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on Regulation |
| By: | Francis Bloch (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Philippe Gagnepain (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We study a model of non-cooperative interaction between two infrastructure managers (IMs) for international rail transport. We compare equilibrium access charges when the IMs are unregulated and regulated. We show that cooperation among IMs eliminates double-marginalization to the benefit of passengers and IMs. We also show that the delegation of access charge collection with adequate transfers allows the two IMs to reach efficiency, both in the unregulated and regulated régimes. We study the effect of differences in regulatory policies, and analyze the effect of monopoly power of train operators and competition among high speed and low speed train routes on access charges. |
| Keywords: | International Rail Transport, Access Charges, International Regulation, Infrastructure Managers |
| Date: | 2025–01–14 |
| URL: | https://d.repec.org/n?u=RePEc:hal:psewpa:halshs-04892920 |
| By: | Nicolas Astier (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, ENPC - École nationale des ponts et chaussées, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Between 2005 and 2021, France has generated more electricity from fossil-free resources (491 TWh/year on average) than its gross domestic consumption (481 TWh/year). Therefore, in terms of total surplus, the French electricity sector should have been barely hit, if at all, by the surge in fossil fuel prices during the 2022 energy crisis. In practice, however, the French government spent billions of euros in subsidies to electricity consumers, the incumbent utility – who operates the whole nuclear fleet – recorded its worst yearly financial result to date, and total electricity imports exceeded exports for the first time in more than 40 years. Although these outcomes can largely be attributed to bad luck, the extent to which they could have been mitigated through better market design and public policies is an open question. This article argues that existing policies, through their implied incentives to share and manage long-term risks, played a critical role in how France navigated the energy crisis. Consistently, reforming long-term risk-sharing mechanisms has emerged as the most pressing issue to address. Looking forward, however, updating short-term wholesale market design so as to better support a low-cost and reliable energy transition will likely prove increasingly important. |
| Keywords: | Market design, Energy crisis, Risk management, Incentives |
| Date: | 2025–02–03 |
| URL: | https://d.repec.org/n?u=RePEc:hal:psewpa:hal-04893886 |
| By: | Bah, Muhammad Maladoh; Weigt, Hannes |
| Abstract: | The U.S. nuclear industry has overcome a challenging period during which low wholesale market prices threatened the survival of nuclear power plants (NPPs). From 2017 to 2019, several U.S. states initiated out-of-market support schemes to bolster the financial conditions of NPPs. This paper provides a comparative cost assessment between the preservation of three upstate New York NPPs under the zero-emission credit (ZEC) support scheme or an early retirement. In addition, the paper explores future market development scenarios with a carbon price mechanism. A bespoke cost-minimization dispatch model is developed for the New York electricity market along with four neighboring electricity markets. The comparative cost assessment of a nuclear phaseout and ZEC expenditures is not definitive. Results indicate that phasing out upstate NPPs in 2018 and 2021 incurred a slightly higher cost burden for New York consumers compared to the total ZEC expenditures. In contrast, phasing out upstate NPPs in 2030 incurs a lower cost burden compared to the total ZEC expenditure, mainly due to a high credit price. Furthermore, results show that a low carbon price of USD 51/ton would raise average NYISO prices by USD 24.1/MWh, thereby improving the long-term income conditions of NPPs, and ensuring sufficient accumulation of nuclear decommissioning funds. The study provides policymakers with a sequence of optimal policy options taking into account the pace of renewable development. |
| Keywords: | nuclear power plant, ZEC, New York, electricity market, carbon price |
| JEL: | L94 Q41 Q48 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:bsl:wpaper:2025/01 |
| By: | Burtraw, Dallas (Resources for the Future); Palmer, Karen (Resources for the Future); Shih, Jhih-Shyang (Resources for the Future) |
| Abstract: | System-level design that integrates hydrogen production with the electricity system may improve market uptake and enable green hydrogen to contribute significantly to a sustainable energy future. Government policies, incentives, and funding opportunities provide the necessary support and financial backing to foster technological advancements.In this paper, we develop a decision-making model to simultaneously optimize capacity investments and system operations in electricity generation and hydrogen production. We investigate the optimal deployment and operation of electrolyzers to produce green hydrogen using grid-connected sources of electricity, an off-grid system that couples variable renewable energy (VRE) resources with long duration energy storage (LDES), or a mix of both. We assess the economic and environmental performance of the hydrogen production system under carbon pricing and various tax incentive policy We evaluate scenarios accounting for the Section 48 Energy Credit, known as the Investment Tax Credit (ITC), of the Internal Revenue Code (IRC), as well as the Section 45V Clean Hydrogen Production Tax Credit (PTC). We note that Section 48 was expanded under the IRA of 2022. Previously, the ITC applied to energy storage only when it was installed in connection with a solar generation facility. The IRA has broadened this to include stand-alone energy storage projects, making them eligible for a tax credit of up to 30 percent of investment cost (Shah et al. 2024; IRS 2024). The ITC is available for renewable energy technologies even if they are not grid-connected. The ITC can be claimed for off-grid renewable energy systems, such as solar photovoltaic (PV) systems, wind turbines, and other qualifying technologies, as long as they meet the eligibility criteria set by the IRS (DOE 2024). scenarios—in particular, the Section 45V Production Tax Credit (PTC) for green hydrogen and the Section 48 Investment Tax Credit (ITC) for VRE and LDES—along with sensitivity analysis on LDES capital costs.Eleven scenarios showcase the model’s capability and highlight the complexity of interactions between system components. We calculate the unit net cost of hydrogen production for each scenario and decompose the unit cost into four components: electricity cost, capital investment, social cost of carbon dioxide emissions, and tax revenue. We find, for example, that the ITC and PTC could potentially reduce unit hydrogen production cost from $10.62 per kilogram in a no-policy scenario to $0.96 per kilogram. This model provides a foundation for further investigation of the full integration of hydrogen infrastructure within the electricity system. |
| Date: | 2025–02–14 |
| URL: | https://d.repec.org/n?u=RePEc:rff:dpaper:dp-25-04 |
| By: | Elisabetta Iossa (CEIS & DEF, University of Rome "Tor Vergata"); Chiara Latour (University of Stockholm) |
| Abstract: | Do firms with higher legality standards contribute to better procurement outcomes? We address this question in the context of Italian public works procurement, by combining contract-level data on procurement and firm-level data on legality scores, using the Legality Rating System managed by the Italian Antitrust Authority. We find that higher legality scores are positively associated with a significant and economically important improvement in procurement efficiency, measured by shorter time delays and lower extra costs. |
| Keywords: | Cartels, corruption, firm efficiency, legality, procurement |
| JEL: | H57 K40 L4 |
| Date: | 2025–02–10 |
| URL: | https://d.repec.org/n?u=RePEc:rtv:ceisrp:592 |
| By: | Stefano Clò; Gianluca Iannucci; Alessandro Tampieri |
| Abstract: | This paper compares two forms of Renewable Energy Communities by assessing their impact on long-run social welfare from the perspective of a local public administration. By maximising the intertemporal utility of a representative prosumer, we assess how different REC organisations affect utility under different energy market, incentive and technology conditions. The results show that while consumption and pollution levels remain constant across REC types, differences in prosumers’ utility arise due to different financial costs and benefits. In particular, high energy market prices, higher incentive levels and increased energy capacity favour bottom-up RECs, while higher coordination costs and higher prosumer incentive weights favour top-down RECs. Our findings highlight the economic trade-offs that influence REC adoption decisions. |
| Keywords: | Energy community, Mean-variance expected utility, Optimal choice. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:frz:wpaper:wp2024_29.rdf |
| By: | Lefouili, Yassine; Madio, Leonardo |
| Abstract: | In this paper, we review recent studies on the impact of mergers on investments. First, we examine how mergers among competing incumbents influence firms' incentives to develop new products and undertake cost-reducing or quality-enhancing investments. Second, we analyze how an incumbent's acquisition of an innovative entrant affects the investment incentives of both parties. Third, we discuss the effects of vertical mergers on the investment decisions of both upstream and downstream firms. Finally, we outline a few directions for future research. |
| Keywords: | Competition; Investments; Innovation; Mergers, Entry |
| JEL: | D43 L13 L40 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130332 |
| By: | Castellini, Marta; D'Alpaos, Chiara; Fontini, Fulvio; Moretto, Michele |
| Abstract: | Renewable energy production plays a crucial role in the energy transition. However, many renewable energy sources (RES) are intermittent, and there is often a mismatch between energy production and consumption, which can be partially solved by storage. In this paper, we investigate the investment decision in a photovoltaic (PV) power plant coupled with a Battery Energy Storage System (BESS), namely an Energy Storage System (ESS). We aim to investigate the relationship between the net present value (NPV) of the investment and the technical implications related to the maximum amount of energy to be stored while also accounting for the impact of energy prices. In our setting, the BESS is connected to the national power grid and the PV plant. Energy can be produced, purchased from the grid, stored, self-consumed, and fed into the grid. PV production and energy consumption loads evolve stochastically over time. In addition, as BESS are costly, energy stored has an opportunity cost, which depends on the prices of energy purchased from the grid and energy fed in and sold to the grid, respectively. However, BESS can significantly contribute to increase ESS managerial flexibility and, in turn, ESS value. In detail, we investigate the optimal BESS size that minimizes ESS net operating costs. We also provide insights on ESS optimal management strategy. Our results show that ESS net operating costs are relatively small. They reduce for increasing selling prices of energy, whereas they increase for increasing volatility of the stock of energy stored in the battery. |
| Keywords: | Climate Change, Dairy Farming, Environmental Economics and Policy, Resource /Energy Economics and Policy, Sustainability |
| Date: | 2025–02–13 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:349431 |
| By: | Hunt Allcott; Juan Camilo Castillo; Matthew Gentzkow; Leon Musolff; Tobias Salz |
| Abstract: | We evaluate the economic forces that contribute to Google’s large market share in web search. We develop a model of search engine demand in which consumer choices are influenced by switching costs, quality beliefs, and inattention, and estimate it using a field experiment with US desktop internet users. We find that (i) requiring Google users to make an active choice among search engines increases Bing’s market share by only 1.1 percentage points, implying that switching costs play a limited role; (ii) Google users who accept our payment to try Bing for two weeks update positively about its relative quality, with 33 percent preferring to continue using it; and (iii) after changing the default from Google to Bing, many users do not switch back, consistent with persistent inattention. In our model, correcting beliefs and removing choice frictions would increase Bing’s market share by 15 percentage points and increase consumer surplus by $6 per consumer-year. Policies that expose users to alternative search engines lower Google’s market share more than those requiring active choice. We then use Microsoft search logs to assess the impact of additional data on search result relevance. The results suggest that sharing Google’s click-and-query data with Microsoft may have a limited effect on market shares. |
| JEL: | L4 L86 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33410 |
| By: | Burnitt, Christopher (University of Warwick); Gars, Jared (University of Florida and JILAEE); Stalinski, Mateusz (University of Warwick and CAGE) |
| Abstract: | Addressing rising political polarization has become a focal point for policy makers. Yet, there is little evidence of its economic impacts, especially in contexts where partisan- ship cannot be easily hidden. To fill this gap, we study a novel channel: the perception of out-group partisan oversight of independent civil service reduces trust in regulation, affecting key markets (e.g., food and medicine). First, we motivate it by demonstrating the salience of the association between the president and expert regulators in US media reporting. Second, in a pre-registered experiment with 5, 566 individuals, we test the channel by exploiting an alignment in the way that the EPA under Trump and Biden defended the safety of spraying citrus crops with antibiotics. This enabled us to randomize the partisanship of the administration, holding the scientific arguments constant. Despite the EPA’s independence, out-group administration reduces support for the spraying by 26%, lowers trust in the EPA’s evaluation, and increases donations to an NGO opposing the spraying by 15%. We find no overall effect on the willing- ness to pay for citrus products, measured in an obfuscated follow-up survey. However, we document significant differences in effects for elastic vs. inelastic consumers. Taken together, polarization has the potential to affect economic decisions. However, a reduction in trust might not translate into lower demand, especially for inelastic consumers. |
| Keywords: | political polarization, civil service, trust in regulation, trust in science, food policy, partisan identity, consumer demand JEL Classification: D12, D83, P16, Q11, Q13, Q18, Z18 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cge:wacage:744 |
| By: | Ayoze Alfageme |
| Abstract: | This paper establishes a connection between non-financial corporate mergers and acquisitions (M&A) and the rise of large firms, decline productive investment, concentration of markets and profits, and rising markups. First, using Refinitiv M&A deals data, I briefly recount the history of corporate M&A deal making in the last four decades in which this study focuses (1980-2020), with special attention to its sector dynamics. Second, the paper presents a literature review highlighting the gap for the type of study presented here, in terms of both methods and time scope. An articulation of the process from which M&A are linked to the new corporate environment is presented in the form of 6 hypothesis. Third, using Compustat firm-level data I present stylised evidence poiting towards the potential validation of those 6 hypothesis. I found that M&A has become an important corporate growth strategy (hypothesis 1). A steeper drop in capital expenditure among firms with the highest acquisition spending points to scrapping capex for M&A (hypothesis 2). Fed’s flow of funds data suggests corporate funds are redirected to the household sector for M&A payments, potentially depleting corporate funds. A micro-macro tension arises (hypothesis 3), where individual firms grow larger in total assets through M&A to achieve corporate growth goals, while their capex declines, dampening aggregate corporate investment. M&A is also connected to the rise in market concentration (hypothesis 4) and the accumulation of intangibles that create barriers to entry (hypothesis 5). Finally, firms with the most acquisitions, account for 40% of total profits and have higher markups (hypothesis 6). In a period where efforts are aimed at curbing M&A deals, these findings highlight the implications of leaving the M&A market unrestricted. |
| Keywords: | Mergers and Acquisitions, Market Concentration, Corporate Investment, Firm Growth |
| JEL: | D22 G34 L11 L40 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2505 |
| By: | Schmal, W. Benedikt; Zombek, Max |
| Abstract: | Eine Welt, in der jede Fluggesellschaft ihre eigenen Flughäfen besitzt, nur bestimmte Automarken auf Autobahnen zugelassen sind und Taxifahrer ihre Konkurrenten ein- fach aus dem Verkehr ziehen können erscheint wie eine reichlich absurde Vorstellung. Im deutschen Schienenverkehr ist diese Absurdität real. Während in anderen Märkten Wettbewerb als treibende Kraft für Innovation, Preisreduktion und bessere Dienstleis- tungen gefeiert wird, scheint der Schienenverkehr in einer eigenen Realität zu existie- ren. Einem Biotop, in dem die Deutsche Bahn ihre Vormachtstellung auf vielerlei Wei- sen gesichert wird, sei es durch eine potenzielle Verknappung von Gebrauchtwag- gons, Ticketbepreisung, die auch als Markteintrittsbarriere fungieren könnte oder durch die restriktiven Zugänge zu Bahnhöfen und deren Vorplätzen durch neue Wett- bewerber im Mobilitätssegment. Dabei geht es nicht nur um die Trennung von Netz und Betrieb. Zahlreiche Stellschrau- ben für mehr Wettbewerb auf der Schiene liegen oft im Detail. Warum werden ge- brauchte Züge lieber verschrottet als verkauft? Weshalb müssen sich neue Anbieter immer noch durch bürokratische Hürden und einen regulatorischen Dschungel kämp- fen, um überhaupt beginnen zu können? Und wieso wird "die Bahn" oft synonym für den gesamten Schienenverkehr verwendet, obwohl private Anbieter längst eine ent- scheidende Rolle spielen? Dieser Policy Impuls beleuchtet, warum die Bahn nicht nur aus Zügen und Schienen besteht, sondern auch aus wirtschaftlichen Anreizen, institutionellen Strukturen und politischen Weichenstellungen. Wir schlagen fünf Maßnahmen vor, die Wettbewerb fördern oder erst ermöglichen. Von einem echten EU-Binnenmarkt für Rollmaterial über die Öffnung der Bahnhofsumfelder bis hin zu einer Ticketpreisgestaltung, die nicht einseitig Marktmacht ausnutzt. Nur mit echtem Wettbewerb kommt der Schie- nenverkehr wirklich ins Rollen und nur so können seine Potenziale für Effizienz und Ökologie vollständig ausgeschöpft werden. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:formoe:311182 |
| By: | Holz, Michael; Icks, Annette; Kranzusch, Peter; Löher, Jonas; Pahnke, André |
| Abstract: | Unternehmen klagen seit langer Zeit über die mangelnde Verhältnismäßig- und Praxistauglichkeit vieler Regelungen und Vorschriften. Ein Grund hierfür ist, dass bei der Gesetzgebung und beim Bürokratieabbau die Erfahrungen der betroffenen Unternehmen bisher nur unzureichend berücksichtigt werden. An genau dieser Stelle sollen die gegenwärtig von der Bundesregierung erprobten Praxischecks ansetzen. In der vorliegenden Studie werden die Potenziale dieses neuen Instruments zur Verringerung bürokratischer Belastungen untersucht. Praxischecks nutzen das praktische Erfahrungswissen aller Beteiligten und stellen so eine sinnvolle Ergänzung zu bestehenden Maßnahmen zum Bürokratieabbau dar. Ihr vermehrter Einsatz ist daher ausdrücklich zu begrüßen. |
| Abstract: | Companies have long complained about many regulations' lack of proportionality and practicability. One reason is that the experience of the companies concerned has so far been insufficiently considered when reducing bureaucracy. This is precisely where the practical checks currently being tested by the German government should come in. We analyse the potential of this new measure for reducing bureaucracy. Based on a literature review and case studies, practice checks are categorized within the framework of existing measures to reduce bureaucracy, and best practices are derived. Overall, practice checks are a sensible extension of existing measures to reduce bureaucracy. Their increased use is therefore expressly welcome. |
| Keywords: | Bürokratie, Bürokratieabbau, Praxischecks, KMU, Bureaucracy, bureaucracy reduction, practice checks, SMEs |
| JEL: | D73 K2 L5 L26 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifmmat:311194 |
| By: | Igor Cialenco; Michael Ludkovski |
| Abstract: | We introduce the problem of groundwater trading, capturing the emergent groundwater market setups among stakeholders in a given groundwater basin. The agents optimize their production, taking into account their available water rights, the requisite water consumption, and the opportunity to trade water among themselves. We study the resulting Nash equilibrium, providing a full characterization of the 1-period setting and initial results about the features of the multi-period game driven by the ability of agents to bank their water rights in order to smooth out the intertemporal shocks. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2501.14071 |