are probabilities used in markets abstract working in a complete markets setting a property of asset demands is identified that is inconsistent with the investor s preference being based on probabilities in this way a market counterpart of the ellsberg paradox is provided journal of economic literature classification numbers d00 d80 d81

drivers and inhibitors of renewable energy a qualitative and quantitative study of the caribbean abstract we explore the factors that affect the development of renewable energy in the caribbean the caribbean region can serve as a laboratory in studying the institutional issues relating to energy development due to the differences in political jurisdictions over a short distance based on 12 case studies and 75 in depth interviews with a variety of stakeholders we identified five factors that appear to be critical for the development of renewable energy in the caribbean entrepreneurship attitudes the role of local champions the electric utility influence informal institutions and the influence of international agencies we built a multiple regression model to test these relationships through a survey of 34 political jurisdictions in the caribbean the statistical analysis we conducted suggests that informal institutions have a significant impact on the extent of renewable energy development while the incumbent electricity utilities influence may impede the development of renewable energy based on these findings we provide recommendations on how best to make use of these factors identified in order to develop effective energy policies throughout the caribbean

using asset prices to measure the cost of business cycles we measure the cost of consumption fluctuations using an approach that does not require the specification of preferences and instead uses asset prices we measure the marginal cost of consumption fluctuations the per unit benefit of a marginal reduction in consumption fluctuations expressed as a percentage of lifetime consumption we find that the gains from eliminating all consumption uncertainty are very large however for consumption fluctuations corresponding to business cycle frequencies we estimate the marginal cost to be between 0 08 percent and 0 49 percent of lifetime consumption

expert opinion and compensation evidence from a musical competition pianists who achieve high scores in the queen elizabeth musical competition are rewarded by subsequent success this is not surprising in itself but it is not immediately clear whether this is caused by the score or because those who have high scores are better pianists data on eleven consecutive competitions make it possible to distinguish between the two explanations since an unexpected situation allows us to use an instrumental variable the randomly assigned order in which musicians appear at the competition uncorrelated with ability but correlated with the results of the competition

the causal impact of medals on wine producers prices and the gains from participating in contests the main objective of this article is to estimate the causal effect of wine medals on producers prices our data set combines information on transactions between wine producers and wholesale traders these data are registered by a wine broker who acts as a middleman in this market with records from eleven important wine competitions our identification strategy exploits a particularity in our data namely that medals are not only awarded before transaction dates but sometimes also thereafter regressing price on dummies indicating past and future medals plus controls allows under weak restrictions to consistently estimate causal effects of medals by simply calculating differences in the two types of dummy estimates in addition the estimates of future medal coefficients can be interpreted as partial correlations between unobserved quality and medal indicators our preferred estimate indicates that producers having earned a medal at a competition can increase their price by 13 the impact for gold is much larger than for silver and bronze but we cannot reject that the correlation with quality is the same across the three colors we then calculate expected profits obtained by producers from participating in competitions and find that the incentives to participate are high finally we investigate the efficiency of contests by measuring to what extent attributed awards are good quality indicators only a minority of competitions attribute medals that are significantly correlated with quality primarily the ones founded a long time ago and whose judges are required to evaluate relatively few wines per day

close but no cigar the bimodal rewards to prize seeking this article examines the economic effects of prizes with implications for the diversity of market positions especially in cultural fields many prizes have three notable features that together yield an emergent reward structure 1 consumers treat prizes as judgment devices when making purchase decisions 2 prizes introduce sharp discontinuities between winners and also rans and 3 appealing to prize juries requires costly sacrifices of mass audience appeal when all three conditions obtain winning a prize is valuable but seeking it is costly so trying and failing yields the worst outcome a logic we characterize as a tullock lottery we test the model with analyses of oscar nominations and hollywood films from 1985 through 2009 we create an innovative measure of prize seeking or oscar appeal on the basis of similarity to recent nominees in terms of such things as genre plot keywords and release date we then show that oscar appeal has no effect on profitability however this zero order relationship conceals that returns to strong oscar appeals are bimodal with super normal returns for nominees and large losses for snubs we then argue that the effect of judgment devices on fields depends on how they structure and refract information

seasonalities in security returns the case of earnings announcements abstract we document a seasonal pattern in stock returns around quarterly earnings announcement dates small firms show large positive abnormal returns and a sizable increase in the variability of returns around these dates only part of the large abnormal returns can be accounted for by the tendency of firms with good news to announce early large firms show no abnormal returns around announcement dates and a much smaller increase in variability

winds of change how high wind penetrations will affect investment incentives in the gb electricity sector abstract wind power is widely expected to expand rapidly in britain over the next decade large amounts of variable wind power on the system will increase market risks with prices more volatile and load factors for conventional thermal plant lower and more uncertain this extra market risk may discourage investment in generation capacity financial viability for thermal plant will be increasingly dependent on price spikes during periods of low wind increased price risk will also make investment in other forms of low carbon generation e g nuclear power more challenging a number of policies can reduce the extent to which generators are exposed to market risks and encourage investment however market risks play a fundamental role in shaping efficient investment and dispatch patterns in a liberalised market therefore measures to improve price signals and market functioning such as a stronger carbon price and developing more responsive demand are desirable however the scale of the investment challenge and increased risk mean targeted measures to reduce although not eliminate risk exposure such as capacity mechanisms and fixed price schemes may have increasing merit the challenge for policy is to strike the right balance between market and planned approaches

generalized disappointment aversion and asset prices we characterize generalized disappointment aversion gda risk preferences that can overweight lower tail outcomes relative to expected utility we show in an endowment economy that recursive utility with gda risk preferences generates effective risk aversion that is countercyclical this feature comes from endogenous variation in the probability of disappointment in the representative agent s intertemporal consumption saving problem that underlies the asset pricing model the variation in effective risk aversion produces a large equity premium and a risk free rate that is procyclical and has low volatility in an economy with a simple autoregressive endowment growth process the observed facts of aggregate risks and asset prices in the post war u s economy have led researchers to explore models of intertemporal preferences that generalize the well developed time additive expected utility specification used in the asset pricing economy of lucas 1978 in particular models that allow for countercyclical risk aversion have been shown to perform much better than the standard model see e g campbell and cochrane 1999 gordon and st amour 2000 and barberis huang and santos 2001 1 this leads us to explore the preference foundations that may produce this behavior endogenously our preference specification is a one parameter extension of the gul 1991 disappointment aversion utility function these new preferences

an analysis of the correlates of discrimination facing young hispanic job seekers this study examines the extent and correlates of discrimination faced by young accented hispanic males in chicago and san diego using the outcomes of job applications by matched pairs of anglo and hispanic job seekers this is one of the first examples of audits being used in the labormarket area the audit methodology provides a powerful basis for examining discriminatory hiring practices because it permits direct comparison of hiring outcomes for pairs of anglo and hispanic jobseekers with similar labor market qualifications in this paper we first present differences in anglo hispanic success rates in filing applications obtaining interviews and obtaining jobs this builds on the descriptive analysis presented in harry cross et al 1990 we then focus on the correlates of differential success in obtaining interviews and in subsequent job acquisition i the audit methodology

a theory of disappointment aversion an axiomatic model of preferences over lotteries is developed it is shown that this model is consistent with the allais paradox includes expected utility theory as a special case and is only one parameter beta richer than the expected utility model allais paradox type behavior is identified with positive values of beta preferences with positive beta are said to be disappointment averse it is shown that risk aversion implies disappointment aversion and that the arrow pratt measures of risk aversion can be generalized in a straight forward manner to the current framework copyright 1991 by the econometric society

are renewable energy subsidies effective evidence from europe abstract we test if policy support for renewable electricity have been effective in promoting renewables in the five largest european countries in the period 2000 2010 we collect data on the exact amount of monetary incentives and the average tariffs granted the econometric analysis reveals a positive correlation between subsidies and the production of incentivized energy as well as the installed capacity we find that a 1 1c increase in the incentive tariff leads to an increase in renewable generation of 0 4 1 18 26 feed in tariffs appear to outperform tradable green certificates overall the analysis shows that these policies have been effective in promoting renewable energy both in the short and in the long run

estimating the value of information we derive a general expression for the value of information to a price taking investor in a dynamic environment and provide a framework for its estimation we study the value of both private and public information and break it into its instrumental and psychic parts to illustrate we estimate and rank the values of leading macroeconomic indicators gdp employment etc using variations in option prices we find that consumer investors with conventional preference parameters would pay 3 to 5 bps of their wealth for a one time private peek into these indicators such signals provide substantial instrumental value but a minor psychic value received august 29 2016 editorial decision june 6 2018 by editor itay goldstein authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

risk preferences and the macroeconomic announcement premium this paper develops a revealed preference theory for the equity premium around macroeconomic announcements stock returns realized around pre scheduled macroeconomic announcements such as the employment report and the fomc statements account for 55 of the market equity premium we provide a characterization theorem for the set of intertemporal preferences that generates a nonnegative announcement premium our theory establishes that the announcement premium identifies a significant deviation from time separable expected utility and provides asset market based evidence for a large class of non expected utility models we also provide conditions under which asset prices may rise prior to some macroeconomic announcements and exhibit a pre announcement drift

explaining occupational sex segregation and wages findings from a model with fixed effects does segregation arise because female occupations have financial advantages for women planning to spend some time as homemakers as human capital theorists claim do male occupations have more onerous working conditions that explain their higher earnings as the neoclassical notion of compensating differentials suggests or do female occupations have low wages that are depressed by the sort of discrimination at issue in comparable worth as sociologists have argued to answer these questions the authors use a model with fixed effects to predict the earnings of young men and women from a pooled cross section time series of the national longitudinal survey analyses are undertaken for both blacks and whites a fixed effects model is useful for answering these questions because it corrects for the selection bias that results from the tendency of persons who differ on stable characteristics that are unmeasured but affect earnings to select themselves into different occupations the authors find little evidence that female occupations provide either low penalties for intermittent employment at high starting wages the advantages human capital theorists have argued them to have rather there is evidence of pay discrimination against men and women in predominantly female occupations implications for economic and sociological theories of labor markets are discussed authors

the value of multiple reviews expert opinion aids consumers purchasing a good they have no personal experience with previous research has found little to no impact of expert opinion on price evidence from panels of cigar reviewers shows that the explanatory power of the experts rating improves as more reviews are used

a theory of subjective compound lotteries abstract we develop a savage type model of choice under uncertainty in which agents identify uncertain prospects with subjective compound lotteries our theory permits issue preference that is agents may not be indifferent among gambles that yield the same probability distribution if they depend on different issues hence we establish subjective foundations for the anscombe aumann framework and other models with two different types of probabilities we define second order risk as risk that resolves in the first stage of the compound lottery and show that uncertainty aversion implies aversion to second order risk which implies issue preference and behavior consistent with the ellsberg paradox

assessing and managing regulatory risk in renewable energy contrasts between canada and the united states abstact a challenge for energy firms when considering new investments is to balance expected financial gains against potential risks however while investment opportunities in different jurisdictions are often straightforward to identify the policy or regulatory risks for investors are more difficult to accurately ascertain here i provide a novel conceptual framework for how firms can assess regulatory risk that focuses on the institutional processes governing policy making risks are lower and policies will subsequently be more stable in jurisdictions where regulatory agencies have greater autonomy from politicians and where policies are formulated through more rigid policy making processes the contrasting development patterns of renewable energy policies in ontario and texas offer support for the framework i further develop strategies for how firms can successfully manage regulatory risks in different types of environment

probabilistic decision model of wind power investment and influence of green power market this paper presents results from a model of a representative wind power investor s decision making process using a monte carlo simulation of a project financial analysis data in the form of probability distribution functions pdfs for key input variables were collected from interviews with investors and other professionals active in the u s wind power industry using a formal expert elicitation protocol this study presents the first quantitative estimates of the effect of the u s voluntary renewable energy certificate rec market on renewable energy generation the results indicate that the investment decisions of wind power project developers in the united states are unlikely to have been altered by the voluntary rec market the problem with the current voluntary rec market is that it does not offer developers a reliable risk adjusted revenue stream consequently the claims by u s green power retailers and promoters that voluntary market recs result in additional wind power projects lack credibility even dramatic increases in voluntary market rec prices in the absence of long term contracts were found to have only a small effect on investor behavior

information quality and long run risk asset pricing implications i study the asset pricing implications of the quality of public information about persistent productivity shocks in a general equilibrium model with kreps porteus preferences low information quality is associated with a high equity premium a low volatility of consumption growth and a low volatility of the risk free interest rate the relationship between information quality and the equity premium differs from that in endowment economies my calibration improves substantially upon the bansal yaron model in terms of the moments of the wealth consumption ratio and the return on aggregate wealth in this paper i introduce learning into a production based long run risk model learning improves the asset pricing implications of the model along three dimensions it increases the equilibrium equity premium reduces the volatility of consumption growth and reduces the volatility of the risk free interest rate i show that because of the production economy setting the relationship between information quality and the equity premium differs from that found in pure exchange economies see e g veronesi 2000 quantitatively my model improves substantially upon the bansal and yaron 2004 model in terms of its predictions about the volatility of the return on aggregate wealth and the wealth consumption ratio compared to bansal and yaron 2004 i use a lower relative risk aversion rra parameter two and a higher intertemporal elasticity of substitution ies parameter two my model generates a lower risk premium on the market portfolio 5 06 per year but does roughly as well as the bansal and yaron 2004 model according to other measures commonly used to assess the performance of consumption based asset pricing models such as the key moments of the risk free interest rate and the consumption growth rate more specifically i consider a general equilibrium model with a linear production technology and kreps porteus preferences kreps and porteus 1978 hengjie ai is at the fuqua school of business duke university this paper is based on chap

expected utility maximization and demand behavior abstract this paper extends the non parametric approach to consumer demand analysis to the case of expected utility maximization we provide necessary and sufficient conditions for a set of price quantity pairs to be consistent with expected utility maximization and investigate their relationship to revealed preference conditions extensions to incomplete markets and intertemporal resolution of uncertainty are also considered

optimal savings distortions with recursive preferences abstract this paper derives an intertemporal optimality condition for economies with private information focusing on a class of recursive preferences by comparing it to the situation where agents can freely save in a risk free asset market we derive the optimal savings distortions necessary for constrained optimality our recursive preferences are homogeneous and satisfy a balanced growth condition while allowing us to separate the role of risk aversion and intertemporal elasticity of substitution we perform some quantitative exercises that disentangle the respective roles played by these two parameters in optimal distortions and the implied welfare gains

electricity market price and nuclear power plant shutdown evidence from california abstract japan s fukushima nuclear disaster triggered by the march 11 2011 earthquake has led to calls for shutting down existing nuclear plants to maintain resource adequacy for a grid s reliable operation one option is to expand conventional generation whose marginal unit is typically fueled by natural gas two timely and relevant questions thus arise for a deregulated wholesale electricity market 1 what is the likely price increase due to a nuclear plant shutdown and 2 what can be done to mitigate the price increase to answer these questions we perform a regression analysis of a large sample of hourly real time electricity market price data from the california independent system operator caiso for the 33 month sample period of april 2010 december 2012 our analysis indicates that the 2013 shutdown of the state s san onofre plant raised the caiso real time hourly market prices by 6 mwh to 9 mwh and that the price increases could have been offset by a combination of demand reduction increasing solar generation and increasing wind generation

the use of expert opinion quality and reputation indicators by consumers evidence from the french vaulting stallion semen market we build a model inspired by the standard hedonic approach developed by rosen 1974 and completed by landon and smith 1997 1998 to analyse the price of french vaulting stallion semen in 2004 we show that reputation modelled as an endogenous factor plays a less important role than information on true quality for the explanation of price dispersion this result is explained by the fact that information on studhorses is not only available but also reliable insofar as the quality of a stallion is stable over time contrary to nondurable products like wine or cigars this explains also why consumers on this market do not use expert opinions to make their choices

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

merit order effects of renewable energy and price divergence in california s day ahead and real time electricity markets abstract we answer two policy questions 1 what are the estimated merit order effects of renewable energy in the california independent system operator s caiso s day ahead market dam and real time market rtm and 2 what causes the hourly dam and rtm prices to systematically diverge the first question is timely and relevant because if the merit order effect estimates are small california s renewable energy development is of limited help in cutting electricity consumers bills but also has a lesser adverse impact on the state s investment incentive for natural gas fired generation the second question is related to the efficient market hypothesis under which the hourly rtm and dam prices tend to converge using a sample of about 21 000 hourly observations of caiso market prices and their fundamental drivers during 12 12 2012 04 30 2015 we document statistically significant estimates p value 0 01 for the dam and rtm merit order effects this finding lends support to california s adopted procurement process to provide sufficient investment incentives for natural gas fired generation we document that the rtm dam price divergence partly depends on the casio s day ahead forecast errors for system loads and renewable energy this finding suggests that improving the performance of the caiso s day ahead forecasts can enhance trading efficiency in california s dam and rtm electricity markets

the merit order effect a detailed analysis of the price effect of renewable electricity generation on spot market prices in germany the german feed in support of electricity generation from renewable energy sources has led to high growth rates of the supported technologies critics state that the costs for consumers are too high an important aspect to be considered in the discussion is the price effect created by renewable electricity generation this paper seeks to analyse the impact of privileged renewable electricity generation on the electricity market in germany the central aspect to be analysed is the impact of renewable electricity generation on spot market prices the results generated by an agent based simulation platform indicate that the financial volume of the price reduction is considerable in the short run this gives rise to a distributional effect which creates savings for the demand side by reducing generator profits in the case of the year 2006 the volume of the merit order effect exceeds the volume of the net support payments for renewable electricity generation which have to be paid by consumers

assessing the strength and effectiveness of renewable electricity feed in tariffs in european union countries in the last two decades feed in tariffs fit have emerged as one of the most popular policies for supporting renewable electricity res e generation a few studies have assessed the effectiveness of res e policies but most ignore policy design features and market characteristics e g electricity price and production cost that influence policy strength we employ 1992 2008 panel data to conduct the first econometric analysis of the effectiveness of fit policies in promoting solar photovoltaic pv and onshore wind power development in 26 european union countries we develop a new indicator for fit strength that captures variability in tariff size contract duration digression rate and electricity price and production cost to estimate the resulting return on investment we regress this indicator on added res e capacity using a fixed effects specification and find that fit policies have driven solar pv development in the eu however this effect is overstated without controlling for country characteristics and is concealed without accounting for policy design we do not find robust evidence that fit policies have driven wind power development overall we show that the interaction of policy design electricity price and electricity production cost is a more important determinant of res e development than policy enactment alone

news driven business cycles insights and challenges there is a widespread belief that changes in expectations may be an important independent driver of economic fluctuations the news view of business cycles offers a formalization of this perspective in this paper we discuss mechanisms by which changes in agents information due to the arrival of news can cause business cycle fluctuations driven by expectational change and we review the empirical evidence aimed at evaluating their relevance in particular we highlight how the literature on news and business cycles offers a coherent way of thinking about aggregate fluctuations while at the same time we emphasize the many challenges that must be addressed before a proper assessment of the role of news in business cycles can be established jel d83 d84 e13 e32 o33

robustly optimal monetary policy with near rational expectations the paper considers optimal monetary stabilization policy in a forward look ing model when the central bank recognizes that private sector expectations need not be precisely model consistent and wishes to choose a policy that will be as good as possible in the case of any beliefs that are close enough to model consistency it is found that commitment continues to be important for optimal policy that the optimal long run inflation target is unaffected by the degree of potential distortion of beliefs and that optimal policy is even more history dependent than if rational expectations are assumed jel c62 d84 el 3 e31 e32 e52 an extensive literature has considered the optimal conduct of monetary policy under the assumption of rational or model consistent expectations this literature has found that it is quite important to take account of the effects of the systematic and hence predictable compo nent of monetary policy on expectations for example it is found quite generally that an optimal policy commitment differs from the policy that would be chosen through a sequential optimiza tion procedure with no advance commitment of future policy it is also found quite generally that optimal policy is history dependent a function of past conditions that no longer affect the degree to which it would be possible to achieve stabilization aims from the present time onward 1 both of these conclusions depend critically however on the idea that an advance commitment of future policy should change people s expectations at earlier dates this may lead to the fear that analyses that assume rational expectations re exaggerate the degree to which a policy authority can rely upon private sector expectations to be shaped by its policy commitments in precisely the way that it expects them to be what if the relation between what a central bank plans to do and what the public will expect to happen is not quite so predictable might both the case for advance commitment of policy and the case for history dependent policy be considerably weakened under a more skeptical view of the precision with which the public s expectations can be predicted one way of relaxing the assumption of rational expectations is to model agents as forecasting using an econometric model the coefficients of which they must estimate using data observed prior to some date sampling error will then result in forecasts that depart somewhat from pre cise consistency with the analyst s model 2 however selecting a monetary policy rule on the basis of its performance under a specific model of learning runs the risk of exaggerating the degree to which the policy analyst can predict and hence exploit the forecasting errors that result from a particular way of extrapolating from past observations one might even conclude

orchestrating impartiality the impact of blind auditions on female musicians a change in the audition procedures of symphony orchestras adoption of blind auditions with a screen to conceal the candidate s identity from the jury provides a test for sex biased hiring using data from actual auditions in an individual fixed effects framework we find that the screen increases the probability a woman will be advanced and hired although some of our estimates have large standard errors and there is one persistent effect in the opposite direction the weight of the evidence suggests that the blind audition procedure fostered impartiality in hiring and increased the proportion women in symphony orchestras

an exploration into pigou s theory of cycles abstract this paper explores a theory of business cycles in which recessions and booms arise due to difficulties encountered by agents in properly forecasting the economy s future needs in terms of capital the idea has a long history in the macroeconomic literature as reflected by the work of pigou industrial fluctuation macmillan london 1926 the contribution of this paper is twofold first we illustrate the type of general equilibrium structure that can give rise to such phenomena second we examine the extent to which such a model can explain the observed pattern of u s recessions frequency depth without relying on technological regress we argue that such a model offer a framework for understanding elements of both the recent u s recession and of the asia downturns of the late 1990s

sex discrimination in restaurant hiring an audit study in an audit study of sex discrimination in hiring comparably matched pairs of men and women applied for jobs as waiters and waitresses at restaurants in philadelphia in high price restaurants where earnings are higher job applications from women had an estimated probability of receiving a job offer that was lower by about 0 4 and an estimated probability of receiving an interview that was lower by about 0 35 both estimated differentials are statistically significant additional evidence suggests that customer discrimination partly underlies the hiring discrimination

what drives renewable energy development abstract this viewpoint reviews renewable energy development in 14 markets that differ in market structure restructured vs not restructured use of feed in tariff fit yes vs no transmission planning anticipatory vs reactive and transmission interconnection cost allocated to a renewable generator high vs low we find that market restructuring is not a primary driver of renewable energy development renewable generation has the highest percent of total installed capacity in markets that use a fit employ anticipatory transmission planning and have loads or end users paying for most if not all of the transmission interconnection costs in contrast renewable developers have been less successful in markets that do not use a fit employ reactive transmission planning and have generators paying for most if not all of the transmission interconnection costs while these policies can lead to higher penetration of renewable energy in the short run their high cost to ratepayers can threaten the economic sustainability of renewable energy in the long run

projecting eu demand for natural gas to 2030 a meta analysis abstract gas demand projections for the eu27 from a variety of sources are compared projected demand varies widely between sources even when similar rates of economic growth and policy strength are assumed the divergence is shown to result from differing assumptions concerning future energy intensity on the one hand and the future contribution of nuclear power and renewables res to electricity generation on the other the variation with time of some of these projections is also examined it is found that the gas demand projected by both the international energy agency iea and the european commission ec for 2020 and for 2030 has tended to decrease with each successive projection this is understandable since the penetration of res e has continued to exceed expectations however in an economically depressed post fukushima europe estimates of future growth in both res and nuclear generation may need significant revision the energy efficiency directive as agreed by the council of the european union and the european parliament in april 2012 council of the european union 2012 will also impact significantly on future gas demand even though the measures incorporated are weaker than the original proposal the analysis presented here shows that a nuclear decline due to the fukushima disaster is seen to moderate rather than reverse projected demand decay a significant shortfall in projected res capacity if it were to occur constitutes a potential source of additional gas demand although the emphasis in this paper is on the eu27 as a whole consideration is given to the regional heterogeneity of each of these impacts hence although aggregate demand growth for the next decade or two is likely to be moderate or more probably negative local demand growth in some regions may be significant ensuring adequate access to these specific regions via interconnection to their eu27 neighbours and or directly from extra eu sources will therefore be essential hence implementation of the third energy plan should remain a priority

learning from experience the development of the renewables obligation in england and wales 2002 2010 abstract the uk has enviable renewable resources both onshore wind and offshore wind wave and tidal the offshore valuation group 2010 the government has had policy mechanisms in place since 1990 to encourage these resources to be developed the current mechanism the renewables obligation ro was specifically designed to emphasise competition and therefore to fit in with the uk s overall strategic approach to energy policy however as yet it has not delivered the capacity that it was designed to do and as a result the uk faces a difficult challenge in attempting to meet european wide renewable energy targets for 2020 as well as longer term decarbonisation targets this paper explores some of the major reasons why the ro has performed so poorly to date and considers the prospects for improvement up to 2020 it concludes that the strategic emphasis on competition in the support mechanisms has played a key role in limiting renewables development but that the mechanism has changed significantly since it was introduced however these changes together with proposals for electricity market reform still do not address important elements of risk in comparison with a standard feed in tariff

learning and asset price jumps w e develop a general equilibrium model in which income and dividends are smooth but asset prices contain large moves jumps these large price jumps are triggered by optimal decisions of investors to learn the unobserved state we show that learning choice is determined by preference parameters and the conditional volatility of income process an important model prediction is that income volatility predicts future jump periods while income growth does not consistent with the model large moves in returns in the data are predicted by consumption volatility but not by consumption growth the model quantitatively captures these novel features of the data jel g00 g12 g14 d83 a prominent feature of financial markets is infrequent but large price movements jumps 1 in this article we develop a model in which income and dividends have smooth gaussian dynamics however asset prices are subject to large infrequent jumps in our model large moves in asset prices obtain from the actions of the representative agent to acquire more information about the unobserved state of the economy for a cost we show that the optimal decision to incur a cost and learn the true economic state is directly related to the level of uncertainty in the economy this implies that aggregate economic volatility as well as market volatility should predict jumps in returns we show that indeed in the data consistent with the model return jumps are predicted by consumption volatility market volatility further the implied asset price implications from our model are consistent with the key findings from parametric models about frequency and predictability of jumps as well as nonparametric jump detection analysis of barndorff nielsen and shephard 2006 based on

longitudinal analyses of the effects of trade unions but union members are different from nonmembers in unobserved ways biasing your estimates y ou should make a selectivity bias correction simultaneously determine union status and economic outcomes develop an unobservables model use longitudinal data archetypical comment on virtually any study of the economic effects of umomsm or suitably modified on any other empirical subject

texas s operating reserve demand curve s generation investment incentive abstract faced with reserve margin projections well below the adopted target of 13 75 of the system peak forecast the public utility commission of texas on 01 17 2019 ordered the state s grid operator the electric reliability council of texas to right shift the operating reserve demand curve ordc to increase generators revenue from energy sales in ercot s real time market rtm using a large sample of 15 min data for the backcast period of 01 01 2015 through 12 31 2018 we calculate the ordc shift s impact on rtm prices and investment incentives for natural gas fired generation ngfg had the ordc shift been in effect in the backcast period the resulting rtm price increases in 2018 could suffice to justify ngfg investment though not in the prior years of 2015 2016 and 2017 while the actual ordc shift occurred on 03 01 2019 had a large impact on rtm prices in the ensuing six month period of march august 2019 texas s planned renewable generation is expected to erode ngfg s operating profit thus diminishing the ordc s investment incentive over time hence texas s energy only market design will likely need further refinements to solve the missing money problem of inadequate ngfg investment incentive

understanding how experts rate cigars a havanometric analysis drawing on data from an annual french guidebook published in 2004 this article focuses on the determinants of experts ratings on cuban cigars we find that high quality cigars are more likely to be recommended to more experienced cigar lovers both the self assessed quality and recommendation depend on the length and diameter of the cigars but also on more subjective characteristics like number and type of aromas results from a fields decomposition show that the quality of cigars is much more sensitive to the presence of a defect and number of aromas than the experts recommendation which is more influenced by the rarity of cigars finally it is essentially the cigars objective characteristics that have an influence on their prices meaning that consumers truly benefit from additional qualitative information when reading experts advice and ratings

using asset prices to measure the persistence of the marginal utility of wealth we derive a lower bound for the volatility of the permanent component of investors marginal utility of wealth or more generally asset pricing kernels the bound is based on return properties of long term zero coupon bonds risk free bonds and other risky securities we find the permanent component of the pricing kernel to be very volatile its volatility is about at least as large as the volatility of the stochastic discount factor a related measure for the transitory component suggest it to be considerably less important we also show that for many cases where the pricing kernel is a function of consumption innovations to consumption need to have permanent effects

asset demand based tests of expected utility maximization we provide conditions under which contingent claim and asset demands are consistent with state independent expected utility maximization the paper focuses on the case of a single commodity and demands are allowed to be functions of probabilities and not just prices and income we extend prior analyses by deriving three distinct tests for demands to be rationalized by expected utility i a contingent claim analogue to the certainty strong axiom of revealed preference ii a characterization of the functional form for demand and iii necessary and sufficient conditions based on the slutsky matrix jel d01 d11 d81 the neoclassical certainty model of consumer behavior postulates that a consum er s demand can be described as having been derived from utility maximization sub ject to a budget constraint one is then naturally led to ask what this model implies about observed demand behavior this question has been addressed using two quite distinct approaches the first originating in the work of slutsky 1915 and antonelli 1886 derives necessary and sufficient conditions for utility maximization assum ing knowledge of the consumer s demand functions the second approach known as revealed preference following the classic work of samuelson 1938 provides necessary and sufficient restrictions on a finite set of demand price pairs such that the demand behavior of a consumer is consistent with utility maximization in this paper we extend both approaches to a classic portfolio choice problem where consumers possess state independent expected utility preferences and there is a single commodity in each state we focus only on the complete market case where the financial asset setting is equivalent to the contingent claim setting and hence it is only necessary to discuss demand tests for the latter we depart from the standard contingent claim theory by assuming that state of nature probabilities are not fixed and we model demand as a function of probabilities as well as prices and income for the revealed preference approach with the restriction of a single commodity in each state we derive a much simpler test for expected utility maximization than those that currently exist in the literature for example the formulation of green and

presidential address asset price dynamics with slow moving capital i describe asset price dynamics caused by the slow movement of investment capital to trading opportunities the pattern of price responses to supply or demand shocks typically involves a sharp reaction to the shock and a subsequent and more extended reversal the amplitude of the immediate price impact and the pattern of the subsequent recovery can reflect institutional impediments to immediate trade such as search costs for trading counterparties or time to raise capital by intermediaries i discuss special impediments to capital formation during the recent financial crisis that caused asset price distortions which subsided afterward after presenting examples of price reactions to supply shocks in normal market settings i offer a simple illustrative model of price dynamics associated with slow moving capital due to the presence of inattentive investors i address the implications for asset price dynamics of the apparent slow movement of investment capital to trading opportunities the arrival of new capital to an investment opportunity can be delayed by fractions of a second in some markets for example an electronic limit order book market for equities or by months in other markets such as that for catastrophe risk insurance accordingly prices respond to supply or demand shocks with a sharp reaction because of the relatively small subset of capital and thus risk bearing capacity that is immediately available to absorb a shock on short notice such a price impact is substantially reversed over time as additional capital becomes available the amplitude of the immediate price impact and the pattern of the subsequent recovery can reflect many sorts of attention costs to trade as well as institutional impediments to capital movement such as search costs for trading

devising renewable heat policy overview of support options renewable energy sources of heat offer the substantial economic environmental and social benefits associated with renewable electricity but policy to support their expansion is considerably less advanced the potential for applying various support instruments to renewable heat is considered with advantages and disadvantages discussed c 2012 published by elsevier ltd