A Regulatory Framework for New and Emerging Markets

The future of the information society crucially depends on investments in upgrading existing infrastructures and building new networks. Traditional cost-based regulation, which focuses on issues of static efficiency and service-based competition necessarily has negative effects on innovation incentives and the emergence of infrastructure-based competition in the highly dynamic telecommunications industry. This paper presents a regulatory framework for new infrastructures, which makes ex ante regulation contingent to the tendency towards effective competitive structures. Unlike the standard Significant Market Power-test (SMP), this approach takes a longer term perspective and therefore secures operators' investment incentives. The proposal has several desirable incentive effects. Firstly, it counters incentives to free-ride on investments by potential competitors, and secondly, it makes preemptive and other predatory practices by the investing firm less attractive. As a result, our proposal of contingent regulation in emerging markets promotes infrastructure-based competition in telecommunications.new markets; infrastructure investments; regulation

Agglomerative Magnets and Informal Regulatory Networks: Electricity Market Design Convergence in the USA and Continental Europe

The absence of one broadly accepted design template for liberalised electricity markets induces regulatory competition and institutional diversity. Focussing on continental Europe and the USA, this analysis explores how agents and structures accelerate or impede the move to one standard market design in the electricity sector. It reveals that market design convergence in Europe is driven by the 'Florence Consensus,' a tripartite coalition between the European Commission fostering European integration and the internal market, informal regulatory networks between grid operators, standardisation authorities and regulators, who have been coordinating their actions in the 'Florence Forum,' and epistemic communities exemplified in the Florence School of Regulation. In contrast, the United States' Federal Energy Regulatory Commission lacks support among politicians, many states' public utility commissions, the neo-liberal intelligentsia and even industrial lobbying groups to effectively push for a standardised market design. However, design convergence in the USA may be induced by the gradual expansion of multi-state markets operated by regional transmission organisations.Electricity, Deregulation, Regulatory Competition, Policy Diffusion

Assessment of First Comer Advantages and Network Effects; the Case of Turkish GSM Market

First comer advantages and network effects are frequently stated as among the most important determinants of market structures and this is particularly relevant for network economies including telecommunications markets. Connected to this, regulatory tools such as number portability have frequently been used to reduce market imperfections resulting from these effects. Within this context, this paper aims to analyze the role of these factors in creating the current market structure of Turkish GSM sector. By examining relevant data such as development of market shares in a historical perspective and by making use of consumer surveys, it is concluded that the dominant operator has benefited from being first comer in the market and established a stable market share (power) due to network effects that are used by this firm deliberately to entrench its position especially in the form of switching costs, scale economies, brand image and tariff (on-net vs. off-net pricing) differentiation; however, it is also observed that introduction of number portability lead to reduction in switching costs, increasing market competition. --First comer advantages,Network effects,Mobile telephony (GSM),number portability,Competition,Regulation and Consumer preferences

Finance, Competition, Instability, and Development Microfoundations and Financial Scaffolding of the Economy

The present paper attempts to utilize “the knowledge-based” nature of firms’ operations as set out in the diverse theoretical frameworks to stress the importance of organisational and managerial techniques in the creation of market dominance by particular financial firms in the same way that these theories have analysed industrial firms. The article will also analyze the process of competition between different firms and between different financial structures in terms of the impact of different organisational regimes on profitability, efficiency, and instability of the economic system. As the result, the diverse policy recommendations concerning financial regulation, institution building, and microfinancial structure are given.

Evading labour market regulations to preserve team performance : Evidence from the Victorian Football League, 1930-70

Sports teams that seek to maximise the number of wins, rather than profits, may not comply with league labour market regulations that compress payroll structures to promote even competition. This strategic behaviour depends on others, as teams choose a strategy to create team incentives, to which rivals will respond. A case study of four teams in a semi-professional Australian Rules football league tests the effectiveness of strategies to evade these regulations on winning percentages. Both compliance and non-compliance within this labour market regulation regime, based on different wage structures and talent distribution, were effective strategies to improve team performance

Regulating non audit services: Towards a principles based approach to regulation

Based on the argument that the benefits conferred through the provision of non audit services by audit firms outweigh the attributed costs of safeguarding the auditor's independence, this paper will not only seek to justify this argument, advance proposals which do not favour an outright prohibition of the provision of non audit services, but also consider means through which non audit services could be regulated in order to facilitate competition in the audit market. At the same time it will consider various legislation which have been introduced in recent years and which are aimed at facilitating greater disclosure of information – hence improving transparency within the audit and financial markets. “Specific measures,” it is contended, “would involve not only the introduction of new standards (for example – the disclosure of client concentration) but also the elimination of current restrictions“. Different types of safeguards which exist in order “to mitigate or eliminate threats” to the auditor’s independence, as a result of the provision of non audit services, will be considered against the regulator’s aim to facilitate competition, enhance disclosure and promote other practices which would advance the regulator’s endeavour to be more “market friendly”. The consultation on control structures in audit firms and their consequences on the audit market, a consultation which was launched by the European Commission as part of its efforts to create more market players, could be regarded as a response to such proposals to facilitate a more “market friendly” environment and also to concerns that the financial market is already over regulated. Some of the possible ways advanced by the Commission as channels for facilitating greater entry into the international market include the deregulation of the capitalisation of audit firms as a catalyst for facilitating greater entry into the audit market. Deregulation of the capital structure in this sense is considered to be a “modification of Article 3 (4) of the 2006 Directive on Statutory Audit which should however not be to the detriment of robust independence rules.”Principles based regulation; audit; directives; regulation; market; NAS (non audit services)

Generic Competition and Price Regulation in Pharmaceuticals: Evidence from the European Union

The purpose of this paper is to examine the extent of generic competition in European countries, given an understanding of these countries' different pharmaceutical price regulations and health care structures. In particular, this study investigates generic competition among the five largest European pharmaceutical markets; the United Kingdom, Germany, France, Italy and Spain, with comprehensive IMS data set for 10 years (1994-2003), in order to estimate the effect of generic entry on drug prices at the product level. Both within and across these countries, different interventions are being applied to in-patent and off-patent markets during 10 years of the study period. For example, in Germany, markets for on-patent drugs are largely unregulated and prices are set relatively freely; however, once generics enter the market, the German government uses reference pricing to set reimbursement rates. In the UK, originator medicine prices are free from direct regulatory intervention, but are subject to a rate of return regulation. Additionally, once generics enter the market, the UK's government uses price caps. France, Italy, and Spain, on the other hand, use direct price controls for originator drugs and reference pricing system for generic drugs. Accordingly, this analysis finds that generic entry has a negative effect on prices in countries with free pricing originator market, whereas in European Union (EU) countries with strict price and reimbursement regulation, generic competition is ineffective and/or counterproductive. Low regulated prices for originator products do not encourage generic entry following patent expiration. This finding is consistent with less generic firms and less competitive late entrants in regulated environments. Thus, strict price regulation undermines price competition in the off-patent sector, and cost savings from post-patent competition are not realized in countries with strict pricing and reimbursement policies

Multinational Regulatory Competition and Single-Stock Futures

Whereas these first two forms of regulatory competition are well documented and covered in the legal literature, the third form - which I call multinational regulatory competition - is newer and more difficult to characterize. Accordingly, any claims about future regulatory competition in this form necessarily are speculative. By multinational regulatory competition, I mean competition occurring when a group of regulators from more than one sovereign forms a partnership as a multinational regulator and then seeks to compete with other groups of regulators, also formed from more than one sovereign. There is some recent empirical evidence that regulatory trends in market for single-stock futures are in the direction of multinational regulatory competition. Multinational regulatory competition may be an attractive alternative to other forms of regulatory competition. As discussed in greater detail below, intrajurisdictional competition is subject to costly and inefficient turf battles over regulatory market power. Interjurisdictional competition is not subject to those same problems, but is likely to generate other costs and inefficiencies, as parties engage in territory-related regulatory arbitrage transactions, which are - at best - normatively indeterminate. Multinational competition - which involves competition between partners of regulators of different countries, and therefore captures both intranational and international competition - may be more likely to create race-to-the-top conditions. Part II describes this new framework for analyzing theories of regulatory competition (including the notion of multinational regulatory competition), and applies the framework to the regulation of single-stock futures.Part III discusses several policy issues related to the regulation of singlestock futures, and attempts to address whether or how multinational regulatory competition with respect single-stock futures might be a more efficient regulatory regime than other structures. In particular, Part III expands the discussion to focus on more general international regulatory issues relevant to single-stock futures. The three preliminary conclusions are: (1) single-stock futures will introduce opportunities for substantial leveraging of individual stock transactions in ways that previously were not available; (2) single-stock futures will shift the focus of securities fraud regulation in numerous areas, including insider trading and market manipulation, and (3) single-stock futures will allow investors to avoid costly restrictions on short sales, which should improve market efficiency. On balance, single-stock futures have the potential to make markets fairer and more efficient, and multinational regulatory competition is one likely method of encouraging such improvements

Multinational Regulatory Competition and Single-Stock Futures

Whereas these first two forms of regulatory competition are well documented and covered in the legal literature, the third form - which I call multinational regulatory competition - is newer and more difficult to characterize. Accordingly, any claims about future regulatory competition in this form necessarily are speculative. By multinational regulatory competition, I mean competition occurring when a group of regulators from more than one sovereign forms a partnership as a multinational regulator and then seeks to compete with other groups of regulators, also formed from more than one sovereign. There is some recent empirical evidence that regulatory trends in market for single-stock futures are in the direction of multinational regulatory competition. Multinational regulatory competition may be an attractive alternative to other forms of regulatory competition. As discussed in greater detail below, intrajurisdictional competition is subject to costly and inefficient turf battles over regulatory market power. Interjurisdictional competition is not subject to those same problems, but is likely to generate other costs and inefficiencies, as parties engage in territory-related regulatory arbitrage transactions, which are - at best - normatively indeterminate. Multinational competition - which involves competition between partners of regulators of different countries, and therefore captures both intranational and international competition - may be more likely to create race-to-the-top conditions. Part II describes this new framework for analyzing theories of regulatory competition (including the notion of multinational regulatory competition), and applies the framework to the regulation of single-stock futures.Part III discusses several policy issues related to the regulation of singlestock futures, and attempts to address whether or how multinational regulatory competition with respect single-stock futures might be a more efficient regulatory regime than other structures. In particular, Part III expands the discussion to focus on more general international regulatory issues relevant to single-stock futures. The three preliminary conclusions are: (1) single-stock futures will introduce opportunities for substantial leveraging of individual stock transactions in ways that previously were not available; (2) single-stock futures will shift the focus of securities fraud regulation in numerous areas, including insider trading and market manipulation, and (3) single-stock futures will allow investors to avoid costly restrictions on short sales, which should improve market efficiency. On balance, single-stock futures have the potential to make markets fairer and more efficient, and multinational regulatory competition is one likely method of encouraging such improvements

Creating competition & mastering markets; New entrants, monopolists, and regulators in transforming public utilities across the Atlantic

This paper is on the transformation of network industries or public utilities in Western Europe and the United States (US). A network industry provides a public or basic service by operating a large infrastructure system whose main characteristics are strongly increasing returns to scale, high levels of capital intensity, deployment of long-lasting industrial assets, and of vital importance to the economy (e.g. telecommunication, energy, transportation systems, water distribution, postal services, broadcasting). The objective of this paper is to look at the transformation of utility markets and to investigate whether the (re-)engineering of utility markets has effectively produced new industrial structures and has generated alternative outcomes. And secondly, whether this deliberate process to stir up the competitive dynamic is thwarted by the combination of industrial predation (e.g. legacy systems and installed customer base) and incumbency power (market leadership, closeness to government, cross-subsidisation, information monopoly) favouring only modest and gradual change or by emergent and unexpected radical forces that have surprised both the omniscient market makers and those favouring the status quo. Introducing deregulation and liberalisation and engineering market dynamics in a utility world that is still characterised by partial competition and a persistent quasi-monopoly, is no easy matter. The process of de-monopolisation can be seen as the result of ongoing strategic and tactical interactions among incumbent operators and insurgent market players, tough bargaining between those firms and supervisory regulators, and difficult negotiations at the federal level of Washington and Brussels between the state administrations, their regulators and the transnational institutions. In order to create some form of dynamic rivalry in those "monopolistic" network-based industries, the emergence of new entry/exit and competition needs to be nourished and closely monitored and supervised: the emergence and persistence of competition needs to be engineered. The concept of engineering competition is somewhat ambiguous, since we should be both aware of the shortcomings of designing and managing markets and the limitations on and problems with self-organisation in regulation. Competition is a spontaneous process and is in the domain of human action, while "regulation" is a product of human design and contains instruments and toolboxes to intervene in a dynamic environment, and those two should not be mixed. Hence, despite the popularity of the term engineering competition, "engineering regulation", with a clear and intentional focus on devising an appropriate framework facilitating competition, is probably a better term