OVERVIEW

The course will cover the basic principles of market regulation, from market failures to the main approaches for regulating different type of prices. quality and investments. Moreover, it will focus on energy markets and their special needs in term of regulation. Theoretical models and case studies will be analyzed in order to improve the comprehension of regulated markets, with a focus on enrgy markets. In particular, solid evidence and multiple anecdotes will be delivered in order show the concrete relevance of theoretical developements and to facilitate the understanding of reality. The relevance of the institutional capacity of the authorities for the optimal design of regulation will also be analyzed, together with policy implications of different regulation approaches.

AIMS AND CONTENT

LEARNING OUTCOMES

The course covers the basic principles of market regulation, from market failures to the main approaches for regulating different type of prices, with a particular focus on energy markets and their special needs in term of regulation. In the first part of the course the issue of the different rationales for regulation are discussed, including the conventional rationale based on the definition of natural monopoly and the need for addressing allocative and productive efficiency; moreover, alternative ways to control or influence firms’ behavior are analyzed, like competition for the market, contestability, state ownership, reliance on competition law and negotiated agreements. In the second part of the course, after discussing the main type of industries structures typically observed in industries subject to regulation, the principles of regulation of the core network activities are analyzed, distinguishing among the principles that might inform the regulation of the activities that more closely resemble natural monopoly and those that might inform the competitive activities in the production chain. The analysis of the key pricing principles in different regulatory settings (full information, multi-product firms, imperfect information, multi-period context) is followed by the discussion of the methods by which price regulation is applied in practice to those activities where competition is limited or non-existent, like core network activities (pipes, cables, wires, rails). Such part of the course focuses on the general properties of each type of price regulation and provides a framework for the analysis of the more specific regulatory approaches applied in specific markets, with particular reference to energy markets (gas and electricity). Moreover, the course sets out the economic principles that might inform regulation in the presence of competition in some segments of the supply chain (eg. retailing or generation in energy sectors) and where the issue of the access to the network becomes relevant. The last part of the course discusses the main insights from behavioral industrial organization that has affected the regulatory principles and how such insights have been applied by regulators. Finally, after discussing the characteristics of the different institutions that influence and apply economic regulation in practice, the course analyzes the specific regulatory issues associated to energy markets. In particular the analysis includes the physical and economic characteristics of the gas and electricity sectors, the regulatory approach, the scope and effects of restructuring policies adopted in different countries and the regulatory policy issues. Within this framework, solid evidence and multiple anecdotes are delivered in order show the concrete relevance of theoretical developments and to facilitate the understanding of reality.

AIMS AND LEARNING OUTCOMES

The course covers the basic principles of market regulation, from market failures to the main approaches for regulating different type of prices, with a particular focus on energy markets and their special needs in term of regulation. In the first part of the course the issue of the different rationales for regulation are discussed, including the conventional rationale based on the definition of natural monopoly and the need for addressing allocative and productive efficiency; moreover, alternative ways to control or influence firms’ behavior are analyzed, like competition for the market, contestability, state ownership, reliance on competition law and negotiated agreements.

PREREQUISITES

Knowledge of a undergraduate microeconomics course.

TEACHING METHODS

Lectures and seminars of field experts, videos and  frorntal lessons.

Students who have valid certification of physical or learning disabilities  and who wish to discuss possible accommodations or other circumstances regarding lectures, coursework and exams, should speak both with the instructor and with Professor Elena Lagomarsino elena.lagomarsino@unige.it, the Department's disability liaison.

SYLLABUS/CONTENT

Chapter 1: Introduction to Regulation

Chapter 2: Why Regulate 

The chapter examines why certain industries are subject to economic regulation, and considers: Why should we regulate certain industries and activities? ,Why do we regulate certain industries and activities? 

Chapter 3: Is Economic Regulation Inevitable? What are some alternatives?  

The chapter considers alternatives to the standard approaches to economic regulation, including: franchising or ‘competition for the market’, state ownership, negotiated agreements, a reliance on ex post competition law, ‘deregulatory’ policies.

Chapter 4: Principles of regulation for monopoly (core network) activities.

The chapter describes general principles for regulating the core network activities of public utility industries (e.g.: the pipes, wires and rails).

Chapter 5: Price Regulation

The chapeter examines different forms of price regulation, including: rate of return regulation, price cap regulation and other alternative approaches. 

RECOMMENDED READING/BIBLIOGRAPHY

Modern Economic Regulation

An Introduction to Theory and Practice

Christopher Decker

University of Oxford

last edition

TEACHERS AND EXAM BOARD

LESSONS

LESSONS START

second semester

Class schedule

The timetable for this course is available here: Portale EasyAcademy

EXAMS

EXAM DESCRIPTION

Home assigments and written examination,