Can Minimum Prices Assure the Quality of Professional Services?

This papers studies the effects on service quality and consumer surplus of a minimum price which is fixed by a bureaucratic non-monopolistic professional association. It shows that the price floor set by a Niskanen-type professional assocation will maximize consumer surplus only if consumers demand the highest possible average quality. If consumers demand services of lesser quality, the association's price floor will be too high if measured by consumer surplus. Moreover we show that a de-regulated market will always reproduce the favorable result of a uniformly high price in the case of top quality demand while delivering superior results in the case of a mixed demand for high and low quality services. The general picture that emerges from this discussion is that the current EU Commission's initiative to abolish fixed price schemes for professional services will not lead to a decrease in quality that would be undesirable from a standpoint of consumer protection. This holds even if we acknowledge the opponent's claim that there is a chance of deprivation of professional ethics due to price competition.Liberal professions; Price regulation; Quality; Professional association; Self-regulation; EU competition policy; Intrinsic motivation

A Modified Yardstick Competition Mechanism

This paper analyzes a modified yardstick competition mechanism (MYC), where the yardstick employed consists of a tariff basket and total costs. This mechanism has a significant information advantage: the regulator "only" needs to observe total costs and output of all firms. The modified yardstick competition mechanism can ensure a socially optimal outcome when allowing for spatial and second degree price discrimination, without increasing the informational requirements. We also introduce regulatory lags in the model. A systematic comparison between the results of traditional yardstick regulation and modified yardstick regulation is carried out. Finally, we discuss the applicability of the mechanism.Regulation, Yardstick competition, Mechanism design, Information asymmetry

Corporate Self-Regulation vs. Ex-Ante Regulation of Network Access: A Model of the German Gas Sector

This paper compares the outcomes of corporate self-regulation and traditional ex-ante regulation of network access to monopolistic bottlenecks. In the model of self-regulation, the domestic gas supplier and network owner and the monopsonistic gas customer fix quantities and the network access price, whereas the competitive fringe of foreign gas producers (third party) and the household customers are excluded from the agreement. The results are then compared with the outcome of traditional ex-ante regulation. We find that while industrial self-regulation leads to an exploitation of households, the effect on the foreign producers is unclear.Ex-ante regulation; Competition policy; Non-discriminatory network access; Bargaining

Increasing Block Tariffs in the Water Sector: A Semi-Welfarist Approach

We analyze the properties of progressive water tariffs that are often applied in the sector in the form of discretely increasing block tariffs (IBT). We are particularly interested in water tarification in a poverty context where a subsistence level of water has to be allocated to each household. Our approach is "semi-welfarist" to the extent that we analyze second-best pricing schemes that may be applied in practice due to "fairness" or other, non-welfarist considerations. In our theoretical model we compare a modified Coase-tariff and a progressively increasing block tariff with respect to water consumption, water expenses and utility levels. When we impose cost coverage on the water utility, there are clearly adverse effects on the "almost poor" by introducing a progressive tariff. This result is supported with a numerical application using real data from Bangladesh: progressive tariffs may fail to achieve "fair" cross-subsidization of low-income groups.water, tarification, prices, fairness, distribution, institutions

A Theory of Optimal Green Defaults

This paper develops an analytical framework for studying the Baumol–Oates efficiency of traditional single instrument abatement policies vis-à-vis green defaults in the face of price inertia and passive choice by subpopulations. In this special case of behavioural heterogeneity, command and control approaches can outperform price-based instruments while pure tax/subsidy schemes need to be adjusted in order to achieve politically desired levels of abatement. We also prove that choice-preserving nudges are superior to any single-instrument policy in this case. An average marginal abatement cost rule is developed to optimize the green defaults and traditional policies of standards and prices under different degrees of market rigidity.EC/H2020/653255/EU/PLAtform for Climate Adaptation and Risk reDuction/PLACAR

A theory of optimal green defaults

This paper develops an analytical framework for studying the Baumol-Oates efficiency of traditional single instrument abatementpolicies vis-à-vis green defaults in the face of price inertia and deliberate defaultingby subpopulations. In this special case ofbehavioural heterogeneity, command and control approaches can outperform price-based instruments while pure tax/subsidy schemes need tobe adjusted in order to achievepolitically desired levels of abatement. We also prove that choice-preserving nudges are superior to any single-instrument policy in this case. An average marginal abatement cost rule is developed to optimise the green defaults and traditional policies of standards and prices under different degrees of market rigidity

The Economics of Water

This open access textbook provides a concise introduction to economic approaches and mathematical methods for the study of water allocation and distribution problems. Written in an accessible and straightforward style, it discusses and analyzes central issues in integrated water resource management, water tariffs, water markets, and transboundary water management. By illustrating the interplay between the hydrological cycle and the rules and institutions that govern today’s water allocation policies, the authors develop a modern perspective on water management. Moreover, the book presents an in-depth assessment of the political and ethical dimensions of water management and its institutional embeddedness, by discussing distribution issues and issues of the enforceability of human rights in managing water resources. Given its scope, the book will appeal to advanced undergraduate and graduate students of economics and engineering, as well as practitioners in the water sector, seeking a deeper understanding of economic approaches to the study of water management

The Economics of Water : Rules and Institutions

This open access textbook provides a concise introduction to economic approaches and mathematical methods for the study of water allocation and distribution problems. Written in an accessible and straightforward style, it discusses and analyzes central issues in integrated water resource management, water tariffs, water markets, and transboundary water management. By illustrating the interplay between the hydrological cycle and the rules and institutions that govern today’s water allocation policies, the authors develop a modern perspective on water management. Moreover, the book presents an in-depth assessment of the political and ethical dimensions of water management and its institutional embeddedness, by discussing distribution issues and issues of the enforceability of human rights in managing water resources. Given its scope, the book will appeal to advanced undergraduate and graduate students of economics and engineering, as well as practitioners in the water sector, seeking a deeper understanding of economic approaches to the study of water management.TU Berlin, Open-Access-Mittel - 202

The Economics of Water

This open access textbook provides a concise introduction to economic approaches and mathematical methods for the study of water allocation and distribution problems. Written in an accessible and straightforward style, it discusses and analyzes central issues in integrated water resource management, water tariffs, water markets, and transboundary water management. By illustrating the interplay between the hydrological cycle and the rules and institutions that govern today’s water allocation policies, the authors develop a modern perspective on water management. Moreover, the book presents an in-depth assessment of the political and ethical dimensions of water management and its institutional embeddedness, by discussing distribution issues and issues of the enforceability of human rights in managing water resources. Given its scope, the book will appeal to advanced undergraduate and graduate students of economics and engineering, as well as practitioners in the water sector, seeking a deeper understanding of economic approaches to the study of water management