a method for the correction of the feed in tariff price for cogeneration based on a comparison between croatia and eu member states the european commission has adopted directive 2004 8 ec on the promotion of cogeneration which the eu member states as well as candidates including croatia were obliged to accept among other terms and conditions the directive requires certain support mechanisms such as feed in tariff prices and premiums added to market electricity prices in this paper the cost effectiveness of selling electricity at the feed in tariff prices in the selected eu member states is compared to selling it on the european electricity market with or without premiums the results of this comparison will indicate whether correction of the croatian feed in tariff price to a higher value would be justified the cost effectiveness ratio of a cogeneration unit upgraded with mean reverting and jump diffusion processes is used for comparison at the end of this paper a method is suggested for the correction of feed in tariff prices with examples of corrected prices for the years 2008 and 2009 such corrections have been proven to be justified and are compared to the feed in tariff prices in most of the selected eu member states

reversing disbursement rates to estimate stationary wealth processes for endowments with recursive preferences endowments have been accused of hoarding their wealth however the theoretically ideal spending plan remains unclear and in practice endowments follow a range of rules here we derive and estimate the optimal spending plans of an infinitely lived charity or endowment with an epstein zin weil utility function given general markovian returns to wealth we analyse two special cases first where spending is a power function of last period s wealth and second where the endowment uses payout smoothing via non linear least squares we estimate the optimal spending rate and the elasticity of inter temporal substitution for an endowment with a typical diversified portfolio and for a portfolio of hedge funds in a new approach we use maximum entropy methods to characterize the returns distribution of an endowment whose spending plan conforms with the optimality condition we confirm that the estimated returns distribution is largely consistent with the optimal spending plan

dusenberry s ratcheting of consumption optimal dynamic consumption and investment given intolerance for any decline in standard of living duesenberry s ratcheting consumption demand is derived as a feature of the optimal dynamic consumption and investment policy given extreme habit formation that prevents consumption from falling over time preferences are in effect non time separable extended real valued von neumann morgenstern preferences consumption increases each time wealth reaches a new maximum risky investment is proportional to the excess of wealth over the perpetuity value of current consumption extensions constrain the net rate of decrease in consumption with a constant other than zero add more consumption goods and constrain on the maximal holding of the risky asset as a proportion of wealth these strategies may be useful for the management of university endowments participatory investment accounts and risky arbitrage funds

comparing feed in tariff incentives in taiwan and germany abstract the current development of clean energy in taiwan is in the embryonic stage even though in recent times taiwan s development of renewable energy has emphasized wind power and photovoltaic power current statistics show they supply only a small portion of total national power needs and that wind power and solar power are still in development in order to promote the growth of clean energy it is necessary to compare the support mechanisms of developing clean energy in different countries the success of implementing clear energy in germany is often followed by other countries including taiwan thus this paper explores the german experience of implementing a feed in tariff hereafter fit and compared it with the fit system in taiwan to illustrate the differences and similarities between these countries the results could be used as a reference for the future modification of the fit system in taiwan

the floor leverage rule for retirement the floor leverage rule is a spending and investment strategy designed for retirees who can tolerate investment risk but insist on sustainable spending the rule calls for purchasing a spending guarantee with 85 of wealth and investing the remaining 15 in equities with 3 leverage surprisingly this leverage is a tool for managing risk the authors compare the rule with some popular strategies illustrate it for a variety of retiree preferences and evaluate its historical performance

consumption and bubbles abstract we show that an unbounded number of consumption dates is necessary to support an asset pricing bubble we work in a continuous time model where the number of trade dates is infinite but the number of consumption dates is flexible and can be chosen to be uniformly bounded finite almost surely or infinite market clearing together with monotone preferences for consumption limits the properties of bubbles and provides restrictions on wealth constraints in the special case of a uniformly bounded number of consumption dates assets in positive net supply cannot have asset pricing bubbles and wealth constraints cannot allow limited arbitrage

twin picks disentangling the determinants of risk taking in household portfolios this paper investigates risk taking in the liquid portfolios held by a large panel of swedish twins we document that the portfolio share invested in risky assets is an increasing and concave function of financial wealth leading to different risk sensitivities across investors human capital which we estimate directly from individual labor income also affects risk taking positively while internal habit and expenditure commitments tend to reduce it our microfindings lend strong support to decreasing relative risk aversion and habit formation preferences furthermore heterogeneous risk sensitivities across investors help reconcile individual preferences with representative agent models

using asset allocation to protect spending the management of an educational endowment or other income producing portfolio involves two strategic decisions at the fund level asset allocation and choice of a spending rule traditionally these two decisions are linked for example to preserve capital on average but the optimal link would be more dynamic this article describes a new protective strategy that links spending and asset allocation in a way that preserves spending power in down markets but participates significantly in up markets the strategy is similar to constant proportions portfolio insurance in that part of the fund is maintained in safe assets to preserve the value needed for continued expenditures like portfolio insurance the strategy outperforms traditional strategies when markets are persistently up or persistently down but underperforms when portfolios are whipsawed by alternating ups and downs

an isomorphism between asset pricing models with and without linear habit formation we show an isomorphism between optimal portfolio selection or competitive equilibrium models with utilities incorporating linear habit formation and corresponding models without habit formation the isomorphism can be used to mechanically transform known solutions not involving habit formation to corresponding solutions with habit formation for example the constantinides 1990 and ingersoll 1992 solutions are mechanically obtained from the familiar merton solutions for the additive utility case without recourse to a bellman equation or first order conditions more generally recent solutions to portfolio selection problems with recursive utility and a stochastic investment opportunity set are readily transformed to novel solutions of corresponding problems with utility that combines recursivity with habit formation the methodology also applies in the context of hindy huang kreps 1992 preferences where our isomorphism shows that the solution obtained by hindy and huang 1993 can be mechanically transformed to dybvig s 1995 solution to the optimal consumption investment problem with consumption ratcheting this article presents a general method for solving asset pricing or portfolio selection models involving linear habit formation of the type studied by sundaresan 1989 constantinides 1990 detemple and zapatero 1991 ingersoll 1992 chapman 1998 and others the basic idea we pursue is that linear habit formation can be thought of as a redefinition of what constitutes consumption to include not only the current consumption rate but also a fictitious possibly negative consumption rate derived from past actual consumption by pricing out this fictitious consumption rate correctly the economy with linear habit formation can be mechanically transformed to an equivalent economy without habit formation this analysis simplifies and unifies existing results but also generates novel solutions for example together with the results of schroder and skiadas 1997 1999 our method produces optimal lifetime consumption and portfolio policies with preferences that combine recursive utility with habit formation under a stochastic

modeling loss aversion and reference dependence effects on brand choice based upon a recently developed multiattribute generalization of prospect theory s value function tversky and kahneman 1991 we argue that consumer choice is influenced by the position of brands relative to multiattribute reference points and that consumers weigh losses from a reference point more than equivalent sized gains loss aversion we sketch implications of this model for understanding brand choice we develop a multinomial logit formulation of a reference dependent choice model calibrating it using scanner data in addition to providing better fit in both estimation and forecast periods than a standard multinomial logit model the model s coefficients demonstrate significant loss aversion as hypothesized we also discuss the implications of a reference dependent view of consumer choice for modeling brand choice demonstrate that loss aversion can account for asymmetric responses to changes in product characteristics and examine other implications for competitive strategy

constructive consumer choice processes consumer decision making has been a focal interest in consumer research and consideration of current marketplace trends e g technological change an information explosion indicates that this topic will continue to be critically important we argue that consumer choice is inherently constructive due to limited processing capacity consumers often do not have well defined existing preferences but construct them using a variety of strategies contingent on task demands after describing constructive choice consumer decision tasks and decision strategies we provide an integrative framework for understanding constructive choice review evidence for constructive consumer choice in light of that framework and identify knowledge gaps that suggest opportunities for additional research

inefficient dynamic portfolio strategies or how to throw away a million dollars in the stock market a number of portfolio strategies followed by practitioners are dominated because they are incompletely diversified over time the payoff distribution pricing model is used to compute the cost of following undiversified strategies simple numerical examples illustrate the technique and computer generated examples provide realistic estimates of the cost of some typical policies using reasonable parameter values the cost can be substantial and should not be ignored by practitioners a section on generalizations shows how to extend the analysis to term structure models and other general models of returns this abstract was borrowed from another version of this item

a sustainable spending rate without simulation financial commentators have called for more research on sustainable spending rates for individuals and endowments holding diversified portfolios we present a forward looking framework for analyzing spending rates and introduce a simple measure stochastic present value that parsimoniously meshes investment risk and return mortality estimates and spending rates without resorting to opaque monte carlo simulations applying it with reasonable estimates of future returns we find payout ratios should be lower than those many advisors recommend the proposed method helps analysts advise their clients how much they can consume from their savings whether they can retire early and how to allocate their assets

the attribute carryover effect what the runner up option tells us about consumer choice processes the process used to differentiate a top choice from a runner up can result in a preference reversal among nonselected alternatives which we term the attribute carryover effect a series of three experiments demonstrate that a phased choice process can shift attribute preferences if the top choice is unavailable consumers with weak attribute preferences are likely to reject their explicitly identified second choice the runner up option instead these consumers choose an option that may not meet the initial screening criteria but that does share a desirable differentiating feature with the unavailable top choice judgment data indicate that this preference reversal is due to increased salience of the differentiating attribute during the last phase of the original choice which carries over into the subsequent choice these findings augment our understanding of consumer choice processes and heighten our ability to predict choice outcomes under situations in which a chosen option is unattainable

testing competitive market structures an accurate understanding of the structure of competition is important in the formulation of many marketing strategies for example in new product launch product reformulation or positioning decisions the strategist wants to know which of his competitors will be most affected and hence most likely to respond many marketing science models have been proposed to identify market structure in this paper we examine the managerial problem and propose a criterion by which to judge an identified market structure basically our criterion is a quantification of the intuitive managerial criterion that a submarket is a useful conceptualization if it identifies which products are most likely to be affected by our marketing strategies we formalize this criterion within the structure of classical hypothesis testing so that a marketing scientist can use statistical statements to evaluate a market structure identified by 1 behavioral hypotheses 2 managerial intuition or 3 market structure identification algorithms mathematically our criterion is based on probabilities of switching to products in the situation where an individual s most preferred product is not available submarkets are said to exist when consumers are statistically more likely to buy again in that submarket than would be predicted based on an aggregate constant ratio model for example product attributes e g brand form size use situations e g coffee in the morning versus coffee at dinner and user characteristics e g heavy versus light users are specified as hypotheses for testing alternate competitive structures measurement and estimation procedures are described and a convergent approach is illustrated an application of the methodology to the coffee market is presented and managerial implications of six other applications are described briefly

integration of renewable energy sources in southeast europe a review of incentive mechanisms and feasibility of investments abstract incentivizing development and deployment of renewable energy sources res but also other low carbon technologies lct has been a successful way of promoting new technologies by creating a feasible investment case and making them competitive with traditional energy sources although different incentive mechanisms exist feed in tariffs have shown to be the best model for accelerating lct development guaranteeing producers preferential prices for the produced electricity over a period of time and enabling them access to the power network to sell inject produced electricity due to these benefits feed in tariff models are the most common model for stimulating res integration in southeast europe the paper reviews the current state of preferential tariffs for res in countries of southeast europe while some countries already have significant installed res capacity others are still in the planning stage the review shows that the amount of installed capacity of a specific technology has a strong impact on the support for the future projects for same technology this comprehensive review of legislative development supporting res as well as technologies preferred in different countries of the region is supported with feasibility assessment of investing in res using the example of two different technology projects wind and photovoltaic analysing the impact of the current tariffs on the return on investment for each country of the region

seventy five years of investing for future generations university endowments invest for future generations so their strategy should reflect their long horizon we researched whether they really do behave like long term investors we examined the behav

feed in tariff and market electricity price comparison the case of cogeneration units in croatia in august 2007 the government of the republic of croatia instituted a feed in tariff system requiring the croatian electricity market operator hrote to off take the electricity produced from renewable energy sources or cogeneration units fueled by natural gas analysis of the off take electricity price range which depends on the net electrical output and electricity market trends indicates that it is more cost effective for cogeneration units greater than 1 mw to sell their electricity on the exchange market this was confirmed by developing a mathematical model to calculate the cost effectiveness ratio of a cogeneration unit this ratio represents the relation between the profit spread i e the difference between the profit generated from selling the electricity on the exchange market and the profit made from dispatching the electricity to hrote as well as the total investment costs the model can be applied for changes in certain parameters such as the net electrical output volatility and spot electricity price the monte carlo method is used to obtain the most probable cost effectiveness ratio and average future electricity price together with these two economic parameters and market price analysis it is possible to calculate and calibrate an acceptable off take electricity price

tourist destination and experience choice a choice experimental analysis of decision sequence effects abstract while many studies have investigated travel motives and modelled holiday destination choices none have directly modelled choice of type of holiday experience and how these two choices interrelate this study tests whether early exposure to geographical destination or experience type information in a decision task influences consumers final choices when choosing a holiday the study compares two choice tasks that have the same instructions and attributes but differ with respect to which attribute is exposed first and is used to label the choice options the destination name or the experience type findings show that early exposure to either attribute enhances the importance of the attribute although the effect is less pronounced for experiences than for destinations the findings are explained using the psychological notions of leader primacy complacency and induced mindset the research conducted in australia shows that sequential effects can be very important in shaping tourism consumption choices and decision making

theory of constant proportion portfolio insurance abstract we study constant proportion portfolio insurance cppi a dynamic strategy that maintains the portfolio s risk exposure a constant multiple of the excess of wealth over a floor up to a borrowing limit we use this simple rule to investigate how transaction costs and borrowing constraints affect portfolio insurance type strategies absent transaction costs cppi is equivalent to investing in perpetual american call options and is optimal for a piecewise hara utility function with a minimum consumption constraint as the multiple increases the payoffs under cppi approach those of a stop loss strategy the expected holding period return is not monotonic in the multiple and a higher expected return can be obtained under cppi than with a stop loss strategy

optimal consumption and portfolio rules with intertemporally dependent utility of consumption abstract in the usual consumption portfolio problem lifetime utility is assumed to be time additive this assumption has been criticized for failing to capture important intertemporal dependencies in utility such as intertemporal risk aversion and habit formation this paper studies the consumption portfolio problem for a class of intertemporally dependent utility functions

evaluating spending policies in a low return environment for an endowment seeking to minimize payout variability while preserving the long run health of the institution appropriate spending policy is a crucial choice we study two competing methods for setting spending policy the moving average method and the snake in the tunnel sit approach we show that the sit approach may significantly decrease the possibility of spending reductions in the short run additionally the sit approach with 3 7 bands allows for a smooth evolution of payouts over time which enhances spending predictability while preserving the endowment s real inflation adjusted long run purchasing power