carbon pass through in the electricity sector an econometric analysis abstract we conduct an econometric analysis to investigate the carbon pass through in the greek electricity sector for this reason we utilize a rich micro level panel dataset including hourly data for 24 thermal power plants spanning the period from january 2014 to december 2017 in order to study the pass through of emissions costs to wholesale electricity prices we employ an instrumental variable approach our findings survived several robustness checks accounting for logged linear and non linear econometric specifications the empirical results indicate the existence of an almost complete pass through revealing that retailers fully internalize the cost of co2 permits this study incurs important policy implications since the complete pass through signify that wholesale electricity prices will increase at least in the short run however the overall effect on retail prices will be mostly affected by the amount of co2 permits and the fuel energy mix

using auctions to price employee stock options the case of zions bancorporation esoars the first empirical analysis of zions bancorporation s 2006 and 2007 auctions of employee stock option appreciation rights securities esoars this study examined 1 the impact of auction rules on bidding strategies and allocations 2 the efficiency of the auction clearing prices and 3 the value gap between esoars auction clearing prices and various model based estimates it found that the design features of the auctions e g ending rules significantly affected bidding strategies but not final allocations which remained highly concentrated it also found that the clearing prices 1 displayed high price elasticities of demand suggesting efficient price discovery and 2 were low relative to some but not all model based estimates these findings suggest design improvements that might benefit auctions of other illiquid derivatives e g banks troubled assets currently being considered by the u s government

testing expected utility in the presence of errors one possible conclusion from recent experimental research on decision making under risk is that observed behaviour can be reasonably accommodated by expected utility plus an error term this conclusion implies that the violation rate of expected utility should decrease if errors are excluded this article reports on an experiment which investigates this implication by presenting the same choice problems to subjects three times the results show that the exclusion of errors leads to a significant reduction of the violation rate for most of the cases this observation can be regarded as supporting evidence for expected utility plus error term the common consequence effect and the common ratio effect both introduced by allais 1953 are the most prominent and most investigated violations of expected utility eu they have motivated the development of alternative theories of choice under risk which are able to accommodate the observed behavioural patterns nowadays a large number of alternative theories exist see starmer 2000 sugden 2004 and schmidt 2004 for surveys and naturally the question arises which theory can explain observed behaviour best many studies have addressed this question most prominent seem to be those of harless and camerer 1994 and hey and orme 1994 since eu and its alternatives are deterministic theories but observed choices are stochastic both papers integrated an error term into their estimations this fact has aroused interest in a general discussion of the role of errors in decision making under risk the discussion can be disentangled into two issues the first issue concerns the modelling of the stochastic component harless and camerer 1994 hey and orme 1994 camerer and ho 1994 hey 1995 loomes and sugden 1995 and corresponding experimental tests carbone 1997 ballinger and wilcox 1997 loomes and sugden 1998 carbone and hey 2000 buschena and zilberman 2000 loomes et al 2002 the second issue concerns the performance of eu and its alternatives for given specifications of the error term in this context hey 1995 building upon the results of hey and orme 1994 arrives at the following conclusion

exchange rate pass through exchange rate volatility and exchange rate disconnect abstract this paper explores the hypothesis that high volatility of real and nominal exchange rates may be due to the fact that local currency pricing eliminates the pass through from changes in exchange rates to consumer prices exchange rates may be highly volatile because in a sense they have little effect on macroeconomic variables the paper shows the ingredients necessary to construct such an explanation for exchange rate volatility in addition to the presence of local currency pricing we need a incomplete international financial markets b a structure of international pricing and product distribution such that wealth effects of exchange rate changes are minimized and c stochastic deviations from uncovered interest rate parity together it is shown that these elements can produce exchange rate volatility that is much higher than shocks to economic fundamentals and disconnected from the rest of the economy in the sense that the volatility of all other macroeconomic aggregates are of the same order as that of fundamentals

the cost of employee stock option grants an empirical analysis this study presents empirical evidence on the ex post costs of employee stock option eso grants to issuing firms and examines whether the black scholes 1973 model provides reasonable estimates of these values because there are no market prices for esos the traditional avenues for testing option pricing models are unavailable this research relies instead on techniques from the economic forecasting literature viewing model values as forecasts of the options payoff the theoretically appropriate rate at which to discount eso payoffs is derived under the maintained hypothesis that the black scholes model is valid this rate is used in estimating ex post eso costs at the time of grant which are then compared with black scholes estimates using theil s 1966 tests of forecast rationality based on a sample of 966 eso grants over 1963 1984 the results suggest that the black scholes model adjusted for concavity in the time to exercise using the hemmer matsunaga and shevlin 1994 procedure appears to provide reasonable estimates of ex post eso costs for the average eso grant however there is significant variability in the amount of model error on an individual grant basis

decisions error and heterogeneity probabilistic choices or choice errors may play an important supporting role in shaping observed risky choices and a variety of restrictions on such choice probabilities play the role of identifying restrictions in empirical decision research we test six restrictions in the context of common ratio effect data for a general class of theories of risky choice two restrictions one for aggregate and one for individual data are supported but none of the heterogeneity restrictions that make the aggregate data model powerful survive scrutiny nor do estimable parametric versions of the individual data model there is room for new stochastic identifying restrictions in empirical decision research

committee decisions under alternative procedural rules an experimental study applying a new non monetary method of preference inducement committees operating with simple majority rule procedures and with closed rule procedures are studied a new method the duplicate method was used to induce preferences the results of the control experiments compare favorably to those for which monetary incentives have been used in all cases the core is a relatively accurate model of committee choice

retail gasoline price dynamics and local market power using monthly data from the 48 contiguous states except nevada for the 1988 2002 period it is shown that retail gasoline prices respond faster to wholesale price increases than to equivalent wholesale price decreases moreover markets with high average retail wholesale margins experience a slower adjustment and a more asymmetric response since gasoline is the only variable input average margins in a state likely reflect the degree of retail market power this suggests that sticky prices and response asymmetries in the gasoline market are at least partially a consequence of retail market power

stochastic choice an optimizing neuroeconomic model a model is proposed in which stochastic choice results from noise in cognitive processing rather than random variation in preferences the mental process used to make a choice is nonetheless optimal subject to a constraint on available information processing capacity that is partially motivated by neurophysiological evidence the optimal information constrained model is found to oer a better t to experimental data on choice frequencies and reaction times than either a purely mechanical process model of choice the drift diusion

the demand for electricity in the gcc countries abstract cointegration techniques are used to study the effects of economic variables on electricity demand in the gcc countries a dynamic model is estimated using aggregate data for the six states spanning the period 1970 97 statistical investigations confirm the existence of unit root in all time series employed in the study which called for the use of cointegration and error correction methodologies empirical results indicate that both income and price have an impact on electricity consumption and income and price policies could be effectively facilitated in electricity demand management

valuing executive stock options with endogenous departure abstract executive stock options differ from exchange traded options because of vesting and portability restrictions executive departure from the firm forces early exercise reducing the value of executive options current methodology calculates the option value by multiplying the black scholes option price by the departure probability this ignores the possibility that executive departure is less likely when stock price is high and thus is correlated with the stock price we show that this correlation implies a substantial increase in option values a similar situation occurs in performance based option packages where the actual number of options granted depends on stock performance

bias in reduced form estimates of pass through we show that in general consistent estimates of cost pass through are not obtained from reduced form regressions of price on cost we derive a formal approximation for the bias that arises even under standard orthogonality conditions we provide guidance on the conditions under which bias may frustrate inference

experimental tests of the separation theorem and the capital asset pricing model a computer controlled multistage portfolio selection task was devised to test experimentally basic assumptions underlying the separation theorem and the capital asset pricing model although most of the subjects diversified among the three risky assets the introduction of a riskless asset did not have the effect predicted by the separation theorem nor were the subjects affected by systematic changes in the variance covariance matrix of the risky returns however performance improved as the reward was increased tenfold the capital asset pricing model capm proposed by william sharpe 1964 john lintner 1965 and jan mossin 1966 has been the predominant normative as well as positive theory for determining assets returns and prices in financial markets the capm has a wide range of implications for various financial issues including the allocation of risky assets price predictions performance indices and market efficiency tests as well as tools for corporate finance decisions such as capital structure costs of financial sources and prices of new issues during the last decade numerous theoretical studies have examined and extended the capm a most recent development is the

an economic theory of the second moments of disturbances of behavioral equations applied econometricians have known for a long time that the smooth curves in economics texts which pretend to be the geometric representations of behavioral equations present an over simplified picture of the real world it almost never occurs that data fit a simple theoretical relation exactly and an explicit method of interpreting and handling the deviations from such relations is therefore needed in the early days of econometrics it was frequently assumed that observational errors were the only or at least the main cause of the occurrence of deviations but this idea was later rejected on the ground that even when the data are perfect deviations will continue to be found because there are very few economic agents who react exactly according to some simple mathematical law the neglected factors entered into the picture their combined influence came to be regarded as a random disturbance with zero mean and unknown variance

a note on the effect of cost changes on prices in a recent article in this journal sumner 1981 took an ingenious approach to estimating the level of monopoly power in the cigarette industry he noted that differences in marginal costs exist in the industry due to varying levels of state taxes the sales prices established will satisfy the equation p i liq l mr mc where p price and q the elasticity of demand for the product in question if elasticity is a constant observing the change in marginal cost and the change in price enables one to infer the elasticity of demand perceived by the firm elasticity could then be used as a proxy for the firm s market power this technique turns out to be of very limited applicability however because it is extremely sensitive to the functional form assumed for the demand curve consider the general problem of a firm facing constant marginal costs of c in maximizing profits the firm solves

expected utility violations implications for agricultural and natural resource economics nomic toolkit they compare the dogged defense of eu by economists to that of a monty python character playing the role of a petstore owner disputing the state of an obviously dead parrot the shop owner goes through incredible machinations to avoid replacing the bird let us consider another analogy the behavior of a caged parrot can likely tell us very little about the behavior of parrots in the wild a biologist may want to incorporate the behavior of caged parrots into the study of wild birds but would undoubtedly need to be extremely careful about understanding the underlying differences in the opportunities and constraints faced by caged versus wild birds before inferring much about wild parrot behavior to some extent experimental violations of eu present us with the same problem as the hypothetical parrot biologist subjects in these risk experiments are in a setting and are completing tasks very different from the setting and tasks they face in their everyday economic and social context what is missing relates to the power of the rationality assumption discussed in friedman that relies not only on the person s skill but also on the feedback they receive from the market friedman s expert billiards players are selected by a market because of their skill in billiards and th se are the players who fit friedman s as if description 1 risk researchers should not ignore experimental data however before we eliminate eu we should more fully understand the underlying reasons for the experimental behavior that violates eu agricultural and natural resource economists are well suited to assess

rewards experience and decision costs in first price auctions consistent with a model of asymmetric risk aversion subjects in first price auctions consistently bid above the risk neutral nash prediction it has been argued that this is due to low opportunity cost of deviating from the risk neutral bid we increase opportunity cost and payoff levels by factors of 0 1 5 10 and 20 from the normal levels generating payoffs up to 250 for risk neutral subjects and observe an insignificant increase in the slope of individual bid functions the rmse of bids declines significantly this is consistent with a reward decision cost model of bidding behavior

monetary rewards and decision cost in experimental economics a survey of thirty one experimental studies which report data on the comparative effects of monetary rewards and opportunity cost shows 1 several studies in which increased rewards shift the central tendency of the data toward the predictions of rational models 2 in virtually all cases rewards reduce the variance of the data around the predicted outcome this is consistent with a model in which rewards are balanced against decision cost in agent behavior and explicates the argument that when rational models fail it can be attributed to low opportunity cost of deviations from the rational prediction

incorporating a stochastic element into decision theories abstract recent papers by harless and camerer 1994 and hey and orme 1994 have employed two rather different models of errors in decision making under uncertainty the present paper develops a third approach and shows how different stochastic specifications of the same deterministic core theory may generate very different and sometimes surprising hypotheses

pass through vertical contracts and bargains abstract this paper analyzes the determinants of pass through that are specific to vertical relationships between wholesalers and retailers the type of vertical agreement firms contract upon as well as their relative bargaining power are identified as major determinants of pass through rates

the evolution of price dispersion in the european car market car prices in europe are characterized by large and persistent differences across countries the purpose of this paper is to document and explain this price dispersion using a panel data set extending from 1980 to 1993 we first demonstrate two main facts concerning car prices in europe i the existence of significant differences in quality adjusted prices across countries with italy and the u k systematically representing the most expensive markets 2 substantial year to year volatility that is to a large extent accounted for by exchange rate fluctuations and the incomplete response of local currency prices to these fluctuations these facts are analysed within the framework of a multiproduct oligopoly model with product differentiation the model identifies three potential sources for the international price differences price elasticities generating differences in markups costs and import quota constraints local currency price stability can be attributed either to the presence of a local component in marginal costs or to markup adjustment that is correlated with exchange rate volatility the latter requires that the perceived elasticity of demand is increasing in price we find that the primary reason for the higher prices in italy is the existence of a strong bias for domestic brancs that generates high markups for the domestic firm fiat in the u k higher prices are mainly attributed to better equipped cars and or differences in the dealer discount practices the import quota constraints are found to have a significant impact on japanese car prices in italy france and the u k with respect to local currency price stability a large percentage of the documented price inertia can be attributed to local costs and a smaller fraction to markup adjustment that is indicative of price discrimination based on these results we conjecture that the emu will substantially reduce the year to year volatility observed in the car price data but without further measures to increase european integration it will not completely eliminate existing cross country price differences

pass through in a concentrated industry empirical evidence and regulatory implications we estimate pass through with thirty years of data from a concentrated industry the empirical model accounts for oligopoly interactions yet facilitates estimation with aggregate price data robust statistical evidence supports that industry wide cost changes are more than completely transmitted downstream and that this industry pass through is largely unaected by competitive conditions the industry in question portland cement is a major focus of environmental and antitrust regulators we use our pass through estimates to i evaluate the welfare consequences of marketbased co2 regulation ii predict the magnitude and location of price eects due to a merger under review by antitrust authorities and iii corroborate the simulation based analysis of the epa regarding its impending regulation of local pollutants

outsourcing and pass through a large share of international trade occurs through intra firm transactions we show that this common cross border organization of the firm has implications for the well documented incomplete transmission of shocks across such borders we present new evidence of an inverse relationship between a firm s outsourcing of inputs and its rate of exchange rate pass through we then develop a structural econometric model with final assemblers and upstream parts suppliers to quantify how firms organization of their activities across national borders affects their pass through behavior

experimental investigations of errors in decision making under risk abstract many if not all of the recent theories of decision making under risk that have been developed in the light of experimentally observed violations of expected utility theory are essentially deterministic in nature yet it is clear that actual decision making contains a random or error component this paper surveys the assumptions that have been employed in previous analyses of such experimental data and tries to find better explanations both from an economic and an econometrics point of view of such errors hopefully such work will lead to a unified theory in which the stochastic component is an integral part

empirical evidence on the role of non linear wholesale pricing and vertical restraints on cost pass through abstract how a cost shock is passed through to final consumer prices may relate to nominal price stickiness and rigidities the existence of nonadjustable cost components strategic markup adjustments or other contract terms along the supply distribution chain this paper presents a simple framework to assess the potential role of nonlinear pricing contracts and vertical restraints such as resale price maintenance or wholesale price discrimination in the supply chain in explaining the degree of pass through from upstream cost shocks in the ground coffee category to downstream retail prices we find that resale price maintenance increases pass through rate

understanding preference imprecision the term preference imprecision seems to have different meanings to different people in the literature one can find references to a number of expressions for example vagueness incompleteness randomness unsureness indecisiveness and thick indifference curves some of these are theoretical constructs some are empirical the purpose of this paper is to survey the various different approaches and to try to link them together to see if they are all addressed to the same issue and to come to some conclusions in the course of this survey we report on evidence concerning the existence of preference imprecision and its impact on theoretical and empirical work

employee stock options equity valuation and the valuation of option grants using a warrant pricing model we investigate the use of a warrant pricing approach to incorporate employee stock options esos into equity valuation and to account for the dilutive effect of esos in the valuation of option grants for financial reporting purposes our valuation approach accounts for the jointly determined nature of eso and shareholder values the empirical results show that our stock price estimate exhibits lower prediction errors and higher explanatory powers for actual share price than does the traditional stock price estimate we use our valuation approach to assess the implications of dilution on the fair value estimates of eso grants we find that the fair value is overstated by 6 if we ignore the dilutive feature of esos furthermore this bias is larger for firms that are heavy users of esos small and r d intensive and for firms that have a broad based eso compensation plan

cognitive imprecision and small stakes risk aversion observed choices between risky lotteries are difficult to reconcile with expected utility maximization both because subjects appear to be too risk averse with regard to small gambles for this to be explained by diminishing marginal utility of wealth as stressed by rabin 2000 and because subjects responses involve a random element we propose a unified explanation for both anomalies similar to the explanation given for related phenomena in the case of perceptual judgments they result from judgments based on imprecise and noisy mental representations of the decision situation in this model risk aversion results from a sort of perceptual bias but one that represents an optimal decision rule given the limitations of the mental representation of the situation we propose a quantitative model of the noisy mental representation of simple lotteries based on other evidence regarding numerical cognition and test its ability to explain the choice frequencies that we observe in a laboratory experiment

the effect of liberalizing uk retail energy markets on consumers this paper describes the evolution of supply competition in the uk residential energy market and the extent to which consumers in general and vulnerable households in particular have benefited from liberalization it concludes that earlier fears about higher prices for vulnerable groups from tariff rebalancing have not so far been realized however in assessing the extent to which suppliers may be able to exploit individual or joint market power increasing concentration in the downstream market may result in adverse effects on all consumers especially low income households this poses a threat to the government s programme to reduce fuel poverty particularly at a time when upstream costs are expected to rise to reflect environmental concerns copyright 2005 oxford university press

employee stock option exercises an empirical analysis this paper describes the exercise behavior of over 50 000 employees who hold longterm options on employer stock at eight corporations employees typically exercise options years before expiration commonly sacrificing half of the black scholes value exercise is strongly associated with recent stock price movements the market to strike ratio proximity to vesting dates time to maturity volatility and the employee s level within the company these findings have implications for compensation planners the fasb as it develops a new accounting standard for options and financial statement users and preparers who apply and interpret the new fasb standard

choice under uncertainty evidence from ethiopia india and uganda we review experimental evidence collected from risky choice experiments using poor subjects in ethiopia india and uganda using these data we estimate that just over 50 of our sample behaves in accordance with expected utility theory and that the rest subjectively weight probability according to prospect theory our results show that inferences about risk aversion are robust to whichever model we adopt when we estimate each model separately however when we allow both models to explain portions of the data simultaneously we infer risk aversion for subjects behaving according to expected utility theory and risk seeking behaviour for subjects behaving according to prospect theory

first evidence of asymmetric cost pass through of eu emissions allowances examining wholesale electricity prices in germany abstract we test the hypothesis that rising prices of emission allowances have a stronger impact on wholesale electricity prices than falling prices asymmetric cost pass through using an autoregressive distributed lag model we confirm this hypothesis for the german market

residential electricity demand in taiwan this paper examines the residential demand for electricity in taiwan as a function of household disposable income population growth the price of electricity and the degree of urbanization short and long term effects are separated through the use of an error correction model in the long run the income elasticity is unit elastic the own price effect is negative and inelastic in an error correction framework the short run income and price effects are small and less than the long run effects cooling degree day effects have a positive impact on short run consumption we have used a proxy variable urbanization to capture economic development characteristics and changes in electricity using capital stocks not explained by income the variable provides significant explanatory power to the model both in the short and long run we interpret it as controlling for economic development factors not captured by the pure income effect and we think it holds promise for explaining residential electricity consumption in other developing countries

additive general error models for production cost and derived demand or share systems many empirical studies of production specify a deterministic model of the firm derive the implied behavioral equations input demand or share system and then embed this system in a stochastic framework by tacking on linear error terms in contrast this paper proposes general error models gems in which the error specification is an integral part of the optimization model these models are the statistical embodiment of stigler s view that apparent observed inefficiencies reflect the investigator s ignorance of the true optimization problem additive gems are proposed and interpreted specification tests indicate that a translog additive gem is superior to the standard translog specification

social comparison and performance experimental evidence on the fair wage effort hypothesis we investigate the impact of wage comparisons for worker productivity we present three studies which all use three person gift exchange experiments consistent with akerlof and yellen s 1990 fair wage effort hypothesis we find that disadvantageous wage discrimination leads to lower efforts while advantageous wage discrimination does not increase efforts on average two studies allow us to measure wage comparison effects at the individual level we observe strongly heterogeneous wage comparison effects we also find that reactions to wage discrimination can be attributed to the underlying intentions of discrimination rather than to payoff consequences

on the external validity of laboratory tax compliance experiments i introduction laboratory methods are now widely accepted as a methodological approach in economics and increasingly they have been used to examine specific public policy issues there is much to be gained from careful laboratory experiments they offer a low cost means of testing and replicating policy innovations and they generate precise data on individual behavior thereby allowing estimation of behavioral responses importantly they allow many policy innovations to be introduced singly and exogenously in a controlled environment and as a result laboratory experiments are typically seen as having a high degree of internal validity brewer 2000 campbell and stanley 1966 shadish cook and campbell 2002 because the causal relation between variables can be properly demonstrated however as emphasized by plott 1987 using laboratory experiments can allow more general inferences regarding human behavior only when the setting implemented in the laboratory parallels what is observed in the naturally occurring world even beyond this requirement of parallelism is the need for generalizing behavioral observations from the laboratory to the field or external validity internal validity can be demonstrated through the evaluation of the design however external validity can only be verified empirically and only with respect to the specific setting being investigated this paper investigates the external validity of laboratory experiments and does so in the context of experiments on tax compliance behavior tax evasion is central to many important policy questions current estimates report the tax gap or difference between taxes owed and taxes paid in the united states to be 450 billion annually internal revenue service 2012 beyond these massive revenue losses evasion creates major misallocations in resource use when individuals alter their behavior to cheat on their taxes its presence requires that government expend resources to detect noncompliance to measure its magnitude and to penalize tax evasion evasion alters the distribution of income in arbitrary unpredictable and unfair ways and it may contribute to feelings of unjust treatment and disrespect for the law more broadly it is not possible to understand the true impact of taxation without recognizing the existence and the effects of tax evasion laboratory methods have been used to examine a wide range of policies that may affect the compliance decision policies that have not always proven amenable to either theoretical analyses or empirical analyses with field data however laboratory studies of compliance are sometimes viewed with skepticism the most common criticism is that the student subjects typically used in experiments may not be representative of taxpayers undergraduates may have little experience with filing tax returns and their economic and demographic backgrounds may differ from those of taxpayers another criticism is that the context of laboratory compliance experiments does not closely enough resemble the context in which actual compliance decisions are made as a result there is a concern that experimental results on policy innovations that rely upon student subjects in laboratory compliance experiments cannot be generalized to the population it is this issue that we examine here building on previous research we present several types of evidence on the external validity of experiments on individual compliance decisions a first question examines whether behavior of laboratory participants is replicated by behavior of individuals making a similar decision in the naturally occurring world that is do participants in laboratory experiments exhibit different patterns of behavior than individuals in a similar naturally occurring setting to answer this question we utilize a special data set from the u s internal revenue service irs assembled as part of its national research program nrp

accounting for incomplete pass through recent theoretical work has suggested a number of potentially important factors in causing incomplete pass through of exchange rates to prices including markup adjustment local costs and barriers to price adjustment we empirically analyze the determinants of incomplete passthrough in the coee industry the observed pass through in this industry replicates key features of pass through documented in aggregate data prices respond sluggishly and incompletely to changes in costs we use microdata on sales and prices to uncover the role of markup adjustment local costs and barriers to price adjustment in determining incomplete pass through using a structural oligopoly model that nests all three potential factors the implied pricing model explains the main dynamic features of short and long run pass through local costs reduce long run pass through by a factor of 59 relative to a ces benchmark markup adjustment reduces pass through by an additional factor of 33 where the extent of markup adjustment depends on the estimated super elasticity of demand the estimated menu costs are small 0 23 of revenue and have a negligible eect on long run pass through but are quantitatively successful in explaining the delayed response of prices to costs we nd that delayed passthrough in the coee industry occurs almost entirely at the wholesale rather than the retail level

examining risk preferences under high monetary incentives experimental evidence from the people s republic of china several experimental sessions were conducted to elicit certainty equivalents for a sequence of lotteries involving real monetary outcomes the opportunity to conduct sessions in the people s republic of china afforded the ability to offer very large monetary incentives relative to subjects living costs in the highest payoff condition subjects earned three times their normal monthly revenue in the course of a two hour experiment results indicate a statistically significant impact of the level of monetary incentives on revealed risk preferences however even under extreme monetary incentives subjects demanded amounts well in excess of expected value for low probability gain prospects copyright 1992 by american economic association

market power and heterogeneous pass through in german electricity retail abstract we analyze the pass through of cost changes to retail tariffs in the german electricity market over the 2007 2014 period we find an average pass through rate of around 60 this significantly varies with demand factors while the pass through rate to baseline tariffs where firms have greater market power because customers are less willing to switch is only 50 it increases to 70 in the competitive segment of the market although the pass through rate of independent firms is significantly higher than that of other firms in the competitive market segment the extent of supply side heterogeneity is limited thus the firms ability to exercise market power and reduce pass through appears to be constrained by competition and largely determined by demand side factors finally we find that the pass through rate in the competitive market segment has been approaching unity over the past years indicating a rise in competitive pressure

intrinsic variability in group and individual decision making the paper examines the random preference model which can explain inherent variability of preferences in managerial and individual decision making and provides axiomatizations for the utility components of two such models differentiated by the structure of core preferences expected utility eu and betweenness like preferences we then examine the possibility of violations of weak stochastic transitivity for these models and for a model with core dual eu preferences such violations correspond to the existence of condorcet cycles and therefore the analysis has implications for managerial decision making and for majority rule voting the paper also investigates implications of its findings for two popular experimental settings this paper was accepted by james smith decision analysis

a structural approach to identifying the sources of local currency price stability the inertia of the local currency prices of traded goods in the face of exchange rate changes is a well documented phenomenon in international economics this paper develops a structural model to identify the sources of this local currency price stability and applies it to micro data from the beer market the empirical procedure exploits manufacturers and retailers first order conditions in conjunction with detailed information on the frequency of price adjustments following exchange rate changes to quantify the relative importance of local non traded cost components markup adjustment by manufacturers and retailers and nominal price rigidities in the incomplete transmission of such changes to prices we find that on average approximately 60 of the incomplete exchange rate pass through is due to local non traded costs 8 to markup adjustment 30 to the existence of own brand price adjustment costs and 1 to the indirect strategic effect of such costs though these results vary considerably across individual brands according to their market shares

pass through of wholesale price to the end user retail price in the norwegian electricity market abstract in this paper we estimate the pass through of wholesale electricity price to the end consumer price with variable price contracts in the norwegian electricity market using weekly data we find substantial asymmetry when retailers pass on the impact of price changes in the wholesale market to the retail prices as price increases are transmitted more quickly than price decreases by examining the cumulative adjustment function of price change we identify that some dominant retailers might be exercising market power in the retail electricity market for an average norwegian household with variable price contract the cost of asymmetric price pass through due to 2 5 ore kwh change in the wholesale price over the complete life of pass through in a year reaches to a high of 2 28 nok this cost sums up to 3 8 million nok for all the norwegian households on variable price contracts for one time price change to deal with this asymmetric price setting behavior end consumers should switch to spot price contracts and make use of smart grid technologies

are hypothetical referenda incentive compatible a comment in a recent article in this journal cummings al 1997 offer experimental evidence rejecting the hypothesis that a hypothetical referendum is an incentive compatible mechanism for obtaining the social value of or willingness to pay for changes in the allocation of environmental goods and services while cautions in offering a blanket rejection of hypothetical referenda as a means of measuring economic values on the basis of their findings the authors do suggest that at least in experimental settings respondents appear to behave differently when real money is changing hands wheather hypothetical situations adequately mimic real market situations has been debated in the contigent valuation literature since its inception see cummings brookshire and schulze 1986 cummings et al s finding of incentive incompatibility appears to offer strong evidence for the critics of hypothetical referenda

theory and misbehavior of first price auctions recent experimental evidence appears to reject simple nash equilibrium models of bidding behavior in first price auctions the author presents a methodological critique of this evidence existing tests have concentrated on deviations of subjects from predictions in the message space of the action bid deviations the author suggests that it is more natural to evaluate subject behavior in expected payoff space he concludes that the evidence against the simple models is not significant enough to warrant their rejection copyright 1989 by american economic association

rational choice the contrast between economics and psychology rational choice the published record of a conference on economics and psychology frames the issues as a contest between economic theory and the falsifying evidence from psychology according to a third perspective that of experimental economics most standard theory provides a correct first approximation in predicting motivated behavior in laboratory experimental markets but the theory is incomplete particularly in articulating convergence processes in time and in ignoring decision cost this view has roots in the work of herbert simon and sidney siegel but it is not plainly represented in contemporary research in economic pyschology

the recovery of risk preferences from actual choices since its introduction the expected utility hypothesis has been widely used in the construction of economic models more recently attention has focused on the conditions under which it is possible in principle to recover individual investors risk preferences from their demand for assets dybvig and polemarchakis 2 this paper represents a first attempt to recover preferences operationally from data on the actual demand for assets numerous difficulties are encountered in attempting to measure preferences toward risk in a real world setting preferences are revealed through the choices of an individual but in an uncertain world these choices also depend on his expectations of future events hence an immediate problem arises in separating the influences of each on such decisions problems can also arise in measuring other variables such as wealth which influence choices because of these difficulties efforts to classify and measure an individual s risk preferences have been confined to direct assessments in hypothetical environments e g kahneman and tversky 4 and keeney and raiffa 5 pp 203 212 2 in these studies the authors assumed that stated preferences are accurate indicators of actual behavior the question remains however whether individuals actually behave in the way their assessments predict the purpose of this note is to make some progress in answering this question in it an experiment is described which infers an individual s risk preferences from his actual choices in a real world environment specifically the risk aversion of a dealer in u s government securities is assessed directly and then estimated statistically from his actual demand for bills in the weekly treasury auctions the distribution of returns used in the analysis are calculated from the forecasts made by the dealer himself in addition to introducing new procedures for measuring preferences this study provides insights into the reliability of direct assessments in predicting the actual behavior

the demand for electricity in israel quarterly data for israel are used to compare and contrast three dynamic econometric methodologies for estimating the demand for electricity by households and industrial companies these are the dynamic regression model and two approaches to cointegration ols and maximum likelihood since we find evidence of seasonal unit roots in the data we also test for seasonal cointegration we find that the scale elasticities are similar in all three approaches but the ols price elasticities are considerably lower moreover ols suggests non cointegration the paper concludes by stochastically simulating the drms to calculate upside risk in electricity demand