Outward direct investment: beneficial or detrimental?

In today’s globalised corporate world, typically not much time is needed to convince firms about the benefits of investing abroad. The stream of arguments about better access to overseas client markets; knowledge and advanced technologies; or less expensive qualified employees is music to the ears of CEOs. But will headquarter profits increase alongside increased production, or will lower employment make domestic productivity look more favourable? And what happens to domestic suppliers, distributors, employees, or tax collectors? Copenhagen Economics has identified and measured specific effects of outward investment accruing to one of Europe’s most dynamic economies. In this project, we have supplemented our trademark quantitative approach with in-depth interviews with top corporate CEOs. Communicated in an accessible language, our study will once again facilitate informed decisions. For further information, please contact Partner Martin Hvidt Thelle 

Advice to European Parliament on international roaming prices
Everyone who has used their mobile phone while travelling abroad knows how expensive it is. As costs do not seem to warrant such exorbitant prices when roaming, the European Commission has proposed to regulate them. However, regulation is a delicate matter, and certain aspects of the Commission proposal can be questioned. For example what is the reason for choosing mobile termination rates (MTRs) as a benchmark for regulation at the wholesale level – and is peak or average MTR the better choice? Furthermore, why is a 30% mark-up on wholesale costs the proper size for regulating retail prices – should it be larger or smaller? The European Parliament led by the Committee on the Internal Market and Consumer Protection (IMCO) feels that these and other similar questions have not been properly answered so far. Therefore, it has asked Copenhagen Economics to answer these questions such that its position on the Commission proposal may be an informed one. For further information, please contact senior economist Christian Jervelund
Status of the European broadband regulation
Copenhagen Economics was commissioned by the Swedish Competition Authority to analyse the regulation of the European broadband markets. We studied how the access to the broadband markets is regulated and what methods the national regulatory authorities use to regulate the markets. Our study shows that the Swedish Regulatory Authority has been one of the front runners in implementing the EU framework. But the time for implementations varies a lot between the different countries. Most national regulation authorities have defined the relevant markets in the same way as the EU Commission. The Commission has accepted other market definitions made by national regulation authorities. This indicates that the Commission focuses more on methodology used that than on the actual market definition. With one exception, all countries have identified a provider with significant market power. The exception is low quality broadband in the Netherlands. The countries use hard remedies to regulate broadband access, normal access and price regulation. The direct effect of hard regulation is that it makes it less attractive to build own infrastructure and instead promotes service competition. It appears that the regulatory authorities only give incentives to go from bitstream access to local loop unbundling and not from local loop unbundling to own infrastructure. The main conclusions of the study can be found in Chapter 12 of the report “Konkurrensen i Sverige 2006” For further information about the report or about telecommucation economics, please contact Henrik Ballebye Olesen
Swedish benefits - Danish costs
Svenska Kraftnät regularly resorts to limiting export capacity on the Oresund-connection in order to solve internal bottleneck problems in the Swedish electricity network. On behalf of, Copenhagen Economics has investigated whether these actions may harm Danish consumers due to higher spot prices and price volatility, and may benefit Swedish consumers due to lower spot prices and lower costs of network management. Overall, we confirm that the actions of Svenska Kraftnät led to large-scale losses for Danish consumers and to significant gains for Swedish consumers. We show, conservatively, that Danish consumers experience economic losses arising from higher spot prices estimated to be at least 725 million DKK. We also show that Swedish consumers experience economic gains due to lower costs of network management. We estimate the gain (avoided costs) passed-on to Swedish consumers to be 215-265 million DKK. The report can be downloaded here   For further information you can contact Claus Kastberg Nielsen
Article in European Competition Law Review
European Competition Law Review has, in the December 2006 Issue, published the article “The Power Fallacy: Energinizing the Cellophane Fallacy” written by Lasse Sundahl and Dr Henrik Ballebye Olesen from Copenhagen Economics. Dr Olesen and Sundahl argue that traditional approaches to market definition may lead to false conclusions in the wholesale electricity market, i.e. a power fallacy. They show that when production costs differ markedly between regions, the low-cost region is a separate market, even if the regions have identical prices. The reason is that a dominant player may use decongestion to import high prices to the low-cost region. For further information contact Dr Henrik Ballebye Olesen