electricity fuel contracting relationships with coal and gas suppliers the growth of competition in the electricity generation industry along with changes in natural gas and coal regulation have led to renewed interest in the nature of efficient transactional arrangements for procuring coal and gas this study examines the evolution of major influences on the incentives for choosing among different transactional forms we find that the asset specificity hypothesis continues to be an important explanation for transactional arrangements in fuel acquisition the degree of asset specificity in a fuel supply arrangement is a function of technological factors of inherent market characteristics and of regulatory rules the expanding role of more flexible fuel supply arrangements in gas and to a lesser extent coal markets is a natural response to current regulatory and technological trends

assessing the performance of renewable electricity support instruments abstract the performance of feed in tariffs and tradable certificates is assessed on criteria of efficacy efficiency equity and institutional feasibility in the early stage of transition to an energy system based entirely on renewable energy supplies renewable electricity can only thrive if support takes into account the specific technical economic and political problems which result from embedding this electricity in conventional power systems whose technology organizational structure environmental responsibility and general mission differ profoundly from the emerging renewable based system support schemes need to capture the diversity of power supplies the variable nature of some renewable supplies and their different attributes for the purposes of public policy they must take into account the variety of generators including small decentralized generation emerging in a renewable based system and the new relationships between generators and customers renewable energy policies need a clear point of reference because the incumbent power systems are not sustainable they must adapt to the requirements of the renewable ones not the other way round incumbent systems carry the responsibility of paying the transition something that corresponds best with the polluter pays principle

can technology specific deployment policies be cost effective the case of renewable energy support schemes can technology specific deployment policies be cost effective the case of renewable energy support schemes

performance evaluation of renewable energy support policies applied on flanders tradable certificates system abstract the article is composed as a diptych first a general framework of criteria to evaluate the performance of renewable energy support systems is elaborated it is built around the main criteria effectiveness efficiency and equity all three are multi layered and specifying the contents of the various layers is case dependent second the framework is applied on detailed data about the flemish tradable certificates support system several salient conclusions confirm observations from research in other countries causing growing awareness first most crucial is a careful and detailed qualification of renewable energy sources and technologies without even effectiveness is not reliably measurable second nearby targets of renewable energy output must follow from a clearly designed transition trajectory towards a sustainable electricity sector such transition is intertwined with an industrial technological policy for bringing the necessary technologies to development and maturity third if the above two prerequisites are overridden certificates systems abound of excess profits predominantly reaped by incumbent power companies being not the best agents of real change to a sustainable energy future

contractual solutions to the hold up problem this paper considers a general version of the hold up problem where n agents first make relation specific investments and then must agree on some collective action it is shown that first best solutions exist under a variety of different assumptions about the nature of information asymmetries

efficient adaptation in long term contracts take or pay provisions for natural gas to mitigate the inflexibility of long term contracting for natural gas parties will look for terms that minimize the need for costly adjudication while maintaining incentives for appropriate adaptation the authors examine the incident of take or pay provisions in contracts between natural gas producers and pipelines from this perspective they argue that take obligations can be viewed as a mechanism for effecting appropriate incentives for contractual performance and show that efficient breach considerations define an optimal take percentage as a function of characteristics of the transaction these incentives are distorted by regulated price ceilings which cause the adoption of take obligations in excess of optimal levels the findings refute the common perception that take or pay provisions are just an artifact of wellhead price regulation and serve no useful purpose in the absence of regulation 20 references 1 figure 1 table

unforeseen contingencies and incomplete contracts we scrutinize the conceptual framework commonly used in the incomplete contract literature this literature usually assumes that contractual incompleteness is due to the transaction costs of describing or of even foreseeing the possible states of nature in advance we argue however that such transaction costs need not interfere with optimal contracting i e transaction costs need not be relevant provided that agents can probabilistically forecast their possible future payoffs even if other aspects of the state of the nature cannot be forecast in other words all that is required for optimality is that agents be able to perform dynamic programming an assumption always invoked by the incomplete contract literature the foregoing optimality result holds very generally provided that parties can commit themselves not to renegotiate moreover we point out that renegotiation may be hard to reconcile with a framework that otherwise presumes perfect rationality however even if renegotiation is allowed the result still remains valid provided that parties are risk averse

pretia ex machina prices and process in long term contracts aimong the primary motives for writing contracts identified in both the law and economics literatures is the desire to protect against the hazards inherent to exchange where one or both parties have invested in reliance or relationship specific assets in support of the transaction because such investments have a higher value in their intended than in their next best use parties have an incentive to engage in haggling or other forms of opportunism in hopes of influencing the distribution of the resulting quasi rents contracts promote efficiency by securing the distribution of those rents ex ante thereby avoiding costly repetitive bargaining over the terms of trade and reducing the risk for each party of relying on the performance of the other in reality this description of the role and functioning of contracting is oversimplified as a number of legal and economic scholars have emphasized contracts are not the precise mechanically enforced documents often encountered in economic theory 2 indeed contracts are extremely

should renewable energy policy be renewable political flexibility brings about trade offs for policy makers aiming to support the deployment of renewable energy sources res on the one hand it allows incorporating new information on ex ante uncertain benefits and costs of res policy on the other hand it may deter res investments this paper scrutinizes how these trade offs play out economically and politically when res policy makers choose the degree of flexibility as well as the instruments to implement flexibility the analysis builds on a theoretical framework distinguishing between flexibility by design and by adjustment it is complemented by a discussion of three case studies res support schemes in germany and the united kingdom and the eu emissions trading scheme theoretical as well as empirical results suggest that the politically chosen degree of flexibility by policy design may be sub optimally low in contrast flexibility by policy adjustment is often excessively high

contractual responses to the common pool prorationing of crude oil production this paper examines bargaining among firms to mitigate rent dissipation following the major oil discoveries of 1926 35 because of high bargaining costs firms chose prorationing instead of consolidation and unitization and success varied the analysis also shows that prorationing took the form it did because concession such as per well quotas were required to draw in small operations and the quotas led to predictable responses regarding rent dissipation prorationing despite its costs controlled total field production and costs conserved natural reservoir energies and lengthened field life when private agreements failed the parties successfully appealed for state enforcement since similar heterogeneities influnce regulations elsewhere in the economy detailed analysis of bargaining among firms is essential for insight into the emergence of various institutional forms 33 references 3 tables

investments holdup and the form of market contracts the authors analyze incomplete contracts to induce efficient investment with exogenous switching costs fixed price contracts are efficient generate some rigidity in prices are renegotiated intermittently by possibly small amounts and when inflation is positive generate asymmetric responses to shocks all consistent with evidence on prices and wages with two sided specific investments efficiency requires prices to have sufficient escalator clauses to avoid renegotiation as observed in many long term contracts a third case with one sided specific investments can generate take or pay contracts and explain why firms sometimes pay for specific investments that appear to benefit employees directly

representing the valuation of take or pay provisions in gas markets with limited liquidity long term contracting is the traditional governance mechanism to deal with the transaction costs associated with the specificity of gas industry assets long term contracts have been often used to allocate risks among players and to that end they often include take or pay provisions these clauses specify that buyers take the volume risk as they are obliged to pay for a minimum amount of gas consumption in exchange buyers pay a predefined price supposedly lower than the risk neutral expectation of short term gas prices in that view if the buyer is able to resell that gas in the short term the contract is an effective hedge against short term volatility otherwise the contract does not act as a hedge but it becomes a sunk cost the corresponding power producers behavior involves not only output decisions but also financial decisions to analyze that situation this paper develops a new quantitative methodology that allows comparing risk neutral valuations of gas and power markets decisions we test the model in a real size system and show the additional cost of the power system associated with a possible illiquidity of the short term gas market

redistribution effects of energy and climate policy the electricity market abstract energy and climate policies are usually seen as measures to internalize externalities however as a side effect the introduction of these policies redistributes wealth between consumers and producers and within these groups while redistribution is seldom the focus of the academic literature in energy economics it plays a central role in public debates and policy decisions this paper compares the distributional effects of two major electricity policies support schemes for renewable energy sources and co2 pricing we find that the redistribution effects of both policies are large and they work in opposed directions while renewables support transfers wealth from producers to consumers carbon pricing does the opposite more specifically we show that moderate amounts of wind subsidies can increase consumer surplus even if consumers bear the subsidy costs co2 pricing in contrast increases aggregated producer surplus even without free allocation of emission allowances however not all types of producers benefit these findings are derived from an analytical model of electricity markets and a calibrated numerical model of northwestern europe our findings imply that if policy makers want to avoid large redistribution they might prefer a mix of policies even if co2 pricing alone is the first best climate policy in terms of allocative efficiency

renegotiation design with unverifiable information this paper considers a buyer seller relationship with observable but unverifiable investments and or random utility parameters in such situations it is known that contract renegotiation may prevent the implementation of first best outcomes in this paper we show however that efficient investments and optimal risk sharing can typically be achieved provided the initial contract is able to monitor the ex post renegotiation process specifically we focus on the following two features of renegotiation design first default options in case renegotiation breaks down second the allocation of all bargaining power to either contracting party moreover we show that these two features can be obtained in standard rubinstein bargaining games through contractual provisions such as specific performance clauses and penalties for delay or equivalently financial hostages refundable without interest

co specific investments hold up and self enforcing contracts abstract this paper offers a general model of the hold up problem when investments are co specific agents are risk neutral and there are no information asymmetries nash bargaining with outside options determines the division of the surplus arising from exchange the model formally demonstrates that reciprocal exposure to specific assets achieved via the partial redistribution of specific investment costs to the potentially opportunistic party serves as a credible commitment to mutually advantageous exchange

transaction cost economics past present and future oliver williamson is the founder and chief developer of transaction cost economics tce in this brief essay on the occasion of his nobel memorial prize i offer a partial discussion of williamson s contributions by first summarizing some of the accomplishments of tce past and then sketching some of the opportunities for tce future most of the topics in both sections tce past and tce future start with a quotation from williamson s early work that i think still speaks volumes today that is while fellow travelers and successors have acted on one set of williamson s insights helping to produce the accomplishments of tce past another collection of williamson s insights has gone relatively unremarked creating some of the opportunities for tce future

implementing the eu renewable target through green certificate markets abstract the european parliament has agreed on a target of a 20 share of renewables in the eu s total energy consumption by 2020 to achieve the target the european council has adopted mandatory differentiated national targets for each of the member states in this paper we consider the use of green certificates to reach the renewable targets and we analyze the potential for cost reductions by allowing for trade in green certificates across member states we show that differentiated national targets cannot ensure a cost effective implementation of the overall target for the eu s renewable energy consumption trade in green certificates can ensure a cost effective distribution of renewable energy production but the national targets prevent a cost effective distribution of energy consumption nevertheless our numerical model indicates that eu wide trade in green certificates may cut the eu s total cost of fulfilling the renewable target by as much as 70 compared with a situation with no trade however the design of green certificate markets may have a large impact on the distribution of costs across countries

supplier performance in vertical alliances the effects of self enforcing agreements and enforceable contracts the paper examines the significance of enforceability and adaptability in governing vertical alliances and their performance ramifications for suppliers literature on supplier relations suggests that suppliers are skeptical of close ties with their buyers helper 1991 helper and sako 1995 such skepticism persists in spite of the fact that buyers are writing longer enforceable contracts with fewer suppliers in this context the paper develops a transaction cost economics tce based model that distinguishes between the verifiable and nonverifiable aspects of governance attributes of safeguards incentive intensity and adaptability in explaining supplier performance variations the paper argues that the following factors prove valuable for suppliers 1 the adaptive and collaborative orientation fostered by the original equipment manufacturer s oem s credible commitment to the exchange and by information sharing on the part of the supplier 2 the presence of certain nonverifiable safeguards and 3 the incentives inherent in target pricing these assertions have been tested using data from the home appliance industry results indicate that information sharing together with 1 oem dependence and 2 target pricing does indeed enhance supplier performance also results suggest that while nonverifiable safeguards can help verifiable safeguards do not have a positive association with supplier interests under certain conditions then suppliers can venture into closer relationships with buyers and benefit

cost effectiveness as energy policy mechanisms the paradox of technology neutral and technology specific policies in the short and long term when choosing policy mechanisms to design and deploy energy policies policymakers typically seek cost effective ones linking cost effectiveness to the lowest cost of support for res e generation and or consumer costs the objectives of this paper are to analyze the cost effectiveness of renewable portfolio standards rps feed in tariffs fit and auctions in the short and long term considering both technology neutral and technology specific approaches results show that rps and auctions are more cost effective than feed in tariffs fit in the short term if cost effectiveness is defined as minimizing consumer costs also if one or more emerging technologies with higher levelized life cycle costs lcc low cumulative production and high experience elasticity are considered in the pool of res e policy design a technology neutral approach in the short term could lock out these emerging technologies avoiding a long term lcc reduction in this case a technology specific policy used in the short term would reflect lower total generation policy costs in the long term if compared with a technology neutral policy in both short and long term this paper calls this phenomenon the paradox of technology neutral and technology specific policies in the long term considering the results this paper suggests a mix of technology neutral and technology specific policies using rps or auction mechanisms to promote res e

distance trade and fdi a hausman taylor sur approach this paper analyses the effects of distance as a common determinant of exports and fdi in a three factor new trade theory model assuming that distance affects both pure trade costs and plant set up costs exports and fdi are not necessarily substitutes with respect to distance since the predicted impact depends on its importance for fixed plant set up costs relative to transportation costs and on the relative importance of vertical mnes for the empirical specification we suggest that the impact of time invariant variables such as distance is most appropriately analysed in a hausman taylor sur model we apply our model to industry level data of bilateral outward fdi stocks and exports of the us and germany copyright 2004 john wiley sons ltd

contractual form and market thickness in trucking a central proposition of the transaction costs literature is that firms will substitute more complicated contractual arrangements for simple spot arrangements when transactions involve relationship specific investments i investigate this proposition by testing whether simple spot arrangements are less common when local trucking markets are thin i find that doubling the thickness of the market increases the likelihood that simple spot arrangements govern transactions by about 30 for long hauls i find weaker evidence of relationships between local market thickness and contractual form for short hauls hauls for which quasi rents are particularly small contracts protect quasi rents over a surprisingly large range but they play a less important role as quasi rents decrease

rationales for technology specific res support and their relevance for german policy in order to achieve cost effective res e deployment it is often argued that technology neutral support schemes for renewables are indispensable against this background res e support policies making widely use of technology differentiation in remuneration settings e g across the eu are frequently criticized from a theoretical point of view however in this paper we provide a systematic critique of the technology neutrality concept as a foundation for designing policy support schemes in the res e technology field specifically the main objective of the paper is to scrutinize the arguments for technology neutrality and discuss three conceptual arguments for why technology specific support schemes could in fact help minimize the societal costs of reaching future res e targets we also briefly address different political economy concerns which could constrain the choice of cost effective policy support schemes and that have to be taken into account for economic policy advice for empirical illustration of the key arguments we refer to the case of german res e policy making the central conclusion from this paper is that technology specific res e support schemes may generate significant economic benefits particularly if technology markets work imperfectly and in second best policy settings with additional non internalized market failures

towards a better understanding of renewable energy yieldcos abstract for renewable energy yieldcos to disburse high and growing present day dividends at the cost of delayed debt service and avoided capital expenditure is clearly unsustainable expecting to issue new stock at ever higher prices to pay incumbent investors ever higher dividends represents the foundations of a pyramidal scheme which is most likely to unravel sooner rather than later in the medium term yieldcos may be expected to offer positive and reasonably stable annualized returns certainly not entirely risk free as frequently perceived though displaying characteristics of a bond rather than those of an equity share this paper also demonstrates the application of the real option valuation framework to prioritize investments into yieldcos with stocks classified in order of the returns they offer and conditioned by the volatility of such returns

renewable electricity support systems are feed in systems taking the lead abstract support systems for renewable energy sourced electricity res e can be classified into price and quantity based systems their most representative instruments are feed in systems price based and quota systems e g green certificates or a renewable portfolio standard quantity based the origins of these support systems are quite different and are motivated by different political and economic needs likewise their geographical distribution and effectiveness also differ worldwide feed in systems are the most widespread res e support system in recent years some classical quota countries have partially or even totally changed to feed in systems feed in systems seem to encourage higher res e deployment technology diversity and investor security although the manufacturing capacity for certain res e technologies has been more developed in some feed in countries lately this has changed to some extent due to the incorporation of emerging countries in the res e industry traditionally quota systems appeared to be more compatible with liberalisation of the electricity market however since the introduction of the premium system this argument can be countered since feed in premiums can be considered compatible with the electricity market as quota systems regarding the price paid for res e in quota countries higher green certificate prices have not led to higher res e quantities moreover the relative support levels in quota countries are higher on average than in fit countries contradicting the common argument that quota systems are more cost effective additionally feed in systems especially if stepped tariffs are designed encourage higher res e geographical dispersion avoiding the concentration of res e facilities in just a few locations which can lead to nimby not in my back yard syndrome all these factors may explain the steady spread of feed in systems worldwide the purpose of this paper is to assess the performance of quota and feed in systems thereby contributing to the worldwide debate on the suitability of the different res e support systems

status and perspectives of renewable energy policy and deployment in the european union what is needed to reach the 2020 targets abstract this article evaluates the status of current res deployment policies and barriers in the eu 27 member states and compares it to the required to meet the 2020 targets the evaluation relies strongly on the quantitative deployment status and policy effectiveness indicators european res deployment and policy has progressed strongly in recent years but the growth here has been mainly driven by effective policies in a small or medium number of top runner countries across europe the highest average policy effectiveness over six years was reached for onshore wind 4 2 biofuels 3 6 and biomass electricity 2 7 while in the heat sector all technologies score below 2 comparing the recent progress to the required growth for meeting the 2020 target it appears that some countries largely exceed the interim targets of the res directive 2009 28 ec despite this europe will need additional policy effort to reach the 2020 target critical success factors include implementing effective and efficient policies that attract sufficient investments reducing administrative and grid related barriers especially in currently less advanced countries upgrading the power grid infrastructure dismantling financial barriers in the heat sector realising sustainability standards for biomass and lowering energy demand through increased energy efficiency efforts

specific investments flexible adaptation and requirement contracts i introduction in bilateral procurement relationships ex post opportunism may cause underinvestment in relationship specific investments as is shown by klein et al 1978 and williamson 1985 in such situations long term contracts can help to mitigate this so called hold up problem in a world of positive transaction costs long term contracts are necessarily incomplete 1 an inflexible incomplete contract may lead to ex post maladaptation in the presence of uncertainty as in williamson 1985 therefore a transaction cost economizing contract needs to provide both incentives for efficient relationship specific investments and flexibility for efficient adaptation 2 in a simple hold up model with contractible cost related variables i show that efficient adaptation and investments can be achieved through a requirement contract which gives the buyer the right to decide on how much to buy ex post and contains a price provision with a two part tariff structure including a fixed component and a unit charge that may vary with quantities and cost related variables this result provides a formal explanation of contractual arrangements observed in vertical procurement relationships formally my result can be viewed as an extension of williamson s 1983 hostage model in which only the seller makes investments the procurement quantity is fixed and there is no cost uncertainty my result is also related to previous formal studies on the take or pay contracts as in hubbard and weiner 1986 crocker and masten 1988 and masten 1988 in a simpler model without cost uncertainty and specific investments they show that a unilateral options contract with a take or pay feature gives the buyer the right incentives to make efficient quantity decisions particularly crocker and masten 1988 and masten 1988 emphasize the take or pay contract s ability to induce efficient adaptation another related paper is by bos 1996 who shows that when the production cost is contractible a target cost pricing contract that requires the seller to share a portion of the cost overrun can achieve the first best outcome the rest of the article is organized as follows section ii provides the background of the issue studied section iii lays out the model and characterizes the first best benchmark section iv derives the optimal contract section v concludes ii background a growing recent literature has attempted to find contractual solutions to the hold up problem most of the papers in the literature use hart and moore s 1988 classical model or its variation in that model there are two risk neutral firms a buyer and a seller of an intermediate good each firm can before production make a relationship specific investment to enhance the future value of the good in the case of the buyer or to reduce the production cost of the good in the case of the seller neither the investments nor the value nor the cost of the intermediate good are contractible ex ante in the absence of a contract there will generally be underinvestment some of the contractual solutions to the underinvestment problem rely on complex direct revelation mechanisms that utilize private or unverifiable information to implement efficient investments as in for example rogerson 1992 and maskin and tirole 1999 but they are not robust to renegotiation several articles have focused on contracts that make explicit use of ex post renegotiation to achieve efficiency particularly aghion et al 1994 chung 1991 and edlin and reichelstein 1996 show that simple fixed price fixed quantity contracts may suffice to achieve the first best outcome such contracts are in general not efficient ex post but as long as mutually beneficial renegotiation of the initial contract is allowed both ex ante and ex post efficiency can be achieved either by a properly designed renegotiation game as in aghion et al

public policies to support the development of renewable energy in romania a review abstract the aim of this study is to review the public policies used to support the development of renewable energy in romania over the past ten years romania assumed a target of 24 share of renewable energy in consumption in 2020 higher than the average target of the european union and this target has already been reached in the beginning of 2014 as a result of the public policies implemented therefore this study examines firstly the support schemes for the development of renewable energy in the european union underlining the arguments to support the renewable energy as well as the main barriers for its development secondly this study analyses the renewable energy sector in romania in terms of theoretical and economic potential production and consumption of renewable energy and legislation related to the renewable energy thirdly this study discloses the main issues of the public renewable energy policy in romania starting with an overview of the tradable green certificates system and revealing the changes of the romanian support scheme and the possible effects of the policy changes the results of the present study may be useful for further research regarding public policies for the development of renewable energy projects

gas market distorting effects of imbalanced gas balancing rules inefficient regulation of pipeline flexibility this paper analyzes the value and cost of line pack flexibility in liberalized gas markets through examination of the techno economic characteristics of gas transport pipelines and the trade offs between different ways to use the infrastructure transport and flexibility line pack flexibility is becoming increasingly important as a tool to balance gas supply and demand over different periods in the european liberalized market context a monopolist unbundled network operator offers regulated transport services and flexibility balancing services according to the network code and balancing rules therefore gas policy makers should understand the role and consequences of line pack regulation the analysis shows that the line pack flexibility service has an important economic value for the shippers and the tso furthermore the analysis identifies distorting effects in the gas market due to inadequate regulation of line pack flexibility by disregarding the sunk costs of flexibility in the balancing rules the overall efficiency of the gas system is decreased finally the analysis demonstrates that the actual costs of line pack flexibility are related to the peak cumulative imbalance throughout the balancing period any price for pipeline flexibility should therefore be based on the related trade off between the right to use the line pack flexibility and the provision of transport services

holdups standard breach remedies and optimal investment in bilateral trading problems the parties may be hesitant to make relationship specific investments without adequate contractual protection we postulate that the parties can sign noncontingent contracts prior to investing and can freely renegotiate them after information about the desirability of trade is revealed we find that such contracts can induce one party to invest efficiently when courts impose either a breach remedy of specific performance or expectation damages moreover specific performance can induce both parties to invest efficiently if a separability condition holds expectation damages on the other hand is poorly suited to solve bilateral investment problems forthcoming the american economic review please contact the program in law and economics at boalt hall school of law uc berkeley berkeley ca 94720 for a copy of this paper

mitigating contractual hazards unilateral options and contract length in this article we consider the ways in which the desire for efficient low cost adaptation to change influences the tradeoff between the design and duration of long term contractual relationships we examine the distortions in contract terms occasioned by nonprice competition for natural gas in the presence of wellhead price regulation deviations from optimal contract incentives significantly raise the cost of being bound to long term agreements and shorten the duration of contracts the approach we adopt suggests a method for empirically assessing the efficiency of alternative contracting practices and legal standards

foreign direct investment and european integration in the 1990s this paper examines the effects of eu integration in the 1990s on the fdi relations in europe we find that the completion of the single market the 1995 enlargement and the so called eastern enlargement are characterised by a substantial positive anticipation effect in the period between the announcement and the formal establishment of each integration step neither the single market programme nor the previous enlargement exhibited any further positive effects on intra eu fdi volumes after their establishment

a techno economic analysis of eu renewable electricity policy pathways in 2030 the aim of this paper is to assess several pathways of a harmonised european policy framework for supporting renewable electricity res e in a 2030 horizon according to different criteria the pathways combine two main dimensions degrees of harmonisation and instruments and design elements a quantitative model based analysis with the green x model is provided the results of the simulations show that there are small differences between the evaluated cases regarding effectiveness all the policy pathways score similarly with respect to res e deployment i e with different degrees of harmonisation and whether using a feed in tariff a feed in premium a quota system with banding or a quota without banding scheme in contrast the policy costs clearly differ across the pathways but the differences can mostly be attributed to the instruments rather than to the degrees of harmonisation this is also the case with other criteria static and dynamic efficiency and the socioeconomic and environmental benefits in terms of co2 emissions and fossil fuels avoided both the degree of harmonisation and the choice of instrument influence the distribution of support costs across countries finally our findings suggest that keeping strengthened national support leads to similar results to other policy pathways

feed in tariffs combined with capital subsidies for promoting the adoption of residential photovoltaic systems abstract both feed in tariffs fits and capital subsidies have been widely employed to promote the adoption of renewable energy technologies this study sheds light on the combined use of fits and capital subsidies the purpose of the study is to clarify their optimal combinations in order to encourage households to adopt photovoltaic pv systems the study develops a microeconomic model embodying the idea of two part tariffs the most important findings concern the combination that maximizes social welfare if fits are applied to the total pv electricity generated they should be set at the avoided cost per unit of pv electricity and capital subsidies should be used to control the number of adopters whereas if fits are applied to only surplus pv electricity the previous principle is distorted however a numerical example suggests that the distortion has little effect on the maximized social welfare and thus it makes little difference whether fits are applied to all pv electricity or just the surplus pv electricity the findings may also be applied to the adoption of wind power generation systems and to adoption by businesses

revisiting legal realism the law economics and organization perspective the contrast between american legal realism which ran itself into the sand schlegel 1979 p 459 and the law and economics movement which is perhaps the most important development in legal thought in the last quarter century posner 1986 p xix is dramatic that the one foundered while the other flourished is explained in large measure by the absence of an intellectual framework for legal realism and the use by law and economics of the powerful framework of neoclassical economics

which renewable energy policy is a venture capitalist s best friend empirical evidence from a survey of international cleantech investors governments around the world have adopted ambitious targets to increase the share of renewable energy and reduce greenhouse gas emissions they pursue a variety of policy approaches to achieve these targets it has been a popular theme for contributions in energy policy to investigate the effectiveness of such policies this article adds a new perspective to the debate namely looking at the policy preferences of private investors in innovative clean energy technology firms we surveyed 60 investment professionals from european and north american venture capital and private equity funds and asked them to assess the effectiveness of various policies in terms of stimulating their interest to invest in innovative clean energy technologies in addition to quantitative rankings we use qualitative interview data to capture additional information on why investors prefer some policies over others the combined analysis compensates for the inherent limitations of a quantitative ranking using generic policy types the results of this exploratory analysis demonstrate that all other things being equal investors in our sample perceived feed in tariffs to be the most effective renewable energy policy the overall preference for feed in tariffs is even more pronounced among investors based in europe and with higher exposure to clean energy

holdups simple contracts and information acquisition abstract in a typical procurement setup several recent papers have shown that when complete contracting is not possible simple noncontingent contracts may suffice to solve the under investment problem this paper points out that a noncontingent contract offer such as a fixed price contract may induce the seller to acquire information on the future course of costs and only to accept the offer if the cost is low it is shown that sometimes the buyer prefers to wait and buy on the spot market than to offer a long term contract when the seller rejects a contract offer or the buyer chooses not to make one the seller will not make efficient investments because he expects to be held up on the spot market

what do facilitating practices facilitate an empirical investigation of most favored nation clauses in natural gas contracts long term contracts often include most favored nation clauses mfns which are nondiscrimination guarantees that obligate a buyer or seller to treat all trading partners symmetrically in pricing decisions recent theoretical work has shown that such clauses can facilitate tacit collusion by increasing the cost of selective price changes aimed at attracting new business an alternative view is that mfns serve to facilitate efficient price adjustment in extended exchange relationships we test these competing hypotheses using data from long term natural gas contracts many of which employ mfns our conclusion is that the pattern of mfn adoption in conjunction with the structure of the nondiscrimination regions and the parallels with other nonstrategic price escalation provisions lends strong support to the efficiency rationale

contracting on time the paper shows how the time considerations especially those concerning contract duration affect incomplete contract theory time is not only a dimension along which the relationship unfolds but also a continuous verifiable variable that can be included in contracts we consider a bilateral trade setting where contracting investment trade and renegotiation take place in continuous time we show that efficient investment can be induced either through a sequence of constantly renegotiated fixed term contracts or through a renegotiation proof evergreen contract a perpetual contract that allows unilateral termination with advance notice we provide a detailed analysis of properties of optimal contracts

contractual flexibility rent seeking and renegotiation design an empirical analysis of information technology outsourcing contracts this paper examines renegotiation design in contracts for outsourced information technology it services whereas prior literature in information systems has highlighted the likelihood of ex post rent seeking engendered by renegotiation we build upon literature on incomplete contracts to posit that renegotiation can be pareto improving by incorporating contingencies revealed ex post research on contract renegotiation has been hampered by two sets of challenges the lack of appropriate data and empirical challenges in identification we circumvent this problem both by appropriate data collection and by employing an identification strategy to address alternate causal explanations we propose a measure pareto improving amendments to assess renegotiation outcomes that enhance the value from outsourcing by hazard equilibration and by incorporating learning using a unique sample of 141 it outsourcing contracts we examine the role of decision rights delineated ex ante in enabling pareto improving amendments and in resolving the trade off between adaptation and rent seeking we find that flexibility provisions termination for convenience rights and contractual rights whereby vendors are granted rights to reuse know how are associated with pareto improving amendments the results are robust to potential endogeneity of contractual provisions when parties have feasible foresight and to the possibility of adverse selection in the sample we also examine alternate explanations from the literature on contractual breach implications for practitioners and researchers are discussed this paper was accepted by sandra slaughter information systems

four formal izable theories of the firm in this essay i define and compare elemental versions of four theories of the firm these elemental theories are distilled from important contributions by hart holmstrom klein williamson and others although these contributions have been widely cited and much discussed i have found it difficult to understand the commonalities distinctions and potential combinations of these seemingly familiar contributions in this essay therefore i attempt to clarify these issues in three steps i begin with informal summaries of the theories then turn to simple but formal statements of each elemental theory and finally nest the four elemental theories in an integrative framework

the trade off between foreign direct investments and exports the role of multiple dimensions of distance to serve foreign markets firms can either export or set up a local subsidiary through horizontal foreign direct investment fdi the conventional proximity concentration theory suggests that fdi substitutes for trade if distance between countries is large while exports become more important if scale economies in production are large this paper investigates empirically the effect of different dimensions of distance on the choice between exports and fdi we find that different dimensions of distance affect exports and fdi differently there is clear evidence of a proximity concentration trade off in geographical terms the share of fdi sales in total foreign sales increases with geographical distance the positive relation between import tariffs and fdi intensity provides further evidence for a trade off resulting from trade costs on the other hand the share of fdi decreases with language differences and cultural and institutional barriers the latter dimensions of distance thus affect fdi more strongly than exports 2011 blackwell publishing ltd

review of internalization of externalities and dynamics of atmospheric emissions in energy sector of baltic states abstract the existence of external costs can lead to market failure this is because the free market generally ignores the existence of external costs pollution taxes and other flexible market instruments are being applied to internalize external costs of atmospheric emissions subsidies to renewable energy technologies are also being applied to internalize positive external benefits of renewables as these technologies have lower life cycle emissions of classical pollutants and ghg emissions in comparison with fossil fuel based energy generation technologies the paper applies context mechanism outcome cmo theoretical framework based on realistic evaluation theory for review and assessment of the level of internalization of externalities and their impact on atmospheric emissions of classical pollutants in baltic states the paper aims to compare external costs of atmospheric pollution and pollution taxes and other measures to internalize externalities in baltic states and to relate them to the trends of emission of classical pollutants in these countries the external costs of atmospheric pollution were compared in baltic states together with atmospheric pollution taxes and other policy measures used to internalize external costs of atmospheric pollution in baltic states the analysis of trends of atmospheric pollution by classical pollutants in baltic states indicated positive trends since 2004 in all analysed countries though review of internalization of externalities in latvia indicated the lowest levels of external costs internalization in terms of pollution taxes excise taxes and feed in tariffs and subsidies from eu structural funds for renewables the atmospheric emission reduction trends for classical pollutants are very favourable in latvia except air pollution by ozone this indicates that the degree of internalization of external costs related to specific pollutants does not necessary imply emission reduction of these pollutants as other factors as well as country context also play very important role and further investigations of this problem are necessary

hedging in coal contracts under the acid rain program tradable permit schemes introduce uncertainty into the cost of regulatory compliance due to the permits uncertain price regulated firms can hedge this uncertainty through their contracts for fuel procurement data on coal contracts are used to estimate how the option not to be delivered higher sulfur coal is priced results show that under a tradable permit scheme coal prices are reduced for an increase in the sulfur bound controlling for reductions in price due to higher delivered sulfur content jel q48 q53

cost effectiveness of renewable electricity policies we analyze policies to promote renewable sources of electricity a portfolio standard rps raises electricity prices and primarily reduces gas fired generation a knee of the cost curve exists between 15 and 20 goals for 2020 in our central case and higher natural gas prices lower the cost of greater reliance on renewables a renewable energy production tax credit lowers electricity price at the expense of taxpayers which limits its effectiveness in reducing carbon emissions and it is less cost effective at increasing renewables than a portfolio standard neither policy is as cost effective as a cap and trade policy for achieving carbon emission reductions

infrastructure endowment and corporate income taxes as determinants of foreign direct investment in central and eastern european countries this paper analyses the importance of taxes on corporate income and production related tangible infrastructure as determinants of foreign direct investment fdi in central and eastern european countries ceecs we operationalise taxes using effective average tax rates on the bilateral level and employ indices derived from principal component analysis as a proxy for the infrastructure endowment in the empirical analysis we control for a possible interrelation between taxes and infrastructure as determinants of fdi an issue usually neglected in the literature specifically a favourable infrastructure endowment may compensate for relatively high taxes hence higher taxes may not deter fdi the results from our panel econometric analysis of bilateral outward fdi flows of seven home countries in eight ceecs for the 1995 2004 period in an augmented gravity model setting show that i both taxes and infrastructure play a role in the location decisions made by multinational enterprises ii telecommunication and transport infrastructure are of special significance to fdi and iii the tax rate sensitivity of fdi indeed decreases with the level of infrastructure endowment copyright 2009 the authors journal compilation 2009 blackwell publishing ltd

regulation and long term contracting in us natural gas markets this paper addresses the recent experience of the us natural gas industry with contracting and regulation the so called contracts problem between producers and pipelines we develop a simple model of contracting between a single buyer and seller emphasizing the determination of price and minimum purchase take or pay provisions we find that take or pay provisions are likely to emerge in regulated and unregulated markets characterized by uncertainty but that phased deregulation may well exacerbate the problem of contract adjustment our model is supported by empirical evidence drawn from recent samples of contracts between wellhead producers and pipelines

transactions costs and the efficient organization of production a study of timber harvesting contracts a transaction costs framework is developed to explain the choice between lump sum and per unit payment provisions in private timber harvesting contracts predictions about which contract type minimizes the transaction costs of presale measurement and contract enforcement and monitoring are derived and tested using private timber sales contracts from north carolina the empirical results provide strong support for the transaction costs approach and also reject several predictions from a risk based model the transaction costs framework also provides insights into the choice between negotiated and competitive sales procedures

the quantity flexibility contract and supplier customer incentives consider a supply chain consisting of two independent agents a supplier e g a manufacturer and its customer e g a retailer the latter in turn serving an uncertain market demand to reconcile manufacturing procurement time lags with a need for timely response to the market such supply chains often must commit resources to production quantities based on forecasted rather than realized demand the customer typically provides a planning forecast of its intended purchase which does not entail commitment benefiting from overproduction while not bearing the immediate costs the customer has incentive to initially overforecast before eventually purchasing a lesser quantity the supplier must in turn anticipate such behavior in its production quantity decision this individually rational behavior results in an inefficient supply chain this paper models the incentives of the two parties identifying causes of inefficiency and suggesting remedies particular attention is given to the quantity flexibility qf contract which couples the customer s commitment to purchase no less than a certain percentage below the forecast with the supplier s guarantee to deliver up to a certain percentage above under certain conditions this method can allocate the costs of market demand uncertainty so as to lead the individually motivated supplier and customer to the systemwide optimal outcome we characterize the implications of qf contracts for the behavior and performance of both parties and the supply chain as a whole

incomplete contracts specific investments and risk sharing an optimal contract design problem is considered contracts which are incomplete and simple are used to investigate the extent to which constrained revisions can mitigate inefficiencies resulting from contractual incompleteness an optimal contract is characterized in two cases first when a contract is being used to facilitate trade between two risk neutral parties who must make relationship specific investments it is possible to implement the first best by a simple contract second when a contract is being used to share risk it is generally not possible to implement the first best when one party is risk neutral however it is possible to implement the first best by assigning all the ex post decision rights to that party

conjectures regarding empirical managerial accounting research abstract the empirical managerial accounting literature has failed to produce a substantive cumulative body of knowledge this literature has not matured beyond describing practice to developing and testing theories explaining observed practice like other areas of accounting research while the lack of publicly available data is a popular reason for this literature s underdeveloped state it is not the only one other conjectures include its inductive approach researchers incentives its use of non economics based frameworks the lack of empirically testable theories and its emphasis on decision making not control

the policy implications of the different interpretations of the cost effectiveness of renewable electricity support abstract the cost effectiveness of support for renewable electricity is a main criterion to assess the success of policy instruments together with effectiveness the costs of support are also a source of significant concern for governments all over the world however significant confusion exists in the literature on the cost effectiveness of public support for renewable electricity while some authors define the concept of cost effectiveness as that which complies with the equimarginality principle many others including documents from relevant organisations european commission international energy agency intergovernmental panel on climate change define it as the lowest costs of support generally equating it with the minimisation of consumer costs the aim of this paper is to clarify the differences between both approaches and their policy implications regarding the choice of instruments and design elements it is shown that they partly overlap and that their policy implications clearly differ leading to very different policy prescriptions while the former favours technology neutral instruments and design elements the minimisation of consumer costs approach favours instruments and design elements which adjust support levels to the costs of the technologies

open access and the evolution of the u s spot market for natural gas federal regulations promoting open access transportation dramatically altered the organizational structure of the u s market for natural gas in the 1980s generally unbundling the merchant and transport functions of interstate pipelines an empirical analysis of wellhead spot prices is undertaken to examine the effect of open access on the geographic scope of the spot market using monthly spot price data from 1984 91 three statistical tests are applied and compared price correlations granger causality and cointegration we find that open access integrated the regional wellhead markets into a national competitive market for natural gas the effects of unbundling on contracts for natural gas are then investigated incentives for long term contracts between pipelines and producers are shown to be effectively removed by the introduction of competitive buying and selling of gas at the wellhead through open access

minimum bill contracts theory and policy this paper examines the efficiency implications of minimum bill cont racts and concludes that minimum bill provisions promote rather than impede efficient adaptation to changing circumstances in particular minimum bills provide a simple mechanism by which parties faced wit h uncertain demand and rising marginal cost can approximate joint pro fit maximizing payment schedules in transaction specific relationship s governed by long term contracts the paper also questions the merit of proposals for legislative or regulatory intervention to reduce mi nimum bill obligations in natural gas contracts and considers the ap propriate legal status of these provisions in the event of contractua l failure copyright 1988 by blackwell publishing ltd

are tradable green certificates a cost efficient policy driving technical change or a rent generating machine lessons from sweden 2003 2008 in the european policy debate tradable green certificates tgc have been suggested to be a superior regulatory framework for promoting the diffusion of renewable electricity technologies the purpose of this paper is to assess the performance of the swedish tgc system contributing to the european debate on the suitability of different types of frameworks the expectations of the tgc system were that it would a be effective in terms of increasing the supply of green electricity b do this in a cost effective manner from both a social and a consumer perspective c generate an equitable distribution of costs and benefits and d drive technical change so far it has performed adequately in terms of effectiveness and social cost effectiveness however consumer costs have been substantially higher than expected very large rents are generated and at best it contributes marginally to technical change thus a tgc framework should be selected if the overriding concern is to minimize short term social costs of reaching a certain goal with a high degree of predictability however it cannot be expected to also drive technical change keep consumer costs down and be equitable such trade offs need to be revealed and not obscured by analysts

the economics of governance the economics of governance is an effort to implement the study of good order and workable arrangements where good order includes both spontaneous order in the market which is a venerated tradition in economics adam smith 1776 friedrich hayek 1945 kenneth a arrow and gerard debreu 1954 and intentional order of a conscious deliberate purposeful kind chester irving barnard 1938 p 9 also i interpret workable arrangements to mean feasible modes of organization all of which are flawed in comparison with a hypothetical ideal avinash dixit 1996 pp 4 9 the object is to work out the efficiency logic for managing transactions by alternative modes of governance principally spot markets various long term contracts hybrids and hierarchies interest among social scientists economists included in the study and practice of good order and workable arrangements has been steadily growing in contrast with the orthodox lens of choice prices and output supply and demand the economics of governance is a lens of contract construction broadly in the spirit of james buchanan s 2001 p 29 observation that mutuality of advantage from voluntary exchange is the most fundamental of all understandings in economics the economics of governance as herein described is principally an exercise in bilateral private ordering by which i mean that the immediate parties to an exchange are actively involved in the provision of good order and workable arrangements to be sure the need for private ordering varies with the rules of the game as provided by the state distinctions between lawlessness where the state provides limited or unreliable protection for property and contract dixit 2004 and lawfulness where the state undertakes to protect property and enforce contracts in a principled way are pertinent the first of these applies mainly to primitive and transition economies the second is commonly associated with western democracies recourse to private ordering under conditions of lawlessness is altogether understandable given the absence of state support the walter a haas school of business university of california berkeley ca 94720 1900 the paper has benefited from workshop presentations at the university of california berkeley the university of valencia insead fountainebleau and the 2004 annual conference of the international society for new institutional economics an abbreviated version was also given as the horst claus recktenwald lecture at nuremburg on 4 november 2004 comments and suggestions from fred balderston ernesto dalbo avinash dixit robert gibbons witold henisz ian larkin steven tadelis and dean williamson are especially acknowledged 1 lon fuller s 1954 p 477 definition of eunomics as the science theory or study of good order and workable arrangements is very much in the spirit of what i refer to as governance 2 one of the immediate ramifications of insistently comparing feasible alternatives all of which are flawed is that the purported inefficiencies that are ascribed to failures to achieve first best optimality are not dispositive but invite the query as compared with what i return to this issue in section iv 3 excluding corporate governance the numbers of articles that used the word governance during the period 1998 2000 as compared with the period 1977 1979 in selected economics business management sociology organization and political science journals were 60 vs 1 76 vs 4 79 vs 18 and 60 vs 25 where the journals surveyed were the american economic review journal of political economy quarterly journal of economics rand journal of economics and journal of economic perspectives in economics strategic management journal management science academy of management journal and academy of management review in business management administrative science quarterly organization science american journal of sociology american sociological review and annual review of sociology in sociology organization and american political science review political science quarterly journal of politics and political research quarterly in political science combining these four categories articles using the word governance increased from 48 to 275 over this 20 year interval dixit 2004 pp 149 50 reports that the number of web pages that turn up under the search for governance is huge

complementarity and evolution of contractual provisions an empirical study of it services contracts an increasing volume of business activity appears to be occurring via alliances or other interfirm arrangements in which complex contracts are featured yet there has been relatively little study of contract design in the strategy or management literatures the economics literature on contracting has been extensive but it has been less concerned with learning and evolution phenomena in which strategy and organization scholars are deeply interested in this paper we investigate the relationship between two types of contractual provisions that are important in high technology contracts or contracts for which environmental uncertainty or technological complexity are significant namely contingency planning and task description previous research suggests that contracts can vary significantly in the degree of detail with which such key provisions are written and that they are each subject to learning in this paper we find evidence from a sample of 386 contracts that contingency planning and task description behave as complements in contractual design we argue that this complementarity reflects patterns of learning to contract we also find that repeated exchange between two firms leads to greater effort at contingency planning in subsequent contracts a finding that is also consistent with learning effects but not with frequently made claims that contracts and trust are substitutes

comparing the costs of intermittent and dispatchable electricity generating technologies economic evaluations of alternative electric generating technologies typically rely on comparisons between their expected life cycle production costs per unit of electricity supplied the standard life cycle cost metric utilized is the levelized cost per mwh supplied this paper demonstrates that this metric is inappropriate for comparing intermittent generating technologies like wind and solar with dispatchable generating technologies like nuclear gas combined cycle and coal levelized cost comparisons are a misleading metric for comparing intermittent and dispatchable generating technologies because they fail to take into account differences in the production profiles of intermittent and dispatchable generating technologies and the associated large variations in the market value of the electricity they supply levelized cost comparisons overvalue intermittent generating technologies compared to dispatchable base load generating technologies they also overvalue wind generating technologies compared to solar generating technologies integrating differences in production profiles the associated variations in the market value of the electricity supplied and life cycle costs associated with different generating technologies is necessary to provide meaningful comparisons between them this market based framework also has implications for the appropriate design of procurement auctions created to implement renewable energy procurement mandates the efficient structure of production tax credits for renewable energy and the evaluation of the additional costs of integrating intermittent generation into electric power networks

the japanese energy sector current situation and future paths abstract as the world s third leading economy and a major importer of fuels the choice of future energy paths and policies that japan makes in the next few years will have a significant influence on the energy security of the world as a whole and of the northeast asia region in particular in this article we describe the current status of and recent trends in the japanese energy sector including energy demand and supply by fuel and by sector we then discuss the current energy policy situation in japan focusing on policies related to climate change targets renewable energy development and deployment liberalization of energy markets and the evolution of the japanese nuclear power sector the final section of the article presents the structure of the japan leap long range energy alternatives planning software system dataset describes several alternative energy paths for japan with an emphasis on alternative paths for nuclear power development and ghg emission abatement and touches upon key current issues of energy policy facing japan as reflected in the modeling inputs and results