Research undertaken at the University of East Anglia (UEA) has identified
whether consumers are likely to switch supplier, whether they are likely
to get a good deal, and how companies are likely to respond to specific
regulatory intervention. Such research findings challenge regulators to
make better decisions. An appropriate regulatory framework leads to better
decisions by consumers, helping markets to work better, and resulting in
lower prices and bills. This is particularly critical in the energy and
water sector, which are of crucial importance to each of the 25 million
households in the UK, and where implementation of some of these research
findings could lead to reductions of 6% in household energy bills (which
translates to a total saving of over £2.1 billion a year).
The banking crisis that followed the collapse of Northern Rock in 2007
resulted in an urgent need to inject liquidity into the financial system.
In order to resolve these issues, the Bank of England asked Professor
Klemperer, an expert in auction theory, to help re-dseign its long-term
market operations to allow the Bank of England to auction loans backed by
financial collateral of varying quality. Since 2010, this has been adopted
as the Bank of England's standard mechanism for its long-term repurchase
operations. The potential impact of the new auction design extends beyond
the Bank of England to other central banks, private industry and to
Professor Michael Waterson demonstrated how two consumer activities —
search and switching — are necessary if competition is to benefit
consumers. He showed how search and switching costs inhibit the
competitive process; highlighted how firms increase these costs in retail,
banking, insurance and energy markets, and recommended government measures
to empower consumers. Regulators around the world have used Waterson's
research to enhance the consumer benefits from competition. Professor
Gregory Crawford also analysed switching costs, estimating the costs of
automatically renewable contracts in the UK telephone market. Based on
this analysis, Ofcom banned rollover contracts for all residential and
small business customers of voice telephone and broadband services,
reducing households' and small businesses' switching costs by at least
The Coalition government's manifesto commitments to remove compulsion in
the annuity market necessitated a decision about a Minimum Income
Requirement (MIR). Cannon's contribution to the government consultation
played a significant role in setting the MIR. Previous research by Cannon
had shown that the UK compulsory-purchase annuity market was efficient
because compulsion expanded market size (more than half of all annuities
are sold in the UK) and reduced selection effects. This research enabled
the government to justify retaining an element of compulsion. The precise
level of the MIR used in the 2011 Finance Bill was based upon the
methodology proposed by Cannon.
The methodological and applied work on micro-econometric demand analysis
outlined here has
been repeatedly used by the UK Competition Commission (since 2002) and the
Competition Panel (now Monitor) of the UK Department of Health (since
2009) in their respective
competition analyses, and by the Hong Kong Consumer Council in its Public
Study (since 2011). It contributed to the European Commission White Paper
on the quantification
of antitrust damages (2010), underpinning some of the econometric
methodology proposed there
to assess cartel damages in EU Courts. Beckert's work in the area of
analysis connects micro-economic demand theory with various econometric
assess demand-side substitution in the presence of taste heterogeneity.
His research is
disseminated through articles in peer-reviewed academic journals, policy
articles, and through
consultation by antitrust authorities, think tanks and economic
Derek Bunn has led a research programme on understanding competition,
market evolution, and
prices in electricity markets. He and other researchers in the LBS Energy
Markets Group have
modelled production facilities in detail, their explicit ownerships, and
the price-formation process.
Their use of computational learning provides subtle insights which have
eluded conventional approaches.
The LBS group was the first to do this, and the approach is now widely
of the work is recognised via funding from major energy companies and
In terms of external impact, this work has informed extensive advice
to several government
inquiries, stimulated further research, and is actively used by
Regulating telecommunications has been difficult for policy-makers, who
must balance freedom for business operation with fairness and value for
consumers. Termination rates — the cost of ending phone calls using other
networks — have been particularly contentious.
Professor Valletti's work helped regulators, including Ofcom, to model
the processes involved and thereby improve regulatory pricing guidelines.
By developing a new theory of regulation — how dynamic incentives price
regulation — his research has influenced policy in both UK and
international telecommunications markets.
Stephan's research identifies difficulties with a dishonesty element in
the offence of agreeing to fix prices with a competitor. It has had impact
in the UK and Australia. In 2011, the Department for Business Innovation
and Skills published a consultation document, citing Stephan's findings in
justifying proposals to drop dishonesty in favour of a new cartel offence.
In Australia, a draft criminal offence which required dishonesty was
proposed in 2008. Following submissions by academics and practitioners
which cited Stephan's work, the dishonesty element was dropped. A 2009
Australian Senate Standing Committee report supported this change, quoting
one of Stephan's papers.