85 results for Evans, Lewis, Scholarly text

  • Forward Markets: The Absent Day-Ahead Market

    Evans, Lewis; Counsell, Kevin (2003)

    Scholarly text
    Victoria University of Wellington

    Lewis Evans, at a half day seminar presented, Measuring and developing the performance of New Zealand's power market in September 2003. A more detailed paper by Kevin Counsell and Lewis Evans entitled Day-Ahead Electricity Markets: Is there a Place for a Day-Ahead Market in the NZEM is available through this link

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  • Sunk Investments, Regulation and the Cost of Capital

    Evans, Lewis; Guthrie, Graeme (2004)

    Scholarly text
    Victoria University of Wellington

    Professor Lewis Evans presented Sunk Investments, Regulation and the Cost of Capital at an ISCR Auckland seminar: Calculating the Cost of Capital: A Revisionists' Appraisal.

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  • Regulation of Lines Networks

    Quigley, Neil; Evans, Lewis (2003)

    Scholarly text
    Victoria University of Wellington

    Lew Evans and Neil Quigley presented, Regulation of Lines Networks at an ISCR half day seminar in March 2003.

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  • Struggling Upstream Efficient Water Allocation on the Waitaki River and Elsewhere

    Evans, Lewis; Counsell, Kevin (2004)

    Scholarly text
    Victoria University of Wellington

    Kevin Counsel and Professor Lewis Evans presented Struggling Upstream: Efficient Water Allocation on the Waitaki River and Elsewhere in Wellington and Auckland in July 2004.

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  • The Required Rate of Return with Sunk Investments

    Evans, Lewis; Guthrie, Graeme (2003)

    Scholarly text
    Victoria University of Wellington

    Professor Lewis Evans presented The Required Rate of Return with Sunk Investments at the ISCR forum, The Cost of Capital for the Regulated Firm in August 2003. Two papers associated with this presentation are available for through these links: 'Risk, Price Regulation and Irreversible Investment' 'Asset Stranding is Inevitable in Competitive Markets'

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  • Competition Law in Small Market Economies - Special Application to New Zealand Commentary

    Evans, Lewis; Arnold, Terence (2006)

    Scholarly text
    Victoria University of Wellington

    Slides by Lew Evans and Terence Lawrence presented Competition Law in Small Market Economies - Special Application to New Zealand Commentary at the Competition Law and Study Institute conference held in Wellington August 2006.

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  • Application of Cost-Benefit Analysis Under Competition Law: The Gas Enquiry

    Evans, Lewis (2006)

    Scholarly text
    Victoria University of Wellington

    Lew Evans presented Application of Cost-Benefit Analysis Under Competition Law: The Gas Enquiry at the Competition Law and Study Institute conference in Wellington in August 2006.

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  • Using Regulation to Resolve Investment and Pricing Issues in Transmission: Round 1

    Evans, Lewis (2006)

    Scholarly text
    Victoria University of Wellington

    Lewis Evans presented Using Regulation to Resolve Investment and Pricing Issues in Transmission in Wellington in April 2006.

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  • Parallel Importation and Service Quality: An Empirical Investigation of Competition between DVDs and Cinemas in New Zealand

    Evans, Lewis; Burgess, Matt (2005)

    Scholarly text
    Victoria University of Wellington

    Investigations into the causes and effects of parallel importing have concentrated on price discrimination but arbitrage can also occur on non-price dimensions. Using a natural experiment in the New Zealand film distribution industry between May 1998 and November 2001 we examine the effect of parallel importing on quality as it relates to the timing of the availability of film media. We demonstrate that a) cinema revenues were undermined as consumers substituted viewing films on parallel imported DVDs for thecinema format and b) that studios responded to the threat of parallel imported DVDs by bringing forward the release of films into New Zealand cinemas. The reduced delay between US and New Zealand cinematic release dates is shown to be consistent with the introduction of competition when timing is a dimension of quality and choice. We conclude that parallel importation of DVDs almost certainly resulted in a net increase in welfare in New Zealand.

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  • Estimating the WACC in a Regulatory Setting: An Assessment of Dr Martin Lally's paper 'The Weighted Average Cost of Capital for Electricity Lines Businesses' of 8 September 2005

    Boyle, Glenn; Evans, Lewis; Guthrie, Graeme (2006)

    Scholarly text
    Victoria University of Wellington

    In September 2005 the New Zealand Commerce Commission (NZCC) released a document (TheWeighted Average Cost of Capital for Electricity Lines Businesses by Dr Martin Lally referred to as LINES hereafter) that estimates a weighted average cost of capital (WACC) for New Zealand electricity lines businesses and proposes a means for detecting future excess earnings. At about the same time the NZCC also began seeking submissions on another document (Draft Guide- lines: The Commerce Commission's Approach to Estimating the Cost of Capital 2005) that addresses the topic of an appropriate framework for the WACC in the New Zealand regulatory environment. Although no specific author is attributed to the latter its material content is drawn from LINES. In this paper we undertake a detailed analysis of the approach followed in LINES. We do so from the perspective of a referee who has been asked to provide a review of that report in order to assess its suitability for publication in an edited book or journal that adheres to conventional academic standards. Although LINES has not of course been submitted for publication orreview of this kind its contents and recommendations should nevertheless meet minimum standards of accuracy thoroughness and consistency. It is these criteria we use to assess LINES. Our report is motivated by a simple but important concern: although the cost of capital is a critical element of the revenue and price settings that materially determine the social net-benefit of income-control regulation there are presently no institutional arrangements in New Zealand that allow for reports such as LINES to be thoroughly reviewed and debated. On the basis of our review we conclude that such institutional arrangements are sorely needed. Our assessment of LINES comprises two parts. In Section I we provide an overview of what we consider to be the critical areas of concern in LINES. Section II then discusses specific errors in detail.

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  • Essays in Water Allocation: The Way Forward

    Evans, Lewis; Counsell, Kevin (2005)

    Scholarly text
    Victoria University of Wellington

    In this book we consider the tradeable property rights framework as a method of allocating water. Our objectives are to explain why such an approach can improve aspects of New Zealand's current water allocation framework to establish the appropriate set of institutional arrangements for a tradeable rights framework to operate effectively and to examine what may influence the value of tradeable water rights.

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  • Assessing the Integration of Electricity Markets Using Principal Component Analysis: Network and Market Structure Effects

    Evans, Lewis; Guthrie, Graeme; Videbeck, Steen (2006)

    Scholarly text
    Victoria University of Wellington

    The major difficulties in assessing market power in electricity wholesale spot markets mean that great weight should be placed upon assessing market outcomes against the fundamental determinants of supply demand and competition. In this spirit we study whether the New Zealand market has been a national market or a set of local markets since its inception in 1996. Electricity markets generally have loop flows that require simultaneous assessment of prices at all nodes thereby limiting the informativeness of pair-wise nodal comparisons. We introduce principal component analysis to this application and show that it is a natural tool for the qualitative and quantitative assessment of the presence of local markets. We find that increased competition induced some separation into local markets that was eliminated by transmission enhancement and the introduction of generation downstream from the constrained circuits. For most of the period New Zealand has had one national market.

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  • The Performance Based Research Fund and the Benefits of Competition Between Universities

    Quigley, Neil; Evans, Lewis (2006)

    Scholarly text
    Victoria University of Wellington

    Until the late 1980s competition between universities was limited and the allocation of funding by the University Grants Committee created a system that was more akin to central planning than to a competitive market. Following the advice of the Treasury the Labour government of the late 1980s and the National government of the early 1990s increasingly encouraged universities to compete for students. From 2000 onwards the Labour-led government began to question the value of competition between public institutions such as universities and to seek ways to minimise competitive duplication of courses and research programmes (Associate Minister of Education 2000; Watkin 2000). Despite the position of the Labour-led governments since 2000 competition between universities over 2000-06 has been perhaps more vigorous than it has ever been. This is because competition to attract students continues and a range of schemes such as Partnerships for Excellence Centres of Research Excellence and the Performance-Based Research Fund (PBRF) have encouraged universities to enter into vigorous competition for the limited funds available.2 The vigour of the competition is also a result of changes in the international environment. For all sectors including higher education both the level of competition and the opportunities for benefit have been increased by the declining cost of travel the improvement in standard of living of formerly low-income countries the growing importance of the service sector and the dramatic fall in the costs of communication including those relating to modes of learning.3 The government has actively promoted 'export education' as a strategy for the tertiary sector which has the effect of placing New Zealand tertiary institutions in direct competition with universities in Australia Canada the United States of America (US) the United Kingdom (UK) Europe and (increasingly) Singapore Hong Kong and Thailand. Even without export education the universities now need to compete with the best universities in Australia to retain the best domestic students in New Zealand let alone attract students from other countries.

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  • The Role and Significance of Cooperatives in New Zealand Agriculture, A Comparative Institutional Analysis

    Evans, Lewis; Meade, Richard (2005)

    Scholarly text
    Victoria University of Wellington

    Cooperatives and other forms of farmer controlled businesses (FCBs) are major players in a number of New Zealand's agricultural sectors and together account for a significant share of New Zealand's economic activity. The New Zealand Ministry of Agriculture and Forestry (MAF) has commissioned the New Zealand Institute for the Study of Competition and Regulation (ISCR) to examine the role and significance of cooperatives in New Zealand agriculture. The inquiry is intended to inform consideration by MAF of public policy issues that either currently or might confront New Zealand's important agricultural sector.

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  • The Efficiency Test under Competition Law and Regulation in Small Distant Open Economy that is New Zealand

    Evans, Lewis (2005)

    Scholarly text
    Victoria University of Wellington

    This paper considers the application of competition law and price regulation inthe very small and isolated economy that is New Zealand. It argues that the total surplus (efficiency) criterion should be applied in tests of practices and actions where the competition threshold is not met or doubtful. Further it argues that this criterion is admitted if not required under New Zealand statutes. The differential treatment of affected parties including foreign investors in measuring the surplus is considered.

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  • Structural Reform: the Dairy Industry in New Zealand

    Evans, Lewis (2004)

    Scholarly text
    Victoria University of Wellington

    In the decade from 1983 to 1993 New Zealand farming moved from a relatively high income protected low-risk environment to a low income unprotected environment in which industry now carries the risks. Walker and Bell (1994) chapter 4.Creating a regulatory framework that enables open entry of farmers processors and marketers will foster the next stage in the development of the dairy industry in New Zealand .... Adrian Orr (Introduction to Watershed for New Zealand Dairy Industry2001)Significant structural change in the New Zealand dairy industry has taken place in two steps. Beginning in the early 1980s deregulation of the economy and agriculture in general materially affected the dairy industry. Then in 2001 a second major deregulatory step was taken that entailed the removal of the industry's (single-desk) exclusive right to export. This had happened to other agricultural and horticultural industries but for dairy it posed particular issues and affected a much larger industry. The dairy industry will continue to evolve but under present regulatory settings this will occur as a result of owner prerogatives in competitive national and international markets rather than on the basis of specific New Zealand regulatory intervention.

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  • Incentive Regulation of Prices when Costs are Sunk

    Evans, Lewis; Guthrie, Graeme (2006)

    Scholarly text
    Victoria University of Wellington

    We present a model featuring irreversible investment uncertain future demand and capital prices and a regulator who sets the firm's output price at discrete intervals. Using this model we derive a closed-form solution for the firm's output price which ensures that whenever the regulator resets the price the present value of the firm's future net revenue stream equals the present value of the investment expenditure incurred by a hypothetical efficient firm which replaced the regulated firm. We calculate the rate of return which shareholders should receive to compensate them for the exposure to demand risk and capital price risk induced by modern incentive regulation. In contrast to rate of return regulation we find that resetting the regulated price more frequently increases the risk faced by the firm's owners and that this is reflected in a higher output price and a higher weighted-average cost of capital. We show that the market value of the regulated firm will generally exceed the replacement cost of its existing assets by an amount that we interpret as the value of the firm's excess capacity. The higher valuation is required in order for the firm to prospectively manage fixed costs that are implied by irreversibility. We suggest it is indicative of the efficient treatment of investment in advance. This contrasts with much of the existing literature which argues that the market value of a regulated firm should equal the cost of its existing assets.

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  • The Interaction Between Contract and Competition Law

    Quigley, Neil; Evans, Lewis (2002)

    Scholarly text
    Victoria University of Wellington

    This paper provides some economic perspectives on the interaction between contract law and competition (antitrust) law. First it surveys some relevant aspects of the literature and provides some specific examples relating to:(i) The theory and development of contract enforcement institutions(ii) Vertical contractual relationships between firms at different levels in the production and supply chain; and (iii) The role of contracts in enabling specialised investments to take place by limiting opportunism spreading risks and assigning property rights.Second it considers the lessons that developing countries may draw from this literature as they consider the sequencing of reforms relating to contract and competition law and the economic implications of the commitment of resources to developing Western-style legal frameworks in each area of law. Most contractual relationships raise questions about the balance between the efficiency gains from ex ante specification of rights and entitlements and the potential reduction in social welfare that may come from the exclusion of other parties from the relationship and the resources committed to it. By focusing only on the detriment side of the welfare ledger especially where the resources committed or the market shares of the contracting parties are large in the context of the relevant markets enforcement of competition law may sometimes reduce welfare by overturning or undermining contracts that have large efficiency benefits but nonetheless may have some lesser anti-competitive detriment. Further setting aside contracts on anti-competitive grounds that have been on foot for a significant term due to changed circumstances that were unforeseen at the time of contracting imposes external costs on the wider economy.

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  • Exchanging Price Information can be Efficient: per se offences should be legilsated very sparingly

    Evans, Lewis; Mellsop, James (2003)

    Scholarly text
    Victoria University of Wellington

    In this paper we draw upon relevant theory of auctions to show that information exchange among firms that leads to an agreed schedule of prices may not be price fixing and may enhance welfare. A case is described in which per se illegal communication among industry players that produced such agreements enhanced welfare. In the circumstances of the case communication substituted for information exchange that would have been provided by a forward market that was too costly to establish. The results are in accord with a growing body of literature that suggests that per se illegality under competition law should be used very sparingly.

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  • Asset Stranding is Inevitable: Implications for Optimal Regulatory Design

    Evans, Lewis; Guthrie, Graeme (2003)

    Scholarly text
    Victoria University of Wellington

    The irreversibility of much infrastructure investment means that some assets will stop earning revenue before the end of their physical lives; they will be stranded. Under traditional rate of return regulation firms are guaranteed the ability to recover the costs of investment insulating them from the consequences of asset stranding. Under modern incentive regulation firms are allowed to earn revenue just sufficient to cover the costs of a hypothetical efficient firm which provides services at minimum cost exposing them to the risk of asset stranding. By actively encouraging competition regulators increase this risk. We suggest two conditions applicable to both regimes which must be met if regulation is to be "reasonable": the regulated firm must not lose value from investment and it cannot collect more revenue than would the lowest cost alternative provider. This implies that regulated firms should be allowed to earn the riskless rate of return on the historical cost of their assets under rate of return regulation and a different (generally higher) rate of return on the replacement cost of their assets under incentive regulation. The risk premium depends on both the systematic and unsystematic risk of demand shocks. Since customers bear the risk of asset stranding under rate of return regulation and shareholders bear this risk under incentive regulation welfare is higher under incentive regulation as long as customers are more risk-averse than shareholders. We show that when there is a choice between reversible and irreversible technology there is no price specification under rate of return regulation that will induce the firm to choose the efficient bundle of technology while under incentive regulation the firm will choose the efficient mix of technologies. That is incentive regulation allocates the risk of asset stranding efficiently and also gives firms the incentive to reduce this risk to efficient levels. Finally incentive regulation has less demanding information requirements than traditional rate of return regulation.

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