offer greater quantity discounts in regional markets where they possess relatively less bargaining power, as a counterbalance to the higher national wholesale prices negotiated by the retailer trade association. We test these predictions using detailed product-level data from the Indian pharmaceutical industry, where significant geographic variations in quantity discounts are observed. Our findings provide empirical support for the proposed theory. |
| Keywords: | quantity discounts, bargaining power, pharmaceuticals, India |
| JEL: | L11 L42 D22 |
| Date: | 2024–07–19 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20240048 |
| By: | Fabio Alessandrini (University of Lausanne; Banque Cantonale Vaudoise); Eric Jondeau (University of Lausanne - Faculty of Business and Economics (HEC Lausanne); Swiss Finance Institute); Lou-Salomé Vallée (University of Lausanne and Center for Risk Management Lausanne) |
| Abstract: | This paper presents a comprehensive comparative analysis of various portfolio construction techniques in the context of decarbonization and the pursuit of net-zero objectives aligned with the 2015 Paris Agreement. Specifically, we examine different strategies that qualify as Article 9 funds under EU regulations, focusing on carbon emissions reduction objectives, such as screening and tracking error minimization techniques. Our findings indicate that all approaches would have achieved the targeted emissions reductions over the 10-year period (2012-2021) analyzed. However, the method of decarbonization significantly affects ex-post tracking errors, with the more ambitious Paris-Aligned Benchmark requiring a substantial departure from the business-as-usual benchmark. Additionally, the tracking error minimization approach involves considerable reallocation of individual securities, potentially leading to, possibly undesirable, idiosyncratic exposures. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:chf:rpseri:rp2444 |
| By: | Spiller, Beia (Resources for the Future); Wilwerding, Rachel; Russo, Suzanne (Resources for the Future) |
| Abstract: | Major investments in electric vehicle (EV) charging station networks will be required to support widespread adoption of EVs. Increasing EV adoption can help improve air quality and, in turn, health outcomes, particularly for communities overburdened by transportation pollution. The creation of a widespread public EV charging station network presents new economic and business opportunities. Thus, an opportunity exists for society to leverage expenditures associated with the electric transition, particularly federal infrastructure investments through programs like the Infrastructure Investment and Jobs Act (IIJA), to improve equity outcomes for communities and households that have been overburdened by transportation pollution due to compounding inequities and structural racism across society. We provide a framework (developed through a literature review and interviews with community-based and non-governmental organizations, EV charging station companies, utilities, and leading researchers) for understanding how charging station investments in urban areas could help reduce existing inequities or may inadvertently exacerbate inequities if a careful approach is not taken. |
| Date: | 2024–08–29 |
| URL: | https://d.repec.org/n?u=RePEc:rff:dpaper:dp-24-14 |
| By: | Gibbons, Stephen; Heblich, Stephan; Pinchbeck, Edward W. |
| Abstract: | This paper investigates the reversibility of the effects of transport infrastructure investments, based on a programme that removed much of the rail network in Britain during the mid-20ℎ century. We find that a 10% loss in rail access between 1950 and 1980 caused a persistent 3% decline in local population relative to unaffected areas, implying that the 1 in 5 places most exposed to the cuts saw 24 percentage points less population growth than the 1 in 5 places that were least exposed. The cuts reduced local jobs and shares of skilled workers and young people. |
| Keywords: | rail; infrastructure; beeching cuts |
| JEL: | H54 R10 R40 N74 |
| Date: | 2024–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:124531 |
| By: | David K Levine |
| Date: | 2024–11–08 |
| URL: | https://d.repec.org/n?u=RePEc:cla:levarc:11694000000000190 |
| By: | Marjolijn Moens; Eliana Barrenho; Valérie Paris |
| Abstract: | In recent years, the call for transparency in pharmaceutical pricing has gained momentum among policymakers and stakeholders. Following a resolution of the 72nd World Health Assembly and the establishment of the Oslo Medicines Initiative, there has been a concerted push for greater transparency in pricing practices. However, the exact scope of transparency measures remains unclear. Key questions persist regarding which prices and for which medicines should be disclosed, the conditions under which countries are willing to share this information, and the barriers hindering such efforts. To clarify these issues and advance the policy debate, the OECD examined the feasibility of sharing medicine price information across countries. A country survey was conducted to explore the willingness, expectations, and motives of governments and payers for sharing information on medicine prices. This report presents the key findings derived from the survey and concludes with an assessment of the feasibility of sharing net medicine price information among OECD countries. |
| JEL: | F6 H51 H57 I11 I18 K12 K23 K32 L1 L65 |
| Date: | 2024–09–11 |
| URL: | https://d.repec.org/n?u=RePEc:oec:elsaad:171-en |
| By: | Andrew Koh; Sivakorn Sanguanmoo |
| Abstract: | We analyze how uncertain technologies should be robustly regulated. An agent develops a new technology and, while privately learning about its harms and benefits, continually chooses whether to continue development. A principal, uncertain about what the agent might learn, chooses among dynamic mechanisms (e.g., paths of taxes or subsidies) to influence the agent's choices in different states. We show that learning robust mechanisms -- those which deliver the highest payoff guarantee across all learning processes -- are simple and resemble `regulatory sandboxes' consisting of zero marginal tax on R&D which keeps the agent maximally sensitive to new information up to a hard quota, upon which the agent turns maximally insensitive. Robustness is important: we characterize the worst-case learning process under non-robust mechanisms and show that they induce growing but weak optimism which can deliver unboundedly poor principal payoffs; hard quotas safeguard against this. If the regulator also learns, adaptive hard quotas are robustly optimal which highlights the importance of expertise in regulation. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2408.17398 |
| By: | Jule Hodok; Tomasz Kozluk |
| Abstract: | This report reviews the literature on the distributional consequences of climate change and mitigation and transition pathways. The heterogeneous levels of exposure and vulnerability to climate change across countries, regions, households, and workers hint at the significant distributional costs of inaction. Climate policies will likely trigger a reallocation from “high-polluting” sectors to “green” sectors, disproportionately affecting certain regions and low-skilled workers. Price-based policies, such as carbon taxation, show varied effects across countries: they tend to be more regressive in developed countries and more progressive in developing countries where energy affordability and energy poverty are major concerns. Non-market-based policies are often regressive and can result in equity issues. Effective climate action requires balancing distributional outcomes, ensuring political acceptability, and understanding the link between policy perceptions and support. |
| Keywords: | climate change, distributional impacts, environmental policy, inequality |
| JEL: | D30 H23 J23 Q52 Q58 |
| Date: | 2024–09–05 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ecoaaa:1820-en |