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on Regulation |
| By: | Genakos, Christos; Lyu, Blair Yuan; Pagliero, Mario |
| Abstract: | We study the retail price pass-through of four major tax changes in petroleum products using daily pricing data from gas stations on small Greek islands. We find that (i) the pass-through of the tax hikes is five times higher than for the tax decrease, (ii) the pass-through of the tax hikes increases with competition, while that of the tax decrease does not, (iii) there is significant asymmetry in the speed of price adjustments, and, (iv) the asymmetric price adjustment cannot be explained by tacit collusion, instead the evidence suggests that search is the most plausible explanation. |
| Keywords: | pass-through; rockets and feathers; tax incidence; gasoline market; market structure; competition |
| JEL: | H22 L1 |
| Date: | 2024–08–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126788 |
| By: | Baum, Leonard; Bryson, Joanna J. (Hertie School) |
| Abstract: | Growing global concern about the problems associated with concentrated market power in the digital economy is leading to a renewed interest in competition policy. Since the late 2010s, China’s government has squarely confronted the problems of its own ‘Big Tech’ with a new competition regime for digital markets. Outcomes represent a unique learning opportunity for Western academics, competition authorities and lawmakers alike, which has so far been underutilized. However, given unreliable official figures, a new methodology is needed to assess competition in China’s digital economy. This article introduces a market capitalization approach that builds on the informativeness of China’s financial markets. We use Bloomberg financial data of 1142 publicly listed firms for the period 2019 to 2022 to quantitatively examine the impact of China’s new digital competition regime. We find a causal link between the new governance approach and a reduction of market concentration and aggregate growth in the primary markets of China’s three most dominant digital platforms – Baidu, Alibaba and Tencent (BATs). Further, our results show a robust correlation between the new competition regime and reduced market concentration and market capitalization growth rates across China’s digital markets. Other empirical findings include a negative correlation between market concentration and the openness of digital markets, a non-relationship between market concentration and profits, and the inability of profit and revenue-based metrics to capture market power effectively in China’s digital economy. Finally, we discuss the relevance of these insights for Western regulatory strategies, particularly as the EU and China emerge as global frontrunners in the field of digital competition regulation. |
| Date: | 2024–01–14 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:zyc6s_v2 |
| By: | Andrew Rhodes (Toulouse School of Economics); Jidong Zhou (Yale University); Junjie Zhou (Tsinghua University) |
| Abstract: | This paper provides a framework in which a multiproduct ecosystem competes with many single-product firms in both price and innovation. The ecosystem is able to use data collected on one product to improve the quality of its other products. We study the impact of data regulation which either restricts the ecosystem's cross-product data usage, or which requires it to share data with small firms. Each policy induces small firms to innovate more and set higher prices; it also dampens data spillovers within the ecosystem, reduces the ecosystem's incentive to collect data and innovate, and potentially increases its prices. As a result, data regulation has an ambiguous impact on consumers, and is more likely to benefit consumers when small firms are relatively more efficient in innovation. A data cooperative among small firms, which helps them to share data with each other, does not necessarily benefit small firms and can even harm consumers. |
| Date: | 2025–02–14 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2426 |
| By: | Francisco, Kris A. |
| Abstract: | Socialized pricing mechanisms are common in utility services like electricity because these services are critical for daily activities and are therefore considered vital for economic growth. The aim of such mechanisms is to redistribute financial resources from well-off to marginalized consumers. This approach is seen as a way to improve the availability and affordability of essential services, thus enhancing overall social welfare. However, while the rationale for socialized pricing mechanisms is widely accepted, discussions related to funding have induced much debate. Some studies have found that subsidies for electricity end up benefiting middle-income and high-income households instead of the poor, exposing possible targeting issues (Mayer et al. 2015, Trimble et al. 2011, Komives et al. 2009). Motivated by these discussions, this study examines two currently implemented socialized pricing mechanisms in the Philippine Electric Power Industry, namely: (1) the lifeline rate and (2) the senior citizen rate. The analysis employed data from the Household Energy Consumption Survey and the Family Income and Expenditure Survey, which showed that the rules for availing of the discounts are prone to leakages, favoring electricity consumers who can afford to pay their electricity consumption at full price. Some recommendations for addressing implementation issues are presented in this paper. Comments on this paper are welcome within 60 days from the date of posting. Email publications@pids.gov.ph. |
| Keywords: | utility services;electricity;socialized pricing;Philippine Electric Power Industry |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:phd:dpaper:dp_2024-47 |
| By: | Gaurab Aryal; Charles Murry; Pallavi Pal; Arnab Palit |
| Abstract: | We study a new market design for K-12 school broadband procurement that switched from school-specific bidding to a system that bundled schools into groups. Using an event study approach, we estimate the program reduced internet prices by 37% per Mbps per month while increasing bandwidth by 500%. These benefits occurred by mitigating exposure risk in broadband procurement – the risk that providers win too few contracts to cover fixed infrastructure costs. Using a bounds approach, we show robustness of our estimates and document that participants saved at least as much as their federal subsidies and experienced substantial welfare gains. |
| JEL: | D44 H42 L86 L96 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33498 |
| By: | Calligaris, Sara; Chaves, Miguel; Criscuolo, Chiara; De Lyon, Joshua; Greppi, Andrea; Pallanch, Oliviero |
| Abstract: | Concentration - the share of an industry's output accounted for by its largest firms and a frequently used proxy of competition - has increased in European countries. This paper provides evidence about this development by introducing several methodological refinements in the cross-country measurement of concentration: it defines industries at a disaggregated level, mostly 3-digit; it takes into account the geographic level at which competition takes place - domestic, European or global; and it accounts for linkages between firms within the same domestic and multinational business group in the relevant geographic region of competition. It then applies these improvements to representative data for fifteen European countries, showing that average concentration increased by about 5 percentage points over the period 2000-2019, from 26% to more than 31%. Third, the paper investigates how each of the methodological improvements affects the levels and trends of concentration. |
| Keywords: | concentration; competition; market power |
| JEL: | L11 L22 F14 |
| Date: | 2024–12–13 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126768 |
| By: | Lluberas, Rodrigo |
| Abstract: | The functioning of the banking sector is key for economic growth. In this paper, we first gather banks' balance sheet monthly regulatory information in a consistent manner for seven Latin American countries. Second, we estimate lending markups and deposits markdowns in each country over time. Third, with the estimated markups and markdowns in the different countries we study how they relate with banks' profitability, the cost of credit, credit risk and credit supply. Finally, we explore whether there are differences in markups on lending rates and markdowns on deposit rates between international and domestic banks. |
| Keywords: | Banking;Markups;markdowns;Market concentration |
| JEL: | E44 L11 L16 G21 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:13988 |
| By: | Christopher Anderson |
| Abstract: | Regulating bank risk-taking is challenging since banks know more than regulators about the risks of their portfolios and can make adjustments to game regulations. To address this problem, I build a tractable model that incorporates this information asymmetry. The model is flexible enough to encompass many regulatory tools, although I focus on taxes. These taxes could also be interpreted as reflecting the shadow costs of other regulations, such as capital requirements. I show that linear risk-sensitive taxes should not generally be set more conservatively to address asymmetric information. I further show the efficacy of three regulatory tools: (1) not disclosing taxes to banks until after portfolio selection, (2) nonlinear taxes that respond to information contained in banks' portfolio choice, and (3) taxes on banks' realized pro ts that incentivize banks to reduce risk. |
| Keywords: | Symmetric information; Bank portfolio choice; Capital regulation; Bank regulation |
| JEL: | G21 G28 G18 G11 |
| Date: | 2025–02–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:2025-09 |
| By: | Tito Boeri; Tommaso Crescioli; Andrea Garnero; Lorenzo G. Luisetto |
| Abstract: | Can collective bargaining mitigate monopsony power? This paper addresses this question by examining how the regulation of noncompete agreements for employees by collective agreements affects firm-level markdowns in the French manufacturing sector. Using a staggered difference-in-differences approach, we find that the regulation of noncompetes set by collective agreements leads to a 1.3%-2.2% reduction in markdowns on average. The effect grows over time and is more pronounced for smaller, less productive firms that pay lower wages. Studying a landmark decision of the French Supreme Court that introduced the obligation to have a compensation to consider a noncompete enforceable, we find a significant complementarity between the regulation of noncompetes at the national level (e.g., via case law) and sectoral collective bargaining. By enhancing compliance or imposing further restrictions, collective bargaining can therefore serve as an effective tool to regulate the use of noncompete agreements. |
| Keywords: | monopsony, unions, noncompetes |
| Date: | 2025–02–25 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2079 |
| By: | Casacuberta, Carlos; Gandelman, Néstor |
| Abstract: | This paper examines the relationship between wages and market power at the firm level. We derive firm-specific measures of labor market power and present a natural decomposition of wage changes into shifts in labor market power and labor productivity. Our findings indicate that 50-60 percent of the variation in nominal wages is attributable to price changes, while the remaining portion, reflecting changes in real wages, is explained mainly by changes in market power and, to a lesser extent, by changes in labor productivity. Moreover, we show that firms with greater market power tend to pay higher wages, suggesting rent-sharing between employers and employees, at the cost of higher prices for consumers. |
| Keywords: | Price Markups;Labor market power |
| JEL: | L10 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:13987 |
| By: | Dirk Bergemann (Yale University); Rahul Deb (Boston College) |
| Abstract: | We study the robust sequential screening problem of a monopolist seller of multiple cloud computing services facing a buyer who has private information about his demand distribution for these services. At the time of contracting, the buyer knows the distribution of his demand of various services and the seller simply knows the mean of the buyerÕs total demand. We show that a simple Òcommitted spend mechanismÓ is robustly optimal: it provides the seller with the highest profit guarantee against all demand distributions that have the known total mean demand. This mechanism requires the buyer to commit to a minimum total usage and a corresponding base payment; the buyer can choose the individual quantities of each service and is free to consume additional units (over the committed total usage) at a fixed marginal price. This result provides theoretical support for prevalent cloud computing pricing practices while highlighting the robustness of simple pricing schemes in environments with complex uncertainty. |
| Date: | 2025–02–10 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2423 |
| By: | Dirk Bergemann (Yale University); Michael C. Wang (Yale University) |
| Abstract: | We consider a seller who offers services to a buyer with multi unit demand. Prior to the realization of demand, the buyer receives a noisy signal of their future demand, and the seller can design contracts based on the reported value of this signal. Thus, the buyer can contract with the service provider for an unknown level of future consumption, such as in the market for cloud computing resources or software services. We characterize the optimal dynamic contract, extending the classic sequential screening framework to a nonlinear and multi-unit setting. The optimal mechanism gives discounts to buyers who report higher signals, but in exchange they must provide larger fixed payments. We then describe how the optimal mechanism can be implemented by two common forms of contracts observed in practice, the two-part tariff and the committed spend contract. Finally, we use extensions of our base model to shed light on policy-focused questions, such as analyzing how the optimal contract changes when the buyer faces commitment costs, or when there are liquid spot markets. |
| Date: | 2025–02–11 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2424 |
| By: | Guadalupe, Maria; Rappoport, Veronica; Salanie, Bernard; Thomas, Catherine |
| Abstract: | We interpret M&A deals in Western Europe during the 2010s as the equilibrium of a matching model. Merger surplus arises from complementarities between multiple firm pre-merger characteristics. Large, productive firms prefer to merge with similarly productive but smaller partners, suggesting positive complementarity in productivities and negative cross complementarity between productivity and scale. We use post-merger data to show that estimated complementarities are strong predictors of merged firm performance. Our results inform the empirical relevance of different theories of mergers. |
| JEL: | G34 |
| Date: | 2024–12–04 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126749 |