‘Towards a Complementary Relationship – The Judge and the Regulatory Agency in the Realm of Utilities Regulation’

The CCP Spring seminar series continues on Friday 31st January with Despoina Mantzari (CCP), our newly-appointed Research Associate, who will be presenting her research entitled ‘Towards a Complementary Relationship – The Judge and the Regulatory Agency in the Realm of Utilities Regulation‘. An abstract for Deni’s seminar can be found below.


The increased recourse to expert economic evidence and analysis in utilities regulation brings to the forefront the appropriate scope of review of regulatory decisions. The question asked in this paper is positive and normative. Does and should economic evidence change the scope, process and intensity of review? On a broader level, with the ever-increasing presentation of economic evidence in regulatory disputes, what is the fit with older conceptions of the court-regulatory agency relationship in the US and the UK?

The argument unfolds in two parts. The first part identifies the divergent visions of the court-agency relationship in the US and the UK. It then uncovers the historical, institutional and constitutional factors that have given rise to the conception of an antagonistic relationship between the judge and the regulatory agency in the US and of a harmonious one in the UK. The second part challenges the assumptions that have preserved the antagonistic/harmonious status quo and offers an alternative set of considerations that should inform judicial review of economic evidence based on the notion of relative institutional competence. The integration of comparative institutional analysis into the discussions on the appropriate scope of review of economic evidence invites the assessment of the relative attributes of both the regulatory agencies and the courts (and other actors) as well as the assessment of which of these institutions allows the broadest representation of interests before deciding on the appropriate degree of deference. By taking into account their relative institutional competence in resolving the question at issue, courts are found in a complementary relationship with the agency and the other actors within the regulatory space. The normative claim of the paper is that the insights of comparative institutional analysis offer a more informed view on the appropriate scope of review of economic evidence that is in line with institutional realities and determinants of judicial behavior. The descriptive claim is that there are instances in the US and UK case law that seem to support the attention to relative institutional competence considerations.

The seminar will take place from 13:00-14:00 in the Thomas Paine Study Centre, Room 1.2.

Policy Briefing: Consumer behaviour in the British retail electricity market

Policy Briefing of CCP Working Paper 13-10:

Flores M and Waddams Price C, ‘Consumer behaviour in the British retail electricity market’ (PDF, 759KB).


  • Consumer activity plays a crucial role in securing effective markets. Understanding what determines consumer activity, and how this varies between customers, is essential to maximise the effectiveness of policies targeting consumer searching and switching.

  • Despite government efforts to promote consumer activity, the European Commission finds that consumers often fail to take advantage of the potential gains available from switching suppliers in liberalised energy markets.

  • In the UK there is growing concern that the competition process has not worked well, despite the energy regulator’s promotion of consumer empowerment and activity.

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Executive Summary: Hospital Procurement with Concentrated Sellers – A Case Study of Hip Prostheses

Executive Summary of CCP Working Paper 13-13:

Davies C and Lorgelly P, ‘Hospital Procurement with Concentrated Sellers: A Case Study of Hip Prostheses’ (PDF, 375KB).


  • Total hip replacement surgery is a routine procedure, carried out throughout the NHS, and accounting for a large share – 2.9% – of the aggregate NHS budget for surgery.
  • The market for hip prostheses is characterised by horizontal product differentiation because no one prosthesis type best meets the needs of all patients.
  • In addition to the needs of the patient, three other players are involved in the choice of hip prosthesis: the surgeon, the hospital and the prosthesis manufacturer.

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‘The hazard function of sales: An analysis of UK supermarket food prices’

The CCP’s Spring seminar series is now well underway and, on Friday 24th January, we welcome Hao Lan (CCP), a Research Associate at the Centre, who will be presenting his research on ‘The hazard function of sales: An analysis of UK supermarket food prices‘, which he has undertaken with Tim Lloyd and Wyn Morgan, his former colleagues at the University of Nottingham. An abstract for his seminar can be found below.


In this paper we examine the empirical pattern of sales behaviour among the UK’s seven largest retail chains using a scanner dataset of weekly food prices on over 500 products over a 2.5 year period. Motivating the analysis is the question ‘are products more likely to go on sale the longer they remain unpromoted?’. Theory is not unanimous and recent empirical studies also offer conflicting evidence. To address the question we estimate the hazard rate of a sale – probability that a product goes on sale in the tth week since the last sale – over the market as a whole and then separately across different national retailers. We pay particular attention to the effects of sales in like-for-like products in rival retailers on the hazard of a sale. We also find that accounting for multiple sales has a pivotal role in determining the slope of the hazard function, which actually reverses sign when proper account is taken of this seemingly innocuous technicality. Correcting for this we find that food products are more likely to be discounted the longer they remain without a sale. This result helps square the circle between price setting and modern theories of sales behaviour. Furthermore, we find that the positive time-dependent pattern varies across product format and brand status. With sales in rivals, branded products in a representative retailer are more likely to be discounted if it has been on sale previously in the rival retailers, however the hazard of a sale in private labels is unrelated to its rival sales. In the individual retailer level, the hazard results show that while most supermarkets exhibit some form of a ‘hi-lo’ pricing there is one retail chain does not (showing no time-dependence) preferring an every day low price strategy (EDLP).

The seminar will take place from 13:00-14:00 in the Thomas Paine Study Centre, Room o.1.

‘Strategic Bypass Deterrence’

We’re into our second week of the CCP’s new Spring seminar series and on Friday 17th January we are delighted to welcome Francis Bloch, a Professor of Economics at Université Paris I. He will be presenting his joint-research with Axel Gautier (HEC University of Liege) on ‘Strategic Bypass Deterrence‘. An abstract for his seminar can be found below.


In liberalized network industries, entrants can either compete for service using the existing infrastructure (access) or deploy their own infrastructure capacity (bypass). In this paper, we demonstrate that, under the threat of bypass, the access price set by an unregulated and vertically integrated incumbent is compatible with productive efficiency. This means that the entrant bypasses the existing infrastructure only if it can produce the network input more efficiently. We show that the incumbent lowers the access price compared to the ex-post efficient level to strategically deter inefficient bypass by the entrant. Accordingly, from a productive efficiency point of view, there is no need to regulate access prices when the entrant has the option to bypass. Despite that, we show that restricting the possibilities of access might be profitable for consumers and welfare because competition is fiercer under bypass.

The seminar will takes place from 13:00-14:00 in the Thomas Paine Study Centre, Room 0.1.

‘Extreme risk judgements and bank efficiency during the financial crisis: Implications for banking regulation’

The CCP seminar series returns for the Spring semester on Friday 10th January with a new programme of interdisciplinary presentations on competition and consumer policy. We kick-off this week with our Senior Research Associate Minyan Zhu (CCP) presenting her research on ‘Extreme risk judgements and bank efficiency during the financial crisis: Implications for banking regulation‘, which she has undertaken alongside Mette Asmild (University of Copenhagen). An abstract for her seminar can be found below.


The recent financial crisis highlighted how banks are exposed to risks arising specifically from their mixes of assets and sources of funding. In traditional assessments of bank efficiency, using Data Envelopment Analysis (DEA), banks are not only allowed to, but in effect also rewarded for, using extreme risk adjusted weights for the different input- and output factors. In this paper we propose a method of measuring bank efficiency, based on weight restricted DEA that limits the banks’ abilities to use extreme risk judgements.

Without a priori knowledge of ‘true’ risk levels, nor of a set of model banks whose weights can be imposed on all banks, we propose to use a range of allowable weights determined from the average weights across the efficient banks, in order to balance extreme judgements. Based on a data set comprising the largest European banks during the financial crisis, we illustrate the impact of the proposed weight restrictions in two different efficiency models; one related to the banks’ funding mix and one related to their asset mix. The results show that banks which were bailed out by their respective governments during the crisis are over-represented among those banks that are heavily affected by imposing these weight restrictions. This means that using a more balanced set of weights tend to reduce the estimated efficiency scores more for those banks that exhibited risky behaviour during the crisis, which confirms the potential bias within standard DEA which does not control for extreme weights applied by highly risky banks.

We also discuss the use of the proposed method as a regulatory tool to constrain discretion in complying with regulatory capital benchmarks such as the Basel regulatory capital ratios. Specifically the use of weight restrictions enables us to select a set of model banks and we suggest that these model banks’ internal estimates can be used as references to constrain the discretion in the choice of risk estimates (for instance, probability of default per rating grade) which are used to derive regulatory capital ratios. This will then reduce discretion in the derived capital ratios thus improving the effectiveness of the regulatory capital benchmarks.

The seminar will takes place from 13:00-14:00 in the Thomas Paine Study Centre, Room 1.4.

Amelia Fletcher awarded OBE for services to Competition and Consumer Economics in the New Year honours list 2014

Amelia Fletcher CCP is delighted to learn that Amelia Fletcher was awarded OBE for services to Competition and Consumer Economics in the New Year honours list 2014.  This is a well-deserved recognition of the work Amelia has put in over the years to help markets work better for consumers.  

We are very pleased that she brings this recognised expertise to work on similar issues within CCP.