robust portfolio optimization for electricity planning an application based on the brazilian electricity mix one of the major challenges of today s policy makers and industry strategists is to achieve an electricity mix that presents a high level of energy security within a range of affordable costs and environmental constraints bearing in mind the planning of a more reliable electricity mix the main contribution of this paper is to consider parameter uncertainties on the electricity portfolio optimization problem we assume that the expected and the covariance matrix of the costs for the different energy technologies such as gas coal nuclear oil biomass wind large and small hydropower are not exactly known we consider that these parameters belong to some uncertainty sets box ellipsoidal lower and upper bounds and convex polytopic three problems are analyzed i finding a energy portfolio of minimum worst case volatility with guaranteed fixed maximum expected energy cost ii finding an energy portfolio of minimum worst case expected cost with guaranteed fixed maximum volatility of the energy cost iii finding a combination of the expected and variance of the cost weighted by a risk aversion parameter these problems are written as quadratic second order cone programming socp and semidefinite programming sdp so that robust optimization tools can be applied these results are illustrated by analyzing the efficient brazilian electricity energy mix considered in losekann et al 2013 assuming possible uncertainties in the vector of expected costs and covariance matrix the results suggest that the robust approach being by nature more conservative can be useful in providing a reasonable electricity energy mix conciliating co2 emission risk and costs under uncertainties on the parameters of the model

asymmetry and revenue in first price auctions abstract we show by an example that in first price ipv auctions asymmetry in bidders valuations need not reduce the revenue compared to a benchmark symmetric model with the same amount of social surplus asymmetry need not reduce competition in first price auctions

spectrum auction designs and revenue variations this study examines a sample of 93 national 3g spectrum auctions for the period 2000 2011 to identify the sources of substantial revenue variations an implied reduced form econometric model that recognises the censored nature of the sample relates per capita winning bid per mhz per million populations values to regulator determined auction design characteristics auction competitiveness mobile wireless market conditions and spectrum package attributes identified from tender documents the analysis reveals that among other factors all auction design characteristics independently impact on realized 3g spectrum auction revenues

impacts of wind and solar spatial diversification on its market value a case study of the chilean electricity market abstract renewable energy is expected to become the main electricity source in the world in the coming decades with solar and wind power taking a big share of the energy supply although there has been a remarkable advance on renewable energy technologies their integration is still difficult for regulators market designers and system operators due to the high variability and limited predictability of solar and wind resources measures can be adopted to ease their integration among them geographical diversification there is plenty of literature about the diversification of solar and wind resources and there is a common conclusion greater dispersion smooths out power production however literature on the effects of spatial diversification on the power system electricity prices and renewable energy market value is much scarcer this paper studies the effects of spatial diversification and questions whether integration policies are incentivizing the placement of renewable generators where they provide the highest value to the electricity system in chile using real data and a simplified dispatch model the analysis presented shows evidence of the effects of diversification on wind and solar market value in chile results suggest that spatial diversification has a strong positive effect on the market value of renewable energy especially in scenarios with active transmission and hydro storage constraints wind market value may vary up to us 10 mw h depending on the level of diversification and the spatial and temporal constraints of the system and given current storage capacity of hydro reservoirs the solar market value may increase us 5 mw h due to diversification if transmission capacity is enough even though these results must be observed with caution because they depend on the assumptions made there is an important effect of renewable spatial diversification that should be observed by regulators

on the existence of pure strategy monotone equilibria in asymmetric first price auctions we establish the existence of pure strategy equilibria in monotone bidding functions in first price auctions with asymmetric bidders interdependent values and affiliated one dimensional signals by extending a monotonicity result due to milgrom and weber 1982 we show that single crossing can fail only when ties occur at winning bids or when bids are individually irrational we avoid these problems by considering limits of ever finer finite bid sets such that no two bidders have a common serious bid and by recalling that single crossing is needed only at individually rational bids two examples suggest that our results cannot be extended to multidimensional signals or to second price auctions

mergers in symmetric and asymmetric noncooperative auction markets the effects on prices and efficiency abstract united states antitrust merger analysis has recently focused on simulating the unilateral effects of mergers we develop a model to simulate the unilateral price increase from a merger in an auction market we illustrate our results in the context of hospital mergers in the u s and calibrate our simulations to known market parameters we compare the price increases in our model to those suggested by analytically simpler models the simulation results suggest that the unilateral price increases predicted by our model are modest in general we also simulate the merger cost savings that are needed to offset the price effects

asymmetric private values auctions with application to joint bidding and mergers abstract much of the theoretical auction literature assumes that there are no observable differences between the bidders of an auction in this paper i present an asymmetric auction model where the distribution of a bidder s value depends on some commonly observed characteristics the model is applied to joint bidding and mergers in auction markets the results provide additional evidence that first price auctions are less susceptible to the acquisition and exercise of market power than open auctions

investment risks in power generation a comparison of fossil fuel and renewable energy dominated markets abstract due to their high capital intensity weather dependent renewable energies res such as solar and wind face considerable investment risks in power markets in addition their uncertain production volumes also affect the investment risks of other plant types through the impact on power prices and residual demand increasing res shares thus potentially increase overall investment risks in power markets which many analysts consider to be a potential problem against this background this paper compares investment risks of different technologies in markets with increasing shares of variable res it further analyses how generation mixes are affected by these investment risks if the risks are evaluated on a stand alone basis or in a plant portfolio context of a private firm for this purpose a stylized investment and dispatch model is used to conduct monte carlo simulations from which risk measures are derived the results show that capital intensive res face the highest stand alone risks since their profits are most affected by the power price risk however the results further indicate that the stand alone risks of variable res decrease with their share in the market because of a negative correlation of output and price risk in addition res have a risk benefit in firm plant portfolios in terms of constituting a hedge against losses of fossil fuel plants this positive portfolio effect however rapidly decreases and becomes negative with increasing res shares in the market

investment incentives in procurement auctions this paper investigates firms incentives to invest in cost reduction in the first price sealed bid auction a format largely used for procurement two central features of the model are that we allow firms to be heterogeneous and that investment is observable we find that firms will tend to underinvest in cost reduction because they anticipate fiercer head on competition using the second price auction as a benchmark we also find that the first price auction will elicit less investment from market participants and that this is socially inefficient these results have implications for market design when investment is important different market institutions provide different incentives for firms to reduce costs acquire information expand and so on in short to undertake any activity that affects their competitive positions accordingly the performance of these market institutions should be judged not only from a static perspective taking firms competitive positions as given but also from a dynamic perspective auction markets are a natural competitive environment to study because there is a clear sense in which we can design such markets by choosing appropriate rules for competition in this paper we study how the first price auction fpa a format commonly used for procurement affects firms incentives to invest in cost reduction many procurement markets are characterized by a small number of participants heterogeneity among firms and low rates of turnover therefore it is interesting to investigate to what extent the format used for the auction contributes to these characteristics the basic ingredients of our model are as follows there are n firms and one of them has the opportunity prior to the auction to make an investment we model this investment as an improvement in the ex ante distribution of costs for this firm the main question we ask is what are the firm s incentives to invest given that this investment is observed by its competitors clearly the benefits of such investment depend on how the firm s competitors react in other words to determine the firm s incentive to invest we need to compare the equilibrium at the procurement stage if it makes this investment and if it does not in section 3 we derive new comparative statics results for the fpa we find that after the investment the investor s opponents will bid collectively more aggressively this result holds generally when there are only two bidders or when the investor s opponents are symmetric proposition 1 otherwise a sufficient condition is that investment changes market leadership proposition 2 in the language of industrial organization investment has a negative strategic effect in the fpa this erodes 1

collusion in second price auctions with heterogeneous bidders abstract we show that efficient collusion by any subset of bidders in second price private value auctions is possible even when the bidders are heterogeneous an important property of efficient collusion is that a bidder s net payoff from participating in collusion is independent of her valuation we show that the cooperative game whose characteristic function evaluated at a coalition is the ex ante collusive surplus of that coalition has a nonempty core a feature of more technical interest is the mechanism characterization when the private information of agents does not enter in a linear or even piecewise linear manner

a study of collusion in first price auctions this paper examines the bidding for school milk contracts in florida and texas during the 1980s in both states firms were convicted of bid rigging the data and legal evidence suggest that the cartels in the two states allocate contracts in different ways one cartel divides the market among members while the other cartel also uses side payments to compensate members for refraining from bidding we show that both forms of cartel agreements are almost optimal provided the number of contracts is sufficiently large in the auction the cartel bidder may face competition from non cartel bidders the presence of an optimal cartel induces an asymmetry in the auction the selected cartel bidder is bidding as a representative of a group and has on average a lower cost than a non cartel bidder the data support the predicted equilibrium bidding behaviour in asymmetric auctions in accordance with optimal cartels

collusive bidder behavior at single object second price and english auctions models of collusive bidder behavior at single object second price and english auctions are provided the ind ependent private values model is generalized to permit the formulatio n of coalitions and a strategic response by the auctioneer cooperati ve strategies are found to be dominant in these models coalitions of any size are viable and the payoff to each member increases with th e size of the coalition in addition the collusive strategies of the coalition represent a noncooperative equilibrium the optimal respon se of the auctioneer is to establish a reserve price that is a functi on of the coalition s size these and other features of the model are found to be consistent with the essential features of actual behavio r copyright 1987 by university of chicago press

econometrics of ascending auctions by quantile regression this paper suggests an identification and estimation approach based on quantile regression to recover the underlying distribution of bidders private values in ascending auctions under the ipv paradigm the quantile regression approach provides a flexible and convenient parameterization of the private values distribution with an estimation methodology easy to implement and with several specification tests the quantile framework provides a new focus on the quantile level of the private values distribution in particular the seller s optimal screening level which can be very useful for bidders and seller an empirical application using data from the usfs timber auctions illustrates the methodology

can wage increases pay for themselves tests with a production function efficiency wage theories predict that companies that pay high wages will have higher productivity from high work effort low turnover and other efficiency enhancing effects this paper uses the pims line of business data set to test whether high wage businesses are more productive relative wages were measured by managers assessments of their relative compensation holding worker quality constant a positive relation was found between changes in relative wages and changes in total factor productivity the elasticity of output with respect to wages was of the magnitude predicted by efficiency wage theories also consistent with efficiency wage theories the relationship between changes in wages and changes in productivity was weaker at businesses with high unionization results from two additional data sets imply that high wages are not merely measuring high human capital copyright 1992 by royal economic society

a point decision for partially identified auction models this article proposes a decision theoretic method to choose a single reserve price for partially identified auction models such as haile and tamer 2003 using data on transaction prices from english auctions the article employs gilboa and schmeidler 1989 for inference that is robust with respect to the prior over unidentified parameters it is optimal to interpret the transaction price as the highest value and maximize the posterior mean of the seller s revenue the monte carlo study shows substantial gains relative to the revenues corresponding to a random point and the midpoint in the haile and tamer interval

quality over quantity reexamining the link between entrepreneurship and job creation although much has been written about the quantity of jobs created by entrepreneurs scholars have yet to examine the quality of these jobs in this article the authors begin to address this important issue by examining nearly 5 000 businesses that began operations in 2004 they investigate the extent to which nascent employers provide what many think of as quality jobs those offering health care coverage and a retirement plan the authors find that because of small scale constrained resources and protection from institutional pressures start up companies do not provide their employees with either of these proxies for job quality and their likelihood of offering health or retirement benefits increases only marginally over their first six years of operation the finding that entrepreneurs impressive record of job creation is not matched by a similarly impressive outcome with respect to job quality challenges policymakers to ensure that entrepreneurs are encouraged to create quality employment opportunities in the course of creating new businesses abstract from author

optimal wind power deployment in europe a portfolio approach geographic diversification of wind farms can smooth out the fluctuations in wind power generation and reduce the associated system balancing and reliability costs the paper uses historical wind production data from five european countries austria denmark france germany and spain and applies the mean variance portfolio theory to identify cross country portfolios that minimise the total variance of wind production for a given level of production theoretical unconstrained portfolios show that countries spain and denmark with the best wind resource or whose size contributes to smoothing out the country output variability dominate optimal portfolios the methodology is then elaborated to derive optimal constrained portfolios taking into account national wind resource potential and transmission constraints and compare them with the projected portfolios for 2020 such constraints limit the theoretical potential efficiency gains from geographical diversification but there is still considerable room to improve performance from actual or projected portfolios these results highlight the need for more cross border interconnection capacity for greater coordination of european renewable support policies and for renewable support mechanisms and electricity market designs providing locational incentives under these conditions a mechanism for renewables credits trading could help aligning wind power portfolios with the theoretically efficient geographic dispersion 2009 elsevier ltd

optimal bidding in auctions from a game theory perspective abstract the game theoretic perspective in auction bidding has provided a powerful normative framework for the analysis of auctions and it has generated an impressive volume of research contributions tracing this research we review key recent advances which have greatly expanded our understanding of the operation of auctions and produced a more accurate analysis of mechanism design and optimal bidding we follow various experimental studies which have shown that the predictive power of auction theory remains in many cases limited for this reason we concentrate on research themes which enhance the applicability of auction theory leading to more realistic descriptions of bidding behaviors we identify important innovations which expand the environment of auction bidding and carry us beyond rational decision making we conclude providing directions of future research and discussing their implications

the effect of bidders asymmetries on expected revenue in auctions abstract bidders asymmetries are widespread in auction markets yet their impact on behavior and ultimately revenue and profits is still not well understood this paper defines a natural benchmark auction environment to which to compare any private values auction with asymmetrically distributed valuations the main result is that the expected revenue from the benchmark auction dominates that from the asymmetric auction both in the first price auction and the second price auction moreover for classes of distributions that lend themselves to a quasi ordering of more or less asymmetric configurations we prove that the expected revenue is lower the more asymmetric bidders are these results formalize the idea that competition is reduced by bidders asymmetries applications to merger analysis joint bidding and investment are discussed

are disadvanteged bidders doomed in ascending auctions a bidder is said to be advantaged if she has a higher expected valuation of the auction prize than her competitor when the prize has a common value component a bidder competing in an ascending auction against an advantaged competitor bids especially cautiously and hence the advantaged bidder wins most of the time however contrary to what is often argued a disadvantaged bidder still wins with positive probability even if his competitor s advantage is very large and even if the disadvantaged bidder has the lowest actual valuation ex post therefore the disadvantaged bidder has an incentive to participate in the auction and the presence of a bidder with a small advantage does not have a dramatic effect on the seller s revenue

the effects of wind generation capacity on electricity prices and generation costs a monte carlo analysis abstractwe use monte carlo analysis to examine the potential of increased renewable generation to provide a hedge against variability in energy prices and costs fuel costs electricity demand and wind generation are allowed to vary and a unit commitment and economic dispatch algorithm is employed to produce cost minimizing generation schedules under different levels of installed wind capacity increased wind capacity reduces the mean and the variance of production costs but only the variance of electricity prices wind generators see their market revenues increase while consumer payments and fossil generator profits do not considerably vary as wind capacity increases risk aversion is captured by considering the conditional value at risk for both consumers and producers the optimal level of wind generation increases as risk aversion increases due to the potential of wind to act as a hedge against very high electricity prices in high fuel price scenarios

productivity in the united states trends and cycles productivity growth in the us has taken a sharp downturn in recent years two experts provide a new body of comparative data on productivity since 1948 by major sector and industry the book analyzes 20 industries to highlight trends and fluctuations in productivity and to provide a better context for the discussion of policy options the authors set forth the causes of productivity advances based on growth accounting for the business economy as a whole they detail interindustry regressions with particular reference to the productivity slowdown since 1966 they look at both the traditional measure of productivity labor output per hour and the more recently developed measure of total factor productivity which takes into account capital as well as labor inputs the quarterly and annual data are used to relate changes to other basic variables such as factor prices unit costs and product prices an appendix presents data for 35 industries 42 references 8 figures 30 tables

the social efficiency of instruments of promotion of renewable energies a transaction cost perspective this paper compares the social efficiency of the regulatory instruments used to promote renewable energy sources in electricity generation taking into consideration their role in promoting the preservation of collective goods they are based on a purchase obligation and act either by price feed in tariffs or by quantity bidding for new res e capacities res e quotas from the public economics perspective the two instruments are distinct in terms of cost efficacy and market incentives in a world of imperfect information exchangeable quotas of green certificates are preferred because this instrument allows better control over consumer costs and whilst retaining market incentives transaction cost economics tce contributes to the assessment of these instruments by introducing res e investment safeguard as a major determinant of social efficiency and the instruments conformity to its institutional environment as a determinant of its viability in light of this additional consideration the arrangements between res e producers and obligated buyers inherent in each instrument are in fact quite similar either long term contracting or vertical integration we compare and assess res e price and quantity instruments on several dimensions from both the public economics and tce perspectives control of the cost for consumers safeguards of res e investments adaptability of the instrument in order to preserve its stability in the long run market incentive intensity and conformity with the new market regime of electricity industry it shows neither instruments offer an optimal solution in each of these dimensions the government will thus select an instrument in accordance with the relative importance of its objectives c 2006 elsevier b v all rights reserved

asymmetric budget constraints in a first price auction abstract i solve a first price auction for two bidders with asymmetric budget distributions and known valuations for one object i show that in any equilibrium the expected utilities and bid distributions of both bidders are unique if budgets are sufficiently low the bidders will bid their entire budget in any equilibrium for sufficiently high budgets mass points in the equilibrium strategies arise a less restrictive budget distribution could make both bidders strictly worse off if the budget distribution of one bidder is dominated by the budget distribution of the other bidder in the reverse hazard rate order the weaker bidder will bid more aggressively than the stronger bidder in contrast to existing results for symmetric budget distributions with asymmetric budget distributions a second price auction can yield a strictly higher revenue than a first price auction under an additional assumption i derive the unique equilibrium utilities and bid distributions of both bidders in an all pay auction

uniqueness of equilibrium in sealed high bid auctions abstract for the case of two buyers we show that equilibrium in the sealed high bid auction is unique when i buyers reservations prices are drawn independently from distributions with finite support and positive mass at the lower endpoint ii buyers have private values and iii buyers preferences are log supermodular for more than two buyers we obtain the same result under the additional assumptions that iv buyers with the same reservation price have the same preferences v buyers are risk neutral or risk averse with non increasing absolute risk aversion and vi the supports of the different buyers distributions of reservation prices have the same upper endpoint

where the wind blows assessing the effect of fixed and premium based feed in tariffs on the spatial diversification of wind turbines abstract feed in tariffs fit are among the most important policy instruments to promote renewable electricity production the fixed price fit ffit which guarantee a fixed price for every unit of produced electricity and the premium based fit pfit which pay a premium on top of the market price are commonly implemented in the eu costs for balancing intermittent electricity production may be significantly higher with ffit than with pfit and ffit do not provide any incentive to produce electricity when marginal production costs are high in contrast pfit do provide strong incentives to better match renewable power output with marginal production costs in the system the purpose of this article is to assess the effects of the two tariff schemes on the choice of wind turbine locations in an analytical model we show that both the covariance between wind power supply and demand as well as between the different wind power locations matter for investors in a pfit scheme high covariance with other intermittent producers causes a decrease in market prices and consequently in revenues for wind power investors they are therefore incentivized to diversify the locations of wind turbines to decrease the covariance between different wind power production locations in an empirical optimization model we analyze the effects of these two different schemes in a policy experiment for austria the numerical results show that under a pfit scheme 1 spatial diversification is incentivized 2 the covariance of wind power production with marginal electricity production costs increases and 3 the variances of the wind power output and of residual load decrease if wind power deployment attains 10 of total national electricity consumption

asymmetric first price auctions abstract a new approach to asymmetric first price auctions is proposed which circumvents the need to examine bidding strategies directly specifically the ratio of bidders endogenous payoffs is analyzed and compared to the ratio of the exogenous distribution functions that describe beliefs most of the results are inferred from this comparison in the existing theoretical literature assumptions of first order stochastic dominance or stronger imply that the latter ratio has very specific properties but no such assumptions are imposed here it is proven that first order stochastic dominance is necessary for bidding strategies not to cross when this assumption is relaxed in the numerical literature it is done in a manner that leads to exactly one crossing however it is straightforward to construct examples with several crossings finally bid distributions will cross in auctions with two bidders whenever second order but not first order stochastic dominance applies

numerical analysis of asymmetric first price auctions abstract we propose numerical algorithms for solving first price auction problems where bidders draw independent valuations from heterogeneous distributions the heterogeneity analyzed in this work is what might naturally emerge when subsets of distributionally homogeneous bidders collude bid functions and expected revenues are calculated for two special cases extensions to more general asymmetric first price auctions are discussed journal of economic literature classification numbers d44 c63 c72 d82

optimal bidding in auctions of mixed populations of bidders abstract a mixed population of bidders consists of two asymmetric groups members of the first group are game theoretic players who maximize their expected profit and incorrectly believe that their opponents act similarly the second group of bidders adopts an irrational strategy they either choose their bids randomly following a given probability distribution in a naive form of bidding or follow a decision theoretic approach maximizing their expected profit under the assumption that all other bids are random in a sealed bid private value procurement auction we examine the optimal strategy of a new player who has perfect knowledge of the structure of the mixed bidder population and enters the auction the optimal bid of the new bidder is derived when the cost and mark up follow a uniform distribution in 0 1 the effect of the relative size of the group of game theoretic bidders and the population size on the optimal bid price is established

the impact of the minimum wage if workers can adjust effort abstract in traditional models a binding minimum wage creates a excess supply of low skilled workers for minimum wage jobs employment falls and some jobs are reallocated from high to low rent workers this disequilibrium cannot persist competition to secure the property rights to now scarce jobs undoes most of the effects of the minimum wage workers who attach the highest value to the jobs are willing to work harder to keep them marginal workers are squeezed out of the market as high rent workers ratchet up effort level this process erodes the rent conferred by the minimum wage but also increases the value of marginal product which reduces the size of the employment effect the minimum wage confers more money income on low skilled workers and creates some distortion in the optimum combination of wage rate and effort level under plausible conditions the minimum wage has little effect on rent employment output and profits

assessing the value of wind generation in future carbon constrained electricity industries this paper employs a novel monte carlo based generation portfolio assessment tool to explore the implications of increasing wind penetration and carbon prices within future electricity generation portfolios under considerable uncertainty this tool combines optimal generation mix techniques with monte carlo simulation and portfolio analysis methods to determine expected overall generation costs associated cost uncertainty and expected co2 emissions for different possible generation portfolios a case study of an electricity industry with coal combined cycle gas turbines ccgt open cycle gas turbines ocgt and wind generation options that faces uncertain future fossil fuel prices carbon pricing electricity demand and plant construction costs is presented to illustrate some of the key issues associated with growing wind penetrations the case study uses half hourly demand and wind generation data from south eastern australia and regional estimates of new build plant costs and characteristics results suggest that although wind generation generally increases overall industry costs it reduces associated cost uncertainties and co2 emissions however there are some cases in which wind generation can reduce the overall costs of generation portfolios the extent to which wind penetration affects industry expected costs and uncertainties depends on the level of carbon price and the conventional technology mix in the portfolios

portfolio applications in electricity markets review private investor and manager perspective trends abstract the private sector plays a major role in the expansion and operation of power systems in most countries especially those running liberalized electricity markets policymakers have the task of inducing private agents through their regulatory designs to make decisions that point toward social welfare maximization conversely it is a task of private agents to protect themselves against the risks of the sector including regulatory risks international fuel price uncertainty climate change policies natural resource availability electricity demand uncertainty co2 clearance prices etc instead of hiding all of these risks within the total project costs and losing competitiveness private agents can use diversification as a strategy to deal with them this paper presents a review of the main applications voids and challenges of portfolio optimization for two key agents of the private sector investors and managers the problem of the investor is to design a technology portfolio to invest in that maximizes its expected returns and limits risks while the manager has to design a portfolio of financial physical instruments long term contracts futures etc to sell buy electricity and hedge against price risks we have found two fundamental issues in the literature the first and most important is excessive confidence in historical data and statistical analysis for predicting future price behavior for a changing future in detriment of more structural analysis structural analysis can include particularities of modern power systems such as future transmission changes congestion operational constraints ramps new entrants new technologies and new demand grow patterns that cannot be taken into account by simply analyzing price historical values the second is the omission of renewable complementarities which is a proven characteristic of dispersed renewable plants that may have important risk mitigation effects although it has largely been ignored in portfolio analysis due to insufficient data modeling limitations and computational complexity

risk return incentives in liberalised electricity markets we employ monte carlo analysis to determine the distribution of returns for various electricity generation technologies costs and revenues for each technology are calculated by means of a unit commitment and economic dispatch algorithm at hourly resolution this represents a considerable contribution to the literature as costs and revenues are determined endogenously which in turn allows the returns of midmerit and peaking plant to be examined market entry is determined on the basis of a heuristic while market exit is according to a predetermined retirement schedule the results show that ccgt is the investment technology of choice for baseload only portfolios while ocgt proves optimal when all technologies are considered the high capital costs of baseload generation reduce incentives to invest the methodology can be expanded to consider random outages revenues from scarcity prices capacity markets and ancillary service payments

equilibrium in sealed high bid auctions there is a voluminous theoretical literature on sealed high bid auctions auctions in which bids are sealed and the high bidder pays his bid see for example vickrey 1961 myerson 1981 riley and samuelson 1981 milgrom and weber 1982 matthews 1983 maskin and riley 1984 holt 1980 cox smith and walker 1988 a critical property on which this literature relies is the existence of equilibrium in which buyers bidding strategies are monotonic in their types this enables the analyst to perform comparative statics as the distribution of types changes and to compare the welfare properties of the high bid auction with those of other auction institutions one case in which the existence of monotonic equilibrium is readily established is that in which buyers types are distributed smoothly independently and symmetrically in this case there exists a symmetric equilibrium one in which all bidders share the same bidding behaviour as a function of their valuations and this bid function is the solution to a first order differential equation

the effect of bidder heterogeneity on combinatorial conservation auction designs in an iterative combinatorial auction bidders can submit bids on individual and or on combinations of projects in a series of intermediate rounds where bid prices are revised before a final allocation is made the iterative format is useful for conservation service procurement as landholders can rely on market information revealed through the rounds to evaluate their choices of projects and bid prices however there is no single way of providing the market information different designs for generating price information have been proposed little is known about the performance of iterative combinatorial auction designs when heterogeneous bidders with different cost structures participate in an auction using an agent based model we evaluate a selected set of designs under different bidder heterogeneity scenarios we observe that higher degrees of heterogeneity lead to lower auction efficiency and that auction outcomes are highly sensitive to price feedback design choices

fuel mix diversification incentives in liberalized electricity markets a mean variance portfolio theory approach monte carlo simulations of gas coal and nuclear plant investment returns are used as inputs of a mean variance portfolio optimization to identify optimal base load generation portfolios for large electricity generators in liberalized electricity markets we study the impact of fuel electricity and co2 price risks and their degree of correlation on optimal plant portfolios high degrees of correlation between gas and electricity prices as observed in most european markets reduce gas plant risks and make portfolios dominated by gas plant more attractive long term power purchase contracts and or a lower cost of capital can rebalance optimal portfolios towards more diversified portfolios with larger shares of nuclear and coal plants

a theory of dual labor markets with application to industrial policy discrimination and keynesian unemployment this paper develops a model of dual labor markets based on employers need to motivate workers in order to elicit effort from their workers employers may find it optimal to pay more than the going wage this changes fundamentally the character of labor markets the model is applied to a wide range of labor market phenomena it provides a coherent framework for understanding the claims of industrial policy advocates it also can provide the basis for a theory of occupational segregation and discrimination that will not be eroded by market forces finally the model provides the basis for a theory of involuntary unemployment

financial risks for green electricity investors and producers in a tradable green certificate market this paper analyzes financial risks in a market for tradable green certificates tgc from two perspectives existing renewable producers and potential investors in new renewable electricity generation capacity the equilibrium pricing mechanism for a consumer based tgc market is described and a market with wind turbines as the sole renewable technology is analyzed in this framework tgc prices and fluctuations in production from wind turbines will be negatively correlated and as a result tgc price fluctuations can actually help decrease the total financial risk based on this recognition analytical expressions for revenue variance minimizing trading strategies are derived and an analysis of the demand and supply for financial hedging is used to show that forward contracts will be traded at a risk premium

endogenous asymmetry in a dynamic procurement auction we show how to numerically solve for a markov perfect equilibrium of a dynamic auction game where a procurer repeatedly purchases construction services from capacity constrained firms we find that the procurer is best off scheduling frequent auctions for small project sizes otherwise firm capacity utilization rates become larger and more asymmetric which softens competition and increases procurement costs we also find that forward looking bidding dampens the competition softening effects of asymmetry farsighted firms compete more intensely than myopic ones this can undermine the goal of a bid preference style affirmative action program more farsighted firms respond less to the asymmetry induced via bid preferences

asymmetry in procurement auctions evidence from snow removal contracts differences in cost efficiency and productivity across firms may introduce asymmetries in procure ment auctions relying on a structural approach this article investigates potential asymmetry among firms bidding for snow removal contracts in montrthe empirical results show that firms located in close proximity have a cost advantage relative to other firms in the most urbanised part of montrbecause of prohibitive equipment storage costs the extent of inefficiency due to asym metry is empirically assessed various policy experiments are performed a bidding preference policy shows that the city could expect to reduce its costs for allocating snow removal contracts when bidders willingness to pay depends in part on observable variables the princi pal s interest is not best served by creating a level auction playing field this article studies procurement auctions for snow removal contracts in montrit investigates the degree to which companies in disadvantageous locations should win even if they do not submit the lowest bid from the submitted bids a novel empirical methodology estimates the extent of cost variation across firms along with its variation within loca tion although the dispersion is substantial the gain from treating bidders unequally is limited when observed individual characteristics affect the firms costs and their bidding strategies all bidders cannot be treated alike these differences in characteristics or asymmetries among bidders may arise from their size as noted by laffont et al 1995 their capacity constraints as in jofre bonet and pesendorfer 2003 or the possession of better information as in hendricks and porter 1988 and hendricks et al 1994

wages and the intensity of labor effort efficiency wages versus compensating payments the distinction between efficiency wages and compensating payments is at best rather vague in both the theoretical and empirical literatures positing a relationship between wages and the intensity of labor effort while efficiency wages and compensating payments are both related to work intensity the mechanisms that generate these relationships are in each case quite distinct compensating payments exist in competitive labor markets to equalize overall compensation across identical workers with dissimilar working conditions workers who expend more labor effort must be paid more or they will seek employment elsewhere efficiency wages are employment rents paid by firms in order to ensure adequate labor effort these rents vary with the costs firms face in monitoring labor effort they cannot be competed away because without employment rents profit maximizing levels of work intensity would not be forthcoming in this paper we distinguish between the efficiency wage and compensating payments components in wage differences across workers and firms in the first section of the paper we use a theoretical model of optimal labor effort choice by workers and firms to make these two com

entry and r d in procurement contracting abstract a model of competitive procurement and contracting is presented in this paper the key features of the model include precontract r d an endogenous number of homogeneous firms and sealed bid auction rules both diminishing and constant returns to scale drs and crs in r d expenditure technologies are considered i find that the sealed bid first price auction fpa is equivalent to the second price auction spa under drs technology the revenue equivalence theorems breaks down under crs because multiple equilibria arise in the r d stage when spa is used howerer spa yields a unique perfect equilibrium given sufficient heterogeneity among potential firms the free entry perfect equilibrium is also characterized the buyer prefers free entry through an appropriate selection of the reservation price

does risk aversion affect transmission and generation planning a western north america case study abstract we investigate the effects of risk aversion on optimal transmission and generation expansion planning in a competitive and complete market to do so we formulate a stochastic model that minimizes a weighted average of expected transmission and generation costs and their conditional value at risk cvar we show that the solution of this optimization problem is equivalent to the solution of a perfectly competitive risk averse stackelberg equilibrium in which a risk averse transmission planner maximizes welfare after which risk averse generators maximize profits this model is then applied to a 240 bus representation of the western electricity coordinating council in which we examine the impact of risk aversion on levels and spatial patterns of generation and transmission investment although the impact of risk aversion remains small at an aggregate level state level impacts on generation and transmission investment can be significant which emphasizes the importance of explicit consideration of risk aversion in planning models

portfolio optimization of renewable energy assets hydro wind and photovoltaic energy in the regulated market in brazil abstract this study proposes a methodology for risk analysis and portfolio optimization of power generation assets with hydro wind and solar power considering the regulated contracting environment and the mechanism for reallocation of energy in brazil innovative stochastic models are used to generate synthetic time series for the random variables water inflow wind speed solar irradiance temperature of the photovoltaic panel and average generation capacity of the mechanism for reallocation of energy the simulation is implemented using the monte carlo method associated with a cholesky decomposition an economic approach is presented taking into account taxation and financing as well as the markowitz portfolio theory the results show that the initial correlation between the energy resources is altered by the cash flow model and mainly by the debt in the diversification process the complementarity between sources helps to reduce the economic risk the increase in debt increases the correlation decreases the return and risk and consequently affects the diversification process and economic results the mechanism for reallocation of energy significantly reduces the hydroelectric economic risk and increases the financial return which directly benefits the formation of portfolios

efficiency wages employment versus welfare this paper analyzes the effects of government policies in an efficiency wage model in such a model wages exceed market clearing rates firms may pay high wages for many reasons levine gives thirteen motivations for efficiency wages 12 in the model used here high wages prevent shirking by workers the model is similar to those of shapiro and stiglitz sparks fairris and alston and others 15 17 7 efficiency wage models are often viewed as providing the microeconomic foundations of involuntary unemployment and keynesian economics 1 2 unemployment is also emphasized in many discussions of government policies 3 4 11 a major example is that of johnson and layard 9 they find that a per capita employment subsidy financed by an ad valorem wage rate tax would reduce unemployment they conclude that this policy would benefit a country because of the employment effect 2 yet this paper shows that the employment effect is misleading here a policy that causes employment to rise fall also must cause income net of effort to fall rise so total welfare falls rises the policy implications discussed by johnson and layard and others are therefore reversed

first price auctions in the asymmetric n bidder case i consider the first price auction when the bidders valuations may be differently distributed i show that every bayesian equilibrium is an essentially pure equilibrium formed by bid functions whose inverses are solutions of a system of differential equations with boundary conditions i then prove the existence of an equilibrium i prove its uniqueness when the valuation distributions have a mass point at the lower extremity of the support i give sufficient conditions for uniqueness when every valuation distribution is one of two atomless distributions i establish inequalities between equilibrium strategies when relations of stochastic dominance exist between valuation distributions

competition in the economic crisis analysis of procurement auctions we study the effects of the recent economic crisis on firms bidding behavior and markups in sealed bid auctions using data from austrian construction procurements we estimate bidders construction costs within a private value auction model we find that markups of all bids submitted decrease by 1 5 percentage points in the recent economic crisis markups of winning bids decrease by 3 3 percentage points we also find that without the government stimulus package this decrease would have been larger these two pieces of evidence point to pro cyclical markups

wind electricity in denmark a survey of policies their effectiveness and factors motivating their introduction this paper surveys the development of the policies supporting the introduction of wind electricity in denmark in the last 15 years with special attention to the new policy introduced after a 2 year long debate the aim of this paper is to explore the roles of financial support policy certainty and planning constraints in the diffusion of wind electricity in denmark and the reasons prompting the change of the system in the current decade it is discovered that political uncertainty has badly affected the effectiveness of the feed in law in the years immediately after its introduction with regard to the new system it is concluded that the change has been prompted by generous conditions under the feed in law and by the desire to facilitate the modernisation of old turbines it is also concluded that incentive based systems can be more effective than tradable quotas in promoting the modernisation of renewable plants this finding is relevant to the development of energy policy in countries such as germany and spain where the average age of wind turbines is much younger than those existing in denmark

energy planning and modern portfolio theory a review abstract modern portfolio theory mpt stands as a widely accepted methodology to meet the challenges associated with the definition of energy planning for a particular territory or region energy planning is thus framed as an investment selection problem mpt is characterized by having a wider capacity and conceptual richness than the other previously used methodologies such as the individual least cost alternative the portfolio approach is based on solving for an objective function that seeks to minimize either the cost or the risk of the portfolio subject to different constraints considering that real electricity generation assets can be defined in terms of cost or return and economic risk for each alternative technology the relevant portfolios are the result of solving the optimization model to determine the efficient cost risk frontier the work presented here consists of an exhaustive review of the literature in relation to the application of mpt methodology to the field of energy planning and electricity production a new classification is proposed from a financial perspective of the selection of investments from the preceding studies it delves deeper into the explanation of the limits to the methodology and into the concept of risk which is key from both a financial and an energy perspective the main methodological contributions found in the literature are examined that are aimed at improving the capacity of the model and adjusting it to the reality of the electricity market finally conclusions are provided from the works analyzed in terms of renewable technologies and the policy implications derived from them in most studies a preference has been shown for the inclusion of renewable technologies in the efficient portfolios however in order to implement the decision to increase the share of renewable technologies greater flexibility in the interconnection capacity between states and in storage capacity is needed

wind power reliability valuation in a hydro dominated power market the colombian case abstract the design of market mechanisms that remunerates the reliability provided by a generator in a power market is a task that aims to ensure the normal operation of the system for the case of a hydro dominated system when wind power is introduced and operated under the merit order effect it is possible to assess the effect of the displacement of hydro generation due to wind generation over the system s reliability in terms of firm energy taking this into account a model that valuates the firm energy provided by wind power in a hydro dominated system is proposed this model considers the effect of wind power over the system s reservoirs and the market price of electricity and valuates the firm energy as the net savings of the system related to the increase in the firm energy of the system when wind power is introduced the results show that wind power under merit order effect increases the firm energy of the system and decreases the market price of electricity being the net savings in comparison to the corresponding hydro only system the reliability income that should be perceived by the wind power generator

the european low carbon mix for 2030 the role of renewable energy sources in an environmentally and socially efficient approach abstract the european union s commitment to increase the presence of renewable energy sources in its portfolio has resulted in better levels of security of supply competitiveness and environmental sustainability this proposed work reviews european legislation regarding the promotion of renewable energy sources as well as the bibliography that applies portfolio theory methodology to energy policy this double revision gives rise to the question whether the share limits of renewable energy technologies anticipated for the european power mix in 2020 and 2030 are actually efficient the optimization model corrects for the attractiveness of renewable energy sources as opposed to conventional sources in terms of costs risks and pollutant gas emissions this model successfully and explicitly identifies the positive effect on the environment that is represented by the inclusion of renewable energy sources in the portfolio the goal is to minimize the cost and risk that society must bear to produce electricity in addition to compliance with european pollutant gas co2 so2 nox and pm objectives the results for 2020 indicate that the eu would not be able to reach its emissions reduction goals with the anticipated shares of renewable energy sources in 2030 achieving a lower emissions portfolio would not mean taking on greater costs although it would be necessary to assume a greater level of risk the anticipated shares of renewable energy sources 5 and fossil fuel technologies 15 would be overdimensioned in the forecasts analyzed in terms of technologies both nuclear and wind energy stand out both with shares above 20 on the contrary biomass and solar photovoltaic energies would be unnecessary in order to reach efficiency in any case one thing is clear the eu would be the master of its energy future if it prioritizes the importance of renewable energy sources in its efficient portfolio