capacity controlled demand side management a stochastic pricing analysis we consider a novel paradigm for demand side management assuming that an aggregator communicates with a household only at the meter imposing a capacity constraint i e a restriction on the total power consumption level within a given time frame consumers are then responsible to adjust the set points of the individual household devices accordingly to meet the imposed constraint we formulate the problem as a stochastic household energy management program with stochasticity arising due to local photovoltaic generation we show how a demand bidding curve for capacity increments can be constructed as a by product of the developed problem and provide a rigorous pricing analysis that results in a probabilistic shadow price envelope to evaluate the efficacy of the proposed approach we compare it with an idealized real time market price set up and show how our analysis can provide guidelines to consumers when selecting a service contract for load curtailment

lottery choice incentives complexity and decision time this paper reports the results of an experiment on lottery choice in which decision cost is measured as decision making time a simple decision cost model motivates this measurement and the experiment and predicts relationships between incentive mechanism manipulations and decision making time which are borne out in the experiment the decision cost model also suggests that decisions will change in the face of the incentive manipulations in the experiment this suggestion is borne out in a complex decision making environment but not in a simple one specification tests demonstrate that observed changes in subjects behavior are not merely due to changes in subject specific error variance one may conclude from this that the payoff dominance problem is a real issue in complex decision making experiments copyright 1993 by royal economic society

the potential of decentralized power to heat as a flexibility option for the german electricity system a microeconomic perspective abstract one fundamental challenge of the german energy transition for the electricity market is the growing imbalance between inflexible generation and generally inelastic load against this background we investigate the future potential of decentralized power to heat p2h as an additional demand side flexibility option for the german electricity system precisely we analyze the case of hybrid systems where conventional gas and oil condensing boiler systems are equipped with an electric heating rod in contrast to previous approaches we set our focus on the economic incentives at household level only if the switch to a p2h hybrid system can reduce individual heating expenses significantly a considerable number of these systems will be installed for this purpose we implemented an integrated approach combining three distinct simulation modules first a stochastic simulation of the electricity spot market prices in 2020 was conducted second average heat load profiles were generated based on a standard bottom up analysis both results were then fed into an optimization model calculating the cost minimizing paths of heat generation at household level during the year 2020 the simulated annual savings prove modest as long as household electricity prices are not heavily reduced through political influence

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

the stability of power system markets market equilibrium conditions can be derived from more general dynamic equations describing the marketplace dynamic equations provide insights into the behavior and stability of markets which are not available from static models for example markets with a single supplier with declining linear costs economies of scale may or may not be stable depending on specific cost characteristics markets with more than one supplier with declining linear costs are always unstable this paper illustrates a situation where the removal of congestion makes a market unstable

price maker bidding in day ahead electricity market for a retailer with flexible demands this study develops a short term planning model to determine the bidding curves on a day ahead market for a price maker retailer with flexible power demand it concerns the interactions between the spot price and the flexible demand both conditional value at risk and volume deviation risk are taken into account a numerical study using the data from the nordic electricity market is performed to investigate the influence of risk factors on the retailer s profit risk levels average spot price and total consumption three types of price elasticity are compared to show that the retailer can benefit from the flexibility in demand side in some cases the flexibility also leads to lower spot prices so that the customers in real time price based demand response can face a lower electricity price for per unit power consumption

benefits and challenges of electrical demand response a critical review advances in it control and forecasting capabilities have made demand response a viable and potentially attractive option to increase power system flexibility this paper presents a critical review of the literature in the field of demand response providing an overview of the benefits and challenges of demand response these benefits include the ability to balance fluctuations in renewable generation and consequently facilitate higher penetrations of renewable resources on the power system an increase in economic efficiency through the implementation of real time pricing and a reduction in generation capacity requirements nevertheless demand response is not without its challenges the key challenges for demand response centre around establishing reliable control strategies and market frameworks so that the demand response resource can be used optimally one of the greatest challenges for demand response is the lack of experience and the consequent need to employ extensive assumptions when modelling and evaluating this resource this paper concludes with an examination of these assumptions which range from assuming a fixed linear price demand relationship for price responsive demand to modelling the highly diverse distributed and uncertain demand response resource as a single centralised negative generator adopting fixed characteristics and constraints

real time pricing control on generation side optimal demand tracking model and information fusion estimation solver this paper develops the information fusion based pricing control ifpc scheme for the generation side in the liberalized wholesale electricity market the market mechanism is described by a feedback system in which the independent system operator iso interacts with generation companies gencos via proposing and responding to real time nodal prices the linear constrained quadratic optimal tracking problem is formulated and the solution nodal price sequence is repeatedly computed by fusing the recently available information with backward manner and updated over the receding preview horizon so that the total supply dynamically tracks the demand the price is stationarized and each genco gains the maximal profit for the given price numeric results on a 118 bus network validate ifpc s effectiveness and flexibility on incorporating various line rating constraints as well as wind power fluctuation uncertainties comparative study demonstrates that ifpc outperforms the negotiated predictive dispatch but elapsing heavier computations the irrational behavior analysis verifies the convergence to equilibrium and speculation behavior of gencos in the real market is also discussed along with the rapid development of smart grid ifpc is practically enabled by the information and communication technology ict its significance and potentials for renewable energy sources res integration would be realized and exploited

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

real time price based home energy management scheduler with the recent development of advanced metering infrastructure real time pricing rtp scheme is anticipated to be introduced in future retail electricity market this paper proposes an algorithm for a home energy management scheduler hems to reduce the cost of energy consumption using rtp the proposed algorithm works in three subsequent phases namely real time monitoring rtm stochastic scheduling sts and real time control rtc in rtm phase characteristics of available controllable appliances are monitored in real time and stored in hems in sts phase hems computes an optimal policy using stochastic dynamic programming sdp to select a set of appliances to be controlled with an objective of the total cost of energy consumption in a house finally in rtc phase hems initiates the control of the selected appliances the proposed hems is unique as it intrinsically considers uncertainties in rtp and power consumption pattern of various appliances in rtm phase appliances are categorized according to their characteristics to ease the control process thereby minimizing the number of control commands issued by hems simulation results validate the proposed method for hems

heterogeneity in risky choice behaviour in a broad population we analyse risk preferences using an experiment with real incentives in a representative sample of 1 422 dutch respondents our econometric model incorporates four structural parameters that vary with observed and unobserved characteristics utility curvature loss aversion preferences towards the timing of uncertainty resolution and the propensity to choose randomly rather than on the basis of preferences we find that all four parameters contribute to explaining choice behaviour the structural parameters are significantly associated with socio economic variables but it is essential to incorporate unobserved heterogeneity in each of them to match the rich variety of choice patterns in the data

the common consequence effect testing a unified explanation of recent mixed evidence abstract the common consequence effect is perhaps the most investigated violation of expected utility theory and yet no single generalised expected utility model convincingly organises the experimental data this paper reports a test of a modified version of expected cardinality specific utility theory with boundary effects neilson w s 1992 economics letters 39 275 278 which can explain some recent mixed evidence without recourse to subjective probability weighting models the results do not convincingly support the boundary effect hypothesis and neither support the more usual probability weighting arguments but do indicate instability in preferences largely consistent with event splitting effects

ex post pricing in the co optimized energy and reserve market this paper discusses an alternative to the ex post pricing model currently under development within iso new england s iso ne ancillary service market since iso ne s real time ancillary service market co optimizes both energy and reserve products ex post pricing is needed for both energy and reserve a co optimization approach for ex post pricing requires defining complex pricing rules and implementing heuristics to ensure consistent binding constraints with the ex ante dispatch in order to avoid complexity and uncertainty of required heuristics a new ex post pricing schema is proposed to calculate the ex post energy and reserve prices in a decoupled way while recognizing the coupling effect of energy and reserve in the proposed approach ex post energy prices are first computed by incorporating the ex ante marginal opportunity cost of reserve in the energy offer the ex post reserve prices are then calculated by considering the ex post marginal opportunity cost of energy this approach simplifies the implementation of ex post pricing rules in the iso ne market numerical examples are presented to further demonstrate the validity of this approach

when are person tradeoffs valid the person tradeoff pto is commonly used in health economic applications however to date it has no theoretical basis the purpose of this paper is to provide this basis from a set of assumptions that together justify the most common applications of the pto method our analysis identifies the central assumptions in pto measurements we test these assumptions in an experiment but find only limited support for the validity of the pto

entry growth and survival in the green industry abstractentry growth and survival in the green industry regional studies economists are interested in the factors that induce firm entry lead to growth and help firms succeed in various markets such information can be helpful to policy makers but unfortunately such patterns have not been considered for green industries this paper takes advantage of a recent definition of green industries proposed by the us bureau of labor statistics bls to investigate patterns characterizing these industries within the state of texas

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

the impact of market clearing time and price signal delay on the stability of electric power markets we generalize a model proposed by alvarado of the electric power market by including the effects of control and communication to simulate realistic markets our model issues control signals only at given times and those signals are delayed during transmission these two effects transform alvarado s continuous system into a hybrid system with consequential effects the stability analysis of the new system reveals two important properties first there is an upper limit on the market clearing time and the delay of the price signal beyond which the system becomes unstable second there is a counter intuitive relationship between the market clearing time and price signal delay when the market clearing time is relatively long delaying the price signal can improve the market s stability while reducing the communication delay can destabilize the market this counter intuitive effect shows that the full impact of information technology on power markets can be significant and difficult to anticipate therefore as markets are designed and regulated careful attention should be paid to the effects of information technology on the market s dynamic behavior

volatility of power grids under real time pricing the paper proposes a framework for modeling and analysis of the dynamics of supply demand and clearing prices in power systems with real time retail pricing and information asymmetry characterized by passing on the real time wholesale electricity prices to the end consumers real time pricing creates a closed loop feedback system between the physical layer and the market layer of the system in the absence of a carefully designed control law such direct feedback can increase sensitivity and lower the system s robustness to uncertainty in demand and generation it is shown that price volatility can be characterized in terms of the system s maximal relative price elasticity defined as the maximal ratio of the generalized price elasticity of consumers to that of the producers as this ratio increases the system may become more volatile since new demand response technologies increase the price elasticity of demand and since increased penetration of distributed generation can also increase the uncertainty in price based demand response the theoretical findings suggest that the architecture under examination can potentially lead to increased volatility this study highlights the need for assessing architecture systematically and in advance in order to optimally strike the trade offs between volatility robustness and performance metrics such as economic efficiency and environmental efficiency

arbitraging intraday wholesale energy market prices with aggregations of thermostatic loads we investigate the potential for aggregations of residential thermostatically controlled loads tcls such as air conditioners to arbitrage intraday wholesale electricity market prices via non disruptive load control we present two arbitrage approaches 1 a benchmark that gives us an optimal policy but requires local computation or real time communication and 2 an alternative based on a thermal energy storage model which relies on less computation communication infrastructure but is suboptimal we find that the alternative approach achieves around 60 80 of the optimal wholesale energy cost savings we use this approach to compute practical upper bounds for savings via arbitrage with air conditioners in california s intraday energy market we investigate six sites over four years and find that the savings range from 2 37 per tcl per year and depend upon outdoor temperature statistics and price volatility

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

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

behavior in the centipede game a decision theoretical perspective the centipede game is a two player finite game of perfect information where a unique subgame perfect nash equilibrium appears to be intuitively unappealing and descriptively inadequate this paper analyzes behavior in the centipede game when a traditional game theoretical assumption that players maximize expected utility is relaxed we demonstrate the existence of a descriptively adequate subgame perfect equilibrium under two standard decision theoretical assumptions first players choose under uncertainty in a probabilistic manner as captured by embedding a core deterministic decision theory in a model of probabilistic choice second players adopt non linear decision weights and overweight the likelihood of rare events as captured for example by rank dependent utility or prospect theory

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

coupon incentive based demand response theory and case study this paper presents the formulation and critical assessment of a novel type of demand response dr program targeting retail customers such as small medium size commercial industrial and residential customers who are equipped with smart meters yet still face a flat rate enabled by pervasive mobile communication capabilities and smart grid technologies load serving entities lses could offer retail customers coupon incentives via near real time information networks to induce demand response for a future period of time in anticipation of intermittent generation ramping and or price spikes this scheme is referred to as coupon incentive based demand response cidr in contrast to the real time pricing or peak load pricing dr programs cidr continues to offer a flat rate to retail customers and also provides them with voluntary incentives to induce demand response theoretical analysis shows the benefits of the proposed scheme in terms of social welfare consumer surplus lse profit the robustness of the retail electricity rate and readiness for implementation the pros and cons are discussed in comparison with existing dr programs numerical illustration is performed based on realistic supply and demand data obtained from the electric reliability council of texas ercot

developments in non expected utility theory the hunt for a descriptive theory of choice under risk this article reviews recent developments in the economic theory of individual decision making under risk since the 1950s it has been known that individual choices violate the standard model of expected utility in predictable ways considerable research effort has now been devoted to the project of developing a superior descriptive model following an overview of non expected utility theories which distinguishes between conventional and non conventional approaches the paper seeks to assess these alternative models in terms of empirical success using laboratory and field data and theoretical usefulness the closing sections reflect on some new directions emerging in this literature

do non expected utility choice patterns spring from hazy preferences an experimental study of choice errors individuals often have only incompletely known preferences when choosing between pair wise gambles particular presentations of the choice problem may then passively encourage the use of some choice method to clarify the preference different presentational displays can then lead to choice patterns predicted by one or other generalised expected utility theory when a preference is not or cannot be constructed choices will be arbitrary i run an experiment that uses three different presentational displays and incorporates a strength of preference indicator the experiment investigates regret theory as an example of a generalised expected utility theory as preference strength is found to vary by display regret effects event splitting effects and choice reversals are all found to be display dependent it is suggested that the evidence is best explained by assuming incomplete eu preferences which are clarified by constructive heuristics rather than some generalised expected utility model coupled with an error term

convergence of volatile power markets with price based demand response price based demand response dr program is a mechanism for encouraging electricity consumers to dynamically manage their energy consumptions in response to time varying electricity prices and thereby reduce peak electricity demands and alleviate the pressure to power systems however it brings additional dynamics and new challenges to the real time supply and demand balance specifically if real time price based dr programs are widely deployed in the future price sensitive dr load levels would constantly change in response to dynamic real time prices which will impact the economic dispatch ed schedule and in turn affect electricity market clearing prices this paper adopts two methods for examining the impacts of different dr price elasticity characteristics and dr participation levels on the convergence of volatile power market a closed loop iterative simulation method and a non iterative method based on the contraction mapping theorem in this paper convergence refers to the fact that load and or price values will finally converge to a fixed point after a finite number of iterations between the ed problem and the price sensitive dr load adjustment five price sensitive dr performance function categories are used to simulate different nonlinear price elasticity characteristics of dr loads numerical studies illustrate how the convergence status of power markets will be affected by the nonlinear price elasticity dr curves the dr penetration levels and the capacity limits of generating units

preference reversals the impact of truth revealing monetary incentives researchers vigorously debate the impact of incentives in preference reversal experiments do incentives alter behavior and generate economically consistent choices lichtenstein and slovic 1971 document inconsistencies reversals in revealed preference in gamble pairs across paired choice and individual pricing tasks the observed pattern is inconsistent with stable underlying preferences expressed with simple errors lichtenstein and slovic 1973 and grether and plott 1979 introduce incentives but aggregate reversal rates change little these results fostered numerous replications and assertions that models of non stable preferences are required to explain reversals contrary to this research we find that incentives can generate more economically consistent behavior our reevaluation of existing experimental data shows that incentives have a clear impact by better aligning aggregate choices and prices the effect is sufficiently large that with truth revealing incentives a stable preferences with error model not only explains behavior but fits the data as well as any model possibly could

decentralized multi period economic dispatch for real time flexible demand management emerging smart grid enabling technologies will allow an unprecedented degree of observability and control at all levels in a power system combined with flexible demand and storage they could allow procuring energy at minimum cost and environmental impact that however presupposes real time coordination of demand of individual households and industries down at the distribution level with generation at the transmission level this is closely related with the balancing market economic dispatch ed problem which currently does not take into account distribution network constraints and flexible demand characteristics still assuming a suitably modified form of that problem was available due to both computational and communications requirements its centralized solution in its full detail would not be tractable while there is currently a wealth of literature dealing with distributed optimization applications in power systems it typically focuses on smaller parts of the overall energy management problem e g transmission area synchronization or electric vehicles management often without considering its full scale or establishing any association with energy market mechanisms the target of this paper is twofold 1 identify a flexible demand and distribution network inclusive formulation for ed and 2 propose a solution method

on variability of renewable energy and online power allocation as electric power system operators shift from conventional energy to renewable energy sources power distribution systems will experience increasing fluctuations in supply these fluctuations present the need to not only design online decentralized power allocation algorithms but also characterize how effective they are given fast changing consumer demand and generation in this paper we present an online decentralized dual descent od3 power allocation algorithm and determine in the worst case how much of observed social welfare can be explained by fluctuations in generation capacity and consumer demand convergence properties and performance guarantees of the od3 algorithm are analyzed by characterizing the difference between the online decision and the optimal decision we demonstrate validity and accuracy of the theoretical results in the paper through numerical experiments using real power generation data

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