accounting for external costs in a study of a swedish district heating system an assessment of environmental policies sweden has historically had strict emission control by implementation of economic policy instruments with the aim of internalising the external costs of air pollution this study aims to evaluate how well current swedish policy instruments reflect the environmental costs associated with heat generation in several district heating dh plants in the dh system of goteborg furthermore it aims to simulate and evaluate the operation of the dh system based on its social cost effectiveness which takes into account the dh system s private and external costs non internalised environmental costs the study shows that the economic policy instruments do not fully internalise all external costs whereas for certain technologies the costs in terms of taxes emission permits environmental fees etc are higher than the environmental costs caused by the pollutants given the environmental cost estimates used in the study the simulation results show that the deviating internalisation of external costs affects the economic ranking of the different plants within the studied dh system the estimated loss in social cost effectiveness of the operation of the dh system of goteborg is noticable but relatively small if compared to the variable heat generation costs for most of the studied dh plants c 2010 elsevier ltd all rights reserved

heat savings and heat generation technologies modelling of residential investment behaviour with local health costs abstract the trade off between investing in energy savings and investing in individual heating technologies with high investment and low variable costs in single family houses is modelled for a number of building and consumer categories in denmark for each group the private economic cost of providing heating comfort is minimised the private solution may deviate from the socio economical optimal solution and we suggest changes to policy to incentivise the individuals to make choices more in line with the socio economic optimal mix of energy savings and technologies the households can combine their primary heating source with secondary heating e g a woodstove this choice results in increased indoor air pollution with fine particles causing health effects we integrate health cost due to use of woodstoves into household optimisation of heating expenditures the results show that due to a combination of low costs of primary fuel and low environmental performance of woodstoves today included health costs lead to decreased use of secondary heating overall the interdependence of heat generation technology and heat saving choice is significant the total optimal level of heat savings for private consumers decrease by 66 when all have the option to shift to the technology with lowest variable costs

auctions with contingent payments there now exists a host of results concerning the revenue performance of various auction methods this note delves deeper into auction markets by examining the effects on sellers revenue of certain noncash means of payment the basic result that bidding mediums which include some contingent pricing feature generally yield the seller more revenue than do cash bids is intriguing by itself and also points out the limitations of received theory since what follows builds on the independent preferences framework it is useful to first note the assumptions of that model and the major results pertaining to it to model an auction in the independent preferences tradition one assumes that bidders have reservation values vi that are known only privately and that can be depicted as being drawn independently from some distribution f v the most important result for this model is the revenue equivalence theorem as given in john riley and william samuelson 1981 any auction involving risk neutral bidders for which the following four conditions hold a a buyer can make any bid above some minimum reserve price b the buyer making the highest bid is awarded the object c the auction rules are anonymous and d there is a common equilibrium bidding strategy in which each buyer makes a bid bi which is a strictly increasing function of his reservation value vi yields an expected revenue of

does the form of compensation matter abstract the role of fee contracts in the agency relation between investment bankers and client firms in tender offers is investigated using a sample of offers between 1978 and 1986 different fees have different payoff functions which can be used by firms to create incentives and by bankers to signal differences in abilities the effectiveness of fee contracts in resolving agency problems in tested with mixed results the evidence suggests that fee contracts are used as a tool by both firms and bankers and that contracts influence tender offer outcomes but that contracting is only a partial solution to the agency problem

concessions of infrastructure in latin america government led renegotiation this paper analyzes government led renegotiations in infrastructure concession contracts in latin america based on the same sample used in guasch laffont and straub 2003 to examine firm led renegotiations after extending the theoretical framework to a multiple period context in which both pareto improving and rent shifting renegotiations at the initiative of the government can occur we develop an original instrumental variable strategy to address the issue of contract endogeneity and derive empirical results while some of the main insights concerning the importance of having a regulator in place when awarding concessions and the fragility of price cap regulatory schemes are unchanged significant differences arise with respect to the effect of investment and financing as well as the corruption variables we provide evidence that a good regulatory framework is especially important in contexts with weak governance and political opportunism copyright 2007 john wiley sons ltd

privatization in latin america what does the evidence say privatization is under attack criticisms run from corrupt deals to abuse of market power and social welfare losses we evaluate the empirical record on privatization relying on recent comprehensive studies from latin america the paper presents four main results first the increased profitability of privatized firms is not explained by sample selection biases second in the quest to identify the sources of increased profitability after privatization we find little evidence that validates concerns of generalized market power abuses exploitation of workers and lack of fiscal benefits third the manner in which privatization is carried out matters transparency and homogeneity in procedures speed and limited restructuring prior to privatization lead to better outcomes and less room for corruption and discretion finally privatization s success is enhanced by two complementary policies deregulation or reregulation of industries previously shielded from competitive forces and an effective corporate governance framework that facilitates privatized firms access to capital at lower cost overall the empirical record shows that privatization leads to increased profitability and productivity firm restructuring fiscal benefits output growth and even quality improvements most cases of privatization failure can be linked to poor contract design opaque processes with heavy state involvement lack of reregulation and a poor corporate governance framework

loan underpricing and the provision of merger advisory services abstract this paper investigates the primary and secondary syndicated bank loan market to analyze the effect on pricing when the financial institution commingles syndicated lending with merger advisory services in particular we investigate the connection between the acquirer s choice of financial advisor in a merger and future financing commitments we find evidence of underpricing of syndicated bank loans in both the primary and secondary market in the primary market we show that non acquisition loans granted by merger advisors to acquiring firms after the merger announcement date are charged a lower all in spread relative to acquisition loans if there has been a prior lending relationship consistent with this finding we find that syndicated bank loans for non acquisition purposes arranged by the acquirer s advisor after the merger announcement date trade in the secondary market at a significant discount since the terms on these non acquisition loans are not set upon merger announcement they are most subject to risk shifting and underpricing agency problems these findings offer evidence consistent with the existence of loss leader and potentially conflicted loans priced at below market terms that are offered by the acquirer s relationship bank advisor in order to win merger advisory business

infrastructure privatization and changes in corruption patterns the roots of public discontent abstract this paper offers a theory of how the degree of corruption that prevails in a society responds to changes in the ownership structure of major public service providers we show that there are cases in which privatization even though it fosters investments in infrastructure also opens the door to more corruption the public dissatisfaction towards privatization is then crucially affected by the changes in the degree and pattern of corruption our model thus helps understand the seemingly paradoxical situation prevailing in latin america where most studies find that privatizations have been efficiency enhancing and have fostered investments and at the same time popular dissatisfaction with the process is extremely high especially among the middle class we show that this line of explanation is consistent with the evidence from surveys in the region

do investment banks matter for m a returns w e document a significant investment bank fixed effect in the announcement returns of m a deals the interquartile range of bank fixed effects is 1 26 compared with a fullsample average return of 0 72 the results remain significant after controlling for the component of returns attributable to the acquirer our findings suggest that investment banks matter for m a outcomes and contrast earlier studies that show no positive link between various measures of advisor quality and m a returns differences in average returns across banks are also persistent over time and predictable from prior performance clients do not chase past returns which may explain why persistence exists in m a performance while it is absent in mutual funds jel g24 g34 mer gers and acquisitions m a are among the most critical decisions a ceo can make successful mergers can create substantial synergies while misguided acquisitions can lead to misallocation of companies to parents unable to reap their full potential in addition to these large effects on shareholder value a bad acquisition also increases the ceo s risk of being fired lehn and zhao 2006 a prominent example is the departure of carly fiorina from hewlett packard which was widely attributed to her acquisition of compaq the quality of m a transactions is also of great importance to the economy as a whole the total value of m a announced by a u s acquirer in 2007 was 2 1 trillion around 15 of gdp

the role of bank advisors in mergers and acquisitions this paper looks at the role of commercial banks and investment banks as financial advisors in their role as lenders and advisors banks can be viewed as serving a certification function however banks acting as both lenders and advisors face a potential conflict of interest that may mitigate or offset any certification effect overall we find evidence of a net certification effect for target firms but conflicts of interest for acquirers in particular target firms earn higher abnormal returns when the target s own bank is hired as merger advisor consistent with the bank s role as certifier of the more informationally opaque target s value to the acquirer in contrast we find no net certification role for acquirers there are at least two possible reasons for this first certification of value may be less important for acquirers because it is the target firm that must be priced in a merger second acquirers may utilize commercial bank advisors in order to obtain access to bank loans to finance activities in the postmerger period thus an acquirer may choose its own bank with whom it has had a prior lending relationship as an advisor in a merger however this choice weakens the certification effect and creates a potential conflict of interest because the advisor s merger advice may be distorted by considerations related to the bank s past and future lending activity

internalisation of external costs in the polish power generation sector a partial equilibrium model this paper presents a methodical framework which is the basis for the economic analysis of the mid term planning of development of the polish energy system the description of the partial equilibrium model and its results are demonstrated for different scenarios applied the model predicts the generation investment and pricing of mid term decisions that refer to the polish electricity and heat markets the current structure of the polish energy sector is characterised by interactions between the supply and demand sides of the energy sector the supply side regards possibilities to deliver fuels from domestic and import sources and their conversion through transformation processes public power plants public chp plants industry chp plants and municipal heat plants represent the main producers of energy in poland demand is characterised by the major energy consumers i e industry and construction transport agriculture trade and services individual consumers and export the relationships between the domestic electricity and heat markets are modelled taking into account external costs estimates the volume and structure of energy production electricity and heat prices emissions external costs and social welfare of different scenarios are presented results of the model demonstrate that the internalisation of external costs through the increase in energy prices implies significant improvement in social welfare

privatizing highways in latin america fixing what went wrong revolution in the way highways are provided took place in latin america in the 1990s when more than fifty projects mainly in argentina brazil chile colombia and mexico were privatized using build operate and transfer bot contracts the so called lost decade of the 1980s resulted in low investment in infrastructure and inad equate maintenance and it created a major highway deficit across latin america this deficit together with chronic budgetary problems led gov ernments to embrace a scheme in which the private sector financed urgently needed infrastructure investments thereby freeing up public resources for projects in other priority areas 1 this paper draws some lessons based on the evidence accumulated to date in particular we show that policymakers face unpleasant choices when considering how to provide highways in the future the evidence suggests that private financing of new highways freed up fewer resources than expected in several cases public funds were diverted to bail out fran chise holders in financial trouble 2 government guarantees for private highway franchises also added to the fiscal burden and such guarantees

auctions with contingent payments an overview i survey a literature on auctions with contingent payments that is auctions in which payments are allowed to depend on an ex post verifiable variable such as revenues in oil lease auctions based on demarzo et al 2005 i describe a partial ranking of auction revenues for auctions that differ in terms of contract forms pricing rules and seller commitment and why the revenue equivalence theorem does not apply even in an independent private values setup i discuss models that incorporate adverse selection moral hazard competition between auctioneers common values and the sale of multiple units

can privatization of u s highways improve motorists welfare abstract we assess the welfare effects of highway privatization accounting for government s behavior in setting the sale price firms strategic behavior in setting tolls and motorists heterogeneous preferences for speedy and reliable travel we find motorists are able to benefit from privatization by negotiating tolls with private providers that increase their consumer surplus surprisingly we find that by obtaining tolls and service that align with their varying preferences motorists may be better off negotiating with a monopolist than with duopoly providers or under public private competition toll regulation may be counterproductive because it is likely to treat motorists as homogeneous

incorporating life cycle external cost in optimization of the electricity generation mix the present work aims to examine the strategic decision of future electricity generation mix considering together with all other factors the effect of the external cost associated with the available power generation technology options not only during their operation but also during their whole life cycle the analysis has been performed by integrating the life cycle assessment concept into a linear programming model for the yearly decisions on which option should be used to minimize the electricity generation cost the model has been applied for the case of greece for the years 2012 2050 and has led to several interesting results firstly most of the new generating capacity should be renewable mostly biomass and wind while natural gas is usually the only conventional fuel technology chosen if externalities are considered wind energy increases its share and hydro power replaces significant amounts of biomass generated energy furthermore a sensitivity analysis has been performed one of the most important findings is that natural gas increases its contribution when externalities are increased summing up external cost has been found to be a significant percentage of the total electricity generation cost for some energy sources therefore significantly changing the ranking order of cost competitiveness for the energy sources examined

elasticities of electricity demand in india abstract the paper examines econometric relationship between electricity consumption and variables like income price of electricity and diesel used in for captive power generation to meet the shortages and reliability of power supply from utilities in five major consumer categories in india these categories are residential commercial agriculture small and medium industries and large industries income and price elasticities of electricity consumption are estimated at the national level for these consumers by pooling data across 19 states spread over 9 years 1985 86 1993 94 the results show that electricity consumption in commercial and large industrial sectors are income elastic 1 while residential agricultural and small and medium industries are income inelastic

investment banking contracts in tender offers abstract empirical analysis reveals that investment banker advisory fees in tender offers average 1 29 of the value of a completed transaction far below the levels often alluded to in the business press most fees are contingent on offer outcome with target firm fees typically contingent on transaction value and bidding firm fees on the number of shares purchased although these contingent contracts motivate investment bankers to satisfy some client objectives many also create conflicts of interest between banker and firm these incentive problems are apparent in offer evaluation in hostile offers and in the price paid by bidding firms

external costs of energy do the answers match the questions looking back at 10 years of externe abstract while the claim for getting prices right is quite popular in conceptual policy papers the implementation of appropriate internalisation strategies is still hampered by a lack of reliable external cost data great expectations were set into the externe project a major research programme launched by the european commission at the beginning of the 1990s to provide a scientific basis for the quantification of energy related externalities and to give guidance supporting the design of internalisation measures after more than a decade of research the externe label became a well recognised standard source for external cost data looking back into the externe history the paper pursues how emerging new scientific insights and changing background assumptions affected external cost estimates and related recommendations to policy over time based on externe results the usefulness and inherent limitations of external cost estimates for impact categories like climate change or nuclear waste disposal is discussed the paper also gives examples on how external costs in spite of remaining uncertainties are successfully used to support environmental policy

dancing with the enemy relational hazards and the contingent value of repeat exchanges in m a markets i examine the problem of relational hazards between repeat exchange partners and the contingent roles of trade uncertainty and future exchange prospects in moderating the potentially conflicting effects of past exchanges on these hazards thereby facilitating or restraining the formation of relational embeddedness on the data of advisory relationships in u s mergers and acquisitions from 1981 to 2004 i find that firms that repeatedly hire the same investment banks as financial advisors tend to overpay for acquisition targets as reflected by negative investor reactions measured in the cumulative abnormal return in addition the degree of overpayment increases with the frequency of prior exchanges this adverse effect of exchange history grows if the uncertainty regarding the target firm rises however better prospects for future business with acquiring firms help mitigate this negative effect although this moderating effect varies across the types of exchange experience the findings suggest that a potentially complex and nuanced process underlies repeat exchanges which are an oft claimed precursor of relational embeddedness to deliver tangible economic benefits this study contributes to the emerging literature on the dark side of embeddedness and more broadly to the sociology of markets and organizations by substantiating the contingency mechanisms that shape the value of a repeat relationship in market exchanges

acquisition premiums when investment banks invest their own money in the deals they advise and when they do not evidence from acquisitions of assets in the uk abstract this paper shows that investment banks that advise acquirers of assets negotiate favourable terms when they invest their own money in the deal but lead their clients to overpay when they do not have financial incentives acquirers pay the smallest premiums in divisional mbos when advised by the investment bank that finances the deal and the largest premiums in interfirm asset sales when advised by an investment bank remunerated contingent on deal completion premiums are in between the two extremes when acquirers do not use advisors these results are attributed to investment bank incentives which exacerbate the information asymmetry between buyers and sellers of assets

a model of the demand for investment banking advising and distribution services for new issues this paper presents a theory of the demand for investment banking advising and distribution services for the case in which the investment banker is better informed about the capital market than is the issuer and the issuer cannot observe the distribution effort expended by the banker the optimal contract under which the offer price decision is delegated to the better informed banker in order to deal with the adverse selection and moral hazard problems resulting from the informational asymmetry and the observability problem is characterized the model demonstrates a positive demand for investment banking advising and distribution services and provides an explanation of the underpricing of new issues an investment banker performs three functions which may be of value to an issuer of new securities underwriting advising and distribution this paper presents a theory of the demand for investment banking advising and distribution services based on an informational asymmetry between an issuer of new securities and an investment banker ultimately a theory of the organization of the financial intermediary industry is required that would predict which firms would use which types of financial intermediaries for which purposes and which firms would raise capital without engaging the services of a financial intermediary only a limited set of such predictions are developed here in the context of a model of a fixedprice offering under a negotiated contract in which the investment banker is

alternative environmental regulation schemes for the belgian power generation sector this paper discusses the effects of alternative waysof using external cost estimates to regulateinvestments and generation in the electricityproduction sector starting from the existing system four alternatives are considered emission taxes forthe utility and for independent producers emissiontaxes limited to the electric utility emissionpermits limited to the electric utility and finally asystem where only investments are regulated anddispatch is not taking external damage estimates fromthe literature these alternatives are compared usinga dynamic partial equilibrium model of the belgianelectricity market for the period 1995 2034 theefficiency and distribution effects of the alternativeenvironmental policy instruments are quantified

credible sales mechanisms and intermediaries we consider a seller who faces several buyers and lacks access to an institution to credibly close a sale if buyers anticipate that the seller may negotiate further they will prefer to wait before making their best and final offers this in turn induces the seller to bargain at length with buyers even if doing so is costly when the seller s cost of soliciting another round of offers is either very large or very small the seller credibly commits to an auction and experiences negligible bargaining costs otherwise there may be several rounds of increasing offers and significant seller losses in these situations an intermediary with a sufficiently valuable reputation and or weak marginal incentives regarding price can create value by credibly committing to help sell the object without delay

binary choice with binary endogenous regressors in panel data this article considers the estimation of the causal effect of fertility on female labor force participation equations my main concern is to examine two considerations the endogeneity of fertility and the impact of controlling for unobserved heterogeneity and for predetermined existing children using psid data a switching binary panel data model that accounts for selectivity bias as well as for other forms of time invariant unobserved heterogeneity is estimated individual effects are allowed to be correlated with the explanatory variables which can be predetermined as opposed to strictly exogenous family sex composition is used as an instrument for exogenous fertility movements the results indicate that exogeneity assumptions of children variables induce a downward bias in absolute value in the estimated negative effect of fertility on participation although the failure to account for unobserved heterogeneity overstates this effect moreover stronger effects of fertility are found when existing c