the role of benefit transfer in ecosystem service valuation the demand for timely monetary estimates of the economic value of nonmarket ecosystem goods and services has steadily increased over the last few decades this article describes the use of benefit transfer to generate monetary value estimates of ecosystem services specifically the article provides guidance for conducting such benefit transfers and summarizes advancements in benefit transfer methods databases and analysis tools designed to facilitate its application

the dual structure of incomplete demand systems integrability of incomplete demand systems is discussed the concepts of weak integrability quasi expenditure function quasi indirect utility function and quasi utility function are defined their relationships to the expenditure function indirect utility function and utility function are developed the dual structure of the quasi functions permits exact welfare analysis and reveals the conditional preference structure for the commodities of interest new results relating the uniqueness and exactness of consumer s surplus to the structure of the expenditure and indirect utility functions are obtained

willingness to pay for land preservation across states and jurisdictional scale implications for benefit transfer in stated preference valuation of farmland preservation respondents are often told that preservation will occur within various jurisdictional scales that is community or state but are not told the specific location of parcels the resultant availability of welfare estimates for different scales and regions provides numerous avenues for benefit transfer this paper provides a systematic assessment of transfer error contrasting different methods for the transfer of farmland preservation values across states and jurisdictional scales results drawn from multistate choice experiments suggest that the choice of across scale versus across state transfer method can have significant implications for transfer validity

risk constrained portfolio selection of renewable sources in hydrothermal electricity markets renewable sources have recently emerged as a generation option for many countries in order to promote clean energy development in the case of brazil small hydro plants and cogeneration from sugarcane waste bagasse have been attractive alternatives during the past years with hundreds of mw installed since 2004 despite their advantages both alternatives are hindered by seasonal yet complementary availability this forces producers to discount or price the risks faced when selling firm energy contracts and may ultimately lead to projects being commercially unattractive we propose a stochastic optimization model that defines the optimal composition of a portfolio based on these two renewable sources in order to maximize the revenue of an energy trading company at the same time this model mitigates hydrological and fuel unavailability risks thus allowing the participation of both sources in the forward market environment in a competitive manner a case study is presented based on data from the brazilian system

estimating the demand for protecting freshwater lakes from eutrophication in any discussion of the valuation of public goods particularly environmental amenities contingent valuation travel cost and hedonics are commonly cited as methods for estimating hicksian or marshallian welfare freeman while contingent valuation and travel cost are widely employed we know of very few applications where hedonic demand functions have been estimated palmquist 1984 and parsons estimated second stage hedonic demands for characteristics of housing units both used the approach of estimating separate hedonic price functions for different real estate markets to identify demand parameters for housing characteristics the research reported here is the first to use separate real estate markets to identify demand parameters for an environmental amenity the specific application is water clarity in selected lakes in maine reduced water

is meta analysis a noah s ark for non market valuation this paper describes meta analytical methods as they have been applied to non market valuation research these studies have been used to review and synthesize literature and more recently in benefit transfer this second use imposes a higher standard on the consistency in economic concepts being summarized and in the resources included in a meta analysis to meet this need the paper proposes and illustrates a structural framework using a generalized method of moments estimator to estimate the parameters of a preference function with the benefits estimates usually encountered in meta analytic summaries

a note on choice of residential location in travel cost demand models where x is number of visits to a site p is price y is a k x 1 vector of observed individual characteristics and e is a random component 1 is a 1 x k parameter vector and p is a scalar parameter hundreds of models with this basic demand relationship as a basis have been estimated see smith s 1989 review my concern is that the price used in this model may be endogenous because people base decisions about where to live in part on proximity to recreation sites if so unobserved taste characteristics in the error term e will be

a structural equations approach to modeling consumptive recreation demand abstract in this analysis we develop a two equation structural model of a count travel cost model of recreational angling demand and angling success by modeling the two equations jointly we avoid the difficulties associated with the usual approach which estimates the demand for recreational fishing sites assuming the existence of an exogenous measure of fishing quality our analysis explicitly develops the joint log likelihood function that combines the two processes we estimate our model using full information maximum likelihood methods

environmental inequality and economic valuation i study how the economic value of a heterogeneously distributed environmental public good depends on how the endowment with this good and income are distributed i find that the effect of environmental inequality on the societal willingness to pay wtp for the environmental good is determined both by its substitutability and by the correlation of its provision with income specifically environmental inequality decreases societal wtp for substitutes but this effect is reversed if the environmental good is a complement or distributed strongly in favour of richer households moreover i show that richer households living in places where environmental good endowment is high increases decreases societal wtp if and only if the environmental good is a substitute for complement to consumption goods i propose novel adjustment factors for structural benefit transfer to control for differences in the spatial distribution of environmental goods using forest preservation in poland as an empirical example i find that societal wtp is up to 4 higher for equal access to forests and up to 8 higher for an equal distribution of both income and access to forests

testing choice experiment for benefit transfer with preference heterogeneity benefit transfer is a cost effective method for estimating the value of environmental goods that relies on information obtained in previous studies the multiattribute approach of choice experiments should provide advantages in terms of benefit transfer allowing differences in environmental improvements between sites as well as differences in socioeconomic and attitude characteristics between respondent populations this article investigates the capability of choice experiment method to be used in environmental benefit transfer when a random parameters approach is used to allow for preference heterogeneity we find that the inclusion of respondents taste heterogeneity reduces the magnitude of the transfer error

valuing environmental resources through demand for related commodities we examine the revealed preference theory underlying the welfare analysis of public goods e g environmental quality by observing the consumption of related commodities inspired by larson 1991 and ebert 1998 and extended from eom and larson 2006 an empirical strategy is formulated consistent with the theory of uniquely deriving use and nonuse values for a change in the public good we show that the weak complementarity assumption and the willig condition the common preference assumptions used to support the revealed preference methods for non market valuation may be tested as parameter restrictions a study of water quality valuation is presented to illustrate the proposed empirical strategy results show that the weak complementarity assumption and the willig condition generally do not hold in the case study and the consumer surplus derived from the indirect valuation method deviates largely from the exact welfare measures

financial bilateral contract negotiation in wholesale electricity markets using nash bargaining theory bilateral contracts are important risk hedging instruments constituting a major component in the portfolios held by many electric power market participants however bilateral contract negotiation is a complicated process as it involves risk management strategic bargaining and multi market participation this study analyzes a financial bilateral contract negotiation process between a generation company and a load serving entity in a wholesale electric power market with congestion managed by locational marginal pricing nash bargaining theory is used to model a pareto efficient settlement point the model predicts negotiation outcomes under various conditions and identifies circumstances in which the two parties might fail to reach an agreement both analysis and simulation are used to gain insight regarding how these negotiation outcomes systematically vary in response to changes in the participants risk preferences and price biases

evaluation of nonmarket goods recovering unconditional preferences a new approach is proposed for the evaluation of nonmarket goods starting from a complete or incomplete conditional demand system for market goods which is observable and depends on nonmarket goods this information is not sufficient to recover the underlying preference ordering of the representative consumer the central idea is to employ additional marginal willingness to pay functions for the nonmarket goods since they can be estimated either together with the demand system or in a separate step they are less arbitrary than the assumptions or hypotheses usually made if the entire system is weakly integrable the underlying ordering and appropriate welfare measures can be derived in this article i investigate the relationship between conditional and unconditional demand systems present sufficient conditions for weak integrability and demonstrate the practicability of the procedure proposed by means of three examples

transferring environmental value estimates issues and alternatives abstract environmental value transfer needs to be understood in the context of scientific information use in general this provides a different perspective upon the reasons why benefit transfer in particular appears so controversial and raises concerns over the limited types of validity testing being undertaken by those supporting such applications as ecosystem services valuation another key issue which we emphasise is the unintentional challenge to standard economic theory raised by the models used to conduct value transfers existing value transfer practice reveals the need for a more inclusive approach if environmental values are to be addressed we argue that there are robust alternative means for including multiple environmental values in decision processes these cannot be dismissed out of hand and analysts should be expanding their understanding of the available approaches which include attitude and norm measures multi criteria analysis and participatory deliberative institutions

meta analytic benefit transfer of outdoor recreation economic values testing out of sample convergent validity a benefit transfer approach to recreationeconomic valuation using meta analysis isexamined since the meta regression modeltakes into account some of the study specificeffects on willingness to pay wtp estimates benefit transfer using meta analysis couldyield a valid wtp estimate of unstudiedrecreation resources the convergent validityof the meta analytic benefit transfer is testedusing out of sample original studies from theu s the analyses are performed usingpercentage difference paired t test regression and correlation tests the testsreveal mixed results on convergence betweenestimated wtp using meta analytic benefittransfer function btf and out of sampleoriginal wtp values there is a fairly highpercentage difference between the estimated andoriginal wtp values 80 88 and the meandifferences are statistically significant asshown by paired t tests however correlationand regression results consistently showsignificant positive relationships betweennational btf estimated and original wtp valuesindicating some level of convergence theresults show that the national btf outperformthe regional btf indicating a potential of thenational btf for recreation benefit transferwhen a first best primary valuation study isnot affordable

vsl reconsidered what do labor supply estimates reveal about risk preferences abstract we propose and illustrate a theoretically consistent framework for linking estimates of the value of a statistical life vsl to individual preferences our example suggests a method for using estimates of the labor supply elasticity to impute a vsl estimate

measuring angling quality in count data models of recreational fishing a non nested test of three approaches this paper develops a methodology for investigating different specifications of angling quality in recreational demand models the methodology is used to compare three alternative specifications of the relationship between angling demand and site quality the site quality alternatives include chemical concentrations biological stress indices based on the chemicals and catch per unit effort the three alternatives are differentiated using a likelihood ratio non nested testing procedure

exact consumer s surplus and deadweight loss consumer s surplus is a widely used tool in applied welfare economics both economic theorists and cost benefit analysis often use consumer s surplus despite its somewhat dubious reputation the basic idea is to evaluate the value to a consumer or his willingness to pay for a change in price of a good from say pricep to pricep because price changes affect consumer welfare an evaluation of this effect is often a key input to public policy decisions yet consumer s surplus is probably the most controversial of widely used economic concepts both paul samuelson and ian little conclude that the economics profession would be better off without it it is my feeling of the situation that substantial agreement exists on the correct quantities to be measured the amount the consumer would pay or would need to be paid to be just as well off after the price change as he was before the price change the quantities correspond to john hicks compensating variation measures an alternative measure which takes ex post price change utility as the basis of comparison is hicks equivalent variation the controversy arises in the measurement of these quantities the usual measurement procedure is to use the area to the left of the marshallian market demand curve between two price levels jules dupuit originated this measure of welfare change and alfred marshall and hicks derived appropriate conditions for its use the primary condition for the area to the left of the demand curve to correspond to the compensating variation is to have constant marginal utility of income marshall gave this condition and if it holds the same quantity will be derived as the area to the left of the compensated hicksian demand curve this area to the left of the compensated demand curve is exactly what the compensating variation and equivalent variation measure thus the constant marginal utility of income is a sufficient condition for marshallian consumer s surplus to be equal to hicks consumer s surplus in this case arnold harberger s plea to use the welfare triangle as one half times the product of the price change times the quantity change to measure deadweight loss corresponds to the correct theoretical amount of welfare change in a recent paper robert willig derives bounds for the percentage difference between the correct measure of either the compensating or equivalent variation and the marshallian measure derived form the market demand curve his bounds which depend on the income elasticity of demand for the single good in the region of price change being considered as well as the proportion of the consumer s income spent on the good demonstrate that the marshallian consumer s surplus is often a good approximation to hicks consumer s surplus the fact that the proportion of the consumer s income spent matters as well as the income elasticity was first pointed out by harold hotelling willig contends that the approximation error will be less than the errors involved in estimating the demand curve thus he hopes to remove the need for apology that applied economists often need to give to theorists who remark on the inappropriateness of using marshallian consumer s surplus to measure welfare change however in this paper i show that for the case primarily considered by willig of a single price change which is also the situation in which consumer s surplus is often used in applied work no approximation is necessary professor of economics massachusetts institute of technology and research associate national bureau of economic research i would like to thank peter diamond erwin diewert daniel mcfadden robert merton robert solow hal varian joel yellin and the referees for help and comments research support from the national science foundation is acknowledged the reason that we still have two rather than one of samuelson s six measures of consumer s surplus arises from an index number problem of the correct basis for the welfare comparison i will give both measures but plan to concentrate on the compensating variation

meta analysis benefit transfer and methodological covariates implications for transfer error meta regression models in the valuation literature demonstrate that willingness to pay estimates vary according to methodological factors neither theory nor characteristics of policy sites dictate the treatment of associated covariates within benefit transfer however and the literature provides few insights into potential impacts of common empirical treatments this paper introduces a method to systematically characterize the impact of methodological variables on transfer error using a repeated leave one out convergent validity framework the analysis contrasts errors for a hypothetical ideal case in which correct methodological covariate treatments are known to the realistic case in which the correct treatment is unknown results indicate that the common assumption of mean values for methodological covariates leads to only a modest increase in mean transfer error relative to that found in the hypothetical ideal case

choice modeling and tests of benefit transfer choice modelling cm is a stated preference technique that is increasingly being used to generate estimates of non market values in cm applications respondents to a survey are presented with several sets of options which contain common attributes but at varying levels and are asked to select their preferred alternative from each set the information provided by respondents choices is used to estimate marginal rates of substitution and hence estimates of value in this paper the results from three separate cm applications are presented estimates are made of the value of improving the quality of wetlands the first two applications focused on the gwydir wetlands in new south wales australia one survey was conducted in sydney a major urban centre and the second was conducted in moree a rural centre close to the gwydir wetlands the third survey which was also conducted in sydney focused on the macquarie marshes another wetland in new south wales an objective of the study was to test the suitability of using cm derived estimates for benefit transfer both across different populations and across different wetlands cm is potentially suited to benefit transfer because it is possible to allow for differences in environmental improvements between sites as well as differences in socio economic characteristics between respondent populations several tests aimed at determining the validity of transfers using cm across sites and populations are presented these include tests of the equality of models implicit prices and estimates of compensating surplus

enhanced geospatial validity for meta analysis and environmental benefit transfer an application to water quality improvements meta regression models are commonly used within benefit transfer to estimate willingness to pay wtp for environmental quality improvements theory suggests that these estimates should be sensitive to geospatial factors including resource scale market extent and the availability of substitutes and complements valuation meta regression models addressing the quantity of non market commodities sometimes incorporate spatial variables that proxy for a subset of these effects however meta analyses of wtp for environmental quality generally omit geospatial factors such as these leading to benefit transfers that are invariant to these factors this paper reports on a meta regression model for water quality benefit transfer that incorporates spatially explicit factors predicted by theory to influence wtp the metadata are drawn from stated preference studies that estimate per household wtp for water quality changes in united states water bodies and combine primary study information with extensive geospatial data from external sources results find that geospatial variables are associated with significant wtp variations as predicted by theory and that inclusion of these variables reduces transfer errors

a market approach to long term security of supply the problem of ensuring that there is enough generation capacity to meet future demand has been an issue in market design since the beginning of the deregulation process although ideally the market itself should be enough to provide adequate investment incentives there are several factors that prevent this result from being achieved and some actual markets have already experienced problems related with a lack of generation capacity a regulatory framework to address this question is presented the procedure is based on an organized market where reliability contracts based on financial call options are auctioned so both their price and their allocation among the different plants are determined through competitive mechanisms this results in a stabilization of the income of the generators and provides a clear incentive for new generation investment with a minimum of regulatory intervention additionally the method represents a market compatible mechanism to hedge demand from the occurrence of high market prices

evaluating the performance of benefit transfer an empirical inquiry abstract benefit transfers are used by public agencies needing information on costs and benefits of policy decisions although scientific debate regarding the validity of benefit transfer is ongoing this article develops a methodology to evaluate the performance of direct benefit transfer and benefit function transfer and applies the methodology to two pairs of similar non market amenities empirical results indicate that benefit function transfer is more robust than transfer of average site benefits our results suggest that the circumstances under which benefit function transfer provides valid policy relevant information may be limited and that errors from applying benefit transfer can be quite large even across seemingly similar amenities

estimating mortality and economic costs of particulate air pollution in developing countries the case of nigeria the value of statistical life is an essential parameter used in ascribing monetary values to the mortality costs of air pollution in health risk analyses however this willingness to pay estimate is virtually non existent for most developing countries in the absence of local estimates two major benefit transfer approaches lend themselves to the estimation of the value of statistical life the value transfer method and the meta regression analysis using nigeria as a sample country we find that the latter method is better tailored than the former for incorporating many characteristics that vary between study sites and policy sites into its benefit transfer application it is therefore likely to provide more accurate value of statistical life predictions for very low income countries employing the meta regression method we find nigeria s value of statistical life estimate to be 489 000 combining this estimate with dose response functions from the epidemiological literature it follows that if nigeria had mitigated its 2006 particulate air pollution to the world health organisation standards it could have avoided at least 58 000 premature deaths and recorded an avoided mortality related welfare loss of about 28 billion or 19 of the nation s gdp for that year

environmental value transfer state of the art and future prospects abstract the main objectives of the paper are to 1 give an overview of the state of the art of environmental value transfer 2 discuss its prospects and potential role in cba as a decision support tool and 3 provide further guidelines for proper use and application environmental value or benefit transfer is a technique in which the results of studies on monetary environmental valuation are applied to new policy contexts the technique is controversial not least because of academic and political reservations over the usefulness and technical feasibility of economic valuation tools to demonstrate the importance of environmental values in project or programme appraisals testing of environmental value transfer so far has been unable to validate the practice taking into account the conditions set out in the literature for valid and reliable value transfer most transfers appear to result in substantial transfer errors this paper discusses why and addresses the question of which factors may have been overlooked it is argued that the problem is much more fundamental than previously acknowledged strict guidelines in terms of quantitative adjustment mechanisms to valid value transfer are meaningless if the more fundamental issue of differences in the very nature of the values elicited is not addressed at the same time

time consistency and risk averse dynamic decision models definition interpretation and practical consequences abstract this paper aims at resolving a major obstacle to practical usage of time consistent risk averse decision models the recursive objective function generally used to ensure time consistency is complex and has no clear direct interpretation practitioners rather choose a simpler and more intuitive formulation even though it may lead to a time inconsistent policy based on rigorous mathematical foundations we impel practical usage of time consistent models as we provide practitioners with an intuitive economic interpretation for the referred recursive objective function we also discourage time inconsistent models by arguing that the associated policies are sub optimal we developed a new methodology to compute the sub optimality gap associated with a time inconsistent policy providing practitioners with an objective method to quantify practical consequences of time inconsistency our results hold for a quite general class of problems and we choose without loss of generality a cvar based portfolio selection application to illustrate the developed concepts

general equilibrium benefits for environmental improvements projected ozone reductions under epa s prospective analysis for the los angeles air basin abstract this research demonstrates how locational equilibrium models can be used for benefit measurement with the detail required to match epa s benefit analysis for the first prospective analysis using the projected changes in ozone concentrations for 2000 and 2010 together with the sieg et al int econ rev forthcoming estimates for household preferences for housing education and air quality this paper measures general equilibrium willingness to pay for the policy scenarios developed for the prospective study as they relate to households in the los angeles area benefits are evaluated taking account at the household level of initial air quality conditions relocation based on changes in ozone and price changes the framework generalizes the partial equilibrium general equilibrium comparisons available with conventional computable general equilibrium and property capitalization models estimated general equilibrium gains from the policy range from 33 to 2400 annually at a household level in 1990 dollars

structural benefit transfer an example using vsl estimates abstract this paper describes and illustrates a method for benefits transfer referred to as preference calibration or structural benefits transfer this approach requires selection of a preference model capable of describing individual choices over a set of market and associated non market goods to maximize utility when facing budget constraints once the structure is selected the next step involves defining the analytical expressions for the tradeoffs being represented by the set of available benefit measures these algebraic relationships are used with the benefit estimates from the literature to calibrate the parameters of the model the calibrated model then offers the basis for defining the new tradeoffs required for the policy analysis i e for transferring benefits a new application is used to illustrate the structural benefits transfer logic it involves the benefits for mortality risk reductions measured with labor market compensation a worker would accept to be willing to work with added risk the measure is usually labeled the value of a statistical life vsl our application indicates that we should not have expected differences in these measures for the economic value of risk reductions with age the calibrated estimates were not greatly different for combinations of risk levels labor supply choices wages and non wage income for older adults thus simple adjustments relying on value per discounted life year remaining seem questionable

forecasting power prices using a hybrid fundamental econometric model we investigate the performance of two hybrid forecasting models to predict the next day base load electricity prices on the apx power exchange for great britain hybrid models have often been advocated as a synthetic method for forecasting but it is an open question how well they perform at the day ahead stage a conventional hybrid approach combines a fundamental model formulated with supply stack modeling with an econometric model using data on price drivers we extend this model to one based upon logistic smooth transition regression which represents a regime switching for periods of structural change empirical results for out of sample forecasting using both hybrid approaches are discussed and compared to non hybrid time series forecasting methods

the validity of environmental benefits transfer further empirical testing this paper provides further empirical evidence of the validity of environmental benefits transfer based on cv studies by expanding the analysis to include control factors which have not been accounted for in previous studies these factors refer to differences in respondent attitudes traditional population characteristics were taken into account but these variables do not explain why respondents from the same socio economic group may still hold different beliefs norms or values and hence have different attitudes and consequently state different wtp amounts the test results are mixed the function transfer approach is valid in one case but is rejected in the 3 other cases investigated in this paper we provide further evidence that in the case of statistically valid benefits transfer the function approach results in a more robust benefits transfer than the unit value approach we also show that the equality of coefficient estimates is a necessary but insufficient condition for valid benefit function transfer and discuss the implications for previous and future validity testing

spatial transferability of hedonic house price functions mcarthur d p osland l and thorsen i spatial transferability of hedonic house price functions regional studies the aim of this paper is to investigate whether it is possible to use parameter estimates from a hedonic function estimated in one region to make reliable predictions in another region two regions in south west norway are taken as the example focus is placed on the stability and transferability of parameters attached to two measures of spatial structure proximity to the central business district cbd and accessibility to the labour market in making this judgement classical statistical tests are employed alongside equivalence testing the conclusions are that predictions made using transferred spatial structure parameters were equivalent given the chosen tolerance level mcarthur d p osland l et thorsen i la transferabilite geographique des fonctions hedoniques des prix du logement regional studies cet article cherche a examiner si oui ou non on peut employer des estimations p

valuing environmental goods and services using benefit transfer the state of the art and science abstract the purpose of this special issue of ecological economics is to elucidate the state of the art and science of environmental benefit transfer and to assist in the design and reporting of future benefit estimation research compiling the insights of thirty two international experts from seven countries the special issue reviews the latest developments in transfer techniques as well as ongoing efforts to standardize and validate them taken together the papers in this special issue provide fresh answers to some long standing questions offer original research insights on state of the art issues and identify fruitful areas for future research this introductory paper provides background and context for the issues addressed by the contributing authors its purpose is to place the interdisciplinary thinking contained here in a comparative context highlighting the need for integration and collaboration to maintain the momentum that has propelled environmental benefit transfer into a widely used approach for estimating the economic value of environmental goods and services worldwide

nonlinear budget constraints and consumer demand an application to public programs for residential housing abstract this study presents a methodology for exploiting the nonlinear hedonic nature of housing prices to estimate the compensated demands of households for particular housing attributes the methodology is employed to provide hicksian benefit measures of a particular housing subsidy program typical of those undertaken recently in developing countries

risk constrained multi stage wind power investment when deciding on wind power investments three major issues arise the production variability and uncertainty of wind facilities the eventual future decline in wind power investment costs and the significant financial risk involved in such investment decisions recognizing the above important issues this paper proposes a risk constrained multi stage stochastic programming model to make optimal investment decisions on wind power facilities along a multi stage horizon the proposed model is illustrated using a clarifying example and a case study

combining revealed and stated preference data to estimate preferences for residential amenities a gmm approach we show how stated preference information obtained from a choice experiment and revealed preference information based on housing market transactions can be combined via generalized method of moments gmm estimation specifically we use a moment condition matching the predicted marginal willingness to pay wtp from a first stage hedonic model to the marginal wtp formula implied by the choice experiment utility function this is coupled with other moments from the choice experiment to produce gmm based estimates of parameters that reflect the strengths of each data source our application values remediation of a contaminated site in buffalo new york and we find evidence in support of estimates arising from our approach jel q51 q53

contracting strategies for renewable generators a hybrid stochastic and robust optimization approach we present a new methodology to support an energy trading company etc to devise contracting strategies under an optimal risk averse renewable portfolio the uncertainty in the generation of renewable energy sources is accounted for by exogenously simulated scenarios as is customary in stochastic programming however we recognize that spot prices largely depend on unpredictable market conditions making it difficult to capture its underlying stochastic process which challenges the use of fundamental approaches for forecasting under such framework industry practices make use of stress tests to validate portfolios we then adapt the robust optimization approach to perform an endogenous stress test for the spot prices as a function of the buy and sell portfolio of contracts and renewable energy generation scenarios the optimal contracting strategy is built through a bilevel optimization model that uses a hybrid approach mixing stochastic and robust optimization the proposed model is flexible to represent the traditional stochastic programming approach and to express the etc s uncertainty aversion in the case where the price distribution cannot be precisely estimated the effectiveness of the model is illustrated with examples from the brazilian market where the proposed approach is contrasted to its stochastic counterpart and both are benchmarked against observed market variables

benefit transfer via preference calibration prudential algebra for policy this paper proposes a new approach to benefit transfer the method assumes a specific form for preferences and uses available benefit information to identify and calibrate the preference parameters to match the existing benefit estimates this approach assures economic consistency of the transfers benefit measures can never be inconsistent with household income the logic also offers a series of potentially observable predictions that can be used to gauge the plausibility of benefit transfers when multiple benefit estimates from different methods are available such as hedonic property value travel cost demand and contingent valuation the framework uses the definition of the benefit concept from each method in a single preference function to reconcile differences it provides a specific way to take account of baseline conditions and scope effects i e the size of the proposed change consistently in the transfer the method is illustrated using estimates for benefit measure changes in water quality from three studies travel cost demand hedonic property value and contingent valuation analysis q26

does the long term interest rate predict future inflation a multi country analysis according to the fisher hypothesis an increase decrease in the spread between the long term or multiperiod interest rate and the one period inflation rate signals an increase decrease in future one period inflation this implication is tested on data from thirteen oecd countries for the period 1962 93 integration and cointegration techniques are applied to examine the time series properties of interest rates and inflation rates and the var methodology developed by john y campbell and robert j shiller 1987 is applied to examine the predictive power of the spread as well as in testing the fisher hypothesis under rational expectations and constant ex ante real rates copyright 1995 by mit press

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined