Essays in the economics of regulation and competition

Esteve Guasch, Vicenc (2022) Essays in the economics of regulation and competition. Doctoral thesis, University of East Anglia.

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This thesis is divided into two parts, each of them covering a relevant topic in the economics of regulation and competition. Part I is devoted to the England and Wales water sector, and more concretely on the interaction between the regulatory regime and capital structure. Part II studies the competitive constraint from private label products on branded products in different categories of retail goods.

Since its privatization in 1989, England and Wales water firms have increased leverage levels dramatically, raising alarms among regulatory authorities, the general press, and academics. However, the relevant literature suggests that this is a welfare enhancing phenomenon in regulated sectors. Firms can strategically use debt to obtain higher prices, and this prevents the regulator to behave opportunistically, yielding higher investment and welfare. We test this theory in Chapter 1. We find that this is not the case and therefore our results pose serious questions on whether the main theoretical framework applies in our case study. In Chapter 2, we explore alternatives theories and find that firms have reacted to regulatory tightening by increasing leverage in order to maintain high returns, which works in the opposite direction of the theory.

The aim of Part II is to assess the competitive constraint from private label to branded products, which is central in competition analysis. We estimate a LA/AIDS demand system in five retail product categories, which allows us to recover elasticities and diversion ratios between brands, including the private label. Based on our findings, we conclude that (1) private label products should generally be considered in the same market as the branded products, (2) high market shares for private label products imply a tight competitive constraint on branded products, (3) lower private label shares impose a less severe constraint, but still significant.

Item Type: Thesis (Doctoral)
Faculty \ School: Faculty of Social Sciences > School of Economics
Depositing User: Chris White
Date Deposited: 23 Nov 2022 13:55
Last Modified: 23 Nov 2022 13:55

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