optimal dynamic pricing of inventories with stochastic demand over finite horizons in many industries managers face the problem of selling a given stock of items by a deadline we investigate the problem of dynamically pricing such inventories when demand is price sensitive and stochastic and the firm s objective is to maximize expected revenues examples that fit this framework include retailers selling fashion and seasonal goods and the travel and leisure industry which markets space such as seats on airline flights cabins on vacation cruises and rooms in hotels that become worthless if not sold by a specific time we formulate this problem using intensity control and obtain structural monotonicity results for the optimal intensity resp price as a function of the stock level and the length of the horizon for a particular exponential family of demand functions we find the optimal pricing policy in closed form for general demand functions we find an upper bound on the expected revenue based on analyzing the deterministic version of the problem and use this bound to prove that simple fixed price policies are asymptotically optimal as the volume of expected sales tends to infinity finally we extend our results to the case where demand is compound poisson only a finite number of prices is allowed the demand rate is time varying holding costs are incurred and cash flows are discounted the initial stock is a decision variable and reordering overbooking and random cancellations are allowed

the spatial and temporal diffusion of house prices in the uk abstract this paper provides a method for the analysis of the spatial and temporal diffusion of shocks in a dynamic system we use changes in real house prices within the uk economy at the level of regions to illustrate its use adjustment to shocks involves both a region specific and a spatial effect shocks to a dominant region london are propagated contemporaneously and spatially to other regions they in turn impact on other regions with a delay we allow for lagged effects to echo back to the dominant region london in turn is influenced by international developments through its link to new york and other financial centers it is shown that new york house prices have a direct effect on london house prices we analyse the effect of shocks using generalised spatio temporal impulse responses these highlight the diffusion of shocks both over time as with the conventional impulse responses and over space

the role of firm size in bilateral bargaining a study of the cable television industry we examine the effect of buyer merger on bilateral negotiations between a supplier and n buyers merger may have bargaining effects in addition to the usual efficiency effects the effect of merger on the buyers bargaining position depends on the curvature of the supplier s gross surplus function merger enhances worsens the buyers bargaining position if the function is concave convex based on a panel of advertising revenue in the cable television industry our estimates indicate that the gross surplus function for suppliers of program services is convex this result suggests that cable operators integrate horizontally to realize efficiency gains rather than to enhance their bargaining position vis a vis program suppliers

preference heterogeneity in experiments comparing the field and laboratory do laboratory experiments provide a reliable basis for measuring field preferences economists recognize that preferences can differ across individuals but only a few attempts have been made to elicit individual preferences for representative samples of a population in a particular geographical area region or country our primary objective is to directly compare estimates of preferences elicited from a convenience sample and the estimates for the wider population from which that sample is drawn we examine the strengths and weaknesses of laboratory and field experiments to detect differences in preferences over risk and time that are associated with standard observable characteristics of the individual

the dynamic correlation and volatility of real estate price and rental an application of msv model this article investigates the dynamic conditional correlation between price and rental among four types of real estate markets namely housing retail office and factory in the case of hong kong from january 1993 to december 2008 the dynamic conditional correlation multivariate stochastic volatility dcc msv model and bayesian markov chain monte carlo mcmc are employed to capture the volatility and time varying correlation of property price and rental in each market the empirical results demonstrate that the volatilities of price are significantly larger than those of rental for each type of real estate markets throughout the whole sample period besides the findings indicate that the correlations between price and rental are time varying and the average correlation in the housing market is much larger than those in the other three markets also the conditional correlations in the factory market are the most volatile while those in the office market are relatively stable additionally two pa

a dynamic approach to estimating hedonic prices for environmental goods an application to open space purchase if housing markets exhibit slow adjustment to system shocks then hedonic estimates of the price impact from environmental amenity trends may be time variant this paper suggests an alternative to the cross sectional model for estimating hedonic prices using an error correction approach that allows for endogenous environmental quality the model is applied to data concerning an open space purchase program in boulder colorado and shows that the economic impact of an open space purchase takes several years to be fully realized this observation questions using cross sectional hedonic models for evaluating willingness to pay for time trended environmental amenities

equilibrium and migration in dynamic models of housing markets abstract this paper presents a model of a regional housing market where households choose among competing employment opportunities offered by cities within a given system the equilibrium requirement imposed in the model requires that households be indifferent among all locations both within their current city and other cities within the region rather than in terms of exogenously determined utility or populations this construction allows the characterization of equilibrium in terms of potentially observable variables related to household income given that equilibrium can be defined in this more general manner it is natural to identify ways in which the predictions will differ from those generated by existing models capozza and helsley s j urban econ 28 1990 180 203 model of land conversion is evaluated in this context in this setting the option value associated with the ability to delay development depends directly on the degree to which the income processes are correlated across cities also increased idiosyncratic income risk does not necessarily lead to larger option values

preference reversals and the independence axiom of all of the paradoxical patterns of behavior reported in laboratory experiments one of the most perplexing for decision theorists is the preference reversal phenomenon a subject in a preference reversal experiment is typically given a choice between a lottery with a high probability of winning a modest amount of money a p bet and a lottery with a low probability of winning a large amount of money a bet the lowest amount of money for which the subject would willingly sell either of these lotteries is also elicited the most common reversal is for a subject to choose the p bet over the bet but to put a higher selling price on the bet preference reversals were first reported by harold lindman 1971 and sarah lichtenstein and paul slovic 1971 in discussing the psychologists discovery of such reversals david grether and charles plott remark the inconsistency is deeper than mere lack of transitivity or even stochastic transitivity it suggests that no optimization principles of any sort lie behind even the simplest of human choices 1979 p 623 this paper offers a simple alternative explanation of documented preference reversals an explanation that does not require the abandonment of the transitivity assumption

residential construction using the urban growth model to estimate housing supply abstract this article presents an empirical model of housing supply derived from urban growth theory this approach describes new housing construction as a function of changes in house prices and costs rather than as a function of the levels of those variables which previous studies have used empirical tests support this specification over the leading alternative models our estimates show that a 10 rise in real prices leads to an 0 8 increase in the housing stock which is accomplished by a temporary 60 increase in the annual number of starts spread over four quarters

what drives returns to euro area housing evidence from a dynamic dividend discount model abstract we apply a dynamic dividend discount model to analyse housing returns for eight euro area countries comprising over 90 of euro area gdp both individually and as a panel a vector autoregressive model var is estimated for four variables excess return to housing rents the real interest rate and real disposable per capita income using quarterly data over the period 1978 2009 this empirical investigation which allows for a decomposition of house price movements into movements in rent cash flow and expected return news components indicates that the bulk of the variability of euro area house price movements can be attributed to movements in fundamentals there remains nonetheless an important but less sizeable influence of market wide or expected return variations in house prices country specific estimation indicates considerable heterogeneity around the euro area result both for what concerns long term impacts and dynamics notably changes in expected returns play a relatively strong role in the house prices of ireland and spain

energy efficiency and financial literacy abstract financial literacy explains anomalies in a wide range of consumers financial decisions we extend the literature on financial literacy by examining its role in the purchase of energy consumer durables a setting purported to suffer from sub optimal levels of investment due to consumer mistakes we augment a standard choice experiment for purchasing a hot water system with data on financial literacy financial literacy is an economically important and statistically significant determinant of investment in energy efficiency this result is robust to incorporating individual discount rates and risk aversion as well as standard controls such as income and education indicating that financial literacy is not merely a proxy for standard demographic characteristics financial literacy also makes choices more consistent with standard consumer preferences and increases the probability that respondents select investments with the lowest lifetime discounted costs the results establish low financial literacy as a mechanism driving low investment in energy efficiency

strategic commitment to price to stimulate downstream innovation in a supply chain abstract it is generally in a firm s interest for its supply chain partners to invest in innovations to the extent that these innovations either reduce the partners variable costs or stimulate demand for the end product they will tend to lead to higher levels of output for all of the firms in the chain however in response to the innovations of its partners a firm may have an incentive to opportunistically increase its own prices the possibility of such opportunistic behavior creates a hold up problem that leads supply chain partners to underinvest in innovation clearly this hold up problem could be eliminated by a pre commitment to price however by making an advance commitment to price a firm sacrifices an important means of responding to demand uncertainty in this paper we examine the trade off that is faced when a firm s channel partner has opportunities to invest in either cost reduction or quality improvement i e demand enhancement should it commit to a price in order to encourage innovation or should it remain flexible in order to respond to demand uncertainty we discuss several simple wholesale pricing mechanisms with respect to this trade off

managing channel profits a channel of distribution consists of different channel members each having his own decision variables however each channel member s decisions do affect the other channel members profits and as a consequence actions a lack of coordination of these decisions can lead to undesirable consequences for example in the simple manufacturer retailer consumer channel uncoordinated and independent channel members decisions over margins result in a higher price paid by the consumer than if those decisions were coordinated in addition the ensuing suboptimal volume leads to lower profits for both the manufacturer and the retailer this paper explores the problems inherent in channel coordination we address the following questions what is the effect of channel coordination what causes a lack of coordination in the channel how difficult is it to achieve channel coordination what mechanisms exist which can achieve channel coordination what are the strengths and weaknesses of these mechanism what is the role of nonprice variables e g manufacturer advertising retailer shelf space in coordination does the lack of coordination affect normative implications from in store experimentation can quantity discounts be a coordination mechanism are some marketing practices actually disguised quantity discounts we review the literature and present a simple formulation illustrating the roots of the coordination problem we then derive the form of the quantity discount schedule that results in optimum channel profits this article was originally published in marketing science volume 2 issue 3 pages 239 272 in 1983

nonlinear pricing in markets with interdependent demand this paper provides a mathematical framework for modeling demand and determining optimal price schedules in markets which have demand externalities and can sustain nonlinear pricing these fundamental economic concepts appear in the marketplace in the form of mutual buyers benefits and quantity discounts the theory addressing these aspects is relevant to a wide variety of goods and services examples include tariffs for electronic communications services pricing of franchises and royalty fees for copyrighted material and patents this paper builds on several previous results from microeconomics and extends nonlinear pricing to markets with demand externalities the implications of this price structure are compared to results obtained for flat rates and two part tariffs in a similar context a case study is described in which the results were applied to planning the startup of a new electronic communications service

review of us esco industry market trends an empirical analysis of project data abstract this comprehensive empirical analysis of us energy service company esco industry trends and performance employs two parallel analytical approaches a survey of firms to estimate total industry size and a database of 1500 esco projects from which we report target markets and typical project characteristics energy savings and customer economics we estimate that industry investment for energy efficiency related services reached us 2 billion in 2000 following a decade of strong growth esco activity is concentrated in states with high economic activity and strong policy support typical projects save 150 200 mj m2 year and are cost effective with median benefit cost ratios of 1 6 and 2 1 for institutional and private sector projects the median simple payback time spt is 7 years among institutional customers 3 years is typical in the private sector reliance on dsm incentives has decreased since 1995 preliminary evidence suggests that state enabling policies have boosted the industry in medium sized states escos have proven resilient in the face of restructuring and will probably shift toward selling energy solutions with energy efficiency part of a package we conclude that appropriate policy support both financial and non financial can jump start a viable private sector energy efficiency services industry that targets large institutional and commercial industrial customers

bank lending and property prices in hong kong abstract this paper studies the relationship between residential property prices and bank lending in hong kong this is an interesting topic for three reasons first swings in property prices have been extremely large and frequent in hong kong second under the currency board regime monetary policy cannot be used to guard against asset price swings third despite the collapse in property prices since 1998 the banking sector remains sound while the contemporaneous correlation between lending and property prices is large our results suggest that the direction of influence goes from property prices to bank credit rather than conversely

efficiency in housing markets which home buyers know how to discount abstract we test for efficiency in the swedish co op market by examining the negative relationship between the sales price and the present value of future monthly payments or rents if the co op housing market is efficient the present value of co op rental payments due to underlying debt obligations of the cooperative should be fully reflected in the sales price however a one hundred kronor increase in the present value of future rents only leads to an approximately 75 kronor reduction in the sales price these inefficiencies are larger at the lower end of the housing market and in poorer less educated regions and appear to reflect both liquidity constraints and the existence of more sophisticated buyers in higher educated areas overall our findings suggest that there is some systematic failure to properly discount the future stream of rent payments relative to the up front sales price

testing the present value relation for housing prices should i leave my house in san francisco abstract we examine the efficiency of residential housing markets by examining price rent and cost of capital indices generated from a transactions level data base for alameda and san francisco counties in northern california we can reject both constant and nonconstant discount rate versions of the housing price present value relation in the short run long run results are consistent with the housing price present value relation when we adjust the discount factor for changes in both tax rates and borrowing costs that characterize our 1970 1988 sample period our preferred explanation for the short run rejection of but long run consistency with the present value model is the high transaction costs that characterize the housing market however we cannot rule out the possibility that deviations of actual and present value price are due to asset market bubbles or nonrational expectations

are private markets and filtering a viable source of low income housing estimates from a repeat income model while filtering has long been considered the primary mechanism by which markets supply low income housing direct estimates of that process have been absent this has contributed to doubts about the viability of markets and to misplaced policy i fill this gap by estimating a repeat income model using 1985 2011 panel data real annual filtering rates are faster for rental housing 2 5 percent than owner occupied 0 5 percent vary inversely with the income elasticity of demand and house price inflation and are sensitive to tenure transitions as homes age for most locations filtering is robust which lends support for housing voucher programs jel r21 r31 r38

testing the efficiency of the norwegian housing market abstract the question of whether or not the housing market is efficient is posed by an increasing number of economists policymakers homebuyers and homesellers this article tests the efficiency hypothesis on data from the housing market in oslo over the period 1991 2002 employing the case shiller time structure test on a repeat sales house price index and returns to housing we demonstrate that both the repeat sales house price index and returns contain time structure and that the housing market is characterized by inefficiencies we also find surprisingly that the housing market consistently yields higher appreciation at lower volatility than the stock market over the period

the economics of energy service contracts energy service contracting can provide a cost effective route to overcoming barriers to energy efficiency energy service contracts allow the client to reduce operating costs transfer risk and concentrate attention on core activities however the energy services model may only be appropriate for a subset of energy services and energy using organisations a challenge for both business strategy and public policy is to identify those situations in which energy service contracting is most likely to be appropriate and the conditions under which it is most likely to succeed energy service contracting is a form of outsourcing it will only be chosen where the expected reduction in the production cost of supplying energy services can more than offset the transaction cost of negotiating and managing the relationship with the energy service provider production costs will be determined by a combination of the physical characteristics of the energy system and the technical efficiency of the relevant organisational arrangements including economies of scale and specialisation transaction costs in turn will be determined by the complexity of the energy service the specificity of the investments made by the contractor the competitiveness of the energy services market and the relevant legal financial and regulatory rules this paper develops these ideas into a general framework that may be used to assess the feasibility of energy service contracting in different circumstances the framework leads to a number of hypotheses that are suitable for empirical test

research on the energy saving and revenue sharing strategy of escos under the uncertainty of the value of energy performance contracting projects abstract under the uncertainty of the value of energy performance contracting projects epcps this paper develops a revenue sharing bargaining model between an energy service company esco and an energy using organization eu based on the model the paper analyzes the impacts of energy prices risk adjusted discount rates and accidents on the esco s bargaining strategies the research shows that the greater the probability of adverse circumstances is the higher is the revenue share of the eu and the more disadvantageous is the esco s position in the game furthermore we design a forecast commitment contract between an esco and an eu and analyze the optimal product s energy savings commitment strategy of the esco to cope with uncertain energy savings and contract risk the research illustrates that by introducing penalties and commitments the contract can eliminate the impact of the uncertain energy savings on the contract execution to a certain extent when the eu takes a greater commitment risk the esco is willing to provide a higher commitment thus enhancing the strategy value of the bilateral relationship and reducing the contract risk finally the policy recommendations about improving shared savings contract standard third party energy savings measurement and verification mechanism and arbitration mechanism of epcs are provided

turning green into gold a framework for energy performance contracting epc in china s real estate industry abstract there is a growing interest in a sustainable built environment and green technologies are gaining worldwide attention however implementing green technologies usually requires more investment than using traditional technologies and the payback period tends to be very long in china most developers sell their properties and subsequently transfer the ownership to customers hence a crucial problem for promoting green construction is that developers cannot obtain economic profits gold from implementing green technologies meanwhile other stakeholders such as property management companies are also hesitant to adopt green technologies because of the large investment involved and their lack of experience to tackle this problem an energy performance contracting epc based framework is proposed to turn green investment into gold benefit by careful sharing of the risks existed the framework was developed by conducting a focus group meeting with three experienced representatives from developer property management company and energy service company respectively a real life case study which includes both energy efficient system retrofit and new construction is used to estimate the costs and benefits involved to demonstrate and verify the conceptual framework the results show that the proposed framework can support the application of green technologies in both types of projects economic benefits as well as environmental benefits can be gained for the project stakeholders and the whole society

from volatility to value analysing and managing financial and performance risk in energy savings projects abstract many energy related investments are made without a clear financial understanding of their values risks and volatilities in the face of this uncertainty the investor such as a building owner or an energy service company will often choose to implement only the most certain and thus limited energy efficiency measures conversely commodities traders and other sophisticated investors accustomed to evaluating investments on a value risk and volatility basis often overlook energy efficiency investments because risk and volatility information are not provided fortunately energy efficiency investments easily lend themselves to such analysis using tools similar to those applied to supply side risk management accurate and robust analysis demands a high level of understanding of the physical aspects of energy efficiency which enables the translation of physical performance data into the language of investment with a risk management analysis framework in place the two groups energy efficiency experts and investment decision makers can exchange the information they need to expand investment in demand side energy projects in this article we first present the case for financial risk analysis in energy efficiency in the buildings sector we then describe techniques and examples of how to identify quantify and manage risk finally we describe emerging market based opportunities in risk management for energy efficiency

impatience incentives and obesity this paper explores the relationship between time preferences economic incentives and body mass index bmi using data from the 2006 national longitudinal survey of youth we rst show that greater impatience increases bmi and the likelihood of obesity even after controlling for demographic human capital occupational and nancial characteristics as well as risk preference next we provide evidence of an interaction

the effect of myopia and loss aversion on risk taking an experimental test myopic loss aversion is the combination of a greater sensitivity to losses than to gains and a tendency to evaluate outcomes frequently two implications of myopic loss aversion are tested experimentally 1 investors who display myopic loss aversion will be more willing to accept risks if they evaluate their investments less often 2 if all payoffs are increased enough to eliminate losses investors will accept more risk in a task in which investors learn from experience both predictions are supported the investors who got the most frequent feedback and thus the most information took the least risk and earned the least money language en

house prices and credit constraints making sense of the us experience most us house price models break down in the mid 2000s due to the omission of exogenous changes in mortgage credit supply associated with the sub prime mortgage boom from house price to rent ratio and inverted housing demand models previous models lack data on credit constraints facing first time home buyers incorporating a measure of credit conditions the cyclically adjusted loan to value ratio for first time buyers into house price to rent ratio models yields stable long run relationships more precisely estimated effects reasonable speeds of adjustment and improved model fits

investigation of rfid investment in a single retailer two supplier supply chain with random demand to decrease inventory inaccuracy abstract inventory information inaccuracy is one of the main causes to the inventory waste in supply chain operations which motivates many companies to adopt modern tracing technologies e g radio frequency identification rfid to decrease inventory errors and strengthen the cooperation between the supply chain stakeholders considering different types of rfid possess unequal technique features in tracing items in more practical environment for the first time this paper explores the different effectiveness of rfid in decreasing the inventory inaccuracies in a supply chain containing one retailer and two suppliers firstly a novel scale factor function is introduced to illustrate the relationships between the variable cost of rfid and the non full abilities of rfid in decreasing inventory inaccuracies then under the stochastic demand and inaccurate inventory analytical models are formulated to investigate the cost effectiveness of different rfids to the optimal order quantities and the expected profits in different scenarios uncoordinated and coordinated supply chains hereby the best coordination strategies are addressed at last numerical results obtained from different scenarios on adopting rfid and a practical case level rfid system for recycling packaging cases indicate that rfid can not only decrease inventory inaccuracies but also strengthen the supply chain coordination

non welfarist optimal taxation and behavioral public economics research in behavioral economics has uncovered the widespread phenomenon of people making decisions against their own good intentions in these situations the government might want to intervene indeed individuals might want the government to intervene to induce behavior that is closer to what individuals wish they were doing the analysis of such corrective interventions through taxes and subsidies might be called behavioral public economics however such analysis where the government has an objective function that is different from that of individuals is not new in public economics in these cases the government is said to be non welfarist in its objectives and there is a long tradition of nonwelfarist welfare economics especially the analysis of optimal taxation and subsidy policy where the outcomes of individual behavior are evaluated using a preference function different from the one that generated the outcomes the object of this paper is to first of all present a unified view of the non welfarist optimal taxation literature and secondly to present behavioral public economics as a natural special case of this general framework

re evaluating the role of energy efficiency standards a behavioral economics approach abstract the economic models that prescribe pigovian taxation as the first best means of reducing energy related externalities are typically based on the neoclassical model of rational consumer choice yet consumer behavior in markets for energy using durables is generally thought to be far from efficient giving rise to the concept of the energy efficiency gap this paper presents a welfare analysis of energy policies that is based on a behavioral model of temptation and self control introduced by gul and pesendorfer 23 24 we find that in the presence of temptation i pigovian taxes alone do not yield a first best outcome ii when viewed as substitutes energy efficiency standards can dominate pigovian taxes and iii a policy combining standards with a pigovian tax can yield higher social welfare than a pigovian tax alone implying that the two instruments should be viewed as complements rather than substitutes

a snapshot of the european energy service market in 2010 and policy recommendations to foster a further market development abstract as of 2010 the energy service market in europe is still far from utilising its full potential wide scale peer reviewed studies investigating the development and up to date status of the european esco market are scarce this article presents a comprehensive insight of the european esco industry based on the results from a large scale survey carried out 2009 2010 in 39 european countries the observed market development during the period 2007 2010 trends in business practices and factors influencing the esco industry evolution are described finally having considered the remaining barriers and the supporting factors as well as the successful experiences in europe policy measures that could further promote esco activities are proposed

actuarial pricing of energy efficiency projects lessons foul and fair recent market convulsions in the energy industry have generated a plethora of post mortem analyses on a wide range of issues including accounting rules corporate governance commodity markets and energy policy while most of these analyses have focused on business practices related to wholesale energy trading there has been limited analysis of retail energy services particularly energy efficiency projects we suggest that there were several business concepts and strategies in the energy efficiency arena whose inherent value may have been masked by the larger failure of companies such as enron in this paper we describe one such concept namely actuarial pricing of energy efficiency projects which leverages a portfolio based approach to risk management first we discuss the business drivers contrasting this approach with conventional industry practice we then describe the implementation of this approach including an actuarial database pricing curves and a pricing process compatible with commodity pricing we conclude with a discussion of the prospects and barriers for the further development of transparent and quantifiable risk management products for energy efficiency a prerequisite for developing energy efficiency as a tradeable commodity we address these issues from an experiential standpoint drawing mostly on our experience in developing and implementing such strategies at enron

residential buildings and the cost of construction new evidence on the efficiency of the housing market present value studies of asset market efficiency are controversial because they compare asset prices to unobserved discounted streams of future rents as an alternative if housing markets are efficient then the price of residential capital or buildings should satisfy the following two conditions i deviations between new building prices and construction costs should disappear faster than construction lags and have no effect on construction and ii temporary building price shocks should dissipate at a similar rate for different vintage buildings results from an error correction model support both hypotheses for single family housing in vancouver british columbia this implies that the implicit market for residential buildings is efficient and that any inefficiencies in the housing market must lie in the market for land itself

how much energy do building energy codes save evidence from california houses regulations governing the energy efficiency of new buildings have become a cornerstone of us environmental policy california enacted the first such codes in 1978 and has tightened them every few years since i evaluate the resulting energy savings three ways comparing energy used by houses constructed under different standards controlling for building and occupant characteristics examining how energy use varies with outdoor temperatures and comparing energy used by houses of different vintages in california to that same difference in other states all three approaches yield estimated energy savings significantly short of those projected when the regulations were enacted

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

house price dynamics and market fundamentals the parisian housing market the paper compares two methods to evaluate the effect of market fundamentals on housing price dynamics the first method follows the traditional two step procedures found in the literature in which

moral hazard income taxation and prospect theory the standard theory of optimal income taxation under uncertainty has been developed under the assumption that individuals maximise expected utility however prospect theory has now been established as an alternative model of individual behaviour with empirical support this paper explores the theory of optimal income taxation under uncertainty when individuals behave according to the tenets of prospect theory it is seen that many of the standard results are modified in interesting ways the first order approach for solving the optimisation prob lem is not valid over the domain of losses and the marginal tax schedule offers full insurance around the reference consumption level the implications of non welfarist objectives under income uncertainty are also examined

an empirical examination of the timing of land conversions in the presence of farmland preservation programs using a panel of parcel level data we estimate a hazard model and find strong evidence that the mere existence of an option to preserve farmland delays decisions to convert farmland to developed uses by about six years a reduction in median conversion time of 12 to 43 depending on parcel size where such delays allow local governments to improve infrastructure or implement stricter growth control measures benefits of a preservation option may be even more long term also increases in the variance of returns to development tended to slow conversion for parcels with all but the highest lot capacities copyright 2008 oxford university press

promoting energy efficiency financing and escos in developing countries mechanisms and barriers abstract developing countries have tremendous potential to increase energy efficiency but face several barriers before the potential can be realised a lack of access to appropriate financing mechanisms is one of the important barriers energy service companies escos a market oriented mechanism to improve energy efficiency had successful experiences in developed countries such as the usa and canada and developing countries such as south korea escos are in nascent stage in many developing countries and face several barriers that include market finance and institutional barriers poor energy pricing policies high transaction costs etc market development through active involvement of governments as a customer information provider and policy maker is required to promote escos development of specialised energy efficiency financing windows in appropriate financial institutions development of skills for energy efficiency project appraisal and design of specialised financial products are other measures to accelerate the diffusion of energy efficiency

swings in commercial and residential land prices in the united states abstract we use a large dataset of land sales dating back to the mid 1990s to construct land price indexes for 23 msas in the united states and for the aggregate of those msas the price indexes show a dramatic increase in both commercial and residential land prices over several years prior to their peak in 2006 2007 and a steep descent since then these fluctuations have exceeded those in well known indexes of home prices and commercial real estate prices because those indexes price a bundle of land and structures this comparison implies that land prices have been more volatile than structures prices over this period this result is a key element of the land leverage hypothesis which holds that home prices and commercial property prices will be more volatile all else equal in areas where land represents a larger share of real estate value

beyond revealed preference choice theoretic foundations for behavioral welfare economics we propose a broad generalization of standard choice theoretic welfare economics that encompasses a wide variety of nonstandard behavioral models our approach exploits the coherent aspects of choice that those positive models typically attempt to capture it replaces the standard revealed preference relation with an unambiguous choice relation roughly x is strictly unambiguously chosen over y written xp y iff y is never chosen when x is available under weak assumptions p is acyclic and therefore suitable for welfare analysis it is also the most discerning welfare criterion that never overrules choice the resulting framework generates natural counterparts for the standard tools of applied welfare economics and is easily applied in the context of specific behavioral theories with novel implications though not universally discerning it lends itself to principled refinements

is there an equilibrating relationship between house prices and replacement cost empirical evidence from berlin abstract it is a feature of competitive markets with forward looking participants that a good s benefit and its production cost are equalized in equilibrium and that no resources are wasted during the adjustment process for housing markets there is mixed evidence whether they meet this standard of allocative efficiency based on a unique data set with rich information on prices and cost we examine the market for single family houses in germany s capital berlin at the aggregate market level we find that prices and cost tend to equalize in the long run short run adjustment appears to be sufficiently fast and properly anticipated to prevent systematic excess profit opportunities at the cross sectional level of individual houses we find support that resources are allocated efficiently between different market segments taken together our results provide sufficient evidence that the market in berlin is efficient

individual time preferences and energy efficiency a large literature examines energy efficiency investments by consumers and firms partic ularly evaluation of the extent of and expla nations for an energy efficiency ee gap gerarden newell and stavins 2015 but prior studies have not considered the role of individ ual discount rates in such decisions instead most assessments assume a certain discount rate against which the rationality of observed choices is gauged allcott and wozny 2014 or alternatively estimate aggregate discount rates that best match observed ee decisions condi tional on an assumed decision model hausman 1979 the absence of evidence on the role of indi vidual discount rates is surprising because the profitability of ee investments depends fun damentally on the rate at which individuals discount future energy savings relative to the required upfront investment the potential importance of individual discount rates is further heightened by findings in experimental studies that elicited time preferences exhibit consider able heterogeneity frederick loewenstein and o donoghue 2002 this paper broadly examines the role of indi vidual discount rates in ee decisions our ear lier findings on information provision newell and siikamaki 2014 henceforth nsindicate that the efficacy of alternative labels in guiding cost efficient decisions depends critically on the discount rate used for analysis here we closely examine individual discount rates as a deter minant of the value households place on future energy savings our results demonstrate that individual dis count rates exhibit considerable heterogeneity

nudging farmers to use fertilizer theory and experimental evidence from kenya we model farmers as facing small fixed costs of purchasing fertil izer and assume some are stochastically present biased and not fully sophisticated about this bias such farmers may procrastinate post poning fertilizer purchases until later periods when they may be too impatient to purchase fertilizer consistent with the model many farmers in western kenya fail to take advantage of apparently profit able fertilizer investments but they do invest in response to small time limited discounts on the cost of acquiring fertilizer free deliv ery just after harvest calibration suggests that this policy can yield higher welfare than either laissez faire policies or heavy subsidies

persistence mean reversion and non linearities in the us housing prices over 1830 2013 abstractthe objective of this study is to provide a direct estimate of the degree of persistence of measures of nominal and real house prices for the us economy covering the longest possible annual sample of data namely 1830 2013 the estimation of the degree of persistence accommodates for non linear deterministic trends using chebyshev polynomials in time in general the results show a high degree of persistence in the series along with a component of non linear behaviour in general if we assume uncorrelated errors non linearities are observed in both nominal and real prices but this hypothesis is rejected in favour of linear models for the log transformation of the data however if autocorrelated errors are permitted non linearities are observed in all cases and mean reversion is found in the case of logged prices though given the wide confidence intervals the unit root null hypothesis cannot be rejected in these cases

time to change what to sow risk preferences and technology adoption decisions of cotton farmers in china this paper examines the role of individual risk attitudes in the decision to adopt a new form of agricultural biotechnology in china i conducted a survey and a field experiment to elicit the risk preferences of chinese farmers who faced the decision of whether to adopt genetically modified bt cotton a decade ago in my analysis i expand the measurement of risk preferences beyond expected utility theory to incorporate prospect theory i find that farmers who are more risk averse or more loss averse adopt bt cotton later farmers who overweight small probabilities adopt bt cotton earlier

irreversible investment real options and competition evidence from real estate development abstract we examine the extent to which uncertainty delays investment and the effect of competition on this relationship using a sample of 1214 condominium developments in vancouver canada built from 1979 1998 we find that increases in both idiosyncratic and systematic risk lead developers to delay new real estate investments empirically a one standard deviation increase in the return volatility reduces the probability of investment by 13 percent equivalent to a 9 percent decline in real prices increases in the number of potential competitors located near a project negate the negative relationship between idiosyncratic risk and development these results support models in which competition erodes option values and provide clear evidence for the real options framework over alternatives such as simple risk aversion

a cooperative game theory model of quantity discounts quantity discounts offered by a monopolist are considered in the context of a bargaining problem in which the buyer and the seller negotiate over the order quantity and the average unit price all units and incremental quantity discounts that permit transaction at a negotiated outcome are described the effects of risk sensitivity and bargaining power on quantity discounts are discussed for alternative bargaining models

optimal policy instruments for externality producing durable goods under present bias abstract when consumers exhibit present bias the standard solution to market failures caused by externalities pigouvian pricing is suboptimal i investigate policies aimed at externalities for present biased consumers optimal policy includes an instrument to correct the externality and an instrument to correct the present bias either instrument can be an incentive based policy e g a tax on fuel economy or a command and control policy e g a fuel economy mandate under consumer heterogeneity a command and control policy may dominate an incentive based policy calibrated to the us automobile market simulation results suggest that the second best gasoline tax is 3 30 higher than marginal external damages the optimal price policy includes a gasoline tax set about equal to marginal external damages and a fuel economy tax that increases the price of an average non hybrid car by about 550 2200 relative to the price of an average hybrid car

specifications of social welfare in economic studies of climate policy overview of criteria and related policy insights an important assumption in economic studies of climate policy is the social welfare function this paper shows that applying distinct decision or social welfare criteria can result in different optimal policies of climate control notably if climate change impacts are uncertain first decision criteria in current climate economic studies are reviewed next the most important alternatives are discussed including their mathematical formalization and incorporation in economy climate models most of these alternative criteria suggest more stringent climate policies to be optimal than the standard discounted utilitarianism approach however several important welfare criteria have not or hardly seen any application in the economic analysis of climate policy we conclude that there is clear need for systematic research on this theme for which the current review provides a solid basis

measuring imputed cost in the semiconductor equipment supply chain we consider the order fulfillment process of a supplier producing a customized capital good such as production equipment commercial aircraft medical devices or defense systems as is common in these industries prior to receiving a firm purchase order from the customer the supplier receives a series of shared forecasts which are called soft orders facing a stochastic internal manufacturing lead time the supplier must decide at what time to begin the fulfillment of the order this decision requires a trade off between starting too early leading to potential holding or cancellation costs and starting too late leading to potential delay costs we collect detailed data of shared forecasts actual purchase orders production lead times and delivery dates for a supplier buyer dyad in the semiconductor equipment supply chain under the assumption that the supplier acts rationally optimally balancing the cancellation holding and delay costs we are able to estimate the corresponding imputed cost parameters based on the observed data our estimation results reveal that the supplier perceives the cost of cancellation to be about two times higher and the holding costs to be about three times higher than the delay cost in other words the supplier is very conservative when commencing the order fulfillment which undermines the effectiveness of the overall forecast sharing mechanism

higher prices for larger quantities nonmonotonic price quantity relations in b2b markets we study a microprocessor company selling short life cycle products to a set of buyers that includes large consumer electronic goods manufacturers the seller has a limited capacity for each product and negotiates with each buyer for the price our analysis of their sales data reveals that larger purchases do not always result in bigger discounts instead the discount curve is like an n while existing theories cannot explain this nonmonotonic pattern we develop an analytical model and show that the nonmonotonicity is rooted in how sellers value capacity when negotiating with a buyer large buyers accelerate the selling process and small buyers are helpful in consuming the residual capacity however satisfying midsized buyers may be costly because supplying these buyers can make it difficult to utilize the remaining capacity which is often too much for small buyers but not enough for large buyers we briefly discuss the implications for capacity rationing and posted pricing as well as potential appl

ahp based risk analysis of energy performance contracting projects in russia abstract understanding and properly managing risks that could potentially affect the target and performance based profits of energy performance contracting epc projects are essential it is particularly important for the establishment and success of energy service companies escos acting in the vulnerable environment of the vast but highly energy inefficient russian market this study systematically explores common risk factors and causes of risk associated with epc projects executed in three russian sectors 1 industrial 2 housing and communal services and 3 public several interviews with the russian epc experts were accomplished and a qualitative risk assessment by using an analytic hierarchy process ahp approach the data were obtained from a web based questionnaire survey conducted among russian epc project executors for each focus sector a specific preference based ranking of the identified risk factors and causes of risk was derived the ahp results show that causes of risk related to the financial and regulatory aspects contribute most to the riskiness of epc projects performed in all three focus sectors in russia calling for the special attention of epc policy and business makers due to sectorial particularities and different actors involved we conclude that there is a need for elaboration of sector specific contractual schemes for epc projects

evaluating energy efficiency investments accounting for risk in the discounting process a prominent feature of the literature regarding the economics of energy conservation is the debate over the existence and nature of the so called efficiency gap a frequent subject of debate is whether consumers apply a reasonable discount rate when evaluating the future benefits of energy efficiency measures a key aspect of the discounting debate is the manner in which consumer attitudes toward risk are accounted for when discounting this paper suggests that an appropriate approach to incorporating risk into the evaluation of energy efficiency projects would yield higher net benefits to such projects than standard evaluation techniques we argue that analysing the purchase of fuel saving capital as though it were a standard investment in a physical asset obscures an important feature of the decision rather than deciding whether or not to invest in an asset with an uncertain future benefit stream the consumer is actually choosing between two future cost streams each of which is uncertain this seemingly minor change in perspective has important implications for how the risk associated with fuel saving capital should be brought into the discounting process an example based on lighting technologies is used to illustrate the principles discussed

the choice of energy saving modes for an energy intensive manufacturer considering non energy benefits in practice energy intensive manufacturers have two main options when improving their energy efficiency design and implement energy efficiency projects on their own we call this self saving or enter into an energy performance contracting epc which mainly includes shared savings and guaranteed savings in this paper we will discuss an energy intensive manufacturer facing self saving and shared savings options and how this manufacturer chooses the optimal energy saving mode when non energy benefits are considered we only consider costs and profit as non energy benefits and formulate an optimization model of self saving and a stackelberg game model of shared savings from our model analysis when considering only energy savings we find that the optimal unit savings has a monotonic impact on the optimal profit of the manufacturer our results indicate that the manufacturer will prefer the second option to the first when the investment cost factor ratio of the energy service company esco to the manufacturer is small otherwise the manufacturer will prefer the first to the second furthermore when considering non energy benefits we find that the results change in some cases

towards a sustainable society the status and future of energy performance contracting in china abstract associated with the rapid economic growth last decades have witnessed significant increases of both energy production and energy consumption in china it is also recognized that the air pollutants emissions brought by excessive fossil energy consumptions have caused serious environmental problems it is imperative to save energy and reduce emissions in china as an innovative market mechanism energy performance contracting epc can effectively reduce the energy consumption china has released a series of laws polices regulations and plans that include epc related contents due to the massive demand as well as the facilitation efforts from the governments epc has developed rapidly in china for instance the number of employees the aggregate investment and the total output value of energy service companies increased by 31 8 times 56 times and 73 2 times between 2005 and 2013 the evolution of policy system of epc in china is examined in this study the results show that legal protection policy guidance and fiscal incentives are main measures to promote the development of epc these policies showcase china s efforts on achieving energy conservation enhancing energy efficiency and improving environmental performance by encouraging the implementation of epc however the analysis also reveals some existing issues further development of epc depends on a number of factors such as a complete legal security system a mature market mechanism flexible economic incentives and the specific development plan for epc the experiences gained in china are helpful for promoting the development of epc industry especially in the developing countries

the emergence of trading and risk management in liberalized electricity markets abstract trading and risk management services are essential components of liberalized electricity markets they thrive in markets where prices are volatile and customers need protection from unwanted and poorly understood risks this viewpoint describes the fundamentals and explains what has been driving their phenomenal growth in the recent past in the usa

why do larger buyers pay lower prices intense supplier competition abstract the paper provides a theoretical explanation of the common claim that larger buyers pay lower prices in the model suppliers compete more aggressively for the business of larger buyers much as they do in boom periods of rotemberg and saloner

prospect theory and energy efficiency abstract investments in energy efficiency entail uncertainty and when faced with uncertainty consumers have been shown to behave according to prospect theory preferences are reference dependent and exhibit loss aversion and probabilities are subjectively weighted using data from a choice experiment eliciting prospect theory parameters i provide evidence that loss averse people are less likely to invest in energy efficiency then i consider policy design under prospect theory when there are also externalities from energy use a higher degree of loss aversion implies a higher subsidy to energy efficiency numerical simulations suggest that the impact of prospect theory on policy may be substantial

evolution of the u s energy service company industry market size and project performance from 1990 2008 lbnl xxxx e rnest o rlando l awrence b erkeley n ational l aboratory evolution of the u s energy service company industry market size and project performance from 1990 2008 peter h larsen charles a goldman and andrew satchwell environmental energy technologies division may 2012 pre print of article submitted for publication to energy policy the work described in this report was funded by the u s department of energy s office of energy efficiency and renewable energy weatherization and intergovernmental program and the permitting siting and analysis division of the office of electricity delivery and energy reliability under contract no de ac02 05ch11231

superstition in the housing market we provide the first solid evidence that chinese superstitious beliefs can have significant effects on house prices in a north american market with a large immigrant population using real estate data on close to 117 000 house sales we find that houses with address number ending in 4 are sold at a 2 2 discount and those ending in 8 are sold at a 2 5 premium in comparison to houses with other addresses these price effects are found either in neighborhoods with a higher than average percentage of chinese residents consistent with cultural preferences or in repeated transactions consistent with speculative behavior jel d03 r2 z1

reference dependent job search evidence from hungary we propose a model of job search with reference dependent preferences with loss aversion relative to recent income the reference point in this model newly unemployed individuals search hard since consumption is below their reference point over time though they get used to lower income and thus reduce their search effort in anticipation of a benefit cut their search effort rises again then declines once they get accustomed to the lower postcut benefit level the model fits the typical pattern of exit from unemployment even with no unobserved heterogeneity to distinguish between this and other models we use a unique reform in the unemployment insurance ui benefit path in 2005 hungary switched from a single step ui system to a two step system with overall generosity unchanged the system generated increased hazard rates in anticipation of and especially following benefit cuts in ways the standard model has a hard time explaining we estimate a model with optimal consumption endogenous search effort and unobserved heterogeneity the reference dependent model fits the hazard rates substantially better than plausible versions of the standard model including habit formation our estimates indicate a slow adjusting reference point and substantial impatience likely reflecting present bias jel codes d03 j64 j65

uncertainty loss aversion and markets for energy efficiency increasing energy efficiency is critical to mitigating greenhouse gas emissions from fossil fuel combustion reducing oil dependence and achieving a sustainable global energy system the tendency of markets to neglect apparently cost effective energy efficiency options has been called the efficiency gap or energy paradox the market for energy efficiency in new energy using durable goods however appears to have a bias that leads to undervaluation of future energy savings relative to their expected value this paper argues that the bias is chiefly produced by the combination of substantial uncertainty about the net value of future fuel savings and the loss aversion of typical consumers this framework relies on the theory of context dependent preferences the uncertainty loss aversion bias against energy efficiency is quantifiable making it potentially correctible by policy measures the welfare economics of such policies remains unresolved data on the costs of increased fuel economy of new passenger cars taken from a national research council study illustrate how an apparently cost effective increase in energy efficiency would be uninteresting to loss averse consumers

energy conservation nudges and environmentalist ideology evidence from a randomized residential electricity field experiment nudges are being widely promoted to encourage energy conservation we show that while the electricity conservation nudge of providing feedback to households on own and peers home electricity usage works with liberals it can backfire with conservatives our regression estimates predict that a democratic household that pays for electricity from renewable sources that donates to environmental groups and that lives in a liberal neighborhood reduces its consumption by 3 percent in response to this nudge a republican household that does not pay for electricity from renewable sources and that does not donate to environmental groups increases its consumption by 1 percent

channel coordination and quantity discounts this paper presents a model for analyzing the impact of joint decision policies on channel coordination in a system consisting of a supplier and a group of homogeneous buyers the joint decision policy characterized by the unit selling price and the order quantity is coordinated through quantity discounts and franchise fees both the annual demand rate and the operating cost including the purchase ordering and inventory holding costs depend on the joint decision policy employed this paper contributes by integrating work addressing quantity discounts on inventory and ordering policies and work focusing on the control mechanism provided by quantity discounts in channel coordination it is shown that the optimal all unit quantity discount policy is equivalent to the optimal incremental quantity discount policy in achieving channel coordination furthermore it is shown that quantity discounts alone are not sufficient to guarantee joint profit maximization the analyses of the general models are illustrated by specific analytical results obtained for a given demand function