using real option analysis for highly uncertain technology investments the case of wind energy technology this study examines the feasibility of using a theoretical model and empirical analysis methods to value renewable energy re investment from perspective of real option analysis roa based on use of a roa approach the re value is evaluated with respect to its ability to conform to the main sensitivity analysis of re investment as well as an empirical method devised to value re investment by using actual data the economic intuitiveness underlying the decision making process for re investment is elucidated while empirical analysis is performed to demonstrate the effectiveness of the options value embedded in current development planning in taiwan for wind energy in addition to revealing the advantages of re development when considering real option analytical results indicate that roa is a highly effective means of quantifying how investment planning uncertainty including managerial flexibility influences re development besides evaluating the value of current re investment this study demonstrates that results of the theoretical model empirical analysis and sensitivity analysis correlate well with each other restated the value of developing re increases when increasing the underlying price time to maturity risk free rate and volatility conversely the value of developing re decreases when increasing the exercise price

an analysis of feed in tariff remuneration models implications for renewable energy investment recent experience from around the world suggests that feed in tariffs fits are the most effective policy to encourage the rapid and sustained deployment of renewable energy there are several different ways to structure a fit policy each with its own strengths and weaknesses this paper presents an overview of seven different ways to structure the remuneration of a fit policy divided into two broad categories those in which remuneration is dependent on the electricity price and those that remain independent from it this paper examines the advantages and disadvantages of these different fit models and concludes with an analysis of these design options with a focus on their implications both for investors and for society

european union commitment towards res market penetration from the first legislative acts to the publication of the recent guidelines on state aid 2014 2020 during the last three decades the european union eu commitment towards the renewable energy sources res market penetration has been very complex involving several aspects pertaining to the economic and political action of member states this paper seeks to overview the historical development of the legislative eu framework including a description of the main financial programmes established and managed by the eu directorates general moreover the work will proceed with the picture of some investment funds ad hoc created for res undertakings and managed by the european investment bank eib in collaboration with the eu or other foreign bank institutes the delicate matter of state aid is discussed paying particular attention to the transition from 1999 to the recent eu guidelines 2014 2020 as these wider scopes could lead to an effective and well functioning european energy single market focusing the attention on three case studies we have produced final remarks on the correct functioning of the eu political framework giving attention to important improvements needed at infrastructural level the eu awareness of the power grid limits that are currently recorded in europe has lead to further reforms of the legislation as shown by the new eu guidelines that will probably support member states in dealing with the infrastructure challenge

should renewable energy policy be renewable political flexibility brings about trade offs for policy makers aiming to support the deployment of renewable energy sources res on the one hand it allows incorporating new information on ex ante uncertain benefits and costs of res policy on the other hand it may deter res investments this paper scrutinizes how these trade offs play out economically and politically when res policy makers choose the degree of flexibility as well as the instruments to implement flexibility the analysis builds on a theoretical framework distinguishing between flexibility by design and by adjustment it is complemented by a discussion of three case studies res support schemes in germany and the united kingdom and the eu emissions trading scheme theoretical as well as empirical results suggest that the politically chosen degree of flexibility by policy design may be sub optimally low in contrast flexibility by policy adjustment is often excessively high

export product diversification and co2 emissions contextual evidences from developing and developed economies abstract ascertaining cleaner production and sustainability is a major issue in the developed and developing world income and international trade are the predominant factors behind this this article explores the heterogeneous impacts of export product diversification extensive margin and intensive margins on the co2 emissions for developing and developed countries to this end the authors analyze the annual data of variables from 1971 to 2014 and employ unrestricted fixed effects and system gmm to solve the research problem the empirics suggest that all three indicators of export diversification significantly reduce co2 emissions in 63 developed and developing countries as a global sample the fixed effect models reveal that product diversification and intensive margin have a negative and significant impact in developed economies the negative impacts of product diversification show that economic sophistication is an important tool to reduce emissions further the chow test proved the statistical difference between developed and developing economies which contributes to policy recommendations based on the empirical outcomes the study suggests innovative policies for cleaner production and industrial manufacturing purposes making the policies more effective in achieving sustainable development goals sdgs

learning from private and public observations of othersʼ actions we study how a continuum of agents learn about disseminated information by observing others actions every period each agent observes a public and private noisy signal centered around the aggregate action taken by the population the public signal represents an endogenous aggregate variable such as a price or a quantity the private signal represents the information gathered through private communication and local interactions we identify conditions such that the average learning curve is s shaped learning is slow initially intensifies rapidly and finally converges slowly to the truth we show that increasing public information always slows down learning in the long run and under some conditions reduces welfare lastly optimal diffusion of information requires that agents strive to be different agents need to be rewarded for choosing actions away from the population average

eu renewable energy support policy faith or facts the recent eu commission proposal for promoting the supply of power from renewable energy sources was originally based on a pan european harmonised tradable green certificate tgc scheme we suggest on the basis of a multi disciplinary analysis that a pan eu tgc system is not the way forward for europe it is vital that the commission and the majority of member states avoids implementation of such policy designs put forward by a coalition of vested interests they should instead look at and act upon the available evidence from those countries that have experimented with tgcs e g flanders uk and sweden and design policies that stand a better chance of meeting the criteria of effectiveness efficiency and equity in particular the policies must enable eu to meet the immense innovation industrialisation challenge by inducing the development of a capital goods industry that can eventually diffuse a broad range of technologies that use renewable energy sources only then we can acquire an ability to implement an industrial revolution in the energy system in a way that broadly meets the criteria of effectiveness and dynamic efficiency

a historical review of promotion strategies for electricity from renewable energy sources in eu countries abstract the core objective of this paper is to elaborate on historically implemented promotion strategies of renewable energy sources and the associated deployment within the european electricity market hence at a first glance the historic development of renewable energy sources in the electricity res e sector is addressed on member state and on sectoral level as well as consequently discussed according to available res e potentials and costs the specific focus of this paper are promotion strategies for res e options as they are the key driver of an efficient and effective res e deployment therefore the paper depicts the main types of different promotion schemes and their properties additionally several cases studies of different european member states show an in depth analysis of the different res e promotion schemes in this context special emphasises are put on the question of effective and efficient promotion scheme designs of different res e technologies generally conducted research led to the conclusion that technology specific financial support measures of res e performed much more effective and efficient than others did hence it is not all about the common question of feed in tariffs vs quota systems based on tradable green certificates but more about the design criteria of implemented res e support schemes

considering the investment decisions with real options games approach abstract the mix of games theory with the real options has been a dynamic range of exploration in the most recent decade the engaging quality of the specialists for displaying aggressive speculation choices by blending ideas from both hypotheses is on account of a venture choice in a focused business sector can be seen in its substance as a game between firms in this paper we expand a model to consider finite horizon real option games under incomplete information with various parameters in incomplete information games firms actions express significant information about profitability to contestants the encapsulation of this information proposed original blocks in models with strategic interactions this is because of circularity where best exercise decisions are based on previous decisions taken which at a given time are quiet to be mentioned because about the dynamic programming principle we expand an extended version of the least squares monte carlo algorithm to confront these results the model can aid in understanding the relation between strategic optionality and information besides how this influences the best decision policy and its value results we find the informational feature is of great significance for firms best decision policy and optimization of project values

information revelation through option exercise in many real world situations agents must formulate option exercise strategies with imperfect information in such a setting agents may infer the private signals of other agents through their observed exercise strategies the building of an office building the drilling of an exploratory oil well and the commitment of a pharmaceutical company toward the research of a new drug all convey private information to other market participants this article develops an equilibrium framework for option exercise games with asymmetric private information many interesting aspects of the patterns of equilibrium exercise are analyzed in particular informational cascades where agents ignore their private information and jump on the exercise bandwagon may arise endogenously article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

a dynamic duopoly investment game without commitment under uncertain market expansion abstract we model capacity building investments in a homogeneous product duopoly facing uncertain demand growth capacity building is achieved through the addition of production units that are durable and lumpy and whose cost is irreversible while building their capacity over time firms compete a la cournot in the product market given their installed capacity there is no exogenous order of moves no commitment regarding future decisions and no finite horizon we investigate markov perfect equilibrium mpe paths of the investment game which may include episodes during which firms invest at different times a preemption pattern and episodes in which firms invest simultaneously a tacit collusion pattern these episodes may alternate and are typically several when firms have yet to invest in capacity the sole pattern that is mpe compatible is a preemption episode firms invest at different times but have equal value the first such investment may occur earlier and therefore be riskier than socially optimal when both firms hold capacity tacit collusion episodes may be mpe compatible firms invest simultaneously at a postponed time hence holding back production in the meantime thereby generating an investment wave in the industry such investment episodes are more likely with higher demand volatility faster market growth and lower cost of capital discount rate

the effect of uncertainty on investment evidence from texas oil drilling this paper estimates the response of investment to changes in uncertainty using data on oil drilling in texas and the expected volatility of the future price of oil using a dynamic model of firms investment problem i find that i the response of drilling activity to changes in price volatility has a magnitude consistent with the optimal response prescribed by theory ii the cost of failing to respond to volatility shocks is economically significant and iii implied volatility data derived from futures options prices yields a better fit to firms investment behavior than backward looking volatility measures such as garch jel c58 d92 g13 g31 l71 q31 the real options literature beginning with marschak 1949 and arrow 1968 and developed in bernanke 1983 pindyck 1991 and dixit and pindyck 1994 explains how firms should make decisions about investments that involve sunk costs real options theory views such investments as options in that at any point in time a firm may choose to either invest immediately or delay and observe the evolution of the investment s payoff a key insight is that the option to delay has value when future states of the world with positive returns to investing and states with negative returns are both possible even holding the expected future return constant at its present level thus in the presence of irreversibility and uncertainty a naive investment timing rule proceed with an investment if its expected benefit even slightly exceeds its cost is suboptimal because it does not account for the value of continuing to hold the option instead firms should delay irreversible investments until a significant gap develops between the investments expected benefits and costs moreover as uncertainty increases real options theory tells us that the incentive to delay should grow stronger and the gap between the expected benefit and cost necessary to trigger investment should widen while real options theory therefore prescribes how firms should carry out irreversible investments in uncertain environments it is not empirically well known

national environmental targets and international emission reduction instruments according to the agreed burden sharing within the european union the overall eu emission reduction target as agreed by in the kyoto protocol is converted into national greenhouse gas reduction targets for each of the member states in parallel with national emission reduction initiatives common eu policies for emission reductions are considered currently discussed is the introduction of a market for tradable permits for co2 emissions to achieve emission reductions within the power industry and other energy intensive industries in parallel with this markets for green certificates to deploy renewable energy technologies seem to be appearing in a number of countries among these denmark italy sweden belgium flanders england and australia although these national initiatives for a green certificate market are fairly different they could be a starting point for establishing a common eu certificate market but interactions between national targets for greenhouse gas emissions and these international instruments for emission reduction are not a trivial matter especially not seen in relation to the possible contributions of these instruments in achieving national ghg reduction targets the paper is split into three parts all taking a liberalised power market as starting point the first part discusses the consequences of a general deployment of renewable energy technologies using planning initiatives or national promotion schemes feed in tariffs in the second part an international green certificate market is introduced into the liberalised power market context substituting other national promotion schemes finally in the third part a combination of an international green certificate market tgc and an international emission trading scheme for co2 is analysed within the liberalised international power market set up the main conclusion is that neither the use of national renewable support schemes nor the introduction of a tgc market into a liberalised power market can be recommended if these initiatives efficiently are expected to contribute in achieving the national co2 reduction targets countries most ambitious in implementing renewable energy technologies will only partly be gaining the co2 reduction benefits themselves the ambitious countries will support the less ambitious ones in achieving their ghg reduction targets finally in a tgc market context the most ambitious countries to fulfil their tgc quotas will have to buy certificates from the less ambitious ones although this only contributes to fulfilling a national target for renewable development not in reaching their national co2 reduction targets however a combination of an international tradable permits market and a green certificate market is seen to be efficient in contributing in achieving the national co2 reduction targets if a close co ordination of the two instruments is undertaken at least at the national level when the green power production is increased the tradable permits quota should be decreased correspondingly otherwise the expected co2 reductions will not contribute by the full value in achieving the national targets for greenhouse gas reductions thus if it is a prerequisite that renewable power contributes to achieving national ghg reduction targets then the combination of these two markets might be the right solution

the feasibility of 100 renewable electricity systems a response to critics abstract the rapid growth of renewable energy re is disrupting and transforming the global energy system especially the electricity industry as a result supporters of the politically powerful incumbent industries and others are critiquing the feasibility of large scale electricity generating systems based predominantly on re part of this opposition is manifest in the publication of incorrect myths about renewable electricity relec in scholarly journals popular articles media websites blogs and statements by politicians the aim of the present article is to use current scientific and engineering theory and practice to refute the principal myths it does this by showing that large scale electricity systems that are 100 renewable 100relec including those whose renewable sources are predominantly variable e g wind and solar pv can be readily designed to meet the key requirements of reliability security and affordability it also argues that transition to 100relec could occur much more rapidly than suggested by historical energy transitions it finds that the main critiques published in scholarly articles and books contain factual errors questionable assumptions important omissions internal inconsistencies exaggerations of limitations and irrelevant arguments some widely publicised critiques select criteria that are inappropriate and or irrelevant to the assessment of energy technologies ignore studies whose results contradict arguments in the critiques and fail to assess the sum total of knowledge provided collectively by the published studies on 100relec but instead demand that each individual study address all the critiques inappropriate criteria we find that the principal barriers to 100relec are neither technological nor economic but instead are primarily political institutional and cultural

status and perspectives of renewable energy policy and deployment in the european union what is needed to reach the 2020 targets abstract this article evaluates the status of current res deployment policies and barriers in the eu 27 member states and compares it to the required to meet the 2020 targets the evaluation relies strongly on the quantitative deployment status and policy effectiveness indicators european res deployment and policy has progressed strongly in recent years but the growth here has been mainly driven by effective policies in a small or medium number of top runner countries across europe the highest average policy effectiveness over six years was reached for onshore wind 4 2 biofuels 3 6 and biomass electricity 2 7 while in the heat sector all technologies score below 2 comparing the recent progress to the required growth for meeting the 2020 target it appears that some countries largely exceed the interim targets of the res directive 2009 28 ec despite this europe will need additional policy effort to reach the 2020 target critical success factors include implementing effective and efficient policies that attract sufficient investments reducing administrative and grid related barriers especially in currently less advanced countries upgrading the power grid infrastructure dismantling financial barriers in the heat sector realising sustainability standards for biomass and lowering energy demand through increased energy efficiency efforts

towards a comprehensive policy for electricity from renewable energy an approach for policy design abstract energy policy design in europe is a complex issue involving multiple levels of governance and heavily influenced by institutional contexts however policy design in europe and model based analysis even more so is arguably shaped by the neo classical school of thought there is a need to provide a structured approach that would facilitate the incorporating of institutional contexts into renewable energy sources for electricity res e policy design and analysis this paper presents a formal approach to res e policy design based on design theory the institutional analysis and development iad framework and agent based modelling and simulation given a certain frame of analysis we propose that it is theoretically possible to identify the complete policy design space a set of design elements crucially this aspect potentially opens up to the policy analyst new avenues for intervention and allows her systematically explore given a range of uncertainties which element s of intervention is are the most vital to achieve the goals of the community its empirical applicability is demonstrated by representing and differentiating between six res e schemes from western europe in terms of the design elements a model based illustration demonstrates the value of this approach to quantitatively analyse the impact of design elements

wind turbine manufacturing in china a review abstract domestic wind turbine manufacturing sector in china has experienced development stages starting from scratch to mass production during the 11th fyp period 2006 2010 the main goal of wind power policy in china is to promote the commercialization of wind power by large scale deployment of wind farms this goal has been realized to a great extent and now the cost of wind power generation is nearly comparable to coal fired power generation in china the industry policy which devotes to mass production of domestic wind turbines is also largely successful the purpose of the paper is to provide an overview on wind turbine manufacturing sector in china the policy evolution in different stages achievements and challenges pertinent to the sector are addressed in the paper key findings are that the misleading industry policy which provides strong incentive to blind entrance and competition for scale and price and restrains innovation as well is the key obstacle for the sustainable development of the sector deficient technology standard and qualification system and the misplaced franchise bidding system also indulge vicious competition and oversupply creating a level playground for all turbine supplies providing strong incentive to innovative manufacturers establishing thorough and practicable standard and qualification system and fine tuning the directive of the franchise bidding system towards technology and service are the primary policy implications proposed by our study

a bayesian approach to real options the case of distinguishing between temporary and permanent shocks traditional real options models demonstrate the importance of the option to wait due to uncertainty over future shocks to project cash flows however there is often another important source of uncertainty uncertainty over the permanence of past shocks adding bayesian uncertainty over the permanence of past shocks augments the traditional option to wait with an additional option to learn the implied investment behavior differs significantly from that in standard models for example investment may occur at a time of stable or decreasing cash flows respond sluggishly to cash flow shocks and depend on the timing of project cash flows during the past two decades the real options approach to valuation of irreversible investment opportunities has become part of the mainstream literature in financial economics the central idea is that the opportunity to invest is equivalent to an american call option on the underlying investment project as a consequence the problem of optimal investment timing is analogous to the optimal exercise decision for an american option applications of the real options approach are now numerous 1 one feature that is common to virtually all real options models is that the underlying uncertainty pertains only to future shocks since future cash flows are uncertain there is an important opportunity cost of investing today the value of the asset might go up so that tomorrow will be an even better time to invest this opportunity cost is often referred to in the literature as the option

assessment of government support for the household adoption of micro generation systems in korea abstract this paper investigates how korean government support affects household adoption of renewable energy based micro generation systems by analyzing household preferences in relation to the costs and benefits of system installation and different kinds of government support the research adopts a discrete choice experiment approach and focuses on two micro generation technologies solar voltaic and solar thermal our empirical analysis revealed firstly that households prefer micro generation systems that have low installation costs but high energy saving benefits and long warranty periods and secondly that households prefer direct subsidies to low interest loans however we also found that households are reluctant to install photovoltaic or solar thermal systems in reality because they see the cost of system installation as being higher than the benefits they would receive from such installation in short while existing government supports are somewhat effective in promoting household adoption of micro generation systems there also exists the obstacle that the majority of households are unwilling to install such systems despite government support thus several policy improvements which focus on increasing the benefits and decreasing the installation costs of micro generation systems are suggested in this paper

a techno economic analysis of eu renewable electricity policy pathways in 2030 the aim of this paper is to assess several pathways of a harmonised european policy framework for supporting renewable electricity res e in a 2030 horizon according to different criteria the pathways combine two main dimensions degrees of harmonisation and instruments and design elements a quantitative model based analysis with the green x model is provided the results of the simulations show that there are small differences between the evaluated cases regarding effectiveness all the policy pathways score similarly with respect to res e deployment i e with different degrees of harmonisation and whether using a feed in tariff a feed in premium a quota system with banding or a quota without banding scheme in contrast the policy costs clearly differ across the pathways but the differences can mostly be attributed to the instruments rather than to the degrees of harmonisation this is also the case with other criteria static and dynamic efficiency and the socioeconomic and environmental benefits in terms of co2 emissions and fossil fuels avoided both the degree of harmonisation and the choice of instrument influence the distribution of support costs across countries finally our findings suggest that keeping strengthened national support leads to similar results to other policy pathways

strategic entry in a triopoly market of firms with asymmetric cost structures abstract this paper examines the strategic investment timing decision in a triopoly market comprising firms with asymmetric cost structures we present three novel results first in the case where there are relatively small cost asymmetries between firms and a relatively small first mover advantage the firm with the lowest cost structure is not always the first investor in other cases the firm with the lowest cost structure is the first investor second an increase in volatility increases the possibility that a firm without the lowest cost structure is the first investor finally even in the three asymmetric firm model we show that the first investor threshold is larger in a triopoly than in a duopoly although it is smaller in a duopoly than in a monopoly

option exercise games an application to the equilibrium investment strategies of firms under the standard real options approach to investment under uncertainty agents formulate optimal exercise strategies in isolation and ignore competitive interactions however in many real world asset markets exercise strategies cannot be determined separately but must be formed as part of a strategic equilibrium this article provides a tractable approach for deriving equilibrium investment strategies in a continuous time cournot nash framework the impact of competition on exercise strategies is dramatic for example while standard real options models emphasize that a valuable option to wait leads firms to invest only at large positive net present values the impact of competition drastically erodes the value of the option to wait and leads to investment at very near the zero net present value threshold copyright 2002 oxford university press

responsive feed in tariff adjustment to dynamic technology development abstract this paper reviews the adjustments of the feed in tariffs for new solar photovoltaic pv installations in germany as pv system prices declined rapidly since 2009 the german government implemented automatic mechanisms to adjust the remuneration level for new installations in response to deployment volumes this paper develops an analytic model to simulate weekly installations of pv systems of up to 30 kw based on project profitability and project duration the model accurately replicates observed market developments and is used to assess different adjustment mechanisms against multiple scenarios for pv system price developments the analysis shows that responsive feed in tariff schemes with frequent tariff adjustments and short qualifying periods reach deployment targets most effectively

real options in strategic investment games between two asymmetric firms abstract this paper examines strategic investment games between two firms that compete for optimal entry in a project that generates uncertain revenue flows under asymmetry on both the sunk cost of investment and revenue flows of the two competing firms we investigate the value of real investment options and strategic interaction of investment decisions compared to earlier models that only allow for asymmetry on sunk cost our model demonstrates a richer set of strategic interactions of entry decisions we provide a complete characterization of pre emptive dominant and simultaneous equilibriums by analyzing the relative value of leader s and follower s optimal investment thresholds in a duopoly market with negative externalities a firm may reduce loss of real options value by selecting appropriate pre emptive entry when one firm has a dominant advantage over its competitor both the dominant firm and dominated firm enter at their respective leader s and follower s optimal thresholds when the pre emptive thresholds of both firms happen to coincide the two firms enter simultaneously under positive externalities firms do not compete to lead

real options and preemption under incomplete information abstract this paper introduces incomplete information and preemption into an equilibrium model of firms facing real investment decisions the optimal investment strategy may lie anywhere between the zero npv trigger level and the optimal strategy of a monopolist depending on the distribution of competitors costs and the implied fear of preemption our model implies that the equity returns of firms which hold real options and are subject to preemption will contain jumps and positive skewness

investment timing and learning externalities abstract we study a duopoly model of investment in which each player learns about the quality of a common value project by observing some public background information and possibly the experience of his rival investment costs are private information and the background signal takes the form of a poisson process conditional on the quality of the project being low the resulting attrition game has a unique symmetric equilibrium which depends on initial public beliefs we determine the impact of changes in the cost and signal distributions on investment timing and how equilibrium is affected when a first mover advantage is introduced

renewable energy policies in europe converging or diverging abstract nations today are urgently challenged with achieving a significant increase in the deployment of renewable energies in europe that need has given rise to a debate about the most effective and efficient support strategy whilst the different interests debate whether full european harmonisation or strengthening of national support policies for electricity from renewable energy sources res e is the best way forward individual national support schemes are rapidly evolving this study investigates how the eu member states have applied support policy types over the last decade by identifying predominant developments in the application of feed in tariffs premiums tradeable green certificates tax incentives investment grants and financing support for specific technologies wind biomass pv this study shows that europe is currently experiencing certain tendencies towards a bottom up convergence of how national policy makers design res e policy supports while some outliers remain the policy supports of most countries become more similar in the policy types applied dominance of feed in tariffs and in their scope of implementation differentiation for installation sizes and stacking of multiple instruments these trends in national decision making which show tendencies of convergence could make an eu driven top down harmonisation of support either dispensable or at least depending on the agreement less controversial

production uncertainty and the market equilibrium of the competitive firm abstract assumptions outputs are planned ex ante by risk neutral firms actual outputs are stochastic with variance function of planned output production costs are function of planned outputs while the market linear demand function is stable if individual outputs as positively correlated expected profit is decreased by the negative covariance between output and price the firms and market equilibria are analyzed in the short run and the long run with varying number of firms they are compared with oi s and tisdell s uncertain demand models

how much do european households pay for green energy abstract the price of electricity for european end users typically fell until development of wind and solar energy began but has increased since then we estimate the savings in co2 emissions due to solar and wind energy and calculate what end users pay per tonne co2 assuming that price increases since the introduction of solar and wind power are due to these types of energy these payments are in most cases well above even high and unlikely estimates of the cost of carbon and in some cases several times as high

mature or emerging markets competitive duopoly investment decisions abstract we develop a competitive investment model wherein two competing firms consider investing into two projects targeting separately a mature and an emerging market the returns firms obtain from investments into these markets are assumed to follow an s shaped curve and depend on both firms actions considering symmetric environments in terms of investment opportunities we find that different forms of interactions may arise e g prisoner s dilemma and game of chicken and outline corresponding strategies that offer higher returns by exploiting first mover advantages cooperation opportunities and aggressive choices we also discuss the market conditions that can lead to these outcomes finally considering non symmetric environments we show that a firm may be better off when its competitor s budget increases

investment under uncertainty does competition matter abstract empirical applications of real options models in competitive environments implicitly exploit the optimality of myopic planning in a seminal paper leahy j v 1993 investment in competitive equilibrium the optimality of myopic behavior quarterly journal of economics 108 1105 1133 shows that the optimal investment strategy of a myopic planner who ignores market entries and exits of competitors as well as the resulting price effects constitutes a market equilibrium under rather general conditions as a result the calculation of optimal investment strategies is simplified considerably because competition does not have to be taken into account in this paper however we demonstrate by using simulation experiments that myopic planning may lead to non optimal investment strategies this is due to the fact that it is difficult or even impossible to specify the correct or equivalent price process for the myopic investor using real world data we quantify the degree of suboptimality and propose measures to reduce the error

strategic investment in technological innovations abstract the aim of this paper is to determine the optimal timing of technology investment of a single firm in a duopoly framework as time passes different technologies are invented which after sometime become available for the firm to adopt the question here is not only when a firm should invest but also which technology should be adopted for different scenarios the optimal technology investment decision is determined outcomes range from pre emption equilibria to equilibria with second mover advantages

promoting the market and system integration of renewable energies through premium schemes a case study of the german market premium abstract with the share of renewable energies within the electricity sector rising improving their market and system integration is of increasing importance by offering plant operators a premium on top of the electricity market price premium schemes represent an option to increase the alignment of renewable electricity production with market signals and have been implemented by several eu member states this paper examines the case study of the german market premium scheme adopted in 2012 building on an evaluation of early experiences we discuss whether the market premium contributes to the aims of market and or system integration effectiveness and what potential efficiency gains and additional costs of administering integration are associated with it efficiency while exposing renewables to price risks is not the scheme s purpose it has successfully increased participation in direct marketing however risks of overcompensating producers for marketing and balancing costs are high and the benefits of gradually leading plant operators towards the market are questionable incentives for demand oriented production are established but they seem insufficient particularly in the case of intermittent renewable energy sources to conclude we provide an outlook on alternative designs of premium schemes and discuss whether they seem better suited for addressing the challenges ahead

delay and information aggregation in stopping games with private information abstract we consider equilibrium timing decisions in a model with a large number of players and informational externalities the players have private information about a common payoff parameter that determines the optimal time to invest they learn from each other in real time by observing past investment decisions we develop new methods of analysis for such large games and we give a full characterization of symmetric equilibria we show that the equilibrium statistical inferences are based on an exponential learning model although the beliefs converge to truth learning takes place too late ex ante welfare is strictly between that without observational learning and that with full information

strategic delegation in a legislative bargaining model with pork and public goods abstract this paper examines the incentives of voters to appoint legislators with different preferences from their own the paper adopts an underlying legislative bargaining model proposed by volden and wiseman 2007 in which legislators with heterogeneous preferences divide a fixed budget between a public good and pork projects local public goods we show that voters have an incentive to strategically delegate to affect how the budget is divided at the legislative level when voters preferences for pork are not too strong the incentives for strategic delegation exist to appoint representatives who will direct more money to the public good and not to pork projects this generally results in at least as many representatives as districts that favor the public good the comparative statics predict that when strategic delegation occurs increasing the size of the legislature increases the fraction of the budget spent on the public good