regret and feedback information in first price sealed bid auctions we investigate the effect of regret related feedback information on bidding behavior in sealed bid first price auctions two types of regret are possible in this auction format a winner of the auction may regret paying too much relative to the second highest bid and a loser may regret missing an opportunity to win at a favorable price in theory under very general conditions being sensitive to winning and paying too much should result in lower average bids and being sensitive to missing opportunities to win at a favorable price should result in higher bids for example the u s government s policy of revealing losing bids may cause regret sensitive bidders to anticipate regret and bid conservatively decreasing the government s revenue we test these predictions in the laboratory and find strong support for both

note testing regret bell s recent paper bell d e 1983 risk premiums for decision regret management sci 29 1156 1166 in this journal provides useful foundations for the regret approach to decision theory this work is all the more important because regret that is the pain of having chosen incorrectly is one of the few radical departures from the conceptual framework of the ubiquitous expected utility model and its variants despite providing many of the parametric accoutrements deemed necessary for the acceptance of a model he has not i believe proposed a test which is the most appropriate to establish the validity of regret

releasing the regret lock consumer response to new alternatives after a sale this research examines how consumers behave after they miss a sale and subsequently face a smaller sale for the same or different product according to the proposed theory a two way interaction is predicted in which adding another similar alternative to the choice set leads to higher choice deferral without prior sale information but lower choice deferral with information about missing a larger sale on one of the alternatives in addition the new alternative in the choice set becomes more attractive and captures most of the market share the results from three lab experiments and one field experiment confirm the hypotheses and the proposed mechanism the article concludes with a discussion of the theoretical and managerial implications of the findings

the effect of power distribution privatization on electricity prices in turkey has liberalization served the purpose various electricity reforms have been adopted by a number of countries within the last 2 decades turkey as one of those countries has restructured its electricity market and intensively privatized the distribution companies as one of the main targets of the liberalization efforts in the sector was announced to be reduced consumer prices it is a matter of interest to look at the related developments after privatizations hence this study attempts to explore the impact of power distribution privatization in turkey on the national end user electricity prices results of the analysis suggest that privatization of electricity distribution companies has not yielded the expected retail price declines within the first 4 years of the program whereas wholesale tariffs exhibit a reduction in the rate of 10 retail tariffs show an increase of 5 9 within the period in question besides the unstable patterns of the two tariffs imply that the market is not yet ready for the automatic pricing mechanism planned to be implemented based on a cost reflective methodology therefore results indicate that the factors behind the unsatisfactory outcomes of the program should be explored in order for the privatization efforts in the turkish electricity distribution market to serve the purpose

a generalized utility model of disappointment and regret effects on post choice valuation in this paper we show that performance information about forgone alternatives i e alternative that were considered but not chosen can have a significant impact on post choice valuation our approach introduces a new and parsimonious way of looking at satisfaction that combines the literature on post choice valuation with research regarding generalized expected utility theory while the post valuation literature focuses on the selected brand as the valuation s basis e g anderson and sullivan anderson e w m w sullivan 1993 the antecedents and consequences of customer satisfaction for firms marketing sci 12spring 125 143 bolton and drew bolton r j drew 1991 a multistage model of customers assessments of service quality and value j consumer res 17 375 384 we draw on a stream of research in generalized expected utility theory that considers both chosen and forgone alternatives as the basis for valuation e g bell bell d 1983 risk premiums for decision regret management sci 29 1156 1166 and bell d 1985 disappointment in decision making under uncertainty oper res 33 1 27 loomes and sugden loomes g r sugden 1982 regret theory an alternative theory of rational choice under uncertainty the econom j 92 805 824 and loomes g r sugden 1986 disappointment and dynamic consistency in choice under uncertainty rev econom stud 53 271 282 the result is a combined model of post choice valuation that explicitly incorporates both concepts specifically we extend the existing paradigm of post choice valuation to include buyers regret concerning forgone alternatives proposing a generalized utility theory based treatment of post choice product assessment that uses the intuitively appealing concepts of disappointment and regret as the basis we propose a model for conceptualizing post choice valuation that is consistent with the existing literature discuss how this model extends the construct to consider the influence of forgone alternatives and report results of an empirical test that contrasts our model to important recent work in the area e g boulding et al boulding w a kalra r staelin v a zeithaml 1993 a dynamic process model of service quality from expectations to behavioral intentions j marketing res 30february 7 27 our generalized model of post choice valuation is based on the sum of three components that represent factors that may contribute to consumers assessment of a chosen product or service the first component is expected performance the second component is disappointment which captures the discrepancy between actual and expected performance much as the disconfirmation construct in traditional satisfaction research the third component is regret which captures the difference between the performance of the chosen product service and the performance of a forgone product service this perspective is useful in that risk is captured by the disappointment and regret terms providing an intuitively appealing decomposition of post choice valuation and offering several advances over previous representations of disappointment and regret we test our model via a choice experiment participants in the empirical study were asked to make choices between successive lottery pairs they were then given outcome feedback on the forgone alternative as well as on the chosen alternative in each lottery pair immediately following outcome feedback for each choice subjects were asked to evaluate their decision our results clearly suggest an effect of regret on post choice valuation information about the forgone alternative influenced subjects valuation of the chosen alternative we also find evidence that as predicted the effects of disappointment and regret on post choice valuation are asymmetric specifically the negative effect of disappointment on post choice valuation was greater than the positive effect of elation similarly the negative effect of regret was greater than the positive impact of rejoicing our research offers five contributions to the literature on post choice valuation first our results illustrate the advantage of using generalized utility theory as the basis for conceptualizing and modeling post choice valuation we derive a model of post choice valuation that formally captures the components of disappointment and regret and show that the outcome of both the chosen alternative through disappointment and a forgone alternative through regret can influence the chosen alternative s valuation second we formally integrate the concepts of disappointment and regret which have been examined separately for many years into a single model based on a multiattribute preference structure third we argue that the effects of disappointment and regret on post choice valuation are asymmetric and present empirical evidence in this regard fourth our results suggest that word of mouth regarding forgone alternatives may affect post choice valuation extending research that has not heretofore considered forgone outcomes role in this process finally our development provides a preconsumption measure of potential disappointment and regret in modeling choice at the time of choice consumers may visualize the feelings of disappointment and or regret that will be derived at consumption taking into account both the chosen brand and forgone brands our generalized utility theory based approach to the post choice valuation construct can be useful in examining the role of disappointment and regret as preconsumption constructs

the british model in britain failing slowly in 1990 britain reorganised its electricity industry to run on competitive lines the british reforms are widely regarded as successful and the model used provides the basis for reforms of electricity industries worldwide the main reason for this perception of success is major reductions in the real price of electricity with no reduction in service quality this paper examines whether the reputation of the british reforms is justified it concludes that the reputation is not justified and that serious fundamental problems are beginning to emerge the central question is have the british reforms resulted in the creation of efficient wholesale and retail markets on this criterion the reforms have failed the wholesale market is dominated by obscure long term contracts privileged access to the market and self dealing within integrated generator retailers leaving the spot markets with minimal liquidity and unreliable prices the failure to develop an efficient wholesale market places the onus on consumers to impose competitive forces on electricity companies by switching regularly small consumers will not do this and they are paying too much for their power for the future there is a serious risk that the electricity industry will become a weakly regulated oligopoly with a veneer of competition

risk attitude under two alternative theories of choice under risk abstract anticipated utility theory and prospect theory have been proposed as descriptive models of choice under uncertainty this paper examines the concept of risk attitude under these two theories and considers the relationship between risk attitude under von neumann morgenstern expected utility theory and risk attitude under these alternative theories a risk premium analysis is conducted and risk premia are partitioned to characterize the complex nature of risk attitude under these theories comparative risk aversion across individuals is also considered

south east europe regional energy market challenges and opportunities for romania abstract the paper takes as its starting point the athens memorandum signed by countries of south east europe whereby a regional energy market in power and gas will be developed the aim under the athens memorandum is that the south east europe regional energy market seerem will be liberalized in a phased manner from 2005 and ultimately that this will form part of the eu s internal energy market the subject of the paper is the extent to which romania one of the biggest countries in south east europe and traditionally a net energy exporter to the region complies with requirements under the athens memorandum and outstanding challenges related to successful serem accession the paper argues that much progress has been made in energy sector reform in romania power prices have increased payments discipline in the power sector has improved independent regulators have been established for power and gas sectors and power and gas utilities have been restructured nevertheless a number of challenges remain if romania is to fully benefit from participation in the seerem further power price increases will be required in the medium term whilst payments discipline remains poor by industry best practice standards in the gas sector retail prices do not reflect border prices and payments discipline remains a problem the paper argues that gas price reform would likely have adverse affordability impacts and proposes means to mitigate these through rationalization of existing social safety nets for gas and heat on investment requirements the paper notes that these are significant in power generation and proposes a contract framework that would support mobilization of finance

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

risk premiums for decision regret some people find decision making under uncertainty difficult because they fear making the wrong decision wrong in the sense that the outcome of their chosen alternative proves to be worse than could have been achieved with another alternative these people may be willing to pay a premium to avoid consequences that produce this decision regret this paper continues an earlier investigation into the normative implications of decision regret and looks at situations where the joint probability distribution of consequences between alternatives is not specified at the time of the decision it includes a discussion of cases where the outcomes produced by alternatives not chosen are never resolved a consequence of this model of preferences for risky situations is that two components of risk aversion may be identified decreasing marginal value and regret aversion

loss aversion with a state dependent reference point this study investigates reference dependent choice with a stochastic state dependent reference point the optimal reference dependent solution equals the optimal consumption solution no loss aversion if the reference point is selected fully endogenously given that loss aversion is widespread we conclude that the reference point generally includes an important exogenously fixed component we develop a choice model in which adjustment costs can cause stickiness relative to an initial exogenous reference point using historical u s investment benchmark data we show that this model is consistent with diversification across bonds and stocks for a wide range of evaluation horizons despite the historically high risk premium of stocks compared to bonds this paper was accepted by peter wakker decision analysis

measuring organizational downside risk despite widespread incorporation of risk measures in strategy research there is little consensus regarding the meaning and measurement of risk in contrast to the variability measures widely used in strategy studies this paper draws from behavioral decision theory finance and management theory to present an alternative perspective on organizational risk downside risk the paper explains three categories of organizational downside risk measures based on the concept of lower partial moments the latter sections of the paper present considerations involved in specifying operational measures of downside risk and an empirical comparison of alternative downside risk measures

or forum perspectives on utility theory utility theory is a branch of decision analysis that is concerned with building models to explain and guide choice behavior under uncertainty in situations in which long run expected values are too simplistic beginning with bernoulli in the 18th century researchers have tried to analyze how people do and how people should make decisions when risk aversion is a factor in this paper we review some recent developments in the area

economic and environmental impacts of electricity subsidy reform in kuwait a general equilibrium analysis abstract this paper examined economic and environmental impacts of reducing electricity subsidy in kuwait a social accounting matrix sam was constructed together with energy consumption with co2 emission were compiled and then calibrated with a computable general equilibrium cge model a simulation experiment was conducted by applying a 30 reduction of subsidy to the electricity sector this policy shock was applied to the model in two scenarios in scenario 1 the subsidy reduction was applied and results were compared with the baseline scenario given in the sam this yielded adverse economic effects on most endogenous variables but positive environmental benefits in terms of co2 emission reduction electricity tariff increased by three fold from 2 to 6 fils 0 7 cents to 2 cents per kwh gdp fell by 0 5 and aggregate household welfare declined by 0 8 in scenario 2 subsidy reduction was accompanied with cash transfers to compensate user losses the subsidy deducted from the electricity sector was allocated to users according to their share in base year total expenditure on electricity the results indicated that such transfers would reduce the adverse economic effects co2 emissions fell by 0 5 the gdp and household welfare effects were reversed rising by 0 4 and 0 1 respectively

measuring super efficiency in dea in the presence of infeasibility super efficiency data envelopment analysis dea model is obtained when a decision making unit dmu under evaluation is excluded from the reference set because of the possible infeasibility of super efficiency dea model the use of super efficiency dea model has been restricted to the situations where constant returns to scale crs are assumed it is shown that one of the input oriented and output oriented super efficiency dea models must be feasible for a any efficient dmu under evaluation if the variable returns to scale vrs frontier consists of increasing constant and decreasing returns to scale dmus we use both input and output oriented super efficiency models to fully characterize the super efficiency when super efficiency is used as an efficiency stability measure infeasibility means the highest super efficiency stability if super efficiency is interpreted as input saving or output surplus achieved by a specific efficient dmu infeasibility does not necessary mean the highest super efficiency

regulatory performance analysis case study britain s electricity industry the success or failure of the privatisation and liberalisation of electricity supply industries has more often been judged in terms of process than of outcomes in this paper in contrast this performance is assessed in terms of the performance of its associated system of regulatory governance taking the uk s electricity supply industry between 1989 and 2000 as case study initially a vertical cross section of the regulation system gives a finding matrix for the various stakeholders involved and identifying winners and losers from the standpoint of funding flows next a horizontal cross section provides the environmental distributive allocative dynamic and productive efficiencies grid for this system the survey shows that the performance of the british esi regulation system produced benefits although not for all stakeholders and not as fairly as possible the chosen path did not seem sustainable and failed to respect intergenerational transfers as a way of fostering sustainability and equity it was unable to underpin simultaneous improvements in efficiencies over time while redistributing industry s funding flows among the players in a regressive manner

liberalising european electricity markets opportunities and risks for a sustainable power sector the process of liberalising european electricity markets encompassing a wide range of restructuring activities has mainly been spurred by the attempt to increase the economic efficiency of the whole sector this process might be used to trigger a development towards a sustainable power sector by increasing the use of renewable energy sources and enhancing energy efficiency on the supply and demand side however by taking a closer look at the current trends of the european electricity markets it becomes obvious that the liberalisation not only implies opportunities but also risks for the creation of a sustainable power sector many of these risks are due to market distortions and imperfections caused by the delay in creating a fully functional single european market thus in the short term the market liberalisation tends to constitute more risks than opportunities without government actions to prevent these risks in the long run though the efficiency gains of the sector and the appearance of new market factors are likely to bring forth the opportunities of liberalisation and actively foster a transformation towards a sustainable electricity sector

disappointment in decision making under uncertainty decision analysis requires that two equally desirable consequences should have the same utility and vice versa most analyses of financial decision making presume that two consequences with the same dollar outcome will be equally preferred however winning the top prize of 10 000 in a lottery may leave one much happier than receiving 10 000 as the lowest prize in a lottery this paper explores the implications of disappointment a psychological reaction caused by comparing the actual outcome of a lottery to one s prior expectations for decision making under uncertainty explicit recognition that decision makers may be paying a premium to avoid potential disappointment provides an interpretation for some known behavioral paradoxes and suggests that decision makers may be sensitive to the manner in which a lottery is resolved the concept of disappointment is integrated into utility theory in a prescriptive model

a bi objective weighted model for improving the discrimination power in mcdea lack of discrimination power and poor weight dispersion remain major issues in data envelopment analysis dea since the initial multiple criteria dea mcdea model developed in the late 1990s only goal programming approaches that is the gpdea ccr and gpdea bcc were introduced for solving the said problems in a multi objective framework we found gpdea models to be invalid and demonstrate that our proposed bi objective multiple criteria dea bio mcdea outperforms the gpdea models in the aspects of discrimination power and weight dispersion as well as requiring less computational codes an application of energy dependency among 25 european union member countries is further used to describe the efficacy of our approach

residential electricity demand dynamics in turkey abstract this article provides fresh empirical evidences for the income and price elasticies of the residential energy demand both in the short run and long run for turkey over the period 1968 2005 using the bounds testing procedure to cointegration the computed elasticities of income and price are consistent with the previous studies and as expected the long run elasticities are greater than the short run elasticities an augmented form of granger causality analysis is implemented among residential electricity income price and urbanization in the long run causality runs interactively through the error correction term from income price and urbanization to residential energy but the short run causality tests are inconclusive the parameter stability of the short run as well as long run coefficients in the residential energy demand function are tested the results of these tests display a stable pattern

value at risk and inventory control the purposes of this paper are two fold on the one hand we shall provide a decision analysis justification for the value at risk var approach based on ex post disappointment decision making arguments we shall show that the var approach is justified by a disappointment criterion in other words the asymmetric valuation between ex ante expected returns above an appropriate target return and the expected returns below that same target level provide an explanation for the var criterion when it is used as a tool for var efficiency design second this paper provides applications to inventory management based on var risk exposure although the mathematical problems arising from an application of the var approach tuned to current practice in financial risk management are difficult to solve analytically solutions can be found by application of standard computational and simulation techniques a number of cases are solved and formulated to demonstrate the paper s applicability

electricity demand in kazakhstan properties of electricity demand in transition economies have not been sufficiently well researched mostly due to data limitations however information on the properties of electricity demand is necessary for policy makers to evaluate effects of price changes on different consumers and obtain demand forecasts for capacity planning this study estimates kazakhstan s aggregate demand for electricity as well as electricity demand in the industrial service and residential sectors using regional data firstly our results show that price elasticity of demand in all sectors is low this fact suggests that there is considerable room for price increases necessary to finance generation and distribution system upgrading secondly we find that income elasticity of demand in the aggregate and all sectoral models is less than unity of the three sectors electricity demand in the residential sector has the lowest income elasticity this result indicates that policy initiatives to secure affordability of electricity consumption to lower income residential consumers may be required finally our forecast shows that electricity demand may grow at either 3 or 5 per year depending on rates of economic growth and government policy regarding price increases and promotion of efficiency we find that planned supply increases would be sufficient to cover growing demand only if real electricity prices start to increase toward long run cost recovery levels and policy measures are implemented to maintain the current high growth of electricity efficiency

merger in the english electricity industry this paper compares consumer prices under vertical integration and verticial separation of the electricity industry in england and wales and considers the costs and benefits of mergers between electricity supply and water companies the impact of vertical integration is important given the proposals for merger between electricity generating and supply companies in 1996 the paper concludes that there could be small benefits to consumers if competition in the electricity industry is limited in a fully competitive industry the impact of vertical integration on the consumer is neutral regarding competition vertical merger might limit the extent of new firm entry in the electricity supply market after liberalisation in 1998 inter industry merger will yield cost savings but may limit new firm entry in electricity supply

evaluating electricity sector reforms in argentina lessons for developing countries abstract in argentina prior to the macroeconomic crisis of early 2002 power sector reforms had proven successful in delivering low electricity tariffs and increasing private investments this had been achieved through the unbundling of electricity supply businesses and the introduction of competition paying due attention to the lessons learned by forerunners in power sector reform including neighbouring chile the reforms that had been implemented in argentina were therefore deemed to have been a success however in the wake of the macroeconomic crisis and the devaluation of the peso generators and gas suppliers found themselves in critical financial straights which caused a halt to additional investment the current challenge facing reforms in the argentine power sector is to rebound from the financial ramifications of peso devaluation and to promote private investment given these basic facts this paper traces the history of reforms in the argentine electricity sector assessing the progress that has been achieved and suggesting lessons for developing countries it is often the case in developing countries that the unbundling of vertically integrated state owned industries into privatised enterprises requires efforts to improve infrastructure as a prerequisite for the introduction of competitive practices bearing this in mind this paper lays out measures that would be useful to consider for electricity sector reforms in developing countries from the following three perspectives 1 transition from a state owned power companies to private enterprises 2 development of conditions required to promote infrastructure projects and 3 development of conditions for the establishment of a healthy and fair competitive environment assuming that liberalisation is achieved once the conditions in 1 and 2 are met

markowitz with regret abstract providing a framework to integrate regret as an additional decision criterion in markowitz s model of portfolio selection we propose two different views on regret an investor might feel regret with respect to the ex post best alternative either in terms of return or in terms of preference value under both views regret can be captured by adjusting the vector of expected returns or alternatively by adjusting the return covariance matrix retaining the tractability of the markowitz model the regret model however has very different implications for how asset characteristics affect optimal portfolios while the impact of the skewness of an asset is strengthened the impact of the variance shrinks moreover we show for a variety of real portfolios that the effects of regret on optimal portfolio weights and the ex ante return distribution are large

negotiations and exclusivity contracts for advertising exclusive advertising on a given media outlet is usually profitable for an advertiser because consumers are less aware of competing products however for such arrangements to exist media must benefit as well we examine conditions under which such exclusive advertising contracts benefit both advertisers and media outlets referred to as stations by illustrating that exclusive equilibria arise in a theoretical model of the media advertisers and consumers who participate in both the product and media markets in the model stations sell advertising space to advertisers and broadcast advertising messages to consumers conditions leading to higher equilibrium levels of advertising can be unprofitable for advertisers because high levels of advertising make consumers better informed and thus lead to fiercer product price competition as a result media stations may be less profitable as well because their payoff is determined as a fraction of the advertiser surplus generated in the product market stations mitigate this effect by offering advertisers exclusive advertising contracts with such contracts consumers are less informed about competing products yielding higher producer surplus it is profitable for stations to offer exclusivity when commercial advertising is an important means for advertisers to inform consumers about their products

reserves regret and rejoicing in open english auctions auction sellers usually must set a reserve which is the lowest auction price that they will accept i propose that anticipated regret and rejoicing affect reserves regret occurs when the highest bid exceeds the seller s value for the property but is still below the reserve rejoicing occurs when the reserve forces the winning bidder to pay a higher price the impact of regret and rejoicing can be observed by examining sellers learning over sequential auctions particularly when they use a frequency heuristic results from an auction experiment with simulated bidders support the impact of anticipated regret and rejoicing on reserves

estimating most productive scale size using data envelopment analysis abstract the relation between the most productive scale size mpss for paparticular input and output mixes and returns to scale for multiple inputs multiple outputs situations is explicitly developed this relation is then employed to extend the applications of data envelopment analysis dea introduced by charnes cooper and rhodes ccr to the estimation of most productive scale sizes for convex production possibility sets it is then shown that in addition to productive inefficiencies at the actual scale size the ccr efficiency measure also reflects any inefficiencies due to divergence from the most productive scale size two illustrations of the practical applications of these results to the estimation of most productive scale sizes and returns to scale for hospitals and stem electric generation plants are also provided emphasize the advantage of this method in examining specific segments of the efficient production surface

electricity restructuring in turkey abstract turkey implemented the electricity sector reform by which the electricity market law no 4628 passed in february 2001 recently all segments of the turkish electricity sector are dominated by a vertically integrated public owned monopoly turkiye elektrik kurumu the turkish electricity institution the turkish electricity reform involves vertical deintegration of generation transmission and distribution introduction of competition into generation and retail sale establishment of an independent regulatory authority and privatization of public generation and distribution entities this article provides an overview of the turkish electricity sector reform and defines some problems that may affect the reform success

transmission loss allocation a comparison of different practical algorithms a pool operated electricity market based on hourly auctions usually neglects network constraints and network losses while applying its market clearing mechanism this mechanism determines the accepted and nonaccepted energy bids as well as the hourly market clearing prices as a result ex post procedures are needed to resolve network congestions and to allocate transmission losses to generators and demands this paper focuses on transmission loss allocation procedures and provides a detailed comparison of four alternative algorithms 1 pro rata pr 2 marginal allocation 3 unsubsidized marginal allocation and 4 proportional sharing a case study based on the ieee rts is provided different load scenarios covering a whole year are analyzed finally conclusions and recommendations are stated

industrial and institutional restructuring of the russian electricity sector status and issues abstract the reform of the russian electricity industry represents one of the largest and most technically complex post soviet era industrial restructurings this paper presents the framework status and perspectives for the russian electricity sector liberalisation uncertainties regarding the effective implementation of the reform are specifically examined ultimately the critical analysis of the reform questions the feasibility and adequacy of the recommended measures in the specific russian context current theories fail to answer a fundamental issue namely how to promote investment in an obsolete electrical infrastructure and more generally whether a pure free market model is compatible with physical constraints posed by the electricity sector a careless deregulation of the russian electricity system could hinder the country s stable and sustainable development as its economy and the population s service have traditionally been closely linked to the electricity industry

bidding of price taker power generators in the deregulated turkish power market abstract in deregulated power markets power firms bid into the day ahead power market either with buy offers or sell offers the auction mechanism and competition determine the equilibrium price and quantity for each hour if the bid price of a company is below the market clearing price then the offer of the company is accepted and rewarded with the market price a company can be a price maker or price taker depending on the capacity it offers to the market a price taker unit must determine the right offer that will maximize their profit given price uncertainty and blind auction rules this paper first examines power supply in the turkish electricity market and bidding process then a marginal cost based monte carlo method is developed to determine hourly and block bidding strategies of price taker units historical market prices are then implemented in a normal distribution to generate hourly price scenarios a solution methodology is developed that maximizes the expected profit of each hourly and block bidding strategy over price scenarios the generator is able to both evaluate the hourly bidding and block bidding strategies and find the best bidding strategy that will be submitted to the market using the proposed methodology the model is illustrated for two coal units in turkish power market and the results are presented

the productivity and efficiency of the australian electricity supply industry australia s electricity supply industry has been through a period of reform over the last 10 years the purpose of this paper is to analyse the changes that have occurred to the australian electricity supply industry over the past 30 years in order to evaluate to what degree these reforms have improved the productivity and efficiency performance of the industry

reply putting a premium on regret anand anand p 1985 testing regret management sci 31 114 116 has suggested that measuring the sacrifice a person is prepared to make to avoid regret may be more difficult than i suggest in bell bell d e 1983 risk premiums for decision regret management sci 29 1156 1166 though he believes regret is probably widespread he is concerned that regret may be confounded with other of the psychological phenomena that i have discussed especially disappointment bell bell d e 1985 disappointment in decision making under uncertainty harvard business school working paper 83 18 1982 oper res january february i will use this opportunity for response to set my work in perspective

restructuring and privatizing electricity industries in the commonwealth of independent states abstract this paper discusses the problems of restructuring electric power sectors in the countries of the commonwealth of independent states cis and examines in detail electric utility privatization in armenia privatization of electric power is expected to provide needed foreign investment increase efficiency and rationalize resource allocation progress in utility commercialization and industry and market restructuring in the cis is compared with that in central and eastern europe this paper presents the argument that throughout the cis little progress has been made because the investment needs of the electricity industry are not great compared with the strategic and political benefits that can be had by not privatizing and because the political and strategic dimensions of electrical power in the region create large risks for potential investors risk of investment is amplified by the large amount of spare generating capacity and continuing operation of significant government operated capacity armenia is found to provide a striking example of conditions and trends in the cis countries prospects for the future of restructuring are considered and specific measures that could be taken to improve those prospects are suggested

super efficiency dea in the presence of infeasibility it is well known that super efficiency data envelopment analysis dea approach can be infeasible under the condition of variable returns to scale vrs by extending of the work of chen 2005 the current study develops a two stage process for calculating super efficiency scores regardless whether the standard vrs super efficiency mode is feasible or not the proposed approach examines whether the standard vrs super efficiency dea model is infeasible when the model is feasible our approach yields super efficiency scores that are identical to those arising from the original model for efficient dmus that are infeasible under the super efficiency model our approach yields super efficiency scores that characterize input savings and or output surpluses the current study also shows that infeasibility may imply that an efficient dmu does not exhibit super efficiency in inputs or outputs when infeasibility occurs it can be necessary that i both inputs and outputs be decreased to reach the frontier formed by the remaining dmus under the input orientation and ii both inputs and outputs be increased to reach the frontier formed by the remaining dmus under the output orientation the newly developed approach is illustrated with numerical examples

electricity demand of manufacturing sector in turkey a translog cost approach abstract this paper models factor demand for manufacturing sector in turkey we estimated a translog cost function with four factor consist of capital labor intermediate input and electricity over the 1980 2001 our objective taking in the consideration electricity as production input was twofold on the one hand to estimate the price elasticity of electricity demand in manufacturing sector and on the other hand to use cross price and morishima elasticities of substitution results for structural analysis regarding effects of electricity liberalization which initiated in 2001 empirical result shows that electricity demand is relatively price sensitive 0 85 our result in terms of electricity price is consistent with the previous studies while electricity labor and electricity capital inputs are complementary results indicate the existence of substitution possibilities between electricity and intermediate input this means that changes in electricity prices have impact on labor demand and investment demand these results have important implications for public policy

the impact of electricity market liberalization in turkey free consumer and distributional monopoly cases abstract electricity sector has grown substantially in turkey since the early 1960s as a result of rapid industrialization and urbanization the vertically integrated state owned company had a legally established monopoly on the generation transmission and distribution of electricity in turkey with the support and encouragement of international organizations like the world bank turkey has initiated a comprehensive program to liberalize and privatize the electricity market in 2001 the liberalization of the electricity market in turkey started in the distribution side of the market the distribution network was divided into 21 distribution regions and in each of these separate initially state owned distribution companies have been authorized to distribute and sell electricity the plan envisaged to complete privatization of all distribution companies until the end of 2006 this study compares the welfare implication of privatization of the distribution networks by comparing two extreme cases a pure regional distributional monopoly case and a representative pure free consumer case with a benchmark case of administered price regulation for this purpose we develop a simulation model of the turkish electricity system and use the data on generation and distribution costs our simulation analysis shows that substantial welfare losses occur if the distributional companies behave as regional monopolists our findings reiterate the importance of regulation and market design

electricity market reform failures uk norway alberta and california an analysis of electricity market reforms already taken place in the uk norway alberta canada and california usa leads to our overall conclusion that the introduction of a competitive generation market of itself has failed to deliver reliable service at low and stable prices the market reform failures are attributed to market power abuse by few dominant sellers especially at times of transmission congestion poor market design that invites strategic bidding by suppliers the lack of customer response to price spikes capacity shortage caused by demand growth not matched by new capacity and thin trading of forward and futures contracts that are critical for price discovery and risk management the paper then explains why an electricity market reform can easily fail to deliver the promised gains of better service at lower and more stable prices the policy implication is that an electric market reform can be extremely risky and may lead to a disastrous outcome thus it is imprudent to implement such a reform in countries with limited sites for newgeneration and no indigenous fuels e g israel and hong kong these countries should therefore consider introducing performance based regulation that can immediately benefit electricity consumers in terms of lower prices more stable prices improved reliability more choices while encouraging the electric sector to pursue efficient operation and investment r 2003 elsevier science ltd all rights reserved

contestable markets an uprising in the theory of industry structure presents a transcript of the presidential address delivered at the 94th meeting of the american economic association on december 29 1981 discussion of developments in the theory of industry structure welfare attributes of contestable markets behavior characteristics of oligopoly equilibrium intertemporal vulnerability to inefficient entry ebsco

the pseudo liberalisation of russia s power sector the hidden rationality of transformation abstract this paper discusses the problems of adjustment of the russian power sector to the challenges for building up a new institutional structure according to political and market requirements and uncovers the reasons why the implementation of a pool regulation model initiated in 1992 was not successful it identifies the purely formal nature of implementation of the model as well as demonetarisation and the non payment problem as the special conditions in russia which were important for shaping the regulation model which evolved in recent years instead in two phases of the power sector s institutional development different incentives led to the emergence of a dual economic regulation model in which elements of the soviet command and supply system co exist with elements of market and entrepreneurship prospects of further regulatory reform are expected to result not from political decisions as was characteristic for regulatory reform in other countries but from economic interest of the already established players in the power market

how much do electricity tariff increases in ukraine hurt the poor abstract increasing the electricity tariffs for private consumers to cost covering levels has been a very sensitive issue for all transition countries the likely negative social consequences are the central argument why the necessary tariff corrections have not yet been implemented in ukraine by the political decision makers since official data is not available there is insufficient knowledge regarding the electricity consumption behaviour of private households this makes it difficult to counter the official arguments with hard evidence a survey was carried out by the authors giving a more detailed picture basic data of the survey was used in evaluating the impact of possible tariff increases on the household expenditures of different income groups using both the compensating cv and the equivalent variation ev methods the findings confirm that an electricity tariff increase up to the level which would cover officially measured costs as defined by the ukrainian electricity regulatory authority would not cause severe social problems however further increases up to a level which would cover the true costs i e up to a level comparable to the average oecd level should only be realised in steps

regulating district heating in romania legislative challenges and energy efficiency barriers abstract many states in eastern and central europe ece possess extensive district heating dh networks that were constructed during the days of communist rule in order to provide a universally accessible energy service that supported soviet development policies but the post communist transition was marked by the exacerbation of the sector s numerous technical economic regulatory and environmental problems accompanied by its abandonment in favour of alternative methods of domestic heating recent efforts to increase the use of dh in ece as a result of environmental and energy security concerns have taken place in an absence of critical context sensitive research the purpose of this paper is to explore the legal aspects of post communist dh reforms in romania with the aim of identifying some of the governance challenges faced by state authorities in managing the sector in broader terms we seek to explore the extent to which the romanian legislative framework is in a position to promote energy efficiency in dh this has been achieved via an analysis of formal policy documents government decrees strategic documents and laws pertaining to this sector as published and subsequently amended in the official gazette the conclusions of the paper identify the key regulatory issues in the sector especially with respect to the tariff setting process and the division of competences among different organisations in it while suggesting a set of policy steps and general restructuring approaches that could help overcome the current situation

electricity consumption and economic growth evidence from turkey abstract this study investigates the causal relationship between electricity consumption and real gdp in turkey during the period of 1950 2000 both of the series were found to be a stationary process around a structural break by the zivot and andrews test thus two different methodologies have been employed to test the granger non causality the dolado lutkepohl test using the vars in levels and the standard granger causality test using the detrended data both tests have yielded a strong evidence for unidirectional causality running from the electricity consumption to the income this implies that the supply of electricity is vitally important to meet the growing electricity consumption hence to sustain the economic growth in turkey

strength of preference and risky choice this paper provides conditions under which a utility function under risk can be legitimately interpreted to measure strength of preference between consequences these conditions require that if a decision maker regards the preference difference between acts a and b to be the same as the preference difference between acts a and b for every state of the world then the preference difference between a and b should be regarded as equivalent to the preference difference between a and b a key assumption is that a decision maker s preference differences between acts given one state of the world should be independent of common consequences given other states of the world usefulness of this result is discussed

measuring the efficiency of grid companies in china a bootstrapping non parametric meta frontier approach abstract the unbundling policy reform of power industry has become a worldwide trend since 1980s there are quite many studies focusing on the efficiency changes of transmission and distribution sectors in european and latin american countries while few reports on china s issues have been found this paper employs a nonparametric frontier estimation combined with meta frontier and bootstrapping method to measure the productive efficiency and changes in the decomposition index for china s 31 grid companies from 2004 to 2013 in addition it further employs tobit regression model to analyze the influences of relevant policies and heterogeneity factors such as natural conditions and economic development the results indicate that the grouping approach extends the application of non parametric data envelopment analysis which may decrease the assumption of homogeneity for the decision making units and provide better efficiency estimates by increasing the credibility of the evaluation results overall productive efficiency increased during the whole study period with technology progress the main contributor to this improvement efficiency trends fluctuated with changes in economic development and power supply situation and the economics and customer density had positive effects on productive efficiency while the influence of clean power proportion is negative

russian electricity market reform deregulation or re regulation abstract russia commenced liberalization of electricity prices in 2007 increasing the liberalization rate by 10 25 every six months it was planned to reach full liberalization by 2011 currently the degree of liberalization is uncertain because of intense price regulation and a highly concentrated market in the hands of four large generating companies increased regulation and further consolidation may drive the market towards its pre reform state this paper analyses the competitive landscape of the russian electricity market by assessing the ownership structure of electricity generation price drivers and government involvement in the electricity wholesale market in russia the main research question is why the targeted level of market liberalization has not been fully achieved in the russian electricity market

turkey trade policy review he trade policy review turkey 2003 the third of its kind provides a comprehensive survey of trade policy developments and practices in turkey this paper discusses besides the principal issues highlighted in the report an issue that has largely been neglected in trade policy reviews it is the sustainability of current account section 2 describes the main developments in turkey s trade regime and trade performance and section 3 examines the trade policy under the headings of measures affecting imports exports and foreign direct investment section 4 is on liberalisation of services and section 5 on sustainability of current account the final section offers conclusions

super efficiency infeasibility and zero data in dea lee et al 2011 and chen and liang 2011 develop a data envelopment analysis dea model to address the infeasibility issue in super efficiency models in this paper we point out that their model is feasible when input data are positive but can be infeasible when some of input is zero their model is modified so that the new super efficiency dea model is always feasible when data are non negative note that zero data can make the super efficiency model under constant returns to scale crs infeasible our discussion is based upon variable returns to scale vrs and can be applied to crs super efficiency models

liberalisation of the russian power sector abstract the paper discusses the russian power sector reform plan approved by the government in july 2001 which outlines the framework for competition and changes in ownership structure the paper focuses on the following issues related to the plan price reform restructuring of regional energos and large generating companies restructuring of transmission and system operation the mechanism for introducing competition competition for residential consumers and reform sequencing one key message of the paper is that price and regulatory reform is central to success of market liberalisation a second key message is that the restructuring of energos should not create companies with market power ideally local generation and distribution companies would be owned separately with multiple generators in each region at a minimum commonly owned companies should keep separate accounts with regulation of generation a possibility where there is market power regarding transmission and dispatch common ownership would not be a problem given that transmission and generation are separately owned on competition a fully fledged pool may not be appropriate in the case of russia with the alternative of a market based on bilateral contracts with a balancing pool functioning better in a context of non payment and constrained institutional capacity and providing security for investments regarding competition for residential consumers this is not a priority in the short to medium term lastly on sequencing it is better that structural and institutional change takes place before competition begins

diversification consistent data envelopment analysis with general deviation measures abstract we propose new efficiency tests which are based on traditional dea models and take into account portfolio diversification the goal is to identify the investment opportunities that perform well without specifying our attitude to risk we use general deviation measures as the inputs and return measures as the outputs we discuss the choice of the set of investment opportunities including portfolios with limited number of assets we compare the optimal values efficiency scores of all proposed tests leading to the relations between the sets of efficient opportunities strength of the tests is then discussed we test the efficiency of 25 world financial indices using new dea models with cvar deviation measures

misery loves company social regret and social interaction effects in choices under risk and uncertainty abstract extensive field evidence shows individuals decisions in settings involving uncertainty depend on their peers decisions one hypothesized cause of peer group effects is social interaction effects an individual s utility from an action is enhanced by others taking the same action we employ a series of controlled laboratory experiments to study the causes of peer effects in choice under uncertainty we find strong peer group effects in the laboratory our design allows us to rule out social learning social norms group affiliation and complementarities as possible causes for the observed peer group effects leaving social interaction effects as the likely cause we use a combination of theory and empirical analysis to show that preferences including social regret are more consistent with the data than preferences including a taste for conformity we observe spillover effects as observing another s choice of one risky gamble makes all risky gambles more likely to be chosen

price and access charge discrimination in electricity distribution an application to the chilean case this paper presents and analyzes a model of electricity distribution in chile with three alternative regulatory pricing contract schemes for assigning a common capacity cost to final customers and competitive energy sellers the first scheme involves ramsey pricing while under the second and third schemes the monopoly chooses final prices and access charges subject either to a peak load physical cap or a total revenue price cap constraint in addition we consider circumstances in which the regulator does not know consumer demand the monopoly cannot price discriminate beyond a range defined by the marginal cost as a floor and the stand alone cost as a ceiling and access charges are set at the fully distributed cost allocation level currently in force the model is calibrated with chilean data and demonstrates that in terms of social welfare the fully distributed cost contract scheme currently in effect can be improved by discriminatory pricing complemented by certain of the analyzed constraints

effects of long term tariff regulation on investments under low credibility of rules rate of return and price cap in russian electricity grids abstract the transition from a short term cost plus tariff regulation to either a long term rate of return or long term price cap regulation in russia started in 2009 and was completed in 2012 causing substantial changes in investment over the course of the reform we estimate panel data of 46 russian electricity distribution entities with a dynamic investment model using the system generalized method of moments and addressing potential endogeneity issues we show that despite the noncredible regulatory policy the transition from short to long term regulation had a positive and significant effect on the investment rate of regulated entities the specific long term regulation design applied in russia from 2008 to 2017 either rate of return or price cap had no effect on the investment rate these results are important for the introduction of changes in regulatory frameworks in developing countries

consumption and portfolio choice under internal multiplicative habit formation this paper explores the optimal consumption and investment behavior of an individual who derives utility from the ratio between his consumption and an endogenous habit we obtain closed form policies under general utility functionals and stochastic investment opportunities by developing a nontrivial linearization to the budget constraint this enables us to explicitly characterize how habit formation affects the marginal propensity to consume and optimal stock bond investments we also show that in a setting that combines habit formation with epstein zin utility consumption no longer grows at unrealistically high rates at high ages and investments in risky assets decrease

the measurement of productive efficiency a reconsideration the purpose of this paper is to generalize the farrell indexes of productive efficiency to nonhomothetic production technologies and at the same time maintain the cost interpretation of the farrell measures since the generalized indexes rely heavily on recent developments in the estimation of frontier cost and production functions several frontier models are reviewed in addition to generalized indexes of technical allocative and overall productive efficiency a variety of single factor efficiency measures are discussed the applicability of the proposed efficiency measures is illustrated with a numerical example of electric power generation

on the optimality of path dependent structured funds the cost of standardization abstract this paper examines the suitability of an important class of standard financial structured products namely those whose performances are based on smoothing the return of a given risky underlying asset while providing a guarantee at maturity using various assumptions about the customers attitudes towards risk we show that such standardized products are not optimal even if the financial market volatility is constant as a by product we provide in particular the optimal portfolio value in the regret rejoice framework to go further with the notion of aversion of getting a return smaller than the risk free one using the notion of compensating variation we determine for the first time the monetary losses of providing these standardized products instead of the optimal ones to the customers we show that these monetary losses can be very significant when the volatility of the risky asset is stochastic from the operational point of view such results highly suggest to trade on the volatility index vix and or to introduce derivatives written on it when selling standardized funds in order to better meet investors needs and preferences

applying regret theory to investment choices currency hedging decisions we apply regret theory an axiomatic behavioral theory to derive closed form solutions to optimal currency hedging choices investors experience regret of not having chosen the ex post optimal hedging decision hence investors anticipate their future experience of regret and incorporate it in their objective function we derive a model of financial decision making with two components of risk traditional risk volatility and regret risk we find results that are in sharp contrast with traditional expected utility loss aversion or disappointment aversion theories we discuss the empirical implications of our model and its ability to explain observed hedging behavior

residential electricity pricing in china the context of price based demand response abstract as a secondary energy electricity is an important channel between original energy and energy consumers electricity price is a critical factor for the interests of all involvers in the electric power market it also plays an important role for the sustainable development of energy and environment smart grid is a new conception proposed in recent years to improve the intelligent level and increase the efficiency of electric power system operation smart grid combines and integrates information technology communication technology and intelligent control technology with tradition power system to achieve the many objectives of smart grid demand response dr as an effective technique of demand side management dsm refers to the changes in electricity consumption behavior of users in response to the dynamic price or incentive rewards price based demand response pbdr is one of the two major dr programs in this paper we first introduce the pricing theories in economics the pricing of electricity and the development of electricity pricing in china then we present a detailed discussion on the pbdr strategies in the dsm of smart grid also the research status of pbdr is reviewed finally it gives a summary of the whole paper in the last section

responsiveness to energy price changes when salience is high residential natural gas demand in ukraine abstract despite its importance for policy purposes evidence about the price elasticity of natural gas demand in the residential sector is very limited and based on inference from situations with modest variation in prices we focus on a locale and time when price changes were extreme and salient to consumers namely ukraine between 2013 and 2017 we exploit the tariff reforms and detailed micro level household consumption records to assess whether consumers adjust their consumption in response to the rate changes and estimate the price elasticity of the demand for natural gas to isolate behavior attention is restricted to those households that made no structural energy efficiency upgrades to their homes thus keeping the stock of gas using capital fixed we find that households are capable of reducing consumption even without installing insulation or making any other structural modifications to their homes the price elasticity is about 0 16 wealthier households people living in multifamily buildings and heavy users have more inelastic demands households reduced consumption even when they received government assistance this and the fact the demand is inelastic especially for wealthier households bode well for tariffs or energy tax schemes where wealthier households subsidize the consumption of the poorer ones

biases from omitted risk effects in standard gamble utilities utilities elicited under the probability equivalence version of the standard gamble procedure systematically exaggerate the utility increments of expensive health interventions that bring the recipient towards full health switching to the alternative certainty equivalence version would introduce the reverse bias the biases arise from anticipated pre and post decision risk effects that expected utility theory omits to include these risk effects partition the future by changes in knowledge into 1 pre choice periods 2 the pre outcome future before the chosen act s outcome becomes known and 3 the more distant post outcome future when that outcome will have become known

the loser s curse decision making and market efficiency in the national football league draft a question of increasing interest to researchers in a variety of fields is whether the biases found in judgment and decision making research remain present in contexts in which experienced participants face strong economic incentives to investigate this question we analyze the decision making of national football league teams during their annual player draft this is a domain in which monetary stakes are exceedingly high and the opportunities for learning are rich it is also a domain in which multiple psychological factors suggest that teams may overvalue the chance to pick early in the draft using archival data on draft day trades player performance and compensation we compare the market value of draft picks with the surplus value to teams provided by the drafted players we find that top draft picks are significantly overvalued in a manner that is inconsistent with rational expectations and efficient markets and consistent with psychological research this paper was accepted by uri gneezy behav

that s what i thought i wanted miswanting and regret for a standard good in a mass customized world how can a standardized product survive in a mass customized world this requires understanding that consumers often experience problems predicting their future hedonic reactions to new experiences such as custom products leading to feelings of regret this form of regret occurs not because the custom product differs from specifications but because consumers miswanted the design they ordered our analytic model shows that regret aversion induces consumers to design custom products to reflect the attributes of the available standard products consequently regret averse consumers may choose the standard product rather than place a custom order the number of available standard products however moderates both these effects two experiments empirically substantiate the key predictions of the analytical model a the custom product s resemblance to the standard product grows with regret aversion associated with miswanting b there exists a segment of regretfully loyal consumers for the standard product in a mass customized world and it expands with regret aversion c both the above effects are weakened by the presence of a second standard product and d the custom product can increase its market share when the number of standard products increases

regulatory reform and market development in power sectors of transition economies the case of kazakhstan abstract kazakhstan has been at the forefront of power sector reform in ebrd s countries of operations starting in 1996 a regulator was set up the industry was partially unbundled some distribution and generation companies were privatised and the large user market was liberalised a number of reform challenges remain however in the area of privatisation regulation and competition the paper proposes that the remaining distribution companies be privatised with a view to raising the level of cash collection before this takes place the industry would benefit from regulatory changes strengthening independence of the regulator and modifying regulatory rules to improve risk allocations and strengthen incentives on competition the paper proposes enhancing the present market arrangements by introducing a balancing pool and re balancing transmission tariffs to reflect location marginal costs implementation of the proposed changes should yield substantial welfare gains for kazakhstan the broad challenges in kazakhstan are characteristic of those in the sector throughout the region