optimal investments in power generation under centralized and decentralized decision making this work presents a novel model for optimization of investments in new power generation under uncertainty the model can calculate optimal investment strategies under both centralized social welfare and decentralized profit objectives the power market is represented with linear supply and demand curves a stochastic dynamic programming algorithm is used to solve the investment problem where uncertainty in demand is represented as a discrete markov chain the stochastic dynamic model allows us to evaluate investment projects in new base and peak load power generation as real options and determine optimal timing of the investments in a case study we use the model to compare optimal investment strategies under centralized and decentralized decision making a number of interesting results follow by varying the assumptions about market structure and price response on the demand side

a multiperiod energy acquisition model for a distribution company with distributed generation and interruptible load this paper presents a multiperiod energy acquisition model for a distribution company disco with distributed generation dg and interruptible load il in a day ahead electricity market assuming that cost information for individual generation companies gencos and discos is known the disco s energy acquisition strategy is modeled as a bilevel optimization problem with the upper subproblem representing individual discos and the lower subproblem representing the independent system operator iso the upper subproblem maximizes individual discos revenues the lower subproblem simulates the iso s market clearing problem that minimizes generation costs and compensation costs for interrupting load the bilevel problem is solved by a nonlinear complementarity method an 8 bus system is employed to illustrate the proposed model and algorithm in particular the roles of dgs and ils to alleviate congestion are analyzed

strategic responses of incumbents to new entry the effect of ownership structure capital structure and focus we examine how certain firm and market specific characteristics affect incumbent firms responses to new entry into their local markets data comes from the discount department store industry where wal mart entered a large number of markets in a short period of time consistent with existing research larger and more profitable incumbents respond more aggressively to wal mart s entry while more highly levered incumbents respond less aggressively also there is evidence that incumbent managers fight harder possibly overinvest when their job is at greater risk and high managerial ownership appears to reduce this agency problem incumbent firms behave differently in markets under attack by wal mart than in markets not yet threatened suggesting that some of the documented responses are specific to walmart s entry article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

generation capacity expansion analysis open loop approximation of closed loop equilibria in this paper we propose a methodology to approximate closed loop capacity equilibria using only open loop capacity equilibrium models in the closed loop model generation companies choose capacities that maximize their individual profit in the first stage while the second stage represents the conjectured price response market equilibrium in the open loop model firms simultaneously choose capacities and quantities to maximize their individual profit while each firm conjectures a price response to its output decisions the closed loop equilibrium model is an equilibrium problem with equilibrium constraints which belongs to a class of problems that is very hard to solve the open loop equilibrium model is much easier to solve however it is also less realistic with the approximation scheme proposed in this paper we are able to solve the closed loop model reasonably well when market behavior is closer to oligopoly than to perfect competition by smartly employing open loop models which reduces the computational time by two orders of magnitude we achieve this by transforming the open loop equilibrium problem into an equivalent convex quadratic optimization problem which can be solved efficiently finally a case study is presented in order to validate the proposed approximation scheme

green electricity policies in the united states case study while there has been interest in promoting the use of renewable energy in electricity production for a number of years in the united states the market share of non hydro renewable energy sources in electricity production has remained at about 2 percent over the past decade the paper reviews the principal energy resources used for electricity production considers the changing regulatory environment for the electricity industry and describes government policies that have been used to promote green electricity in the united states with an emphasis on measures adopted by state governments factors influencing the development of green power markets are also discussed including underlying economic issues public policy measures the regulatory environment external costs and subsidies without significant increases in fossil fuel prices much more stringent environmental regulations or significant changes in electricity customer preferences green electricity markets are likely to develop slowly in the united states

a model for the multiperiod multiobjective power generation expansion problem a long term multiobjective model for the power generation expansion planning of electric systems is described and evaluated in this paper the model optimizes simultaneously multiple objectives i e minimizes costs environmental impact imported fuel and fuel price risks and decides the location of the planned generation units in a multiperiod planning horizon among the attributes considered in the model are the investment and operation cost of the units the environmental impact the amount of imported fuel and the portfolio investment risk the approach to solve this problem is based on multiobjective linear programming and the analytical hierarchy process a case study from the mexican electric power system is used to illustrate the proposed framework

capital structure and product market rivalry how do we reconcile theory and evidence this paper presents empirical evidence on the interaction of capital structure decisions and product market behavior we examine when firms recapitalize and increase the proportion of debt in their capital structure the evidence in this paper shows that firms with low productivity plants in highly concentrated industries are more likely to recapitalize and increase debt financing this finding suggests that debt plays a role in highly concentrated industries where agency costs are not significantly reduced by product market competition following the empirical evidence we introduce the strategic investment effects of debt and argue that this effect in conjunction with agency costs appears to fit the data this abstract was borrowed from another version of this item

a model for integrated analysis of generation capacity expansion and financial planning this paper discusses the need for an integrated analysis of investment and financing decisions in the context of electricity generation capacity addition planning the traditional mathematical programming model for investment planning and its potential enhancement to encompass financing decisions in a unified framework have been discussed the integrated investment finance model for a power system is formulated the model is implemented for a well known investment planning case study and the various investment financing interactions have been discussed the results indicate that the interaction of financing and investment decisions could be very significant and needs to be accounted for in capacity planning optimization exercises this is particularly relevant for utilities in a competitive environment

market based transmission expansion planning restructuring and deregulation has exposed transmission planner to new objectives and uncertainties therefore new criteria and approaches are needed for transmission planning in deregulated environments a new market based approach for transmission planning in deregulated environments is presented in this paper the main contribution of this research is i introducing a new probabilistic tool named probabilistic locational marginal prices for computing the probability density functions of nodal prices ii defining new market based criteria for transmission expansion planning in deregulated environments and iii presenting a new approach for transmission expansion planning in deregulated environments using the above tool and criteria the advantages of this approach are i it encourages and facilitates competition among all participants ii it provides nondiscriminatory access to cheap generation for all consumers iii it considers all random and nonrandom power system uncertainties and selects the final plan after risk assessment of all solutions and iv it is value based and considers investment cost operation cost congestion cost load curtailment cost and cost caused by system unreliability the presented approach is applied to ieee 30 bus test system

network planning in unbundled power systems in this paper a new approach for network planning in unbundled power systems is presented the approach takes into account the desires of demand customers power producers system operator network owner s and regulator in network planning competition reliability flexibility of operation transmission expansion cost and environmental impacts are used as planning criteria in order to consider the importance degrees of stakeholders and planning criteria in network planning first importance degrees of stakeholders and planning criteria are determined by a presented new method then importance degrees of stakeholders and planning criteria are aggregated with appropriateness degrees of expansion plans to compute a fuzzy index for measuring the goodness of expansion plans the final plan is selected using the presented fuzzy risk assessment method the approach is applied to an eight bus test system

collusion fluctuating demand and price rigidity we study an infinitely repeated bertrand game in which an i i d demand shock occurs in each period each firm receives a private signal about the demand shock at the beginning of each period at the end of each period all information but the private signals becomes public we consider the optimal symmetric perfect public equilibrium sppe mainly for patient firms we show that price rigidity arises in the optimal sppe if the accuracy of the private signals is low we also study the implications of more firms and firms impatience on collusive pricing empirical evidence shows that prices in oligopolistic markets tend to be more rigid than prices in competitive markets dixon 1983 carlton 1986 this suggests that collusion may result in firms inflexible pricing behavior it is not obvious however that collusion causes price rigidity why do colluding firms not adjust prices according to changing environments by which they can potentially earn higher profits what limits colluding firms ability to coordinate thereby leading to price rigidity in this article we study how information asymmetry among firms limits colluding firms ability to respond to demand shocks and characterize the conditions under which prices are rigid specifically we consider private information about demand in an infinitely repeated bertrand game with two identical firms in which an i i d binary demand shock occurs in each period each firm receives a conditionally independent private signal about the underlying demand state at the beginning of each period and then charges a price the accuracy of private signals is measured by the probability of receiving a high respectively low signal conditional on a high respectively low underlying demand state therefore the lower the accuracy the higher the degree of informational asymmetry at the end of each period firms observe the underlying demand and the prices but they never observe their rivals signals we adopt symmetric perfect public equilibria sppe as our solution concept which requires that at each period firms pricing schemes

evaluation of regulatory impacts on dynamic behavior of investments in electricity markets a new hybrid dp game framework a new hybrid framework based on game theory and dynamic programming dp with random demands and prices is proposed for studying the impacts of regulatory interventions on the dynamics of investment in power generation in electricity markets in our approach using markov chains the electric demand and growth of fuel prices have been modeled dp has been used for solving the generation expansion planning gep problem investment strategies of other investors in the market are modeled as constraints the income of the investor is calculated by modeling strategic interactions among market players in the spot energy market the cournot game concept has been applied and the nash equilibrium is calculated for each state and stage of dp simulation results confirm that the proposed framework is an appropriate decision support tool that provides useful information about dynamics of investment

a holistic approach for planning natural gas and electricity distribution networks this paper presents a new planning expansion model of an electricity and natural gas distribution system that has high penetration of distributed generation based on natural gas the model entails lower investment costs as compared to traditional planning models that consider both systems electricity and natural gas as independent networks this model is especially convenient for utilities that own both systems as electricity and natural gas customers can derive benefits via electricity or natural gas tariffs if there are significant savings in investment costs for fast growing economies the merging of electricity and natural gas distribution systems is seen as a promising business opportunity in which economies of scope can have lower investment costs so there is a definite need for this type of approach

imperfect information and dynamic conjectural variations this article analyzes oligopoly interaction in an environment where firms are imperfectly informed about the evolution of the market demand curve the analysis develops a two period cournot framework under the assumptions that demand shifts are positively serially correlated that firms never directly observe the demand curve and that firms never observe the previous quantity decisions of rivals firms do draw inferences about the position of the demand curve from past observations on prices consequently the current output of a firm will influence the current market price which will then influence rivals inferences about future demand the future output decisions of rivals will respond accordingly the theory predicts negative dynamic conjectural variations essentially a firm perceives that an increase in its output will lower the current market clearing price which will cause rival firms to think that the demand curve has shifted down and hence induce them to lower their outputs in the future

modeling asymmetric competition the effects of the marketing actions of one brand can be distributed among its competitors market shares in a complex manner this paper presents and illustrates methods for modeling brand competition and brand strategies in markets where competitive effects can be differentially and asymmetrically distributed we discuss the empirical specification parameter estimation and competitive strategy implications of the models proposed price and advertising competition among eleven brands of an australian household product is used to illustrate the application of these procedures

generation capacity expansion in energy markets using a two level game theoretic model with a significant number of states in the u s and countries around the world trading electricity in restructured markets a sizeable proportion of capacity expansion in the future will have to take place in market based environments however since a majority of the literature on capacity expansion is focused on regulated market structures there is a critical need for comprehensive capacity expansion models targeting restructured markets in this research we develop a two tier matrix game model and a novel solution algorithm that incorporates risk due to volatilities in profit via cvar intended for use by generators to make multi period multi player generation capacity expansion decisions we demonstrate the applicability of the model using a sample network from power world software and analyze the results

advertising and coordination when market information such as price is difficult to communicate consumers and firms may be unable to take advantage of mutually beneficial scale economies so that coordination failures arise ostensibly uninformative advertising expenditures can be used to eliminate coordination failures by allowing an efficient firm to communicate implicitly that it offers a low price this provides a theoretical explanation for benham s 1972 empirical association of the ability to advertise with lower prices and larger scale advertising becomes necessary for optimal coordination when the identity of the efficient firm is uncertain an application to loss leader pricing is developed

two stage robust generation expansion planning a mixed integer linear programming model this paper presents a new uncertainty handling framework for optimal generation expansion planning gep amalgamating the notions of single stage and two stage robust optimization ro the proposed multiyear robust gep methodology as a tractable mixed integer linear programming optimization problem copes with the inherent planning uncertainties associated with forecasted electricity load demand as well as estimated investment and operation costs through distribution free bounded intervals producing polyhedral uncertainty sets the optimal generation expansion plan obtained from the proposed ro approach is immunized against worst case planning uncertainties considering the adopted degree of conservatism for each uncertainty set therefore the proposed methodology is capable of controlling the robustness of the optimal investment schedule regarding the enforced planning uncertainties simulation results demonstrate the efficacy and efficiency of the proposed ro framework throughout gep studies

advertising in competitive markets in this paper small firms sell a homogeneous good to small consumers under conditions of free entry but consumers receive price information only through firms advertising in equilibrium every firm on the continuous price distribution buys less advertising than is socially optimal the result is robust if firms advertise in just one medium if readers of different advertising media are positively correlated excess advertising can occur in media used exclusively to advertise discount prices copyright 1991 by american economic association

relational incentive contracts standard incentive theory models provide a rich framework for studying informational problems but assume that contracts can be perfectly enforced this paper studies the design of self enforced relational contracts i show that optimal contracts often can take a simple stationary form but that self enforcement restricts promised compensation and affects incentive provision with hidden information it may be optimal for an agent to supply the same inefficient effort regardless of cost conditions with moral hazard optimal contracts involve just two levels of compensation this is true even if performance measures are subjective in which case optimal contracts terminate following poor performance jel c73 d82 l14

conflicting objectives and risk in power system planning planning in the 1990s must deal with a wide range of options with conflicting objectives and with uncertainty types of conflict among planning objectives are illustrated and categorized risk is distinguished from uncertainty and both are qualified hedging to reduce risk is demonstrated real examples are drawn from major recent planning studies

relational incentive contracts with productivity shocks abstract this paper extends levin s 2003 relational contract model by having not only the agent s cost of effort agent s type but also the value of that effort to the principal principal s type subject to i i d shocks when optimal effort is fully pooled across agent types for multiple principal types it is also pooled across those principal types when optimal effort separates some agent types for multiple principal types efforts of those agent types may be separated across principal types but then somewhat perversely some agent type s effort is decreasing in the principal s value of effort when agent type is uniformly distributed that applies to agent types with lower effort cost so reducing the difference in effort between low and high effort cost types this result extends to the principal s type being observed only by the principal if the marginal cost of effort to the agent is sufficiently convex

on the existence of an optimal capital structure theory and evidence one of the most contentious issues in the theory of finance during the past quarter century has been the theory of capital structure the geneses of this controversy were the seminal contributions by modigliani and miller 18 19 the general academic view by the mid 1970s although not a consensus was that the optimal capital structure involves balancing the tax advantage of debt against the present value of bankruptcy costs no sooner did this general view become prevalent in the profession than miller 16 presented a new challenge by showing that under certain conditions the tax advantage of debt financing at the firm level is exactly offset by the tax disadvantage of debt at the personal level since then there has developed a burgeoning theoretical literature attempting to reconcile miller s model with the balancing theory of optimal capital structure e g deangelo and masulis 5 kim 12 and modigliani 17 the general result of this work is that if there are significant leverage related costs such as bankruptcy costs agency costs of debt and loss of non debt tax shields and if the income from equity is untaxed then the marginal bondholder s tax rate will be less than the corporate rate and there will be a positive net tax advantage to corporate debt financing the firm s optimal capital structure will involve the trade off between the tax advantage of debt and various leverage related costs the upshot of these extensions of miller s model is the recognition that the existence of an optimal capital structure is essentially an empirical issue as to whether or not the various leverage related costs are economically significant enough to influence the costs of corporate borrowing the miller model and its theoretical extensions have inspired several timeseries studies which provide evidence on the existence of leverage related costs trczinka 28 reports that from examining differences in average yields between taxable corporate bonds and tax exempt municipal bonds one cannot reject the miller hypothesis that the marginal bondholder s tax rate is not different from the corporate tax rate however trczinka is careful to point out that this finding does not necessarily imply that there is no tax advantage of corporate debt if the personal tax rate on equity is positive indeed buser and hess 1 using a longer time series of data and more sophisticated econometric techniques estimate that the average effective personal tax rate on equity is statistically positive and is not of a trivial magnitude more importantly they document evidence that is consistent with the existence of significant leverage related costs in the economy

geographic attribution of an electricity system renewable energy target local economic social and environmental tradeoffs the 2014 intergovernmental panel on climate change ipcc report asserts that investment in low carbon electricity production will need to rise by several hundred billion dollars annually before 2030 in order to stabilize greenhouse gas concentrations in the atmosphere by 2100 in recognition of this urgent need to mitigate climate change many governments have already established policies to spur renewable energy investment in the electricity sector one such policy measure is a renewable energy target ret which sets a target percentage of electricity production to be generated from renewable sources by a specified date variations on this policy have been implemented around the world from the eu 20 20 20 to diverse renewable portfolio standards in u s states and municipalities this work analyzes economic environmental and social aspects of a geographic attribution i e isolated regional or country of an ret to gain insights on the associated tradeoffs in the case study of the azores islands portugal the regional geographic attribution of an ret captures the best of all three tradeoffs

a model of advertising competition using a dynamic model of advertising rivalry between competitors in a duopoly the author obtains analytical results for the case of pure market share rivalry in a mature market a more general mod

measuring market power in the ready to eat cereal industry the ready to eat cereal industry is characterized by high concentration high price cost margins large advertising to sales ratios and numerous introductions of new products previous researchers have concluded that the ready to eat cereal industry is a classic example of an industry with nearly collusive pricing behavior and intense nonprice competition this paper empirically examines this conclusion in particular i estimate price cost margins but more importantly i am able empirically to separate these margins into three sources i that which is due to product differentiation ii that which is due to multi product firm pricing and iii that due to potential price collusion the results suggest that given the demand for different brands of cereal the first two effects explain most of the observed price cost margins i conclude that prices in the industry are consistent with noncollusive pricing behavior despite the high price cost margins leading firms are able to maintain a portfolio of differentiated products and influence the perceived product quality it is these two factors that lead to high price cost margins

capacity expansion equilibria in liberalized electricity markets an epec approach this paper presents a novel way to model the generation capacity expansion problem in a liberalized framework via a multi year bilevel equilibrium model in the upper level the competing generation companies maximize their individual profits while the lower level represents the market using a conjectured price response approach which allows us to vary the strategic spot market behavior to see how much the reigning competitive behavior impacts investment decisions the bilevel equilibrium model is formulated as an equilibrium problem with equilibrium constraints transformed into a mixed integer linear program and solved as such using diagonalization in order to verify equilibria we present a case study to apply this new modeling approach and to demonstrate that the proposed equilibrium problem with equilibrium constraints can have multiple solutions whose respective investments can vary

pioneers marketing mix reactions to entry in different competitive game structures theoretical analysis and empirical illustration pioneers marketing mix reactions to new entries are recognized as important determinants of the outcome of pioneerlate mover competition particularly in price inelastic markets such as those for pharmaceuticals cigarettes and luxury goods managers in such markets are interested in better understanding when to accommodate i e decrease marketing spending or retaliate i e increase spending in nonprice marketing variables such as advertising and salesforce in addition the reallocation of marketing resources toward advertising indicated by a pull strategy or salesforce indicated by a push strategy upon entry is strategically important to managers previous theoretical research shows that pioneers should retaliate in both static and growing markets results from empirical research are mixed in that they support both accommodation and retaliation in growing markets empirical research also shows that a pioneer accommodates retaliates with its low high elasticity marketing mix variable contrary to prior research however some pioneers have successfully accommodated late movers in growing markets and in some cases have accommodated with their stronger marketing mix variables and also retaliated with their weaker marketing mix variables for example bristol myers squibb s capoten accommodated the entry of merck s vasotec in the growing ace inhibitors market with its more powerful variable salesforce but also retaliated with its less potent variable advertising moreover not much is known about how the pioneer s marketing mix allocation should change i e toward pull vs push strategies in response to new entries we seek to better explain the pioneer s reactions and predict its shift in marketing mix allocation upon new entry we note that prior research s predictions on the pioneer s reactions are based on a limited number of key factors such as product market characteristics and the pioneer s elasticities prior to a new entry in this paper we extend previous research by adding two other critical factors namely the impact of new entry on the pioneer s elasticities and margin and different competitive game structures to better predict and explain the pioneer s reactions we develop analytical results on the pioneer s reactions in price advertising and salesforce in different competitive games both nash and different leader follower games in these results we identify the conditions under which the pioneer should accommodate or retaliate or not react to a late mover s entry and shift its marketing mix allocation toward pull versus push strategies we empirically illustrate some of the analytical results using data from a pharmaceutical category we show that a pioneer who adopts a follower leader role with respect to a marketing mix variable in a static growing market and witnesses a decrease an increase in own elasticity and margin upon a new entry generally should accommodate retaliate in that variable however we are also able to show that there are cases where these general reactions don t hold thus for example it is possible for a pioneer to find it optimal to accommodate in a growing market or to retaliate even when its elasticity decreases upon entry depending on the combination of competitive game the impact of entry on elasticities and margin and market growth in this way our results point to the fact that it is necessary to look not only at one factor at a time but instead examine the combination of all the factors we explain the empirical support for both accommodation and retaliation in growing markets by showing that the pioneer should accommodate retaliate a late mover with its competitively low high elasticity marketing mix variable competitively high low elasticity variables are not are likely to be significantly reduced by a new entry in the anticipated competitive game with regard to reallocation of the pioneer s marketing mix we show that the change in the pioneer s marketing mix allocation should follow the change in the relative marketing mix effectiveness after new entry this in turn depends on the structure of competition the impact of the late mover on its elasticities and margins and the competitor s marketing mix elasticities in addition to own elasticities the results can guide managers on how factors such as competitive structure changes in elasticities and margin and market growth impact the pioneer s marketing mix decisions and on when to accommodate retaliate or not react to a late mover s entry and shift marketing mix allocation toward pull versus push strategies

capital market imperfections and countercyclical markups theory and evidence during recessions output prices seem to rise relative to wages and raw material prices one explanation is that imperfectly competitive firms compete less aggressively during recessions that is markups of price over marginal cost are countercyclical the authors present a model of countercyclical markups based on capital market imperfections during recessions liquidity constrained firms boost short run profits by raising prices to cut their investments in market share the authors provide evidence from the supermarket industry in support of this theory during regional and macroeconomic recessions more financially constrained supermarket chains raise their prices relative to less financially constrained chains copyright 1996 by american economic association

optimal investment planning for distributed generation in a competitive electricity market this paper proposes a new heuristic approach for distributed generation dg capacity investment planning from the perspective of a distribution company disco optimal sizing and siting decisions for dg capacity is obtained through a cost benefit analysis approach based on a new optimization model the model aims to minimize the disco s investment and operating costs as well as payment toward loss compensation bus wise cost benefit analysis is carried out on an hourly basis for different forecasted peak demand and market price scenarios this approach arrives at the optimal feasible dg capacity investment plan under competitive electricity market auction as well as fixed bilateral contract scenarios the proposed heuristic method helps alleviate the use of binary variables in the optimization model thus easing the computational burden substantially

an empirical analysis of dynamic nonprice competition in an oligopolistic industry this article develops a dynamic model of nonprice competition in an oligopolistic industry and uses it to analyze advertising competition in the u s cigarette industry the model generalizes existing studies by allowing advertising to affect both firm market shares and the total size of the market the model also allows dynamic conjectural variations to arise from the intertemporal links created by the durability of advertising we use these dynamic conjectural variations to distinguish alternative models of competitive interaction we estimate the complete model of firm production demand and advertising choice by using data for u s cigarette producers the results indicate that firm advertising primarily affects the level of market demand with a firm s effect on rival firms market shares arising through variations in the number of brands sold empirical results on firm behavior suggest that firms act as if their advertising choices will alter the future advertising choices of rival firms in both the high tar and low tar cigarette markets

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

the durability of advertising revisited recent cross section studies find that advertising is relatively long lived providing support for treating advertising as capital this paper models the firm s advertising decision treating advertising and product quality as complements the model predicts that failing to control for differences in firm specific factors positively correlated with the return to advertising will understate advertising s direct effect on sales and overstate its durability the authors empirical study using several years of data for over four hundred firms confirms these predictions advertising s apparent life shrinks dramatically when firm specific factors are held constant they also find no support for the steady state assumptions critical to intangible assets models copyright 1994 by blackwell publishing ltd

a signal jamming theory of predation we propose a new theory ofpredation based on signal jamming in our model the predator s characteristics are common knowledge while the entrant is uncertain of his own future profitability the entrant uses his current profit to decide whether to remain in the market and the predator preys to jam or interfere with this inference problem thus our model differs from those based on reputation effects in which the predator preys to signal information about himself

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

an empirical investigation of advertising strategies in a dynamic duopoly the equilibrium profit maximizing advertising policies of firms operating in a dynamic duopoly are derived by linking in a single framework the econometric estimation of the market response function and the technique of differential games that characterizes dynamic competitive behavior we use the lanchester model of combat to represent the system dynamics that capture the competitive shifts due to investments in advertising by the two market rivals we determine the equilibrium advertising levels using both closed and open loop policies we also compare these equilibrium advertising policies for each firm to those obtained using an optimal control theory formulation wherein the advertising spending levels of the rival are assumed to be known the empirical results obtained by analyzing the advertising rivalry between coke and pepsi for the period 1968 1981 under the above three alternative spending policies provide some interesting insights into the nature of competition between these two market rivals a significant contribution of this paper is to extend the existing literature on advertising competition by integrating theoretical and empirical analyses

strategic generation investment using a complementarity approach this paper provides a methodology to assist a strategic producer in making informed decisions on generation investment a single target year is considered with demand variations modeled through blocks the strategic behavior of the producer is represented through a bilevel model the upper level considers both investment decisions and strategic production actions and the lower level corresponds to market clearing prices are obtained as dual variables of power balance equations rival uncertainties on offering and investment are characterized through scenarios the resulting model is a large scale mixed integer lp problem solvable using currently available branch and cut techniques results pertaining to an illustrative example and a case study are reported and discussed

power system expansion planning under uncertainty a methodology is described for expansion planning of power systems under uncertainty in factors such as demand growth fuel cost delay in project completion and financial constraints the approach draws upon three classes of techniques decomposition and stochastic optimization provide the basic framework and allow an implicit representation of alternative investment strategies decision analysis is used to represent the dynamic aspects of decision making as uncertainties are resolved over time and hedging objectives from tradeoff analysis help select flexible and resilient expansion strategies case studies within the brazilian system are presented and discussed

optimal contract pricing of distributed generation in distribution networks this paper proposes a bilevel programming approach to determine the optimal contract price of dispatchable distributed generation dg units in distribution systems two different agents are considered in the model namely the distribution company disco and the owner of the dg the former seeks the minimization of the payments incurred in attending the forecasted demand while the latter seeks the maximization of his profit to meet the expected demand the disco has the option to purchase energy from any dg unit within its network and directly from the wholesale electricity market a traditional distribution utility model with no competition among dg units is considered the proposed model positions the dg owner in the outer optimization level and the disco in the inner one this last optimization problem is substituted by its karush kuhn tucker optimality conditions turning the bilevel programming problem into an equivalent single level nonlinear programming problem which is solved using commercially available software tests are performed in a modified ieee 34 bus distribution network

the impact of capital structure on advertising competition an empirical study this article examines the interaction between capital structure and advertising competition using a sample of firms that raise significant amounts of capital we find that firms whose financial leverage has decreased as a result of their new funding increase their advertising significantly more than firms whose leverage has increased we also find that these firms industry rivals respond less aggressively with their own advertising when they have more debt in their capital structure overall our results support the view that financial leverage has a dampening effect on the intensity with which a firm chooses to compete in the product market

power generation expansion planning model towards low carbon economy and its application in china climate change poses a huge threat to human welfare hence developing a low carbon economy has become a prevailing and inevitable trend decarbonization of power generation especially converting the current power mix into a low carbon structure will be a critical option for co2 emission mitigation in this paper an integrated power generation expansion pge planning model towards low carbon economy is proposed which properly integrates and formulates the impacts of various low carbon factors on pge models in order to adapt to the characteristics of pge models based on low carbon scenario a compromised modeling approach is presented which reasonably decreases complexities of the model while properly keeping the significant elements and maintaining moderate precision degree in order to illustrate the proposed model and approach a numerical case is studied based on the background of china s power sector making decisions on the optimal pge plans and revealing the prospects and potentials for co2 emission reduction

implicit contracts incentive compatibility and involuntary unemployment this paper considers the enforceability of employment contracts when employees performance cannot be verified in court so that piece rate contracts are not legally enforceable part i shows that there exists a variety of self enforcing implicit contracts modelled as perfect equilibria in a repeated game and characterizes all the wage and performance outcomes that can be implemented implementation requires a strictly positive surplus from employment the form of the contract depending on how this surplus is divided between firm and employee piece rate contracts and contracts with an informally agreed bonus can be made self enforcing but the use of severance pay and bonding does not extend the set of implementable allocations the resulting contracts resemble actual labor contracts more than do the contracts in standard principal agent models part ii analyses market equilibrium with these contracts also modelled as perfect equilibria in a repeated game and shows that many such equilibria exist unfilled vacancies and unemployed workers can co exist despite the existence of contracts that are potentially mutually beneficial for those jobs that are filled any division of the potential surplus is possible so that the market can have at the same time involuntary unemployment and vacancies that are unfilled despite filled jobs earning positive profits as a criterion for selecting equilibria a notion of renegotiation proofness is applied then either all workers are employed or all jobs filled but any division of the potential surplus is still possible the paper explores what further restrictions on beliefs give rise to a walrasian outcome in which all the potential surplus goes to the short side of the market and to an efficiency wage type outcome in which the potential surplus goes to the long side

short term market power assessment in a long term dynamic modeling of capacity investment this paper proposes a dynamic time simulation model for long term generation capacity investment decisions in the presence of either perfect or imperfect electricity market the model is based on system dynamics concept in which the dynamics of capacity construction is traced using the forecast of electricity price cleared in the short term electricity market both the perfect and oligopolistic competitions are considered and a market power index is defined to evaluate the competition level of the electricity market the short term and long term dynamic analysis are used to represent the generation firms behavior in bidding strategy and capacity investment respectively both possibilities of using forward bilateral contracts and application of wind power generation have been assessed individually in the proposed model in order to mitigate the market power the time simulation results derived from a case study demonstrate the effectiveness of the model in illustrating the oligopoly in electricity marketplace and also the alternative decisions to attenuate it such a decision tool enables both the generation firms and the regulators to gain perfect insight into the oligopoly and its consequences in the long term capacity investment in the electricity market