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on Regulation |
| By: | Crampes, Claude; Renault, Jérôme |
| Abstract: | Electricity is consumed continuously night and day and is not storable at large scale. Consequently, in an electricity industry organized and managed efficiently, demand should be tightly responsive to time-varying prices. We explore the consequences of the limited ability of electricity consumers to use price signals in their decisions to withdraw energy from the grid and the advantages of an assistance service that can correct this bias. Depending on the statistical distribution of price misperception types, we determine the allocation of assistance that allows to decrease total consumption and the outcome of different market structures. Because of the impossibility of distinguishing between consumers who underestimate and those who overestimate electricity prices, we show that it may be suboptimal to organize a market for assistance. We also show that it is less efficient to rely on a private integrated monopoly than on two separate private monopolies, one for assistance, the other for energy. |
| JEL: | C72 D24 D47 L23 L94 |
| Date: | 2025–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130188 |
| By: | NAKAISHI Tomoaki; YOO Sunbin; KUMAGAI Junya; MANAGI Shunsuke |
| Abstract: | The adoption of residential solar photovoltaic (PV) systems is widely regarded as a critical measure to mitigate global warming by reducing carbon emissions and supporting a shift toward renewable energy. However, the broader impact of residential solar PV on household consumption behaviors remains underexplored. This study investigates the effects of residential solar PV adoption on household electricity consumption, with a focus on the mediating roles of pro-environmental behaviors and technology adoption. Using structural equation modeling (SEM) and data from Japanese households, we examine electricity costs post-adoption as a proxy for usage and emissions, highlighting seasonal variations across winter, summer, and spring. Our findings reveal that residential solar PV adoption is associated with increased electricity costs in winter (13.899%) and spring (2.429%), but a decrease in summer (6.322%). This pattern is partly driven by a greater use of energy-efficient products and electric vehicles (EVs) beyond levels that would have been previously been necessary, actually increasing costs, as households perceive solar energy as a low-cost resource. These insights suggest that while solar PV reduces fossil fuel reliance, it may inadvertently lead to higher energy use. To maximize the environmental benefits of solar energy, policies that promote energy conservation, incentivize battery storage, and curb excessive use of energy-efficient products are recommended. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25011 |
| By: | Sayag, Doron; Snir, Avichai; Levy, Daniel |
| Abstract: | We test the predictions of the sticky information model using a survey dataset by comparing the shoppers’ accuracy in recalling the prices of regulated and comparable unregulated products. Regulated product prices change less frequently, vary less across stores and between brands, and are sold more than comparable but unregulated product prices. Therefore, shoppers would be expected to recall the regulated product prices more accurately. However, we find that shoppers are better at recalling the prices of unregulated products, in line with the sticky information model which predicts that shoppers will be more attentive to prices that change more frequently. |
| Keywords: | Sticky information; cost and benefit of information; information gathering; information processing; price cap; price regulation; price controls; price adjustment; sticky prices; rigid prices |
| JEL: | D12 D83 D91 E31 K20 L11 L16 L50 |
| Date: | 2025–01–03 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123267 |
| By: | Dirk Bergemann (Yale University); Tibor Heumann (Pontificia Universidad Catolica de Chile); Michael C. Wang (Yale University) |
| Abstract: | We analyze how market segmentation affects consumer welfare when a monopolist can engage in both second-degree price discrimination (through product differentiation) and third-degree price discrimination (through market segmentation). We characterize the consumer-optimal market segmentation and show that it has several striking properties: (1) the market segmentation displays monotonicityÑhigher-value customers always receive higher quality product than lower-value regardless of their segment and across any segment; and (2) when aggregate demand elasticity exceeds a threshold determined by marginal costs, no segmentation maximizes consumer surplus. Our results demonstrate that strategic market segmentation can benefit consumers even when it enables price discrimination, but these benefits depend critically on demand elasticities and cost structures. The findings have implications for regulatory policy regarding price discrimination and market segmentation practices. |
| Date: | 2024–12–22 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2420 |
| By: | Neal Ma; Ningkun Zheng; Ning Qi; Bolun Xu |
| Abstract: | The rapid growth of battery energy storage in wholesale electricity markets calls for a deeper understanding of storage operators' bidding strategies and their market impacts. This study examines energy storage bidding data from the California Independent System Operator (CAISO) between July 1, 2023, and October 1, 2024, with a primary focus on economic withholding strategies. Our analysis reveals that storage bids are closely aligned with day-ahead and real-time market clearing prices, with notable bid inflation during price spikes. Statistical tests demonstrate a strong correlation between price spikes and capacity withholding, indicating that operators can anticipate price surges and use market volatility to increase profitability. Comparisons with optimal hindsight bids further reveal a clear daily periodic bidding pattern, highlighting extensive economic withholding. These results underscore potential market inefficiencies and highlight the need for refined regulatory measures to address economic withholding as storage capacity in the market continues to grow. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2501.13324 |
| By: | Wong, Sara; Petreski, Marjan |
| Abstract: | This paper investigates the effects of competition laws and regulations on manufacturing firms productivity in Latin American countries (LACs), addressing a gap in existing research. Leveraging firm-level panel data from the World Bank Enterprise Surveys across 14 LAC economies and competition law indicators from the Comparative Competition Law initiative, the study employs total factor productivity (TFP) measures to analyze the effects of competition laws on manufacturing productivity through key mediators: firm size, distance to the frontier, and broader institutional arrangements. Utilizing various empirical methodologies that address potential biases, the findings reveal a nuanced relationship between competition law stringency, enforcement practices, and productivity outcomes across different industries and countries. Results reveal heterogeneous effects of competition law and enforcement on productivity, with certain aspects showing a positive relationship with productivity, particularly when controlling for firm size, while stronger enforcement measures weaken the positive association between competition law and productivity, potentially due to increased compliance costs and legal uncertainty. The study suggests a need for policymakers to strike a balance between regulatory stringency and enforcement in competition to avoid stifling innovation and hindering productivity growth, particularly in industries nearing technological frontiers. Accounting for industry-specific factors are essential for fostering fair competition and market efficiency without unduly burdening businesses. |
| Keywords: | Competition law and regulations;Firm productivity;Enforcement |
| JEL: | K21 L11 O54 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:13963 |
| By: | Grajzl, Peter; Ćorić, Bruno; Srhoj, Stjepan |
| Abstract: | Conventional wisdom suggests that when business regulation is excessive, deregulation should enhance efficiency. The liberalization of services markets in Croatia demonstrates that this is not necessarily the case, particularly when features of the reform process allow undue influence by those who stand to lose from the removal of regulatory barriers. To assess the effects of the Croatian reform, we determine the yearly volume of deregulation measures applicable to each affected sector and construct a sector-level panel dataset encompassing a wide range of outcomes. Exploiting within-sector, over-time variation in the volume of deregulation measures, we find that deregulation, on average, increased labor productivity but had no effect on entry, employment, or profit margins. While both new entrants and incumbents shared the labor-productivity gains, incumbents benefited more and also experienced an increase in profit margins. Heterogeneity analysis reveals that the reform was more effective in sectors with initial conditions indicative of weaker incumbent power. Our findings underscore the relevance of public-choice perspectives not only in understanding regulation, as emphasized by prior literature, but also in the context of deregulation. |
| Keywords: | deregulation, liberalization, services markets, heterogeneity, special interests |
| JEL: | L51 L80 D02 K20 P16 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1554r |
| By: | David P. Myatt (London Business School); David Ronayne (ESMT Berlin) |
| Abstract: | We study markets in which potential buyers engage in costly search to find a good deal. Our novel solution concept for prices builds upon the idea that any movement in a firm's price is followed by an opportunity for its competitors to respond with special offers. This mechanism selects the highest prices such that no firm wishes to undercut a competitor. We identify a distinctive closed-form pattern of disperse prices that uniquely satisfy our pricing solution, and pair that price profile with optimal fixed-sample search. In a stable equilibrium with active search, the intensity of search and consumer surplus are lower and industry profit is higher with more competitors. In a concentrated oligopoly, complete search in equilibrium can eliminate industry profit. |
| Date: | 2025–01–28 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:524 |
| By: | Luis Guijarro; Jos\'e-Ram\'on Vidal; Vicent Pla |
| Abstract: | We model a market for data where an incumbent and a challenger compete for data from a producer. The incumbent has access to an exclusive data producer, and it uses this exclusive access, together with economies of scope in the aggregation of the data, as a strategy against the potential entry by the challenger. We assess the incumbent incentives to either deter or accommodate the entry of the challenger. We show that the incumbent will accommodate when the exclusive access is costly and when the economies of scope are low, and it will blockade or deter otherwise. The results would justify an access regulation that incentivizes the entry of the challenger, e.g., by increasing production costs for the exclusive data. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2501.07235 |
| By: | Cao, Yiran; Lin, ping; Zhang, Tianle |
| Abstract: | Incumbent firms may acquire start-ups to eliminate potential competition without intending to develop new technology (killer acquisitions). We develop a model to examine the incentives and welfare implications of killer acquisitions under different market structures: vertical separation and integration. Our model focuses on the competition between an upstream incumbent firm and a start-up with the potential to develop superior technology, where the incumbent has the option to acquire the start-up and decide whether to continue the development of the superior technology. We find that killer acquisitions are more likely when the cost of developing the superior technology is moderate under both vertical separation and integration. However, these acquisitions lead to a welfare loss only when the development cost is relatively low. Comparing vertical integration to separation, the probability of killer acquisition is higher (lower) when the incumbent firm has a greater (smaller) chance of successfully developing the superior technology. |
| Keywords: | innovation incentive, killer acquisitions, vertical integration. |
| JEL: | D8 L1 |
| Date: | 2024–12–26 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123344 |
| By: | Hubert Stahn (Aix Marseille Univ, CNRS, AMSE) |
| Abstract: | In this paper, we examine the possibility for a regulator to reduce policy costs by substituting a voluntary policy based on a legislative threat to an active harvest control. Specifically, we focus on fisheries where the regulator aims to maintain an optimal level of conservation through a voluntary agreement. To achieve this, we identify a mandatory regulation that can serve as a threat to ensure voluntary compliance and avoid regulation costs. However, threats differ from effective policies. To be enforceable, they must be validated through a legislative process, the outcome of which is uncertain and subject to objections. Consequently, we introduce of a random delay in its application and address issues of social acceptability. This threat rests upon two pillars: a moratorium with financial compensation followed by an Individual Transferable Quota (ITQ) mechanism, and a suitably chosen tax on harvesting capacity to deter deviations. We use data from the scallop fishery in the Bay of Saint-Brieuc (France) to illustrate this voluntary mechanism. |
| Keywords: | Q22, Q28 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:aim:wpaimx:2501 |