The Elmar model: output and capacity in imperfectly competitive electricity markets

With the ongoing liberalization and integration of European energy markets and the increasing worries about security of supply, the need for thorough economic analysis of electricity markets is growing. Elmar is a model for the European electricity market, taking into account imperfect competition through conjectural variations, as well as imperfect international competition due to import capacity restrictions. The model distinguishes between competition on the output market and competition in capacity investments. We find that the least competitive of these determines wholesale prices.

Estimating Network Effects and Compatibility in Mobile Telecommunications

This paper provides empirical evidence on the extent of network effects and compatibility between networks in mobile telecommunications. We specify a structural model of demand for mobile telephone service, which allows us to identify the parameters of interest from the S-shape of mobile service diffusion. The network effects are measured by the dependence of consumer willingness to pay on the installed base of subscribers. Compatibility is measured by the relative extent of cross- and own-network effects. As such, it indicates whether the network effects operate at the firm level, at the industry level, or at both. We then estimate this model for the Polish mobile telephone industry using quarterly panel data for the period 1996-2001. We find strong network effects, which give rise to upward-sloping demand, and, despite full interconnection of the mobile telephone networks, low compatibility. We show also that ignoring network effects in empirical models of emerging network industries might substantially bias downward the estimated price elasticity of demand. ZUSAMMENFASSUNG - (Schätzung von Netzwerkeffekten und Kompatibilität in Mobilfunktelekommunikation) Der vorliegende Beitrag bietet empirische Evidenz für den Umfang von Netzwerkeffekten und Netzwerkkompatibilität in der Mobilfunktelekom-munikation. Wir spezifizieren ein strukturelles Modell für die Nachfrage von Mobilfunkdienstleistungen, das die Parameter von Interesse mithilfe der S-förmigen Funktion der Dienstleistungsdiffusion identifiziert. Die Netzwerkeffekte werden durch die Abhängigkeit der Zahlungsbereitschaft der Konsumenten von der installierten Abonnentenbasis gemessen. Netzwerkkompatibilität wird durch den relativen Umfang der Quer- und Eigen-Netzwerkeffekte gemessen. Sie weist darauf hin, ob Netzwerkeffekten auf Unternehmensebene, auf Industrieebene, oder auf beiden Ebenen bestehen. Dann schätzen wir das Modell für die Polnische Mobilfunkindustrie mit vierteljährlichen Paneldaten für 1996-2001. Wir stellen starke Netzwerkeffekte fest, die eine positive Steigung in der Nachfragefunktion verursachen, und - trotz der technisch vollständigen Querverbindung der Mobilfunknetze - niedrige Kompatibilität. Wir zeigen auch, dass das Übersehen von Netzwerkeffekten in empirischen Modellen von neuen Netzwerkindustrien die geschätzte Preiselastizität der Nachfrage signifikant nach unten verzerren kann.Structural Econometric Model, Network Effects, Compatibility, Mobile Telecommunications

Rail Privatisation: The Economic Theory

The purpose of this paper is to examine the relevance of economic theory to the rail privatisation proposals contained in the Railways Act 1993. After a review of the latest rail privatisation literature four major themes emerged: (1) Contestability and Barriers to Entry. (2) Franchising. (3) Vertical Integration. (4) Horizontal Integration. Following a short review of the rail privatisation proposals the paper presents each theme in the context of the proposals. In conclusion, we highlight a number of future issues which will require monitoring and research in the future. In particular, we identify a number of hypotheses, put forward by both those in favour and against the Government's proposals, that should be tested

The Liberalisation of the Energy Sector in the European Union

The energy sector covers the coal, oil, gas and electricity sector. The European coal and oil sector have already been liberalised in the past. The current debate concerns mainly the electricity and the gas sector. In this paper we will concentrate on the electricity sector for three reasons. First, the sector is more important in terms of value added, secondly it is considered to be more complex and, finally, the opening of the electricity market precedes that of the gas market. Obviously, this does not mean that the gas sector should not be studied as there are many challenges left. In section II, we discuss the institutional background for the liberalisation. Section III then analyses the British experience. This is of interest because the UK has liberalised its market about 10 years ago and this experience has been the subject of extensive economic research. In the sections IV to VII, we focus on the four main problems in the liberalisation of the European electricity market: the stranded costs issue, the cross-subsidies issue, the pricing of transmission and the regulation of the environment. Finally, section VIII concludes.

Two-Sided Markets and Electronic Intermediaries

The object of this paper is to discuss on-line intermediation from the perspective of two-sided markets. It builds a simple model of the intermediation activity when trading partners are involved in a commercial relationship and uses it to illustrate some of the results that emerge in the two-sided market literature, as well as to discuss some new aspects. The first part concentrates on a monopoly intermediation service and discusses both efficient pricing and monopoly pricing. The second part discusses the nature of competition between intermediaries, addressing issues as competitive crosssubsidies, multi-homing or tying.intermediation, two-sided market, network, cross-subsidy, tying

The economics of interchange fees and their regulation : an overview

Debit cards ; Credit cards

The Economics of Competition Policy: Recent Developments and Cautionary Notes in Antitrust and Regulation

Competition policy has become more prominent while the thinking underlying those policies has undergone substantial revision. We survey advances in antitrust economics and the economics of regulation. Increasing reliance on non-cooperative game theory as a foundation for antitrust has led to rethinking conventional approaches. We review some of these contributions in the context of mergers, vertical restraints, and competition in "network industries." Turning to regulation, we review standard rationales and identify some major contemporary refinements, with examples of the motives behind them and their application. After brief thoughts on privatization, we conclude with suggestions on design and implementation, with some observations on whether these developments are as valuable in the corridors of policy as they may be in the halls of academe.