diamonds are a government s best friend burden free taxes on goods valued for their values comments one of the most startling tax policy prescriptions to appear in recent years is the diamond good tax of yew kwang ng 1987 diamond goods are goods such as diamonds precious stones and metals expensive fur coats and luxurious cars which are valued for their values more than for their intrinsic consumption effects consumers of diamond goods are viewed as deriving utility from exhibiting their wealth and or by using these goods as a store of value and or giving them as gifts of value in these cases it is the value of the good that matters most after analyzing the taxation of diamond goods ng formally asserts three propositions and a corollary his principal findings are that a change in the price of a diamond good leaves its value and the amounts of all other goods consumed and hence the utility level of the consumer unaffected proposition 1 and that the demand curve for a diamond good is a rectangular hyberbola with unit elasticity throughout the whole range where it remains a pure diamond good corollary 1 these findings form the basis for his conclusion that a pure diamond good has an infinite tax in an optimal tax system proposition 3 the taxation of diamond goods thus represents a burdenless tax policy panacea the purpose of this paper is to reconsider the microeconomic analysis of the taxation of diamond goods we show that the striking results of ng depend on the particular way in which the diamond good is specified we demonstrate that an alternative and eminently reasonable specification yields drastically different results in that ng s principal findings do not hold ng considers a representative consumer choosing among a single pure diamond good and n 1 ordinary consumption goods the utility function is assumed to be well behaved and is written

resolving new keynesian anomalies with wealth in the utility function at the zero lower bound the new keynesian model predicts that output and inflation collapse to implausibly low levels and that government spending and forward guidance have implausibly large effects to resolve these anomalies we introduce wealth into the utility function the justification is that wealth is a marker of social status and people value status since people partly save to accrue social status the euler equation is modified as a result when the marginal utility of wealth is sufficiently large the dynamical system representing the zero lower bound equilibrium transforms from a saddle to a source which resolves all the anomalies

the environmental kuznets curve environmental protection policy and income distribution abstract the effect of economic growth on pollution emissions differs substantially among high income countries i address this issue by analyzing public environmental policy decisions individual heterogeneity relative income effect and the political framework in which policy decisions are taken determine the emergence of the downward sloping segment of the environmental kuznets curve ekc income inequality produces a gap between the country s ability to pay for environmental protection and a country s willingness to pay i test this result by using oecd data on public r d expenditure for environmental protection the conclusion is that contrary to the ek hypothesis moments of the income distribution function other than the mean may be important for the emergence of a virtuous path of sustainable growth in high income countries

an economic theory of self control the concept of self control is incorporated in a theory of individual intertemporal choice by modeling the individual as an organization the individual at a point in time is assumed to be both a farsighted planner and a myopic doer the resulting conflict is seen to be fundamentally similar to the agency conflict between the owners and managers of a firm both individuals and firms use the same techniques to mitigate the problems which the conflicts create this paper stresses the implications of this agency model and discusses as applications the effect of pensions on saving saving and the timing of income flows and individual discount rates

price formation in electricity forward markets and the relevance of systematic forecast errors since the liberalisation of the european electricity sector forward and futures contracts have gained significant interest of market participants due to risk management reasons for pricing of these contracts an important fact concerns the non storability of electricity in this case according to economic theory forward prices are related to the expected spot prices which are built on fundamental market expectations in the following article the crucial impact parameters of forward electricity prices and the relationship between forward and future spot prices will be assessed by an empirical analysis of electricity prices at the european energy exchange and the nord pool power exchange in fact price formation in the considered markets is influenced by historic spot market prices yielding a biased forecasting power of long term contracts although market and risk assessment measures of market participants and supply and demand shocks can partly explain the futures spot bias inefficiencies in the analysed forward markets cannot be ruled out

composite forecasting approach application for next day electricity price forecasting abstract accurate forecasting of electricity prices can provide significant benefits to energy suppliers when allocating their assets and to energy consumers for defining an optimal portfolio there are numerous methods that efficiently support the forecasting of time series such as electricity prices which have high volatility however the performance of these approaches varies depending on data sets and operational conditions in this work the concept of composite forecasting is presented and implemented in a retrospective study in real industrial forecasting conditions to show the potential of forecast performance improvement and comparable high consistency of a forecast performance across different day peak and day base electricity price data sets for different seasons as individual methods support vector regression artificial neural networks and ridge regression are implemented the forecast performances of these methods are evaluated and compared with their forecast combination using different error measures the results show that composite forecasting processes with inverse root mean squared error combination approach can generate on average a more accurate and robust forecast than using an individual methods or other combination schemas

forecasting hourly electricity prices using armax garch models an application to miso hubs abstract the recent deregulation of the electricity industry and reliance on competitive wholesale markets has generated significant volatility in wholesale electricity prices given the importance of short term price forecasts in this new environment this paper estimates and evaluates the forecasting performance of four armax garch models for five miso pricing hubs cinergy first energy illinois michigan and minnesota using hourly data from june 1 2006 to october 6 2007 our empirical results reveal three important patterns a electricity price volatility is regional and the optimum volatility model depends in part on the hub location the forecast horizon and regulated versus unregulated status of the market b the aparch model performs well in hubs in deregulated states and c volatility dynamics in regulated states are better captured by a simple garch model and thus are less complex

on the existence of pareto optimal allocations when individual welfare depends on relative consumption abstract in this paper we analyze the existence of pareto optimal allocations of k goods among n agents when individual welfare depends on relative consumption under rather mild assumptions we show that for any predetermined vector of utility values we can find the amounts of goods and their corresponding distribution so that those target utility values are efficiently achieved then we prove that in the case where utility functions are interpersonally comparable in ordinal terms there exists a pareto optimal allocation of any given bundle of goods that equalizes all agents welfare levels what we call a welfare fair allocation

art as an investment and conspicuous consumption good ments art is also a consumption good art owners take pleasure in its intrinsic value e g for aesthetic pleasure or as a storehouse of an artist s deftness and to the extent that it is a luxury good they derive additional enjoyment from the signal of wealth that owning a masterpiece transmits it is the mixture of pecuniary and nonpecuniary payoffs to ownership that makes artworks both compelling to purchase and difficult to value i exploit this insight to explain why the measured risk premium of a portfolio of artworks is low compared to other risky assets in a consumption based pricing model an asset s risk premium is a function of the covariance of its returns with agents marginal utility of consump tion agents need to be compensated if the asset pays off in a period of already high utility as a luxury good relative art demand is an increasing function of wealth therefore positive shocks to income increase the demand price and returns to art in periods of high consumption utility implying a high risk premium this intuition is at odds with empirical studies that quantify the average financial returns of paintings relative to more traditional investment vehicles these studies find that art 1 often underperforms relative to equities and bonds while there have been

competing macro hypotheses in the united states a kalman filtering approach the empirical validity of alternative views about the short run determinants of real output growth in the united states is investigated a nested framework is used to test the macro rational expectations mre hypothesis directly against two competing hypotheses the neo keynesian view that anticipated and unanticpated monetary policy both matter and friedman s 1977 proposition that increased inflation uncertainty reduces real output at least temporarily the unobservable explanatory variables are obtained from time varying parameter models of inflation and money growth which generate forecast errors and their conditional variances consistent with rational expectations under a continuously chaning policy regime the empirical results strongly support friedman s view the mre hypothesis must be rejected since both anticipated and unanticipated monetary changes matter the results prove robust across different model specifications and estimation techniques

occupation induced status social norms and economic growth abstract we analyse a monetary growth model where entrepreneurs borrow funds to invest in projects that produce capital goods in addition to their varying pecuniary returns different projects also vary with respect to the status they confer to the entrepreneurs who operate them we show that i social status increases the growth rate but this effect is mitigated by a social norm that inversely links overall levels of employment in the high return project with the status conferred to it ii the combined effect of social status and inflation is a source of transitional dynamics in an environment where such dynamics would not emerge if considerations of occupational prestige were absent iii when the social norm affects social status the economy s dynamics may be manifested in the form of endogenous volatility iv the presence and characteristics of social status can generate a negative correlation between volatility and growth

international evidence on crude oil price dynamics applications of arima garch models abstract we examine the usefulness of several arima garch models for modeling and forecasting the conditional mean and volatility of weekly crude oil spot prices in eleven international markets over the 1 2 1997 10 3 2009 period in particular we investigate the out of sample forecasting performance of four volatility models garch egarch and aparch and figarch over january 2009 to october 2009 forecasting results are somewhat mixed but in most cases the aparch model outperforms the others also conditional standard deviation captures the volatility in oil returns better than the traditional conditional variance finally shocks to conditional volatility dissipate at an exponential rate which is consistent with the covariance stationary garch models than the slow hyperbolic rate implied by the figarch alternative

relative wealth status seeking and catching up abstract according to our studies if relative wealth appears in the reduced form utility function for example because of status seeking then the poor will catch up with the rich if the elasticity of marginal utility of relative wealth is greater than the elasticity of marginal utility of consumption we give sufficient conditions for the final distribution of wealth to be independent of the initial distribution and conditions for saddlepoint stability in a two class model

forecasting electricity prices and their volatilities using unobserved components abstract the liberalization of electricity markets more than ten years ago in the vast majority of developed countries has introduced the need of modelling and forecasting electricity prices and volatilities both in the short and long term thus there is a need of providing methodology that is able to deal with the most important features of electricity price series which are well known for presenting not only structure in conditional mean but also time varying conditional variances in this work we propose a new model which allows to extract conditionally heteroskedastic common factors from the vector of electricity prices these common factors are jointly estimated as well as their relationship with the original vector of series and the dynamics affecting both their conditional mean and variance the estimation of the model is carried out under the state space formulation the new model proposed is applied to extract seasonal common dynamic factors as well as common volatility factors for electricity prices and the estimation results are used to forecast electricity prices and their volatilities in the spanish zone of the iberian market several simplified alternative models are also considered as benchmarks to illustrate that the proposed approach is superior to all of them in terms of explanatory and predictive power

status the distribution of wealth and growth we analyze a simple model of endogenous growth in which individuals care about both consumption and their rank in the distribution of wealth we show that the steady growth rate of the economy increases with both the strength of the status seeking motive and the initial equality of the wealth distribution contrary to the basic model of endogenous growth the equilibrium growth rate is not necessarily smaller than in the social optimum and we identify the circumstances under which the two coincide

signaling and indirect taxation commodities communicate we investigate optimal indirect taxation when both the intrinsic qualities of goods and signaling motivate consumption choices optimal indirect taxes are introduced into a monotonic signaling game we provide sufficient conditions for the uniqueness of the d1 sequential equilibrium strategies in the case of pure costly signaling signaling goods can in equilibrium be taxed without burden when commodities serve both intrinsic consumption and signaling optimal taxes are characterized by a ramsey rule which deals with distortions resulting from signaling

the time varying parameter model for modeling changing conditional variance the case of the lucas hypothesis the main econometric issue in testing the lucas 1973 hypothesis in a time series context is estimation of the forecast error variance conditional on past information the conditional variance may vary through time as monetary policy evolves and agents are obliged to infer its present state under the assumption that a monetary policy regime is continuously changing a time varying parameter model is proposed for the monetary growth function based on kalman filtering estimation of recursive forecast errors and their conditional variances the lucas hypothesis is tested for the u s economy 1964 1 1985 4 using monetary growth as aggregate demand variable the lucas hypothesis is rejected in favor of friedman s 1977 hypothesis the conditional variance of monetary growth affects real output directly not through the coefficients on the forecast error term in the lucas type output equation

does anticipated aggregate demand policy matter further econometric results a heated debate has arisen over what modigliani has dubbed the macro rational expections mre hypothesis this hypothesis embodies two component hypotheses 1 rational expectations and 2 short run neutrality i e that anticipated changes in aggregate demand will have already been taken into account in economic agents behavior and will thus evoke no output or employment response together these component hypotheses imply that deterministic feedback policy rules will have no effect on business cycle fluctuations the irrelevance of these types of policy rules is inconsistent with much previous macro theorizing as well as with the views of policymakers it is thus an extremely controversial proposition which requires a wide range of empirical research this paper is a sequel to a previous paper by the author that paper developed a methodology for testing the mre hypothesis and found that anticipated money growth does matter to the business cycle this paper extends the analyses to cases where the rate of nominal gnp growth or the inflation rate rather than money growth is the aggregate demand variable the empirical results are also negative on the mre hypothesis and its corresponding policy ineffectiveness proposition this abstract was borrowed from another version of this item

intrafamiliar consumption and saving under altruism and wealth considerations this paper introduces a non cooperative and dynamic framework of intrafamiliar decisions where the partners obtain utility from own consumption account for the partner s benefit from consumption altruism and appreciate wealth stationary wealth and thus stationary consumption decreases with respect to altruism under cooperation but increases in the subgame perfect equilibrium in linear markov perfect strategies moreover non cooperation reduces savings and altruism mitigates this effect however altruism is an imperfect substitute for commitment and of course for cooperation because open loop strategies although independent of altruism result in greater wealth

are workers paid their marginal products status is like coase s social costs a reciprocal phenomenon given that one person s gain in status can occur only at the expense of a loss in status for others and that workers are free to choose their coworkers it follows that the competitive wage structure within a firm must be one in which individual wage differences understate individual differences in marginal products the purpose of this paper is to examine a variety of empirical evidence that relates to this proposition about the firm s internal wage structure the paper is organized as follows section i briefly summarizes the theoretical considerations that govern competitive wage determination when status matters to people and firms are viewed as voluntary associations of workers section ii then confronts the predictions of section i by examining pay and productivity schedules for a group of sales occupations for which these schedules are relatively easily observed section ii also examines the relationship between wages and productivity for a sample of university professors an occupation in which individual productivity differences are for a variety of obvious reasons relatively more difficult to measure all of the evidence examined is consistent with the hypothesis that within firms wage rates vary substantially less than do individual productivity values section iii discusses additional observations and evidence that bear on this same hypothesis it suggests that the implicit market for status may strongly influence the ways in which firms are organized to carry out the tasks they perform section iv concludes by considering the claim that egalitarian internal wage structures arise because of equity considerations it argues that the concept of equity appears very closely linked to the concept of status and suggests a strategy for assigning monetaty value to the equity considerations that so often dominate public policy decisions

electricity price forecasting using sale and purchase curves the x model abstract our paper aims to model and forecast the electricity price by taking a completely new perspective on the data it will be the first approach which is able to combine the insights of market structure models with extensive and modern econometric analysis instead of directly modeling the electricity price as it is usually done in time series or data mining approaches we model and utilize its true source the sale and purchase curves of the electricity exchange we will refer to this new model as x model as almost every deregulated electricity price is simply the result of the intersection of the electricity supply and demand curve at a certain auction therefore we show an approach to deal with a tremendous amount of auction data using a subtle data processing technique as well as dimension reduction and lasso based estimation methods we incorporate not only several known features such as seasonal behavior or the impact of other processes like renewable energy but also completely new elaborated stylized facts of the bidding structure our model is able to capture the non linear behavior of the electricity price which is especially useful for predicting huge price spikes using simulation methods we show how to derive prediction intervals for probabilistic forecasting we describe and show the proposed methods for the day ahead epex spot price of germany and austria

macroeconomic implications of conspicuous consumption a sombartian dynamic model this chapter presents a dynamic general equilibrium model in which consumers have status preference i investigate the manner in which capital accumulation is impeded by conspicuous consumption a la corneo and jeanne j public econ 66 55 71 1997a following the literature social norms are given as either bandwagon type or snob type i then show that when the economy is characterized by a bandwagon type social norm capital accumulation exhibits interesting patterns those patterns include for example an oscillating convergence path the rise of the economy feeds its decay through conspicuous consumption and that decay suppresses conspicuous consumption and engenders prosperity as predicted by sombart liebe luxus und kapitalismus reprinted 1967 deutscher taschenbuch verlag munchen 1912

taxation of rent seeking activities we consider taxes on firms which engage in rent seeking contests the taxes can be on realized profits or on rent seeking expenditures the prize can be awarded to either the highest bidder or to a firm with probability proportional to its share of total spending on lobbying we find the conditions under which taxes do not reduce rent seeking effort generate tax revenue with no tax burden and cause no reduction in the profits of firms

limits to arbitrage in electricity markets a case study of miso abstract we study the case of financial traders in the midwest electricity market where they are expected to arbitrage price differences that result in inefficiencies using exogenous variation in financial trading from the financial crisis and a period of high transaction costs we show speculators had only a weak effect moreover while arbitrage was restricted by transaction costs imposed by regulation some financial players bet in exactly the opposite direction of the pricing gap sustaining large losses while doing so we show this is consistent with price manipulation intended to increase the value of a related instrument that bets on local price differences ftrs

economic cosmology and the evolutionary challenge abstract the intellectual histories of economics and evolutionary biology are closely intertwined because both subjects deal with living complex evolving systems because the subject matter is similar contemporary evolutionary thought has much to offer to economics in recent decades theoretical biology has progressed faster than economics in understanding phenomena like hierarchical processes cooperative behavior and selection processes in evolutionary change this paper discusses three very old cosmologies in western thought how these play out in economic theory and how evolutionary biology can help evaluate their validity and policy relevance these cosmologies are 1 natural man as a rational self sufficient egotistical individual 2 competition among individuals can lead to a well functioning society and 3 there exists an ideal optimal state of nature these correspond to colander et al 2004 holy trinity of orthodox economics rationality greed and equilibrium it is argued below that current breakthroughs in evolutionary biology and neuroscience can help economics go beyond these simple cosmologies

frames of reference and the quality of life asked to choose most people state confidently that they would rather be killed in an automobile accident than to survive a quadraplegic and so we are not surprised to learn that severely disabled people experience a period of devastating depression and disorientation in the wake of their accidents what we do not expect however are the speed and extent to which many of these victims accommodate to their new circumstances within a year s time many quadraplegics report the same mix of moods and emotions as able bodied people do there is also evidence that the blind the retarded and the malformed are no less happy than other people ads for the new york state lottery show participants fantasizing about how their lives would change if they won i d buy the company and fire my boss people who actually do win the lottery report the anticipated rush of euphoria in the weeks after their good fortune followup studies done after several years however indicate that these people are no happier indeed are in many ways less happy than before as a young man fresh out of college i served as a peace corps volunteer in rural nepal my one room house had no electricity no heat no indoor toilet no running water the local diet offered little variety and virtually no meat and yet at no time during my two year stay in nepal did i experience a sense of material deprivation on the contrary my monthly stipend of 40 was much more than most others in my village had and with it i experienced a feeling of prosperity that i have recaptured only in recent years these observations illustrate the critical role of context as a determinant of human satisfaction the neoclassical economic model of choice abstracts from context saying that utility depends only on the level of consumption consumption levels obviously are important and the neoclassical model performs reasonably well in many instances and yet its narrow focus misses something important to predict people s behavior to draw inferences about their well being or to make intelligent policy decisions we must not only know the relevant levels of consumption but also have an appropriate frame of reference within which to evaluate them

social organization status and savings behavior abstract we develop a model of status seeking in the presence of incomplete information and derive its implications for aggregate savings status seeking endogenously takes the form of conspicuous consumption its impact on savings depends on the scheduling of the contests for status over the life cycle if individuals engage in conspicuous consumption when old aggregate savings are increased we also study the role of social segmentation while social segmentation reduces the inequality across status seekers and fuels social rivalry under complete information we show that under incomplete information social segmentation weakens the incentive to strive for greater status

interdependent preferences and the competitive wage structure this article shows by example that when workers care about relative income and are free to choose their coworkers the equilibrium distribution of wages within firms must be less dispersed than the corresponding distribution of marginal products an implicit market for within firm status is shown to produce welfare gains by sorting workers among firms in accordance with how much they are willing to pay for high rank the resulting equilibrium pareto dominates allocations in which each worker is paid his marginal product

can the electricity market be characterised by asymmetric behaviour in this paper we test for asymmetric behaviour of industrial and residential electricity demand for the g7 countries using the entropy based test for symmetry suggested by racine j and maasoumi e 2007 a versatile and robust metric entropy test of time reversibility and other hypotheses journal of econometrics 138 2 547 567 racine j and maasoumi e 2008 a robust entropy based test of asymmetry for discrete and continuous processes econometric reviews 28 246 261 the triples test of randles r flinger m policello g and wolfe d 1980 an asymptotically distribution free test for symmetry versus asymmetry journal of the american statistical association 75 168 172 and the bai j and ng s 2001 a consistent test for conditional symmetry in time series models journal of econometrics 103 225 258 test for conditional symmetry using data that spans over three decades we find overwhelming evidence of conditional symmetry of residential and industrial electricity consumption this finding implies that the use of econometric tests based on linear data generating processes is credible

wealth seeking reconsidered abstract if individuals are interested in their relative wealth position they engage in contests for wealth this leads to a steady state with overaccumulation in a simple growth model it is shown that if some individuals are engaged in wealth seeking activity but others are not the latter might benefit however wealth seeking is not welfare enhancing under usual assumptions concerning production technology the steady state equilibrium is characterized by a marginal productivity of capital that is below the steady state rate of time preference and by emergence of a class structure

time dependent correlations in electricity markets in the last years many electricity markets were subjected to deregulated operation where prices are set by the action of market participants in this form producers and consumers rely on demand and price forecasts to decide their bidding strategies allocate assets negotiate bilateral contracts hedge risks and plan facility investments a basic feature of efficient market hypothesis is the absence of correlations between price increments over any time scale leading to random walk type behavior of prices so arbitrage is not possible however recent studies have suggested that this is not the case and correlations are present in the behavior of diverse electricity markets in this paper a temporal quantification of electricity market correlations is made by means of detrended fluctuation and allan analyses the approach is applied to two canadian electricity markets ontario and alberta the results show the existence of correlations in both demand and prices exhibiting complex time dependent behavior with lower correlations in winter while higher in summer relatively steady annual cycles in demand but unstable cycles in prices are detected on the other hand the more significant nonlinear effects measured in terms of a multifractality index are found for winter months while the converse behavior is displayed during the summer period in terms of forecasting models our results suggest that nonlinear recursive models e g feedback nns should be used for accurate day ahead price estimation in contrast linear models can suffice for demand forecasting purposes

an empirical comparison of alternate regime switching models for electricity spot prices one of the most profound features of electricity spot prices are the price spikes markov regime switching mrs models seem to be a natural candidate for modeling this spiky behavior however in the studies published so far the goodness of fit of the proposed models has not been a major focus while most of the models were elegant their fit to empirical data has either been not examined thoroughly or the signs of a bad fit ignored with this paper we want to fill the gap we calibrate and test a range of mrs models in an attempt to find parsimonious specifications that not only address the main characteristics of electricity prices but are statistically sound as well we find that the most universal and robust structure is that of an independent spike 3 regime model with heteroscedastic diffusion type base regime dynamics and shifted spike regime distributions

on relative wealth effects and the optimality of growth abstract we present a model of endogenous growth in which a desire for social status lead individuals to care about their relative wealth the growth rate of the economy is socially optimal if the status motive is sufficiently important but the presence of status seeking may also lead to excessive growth

efficient modeling and forecasting of electricity spot prices abstract the increasing importance of renewable energy especially solar and wind power has led to new forces in the formation of electricity prices hence this paper introduces an econometric model for the hourly time series of electricity prices of the european power exchange epex which incorporates specific features like renewable energy the model consists of several sophisticated and established approaches and can be regarded as a periodic var tarch with wind power solar power and load as influences on the time series it is able to map the distinct and well known features of electricity prices in germany an efficient iteratively reweighted lasso approach is used for the estimation moreover it is shown that several existing models are outperformed by the procedure developed in this paper

spot electricity price discovery in indian electricity market this paper investigates the spot electricity price discovery that exists among the five regions of indian electricity market using hourly spot electricity price data from 1st january 2014 to 31st december 2015 using augmented dickey fuller 1981 and narayan and popp 2010 unit root tests we find that the spot electricity prices for both peak and off peak hours across all the regions are stationary at level then by applying granger causality test for a reduced var model at level the results show that there hardly any causality exists between these electricity markets barring few regions though we did not find any causality between peak price and off peak price for all individual region but we formed two panels by using peak and off peak price data of all five regions our results showed short run and long run panel granger causality between peak price and off peak price the results of the study suggests that though india as a nation has all the regions inter connected with single frequency of power grid operation since 2008 however these markets are not highly integrated in comparison to electricity markets of developed nations around the world

do food and oil prices co move abstract this paper studies co movements between world oil prices and global prices for corn soybean and wheat using copulas several copula models with different conditional dependence structures and time varying dependence parameters were considered empirical results for weekly data from january 1998 to april 2011 showed weak oil food dependence and no extreme market dependence between oil and food prices these results support the neutrality of agricultural commodity markets to the effects of changes in oil prices and non contagion between the crude oil and agricultural markets however dependence increased significantly in the last three years of the sampling period even though upper tail dependence remained insignificant indicating that food price spikes are not caused by positive extreme oil price changes these results have implications for policy design risk management and hedging strategies

asymmetric volatility in european day ahead power markets a comparative microeconomic analysis this paper uses high frequency spot price data from fourteen wholesale electricity markets in europe to analyze asymmetric volatility in european day ahead power markets with exponential garch e garch and tarch models our data set ranges from 1992 to 2015 and consists of approximately 926 000 observations as such this paper constitutes the most extensive and comprehensive work conducted so far on european power markets to the best of our knowledge unlike most of the literature that treats price as a continuous variable and attempts to model its trajectory this paper adopts a unique approach and regards each hour in a day a separate market the results show in post 2008 period the most expensive electricity is consumed in turkey ireland and uk while the cheapest power is in russia nordic countries and czech republic russia poland and czech republic have the least volatile markets while france ireland and portugal have the most volatile ones volatility has decreased in many european countries in post 2008 period besides we find magnitude effect is usually larger than the leverage effect meaning that the absolute value of price change is relatively more important than the sign of the change whether it is an increase or a decrease to explain volatility in european day ahead power markets moreover the results imply there is not a uniform inverse leverage effect in electricity prices that is price increases are more destabilizing in some european markets e g poland slovenia ireland netherlands than comparable price decreases but vice versa also holds true in some other countries e g portugal and france leverage or inverse leverage effect in post 2008 period is relatively stronger in portugal france and ireland but its impact is quite limited in turkey and germany furthermore although the impact of seasonality on prices is obvious a specific pattern cannot be identified finally large changes in the volatility will affect future volatilities for a relatively longer period of time in nordic countries ireland and the uk while changes in current volatility will have less effect on future volatilities in czech republic russia and turkey

relativity and efficient taxation research by frank 3 4 5 van de stadt kapteyn and van de geer 7 layard 6 and easterlin 2 suggests that the tax consequences of duesenberry s relative income hypothesis 1 deserve investigation the relativity hypothesis contends that when one person increases his income he imposes utility losses on others if the hypothesis is correct then efficiency requires that each person confront a marginal tax rate that internalizes the externality so that each person bears a cost equal to the relativistic losses he generates the structure of relativity determines the structure of efficient taxation duesenberry devotes almost a full chapter to the tax implications of relativity this paper extends duesenberry s seminal contribution duesenberry considers only one directional relativity only the case where relativity applies to income but not leisure and only the three person economy our analysis of one directional relativity considers the important case where relativity applies to leisure as well as income and also considers the n person economy moreover our analysis considers several alternative relativity structures

the tragedy of the commons in a fishery when relative performance matters this paper presents a simple model of a common access fishery where fishermen care about relative performance as well as absolute profits our model captures the idea that status which depends on relative performance in a community influences a person s well being in our main specification relative performance depends on the absolute difference in after tax profits we show that overharvesting resulting from the tragedy of the commons problem is exacerbated by the desire for higher relative performance leading to a smaller steady state fish stock and smaller steady state profit for all the fishermen we also consider alternative specifications where status depends on the absolute difference in harvests or relative difference in profits or where there is heterogeneity in the degree to which status matters or allowing for the possibility of extinction in all these specifications status further reduces the steady state fish stock we examine taxes and an individual quota as policy alternatives and find support for using the direct quantity method to implement the socially efficient stock level

efficient status seeking externalities and the evolution of status games abstract status seeking games are games in which an individual s utility is determined by his relative expenditure on status seeking activities rather than his absolute consumption there are a number of parallels between status seeking and rent seeking activities for example a tendency for pareto excessive private investment however many status seeking activities differ from rent seeking activities insofar as they generate significant benefits to individuals not actively involved in the game given an array of more or less productive status seeking games it is likely that relatively efficient status conferring mechanisms will tend to displace less efficient ones

is public spending good for you the whole world is marching towards the right with the transformation of the soviet union and eastern europe the drastic economic reforms in china and the privatisation liberalisation and reversing the historical increasing trend reduction in public spending in many western countries 1 much about these changes is applaudable and economists may feel proud for partially contributing to them however this paper argues that the reduction in public spending especially in education research and environmental protection is counter productive this may not be so viewed in the narrow perspective of production and consumption especially in the short run but is almost certainly so viewed in the wider perspective of welfare or happiness in the long run it is well known that public spending has some efficiency problems but the probably much worse inefficiency of private consumption has been largely ignored this paper attempts to provide a broader and more balanced picture from an interdisciplinary perspective

relative standing comparisons risk taking and safety regulations abstract we study the question of how relative standing comparisons or status seeking influence risk taking when utility is separable in consumption and status the following results apply with non systematic risks more concern for status leads to more less risk taking when in a sense made precise in the paper the utility function is less more concave in status than in pure consumption with systematic risk risk taking always increases with the concern for status however status seeking always implies socially excessive risk taking thus suggesting a role for public regulation of risky choices

are output fluctuations transitory according to the conventional view of the business cycle fluctuations in output represent temporary deviations from trend the purpose of this paper is to question this conventional view if fluctuations in output are dominated by temporary deviations from the natural rate of output then an unexpected change in output today should not substantially change one s forecast of output in say five or ten years our examination of quarterly postwar united states data leads us to be skeptical about this implication the data suggest that an unexpected change in real gnp of 1 percent should change one s forecast by over 1 percent over a long horizon

deficits and the demand for money in recent years the large budget deficits of the federal government have renewed interest in the effects of government debt on private sector behavior to date empirical research has focused on the relationship between debt and two key variables consumption and interest rates by contrast empirical research on the effects of government debt on other variables of interest to macroeconomists is limited this paper examines the relationship between government debt and one such variable real money balances the neglect of government debt as a determinant of money demand is surprising many traditional macroeconomic models such as blinder and solow s 9 influential work include government debt as an argument to the money demand function moreover macroeconomic theorists have long been aware that a government debt money demand relationship has important implications for the efficacy of fiscal policy 2 this paper examines the relationship between government debt and real money holdings over the 1950 1990 period a positive money debt relationship was previously noted by butkiewicz 12 and deravi hegji and moberly 15 hereafter referred to as dhm our work improves upon this research in two ways first in contrast to butkiewicz 12 and dhm 15 we investigate the time series properties stationarity cointegration of relevant variables second we distinguish between supply side and demand side explanations of the debt money relationship the explanation advanced by butkiewicz 12 and dhm 15 is that an increase government debt is perceived by the private sector as an increase in net wealth and hence should increase money demand 3 this explanation ignores a potentially important connection between government debt and money supply if the federal reserve monetizes debt and if the private sector s adjustment to this monetization is lagged then debt and real money balances will exhibit a positive correla

pricing anomalies in the market for diamonds evidence of conformist behavior some goods are consumed not just for their intrinsic utility but also for the impression their consumption has on others we analyze the market for such a commodity diamonds we collect data on price and other attributes from the inventories of three large online retailers of diamonds we find that people are willing to pay premiums upward of 18 for a diamond that is one half carat rather than slightly less than a half carat and between 5 and 10 for a one carat rather than a slightly less than one carat stone since a major portion of larger gem quality diamonds are used for engagement rings such an outcome is consistent with bernheim s model of conformism where individuals try to conform to a single standard of behavior that is often established at a focal point in this case prospective grooms signal their desirability as a

credit markets and the control of capital traditional discussions of the role of capital markets have identified a number of distinct functions which they perforrn they allocate scarce capital among competing users and uses l and they provide signals to guide managers in making their investment decisions 2 in this lecture i wish to focus on a rather different function of the capital market what i shall refer to as the control of capital 3 conventional theory treats the typical firrn in an anthropomorphic manner it acts as a single rational individual doing what it is supposed to be doing maximizing stock market value that may have been well and good in those nostalgic bygone days of small firrns each run tightly by their owners who were single mindedly pursuing their lust for wealth but today a majority of production occurs in large corporations in which no shareholder owns more than a small fraction of the shares in which the separation of ownership and control that frank knight was so concerned with in his writings some sixty five years ago has become a reality those

the challenge of high unemployment it is argued that policymakers macroeconomists and microeconomists should all take high unemployment more seriously the shortcomings of existing theories of unemployment are discussed and a new definition of involuntary unemployment is proposed a model is sketched in which falling aggregate demand leads to keynesian unemployment because labor is heterogeneous and relative wages matter microeconomic theory is criticized for assuming away unemployment and in the process radically changing the answers to some basic questions in trade theory and public finance finally some speculative explanations are offered for the low unemployment now found in states like new jersey and massachusetts this abstract was borrowed from another version of this item

arima models to predict next day electricity prices price forecasting is becoming increasingly relevant to producers and consumers in the new competitive electric power markets both for spot markets and long term contracts price forecasts are necessary to develop bidding strategies or negotiation skills in order to maximize benefit this paper provides a method to predict next day electricity prices based on the arima methodology arima techniques are used to analyze time series and in the past have been mainly used for load forecasting due to their accuracy and mathematical soundness a detailed explanation of the aforementioned arima models and results from mainland spain and californian markets are presented

promotions and product pricing parsimony versus veblenesque demand the veracity of the parsimonious law of demand has long been challenged by analyses of the veblen effect and prestige pricing backward bending demand curves often attend discussions of conspicuous consumption probing the sociological and psychological intricacies of potential consumer interdependencies scholars in economics and marketing have overlooked mundane product promotions for a monopolistic firm we formalize the relationship between the optimal price quantity combination and the thoroughness of product promotions iterating toward the profit maximizing thoroughness of product promotion gives rise to a backward bending price quantity locus challenges to the law of demand that ignore product promotions are thereby undercut

the effect of long term expansion on the evolution of electricity price numerical analysis of a theoretically optimised electricity market abstract a decision support tool is proposed for optimising the expansion planning of a semi liberalised electricity market whilst the underlying interaction of the generating mix with electricity prices is researched in the long run a nonlinear stochastic programming algorithm is used for handling multiple uncertainties optimising the power sector characteristics both in terms of financial and environmental performance two endogenous models and an exogenous one are analysed and compared the endogenous model results indicate that consumers might benefit by the moderate electricity prices in case the optimal loads and capacity orders are rendered the exogenous model is insensitive to generating mix variations the long term actions suggested for system operators are comprised of the permits issued for new entries they are affected by the evolution of electricity prices since the permits granted for conventional technologies are maintained when their profits are rising the permits granted for renewable technologies are also maintained thus allowing cleaner electricity production to be induced to the grid the optimal bid strategies of generators interact with their dispatching schedule and the diversification of their load curves the relevant bids are primarily driven by the merit order the plants are dispatched in the assigned load levels may be raised in profitable producers so that their profit is maximised they might be restrained instead in case there are no significant prospects for individual profits the lognormal distribution of electricity price results is characterised by increasing variance over time indicating that the model is more robust in the most imminent solutions

spurious trend and cycle in the state space decomposition of a time series with a unit root abstract recent research has proposed the state space ss framework for decomposition of gnp and other economic time series into trend and cycle components using the kalman filter this paper reviews the empirical evidence and suggests that the resulting decomposition may be spurious just as detrending by linear regression is known to generate spurious trends and cycles in nonstationary time series a monte carlo experiment confirms that when data are generated by a random walk the ss model tends to indicate incorrectly that the series consists of cyclical variations around a smooth trend the improvement in fit over the true model will typically appear to be statistically significant these results suggest that caution should be exercised in drawing inferences about the nature of economic processes from the ss decomposition

contests for ranks experimental evidence we use experiments to analyze multiple dimensions of the relationship between rank incentives and individual performance in our experiment i rank is defined as subjects relative position in their group based on their performance in a real effort task and ii subjects earnings are independent of their performance we find that any rank incentive improves mean performance than no rank incentive and this result is independent of the group size in the large group the mean performance increases strictly in all except at the highest rank incentive but in the small group the mean performance increases weakly in rank incentives finally the mean performance is significantly higher in the large than in the small group because of a higher prestige effect in additional treatments in which we do not reveal the identity of the statusprize winners we find that average performance is identical to that in the baseline treatment without any status prizes the last result signifies the important role that public revelation plays to enhance the strength of status the results are important for managerial practices

short term forecasting of electricity prices for miso hubs evidence from arima egarch models this study estimates three time series models arima arima egarch and arima egarch m for hourly real time electricity prices for each of the five hubs of the midwest independent system operator miso and examines the in and out of sample forecasting performance of the respective models the results from the arima models reveal the presence of autoregressive conditional heteroskedasticity recognizing the possibility of asymmetric time varying volatility the egarch specification for the variance equation demonstrates the presence of an inverse leverage effect in electricity prices for each hub with respect to forecasts no one model clearly dominates the others in terms of in sample forecasting performance based on four forecast evaluation statistics however the arima egarch m model outperforms the other models michigan hub is the exception in terms of the out of sample forecasting performance

testing the rational expectations hypothesis further evidence this article tests the macro rational expectations hypotheses of rationality and neutrality for quarterly u s data the vector autoregressive representation is derived and the implied interequation nonlinear restrictions are tested using the wald statistic despite several modifications adopted here the results confirm the robustness of earlier findings that is the test results support rationality but not neutrality

variable renewable energy technologies in the turkish electricity market quantile regression analysis of the merit order effect abstract the share of variable renewable energy sources in power supply has increased significantly in many countries however this increase has also created problems in electricity markets while the average day ahead market price has declined in several markets the merit order effect the remuneration mechanisms in some countries have to be revised due to the surge in financial costs yet further research is needed to understand the implications of the merit order effect for remuneration mechanisms thoroughly accordingly this study aims to contribute to the literature through employing a quantile regression model to analyze the merit order effect and discuss its implications for the remuneration mechanism in turkish electricity market model results show significant negative merit order effect for both wind and run of river hydro technologies however this effect varies with respect to demand price level and technology moreover the contribution of these technologies to the total welfare in the turkish electricity market does not favor fixed price payments in conclusion it is recommended that the remuneration mechanism is revised to include the temporal value of variable renewable energy sources and electricity market design should reflect the locational value of variable renewable energy sources in turkey

forecasting realized volatility in electricity markets using logistic smooth transition heterogeneous autoregressive models we apply the non parametric realized volatility technique and the associated jump detection test to measure volatility and jumps in electricity prices then we propose a group of logistic smooth transition heterogeneous autoregressive lsthar models of realized volatility the models can simultaneously approximate long memory behavior and describe sign and size asymmetries they differ in the underlying heterogeneous autoregressive structure and the transition variable specification the out of sample forecast accuracy of the lsthar models is evaluated through the diebold mariano test and the superior predictive ability test in terms of the mean square error and the mean absolute error using high frequency prices from the australian new south wales nsw electricity market as empirical data we draw the following conclusions 1 introducing the logistic smooth transition structure with appropriate transition variable specification to the heterogeneous autoregressive models improves volatility forecasts 2 overall the lsthar model that uses the sum of beta function weighted past returns as the transition variable and includes past daily jumps as a predictor is the superior model for predicting volatility in the nsw market this model significantly outperforms the others

should public policy respond to positional externalities abstract a nice suit is one that compares favorably with those worn by others in the same local environment more generally a positional good is one whose utility depends strongly on how it compares with others in the same category 1 a positional externality occurs when new purchases alter the relevant context within which an existing positional good is evaluated 2 for example if some job candidates begin wearing expensive custom tailored suits a side effect of their action is that other candidates become less likely to make favorable impressions on interviewers from any individual job seeker s point of view the best response might be to match the higher expenditures of others lest her chances of landing the job fall but this outcome may be inefficient since when all spend more each candidate s probability of success remains unchanged all may agree that some form of collective restraint on expenditure would be useful in such cases however it is often impractical to negotiate private solutions do positional externalities then become legitimate objects of public policy concern in attempting to answer this question i employ the classical libertarian criterion put forth by john stuart mill 3 who wrote the state may not legitimately constrain any citizen s freedom of action except to prevent harm to others i argue that many positional externalities appear to meet mill s test causing not just negative feelings but also large and tangible economic costs to others who are ill equipped to avoid them i also discuss an unintrusive policy remedy for positional externalities one modeled after the use of effluent charges to curb environmental pollution the paper is organized as follows section 1 notes the deep similarity between the conditions that give rise to positional arms races and those that give rise to conventional military arms races section 2 follows with a review of evidence concerning the strength of concerns about relative position section 3 describes some of the tangible economic costs that people experience as a result of positional externalities arising from such concerns section 4 takes up the question of whether collective action directed against positional externalities is consistent with respect for individual rights section 5 describes how a progressive consumption tax could neutralize many of the most costly effects of positional externalities

do opec announcements influence oil prices abstract this paper investigates the effect of opec production decisions increase cut maintain on both wti and brent crude oil prices between q1 1991 and q1 2015 by employing the event study methodology and by using two indices as benchmarks bci and s p gsci we employ an egarch model to take into account the high volatility of oil prices and some stylized facts characterizing this volatility we find that the impact of opec s announcements on oil prices i evolves over time and among decisions ii is more significant for production cut and maintain iii is different for wti and brent prices and iv is sensitive to the benchmark index moreover opec s decisions depend on the exploration and extraction cost of more expensive unconventional oil resources

generation scheduling in a deregulated system the norwegian case the paper gives an overview of the deregulated electricity supply system in norway with emphasis on the generation scheduling approach procedures and tools for long medium and short term scheduling are described scheduling is carried out by each individual utility since scheduling is based on profit maximizing the spot market price is a very important factor this price is varying and uncertain however a part of the paper describes how to deal with this by considering the spot market price as an exogenously given stochastic variable it is shown how to extend the common water value computations so as to handle this case implications to the medium and short term scheduling are also discussed

forecasting next day electricity prices by time series models in the framework of competitive electricity markets power producers and consumers need accurate price forecasting tools price forecasts embody crucial information for producers and consumers when planning bidding strategies in order to maximize their benefits and utilities respectively this paper provides two highly accurate yet efficient price forecasting tools based on time series analysis dynamic regression and transfer function models these techniques are explained and checked against each other results and discussions from real world case studies based on the electricity markets of mainland spain and california are presented

regime jumps in electricity prices many countries are liberalizing their energy markets participants in these markets are exposed to market risk due to the characteristics of electricity price dynamics electricity prices are known to be mean reverting very volatile and subject to frequent spikes models that describe the dynamics of electricity prices should incorporate these characteristics in order to capture the price spikes many researchers have introduced stochastic jump processes but we argue and show that this specification might lead to potential problems with specifying the true amount of mean reversion within the process in this paper we propose a regime switching model that models price spikes separated from normal mean reverting prices

does anticipated monetary policy matter an econometric investigation a heated debate has arisen over the policy ineffectiveness proposition associate with the work of lucas sargent and wallace it postulates that anticipated aggregate demand policy will have no effect on business cycle fluctuations so that one deterministic feedback policy rule is as good as any other from the point of view of stabilizing the economy this paper develops a methodology for empirically analyzing rational expectations models displaying this neutrality result and then applies it to the important question of whether anticipated monetary policy matters to the business cycle

the cyclical component of u s economic activity quarterly data on industrial production and deflated gross national product in the united states from 1947 through 1985 are decomposed into independent nonstationary trend and stationary cycle components using kalman filtering and smoothing techniques estimates of the model parameters imply that at least half of the quarterly innovation in u s economic activity can be attributed to a stationary cyclical component that persists over periods of time as long as five years this finding is inconsistent with the hypothesis that most of the apparent variation in u s economic activity can be attributed to a nonstationary trend component

how do crude oil prices co move a copula approach abstract this paper examines the dependence structure between crude oil benchmark prices using copulas by considering several copula models with different conditional dependence structures and time varying dependence parameters we find evidence of significant symmetric upper and lower tail dependence between crude oil prices these findings suggest that crude oil prices are linked with the same intensity during bull and bear markets thus supporting the hypothesis that the oil market is one great pool in contrast with the hypothesis that states that the oil market is regionalized our findings on crude oil price co movements also have implications for risk management hedging strategies and asset pricing

electricity price short term forecasting using artificial neural networks this paper presents the system marginal price smp short term forecasting implementation using the artificial neural networks ann computing technique the described approach uses the three layered ann paradigm with backpropagation the retrospective smp real world data acquired from the deregulated victorian power system was used for training and testing the ann the results presented in this paper confirm considerable value of the ann based approach in forecasting the smp

energy clearing price prediction and confidence interval estimation with cascaded neural networks the energy market clearing prices mcps in deregulated power markets are volatile good mcp prediction and its confidence interval estimation will help utilities and independent power producers submit effective bids with low risks mcp prediction however is difficult since bidding strategies used by participants are complicated and various uncertainties interact in an intricate way furthermore mcp predictors usually have a cascaded structure as several key input factors need to be predicted first cascaded structures are widely used however they have not been adequately investigated this paper analyzes the uncertainties involved in a cascaded neural network nn structure for mcp prediction and develops the prediction distribution under the bayesian framework a computationally efficient algorithm to evaluate the confidence intervals by using the memoryless quasi newton method is also developed testing results on a classroom problem and on new england mcp prediction show that the method is computationally efficient and provides accurate prediction and confidence coverage the scheme is generic and can be applied to various networks such as multilayer perceptrons and radial basis function networks

rank as an inherent incentive evidence from a field experiment abstract money is the prime incentive considered in economic models however recent evidence indicates that people are also greatly concerned about their social rankings is this solely because rank brings tangible benefits or because in addition people have an inherent preference for high rank this paper deployed a field experiment that provides evidence for an inherent preference in the experiment vietnamese students enrolled in an english course performed significantly better on the official standardized international final test when they were told their rankings on practice tests than when they were not this result held even when this ranking information could not be reliably communicated thus severely attenuating the potential to bring tangible or status benefits

social organization in an endogenous growth model we develop an endogenous growth model in which individuals form matches in order to consume goods that are not explicitly traded the matching process endogenously generates a concern for relative wealth and is thereby beneficial for capital accumulation and economic growth we then study how social segmentation in the matching process affects economic growth under strong segmentation social competition over mates occurs inside homogeneous groups this homogeneity increases the severity of the rat race of wealth accumulation and fosters economic growth

superstitious seasonality in precious metals markets evidence from garch models with time varying skewness and kurtosis in this article we analyse whether the friday the 13th effect documented by kolb and rodriguez 1987 can be observed in precious metals markets specifically we use dummy augmented garch models to investigate the impact of this specific calendar day on the conditional means of gold silver palladium and platinum returns the specification of the garch model follows a flexible class recently proposed by leon et al 2005 that incorporates time varying skewness and kurtosis by applying a gram charlier series expansion of the normal density function our results for the period from july 1996 to august 2013 provide three important insights first there is no evidence that human superstition regarding bad luck fridays affects precious metals markets in a negative way i e returns on fridays the 13th are not significantly lower than on regular fridays second besides showing robustness in a variety of settings we can confirm this main result in a sensitivity check where we replace the dummy variables

renewable energy regulation and structural breaks an empirical analysis of spanish electricity price volatility abstract international experience proves that electricity prices have undergone major changes in volatility since the entry of green technologies the intermittency of renewable sources is one of the reasons for these changes as it leads to higher volatility in periods of higher participation by renewables we argue that the development of the regulatory system promoting renewable electricity also plays a crucial role we raise a question that deserves attention could an incentive scheme induce higher share of renewables and lower volatility simultaneously in this paper we conduct an empirical analysis with spanish data we analyze possible ensuing structural changes in spanish electricity spot price volatility from january 2002 to december 2017 we identify two structural breaks linked to important measures related to renewable electricity i the abolishment of the feed in tariff scheme and ii the establishment of a more market oriented regulation based on investment and operating costs we conclude that stable regulatory policies reduce volatility even though the presence of renewable sources is greater furthermore market based policy measures achieve lower volatility encouraging good integration of intermittent renewable electricity

environmental policy when pollutive consumption is sensitive to advertising norms versus status a theoretical model is developed to analyse optimal environmental policy when consumer preferences are endogenous it captures that pollutive consumption is sensitive to consumption by others and commercial advertising this is conceptualized through a consumption norm an increase in this norm means that consumers will become dissatisfied with a given consumption level and try to raise it which will cause an increase in pollution the model is particularly relevant for the study of conspicuous consumption which generally is subject to concentrated advertising efforts while it generates considerable pollution the model can accommodate the cases of an externality created by advertising being positive or negative we also show that using different functional specifications for the norm function one can address either conformity or status seeking we derive optimal rules for a pollution tax a subsidy or tax on advertising and information provision by the government the results not only contribute to more realism in environmental policy theory but also extend public policy with new instruments

are daily and weekly load and spot price dynamics in australia s national electricity market governed by episodic nonlinearity in this article we use half hourly spot electricity prices and load data for the national electricity market nem of australia for the period from december 1998 to june 2009 to test for episodic nonlinearity in the dynamics governing daily and weekly cycles in load and spot price time series data we apply the portmanteau correlation bicorrelation and tricorrelation tests introduced in hinich 1996 to the time series of half hourly spot prices and load demand from 7 12 1998 to 30 06 2009 using a fortran 95 program we find the presence of significant third and fourth order nonlinear serial dependence in the weekly load and spot price data in particular but to a much more marginal extent in the daily data

why do people care about social status abstract this paper shows that complementary interaction can induce people to care about social status because it serves as a signal of non observable abilities there is a unique separating equilibrium in which everyone cares about social status in this equilibrium a person s social status perfectly reveals his abilities and everyone matches with a person of like ability the analysis shows that people s instrumental concern for social status has important welfare and policy implications indeed peoples efforts to keep up with the joneses may be welfare enhancing

timing of kindness evidence from a field experiment abstract we conduct a field experiment in a naturally occurring labor environment and track whether the performance of workers responds to unexpected wage increases specifically we investigate how the timing of wage increases affects efforts we find that workers performance is substantially higher for the same total wage when their wage is increased in two steps as opposed to a single increase at the outset moreover workers are more honest and are more willing to do voluntary extra work after surprising wage increases compared to a baseline condition without increases

individual well being in a dynamic perspective this paper explores the determinants of individual well being as measured by self reported levels of satisfaction with income making full use of the panel data nature of the german socio economic panel we provide empirical evidence for well being depending on absolute and on relative levels of income in a dynamic framework this finding holds after controlling for other influential factors in a multivariate setting the main novelty of the paper is the consideration of dynamic aspects individual s own history as well as the relative income performance with respect to the others living in the society under analysis do play a major role in the assessment of well being

applying arma garch approaches to forecasting short term electricity prices abstract accurately modeling and predicting the mean and volatility of electricity prices can be of great importance to value electricity bid or hedge against the volatility of electricity prices and manage risk the paper applies various autoregressive moving average arma models with generalized autoregressive conditional heteroskedasticity garch processes namely arma garch models along with their modified forms arma garch in mean arma garch m to model and forecast hourly ahead electricity prices in total 10 different model structures are adopted and this paper thus conducts a comprehensive investigation on the arma garch based time series forecasting of electricity prices multiple statistical measures are employed to evaluate the modeling sufficiency and predication accuracy of the arma garch m methods the results show that the arma garch m models are in general an effective tool for modeling and forecasting the mean and volatility of electricity prices while arma sgarch m models are simple and robust and the arma gjrgarch m model is very competitive in addition we observe that hourly electricity prices exhibit apparent daily weekly and monthly periodicities and have the nonlinear and asymmetric time varying volatility together with an inverse leverage effect