the effect of supply uncertainty in price setting newsvendor models abstract we consider a price setting newsvendor model in which a firm needs to make joint inventory and pricing decisions before the selling season the supply process is uncertain such that the received quantity is the product of the order quantity and a random yield rate two cost structures are investigated the in house production case in which the firm pays for the input quantity and the procurement case in which the firm pays for the quantity received only our objective is to investigate the effect of yield randomness on optimal decisions and expected profit by using the theory of stochastic comparisons we find that under both cost structures a less variable yield rate leads to a lower optimal price and a higher expected profit moreover we show that in the in house production case a stochastically larger yield rate also results in a lower optimal price and a higher profit but this is not true in the procurement case examples show that the effect of supply uncertainty on optimal order quantity is not universal

optimal supply diversification under general supply risks we analyze a planning model for a firm or public organization that needs to cover uncertain demand for a given item by procuring supplies from multiple sources the necessity to employ multiple suppliers arises from the fact that when an order is placed with any of the suppliers only a random fraction of the order size is usable the model considers a single demand season with a given demand distribution where all supplies need to be ordered simultaneously before the start of the season the suppliers differ from one another in terms of their yield distributions their procurement costs and capacity levels the planning model determines which of the potential suppliers are to be retained and what size order is to be placed with each we consider two versions of the planning model in the first the service constraint model scm the orders must be such that the available supply of usable units covers the random demand during the season with at least a given probability in the second version of the model the total cost model tcm the orders are determined so as to minimize the aggregate of procurement costs and end of the season inventory and shortage costs in the classical inventory model with a single fully reliable supplier these two models are known to be equivalent but the equivalency breaks down under multiple suppliers with unreliable yields for both the service constraint and total cost models we develop a highly efficient procedure that generates the optimal set of suppliers as well as the optimal orders to be assigned to each most importantly these procedures generate a variety of important qualitative insights for example regarding which sets of suppliers allow for a feasible solution both when they have ample supply and when they are capacitated and how various model parameters influence the selected set of suppliers the aggregate order size and the optimal cost values

who would be left behind by enhanced private school choice abstract debate over school choice is central to many discussions of public elementary and secondary educational reform the debate has largely focused on conceptual arguments rather than careful empirical research that attempts to sort out competing claims an important unresolved issue is the question of cream skimming who will move and who will be left behind as a result of enhanced school choice this paper uses data from the national educational longitudinal survey nels 88 to estimate a model of public private school choice which is used to simulate who would likely leave public schools as a result of enhanced private school choice building upon the work of k train et al 1987 the review of economics and statistics 69 383 391 we employ a probit model with latent explanatory variables to account for the unobserved attitudes of parents and their children regarding education the model allows us to consider such latent interests in education as well as the academic and socioeconomic characteristics of those students who would likely switch to private schools our findings indicate that concerns about bright flight or academic cream skimming in response to increased school choice appear to be overstated however we estimate that there would be substantially more economic and racial segregation of students as movers tend to be white and have higher incomes than those who are left behind

a review of wta wtp studies abstract willingness to accept wta is usually substantially higher than willingness to pay wtp these constructs have been studied for roughly 30 years and with a wide variety of goods this paper reviews those studies we find that the less the good is like an ordinary market good the higher is the ratio the ratio is highest for non market goods next highest for ordinary private goods and lowest for experiments involving forms of money a generalization of this pattern holds even when we account for differences in survey design ordinary goods have lower ratios than non ordinary ones we also find that ratios in real experiments are not significantly different from hypothetical experiments and that incentive compatible elicitation yields higher ratios

household electricity demand revisited respond to price changes this paper develops a model for evaluating the effects of alternative tariff designs on electricity use the model concurrently addresses several interrelated difficulties posed by nonlinear pricing heterogeneity in consumer price sensitivity and consumption aggregation over appliances and time we estimate the model using extensive data for a representative sample of 1300 california households the results imply a strikingly skewed distribution of household electricity price elasticities in the population with a small fraction of households accounting for most aggregate demand response we then estimate the aggregate and distributional consequences of recent tariff structure changes recent efforts to restructure electricity markets have renewed interest in electricity demand and pricing this interest reflects a broad desire to improve the efficiency of electricity markets and policy makers concerns over the impact of price changes on consumers how new pricing mechanisms would affect households consumption and expenditures is a matter of considerable uncertainty however this uncertainty has provoked controversy and debate in the regulatory policy arena hampering market reforms using econometric methods to assess the effects of electricity price changes presents several challenges these include the nonlinear structure of tariff schedules aggregation of metered consumption behaviour over time and appliances and the interdependence of energy use with longer term household decisions over appliance ownership and dwelling characteristics the first two issues introduce complex simultaneity problems between marginal prices and consumption the third issue imposes high data requirements information on household specific appliance holdings and residence features and creates heterogeneity in consumption responses related to the characteristics of these durable goods when the researcher s objective is to develop a model for simulating the effects of prospective tariff changes ignoring these issues will provide an incomplete assessment of demand responses and potentially misleading predictions of a new tariff s consumption and revenue consequences in this paper we estimate a model of household electricity demand that can be used

a probit latent variable model of nutrition information and dietary fiber intake nutrition information and intake data for a sample of u s household meal planners are used to estimate the effects of fiber specific information on dietary fiber intake the information variables are measured using survey questions on fiber content of foods attitude toward consuming fiber rich foods and awareness of fiber health links the evidence confirms the influence of nutrition information on fiber intake household income meal planner age smoking status vegetarian status race and ethnicity are major determinants of both information and intake education exerts a sizable intake effect by enhancing the information level direct and indirect effects of exogenous variables are reported

operational flexibility and financial hedging complements or substitutes we consider a firm that invests in capacity under demand uncertainty and thus faces two related but distinct types of risk mismatch between capacity and demand and profit variability whereas mismatch risk can be mitigated with greater operational flexibility profit variability can be reduced through financial hedging we show that the relationship between these two risk mitigating strategies depends on the type of flexibility product flexibility and financial hedging tend to be complements substitutes i e product flexibility tends to increase decrease the value of financial hedging and vice versa financial hedging tends to increase decrease the value of product flexibility when product demands are positively negatively correlated in contrast to product flexibility postponement flexibility is a substitute to financial hedging as intuitively expected although our analytical results assume perfect flexibility and perfect hedging and rely on a linear approximation of the value of hedging we validate their robustness in an extensive numerical study

paying too much and being happy about it existence causes and consequences of tariff choice biases abstract a common assumption underlying the analysis of consumers choices among optional tariffs is that consumers choose the tariff that maximizes their surplus and thus the tariff that leads to the lowest billing rate for a given amount of usage yet there is evidence that many users prefer a flat rate even though their billing rate would be lower with a pay per use tariff flat rate bias and some users prefer a pay per use tariff even though they would save money with a flat rate pay per use bias the authors conduct four empirical analyses based on three different data sets they show that the flat rate bias is more important and has a greater regularity and time persistence than the pay per use bias they classify potential causes of the flat rate bias as insurance effect taxi meter effect convenience effect and overestimation effect and show that the insurance the taxi meter and the overestimation effects lead to a flat rate bias they provide evidence that underestimation of usag

uncovering context induced status quo effects in choice experiments abstract in this study five design dimensions are varied systematically investigating context induced status quo effects in choice experiments additionally two structural complexity measures entropy and the number of attribute level changes are used to capture status quo effects from the similarity between alternatives and the number of trade offs a crucial finding is that the frequency of status quo choices is negatively associated with the number of alternatives indicating preference matching effects by contrast the probability of choosing the status quo increases with a higher number of choice tasks a wider level range and the similarity between alternatives status quo choices are further affected by the current environmental situation perceived by respondents we also find that marginal and non marginal welfare estimates are significantly affected by the choice design one key finding is that the most used choice task format in environmental economics i e two hypothetical and a status quo alternative is likely to increase the propensity to choose the status quo option

pricing and the news vendor problem a review with extensions in the newsvendor problem a decision maker facing random demand for a perishable product decides how much of it to stock for a single selling period this simple problem with its intuitively appealing solution is a crucial building block of stochastic inventory theory which comprises a vast literature focusing on operational efficiency typically in this literature market parameters such as demand and selling price are exogenous however incorporating these factors into the mode l can provide an excellent vehicle for examining how operational problems interact with marketing issues to influence decision making at the firm level in this paper we examine an extension of the newsvendor problem in which stocking quantity and selling price are set simultaneously we provide a comprehensive review that synthesizes existing results for the single period problem and develop additional results to enrich the existing knowledge base we also review and develop insight into a dynamic inventory extension of this problem and motivate the applicability of such models

joint inventory replenishment and pricing control for systems with uncertain yield and demand we study the joint inventory replenishment and pricing problem for production systems with random demand and yield more specifically we analyze the following single item periodic review model demands in consecutive periods are independent random variables and their distributions are price sensitive the production yield is uncertain so that the quantity received from a replenishment is a random variable whose distribution depends on the production quantity stockouts are fully backlogged our problem is to characterize the optimal dynamic policy that simultaneously determines the production quantity and the price for each period to maximize the total discounted profit we show that the optimal replenishment policy is of a threshold type i e it is optimal to produce if and only if the starting inventory in a period is below a threshold value and that both the optimal production quantity and the optimal price in each period are decreasing in the starting inventory we further study the operational e

the structure of periodic review policies in the presence of random yield this work provides a comprehensive analysis of a general periodic review production inventory model with random variable yield existence of an order point whose value does not depend on yield being random is proved in the single period case without specifying the yield model and using a very general cost structure when yield is a random multiple of lot size the nonorder up to optimal policy is characterized for a finite horizon model the finite horizon value functions are shown to converge to the solution of an infinite horizon functional equation and the infinite horizon order point is shown to be no smaller than when yield is certain

price and order postponement in a decentralized newsvendor model with multiplicative and price dependent demand we analyze the effect of price and order postponement in a decentralized newsvendor model with multiplicative and price dependent demand wherein the manufacturer sets the wholesale price and possibly offers a buyback rate and the retailer determines the order quantity and retail price such postponement strategies can be used by the retailer by delaying his operational decisions order quantity and retail price until after demand uncertainty is observed we show how the equilibrium values of the contract parameters and profits are affected by i vertical competition ii type of contract wholesale price only or buyback iii demand distribution iv form of the expected demand function and v the timing of the retailer s operational decisions although in most cases postponement is quite beneficial for the channel members we show that for some model parameters due to vertical competition the expected value of perfect information about demand for price postponement and order postponement may be negative for the channel and even surprisingly for both members we also show that when a buyback option is offered neither order postponement nor price postponement has an effect on the equilibrium wholesale price profit allocation ratio between the manufacturer and the retailer and channel efficiency and that the equilibrium wholesale price expected retail price profit allocation ratio between the manufacturer and the retailer and channel efficiency in the model with buyback options under either order or price postponement further coincide with their counterparts in the corresponding deterministic model

real time pricing when some consumers resist in saving electricity successful real time electricity pricing depends firstly upon consumers willingness to subscribe to such terms and secondly on their ability to curb consumption levels the present paper addresses both issues by considering consumers differentiated by their electricity saving costs half of whom resist saving electricity we demonstrate that when consumers are free to adopt real time prices producers prefer charging inefficient prices and in so doing discriminate against that portion of the consumer population which faces no saving costs we also find that efficient marginal cost pricing is feasible but is incompatible with mass adoption of real time prices

solar feed in tariffs examining fair and reasonable retail rates using cost avoidance estimates abstract growing solar photovoltaic pv electricity systems in geographically diverse regions presents a complex policy problem for governments during 2013 16 the queensland government in australia examined establishing a fair and reasonable retail feed in tariff fit policy noting it regulates state retail electricity consumption prices a combined cost avoidance and stakeholder analysis was applied to show that determination of a fair and reasonable fit for all stakeholders while aspirational is difficult to achieve typically agreement on a fair tariff rate will depend on stakeholders relative position in energy supply chains service providers retailers suppliers customers advocates and interpretations of fairness that can be shaped by competition in the supply area also increases in financial benefits to pv customers might be considered unreasonable by non pv customers and retailers that experience increases in electricity prices and operating costs importantly the application of a retail fit in regional and isolated areas requires careful energy policy design taking account of network losses remote and isolated customer metering cost effective network control technologies and diesel generator operating limits the study also observed that shifting funding of fit schemes from electricity distributors to competitive retailers will likely have negative consequences for retail fit offerings and pv customer servicing

uptake and usage of cost reflective electricity pricing insights from psychology and behavioural economics abstract the australian electricity industry like many other countries globally is currently facing the complex challenge of reforming electricity tariffs momentum is growing for transitioning residential consumers toward more cost reflective pricing that better reflects the true costs of generation and supply and sends a price signal that presumably incentivises reduced consumption during peak periods under such tariffs customers pay more for electricity used during times of peak demand unlike traditional flat rate tariffs where the price remains stable regardless of time or demand pilot trials indicate that cost reflective tariffs might succeed in reducing peak demand but often only for a small minority of customers such that population wide demand response is minimal or insignificant in this paper we apply insights from psychology and behavioural economics to identify how cost reflective pricing can be designed depicted and delivered to enhance customer uptake and optimal usage thereby facilitating appropriate demand response for a larger cross section of the population by carefully considering the likely impact of relevant cognitive biases and psychological factors which routinely shape human decision making and behaviour we are able to propose practical strategies that industry can adopt to maximise the prospect of cost reflective pricing achieving significant population level peak demand reductions while providing shared benefits for customers retailers networks and regulators alike

household energy use applying behavioural economics to understand consumer decision making and behaviour household energy conservation has emerged as a major challenge and opportunity for researchers practitioners and policymakers consumers also seem to be gaining greater awareness of the value and need for sustainable energy practices particularly amid growing public concerns over greenhouse gas emissions and climate change yet even with adequate knowledge of how to save energy and a professed desire to do so many consumers still fail to take noticeable steps towards energy efficiency and conservation there is often a sizeable discrepancy between peoples self reported knowledge values attitudes and intentions and their observable behaviour examples include the well known knowledge action gap and value action gap but neither is household energy consumption driven primarily by financial incentives and the rational pursuit of material interests in fact people sometimes respond in unexpected and undesirable ways to rewards and sanctions intended to shift consumers cost benefit calculus in favour of sustainable behaviours why is this so why is household energy consumption and conservation difficult to predict from either core values or material interests by drawing on critical insights from behavioural economics and psychology we illuminate the key cognitive biases and motivational factors that may explain why energy related behaviour so often fails to align with either the personal values or material interests of consumers understanding these psychological phenomena can make household and community responses to public policy interventions less surprising and in parallel can help us design more cost effective and mass scalable behavioural solutions to encourage renewable and sustainable energy use among consumers

resource flexibility with responsive pricing this article studies two types of flexibility used by firms to better respond to uncertain market conditions resource flexibility and responsive pricing we consider a situation in which a single flexible resource can be used to satisfy two distinct demand classes while the resource capacity must be decided based on uncertain demand functions the resource allocation as well as the pricing decision are made based on the realized demand functions we characterize the effects of two key drivers of flexibility demand variability and demand correlation assuming normally distributed demand curve intercepts demand variability creates opportunity costs and with fixed prices decreases the firm s profit we show that with the additional flexibility gained from responsive pricing the firm can maximize the benefits of favorable demand conditions and mitigate the effects of poor demand conditions ultimately profiting from variability positive demand correlation on the other hand remains undesirable under responsive pricing the optimal capacity of the flexible resource is always increasing in both demand variability and demand correlation this contrasts with the scenarios based on fixed prices highlighting the crucial difference that responsive pricing makes in the management of flexible resources we further quantify the value of flexibility for the firm and its customers by considering as a benchmark a firm relying on two dedicated resources the value of flexibility is most significant if the demand levels are highly variable and negatively correlated in such cases the firm benefits from demand variability due to responsive pricing while facing limited demand risk due to resource flexibility finally we endogenize the input price of the flexible resource by considering the pricing decision of the resource supplier

understanding household energy use decision making and behaviour in guinea conakry by applying behavioural economics abstract for decades generalized frauds have left the electrical sector of guinea with an entirely defective financial scheme as a developing nation guinea s electricity consumption has been relatively low for a long time although it has been increasing recently due to increasing power generation the growth in power capacity is due to the construction of two new dams kaleta dam 240 mw which is already operational and souapiti dam 550 mw which is still under construction taking into account that the country has so far been without electricity there is a need to assess and predict consumer behaviour before the full completion of these projects the aim of this study is to make the household and community reactions to public policy interventions less surprising however even sufficient knowledge of how to conserve energy and a stated desire to do so many consumers still fail to take perceptible measures to increase energy efficiency and conservation why is this so by focusing on crucial insights from behavioural economics and psychology we highlight the incentive factors the basic cognitive biases and the psychological phenomena that cause this disconnect understanding these factors can help us to design sustainable energy use among consumers in guinea conakry

commercial industrial customer response to time of use electricity prices some experimental results this article analyzes a time of use pricing experiment involving over 700 small and medium size commercial industrial firms two basic rate structures were implemented one with time varying demand kw charges and a flat energy kwh charge and the other with time varying energy charges and a flat kw charge a small but statistically significant elasticity of substitution between peak and offpeak kwh consumption is estimated for the summer season in the overall sample for firms facing the time of use demand rate a substantially larger response is estimated in the summer season for the subgroup of large firms in the experiment that faced a time of use demand rate and this response translates into a welfare gain that in just the first year more than offsets the additional metering costs involved under mandatory implementation

optional time of use prices for electricity econometric analysis of surplus and pareto impacts we estimate a model of time of use tou consumption and choice among optional tou tariffs in which the customer s choice among tariffs is based on its demand parameters which vary in the population we simulate the impact on consumption consumer surplus and profit of several optional tou rates that were offered experimentally in northern california the analysis suggests that with one possible exception the offering of these optional rates did not constitute a pareto improvement however total surplus excluding measurement costs is estimated to have risen by 1 41 to 2 55 per month per customer who chose the tou rates

residential willingness to pay for deep decarbonization of electricity supply contingent valuation evidence from hong kong abstract motivated by the government s proposed target of reducing co2 emissions by 30 of the 2005 level in the year 2020 we estimate the residential willingness to pay wtp for deep decarbonization of hong kong s electricity supply which is heavily dependent on coal fired generation our contingent valuation survey conducted in 2016 of 1460 households yields dichotomous choice data based on the respondents answers to a series of closed ended questions such data are less susceptible to the strategic bias that often plagues self stated wtp data obtained by direct elicitation via open ended questions using binary choice models we find that average wtp is 48 51 relative to current bills if the decarbonization target is achieved via natural gas generation and renewable energy however estimated wtp declines to 32 42 when decarbonization entails additional nuclear imports from china as the projected bill increase caused by the target s implementation is 40 our wtp estimates support the government s fuel mix policy of using natural gas and renewable energy to displace hong kong s coal generation

popular attitudes toward markets and democracy russia and united states compared 25 years later abstract we repeat a survey we did in the waning days of the soviet union shiller boycko and korobov aer 1991 comparing attitudes towards free markets between moscow and new york additional survey questions from gibson duch and tedin j politics 1992 are added to compare attitudes towards democracy two comparisons are made between countries and through time to explore the existence of international differences in allegiance to democratic free market institutions and the stability of these differences

residential implementation of critical peak pricing of electricity this paper investigates how critical peak pricing cpp affects households with different usage and income levels with the goalof informing policy makers who are considering the implementation of cpptariffs in the residential sector using a subset of data from thecalifornia statewide pricing pilot of 2003 2004 average load changeduring summer events annual percent bill change and post experimentsatisfaction ratings are calculated across six customer segments categorized by historical usage and income levels findings show thathigh use customers respond significantly more in kw reduction than dolow use customers while low use customers save significantly more inpercentage reduction of annual electricity bills than do high usecustomers results that challenge the strategy of targeting only high usecustomers for cpp tariffs across income levels average load and billchanges were statistically indistinguishable as were satisfaction ratesresults that are compatible with a strategy of full scale implementationof cpp rates in the residential sector finally the high use customersearning less than 50 000 annually were the most likely of the groups tosee bill increases about 5 percent saw bill increases of 10 percent ormore suggesting that any residential cpp implementation might considertargeting this customer group for increased energy efficiencyefforts

a micro econometric analysis of risk aversion and the decision to self insure this study estimates a von neumann morgenstern utility function using market data and micro econometric methods we investigate the decision whether to purchase insurance against the risk of telephone line trouble in the home using the choices of approximately 10 000 residential customers we determine the shape of the utility function and the degree of risk aversion we find that risk aversion varies systematically in the population and varies with the level of income and that the observed choice behavior is consistent with expected utility maximization we are unable to detect the presence of ambiguity effects or over weighting of low probability events

consumer rationality and the status quo received microeconomic theory presumes rational consumers maximize utility over all commodity bundles recent analysis however suggests that a consumer s status quo may limit economic rationality bias consumer decisions and induce serious errors in survey based valuations of public and private goods using regression and choice theoretic frameworks we investigate the existence of status quo effects in the consumer valuation of a particular unpriced product the reliability of residential electrical service such valuations have become important in electric utility resource planning and rate making we find substantial status quo effects which must be addressed in welfare comparisons regarding electric service reliability

regret in repeat purchase versus switching decisions the attenuating role of decision justifiability the decision making literature has consistently reported that decisions to maintain the status quo tend to be regretted less than decisions to change it we examine the consequences of repeat purchasing maintaining the status quo versus switching in the context of information regarding the reason for the decision e g prior consumption episode brand history and we argue that there are situations in which repeat purchasing may cause as much or even more regret than switching we contend that this effect depends on whether or not there is a justifiable basis for the decision in a series of four studies we show that if there is sufficient motivation to warrant a switch consumers will feel less regret in the face of a subsequent negative outcome realized via a switch than in one realized via a repeat purchase our results imply that feelings of regret are mitigated when the consumer reflects and concludes that the decision was appropriate under the circumstances

technical note a risk averse newsvendor model under the cvar criterion the classical risk neutral newsvendor problem is to decide the order quantity that maximizes the one period expected profit in this note we consider a risk averse newsvendor with stochastic price dependent demand we adopt conditional value at risk cvar a risk measure commonly used in finance as the decision criterion the aim of our study is to investigate the optimal pricing and ordering decisions in such a setting for both additive and multiplicative demand models we provide sufficient conditions for the uniqueness and existence of the optimal policy comparative statics show the monotonicity properties and other characteristics of the optimal pricing and ordering decisions we also compare our results with those of the newsvendor with a risk neutral attitude and a general utility function

diversification under supply uncertainty supply chain management is becoming an increasingly important issue especially when in most industries the cost of materials purchased comprises 40 60 of the total sales revenue despite the benefits cited for single sourcing in the popular literature there is enough evidence of industries having two three sources for most parts in this paper we address the operational issue of quantity allocation between two uncertain suppliers and its effects on the inventory policies of the buyer based on the type of delivery contract a buyer has with the suppliers we suggest three models for the supply process model i is a one delivery contract with all of the order quantity delivered either in the current period with probability or in the next period with probability 1 model ii is also a one delivery contract with a random fraction of the order quantity delivered in the current period the portion of the order quantity not delivered is cancelled model iii is similar to model ii with the remaining quantity delivered in the next period we derive the optimal ordering policies that minimize the total ordering holding and penalty costs with backlogging we show that the optimal ordering policy in period n for each of these models is as follows for x a n order nothing for vi n x a n use only one supplier and for x vi n order from both suppliers for the limiting case in the single period version of model i we derive conditions under which one would continue ordering from one or the other or both suppliers for model ii we give sufficient conditions for not using the second more expensive supplier when the demand and yield distributions have some special form for the single period version of models ii and iii with equal marginal ordering costs we show that the optimal order quantities follow a ratio rule when demand is exponential and yields are either normal or gamma distributed

role of risk aversion in price postponement under supply random yield price postponement is an effective mechanism to hedge against the adverse effect of supply random yield however its effectiveness and the resulting production decisions have not been studied for

probabilistic dominance and status quo bias abstract decision makers have a strong tendency to retain the current state of affairs this well documented phenomenon is termed status quo bias we present the probabilistic dominance approach to status quo bias an alternative is considered acceptable to replace the status quo only if the chances of a subjectively severe loss relative to the status quo are not too high probabilistic dominance is applied and behaviorally characterized in a choice model that allows for a range of status quo biases general enough to accommodate unanimity but also standard expected utility maximization we present a comparative notion of revealing more bias towards the status quo and study its implications to the probabilistic dominance model of choice lastly the model is applied to the endowment effect phenomenon and to a problem of international portfolio choice when investors are home biased

infinite horizon strategies for replenishment systems with a general pool of suppliers we consider a general infinite horizon inventory control model that combines demand and supply risks and the firm s ability to mitigate the supply risks by diversifying its procurement orders among a set of n potential suppliers supply risks arise because only a random percentage of any given replenishment order is delivered as useable units the suppliers are characterized by the price they charge and the distribution of their yield factor assuming unsatisfied demand is backlogged the firm incurs as in standard inventory models three types of costs i procurement costs ii inventory carrying costs for units carried over from one period to the next and iii backlogging costs we establish the existence of an optimal stationary policy under both the long run discounted and average cost criteria and characterize its structure assuming each period s inventory level distribution can be approximated as a normal we develop an efficient solution method identifying additional structural properties finally we identify a simple class of heuristic policies that come close to being optimal

energy saving in italy in the late 1990s which role for non monetary motivations abstract the paper studies the relationship between energy saving behaviour monetary drivers and non monetary motivations in italy in a period the end of the 1990s when the energy industry was not yet liberalized there were no energy saving incentive schemes and the environmental sensitivity and information were lower we consider as dependent variable the frequency with which individuals switch the light off when leaving a room as monetary drivers income and perceived energy costs while non monetary motives in our model are measured by proxies of pro environmental attitudes environmental information social pressure and pro social behaviours the analysis is based on probit and logit models estimated on a sample from the multipurpose household survey dataset conducted by the italian statistical office we find that individuals who were less concerned about environmental issues were also more attentive in energy saving behaviour suggesting together with results about income and perceived energy costs that monetary motivations were primary in driving this energy saving behaviour such findings are robust to the inclusion of variables accounting for pro social behaviours altruism by individuals who claim to be more concerned about broad environmental externalities may have adversely affected their propensity to optimize energy consumption

introducing a demand based electricity distribution tariff in the residential sector demand response and customer perception increased demand response is essential to fully exploit the swedish power system which in turn is an absolute prerequisite for meeting political goals related to energy efficiency and climate chan

an elasticity approach to the newsvendor with price sensitive demand we introduce a measure of elasticity of stochastic demand called the elasticity of the lost sales rate which offers a unifying perspective on the well known newsvendor with pricing problem this new concept provides a framework to characterize structural results for coordinated and uncoordinated pricing and inventory strategies concavity and submodularity of the profit function as well as sensitivity properties of the optimal inventory and price policies are characterized by monotonicity conditions or bounds on the elasticity of the lost sales rate these elasticity conditions are satisfied by most relevant demand models in the marketing and operations literature our results unify and complement previous work on price setting newsvendor models and provide a new tool for researchers modeling stochastic price sensitive demand in other contexts

combined pricing and inventory control under uncertainty this paper addresses the simultaneous determination of pricing and inventory replenishment strategies in the face of demand uncertainty more specifically we analyze the following single item periodic review model demands in consecutive periods are independent but their distributions depend on the item s price in accordance with general stochastic demand functions the price charged in any given period can be specified dynamically as a function of the state of the system a replenishment order may be placed at the beginning of some or all of the periods stockouts are fully backlogged we address both finite and infinite horizon models with the objective of maximizing total expected discounted profit or its time average value assuming that prices can either be adjusted arbitrarily upward or downward or that they can only be decreased we characterize the structure of an optimal combined pricing and inventory strategy for all of the above types of models we also develop an efficient value iteration method to compute these optimal strategies finally we report on an extensive numerical study that characterizes various qualitative properties of the optimal strategies and corresponding optimal profit values

responsive pricing under supply uncertainty consider a retailer orders a seasonal product from a supplier and sells the product over a selling season while the product demand is known to be a linear function of price the supply yield is uncertain and is distributed according to a general discrete probability distribution this paper presents a two stage stochastic model for analyzing two pricing policies no responsive pricing and responsive pricing under the no responsive pricing policy the retailer would determine the order quantity and the retail price before the supply yield is realized under the responsive pricing policy the retailer would specify the order quantity first and then decide on the retail price after observing the realized supply yield therefore the responsive pricing policy enables the retailer to use pricing as a response mechanism for managing uncertain supply our analysis suggests that the retailer would always obtain a higher expected profit under the responsive pricing policy in addition to examining the impact of yield distribution and system parameters on the optimal order quantities retail prices and profits under these two pricing policies we analyze two issues arising from responsive pricing the first issue deals with the case in which the retailer can place an emergency order with an alternative source after observing the realized yield while the second issue deals with a situation in which the retailer has to allocate his order among multiple suppliers

anticipated vs actual synergy in merger partner selection and post merger innovation past research has primarily focused on what happens after a merger this research attempts to determine whether anticipated benefits from the merger actually accrue we characterize the effects of observed variables on whether pairs of firms merge vis a vis roommate matching and then link these factors to post merger innovation i e number of patents we jointly estimate the two models using markov chain monte carlo methods with a unique panel data set of 1 979 mergers between 4 444 firms across industries and countries from 1992 to 2008 we find that similarity in national culture and technical knowledge has a positive effect on partner selection and post merger innovation anticipated synergy from subindustry similarity however is not realized in post merger innovation furthermore some key synergy sources are unanticipated when selecting a merger partner for example financial synergy from higher total assets and complementarity in total assets and debt leverage as well as knowledge synergy fr

investment credit and child labour it is generally assumed that credit has a positive effect on children s schooling among poor households this article shows that need not be the case when households obtain credit for investment purposes in fact investment loans may not have any effect on the likelihood of schooling for children who work in their family business our estimates confirm that this is the case credit used to finance investments has no effect on the odds of schooling for employed children this may be because investment loans increase children s labour productivity which in turn increases the opportunity cost of schooling the results of this study suggest that improving access to credit may not by itself constitute a solution to the problem of child labour in developing countries

selecting a portfolio of suppliers under demand and supply risks we analyze a planning model for a firm or public organization that needs to cover uncertain demand for a given item by procuring supplies from multiple sources each source faces a random yield factor with a general probability distribution the model considers a single demand season all supplies need to be ordered before the start of the season the planning problem amounts to selecting which of the given set of suppliers to retain and how much to order from each so as to minimize total procurement costs while ensuring that the uncertain demand is met with a given probability the total procurement costs consist of variable costs that are proportional to the total quantity delivered by the suppliers and a fixed cost for each participating supplier incurred irrespective of his supply level each potential supplier is characterized by a given fixed cost and a given distribution of his random yield factor the yield factors at different suppliers are assumed to be independent of the season s demand which is described by a general probability distribution determining the optimal set of suppliers the aggregate order and its allocation among the suppliers on the basis of the exact shortfall probability is prohibitively difficult we have therefore developed two approximations for the shortfall probability although both approximations are shown to be highly accurate the first based on a large deviations technique ldt has the advantage of resulting in a rigorous upper bound for the required total order and associated costs the second approximation is based on a central limit theorem clt and is shown to be asymptotically accurate whereas the order quantities determined by this method are asymptotically optimal as the number of suppliers grows most importantly this clt based approximation permits many important qualitative insights

status quo bias multiple priors and uncertainty aversion motivated by the extensive evidence about the relevance of status quo bias both in experiments and in real markets we study this phenomenon from a decision theoretic prospective focusing on the case of preferences under uncertainty we develop an axiomatic framework that takes as a primitive the preferences of an agent for each possible status quo option and provide a characterization according to which the agent considers a full dimensional set of possible priors and abandons her status quo option only if she finds an alternative that returns a higher expected utility for each of these priors we then show that in this framework the very presence of a status quo induces the agent to be more uncertainty averse than she would be without a status quo option

response bias in a conjoint analysis of power outages abstract a methodology is proposed for estimating status quo effects resistance to change and loss aversion willingness to pay is less than willingness to accept from consumer survey data conjoint data on israeli households attitudes to electricity outages reveal that both of these effects are pronounced and that they depend on the interviewees characteristics ordered conditional logit estimation indicates that while the estimates are rank sensitive the suggested methodology continues to be applicable finally the conjoint estimates are compared with those obtained by applying the method of contingent valuation

environmental regulation of households an empirical review of economic and psychological factors abstract the literature on sustainable consumption and environmental regulation of household behavior is dominated by conceptual and normative approaches as a result many suggestions lack a firm empirical basis to overcome this deficiency econometric studies in three areas of environmentally relevant activities of households are reviewed residential use of energy generation of solid waste and recycling and residential use of water next to price and income elasticities attention is devoted to individual socio economic features and psychological factors such as attitudes knowledge perceptions and values potential psychological determinants and related insights are further examined by discussing a range of representative and illustrative statistical psychological studies of environmental behavior one important general finding is that there are very few empirical studies that systematically combine socio economic and psychological determinants a range of insights for environmental policy is derived and research recommendations are offered

property rights and choice the case of the fishery formal property rights are typically established after considerable waste has occurred despite the effectiveness of such schemes in addressing the inefficiencies of common pool resources adoption can be contentious because of the assignment of wealth and political influence that accompany the transition to exclusive property rights this paper studies how the early involvement of harvesters in policy implementation designed to address the commons inefficiency may foster perceived legitimacy and lessen political opposition to the establishment of individual property rights we demonstrate that it is optimal for a manager facing industry strife and reform delay to allow firms to self select into the property rights regime the strategic interaction of harvesters leads to an equilibrium characterized by the global adoption of property rights thus by providing harvesters with a choice between management systems policy makers can reduce the transaction costs associated with the need to create political consensus while ensuring an outcome similar to the top down implementation of market based management evidence is provided from a recent policy change in maryland fisheries in which the provision of a choice resulted in the overwhelming adoption of individual transferable quotas and the end of the race to fish

consumer demand for time of use electricity tariffs a systematized review of the empirical evidence abstract time of use tou tariffs if widely adopted could help make electricity more secure clean and affordable however quite little is known about whether consumers will switch to a tou tariff or what might increase uptake if switching rates are lower than required this paper presents the results of a systematized review and meta analysis combining the results of 66 measures of uptake to a variety of tou tariffs across 27 studies conducted in six countries it provides the first robust estimate of consumer demand and correlates of demand for tou tariffs that is not based on the results from just a single study or tariff four main conclusions emerge first if consumers are left to opt in to tou tariffs uptake could be as low as 1 unless efforts are made to close the intention action gap otherwise enrolment could reach 43 second if enrolment is opt out uptake could approach 100 third whilst national surveys indicate the potential appetite for tou tariffs in a population they are insufficient for predicting future tou tariff adoption rates the median proportion of domestic energy bill payers who say they would be willing to switch to a tou tariff in national surveys is five times higher than the median enrolment rate to tou tariffs offered by utilities fourth real time pricing tariffs in which the price of electricity varies freely throughout the day are less popular than static tou tariffs which have fixed peak and off peak rates this paper discusses the limitations of opt out enrolment for tou tariffs and presents results suggesting that small upfront payments bill protection and automation are promising alternative methods of increasing opt in enrolment policymakers and researchers should now consider how recruitment will be performed weighing up the benefits to society as a whole against the distributional impacts for individuals and groups

short selling and the wta wtp gap abstract the experimental results of the current paper reveal positive relations between short selling bidding prices and the wta wtp gap this result may be explained by the status quo bias

consumer attitudes and voluntary rate schedules for public utilities attitudes enter as latent explanatory variables in a model of consumers choice among optional rate schedules offered by a public utility a consistent estimator of the choice model is described that utilizes the distribution of the latent attitude variables conditional on manifest indicator variables the model is applied to households choice between time of use and non time differentiated rates for electricity to determine the impact of attitudes about energy conservation copyright 1987 by mit press

does pricing nature reduce monetary support for conservation evidence from donation behavior in an online experiment abstract ecosystem services valuation attempts to determine the monetary value of the benefits provided by the natural world prior research has shown that making monetary value salient fosters self interested behavior in experimental settings vohs mead and goode 2006 reduces the intrinsic value ascribed to pro social activities such as volunteering pfeffer and devoe 2009 and reduces the efficacy of environmentally relevant interventions steinhorst klockner and matthies 2015 these findings raise concern that ecosystem service valuation information might adversely impact individual s pro environmental behaviors this study uses an experimental framework to determine whether ordinary citizens exposure to valuation information such as one might encounter in a news article or fundraising materials might influence an individual s contribution to a natural resource conservation fund the study is implemented with 250 participants from across the united states we find that participants who receive a natural resource description plus valuation treatment donate a statistically significant lower dollar amount of their experimental earnings on average than those who read the narrative alone based upon this evidence we assert that ecosystem service valuation information has the potential to negatively impact financial support for the exact resources the information is designed to promote

choice under uncertainty problems solved and unsolved ffifteen years ago the theory of choice under uncertainty could be considered one of the success stories of economic analysis it rested on solid axiomatic foundations it had seen important breakthroughs in the analytics of risk risk aversion and their applications to economic issues and it stood ready to provide the theoretical underpinnings for the newly emerging information revolution in economics 1 today choice under uncertainty is a field in flux the standard theory is being challenged on several grounds from both within and outside economics the nature of these challenges and of our profession s responses to them is the topic of this paper

efficient but immoral assessing market attitudes as multidimensional abstract much of the research on market attitudes to date has employed a one dimensional scale through which individuals are described as being either pro market or anti market we speculate that the use of a one dimensional scale obscures important underlying variation in individuals attitudes toward market systems factor analysis of responses from nearly 2000 participants across three studies is used to create and validate a multidimensional scale consisting of five distinct components of market attitudes we assert that understanding within subject variation in attitudes towards markets better informs analyses that relate market attitudes with economic behavior

technical note optimal product pricing and component production quantities for an assembly system under supply uncertainty we consider an assemble to order system where one of the components faces uncertainty in the supply process in which the actual available quantity is equal to some random fraction of the production quantity demand is assumed to be price dependent we analyze how the supply uncertainty of one component affects the product pricing and production quantities of all the components under the assembly structure we show that it is profitable for the firm to assemble the product only if the product price exceeds a certain threshold this price threshold increases as the unit cost of each component or the degree of variability of the supply reliability distribution increases but it is independent of the underlying demand function and demand distribution also the optimal product price decreases as supply uncertainty decreases we further show that under deterministic demand the components can be managed independently such that the production quantity or unit cost of the component with supply uncertainty does not affect the optimal production quantity of the other components as long as it is profitable to assemble the product however when demand is stochastic the optimal production quantity of each component depends on the supply reliability distribution as well as the unit costs of the other components for a fixed product price the optimal production quantities of the components are smaller when the unit product price is low and they are higher when the unit product price is high as compared to the case with no supply uncertainty

price environment and security exploring multi modal motivation in voluntary residential peak demand response peak demand on electricity grids is a growing problem that increases costs and risks to supply security residential sector loads often contribute significantly to seasonal and daily peak demand demand response projects aim to manage peak demand by applying price signals and automated load shedding technologies this research investigates voluntary load shedding in response to information about the security of supply the emission profile and the cost of meeting critical peak demand in the customers network customer willingness to change behaviour in response to this information was explored through mail back survey the diversified demand modelling method was used along with energy audit data to estimate the potential peak load reduction resulting from the voluntary demand response a case study was conducted in a suburb of christchurch new zealand where electricity is the main source for water and space heating on this network all water heating cylinders have ripple control technology and about 50 of the households subscribe to differential day night pricing plan the survey results show that the sensitivity to supply security is on par with price with the emission sensitivity being slightly weaker the modelling results show potential 10 reduction in critical peak load for aggregate voluntary demand response

despairing over disparities explaining the difference between willingness to pay and willingness to accept this paper examines the three major explanations for the disparity between willingness to pay wtp and willingness to accept wta observed in contingent value surveys and laboratory experiments a belief that the results must be biased in some fashion hanemann s 1991 substitutes hypothesis and the loss aversion model proposed by tversky and kahneman 1991 starting from the assumption that individuals make utility maximizing choices we develop structural equations that yield parametric tests of the hypotheses within a single non experimental framework the approach is flexible enough to incorporate a variety of functional form and distributional assumptions and can be applied to either data from either open ended bids or dichotomous choice questions the usefulness of the approach is demonstrated using data from a survey that asked both wtp and wta questions the results provide weak support for loss aversion

random coefficient models for stated preference surveys abstract this paper combines the use of random coefficient discrete choice models that allow for correlated errors in the form of unobserved preference heterogeneity with an investigation of the reliability and usefulness of rankings data for the data we examine we find significant unobserved preference heterogeneity in the rankings which violates the underlying assumptions of the rank ordered logit model further directly modeling unobserved preference heterogeneity results in significant improvement in the precision of the parameter estimates and in estimated willingness to pay wtp the reliability and usefulness of rankings data should be re examined with econometric models not subject to the independence of irrelevant alternatives iia

coordinating inventory control and pricing strategies with random demand and fixed ordering cost the finite horizon case we analyze a finite horizon single product periodic review model in which pricing and production inventory decisions are made simultaneously demands in different periods are random variables that are independent of each other and their distributions depend on the product price pricing and ordering decisions are made at the beginning of each period and all shortages are backlogged ordering cost includes both a fixed cost and a variable cost proportional to the amount ordered the objective is to find an inventory policy and a pricing strategy maximizing expected profit over the finite horizon we show that when the demand model is additive the profit to go functions arek concave and hence an s s p policy is optimal in such a policy the period inventory is managed based on the classical s s policy and price is determined based on the inventory position at the beginning of each period for more general demand functions i e multiplicative plus additive functions we demonstrate that the profit to go function is not necessarilyk concave and an s s p policy is not necessarily optimal we introduce a new concept the symmetrick concave functions and apply it to provide a characterization of the optimal policy

popular attitudes toward free markets the soviet union and the united states compared random samples of the moscow and new york populations were compared in their attitudes towards free markets by administering identical telephone interviews in the two countries in may 1990 although the soviet respondents were somewhat less likely to accept exchange of money as a solution to personal problems and although their attitudes toward business were less warm the authors found that the soviet and american respondents were basically similar in some very important dimensions in their attitudes toward fairness income inequality and incentives and in their understanding of the working of markets copyright 1991 by american economic association

technical note price setting newsvendor problems with uncertain supply and risk aversion the price setting newsvendor problem which models the economic trade offs associated with uncertain demand of a perishable product is fundamental to supply chain analysis however in settings such as agriculture there is significant economic risk associated with supply uncertainty we analyze how risk aversion and the source of uncertainty demand and or supply affect tractability and optimal decisions we find that concavity of the objective function is preserved under the introduction of risk aversion if the source of uncertainty is demand but it is not necessarily preserved if the source of uncertainty is supply we identify a structural difference that explains this result and show that this difference can lead to opposing directional effects of risk aversion on optimal decisions

price versus production postponement capacity and competition this article presents a comparative analysis of possible postponement strategies in a two stage decision model where firms make three decisions capacity investment production inventory quantity and price typically investments are made while the demand curve is uncertain the strategies differ in the timing of the operational decisions relative to the realization of uncertainty we show how competition uncertainty and the timing of operational decisions influence the strategic investment decision of the firm and its value in contrast to production postponement price postponement makes the investment and production inventory decisions relatively insensitive to uncertainty this suggests that managers can make optimal capacity decisions by deterministic reasoning if they have some price flexibility under price postponement additional postponement of production has relatively small incremental value therefore it may be worthwhile to consider flexible ex post pricing before production postponement reengineering while more postponement increases firm value it is counterintuitive that this also makes the optimal capacity decision more sensitive to uncertainty we highlight the different impact of more timely information which leads to higher investment and inventories and of reduced demand uncertainty which decreases investment and inventories our analysis suggests appropriateness conditions for simple make to stock and make to order strategies we also present technical sufficiency and uniqueness conditions under price postponement these results extend to oligopolistic and perfect competition for which pure equilibria are derived interestingly the relative value of operational postponement techniques seems to increase as the industry becomes more competitive

rainfall uncertainty and occupational choice in agricultural households of rural nepal abstract although agriculture is the main occupation in rural nepal evidence suggests that households strive to diversify their sources of income this paper investigates why this is the case using household data from the world bank and information on rainfall for the various rural districts of nepal we find that occupational choice is highly correlated to the uncertainty associated with historical rainfall patterns where the head is employed in agriculture other family members are less likely to choose agriculture as an occupation in districts where rain is more uncertain estimates indicate that for a 1 per cent increase in the coefficient of variation of rain there is a 0 61 per cent decrease in the probability of choosing the same occupation as the household head where the head is classified as self employed in agriculture the negative effect of rainfall uncertainty on occupational choice is less evident in households that have access to credit and in households with relatively high levels of

energy conservation nudges and environmentalist ideology evidence from a randomized residential electricity field experiment nudges are being widely promoted to encourage energy conservation we show that while the electricity conservation nudge of providing feedback to households on own and peers home electricity usage works with liberals it can backfire with conservatives our regression estimates predict that a democratic household that pays for electricity from renewable sources that donates to environmental groups and that lives in a liberal neighborhood reduces its consumption by 3 percent in response to this nudge a republican household that does not pay for electricity from renewable sources and that does not donate to environmental groups increases its consumption by 1 percent

strategic rate making in the context of dynamic ramsey pricing as a result of the public utilitie regulatory policies act of 1978 purpa state public utility commissions have begun to implement cost based rate setting procedures in order to rationalize energy choices made by utilities and utility customers this rationalization had been necessary in view of the increased competition characterizing the eletric utility industry taking these regulatory and competitive change as a point of departure we develop and implement an electricity rate setting model which is cost based which explicitly accounts for static and dynamic competitive pressures and which is welfare maximizing the model extends standard ramsey methods to include bothshort run andlong run price responses in the inverse elasticity rule we use the estimated model to evalute and design alternative rates our analysis takes a distincly strategic approach explicitly addressing competition from other fuels and the possibility of competitive bypass

salt or sludge exploring preferences for potable water sources decision makers often use information about public preferences to guide public policy several disciplines gather information on preferences through surveys by asking respondents to make hypothetical choices over potential policies however the context of the choice question differs between approaches with some failing to make the full consequences of the respondent s choice explicit in the question in this study we investigate whether question context matters by exploring whether economic and psychology approaches yield a similar understanding of community preferences towards a large scale recycled wastewater scheme we find that stated preferences differ depending on whether the preference question is contextualised using economic incentives the findings provide insight into the implications of inappropriately contextualised preference questions methodological considerations in attitude identification and estimation and the diversity of values and public attitudes towards recycled wastewater

self selection in the residential electricity time of use pricing experiments in none of the existing studies that attempt to pool the results of the five best residential electricity tou pricing experiments is the problem of selection bias addressed three of the five experiments used samples of volunteers and it is well known that this can bias results if the ultimate inference to be made applies to the population of non volunteers i e the situation of mandatory tou pricing in this paper we adapt some well used methodology for correcting for self selection to the five experiments in question and estimate the extent to which its presence biases estimates of the elasticity of substitution between peak and off peak electricity consumption we find for example that the bias is upwards of 24 per cent in the los angeles experiment resulting in a substantial overstatement of the response of customers to mandatory tou prices while we stop short of integrating our methodology into a full blown pooling framework users of the epri sponsored retou program should nevertheless be cautioned to the potential biases inherent in forecasts of tou response derived from it since no account for the selfselection phenomenon and its consequences was taken in its development

a canonical model of choice with initial endowments we use the revealed preference method to derive a model of individual decision making when the endowment of an agent provides a reference point that may influence her choices this model generalizes the classical rational choice model which views choice as a consequence of utility maximization instead our model sees choice as arising from psychologically constrained utility maximization where the constraints are induced by one s initial endowment in particular this model produces status quo bias as a natural consequence but not necessarily the endowment effect a range of economic applications identify the predictive and explanatory strength of the model in particular we demonstrate that the status quo bias phenomenon reduces the size of the substitution effect in problems of consumption choice

a new meta analysis on the wtp wta disparity abstract this study reports a new meta analysis of papers that elicit willingness to pay wtp and willingness to accept compensation wta measures of value for the same good we investigate the effects of type of good and several survey design features on the wtp wta disparity measured as the logarithm of the ratio of mean wta to mean wtp confirming horowitz and mcconnell s 2002 pioneering meta analysis we find the disparity is smaller for ordinary private goods than for public and non market goods that it is not solely an artifact of using hypothetical transactions or other weak experimental or survey methods and that it is smaller for studies using student subjects in addition we find that the disparity is smaller when subjects have experience valuing the good in real markets or through repeated experimental trials in contrast to horowitz and mcconnell we find the disparity is significantly smaller in studies using incentive compatible elicitation mechanisms the disparity is smaller in more recent studies an effect that is attributable only in part to changes in study characteristics

integrating dynamic pricing and replenishment decisions under supply capacity uncertainty this paper examines an integrated decision making process regarding pricing for uncertain demand and sourcing from uncertain supply which are often studied separately in the literature our analysis of the integrated system suggests that the base stock list price policy fails to achieve optimality even under deterministic demand instead the optimal policy is characterized by two critical values a reorder point and a target safety stock under this policy a positive order is issued if and only if the inventory level is below the reorder point when this happens the optimal order and price are coordinated to achieve a constant target safety stock which aims at hedging the demand uncertainty we further investigate the profit improvement obtained from deploying dynamic pricing as opposed to static pricing our results indicate that either supply limit or supply uncertainty may induce a significant benefit from dynamic pricing and the compound effect of supply limit and uncertainty can be much more pronounced than the individual effects whether or not the supply capacity is limited has a major implication on the value of dynamic pricing under unlimited supply dynamic pricing is more valuable when procurement cost is high or when demand is more sensitive to price with limited supply however the capacity restriction tends to be relaxed reducing the value of dynamic pricing

explaining the energy efficiency gap expected utility theory versus cumulative prospect theory abstract energy efficiency is one of the key factors in mitigating the impact of climate change and preserving non renewable resources although environmental and economic justifications for energy efficiency investments are compelling there is a gap between the observable and some notion of optimized energy consumption the so called energy efficiency gap behavioral biases in individual decision making have been resonated by environmental research to explain this gap to analyze the influence of behavioral biases on decisions upon energy efficiency investments quantitatively we compare expected utility theory with cumulative prospect theory on basis of a real world example we illustrate how the extent of the gap is influenced by behavioral biases such as loss aversion probability weighting and framing our findings indicate that cumulative prospect theory offers possible explanations for many barriers discussed in literature for example the size of the gap rises with increased risk and investment costs because behavioral biases are systematic and pervasive our insights constitute a valuable quantitative basis for environmental policy measures such as customer focused and quantitatively backed public awareness campaigns financial incentives or energy savings insurances in this vein this paper may contribute to an accelerated adaption of energy efficiency measures by the broader public

how projected electricity price and personal values influence support for a 50 renewable energy target in australia abstract this study investigated how projected electricity prices and personal values influence public support for a 50 renewable energy target ret in australia in an online experiment 404 participants rated their support for a 50 ret across eight projected increases in their quarterly power bills multi level modelling indicated that 1 support for the 50 ret fell as the projected price of electricity increased 2 although participants with low self enhancement values and high self transcendent values were most supportive of the 50 ret these value based differences disappeared as projected electricity prices increased implications of these findings for energy policy design are discussed