Economics of Regulating Markets

Faculteit Economie en Bedrijfskunde
Jaar 2017/18
Vakcode EBM148A05
Vaknaam Economics of Regulating Markets
Niveau(s) master, uitwisseling
Voertaal Engels
Periode semester II b
ECTS 5
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Uitgebreide vaknaam Economics of Regulating Markets
Leerdoelen Upon completion of the course the student is able to:
1. use insights from micro-economics, finance as well as international economics to discuss the way network industries in particular in energy, but also in transport and telecom could be regulated;
2. apply (basic) quantitative techniques to assess the costs of a network operator, to determine the appropriate reward on capital (WACC) and to evaluate how competition in wholesale and retail energy markets evolves;
3. understand academic papers on the design of regulation of in particular energy markets and how the effects of regulation could be evaluated.
Omschrijving The central theme of the course is: how can governments (regulators) effectively improve the functioning of markets, in particular those markets which are characterized by economies of scale resulting in natural monopolies? Examples of those markets are energy markets, transport markets and telecom markets. Topics to be discussed are among others: how to determine the tariffs that an operator of an gas network, airport or rail track is allowed to charge on users of the network infrastructure as gas users, airlines and railway companies, respectively? How to implement competition in the energy industry, both on wholesale level and retail level?
Knowledge of economics of regulating market is useful for positions within regulated companies (TenneT, Gasunie, Schiphol, Prorail, etc.), companies using regulated infrastructures (airlines, large energy users, etc.) regulatory bodies (ACM, ACER, etc.) and consultancies (PWC, Oxera, etc.).
The course not only deals with the economic theory behind the regulation of markets, but also applies this theory to real-life problems in particularly energy markets, but also in telecom and transport.
The course consists of 7 meetings of 3 hours per week. In each meeting we discuss a specific topic. We start by discussing the question why some markets, in particular energy markets, need regulation and others not (Meeting 1). Then, we discuss how the government could regulate these markets (Meeting 2). These first two meetings are meant to give the students some theoretical background in economic regulation. Afterwards, we have two meetings in which we discuss key issues in the daily practice of regulation. The first one is on benchmarking on efficiency (Meeting 3). Here we discuss how to assess the costs of a regulated firm. In the other one we discuss how to determine the appropriate reward (i.e. the WACC) on capital which is invested in the network (Meeting 4). These questions are highly important for regulated firms as it affects how much profit they are allowed to make and to which extent they are able to finance the investments. Then, we go into in the question how to implement competition in these industries. These sessions are mainly directed at energy markets. First, we discuss the design of electricity and gas markets on wholesale level (Meeting 5). Afterwards, we analyze how electricity and gas markets can become more integrated on an international level (Meeting 6). In the final meeting, we pay attention to the retail market, discussing how competition can be implemented in markets where consumers (instead of firms) play a key role (Meeting 7).
For those not having a strong background in microeconomics, two additional lectures are organized in which all relevant microeconomic concepts are discussed.
This course is part of the focus area 'Energy'. When you focus your MSc on energy subjects you will be awarded an official acknowledgement on your diploma, improving and broadening your career opportunities in the energy sector. Prerequisites are mentioned in the Teaching and Examiniation Regulations: 'Focus areas in the master programmes'.
Uren per week 4
Onderwijsvorm gecombineerde hoor-/werkcolleges
(1 guest lecture and option to join excursion to energy companies (voluntary).)
Toetsvorm opdracht(en), presentatie(s)
(Determination of final grade: weekly assignments: max 20%; written exam: max 80%)
Vaksoort master
Coördinator prof. dr. M. Mulder
Docent(en) prof. dr. M. Mulder , M. Ollar, PhD.
Verplichte literatuur
Titel Auteur ISBN Prijs
Scientific articles and working papers as well as chapters from books. The literature will be made available through the Student Portal. Various
Entreevoorwaarden Open to all MSc students, but students are recommended to have some background in microeconomics and finance.
Opmerkingen Info: Prof. Machiel Mulder, e-mail machiel.mulder@rug.nl
Secretary: Kim Vudinh, e-mail k.m.vudinh@rug.nl, room 5411.0734
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