Hungary premier’s price-cap move is with polls in mind

Headline HUNGARY: Price-cap move is with polls in mind

Price cap regulation and water quality

A number of studies suggest that price cap regulation may reduce the quality of the regulated good. This paper analyzes the impact on drinking water quality of a shift from cost-of-service to price cap regulation in Denmark, using a balanced panel of drinking water companies, for the period 2008 to 2016. The price cap was introduced in 2011 for companies above a certain threshold size. We exploit this quasi-experimental setting to estimate the impact of the shift in regulation using a regression discontinuity difference-in-differences approach. Our measure of drinking water quality is based on results from a compulsory surveillance drinking water testing program, which investigates whether or not water samples contain a level of microbiological content that exceeds limit values. More specifically, we compare the change over time in water quality for a treatment group of 113 companies regulated with price caps that have a size close to the threshold size for being regulated, with the change in drinking water quality for a control group of 282 companies that are below but close to the threshold size. We find that the shift in regulation has not caused a reduction in drinking water quality in Denmark.

An Application of the Tourist Test to Colombian Merchants

Cash is still widely used in Colombia, even among merchants that accept payment cards. Indeed, 60% of these merchants use dissuasive strategies to make their clients pay with cash. This shows that merchant service costs (MSC) for cards are not optimal in the sense of the Tourist Test. We present estimates of MSC compatible with the Tourist Test, such that merchants are indifferent between being paid with cash or cards. We find that cash is less costly than cards at the average retail-sales transaction-value, hence there is no positive optimal MSC at this ticket value. For the average card transaction ticket, the optimal MSC would be positive but far below the rates charge by the industry (0.74% in a short-term scenario). Yet, the additional incentive that sales-tax evasion provides to cash payments reduces the Tourist Test MSC to 0.44%. Our estimates for long-term scenarios yield even lower optimal MSC. An average price cap regulation that strikes a middle ground between these figures, and is complemented with sales-tax evasion measures, should discourage merchant strategies that deter consumers from paying with cards and will accommodate the wide heterogeneity in merchants´ scale, payment processing processes and ticket size. These results should be taken as a guideline as the estimations depend on the underlying assumptions and only consider the merchant´s side of the card industry.

Análisis de impacto del bienestar social del modelo de la concesión del Sit-Arequipa

El presente artículo recoge la realidad de los contratos de concesión en materia de transporte público urbano tiene como objetivo determinar un método de regulación tarifaria que permitirá optimizar el bienestar social en el modelo de concesión del SIT-Arequipa, la metodología empleada se sustentó en el enfoque cuantitativo que estuvo conformado por dos métodos, el modelo regulatorio tarifario por tasa interna de retorno que se contrastó con los datos arrojados al aplicar el modelo precio tope o RPI-X. Como hipótesis de investigación, el estudio se planteó establecer si el modelo de regulación tarifaria por factor X (price cap) es el más eficiente para la modalidad de concesión del Sistema Integrado de Transporte en ciudades intermedias como Arequipa, siendo sometida a una serie de análisis que permitieron observar las variables que componen los sistemas financieros de este sistema de transporte y cuyo resultad demostró que, mientras se incorpore modelo de regulación tarifaria por precio tope o RPI-X se pueden obtener disminuciones sostenidas de la tarifa de usuario final de transporte público, con lo cual se producen mejoras en el bienestar social.

Price Cap Models in Pharmaceutical Online-to-Offline Supply Chains

Pharmaceutical supply chains are often highly complex with conflicting objectives of social welfare and profit maximization. Furthermore, there are various stakeholders including pharmaceutical manufacturer, distributors, retailers, patients, and the government. In this paper, we consider a two-stage supply chain consisting of one pharmaceutical manufacturer and a pharmacy with online and offline channels. We focus on four price cap models: no price cap regulation, pharmaceutical manufacturer’s price cap regulation, pharmacy price cap regulation, and linkage price cap regulation. We apply game theory, investigate how the price cap regulations affect the firms’ pricing, and evaluate the economic performance and social welfare of the dual-channel pharmaceutical supply chain. Our findings show that first, like the single-channel pharmaceutical supply chain, the profit of the regulated firm always decreases and the profit of the unregulated firm always increases when they are under one-sided price cap regulations. Second, the impacts of the linkage price cap regulation on the supply chain are more complicated depending on the linkage coefficient and market share. Overall, our findings can provide theoretical and practical insights to help the government devise price cap regulations for complex modern pharmaceutical supply chains.

Does price-cap regulation work for increasing access to contraceptives? Aggregate- and pharmacy-level evidence from Colombia

Background: Price caps through international reference pricing are widely used around the World, but not so commonly in over-the-counter markets (OTC). We study this type of regulation for the case of oral contraceptives in Colombia, which is a de facto OTC market. Objectives: We aim to establish whether the regulation triggered a competitive response within and across product categories (active pharmaceutical ingredients).We also study whether regulated products targeted to customers from high socio-economic status are now distributed in pharmacies from low socio-economic neighborhoods.Methods: First, we use a fixed effects linear panel model to estimate the change in prices and quantities associated with the new regulation for regulated and non-regulated products using administrative data at the wholesale level, according to three price tiers. Second, we conducted an audit study with 213 community pharmacies in the city of Bogotá, Colombia. We visited pharmacies twice, before and after the introduction of the price cap, collecting information on prices and availability of six selected brands. Findings: The wholesale-level analysis reveals a price reduction in regulated and non-regulated products with a regulated active ingredient. Traded quantities increase for the same product types, but only for those in the most expensive categories. Besides, the traded quantities of non-regulated products decrease.However, the traded quantities of non-regulated products in the Top, Intermediate, and Bottom price categories decreased. Although this price reduction is also transmitted to community pharmacies, the availability of the high-end and mid-range contraceptives included in our audit study decreases as well. We provide suggestive evidence that reduction in the availability of was larger in areas of low socio-economic status.Conclusions: Price cap regulations that might look as effective in lowering prices and expanding access at the aggregate level could conceal stocking patterns that negatively affect the product availability for the final consumer.

NT DISOC 90 - A Nova Metodologia de Reajuste dos Planos de Saúde Medirá os Custos, os Preços e a Eficiência das Operadoras?

A Agência Nacional de Saúde Suplementar (ANS) aprovou uma nova metodologia de cálculo do reajuste dos planos de saúde individual e familiar em 19 de dezembro de 2018. A regulação dos preços é necessária em vista das várias falhas de mercado presentes nesse setor: demanda induzida, risco moral, externalidades – por exemplo, no caso do tratamento de doenças infectocontagiosas –, entre outras (Cutler e Zeckhauser, 2000; Ocké-Reis e Cardoso, 2006). Também na medicina se verifica a chamada “doença dos custos” (Baumol, 1993, p. 19), que conduz a uma apreciação histórica dos serviços de saúde em relação a outros bens e serviços de consumo. Nosso objetivo é compreender os pressupostos teóricos dessa metodologia, tendo em mente o exame da sua capacidade de medir a evolução dos custos e preços desse segmento, bem como de mensurar a eficiência das operadoras em funcionamento no mercado de planos de saúde brasileiro Cabe assinalar, a agência reguladora não fez aparentemente qualquer avaliação de impacto dessa nova regra2 – por exemplo – a partir dos dados de desempenho das operadoras observados no passado, o que nos deixou reticentes para construir cenários empíricos, a partir da utilização dos microdados da ANS. De fato, como os microdados das operadoras não estão disponíveis para nós, nenhum exercício empírico foi realizado nesta nota técnica (NT). Nessa linha, dividimos este trabalho em quatro seções, além desta introdução. Na seção 2, faremos uma breve retrospectiva das alternativas regulatórias avaliadas pela ANS. Na seção 3, questionamos algumas dimensões técnicas assumidas pela nova metodologia, em especial seu modelo de regulação por desempenho e o fator de ganhos de eficiência (FGE) – equivalente ao chamado fator X dos modelos de regulação por teto de preços (price cap).3 Na seção 4, além de apontar lacunas presentes no debate, sugerimos uma abordagem mais ousada para se regular o setor de saúde suplementar, que requereria uma quebra de paradigma e uma conciliação dessa regulação com a do próprio Sistema Único de Saúde (SUS). Na seção 5, resumiremos as principais conclusões deste trabalho.

Improving efficiency in the MSW collection and disposal service combining price cap and yardstick regulation: The Italian case

The municipal solid waste collection and disposal service is a key element of the European strategy aimed at moving towards a circular economy. An efficient municipal solid waste collection and disposal is closely related to both lower waste tax and higher welfare of the interested population. In Italy, the lack of a centralized regulatory framework has determined heterogeneous performances of sector operators across the country. Firstly, we will be estimating the productive efficiency in different optimal territorial areas and secondly we will be forecasting the economic benefits that would arise under a new regulatory regime. Our approach combines the well-known yardstick competition and the price-cap mechanisms. Results suggest that if all territorial areas converged to the most efficient ones, a potential saving between 12% and 19% emerges, i.e., up to €2bn savings out of €10.05bn total tax revenue in 2015.