efficiency growth and concentration an empirical analysis of hospital markets taking an evolutionary view of markets harold demsetz hypothesized that firms differ persistently in efficiency and that industry concentration results from growth of efficient firms at the expense of inefficient ones we test the hypothesis with high quality microdata from the us hospital industry an industry of keen policy and scientific interest we measure efficiency by firm in the early 1980s and relate it to subsequent growth of efficient firms to the persistence of profit differences and to changes in the concentration of markets initial hospital efficiency and subsequent growth and profitability are significantly and positively related also greater initial variation in hospital efficiency within local markets is positively related to subsequent growth in market concentration these findings support the logic of demsetz s evolutionary efficiency hypothesis though they cannot confirm the stronger idea that variation in firm efficiency is the dominant explanation for changes in concentration

time varying convergence in european electricity spot markets and their association with carbon and fuel prices abstract long run dynamics of electricity prices are expected to reflect fuel price developments since fuels generally account for a large share in the cost of generation as an integrated european market for electricity develops wholesale electricity prices should be converging as a result of market coupling and increased interconnectivity electricity mixes are also changing spurred by a drive to significantly increase the share of renewables consequently the electricity wholesale price dynamics are evolving and the fuel electricity price nexus that has been described in the literature is likely to reflect this evolution this study investigates associations between spot prices from the british french and nordpool markets with those in connected electricity markets and fuel input prices from december 2005 to october 2013 in order to assess the time varying dynamics of electricity spot price series localized autocorrelation functions are used electricity spot prices in the three markets are found to have stationary and non stationary periods when a trend in spot prices is observed it is likely to reflect the trend in fuel prices cointegration analysis is then used to assess co movement between electricity spot prices and fuel inputs to generation the results show that british electricity spot prices are associated with fuel prices and not with price developments in connected markets while the opposite is observed in the french and nordpool day ahead markets

electricity market integration decarbonisation and security of supply dynamic volatility connectedness in the irish and great britain markets abstract this study investigates the volatility connectedness between the irish and great britain electricity markets and how it is driven by changes in energy policy institutional structures and political ideologies we assess various aspects of this volatility connectedness including static unconditional vs dynamic conditional symmetric vs asymmetric characteristics between 2009 and 2018 we find that the volatility connectedness is time varying and it is significantly affected by important events policy reforms or market re designs such as brexit oil price slump an increasing share of renewables and fluctuations in the exchange rates our asymmetric analysis shows that magnitude of the good volatility connectedness is marginally larger than that of the bad volatility connectedness our result suggests that good volatility levels would be even higher once the irish market adopts the carbon price floor therefore supporting renewable generation by setting an appropriate price of carbon in interconnected wholesale electricity markets will improve market integration

the nature and extent of the market for high quality beef in japan before the abolition of import quotas it is examined whether wagyu beef produced in japan and high quality beef produced in the united states and exported to japan are components of the same product market in addressing this issue an approach is used for defining the nature and extent of a product market relying on the concept of instantaneous causality the results for selected cuts of beef suggest that the markets are in fact separate

the relationship between spot and contract gas prices in europe abstract following deregulations in the european gas market spot trading of natural gas has been established in the uk belgium and the netherlands while long term contracts remain the dominant pricing process in continental europe in this paper we investigate the degree of market integration between the three spot markets the contract gas price in germany and the oil price the results indicate a highly integrated market and there is no evidence of an independent price determination process for natural gas

oil and gas markets in the uk evidence from a cointegrating approach the paper examines the relationship between uk wholesale gas prices and the brent oil price over the period 1996 2003 in order to investigate whether oil and gas prices decoupled during this period as orthodox gas market liberalisation theory suggests tests for unit roots and cointegration are carried out and it is discovered that a long run equilibrium relationship between uk gas and oil prices exists moreover this relationship pre dates the opening of the uk mainland europe interconnector following a recursive methodology hansen h and johansen s 1999 some tests for parameter constancy in cointegrated var models econometrics journal 2 306 333 it was found that the cointegrating relationship is present throughout the sample period however the long run solutions seem to be more volatile evidence is provided that the short run relationship is linear and impulse response functions are used to examine the effects that a shock in oil would have on gas these findings do not support the assumption that gas prices and oil prices decouple

contracting theory and accounting abstract this paper reviews agency theory and its application to accounting issues i discuss the formulation of models of incentive problems caused by moral hazard and adverse selection problems i review theoretical research on the role of performance measures in compensation contracts and i compare how information is aggregated for compensation purposes versus valuation purposes i also review the literature on communication including models where the revelation principle does not apply so that nontruthful reporting and earnings management can take place the paper also discusses capital allocation within firms including transfer pricing and cost allocation problems

cross commodity news transmission and volatility spillovers in the german energy markets this study investigates volatility spillovers to electric power from large exogenous shocks in the prices of gas coal and carbon emission allowances in the german energy market our sample ranges from 2008 to 2016 and covers periods of different market conditions we use a general var bekk model and the volatility impulse response function methodology to analyze and evaluate the spillover effects special attention is paid to selecting an appropriate econometric volatility model our results show that the spillover effects often are of a significant magnitude and display considerable variation over time and across commodities coal and gas generate non negligible spillovers during almost the entire sample period carbon has very little impact during the early and late parts of the sample but generates significant and highly variable spillovers during the period from 2011 to the end of 2014

price dynamics among u s electricity spot markets combining recent advances in causal flows with time series analysis relationships among 11 u s spot market electricity prices are examined results suggest that the relationships among the markets vary by time frame in contemporaneous time the western markets are separated from the eastern markets and the electricity reliability council of texas at longer time frames these separations disappear even though electricity transmission between the regions is limited it appears the relationships among markets are not only a function of physical assets such as transmissions lines among markets but by similar and dissimilar institutional arrangements among the markets

volatility transmission and volatility impulse response functions in european electricity forward markets using daily data from march 2001 to june 2005 we estimate a var bekk model and find evidence of return and volatility spillovers between the german the dutch and the british forward electricity markets we apply hafner and herwartz 2006 journal of international money and finance 25 719 740 volatility impulse response function virf to quantify the impact of shock on expected conditional volatility we observe that a shock has a high positive impact only if its size is large compared to the current level of volatility the impact of shocks are usually not persistent which may be an indication of market efficiency finally we estimate the density of the virf at different forecast horizon these fitted distributions are asymmetric and show that extreme events are possible even if their probability is low these results have interesting implications for market participants whose risk management policy is based on option prices which themselves depend on the volatility level

executive effort and selection of risky projects this article examines the incentives of executives to adopt risky projects the agency problem considered is that of motivating the executive to expend effort to generate information about the profitability of projects and to select the best project conditional upon the information that his effort generates we show that the executive and the principal will not always agree regarding which project is best we provide conditions under which this conflict of interest leads from the principal s perspective to either an underinvestment or an overinvestment in risky projects

cointegration analysis of spot electricity prices insights on transmission efficiency in the western us abstract the us energy policy act of 1992 promoted the development of spot markets for electric power by requiring utilities to open their transmission systems to wholesale power sales in this paper we specify and estimate a vector error correction model using peak and off peak electricity spot prices during 1994 1996 covering 11 regional markets in the western united states and test these prices for evidence of market integration the results show evidence of an efficient and stable wholesale power market

a local analysis of stability and regularity of stationary states in discrete symmetric optimal capital accumulation models abstract in discrete time optimal capital accumulation models where the period utilities have a certain symmetry property a complete characterization of local stability of stationary states is obtained in terms of the characteristic roots of the product of certain submatrices of the hessian of the utility function this is used to analyze the connection between stability and properties of the effects of parameter changes on the stationary state certain differences in the results in discrete and continuous models are noted a special case where utilities are separable in initial stocks and net investment is also treated

efficiency of financial transmission rights markets in centrally coordinated periodic auctions electricity market design in the united states is increasingly dominated by locational marginal pricing lmp of energy and transmission lmp markets are typically coupled with periodic auctions of financial transmission rights ftrs to hedge transmission price risks while lmp designs offer considerable advantages forward price discovery in these markets requires participants to form efficient expectations on spot congestion price differences in this paper we examine trends in the efficiency of one of the early lmp markets the new york independent system operator nyiso analyzing a panel data set of over 9000 contracts over a six year period beginning september 2000 we show that nyiso ftr markets were inefficient in their early years but that market participants learned to predict forward prices and thus efficiency improved for ftrs not solely within the new york city long island sub region ftrs within this sub region which has a number of special characteristics remain relatively inefficient

revisiting long run relations in power markets with high res penetration abstract electricity generation from renewable energy resources res has become increasingly significant to reach eu and emissions reduction targets at the same time one of the main eu policy goals has been the creation of a common internal energy market for europe in this paper we focus on these two issues previously studied separately considering their possible interactions we first analyze the long run relationship between day ahead electricity prices and fuel prices natural gas and coal looking at two samples of years characterized by low and high res penetration then we explore the integration of eu markets we show that the electricity fuel nexus found over 2006 2008 changed dramatically over 2010 2014 for the majority of countries considered in particular the long run dependence of electricity from gas and coal prices is much lower in recent years furthermore our results confirm that the considered eu countries are becoming less integrated as res e increases our findings suggest that nationally implemented policies to support renewables are successful in increasing res penetration but they have lessened the linkage among eu markets then making integration more difficult to obtain

comparative dynamics in aggregate models of optimal capital accumulation the hypothesis that capital increases at each time in response to an increase in the discount factor is explored for a class of aggregate models of optimal accumulation when the optimal program is monotonic capital is shown to increase with an increase in the discount factor a counterexample in the case of oscillating programs is discussed an application of the monotone case is given for an adjustment cost model of the firm

evaluating the market splitting determinants evidence from the iberian spot electricity prices abstract this paper aims to assess the main determinants on the market splitting behaviour of the iberian electricity spot markets iberia stands as an ideal case study where the high level deployment of wind power is observed together with the implementation of the market splitting arrangement between the portuguese and the spanish spot electricity markets logit and non parametric models are used to express the probability response for market splitting of day ahead spot electricity prices as a function of the explanatory variables representing the main technologies in the generation mix wind hydro thermal and nuclear power together with the available transfer capacity and electricity demand logit models give preliminary indications about market splitting behaviour and then notwithstanding the demanding computational challenge a non parametric model is applied in order to overcome the limitations of the former models results show an increase of market splitting probability with higher wind power generation or more generally with higher availability of low marginal cost electricity such as nuclear power generation the european interconnection capacity target of 10 of the peak demand of the smallest interconnected market might be insufficient to maintain electricity market integration therefore pro active coordination policies governing both interconnections and renewables deployment should be further developed

market integration among electricity markets and their major fuel source markets dynamic price information flows among u s electricity wholesale spot prices and the prices of the major electricity generation fuel sources natural gas uranium coal and crude oil are studied multivariate time series methods applied to weekly price data show that in contemporaneous time peak electricity prices move natural gas prices which in turn influence crude oil in the long run price is discovered in the fuel sources market except uranium as these prices are weakly exogenous in a reduced rank regression representation of these energy prices

an empirical investigation of the relative performance evaluation hypothesis the principal agent framework has become a widely used paradigm in accounting and economics for analyzing issues in performance evaluation management control and the design of incentive systems while recent work in experimental economics has begun to examine empirically some of the underlying assumptions and implications of agency theory see baiman and lewis 1989 and kirby forthcoming few precise hypotheses have been tested using real world or naturally occurring data one exception has been the empirical investigation of the relative performance evaluation rpe hypothesis agency theory suggests that there are benefits associated with evaluating agents on the basis of their relative performances when the agents performances are affected by a common shock term e g see diamond and verrecchia 1982 and holmstrom 1979 1982 specifically a relative performance based contract can remove the common shock term from an agent s performance which enables a better evaluation of the agent s actions

reassessing the integration of european electricity markets a fractional cointegration analysis this study extends existing literature on the assessment of electricity market integration in europe by developing and testing hypotheses on the convergence of electricity wholesale prices and adopting a time varying fractional cointegration analysis in addition the potential impacts of some special events that may affect system capacity new interconnection market coupling increase in share of intermittent generation on spot and forward markets are considered and evaluated daily spot prices from february 2000 to march 2013 of nine european electricity spot markets apx uk apx nl belpex epex fr epex de ipex nordpool omel and ote and month ahead prices in four markets french british german and dutch from november 2007 to december 2012 are investigated results show that unit root tests which are generally used in the literature to test market integration are inadequate for assessing electricity spot market convergence because spot prices are found to be fractionally integrated and mean reverting time series furthermore spot price behaviour and their association with different markets change over time reflecting changes in the eu electrical system one month ahead prices by contrast were found to have become more resilient to shocks and to follow more stable trends

renewables diffusion and contagion effect in italian regional electricity markets assessment and policy implications abstract in the electricity market sudden price jumps occur more frequently than in other markets due to the peculiarity of electricity furthermore the structural spot characteristics of the electricity market determine high price variability all these characteristics have been accentuated by the dramatic increase of renewable energy supply in italy starting in 2010 these features suggest the possibility of contagion effects across italian regional electricity markets considering contagion such as a sudden and significant increase in cross market links arising from a shock to a specific market in this paper we investigate whether such a renewable energy increase has affected the contagion behavior in the italian electricity spot market taking into account both the difference between interdependence and contagion and the direction of the shock we find empirical evidence with significant tests that no changes have occurred in interdependence mechanism nor in contagion effects due to renewable energy sources development in italy

market definition in antitrust analysis a regression based approach alleged violations of either sherman 2 s antimonopoly strictures or clayton 7 s proscriptions against anticompetitive mergers necessarily involve a particular product and must occur in a particular place that is the plaintiff in either a 2 or 7 suit must define a relevant market within which the violation alleged has occurred even in the most mundane antitrust analysis however market definition is rarely readily accomplished and unaccompanied by a series of caveats and the possibility of the opposing parties in an antitrust suit failing to contest each other s proffered definition is virtually nil 2 because economists from

spot electricity price discovery in indian electricity market this paper investigates the spot electricity price discovery that exists among the five regions of indian electricity market using hourly spot electricity price data from 1st january 2014 to 31st december 2015 using augmented dickey fuller 1981 and narayan and popp 2010 unit root tests we find that the spot electricity prices for both peak and off peak hours across all the regions are stationary at level then by applying granger causality test for a reduced var model at level the results show that there hardly any causality exists between these electricity markets barring few regions though we did not find any causality between peak price and off peak price for all individual region but we formed two panels by using peak and off peak price data of all five regions our results showed short run and long run panel granger causality between peak price and off peak price the results of the study suggests that though india as a nation has all the regions inter connected with single frequency of power grid operation since 2008 however these markets are not highly integrated in comparison to electricity markets of developed nations around the world

deliverability and regional pricing in u s natural gas markets during the 1980s and early 90s interstate natural gas markets in the united states made a transition away from the regulation that characterized the previous three decades with abundant supplies and plentiful pipeline capacity a new order emerged in which freer markets and arbitrage closely linked natural gas price movements throughout the country after the mid 1990s however u s natural gas markets tightened and some pipelines were pushed to capacity we look for the pricing effects of limited arbitrage through causality testing between prices at nodes on the u s natural gas transportation system and interchange prices at regional nodes on north american electricity grids our tests do reveal limited arbitrage which is indicative of bottlenecks in the u s natural gas pipeline system

long run relations in european electricity prices this paper analyses the interdependencies existing in wholesale electricity prices in six major european countries the results of a robust multivariate long run dynamic analysis reveal the presence of four highly integrated central european markets france germany the netherlands and austria the trend shared by these four electricity markets appears to be common also to gas prices but not to oil prices the existence of a common long term dynamics among electricity prices and between electricity prices and gas prices can be explained by the similarity of the market design across europe and by the same marginal generation technology since standard unit root and cointegration tests are not robust to the peculiar characteristics of electricity prices time series we also develop a battery of robust inference procedures that should assure the reliability of our results copyright 2009 john wiley sons ltd

some further evidence on the law of one price the law of one price still holds international trade models often postulate the existence of a representative price i e the price which prevails at all markets this is known as the law of one price in this paper the law of one price is tested for seven commodities among four countries by explicitly considering transaction costs the empirical evidence suggests that in most cases the law of one price cannot be rejected asa maintained hypothesis furthermore for the remaining cases transaction costs seem to cause the failure

stochastic price modeling of high volatility mean reverting spike prone commodities the australian wholesale spot electricity market it is commonly known that wholesale spot electricity markets exhibit high price volatility strong mean reversion and frequent extreme price spikes this paper employs a basic stochastic model a mean reverting model and a regime switching model to capture these features in the australian national electricity market nem comprising the interconnected markets of new south wales queensland south australia and victoria daily spot prices from 1 january 1999 to 31 december 2004 are employed the results show that the regime switching model outperforms the basic stochastic and mean reverting models electricity prices are also found to exhibit stronger mean reversion after a price spike than in the normal period and price volatility is more than fourteen times higher in spike periods than in normal periods the probability of a spike on any given day ranges between 5 16 in nsw and 9 44 in victoria

locational price spreads and the pricing of contracts for difference evidence from the nordic market in electricity markets not only does the risk of substantial price variations over time exist but so does the risk of price variations over space as prices between locations can differ due to transmission congestion to manage this risk contracts for difference cfds i e forwards on the spread between a particular area price and the unconstrained system price were introduced at the scandinavian electricity exchange nord pool at the end of 2000 we empirically investigate the pricing of these cfds over the period 2001 through 2006 and find that cfd prices contain significant risk premia their sign and magnitude however differ substantially between areas and delivery periods because areas are subject to transmission congestion to a varying extent while the relation between risk premia and time to maturity is not uniform for cfds there is a negative relation for implied area and system forwards which can be explained by the relative hedging demand of market participants in addition we find that risk premia of cfds and implied area forwards vary systematically with the variance and skewness of the underlying spot prices this confirms both implications of the bessembinder and lemmon bessembinder h lemmon m l 2002 equilibrium pricing and optimal hedging in electricity forward markets journal of finance 57 1347 1382 model

gradual reforms and the emergence of energy market in china evidence from tests for convergence of energy prices this study investigates the emergence of energy markets by testing for convergence of energy prices with a new dataset on energy spot prices in 35 major cities in china both descriptive statistics and unit root are employed to test the convergence of energy prices for each of four fuel price series the whole study period is divided into two sub periods in order to reconcile the gradual energy reforms the results show the steady improvement in energy market performance in china especially during the second sub period which suggests that the market appears to be playing an increasing role in determining energy prices while panel unit root tests show energy markets are integrated in china as a whole city by city univariate unit root tests suggest that there are still many regional energy markets probably because energy reserves especially coal vary widely across regions since china s energy economy is gradually moving towards market oriented mechanisms the existing literature may become obsolete soon

bidding structure market efficiency and persistence in a multi time tariff setting the purpose of this study is to examine the fractal dynamics of day ahead electricity prices by using parametric and semi parametric approaches for each time zone in a multi time tariff setting in the framework of bidding strategies market efficiency and persistence of exogenous shocks we find that that electricity prices have long term correlation structure for the first and third time zones indicating that market participants bid hyperbolically and not at their marginal costs market is not weak form efficient at these hours and exogenous shocks to change the mean level of prices will have permanent effect and be effective on the other hand for the second time zone we find that price series does not exhibit long term memory this finding suggests the weak form efficiency of the market in these hours and that market participants bid at their marginal costs furthermore this indicates that exogenous shocks will have temporary effect on electricity prices in these hours these findings constitute an important foundation for policy makers and market participants to develop appropriate electricity price forecasting tools market monitoring indexes and to conduct ex ante impact assessment

market efficiency assessment under dual pricing rule for the turkish wholesale electricity market abstract this study analyses the price dynamics of day ahead and real time electricity prices following the implementation of dual pricing legislation in turkey to understand the legislation s impact on arbitrage opportunities and market efficiency the convergence of prices between the day ahead forward and the real time markets analysed in order to determine whether persistent price differences between the two markets exist arbitrage opportunities exist if there is a persistent difference between prices in the day ahead forward and real time market markets are considered to be efficient if it is not possible for market participants to earn an excess profit through exploitation of price differences furthermore we examined how the ex post risk premium changes over time using rolling estimations and find that after the implementation of dual pricing the risk premium increased significantly for day and peak hours where the demand is relatively higher compared to night hours as market participants have more experience regarding the dynamics of the market the difference between real time and day ahead forward prices converges to zero since the dual pricing regime enforce market participants to forecast accurately by punishing the forecast error

one sector nonclassical optimal growth optimaility conditions and comparative dynamics the authors consider a one sector nonclassical model of optimal economic growth characterized by a convex concave production function they provide in a dynamic programming context a characterization of all local interior maximum of the miximand of the bellman equation these conditions are the euler equation and a second order condition namely that the marginal propensity to consume is less than one an example is used to illustrate these conditions also several comparative dynamic results are derived in particular it is shown that the maximum and minimum selections out of the optimal consumption correspondence shift down as the discount factor increases copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the extent of the market examines the classical theory of the market in this paper authors consider the role of price market determination price movement in competitive and monopolistic markets extension of commodity markets

modelling price and volatility inter relationships in the australian wholesale spot electricity markets this paper examines the inter relationships of wholesale spot electricity prices among the four regional electricity markets in the australian national electricity market nem namely new south wales queensland south australia and victoria using the constant conditional correlation and tse and tsui s tse y k tsui a k c 2002 a multivariate generalised autoregressive conditional heteroscedasticity model with time varying correlations journal of business and economic statistics 20 3 351 362 and engle s engle r 2002 dynamic conditional correlation a sample class of multivariate generalized autoregressive conditional heteroskedasticity models journal of business and economic statistics 20 3 339 350 dynamic conditional correlation multivariate garch models tse and tsui s tse y k tsui a k c 2002 a multivariate generalised autoregressive conditional heteroscedasticity model with time varying correlations journal of business and economic statistics 20 3 351 362 dynamic conditional correlation multivariate garch model which takes account of the student t specification produces the best results at the univariate garch 1 1 level the mean equations indicate the presence of positive own mean spillovers in all four markets and little evidence of mean spillovers from the other lagged markets in the dynamic conditional correlation equation the highest conditional correlations are evident between the well connected markets indicating the presence of strong interdependence between these markets with weaker interdependence between the not so well interconnected markets

exogeneity tests of market boundaries applied to petroleum products us antitrust law makes market definition and the calculation of marketshare statistics an integral part of the determination of the anticompetitive impact of a merger because markets frequently overlap however market definition is rarely an easy task a statistical test that can be used as an aid in defining markets is proposed here time series techniques are used to test if price in one region is exogenous to the process that determines price in another the rejection of exogeneity can be an indication that the two regions are economically linked and thus may belong to a common geographic market the test is applied to petroleumproduct prices from various regions of the united states time series techniques have long been appreciated by macroeconomists the uses to which they have been put range from testing for the exogeneity of variables used in the construction of macroeconomic models sims 1972 for example to discovering empirical regularities in macroeconomic data without imposing a priori structure on the observations ashenfelter and card 1982 for example in contrast these techniques have not been so

a note on comparative statics and dynamics of stationary states abstract certain results are communicated regarding effects of parameter changes when the stationary state is stable on the stationary state and an optimal paths in its neighbourhood in discrete time multi sectoral optimal growth models where period utilities are discounted

the strategic choice of managerial incentives do firms with separate owners and managers maximize profits we address this question for an oligopoly where managers compete in quantities or prices as in the cournot or bertrand models and owners choose their managers incentives we find that there is a strategic aspect in the problem of selecting incentives and that profit maximizing behavior does not result in particular in the oligopoly we study the behavior of firms competing in quantity price more closely resembles perfectly competitive collusive behavior than cournot bertrand behavior

penalizing success in dynamic incentive contracts no good deed goes unpunished we examine optimal dynamic incentive contracts when adverse selection and moral hazard problems are present we find that early success is optimally penalized in the sense that the agent who succeeds early subsequently faces a lower powered incentive contract penalizing success in this manner serves to limit the agent s initial incentive to understate his ability

comparative dynamics in the one sector optimal growth model abstract the comparative dynamics properties of the one sector optimal growth model with discounting are derived a dynamic programming argument is used to show that an increase in the utility discount factor increases the capital stock at each time initially lowers consumption and eventually increases consumption as compared to the original program the present value of the stream of increments in capital is also shown to be positive at the initial support prices the relationship with the correspondence principle is discussed as well

product aggregation market integration and relationships between prices an application to world salmon markets relationships between prices of goods offer motives of interest in at least two areas market integration and product aggregation there is a close relationship between market integration and aggregation which may increase the usefulness of market integration studies in this article these relationships are developed and illustrated by an application to the world salmon market it is shown that the law of one price holds for an international market with five salmon species this result has significant implications for the world salmon market regarding both product aggregation in demand analyses and international trade policy

measuring market integration and estimating policy impacts on the swiss electricity market abstract we investigate market integration in central western european electricity markets with a focus on switzerland we propose a structural microeconometric approach to measuring the degree of market integration taking advantage of unilateral demand and supply shocks such as the generation from volatile renewable resources the unavailability of generation units and national holidays these exogenous events affect electricity prices in switzerland and allow estimating the level of market integration by disentangling their effects in congested and non congested situations exploiting information on congested and non congested situations in parametric instrumental variable estimation permits simulating hypothetical non congested swiss electricity prices in historically congested situations our approach allows considering the non linear nature of level shifts of congestion and disentangling it from the structurally different interplay of demand and supply in respective situations using data on hourly electricity prices and its determinants regarding switzerland and neighboring countries from 2015 and 2016 we find that an expansion of interconnector capacity at the german austrian swiss border could decrease swiss electricity prices substantially in a more attenuated way the same holds true for the french swiss and the italian swiss border for switzerland as a whole prices in congested situations are about 17 higher than hypothetical non congested prices

transmission of prices and price volatility in australian electricity spot markets a multivariate garch analysis this paper examines the transmission of spot electricity prices and price volatility among the five regional electricity markets in the australian national electricity market namely new south wales queensland south australia the snowy mountains hydroelectric scheme and victoria a multivariate generalised autoregressive conditional heteroskedasticity model is used to identify the source and magnitude of price and price volatility spillovers the results indicate the presence of positive own mean spillovers in only a small number of markets and no mean spillovers between any of the markets this appears to be directly related to the physical transfer limitations of the present system of regional interconnection nevertheless the large number of significant own volatility and cross volatility spillovers in all five markets indicates the presence of strong autoregressive conditional heteroskedasticity and generalised autoregressive conditional heteroskedasticity effects this indicates that shocks in some markets will affect price volatility in others finally and contrary to evidence from studies in north american electricity markets the results also indicate that australian electricity spot prices are stationary

econometric modeling of regional electricity spot prices in the australian market abstract wholesale electricity markets are increasingly integrated via high voltage interconnectors and inter regional trade in electricity is growing to model this we consider a spatial equilibrium model of price formation where constraints on inter regional flows result in three distinct equilibria in prices we use this to motivate an econometric model for the distribution of observed electricity spot prices that captures many of their unique empirical characteristics the econometric model features supply and inter regional trade cost functions which are estimated using bayesian monotonic regression smoothing methodology a copula multivariate time series model is employed to capture additional dependence both cross sectional and serial in regional prices the marginal distributions are nonparametric with means given by the regression means the model has the advantage of preserving the heavy right hand tail in the predictive densities of price we fit the model to half hourly spot price data in the five interconnected regions of the australian national electricity market the fitted model is then used to measure how both supply and price shocks in one region are transmitted to the distribution of prices in all regions in subsequent periods finally to validate our econometric model we show that prices forecast using the proposed model compares favorably with those from some benchmark alternatives

investing in electricity production under a reliability options scheme abstract reliability options ros are used to enhance the security of supply in electricity systems when a power producer writes a ro s he agrees to set a cap on the price of electricity that s he cashes in return the system operator i e the party that is buying the option pays to the option issuer a fixed premium in this paper we analyze how ros affect the timing and value of investments in the energy sector and we show under what conditions they can be used as investment stimuli we prove that contrarily to what is expected ros can potentially harm the security of supply by delaying the adoption of new capacity and by reducing the value of investing in it to avoid such a result a careful setting of the relevant parameters is needed

accounting earnings and top executive compensation abstract this paper investigates the role of accounting earnings in top executive compensation contracts it provides evidence in support of the hypothesis that earnings based incentives help shield executives from market wide factors in stock prices the paper demonstrates that earnings reflect firm specific changes in value but are less sensitive to market wide movements in equity values as a result the inclusion of earnings based performance measures in executive compensation contracts helps shield executives from fluctuations in firm value that are beyond their control the hypothesis is shown to explain cross sectional variation in the use of earnings based incentives

the extent of european power markets abstract there is an ongoing debate on the degree of integration of european wholesale power markets a major task of the european union is the creation of a common market in europe and a common power market is an important part of this goal the literature analyzing the degree of integration of european energy markets is growing and provides mixed results we add to this literature by using national holidays as exogenous demand shocks to measure integration of european energy markets our main findings indicate that integration of european wholesale energy markets has increased with regard to germany and austria as well as belgium and the netherlands

electricity wholesale market prices in europe convergence abstract this paper tests the hypothesis that the ongoing restructuring process in the european electricity sector has led to a common european market for electricity based on a principal component analysis pca of wholesale electricity prices in 2002 2006 we reject the assumption of full market integration for several pairs of countries the weaker hypothesis of bilateral convergence is accepted based on unit root tests kpss and adf and a convergence test based on filtered pairwise price relations this indicates that the efforts to develop a single european market for electricity were so far only partially successful we show that the daily auction prices of scarce cross border transmission capacities are insufficient to explain the persistence of international price differentials empirically our findings confirm the insufficiency of explicit capacity auctions as stated in the theoretical literature

indirect competition with spatial product differentiation although two markets may appear to be separate sometimes one firm participates in both of them that firm provides a link between the two markets such a straddling firm transmits indirect competition from each market to the other since its actions reflect competitive conditions in both markets in a model of spatial product differentiation the author shows that indirect competition may make a market perform significantly better than the number of firms would indicate moreover total consumer surplus increases if two previously distinct markets are linked by a straddler finally the author considers implications of these results for antitrust analysis copyright 1989 by blackwell publishing ltd

integration and shock transmissions across european electricity forward markets abstract new results are presented relating to the integration of the french german british dutch and spanish power markets at day ahead week ahead one month ahead and two month ahead lead times overall there is evidence of market integration increasing over time despite an underlying inefficiency in each market with respect to the forward and spot price convergence the spatial analysis on a financial dimension is undertaken using causality tests cointegration and impulse response techniques for both price levels and volatilities in general we find less influence of the size and proximity of neighbouring markets than other studies more integration at baseload than peak and surprisingly less integration in forwards than spot prices

electricity prices and fuel costs long run relations and short run dynamics the paper examines the long run relation and short run dynamics between electricity prices and three fossil fuel prices coal natural gas and crude oil using annual data for the u s for 1960 2007 the results suggest 1 a stable long run relation between real prices for electricity and coal 2 bi directional long run causality between coal and electricity prices 3 insignificant long run relations between electricity and crude oil and or natural gas prices and 4 no evidence of asymmetries in the adjustment of electricity prices to deviations from equilibrium a number of implications are addressed

capital deepening and impatience equivalence in stochastic aggregative growth models this paper analyzes the aggregative growth model subject to random production shocks it is shown that for a higher discount factor the associated optimal plan maintains higher capital input at every time period and for almost all environments in both the finite and infinite horizon problems it is further shown that two alternative notions of decreasing impatience lengthening the horizon for a fixed discount factor and increasing the discount factor for a fixed horizon are in a precise sense equivalent discount factor insensitivity is also established

the dynamics of efficient intertemporal allocations with many agents recursive preferences and production abstract the local dynamics of efficient allocations are studied for heterogeneous agent economies with production where preferences are recursive but not time separable in the case of a one sector neoclassical technology it is shown that optimal trajectories locally converge to a unique steady state provided that every agent s utility satisfies normality and increasing marginal impatience conditions in the two sector case with the above restrictions on preferences it is shown that oscillations can result only if the consumption goods sector is sufficiently capital intensive

integration of the global carbon markets abstract this paper analyzes the market architecture and common factors of emission reduction instruments in europe and north america spot and futures prices across exchanges in europe are cointegrated but the futures curve beyond the calendar year evolves independently despite narrower spreads political uncertainties about the clean development mechanism have kept eua and cer prices from converging rggi allowances share a common trend with eua and the european markets adjust to the u s price trend a 0 10 shock to rggi prices leads to a one month 0 64 cumulative increase in eua prices the introduction of cap and trade legislation in the u s has broken a cointegrating relationship in voluntary prices voluntary instruments that are convertible into mandatory allowances imply less than a 20 probability of price convergence between the u s and europe by 2013

market integration efficiency of arbitrage and imperfect competition methodology and application to u s celery this paper develops and applies a methodology to test for efficiency of interregional commodity arbitrage application of the methodology requires only time series data on prices for alternative cities regions countries or product forms yet the approach is capable of generating evidence on a number of market parameters including market integration arbitrage efficiency the magnitude of marketing margins product substitutability and competitiveness of markets estimation is based on a switching regression model with three regimes efficient arbitrage relative shortage and relative glut results from application of the model to u s celery marketing indicated significant departures from efficient arbitrage for both california and florida celery

relative performance evaluation and project selection relative performance evaluation rpe occurs when one person s compensation depends on the relation of his output to that of others agency theory e g lazear and rosen 1981 and holmstrom 1979 1982 predicts that managerial compensation will use relative performance when other firms outputs reveal information about the manager s actions which is not knowable from the manager s output alone tests of the theory measure other firms outputs using the performance of other firms in the same industry or some macroeconomic measures of performance these two approaches are designed to separate industry and economy effects from the effects of the manager s actions empirical tests by antle and smith 1986 and janakiraman lambert and larcker 1992 found limited evidence that managerial compensation is adjusted for industry effects gibbons and murphy 1990 found some adjustment in ceo compensation for industry performance and much more adjustment for changes in market wide rates of return this paper provides an explanation for these empirical results by illustrating how the benefits of rpe based schemes depend on the absence of project choice decisions in the canonical agency model 1

testing market integration a model of spatial price differentials for a tradable good is proposed which avoids the inferential dangers of received methods using static price correlations the proposed method also extracts more information on the causes of price differentials from the same data the method is illustrated using monthly rice price data for postindependence bangladesh including the very substantial regional price shocks during the 1974 famine impediments to market integration are indicated

managerial incentives and capital management the paper shows how career concerns rather than effort aversion can induce a natural incongruity in risk preferences between managers and superiors a model based on learning about managerial talent is developed to study second best contractual remedies we show that the optimal wage contract is an option of the value of the manager s human capital for insurance reasons and that consequently rationing of capital is often required to counterbalance the manager s resulting incentive to overinvest rationing is strictly superior to price decentralization offering one reason for the prevalence of centralized capital budgeting procedures

two markets and a weak link abstract we characterise the relationship between two network based oligopoly markets when local players share the interconnection s ownership to that purpose we analyse the case of the bacton uk zeebrugge belgium natural gas pipeline using vector auto regressive representation techniques we conclude that there is a threshold of capacity deployment after which the two local markets split as a result the relationship between local price differentials and capacity utilisation is increasing and convex we also show that the local prices dynamic structure is characterised by convergence features

a dynamic network analysis of spot electricity prices in the australian national electricity market abstract this study applies dynamic network analysis to the power sector examining the relationship between regional spot electricity prices in the australian national electricity market nem in particular we employ principal component analysis and generate granger causality networks to examine the degree of interconnectedness of the nem in a time varying setting we find that the derived measures of interdependence can be related to actual market events such as price spikes unexpected high demand for electricity sudden increases in price volatility rebidding of dominant generators the temporary or permanent outage of major power stations and upgrades and limitations in transmission capacity in the analysed network we find that stronger dependence is exhibited by regional markets that are linked through interconnectors while the direction of granger causality can be related to interregional trade we further examine the usefulness of the derived measures for forecasting distributional characteristics of spot prices such as the maximum price volatility price spreads or upcoming periods of price spikes our results suggest that the derived network measures have predictive power albeit limited for the behaviour of spot electricity prices in the nem