a game theoretic approach for optimal time of use electricity pricing demand for electricity varies throughout the day increasing the average cost of power supply time of use tou pricing has been proposed as a demand side management dsm method to influence user demands in this paper we describe a game theoretic approach to optimize tou pricing strategies gt tou we propose models of costs to utility companies arising from user demand fluctuations and models of user satisfaction with the difference between the nominal demand and the actual consumption we design utility functions for the company and the users and obtain a nash equilibrium using backward induction in addition to a single user type scenario we also consider a scenario with multiple types of users each of whom responds differently to time dependent prices numerical examples show that our method is effective in leveling the user demand by setting optimal tou prices potentially decreasing costs for the utility companies and increasing user benefits an increase in social welfare measure indicates improved market efficiency through tou pricing

regressive sin taxes with an application to the optimal soda tax a common objection to sin taxes corrective taxes on goods that are thought to be overconsumed such as cigarettes alcohol and sugary drinks is that they often fall disproportionately on low income consumers this paper studies the interaction between corrective and redistributive motives in a general optimal taxation framework and delivers empirically implementable formulas for sufficient statistics for the optimal commodity tax the optimal sin tax is increasing in the price elasticity of demand increasing in the degree to which lower income consumers are more biased or more elastic to the tax decreasing in the extent to which consumption is concentrated among the poor and decreasing in income effects because income effects imply that commodity taxes create labor supply distortions contrary to common intuitions stronger preferences for redistribution can increase the optimal sin tax if lower income consumers are more responsive to taxes or are more biased as an application we estimate the optimal nationwide tax on sugar sweetened beverages using nielsen homescan data and a specially designed survey measuring nutrition knowledge and self control holding federal income tax rates constant our estimates imply an optimal federal sugar sweetened beverage tax of 1 to 2 1 cents per ounce although optimal city level taxes could be as much as 60 lower due to cross border shopping

brand pricing and advertising industrial organization theory posits that market structure influences a firm s opportunity to raise its product s price above its marginal cost most studies have explained the structure performance relationship in terms of the ability of firms to collude in an industry protected by barriers to entry an alternative theory is that the structure performance relationship results from leading firms relative efficiency a third explanation one that has not previously been explored is related to the positive effect of brand advertising on brand price in consumer markets the purpose of much advertising is to convince buyers that the brands they are purchasing provide the best value in some products consumers preferences for high priced brands have persisted in spite of credible evidence that competing brands are physically identical concentrated lemon juice evaporated milk and household bleach alternative brands are packaged under identical specifications by the same manufacturers cookies or buyers cannot distinguish their brand from lower priced brands in blind taste tests beer the results of structure performance studies of food manufacturing industries generally are similar to those found in other industries collins and preston 3 found that sales concentration was positively related to industry price cost margins across 32 food industries parker and connor 21 found that advertising intensity also was positively related to food industry price cost margins rogers 26 concluded that the impacts of advertising intensity and concentration on food industry price cost margins had increased between 1954 and 1977 the federal trade commission 10 imel and helmberger 14 and ravenscraft 25 similarly conclude that profit rates of food manufacturing firms reflect the structure of the markets they serve and their relative position in those markets

optimal bidding scheduling and deployment of battery systems in california day ahead energy market an optimal supply and demand bidding scheduling and deployment design framework is proposed for battery systems it takes into account various design factors such as the day ahead and real time market prices and their statistical dependency as well as the location size efficiency lifetime and charge and discharge rates of the batteries utilizing second life used batteries is also considered without loss of generality our focus is on the california independent system operator iso energy market and its two available bidding options namely self schedule bidding and economic bidding while the formulated stochastic optimization problems are originally nonlinear and difficult to solve we propose a methodology to decompose them into inner and outer subproblems accordingly we find the global optimal solutions within a short amount of computational time all case studies in this paper are based on real market data

behavioral hazard in health insurance a fundamental implication of standard moral hazard models is overuse of low value medical care because copays are lower than costs in these models the demand curve alone can be used to make welfare statements a fact relied on by much empirical work there is ample evidence though that people misuse care for a different reason mistakes or behavioral hazard much high value care is underused even when patient costs are low and some useless care is bought even when patients face the full cost in the presence of behavioral hazard welfare calculations using only the demand curve can be off by orders of magnitude or even be the wrong sign we derive optimal copay formulas that incorporate both moral and behavioral hazard providing a theoretical foundation for value based insurance design and a way to interpret behavioral nudges once behavioral hazard is taken into account health insurance can do more than just provide financial protection it can also improve health care efficiency jel codes d03 i12 i13 i30 i38

the life cycle effects of house price changes we develop a life cycle model that explicitly incorporates the dual feature of housing as both a consumption good and an investment asset our analysis indicates that the consumption and welfare consequences of house price changes on individual households vary significantly in particular the non housing consumption of young and old homeowners is much more sensitive to house price changes than that of middle aged homeowners more importantly while house price appreciation increases the net worth and consumption of all homeowners it only improves the welfare of old homeowners renters and young homeowners are worse off due to higher lifetime housing consumption costs

product differentiation and profitability an asymmetric model the purpose of this paper is to develop a model of product differentiation in which there is an asymmetry namely that some customers are easier to serve than others it turns out that profits are negatively related to difficulty of service and that profits and market share are negatively related the results of this model are used to shed light on some aspects of the collusion versus differential efficiency debate and are also compared with vertical product differentiation models copyright 1990 by blackwell publishing ltd

coordinated price maker operation of large energy storage units in nodal energy markets in this paper a new optimization framework is proposed to coordinate the operation of large price maker and geographically dispersed energy storage battery systems in a nodal transmission constrained energy market the energy storage units are assumed to be investor owned and independently operated seeking to maximize their total profit various design factors are taken into consideration such as the location size efficiency and charge and discharge rates of the energy storage units as well as the joint impact of the energy storage operations on the locational marginal prices while the formulated optimization problem is originally nonlinear and hard to solve nonlinearities are tackled both in the objective function and in the constraints and the problem is transformed into a tractable mixed integer linear program for which the global optimal solutions are found for the charge and discharge schedules of each energy storage unit both deterministic and stochastic design scenarios are addressed various case studies are presented it is observed that transmission line congestion is often but not always desirable for the coordinated storage systems locational diversity practice of arbitrage robust design self scheduling versus economic bidding and the overall power system performance are also investigated

do pharmacists buy bayer informed shoppers and the brand premium we estimate the effect of information and expertise on consumers willingness to pay for national brands in physically homogeneous product categories in a detailed case study of headache remedies we find that more informed or expert consumers are less likely to pay extra to buy national brands with pharmacists choosing them over store brands only 9 percent of the time compared to 26 percent of the time for the average consumer in a similar case study of pantry staples such as salt and sugar we show that chefs devote 12 percentage points less of their purchases to national brands than demographically similar nonchefs we extend our analysis to cover 50 retail health categories and 241 food and drink categories the results suggest that misinformation and related consumer mistakes explain a sizable share of the brand premium for health products and a much smaller share for most food and drink products we tie our estimates together using a stylized model of demand and pricing

a search cost model of obfuscation this article develops models in which obfuscation is individually rational for oligopolistic firms firms sell a homogeneous good to rational consumers who incur search costs to learn prices search costs are endogenized by allowing obfuscation firms have an unobservable action that increases the time needed to learn their price one model involves search costs convex in shopping time we show that slight convexity can dramatically alter the equilibrium price distribution a second model examines an informational linkage between current and future search costs consumers are uncertain about a component of search costs here a signal jamming mechanism can lead to equilibrium obfuscation

home equity in retirement retired homeowners dissave more slowly than renters which suggests that homeownership affects retirees saving decisions we investigate empirically and theoretically the life cycle patterns of homeownership housing and nonhousing assets in retirement using an estimated structural model of saving and housing decisions we find first that homeowners dissave slowly because they prefer to stay in their house as long as possible but cannot easily borrow against it second the 1996 2006 housing boom significantly increased homeowners assets these channels are quantitatively significant without considering homeownership retirees net worth would be 28 44 lower depending on age

housing wealth and consumption growth evidence from a large panel of households this article uses a large panel dataset that tracks the housing wealth and credit card spending of 12 793 individuals in hong kong to study the relationship between housing wealth and household consumption i identify a significant effect of housing wealth on consumption a pure wealth effect can explain part of the sensitivity households with multiple houses have much stronger consumption responses consistent with a relaxation of the credit constraints mortgage refinancing significantly increases households consumption sensitivities however for the majority of the households that do not refinance consumption sensitivity appears to be due to a reduction in precautionary saving jel e21 g21

optimal demand bidding for time shiftable loads time shiftable loads have recently received an increasing attention due to their role in creating load flexibility and enhancing demand response and peak load shaving programs in this paper we seek to answer the following question how can a time shiftable load that itself may comprise of several smaller time shiftable subloads submit its demand bids to the day ahead and real time markets so as to minimize its energy procurement cost answering this question is challenging because of the inter temporal dependencies in choosing the demand bids for time shiftable loads and due to the coupling between demand bid selection and time shiftable load scheduling problems nevertheless we answer the above question for different practical bidding scenarios and based on different statistical characteristics of practical market prices in all cases closed form solutions are obtained for the optimal choices of the price and energy bids the bidding performance is then evaluated in details by examining several case studies and analyzing actual market price data

the value of quality product quality is probably undervalued by firms because there is little consensus about appropriate measures and methods to research quality we suggest that published ratings of a product s quality are a valid source of quality information with important strategic and financial impact we test this thesis by an event analysis of abnormal returns to stock prices of firms whose new products are evaluated in the wall street journal quality has a strong immediate effect on abnormal returns which is substantially higher than that for other marketing events assessed in prior studies moreover there are some important asymmetries in the effect we discuss the research managerial investing and policy implications

who participates in household scanning panels we compare two widely used household scanning panels maintained by the nielsen company and information resources inc to a random sample of the u s population results indicate that the demographic characteristics of the random sample more closely match the census bureau data than the household scanning panels we also show that after controlling for demographic differences participants in the household scanning panels are slightly more price sensitive than participants in the random sample the two household scanning panels yield similar results in relation to one another which suggests that the household scanning panels may suffer from sample selection and participation biases

booms and busts in the uk housing market the often volatile behaviour of uk house prices between 1957 and 1994 is analysed in an annual econometric model theory suggests that financial liberalisation of mortgage markets in the 1980s should have led to notable shifts in house price behaviour the evidence supports the predictions of theory suggesting shifts took place in wealth effects as in the consumption function and that real interest rates and income expectations became more important the presence of transactions costs suggests important nonlinearities in house price dynamics the paper also contains an explicit econometric treatment of expectations demography supply spillovers from the rented sector and of composition biases in the official house price index

price competition under limited comparability this paper studies market competition when firms can influence consumers ability to compare market alternatives through their choice of price formats we introduce random graphs as a tool for modelling limited comparability of formats our main results concern the interaction between firms equilibrium price and format decisions and its implications for industry profits and consumer switching rates we show that narrow regulatory interventions that aim to facilitate comparisons may have adverse consequences for consumer welfare finally we argue that our limited comparability approach provides a new perspective into the phenomenon of product differentiation

uninformed votes information effects in presidential elections theory recent scholarship has emphasized the potential importance of cues information shortcuts and statistical aggregation processes in allowing relatively uninformed citizens to act individually or collectively as if they were fully informed hypotheses uninformed voters successfully use cues and information shortcuts to behave as if they were fully informed failing that individual deviations from fully informed voting cancel out in a mass electorate producing the same aggregate election outcome as if voters were fully informed methods hypothetical fully informed vote choices are imputed to individual voters using the observed relationship between political information and vote choices for voters with similar social and demographic characteristics estimated by probit analysis of data from national election study surveys conducted after the six most recent united states presidential elections results both hypotheses are clearly disconfirmed at the individual level the average deviation of actual vote probabilities from hypothetical fully informed vote probabilities was about ten percentage points in the electorate as a whole these deviations were significantly diluted by aggregation but by no means eliminated incumbent presidents did almost five percentage points better and democratic candidates did almost two percentage points better than they would have if voters had in fact been fully informed

price maker bidding in day ahead electricity market for a retailer with flexible demands this study develops a short term planning model to determine the bidding curves on a day ahead market for a price maker retailer with flexible power demand it concerns the interactions between the spot price and the flexible demand both conditional value at risk and volume deviation risk are taken into account a numerical study using the data from the nordic electricity market is performed to investigate the influence of risk factors on the retailer s profit risk levels average spot price and total consumption three types of price elasticity are compared to show that the retailer can benefit from the flexibility in demand side in some cases the flexibility also leads to lower spot prices so that the customers in real time price based demand response can face a lower electricity price for per unit power consumption

the uk consumption boom of the late 1980s aggregate implications of microeconomic evidence two competing explanations of the uk consumer boom in the late 1980s are the financial liberalisation imperfect housing market hypothesis of muellbauer and murphy and the expectations hypothesis of king we use 15 years of family expenditure surveys and cohort analysis to investigate to what extent these two hypotheses agree with observed changes in consumption patterns we find that the housing markets explanation accounts for much of the increase by older cohorts but cannot be reconciled with the marked rise in expenditure levels of younger households a simple simulation exercise shows instead that the expectations hypothesis can generate increases of expenditure by young consumers of the magnitude observed in our data

wealth inequality and intergenerational links previous work has had difficulty generating household saving behaviour that makes the distribution of wealth much more concentrated than that of labour earnings and that makes the richest households hold onto large amounts of wealth even during very old age i construct a quantitative general equilibrium overlapping generations model in which parents and children are linked by accidental and voluntary bequests and by earnings ability i show that voluntary bequests can explain the emergence of large estates while accidental bequests alone cannot and that adding earnings persistence within families increases wealth concentration even more i also show that the introduction of a bequest motive generates lifetime savings profiles more consistent with the data

a real estate boom with chinese characteristics abstract chinese housing prices rose by over 10 percent per year in real terms between 2003 and 2014 and are now between two and ten times higher than the construction cost of apartments at the sa

the morphology of price dispersion this paper is a study of the shape and structure of the distribution of prices at which an identical good is sold in a given market and time period we find that the typical price distribution is symmetric and leptokurtic with a standard deviation between 19 and 36 only 10 of the variance of prices is due to variation in the expensiveness of the stores at which a good is sold while the remaining 90 is due in approximately equal parts to differences in the average price of a good across equally expensive stores and to differences in the price of a good across transactions at the same store we show that the distribution of prices that households pay for the same bundle of goods is approximately normal with a standard deviation between 9 and 14 half of this dispersion is due to differences in the expensiveness of the stores where households shop while the other half is mostly due to differences in households choices of which goods to purchase at which stores we find that households with fewer employed members pay lower prices and do so by visiting a larger number of stores rather than by shopping more frequently

life cycle prices and production we use scanner data and time diaries to document how households substitute time for money through shopping and home production we document substantial heterogeneity in prices paid for identical goods for the same area and time with older households shopping the most and paying the lowest prices doubling shopping frequency lowers a good s price by 7 to 10 percent we estimate the shopper s price of time and use this series to estimate an elasticity of substitution between time and goods in home production of roughly 1 8 the observed life cycle time allocation implies a consumption series that differs markedly from expenditures

homeowner borrowing and housing collateral new evidence from expiring price controls i empirically analyze how changes to the collateral value of real estate assets affect homeowner borrowing behavior while previous research has documented a positive relationship between house prices and home equity based borrowing a key empirical challenge has been to disentangle the role of collateral constraints from that of wealth effects in generating this relationship to isolate the role of collateral constraints i exploit the expiration of resale price controls on owner occupied housing units created through an inclusionary zoning regulation in montgomery county maryland because the duration and stringency of the price controls are set by formula and known in advance their expiration has no effect on expected lifetime wealth but directly shocks collateralized borrowing capacity using data on all transactions and loans secured against every property in the county from 1997 2012 i estimate that the marginal propensity to borrow out of increases in housing collateral induced by expiring price controls is between 0 04 and 0 13 the magnitude of this effect is correlated with a homeowner s initial leverage and indicates that a significant fraction of the additional borrowing arising from house price increases is due to relaxing collateral constraints additional analysis of residential investment and ex post loan performance further suggests that borrowers used at least some portion of the extracted funds to finance current consumption and investment expenditures these results highlight the importance of collateral constraints for homeowner borrowing and suggest a potentially important role for house price growth in driving aggregate consumption

family labor supply and asset returns abstract we study how shocks to wages and asset prices affect consumption and labor supply decisions of two earner households in a life cycle framework with housing and flexible preferences we provide a micro foundation of the wealth effects on consumption and labor supply we find evidence for non separability between non durable consumption housing services and hours of work the results also highlight the importance of family labor supply in understanding how households respond to shocks to financial and housing markets

the bidder s curse reply in our paper the bidder s curse malmendier and lee 2011 we introduce a novel research design to identify overbidding on ebay we compare the final price in an auction to the fixed price at which the same item was simultaneously available on ebay during the sample period overbidding was surprisingly prevalent affecting around 40 50 percent of auctions across different datasets the overbidding percentages ranged from 0 to 72 percent for different item categories the paper shows that such widespread overbidding is generated by a small number of bidders auctions emerge as a tool to fish for fools whose bids generate high final prices cf malmendier and szeidl 2012 our research design has been used or discussed in a number of papers 1 including schneider 2016 schneider applies the comparison to another dataset of dvd auctions he finds a very similar range of overbidding percentages between 0 percent and 69 percent without shipping cost and 0 percent to 83 percent with shipping cost depending on the movie and 23 percent on average the emphasis of the paper however is different schneider points to users inability to inspect all relevant ebay listings of an item e g to click page down or next page but also to use all relevant search terms he proposes that these failings indicate that traditional

income and wealth effects on private label demand evidence from the great recession we measure the causal effects of income and wealth on the demand for private label products prior research suggests that these effects are large and in particular that private label demand rises during recessions our empirical analysis is based on a comprehensive household level transactions database matched with price information from store level scanner data and wealth data based on local house value indices the great recession provides a key source of the variation in our data showing a large and geographically diverse impact on household incomes over time we estimate income and wealth effects using within variation of income at the household level and wealth at the zip code level our estimates can be interpreted as income and wealth effects consistent with a consumer demand model based on utility maximization we establish a precisely measured negative effect of income on private label shares the effect of wealth is negative but not precisely measured however the estimated effect sizes

a model of housing in the presence of adjustment costs a structural interpretation of habit persistence building on the model of sanford j grossman and guy laroque 1990 this paper provides a model of household consumption and portfolio allocation which incorporates the role of housing as both a consumption good and as a component of wealth the model captures the following features of the household s problem a utility depends probably nonseparably on two distinct goods nondurable consumption and housing b nondurable consumption can be adjusted cost lessly but housing is subject to an adjustment cost c households face housing price risk in the sense that the relative price of housing varies over time and d in addition to the house the household can invest in a wide variety of financial assets this single reasonably tractable model generates testable implications for portfolio allocation risk aversion asset pricing and the dynamics of nondurable consumption because the original grossman and laroque model considers a utility function in which the durable good is the sole argument and thus abstracts completely from nondurable consump tion their analysis cannot address either the potential spillover effects of the adjustment costs of the durable good on the dynamics of nondurable consumption or the implications for portfolio allocation of housing risk arising from variation in the relative price of housing in addition to generating implications for issues on which the original grossman and laroque model was silent the housing model delivers a strikingly different message concerning asset pricing that is in contrast to the grossman and laroque result that the consumption based capital asset pricing model consumption capm fails the housing model implies that the consumptioncapm holds we assume that the household incurs an adjustment cost when altering the holding of the dura ble good or house although financial assets can be bought and sold costlessly consumption of the nondurable good can also be adjusted costlessly when choosing a new house the consumer takes into account the fact that the consumption of housing services will be constant at the new level until the subsequent stopping time when it is again worthwhile to incur the adjustment cost thus the home purchase decision is endogenous and fully rational but because of the adjustment cost infrequent in this continuous time setting the household s decision process has a recursive structure at each instant the household first decides whether it is optimal to sell the house immediately on those rare occasions that it is optimal to incur the adjustment cost the household sells the old house and buys a new one instantaneously if the household decides that it is not optimal to sell the house immediately it then determines its optimal holdings of financial assets and optimal level of nondurable consumption conditional on the current housing stock in essence because of the adjustment costs associated with the durable good the current

a simple theory of advertising as a good or bad our analysis treats advertisements and the goods advertised as complements in stable metautility functions and generates new results for advertising by building on and extending the general analysis of complements by assimilating the theory of advertising into the theory of complements we avoid the special approaches to advertising found in many studies that place obstacles in the way of understanding the effects of advertising we also use this approach to evaluate advertising from a welfare perspective whether there is excessive or too little advertising depends on several variables the effects on consumer utility the degree of competition in the market for advertised goods the induced changes in prices and outputs of advertised goods and whether advertising is sold to consumers

how do consumers respond to house price declines abstract movements in house prices and consumer spending are closely correlated in many developed nations much debate exists on whether this relationship is causal arising from either wealth effects or via borrowing constraints this paper uses a unique survey question on consumer responses to house price falls to explain the relationship between house price movements and consumer spending among households in the united kingdom 30 of households report they would cut back consumption as a direct response to house price falls households who reported they were borrowing constrained were much more likely to report they would cut consumption

booms and busts consumption house prices and expectations over much of the past 25 years house price and consumption growth have been closely synchronized three main hypotheses for this have been proposed increases in house prices raise household wealth and so their consumption house price growth reduces credit constraints by increasing the collateral available to homeowners and house prices and consumption are together influenced by common factors using microeconomic data we find that the relationship between house prices and consumption is stronger for younger than older households contradicting the wealth channel we suggest that common causality has been the most important factor linking house prices and consumption

optimal bidding strategies for hydro electric producers a literature survey in a competitive environment with bid based markets power generation companies desire to develop bidding strategies that maximize their revenue in this paper we ask what approaches and methodologies have been used to model the bidding problem for hydro electric producers we present the problem s developments over time and through reviewing different variants of the problem progressively build to the case in which the agent is a price maker hydro electric producer in each variant of the bidding problem we examine how the approaches used to solve it may or may not be applicable to other variants last for the price maker hydro electric producer s bidding problem we recognize the most recent developments and illuminate a path for future efforts

is consumption growth consistent with intertemporal optimization evidence from the consumer expenditure survey in this paper we show that some of the predictions of models of consumer intertemporal optimization are in line with the patterns of nondurable expenditure observed in u s household level data we propose a flexible specification of preferences that allows multiple commodities and yields empirically tractable equations we estimate preference parameters using the only u s micro data set with complete consumption information we show that previous rejections can be explained by the simplifying assumptions made in previous studies we also show that results obtained using good consumption or aggregate data can be misleading

is the uk balance of payments sustainable the uk current account deficit john muellbauer and anthony murphy the uk has a large and persistent current account deficit policy makers argue that the deficit is easily financed temporary and therefore not a sign of structural weakness we examine the conditions in which it is appropriate for a country to overspend its current income with the intention of repaying loans out of future income these include an increase in international capital mobility larger net holdings of foreign assets and expectations of faster productivity growth all three apply to the uk so official reasoning is in part correct even so for several decades there has been a trend deterioration of uk trade performance most markedly in manufacturing and we detect no underlying improvement in the 1980s we highlight structural deficiencies in both demand and supply on the demand side we show the importance of rising house prices and easier consumer credit in fuelling the consumer boom to an unwarranted extent this we trace to unjustifiable subsidies to house ownership on the supply side we stress vastly inadequate investment in skill formation education and physical capital these structural deficiencies lead us to a less optimistic view than official policy we draw the policy lessons for the uk and consider whether continental europe will face similar problems as financial markets are liberalized

humps and bumps in lifetime consumption in this article we argue that the life cycle model that allows demographics to affect household preferences and relaxes the assumption of certainty equivalence can generate hump shaped consumption profiles over age that are very similar to those observed in household level data sources and in particular match the differences in shape across different education groups liquidity constraints or myopia are not required to explain the empirical features of observed life cycle patterns

shrouded attributes consumer myopia and information suppression in competitive markets bayesian consumers infer that hidden add on prices e g the cost of ink for a printer are likely to be high prices if consumers are bayesian firms will not shroud information in equilibrium however shrouding may occur in an economy with some myopic or unaware consumers such shrouding creates an inefficiency which firms may have an incentive to eliminate by educating their competitors customers however if add ons have close substitutes a curse of debiasing arises and firms will not be able to profitably debias consumers by unshrouding add ons in equilibrium two kinds of exploitation coexist optimizing firms exploit myopic consumers through marketing schemes that shroud high priced add ons in turn sophisticated consumers exploit these marketing schemes it is not possible to profitably drive away the business of sophisticates it is also not possible to profitably lure either myopes or sophisticates to nonexploitative firms we show that informational shrouding flourishes even in highly competitive markets even in markets with costless advertising and even when the shrouding generates allocational inefficiencies

self scheduling of large consumers with second order stochastic dominance constraints this paper develops a decision making framework for mid term scheduling problems of the large industrial consumers the proposed approach is based upon the recently introduced class of stochastic programming problems established by the concept of second order stochastic dominance ssd in this paper it is assumed that the electricity price and the rate of availability unavailability of the generating unit forced outage rate are the sources of uncertainty in the decision making problem in the developed ssd constrained stochastic programming problem the consumer risk is managed by minimization of the pool procurement as the objective function and economic issues e g cost minimization are considered in the sd constraint furthermore while most approaches optimize the cost subject to an assumed demand profile our method enforces the electricity consumption to follow an optimum profile for mid term time scheduling i e three months 12 weeks so that the total production will remain constant simulation results for a typical cement factory as an industrial consumer and comparison to a mean risk approach with cvar risk measure revealed the interesting results and benefits of the proposed approach

health insurance for humans information frictions plan choice and consumer welfare traditional models of insurance choice are predicated on fully informed and rational consumers protecting themselves from exposure to financial risk in practice choosing an insurance plan is a complicated decision often made without full information in this paper we combine new administrative data on health plan choices and claims with unique survey data on consumer information to identify risk preferences information frictions and hassle costs our additional friction measures are important predictors of choices and meaningfully impact risk preference estimates we study the implications of counterfactual insurance allocations to illustrate the importance of distinguishing between these micro foundations for welfare analysis

tightening belts to buy a home consumption responses to rising housing prices in urban china abstract this paper measures the impact of housing price changes on household consumption at the city level using the universe of credit and debit card transactions in china from 2011 to 2013 in sharp contrast to the literature on the us housing market our analysis shows a large and negative housing price elasticity of consumption a 10 increase in housing prices would lead to a 9 reduction in non housing spending we argue that the negative elasticity is driven by the combination of a strong investment incentive in housing and heavy borrowing constraints faced by households this finding is corroborated by the fact that households increase their savings as housing prices increase our analysis suggests that the negative impact of housing price increases on consumption was an important factor behind the low growth rate in household consumption relative to the growth of disposal income during the sample period

housing wealth and consumption evidence from geographically linked microdata rising home values also raise the cost of living offsetting their impact on consumption however additional home equity collateral can loosen borrowing constraints increasing spending for households that value their current endowment of housing highly i use geographically linked microdata to exploit regional heterogeneity in housing markets and identify the causal effect of house price fluctuations on consumer spending a 1 increase in home values leads to a 0 047 increase in spending for homeowners but a negligible response for renters results reflect large responses among credit constrained households suggesting looser borrowing constraints are a primary driver of the mpc out of housing wealth

price maker economic bidding in two settlement pool based markets the case of time shiftable loads in this paper a new scenario based stochastic optimization framework is proposed for price maker economic bidding in day ahead and real time markets the presented methodology is general and can be applied to both demand and supply bids that is no restrictive assumptions are made on the characteristics of the pool and its agents however our focus is on the operation of time shiftable loads with deadlines because they play a central role in creating load flexibility and enhancing demand response and peak load shaving programs both basic and complex time shiftable load types are addressed where the latter includes time shiftable loads that are uninterruptible have per time slot consumption limits or ramp constraints or comprise several smaller time shiftable subloads four innovative analytical steps are presented in order to transform the originally nonlinear and hard to solve price maker economic bidding optimization problem into a tractable mixed integer linear program accordingly the global optimal solutions are found for the price and energy bids within a relatively short amount of computational time a detailed illustrative case study along with multiple case studies based on the california energy market data are presented it is observed that the proposed optimal price maker economic bidding approach outperforms optimal price maker self scheduling as well as even load distribution

beyond revealed preference choice theoretic foundations for behavioral welfare economics we propose a broad generalization of standard choice theoretic welfare economics that encompasses a wide variety of nonstandard behavioral models our approach exploits the coherent aspects of choice that those positive models typically attempt to capture it replaces the standard revealed preference relation with an unambiguous choice relation roughly x is strictly unambiguously chosen over y written xp y iff y is never chosen when x is available under weak assumptions p is acyclic and therefore suitable for welfare analysis it is also the most discerning welfare criterion that never overrules choice the resulting framework generates natural counterparts for the standard tools of applied welfare economics and is easily applied in the context of specific behavioral theories with novel implications though not universally discerning it lends itself to principled refinements

ask your doctor direct to consumer advertising of pharmaceuticals we measure the impact of direct to consumer television advertising dtca by drug manufacturers our identification strategy exploits shocks to local advertising markets generated by the political advertising cycle and a regulatory intervention affecting a single product we find evidence of significant business stealing effects among branded advertised drugs in addition we show positive spillovers from drug advertisements to non advertised competitors in the same class we decompose the effect and show it is primarily due to new customers finally we provide evidence that dtca is cost effective from a societal standpoint in our setting

cellular service demand biased beliefs learning and bill shock by april 2013 the fcc s recent bill shock agreement with cellular carriers requires consumers be notied when exceeding usage allowances will the agreement help or hurt consumers to answer this question we estimate a model of consumer plan choice usage and learning using a panel of cellular bills our model predicts that the agreement will lower average consumer welfare by 2 per year because rms will respond by raising monthly fees our approach is based on novel evidence that consumers are inattentive to past usage meaning that bill shock alerts are informative and advances structural modeling of demand in situations where multipart taris induce marginal price uncertainty additionally our model estimates show that an

the spending and debt response to minimum wage hikes abstract immediately following a minimum wage hike household income rises on average by about 250 per quarter and spending by roughly 700 per quarter for households with minimum wage workers most of the spending response is caused by a small number of households who purchase vehicles furthermore we find that the high spending levels are financed through increases in collateralized debt our results are consistent with a model where households can borrow against durables and face costs of adjusting their durables stock jel d12 d14 d91 j38

houses as atms mortgage refinancing and macroeconomic uncertainty we estimate a structural model of household liquidity management in the presence of long term mortgages households face counter cyclical idiosyncratic labor income uncertainty and borrowing constraints which aect optimal choices of leverage precautionary saving in liquid assets and illiquid home equity debt repayment mortgage renancing and default taking the observed historical path of house prices aggregate

inflation at the household level abstract we use scanner data to estimate inflation rates at the household level households inflation rates have an annual interquartile range of 6 2 9 0 percentage points most of the heterogeneity comes not from variation in broadly defined consumption bundles but from variation in prices paid for the same types of goods lower income households experience higher inflation but most cross sectional variation is uncorrelated with observables households deviations from aggregate inflation exhibit only slightly negative serial correlation almost all variability in a household s inflation rate comes from variability in household level prices relative to average prices not from variability in aggregate inflation

strategic it investments the impact of switching cost and declining it cost the declining cost of information technology it over time provides the later entrant in information intensive industries a cost advantage on the other hand the earlier entrant has the potential to build and retain its market share if consumers incur a cost in switching to the later entrant we investigate the impact of a decline in the it cost and the switching cost on it investment strategies of firms we find that a declining it cost always hurts the early entrant s profit the early entrant may assume an aggressive investment strategy or a defensive investment strategy in response to a decline in the it cost depending on whether the switching cost relative to the extent of decline in the it cost is high or low respectively a decline in it cost also hurts the later entrant s profit if the switching cost is high a surprising result is that when the decline in the it cost is higher than a critical value a higher switching cost increases consumer surplus when firms control the switching cost the early entrant increases its investment in quality and switching cost and maintains its quality and its market share leadership irrespective of the extent of decline in the it cost

house prices and consumer spending recent empirical work shows large consumption responses to house price movements this is at odds with a prominent theoretical view which using the logic of the permanent income hypothesis argues that consumption responses should be small we show that in contrast to this view workhorse models of consumption with incomplete markets calibrated to rich cross sectional micro facts actually predict large consumption responses in line with the data to explain this result we show that consumption responses to permanent house price shocks can be approximated by a simple and robust rule of thumb formula the marginal propensity to consume out of temporary income times the value of housing in our model consumption responses depend on a number of factors such as the level and distribution of debt the size and history of house price shocks and the level of credit supply each of these effects is naturally explained with our simple formula

a closer look at demand bids in california iso energy market one year of demand bids in the california energy market are analyzed and observations are reported on type size shape and other characteristics of the bids the implications of these observations the underlying causes and the potentials to improve demand bids by exploiting load flexibility are discussed

the product space revisited china s trade profile the concept of product space has encountered broad interest within the development community as an analytical tool against which to assess countries potential to diversify their production and export structures it has received far less attention in the economics literature and its assumptions and building blocks have not been put under scrutiny this paper assesses whether exclusive reliance on export data in product space analysis may limit its value as a tool assessing country capabilities reliance on net trade flows to account for horizontal intra industry trade and on unit values to capture within product differentiation changes the features of the product space based on a highly detailed data set of both trade value and volume and spanning over 144 countries the amended product space put forth in this paper shows that china has indeed expanded its trade profile to now occupy also product areas that are typically associated with higher income countries however china s remarkable success in expanding horizontally within the product space is strongly qualified by the introduction of the vertical dimension which shows the country to be occupying mostly the low unit value segment of product categories more akin to the typical trade profile of a developing country

pricing exit and location decisions of firms evidence on the role of debt and operating efficiency abstract we compare pricing and exit decisions of discounters across the business cycle cities containing high debt and or low efficiency firms display higher prices during non recession years during recessions prices increase in cities with less efficient incumbents but decrease in cities with a mix of high and low debt firms high debt firms are more likely to exit cities with lower prices and high debt exiting firms are more likely to be efficient apparently low debt firms strategically lower prices during recessions to force exit of efficient financially constrained rivals weaker competitors face another cost new entrants locate closer

competition and product quality in the supermarket industry this article analyzes the effect of competition on a supermarket firm s incentive to provide product quality in the supermarket industry product availability is an important measure of quality using u s consumer price index microdata to track inventory shortfalls i find that stores facing more intense competition have fewer shortfalls competition from walmart the most significant shock to industry market structure in half a century decreased shortfalls among large chains by about a third the risk that customers will switch stores appears to provide competitors with a strong incentive to invest in product quality

product differentiation search costs and competition in the mutual fund industry a case study of s p 500 index funds we investigate the role that non portfolio fund differentiation and information search frictions play in creating two salient features of the mutual fund industry the large number of funds and the sizeable dispersion in fund fees in a case study we find that despite the financial homogeneity of s p 500 index funds this sector exhibits the fund proliferation and fee dispersion observed in the broader industry we show how extra portfolio mechanisms explain these features these mechanisms also suggest an explanation for the puzzling late 1990s shift in sector assets to more expensive and often newly entered funds an influx of highinformation cost novice investors

fiscal incentives and policy choices of local governments evidence from china abstract this paper examines how fiscal incentives affect the policy choices of local governments in the context of china based on exogenous changes in the intergovernmental revenue sharing scheme we construct a simulated instrumental variable to resolve the endogeneity problem we find evidence that local governments shifted their efforts from fostering industrial growth to urbanizing china i e to developing the real estate and construction sectors when their retention rate of enterprise tax revenue was reduced the increase from the new revenue source compensated for half of the losses in revenue that resulted from the reassignment of fiscal rights the reassignment had also the effect of retarding the industrial growth of domestically owned firms in particular

price maker self scheduling in a pool based electricity market a mixed integer lp approach this paper addresses the self scheduling problem faced by a price maker to achieve maximum profit in a pool based electricity market an exact and computationally efficient mixed integer linear programming milp formulation of this problem is presented this formulation models precisely the price maker capability of altering market clearing prices to its own benefits through price quota curves no assumptions are made on the characteristics of the pool and its agents a realistic case study is presented and the results obtained are analyzed in detail

china s mobility barriers and employment allocations china s hukou system imposes two main barriers to population movements agricultural workers get land to cultivate but are unable to trade it in a frictionless market social transfers education health etc are conditional on holding a local hukou we show that the land policy leads to over employment in agriculture and it is the more important barrier to industrialization effective land tenure guarantees and a perfect competitive rental market would correct this inefficiency the local restrictions on social transfers favour rural enterprises over urban employment with a relatively smaller impact on industrialization

do house prices drive consumption growth the coincident cycles of house prices and consumption in the uk this paper uses a realistic structural lifecycle model of consumption and housing decisions to understand how data might distinguish different mechanisms that explain the correlation between house prices and consumption the model includes price and earnings shocks estimated from data the latter including aggregate and idiosyncratic components and incorporates realistic features of the uk mortgage market we simulate the model using more than 30 years of realized shocks and under counterfactual scenarios our results confirm the intuition of earlier studies house price shocks should have a larger effect on the consumption of older households and earnings shocks on young households

price and quality components of imports of food products into the uk this paper analyses the principal factors responsible for the growth in the value of imports of the uk food sector during the period 1985 90 on the basis of estimates of translog multilateral price indices it assesses the relative contribution of changes in the quality of imported products and factors other than quality to growth in import values of food products the main conclusion is that growth in quality appears to be the principal reason for the growth in unit values of imports and the trade deficit incurred by the food manufacturing sector