Economics of Regulation

The lecturers are Annalisa Vinella and Giuseppe Coco from UB in Bari (IT).

Students must have followed a course of Microeconomics, providing them with a good knowledge of the standard consumption and production models. The study of market inefficiencies stemming from cost sub-additivities, externalities, and asymmetric information is a prerequisite, although sub-additivities and sunk costs will be discussed in some depth during the course.

Part 1

• The theory of natural monopoly (VVH, chapt. 11)
• Traditional tariff regulation (RoR, FDC, Peak-load, Incentive regulation) (VVH, Chapt. 12)
• Price caps (ACV, Chapt 6)
• Market design (OECD)
• Impact assessment and administrative burdens in the EU (European Commission)

Part 2

• Optimal monopoly regulation: Static analysis (AVC, Chapt 2)
• Multiproduct and dynamic analysis (AVC, Chapt 3)
• Competition and liberalization (AVC, chapt. 4)
• Electricity liberalisation in the European Union: An overview (Pollitt)

This course aims at providing students with the main instruments for evaluating regulatory structures, with special reference to economic regulation. The course includes an in-depth treatment of regulatory impact analysis and the restructuring process in the energy industry at EU level.

• V. Viscusi, Harrington Economics of Regulation and Antitrust, The MIT Press (VVH)
• C. Armstrong & Vickers, Regulatory Reform, The MIT Press (ACV)
• OECD (2001), ‘Restructuring Public Utilities for Competition’ (http://www.oecd.org/dataoecd/6/60/19635977.pdf)
• European Commission ‘Impact Assesment Guidelines’ and ‘Annex’ (http://ec.europa.eu/governance/impact/commission_guidelines/docs/iag_2009_en.pdf) and (http://ec.europa.eu/governance/impact/commission_guidelines/docs/iag_2009_annex_en.pdf)
• M.G. Pollitt (2009), Electricity Liberalisation in the European Union: A Progress Report, EPRG Working Paper 0929, Cambridge Working Papers in Economics 0953

Upon successful completion of the course, students should be able:

• To evaluate the restructuring process ongoing in Europe in the utilities sector, and particularly the adequacy of tariff mechanisms, by using the tools of economic theory

The course consists of 25 hours and is spread over one or two weeks. One lecture lasts 4 hours.

Students are evaluated during a written exam of two hours.