capacity utilization under regulatory constraints this paper presents a methodology for predicting the effect of quota type regulatory constraints on capacity utilization for a multiproduct profit maximizing firm the approach builds on recent advances in the use of virtual prices to model the effects of rationing this allows the effects of regulatory constraints to be examined ex ante the methodol ogy is illustrated through a case study of the imposition of output quotas in an open access marine fishing industry on the pacific coast of the united states the results suggest that for certain species output quotas can cause strong disinvestment incentives have been used for many years to analyze the current status of the economy the expansion ary or contractionary forces on investment and inflation and productivity movements tradi tional cu measures were based on the notion of maximum possible output recently economists have developed measures derived from the eco nomic theory of the firm and based instead on a notion of optimal output berndt and fuss 1986 hickman 1964 klein 1960 morrison 1985 1988 segerson and squires 1990a these measures assume that some inputs are quasi fixed and that capacity utilization is determined by the level of the quasi fixed input s relative to the level of output previous studies of theory based cu measures have generally assumed that the industry under study was free from regulatory constraints an exception is morrison s 1988 study which ana lyzed among other things the effect of pollution control regulations on capacity utiliza tion in the u s and canadian steel industries the analysis is retrospective however since it studied the impacts of regulations that were al ready in effect in many cases it would be useful to be able to predict the effect of proposed regulations on ca pacity utilization such prospective or ex ante analysis would provide regulators with useful information regarding the likely effect of alterna tive policies on investment incentives for exam ple regulatory production limits on a single product such as quotas may cause multiproduct firms to change the volume and mix of their production which could in turn change invest ment incentives 1 likewise input use restrictions could affect both output supplies and the de mands for unregulated inputs thereby altering investment incentives predictions of these changes would contribute to designing more ef fective public policies regulating capacity and in vestment

a problem with the decomposition of technical inefficiency into scale and congestion components in 1988 byrnes fare grosskopf and lovell define a decomposition of inefficiency differentials into scale and congestion components this note shows that the decomposition may be sensitive to the order in which the two components are calculated and consequently use of the decomposition may result in misleading signals being given to management

optimal shared savings contracts in supply chains linear contracts and double moral hazard in many supply chains consumption of indirect materials sold by a supplier to a customer for use in her production process can be reduced by efforts exerted by either party since traditional supply contracts provide no incentive for the supplier to exert such effort shared savings contracts have been proposed as a way to improve incentives in the channel leading to more efficient effort choices by the two parties such shared savings contracts typically combine a fixed service fee with a variable component based on consumption volume we formalize this situation using the double moral hazard framework in which both parties decide how much effort to exert by trading off the cost of their effort against the benefits that they will obtain from reduced consumption we also extend the double moral hazard framework to analyze a broader class of cost of effort functions than considered so far including the linear cost of effort functions commonly found in practice we show that the supplier can still always induce the optimal second best equilibrium with a linear shared savings contract under this broader class of functions however the behavior of the optimal contract as a function of the problem parameters becomes more complex we illustrate how small changes in the problem parameters can turn profits from being a well behaved to a poorly behaved function of the contract and provide some theoretical characterization of this phenomenon the practical significance of this is that simple linear contracts are sufficient in many double moral hazard contexts even for the broader class of functions we consider but care must be taken in selecting the optimal contract parameters

a nonparametric cost approach to scale efficiency starting with farrell fieldhouse 1962 a host of notiparametric models have been developed for calculation of scale efficiency a common property of these models is that they are specified in terms of input output data duality theory has taught us that technological characteristics may be analyzed from either the primal or the dual cost side the purpose of this paper is to introduce a nonparametric dual method of calculating scale efficiency

primal and dual capacity utilization an application to productivity measurement in the u s automobile industry capacity utilization measures have traditionally been constructed as indexes of actual as compared to potential output this potential or capacity output y can be represented within an economic model of the firm as the tangency between the short and long run average cost curves economic theoretical measures of capacity utilization cu can then be characterized as y y where y is the realized level of output these quantity or primal cu measures allow for economic interpretation they provide explicit inference as to how changes in exogenous variables affect cu additional information for analyzing deviations from capacity production can be obtained by assessing the dual cost of the gap in this article the definitions and representations of primal output and dual cost cu measures are formalized within a dynamic model of a monopolistic firm as an illustration of this approach to characterizing cu measures a model is estimated for the u s automobile industry 1959 1980 and primal and dual cu

allocative efficiency of technically inefficient production units we discuss how to measure allocative efficiency without presuming technical efficiency this is relevant when it is easier to introduce reallocations than improvements of technical efficiency we compare the approach to the traditional one of assuming technical efficiency before measuring allocative efficiency in particular we develop necessary and sufficient conditions in the technology to ensure consistent measures we suggest alternative interpretations of the approaches and we relate them to motivational and organizational change perspectives

security of supply and regulation of energy networks abstract in recent years the security of energy supplies has re emerged as a central issue in the energy policy arena in the uk and elsewhere this re emergence takes place against a backdrop of increased liberalisation of the energy markets so that security of supply needs to be revisited within this context security of supply is multifaceted but is often discussed in terms of physical availability of energy sources and their commodity price risk this paper discusses the relationship between security of supply and network regulation that is how the energy networks and appropriate regulation of them can contribute to security of supply in liberalised energy sectors energy networks are predominantly natural monopolies and as a result are generally subject to regulatory oversight we discuss a range of issues and trends that pose challenges and opportunities to network regulation and which call for new and innovative measures the paper identifies a number of areas where network regulation can play a significant role in increasing the security of supply of future energy systems

the logic of political violence this paper offers a unified approach for studying political violence whether it emerges as repression or civil war we formulate a model where an incumbent or opposition can use violence to maintain or acquire power to study which political and economic factors drive one sided or two sided violence repression or civil war the model predicts a hierarchy of violence states from peace via repression to civil war and suggests a natural empirical approach exploiting only within country variation in the data we show that violence is associated with shocks that can affect wages and aid as in the theory these effects are only present where political institutions are non cohesive

separation of powers and political accountability political constitutions are incomplete contracts and therefore leave room for abuse of power in democracies elections are the primary mechanism for disciplining public officials but they are not sufficient separation of powers between executive and legislative bodies also helps to prevent the abuse of power but only with appropriate checks and balances checks and balances work by creating a conflict of interest between the executive and the legislature yet requiring both bodies to agree on public policy in this way the two bodies discipline each other to the voters advantage under appropriate checks and balances separation of powers also helps the voters elicit information

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

de facto political power and institutional persistence much of the empirical work and the conceptual discussion of the impact of institutions on economic development either implicitly or explicitly assumes that institutions persist although acemoglu et al 2001 provide evidence that constraints on the executive persist many aspects of institutions change frequently less developed countries cycle between democracy and dictatorship and often change their constitutions relatedly while the current economic problems in latin america are often traced back to colonial times stanley l engerman and kenneth l sokoloff 1997 acemoglu et al 2002 the specific institutions that once underpinned the colonial economy such as the encomienda the mita or slavery vanished long ago these observations suggest that we need to develop a framework in which changes in certain dimensions of institutions are consistent with overall institutional persistence in this paper we make an attempt to highlight some important mechanisms for understanding simultaneous change and persistence in institutions institutional persistence in this context refers to the persistence of a cluster of economic institutions such as the extent of enforcement of property rights for a broad cross section of society acemoglu et al 2001 such lack of property rights enforcement may be driven by quite different specific institutions e g risk of expropriation entry barriers or economic systems such as serfdom or slavery in turn these different specific economic institutions may exist under different political institutions including dictatorships absolutist monarchies oligarchies and corrupt or even populist democracies given this rich array of possibilities a useful framework must specify which aspects of institutions can change which others have a tendency to persist in equilibrium and how the persistence of certain types of institutions could have lasting effects on economic outcomes in this paper we provide a simple model of the coexistence of change and persistence in institutions first we describe some existing approaches to the persistence of social arrangements as well as the essence of the mechanism we propose next we illustrate the key issues using the experience of the southern united states and last we provide a simple model that formalizes the main mechanism in the paper we conclude by discussing a complementary mechanism to the one presented in this paper

normal markets market imperfections and energy efficiency abstract the conventional distinction between economic and engineering approaches to energy analysis obscures key methodological issues concerning the measurement of the costs and benefits of policies to promote the adoption of energy efficient technologies the engineering approach is in fact based upon firm economic foundations the principle of lifecycle cost minimization that arises directly from the theory of rational investment thus evidence that so called market barriers impede the adoption of cost effective energy efficient technologies implies the existence of market failures as defined in the context of microeconomic theory problems of imperfect information and bounded rationality on the part of consumers for example may lead real world outcomes to deviate from the dictates of efficient resource allocation a widely held contrary view that the engineering view lacks economic justification is based on the fallacy that markets are normally efficient

the structure of technical efficiency it is common practice to decompose measures of efficiency into component measures of technical and allocative efficiency in this paper we show how and why to decompose a general measure of technical efficiency into component measures of purely technical efficiency congestion and scale efficiency and we investigate the properties of each measure we do so for a multiple output technology which satisfies a weak axiom system that does not include either constant returns to scale or strong input disposability

strategic commitment to price to stimulate downstream innovation in a supply chain abstract it is generally in a firm s interest for its supply chain partners to invest in innovations to the extent that these innovations either reduce the partners variable costs or stimulate demand for the end product they will tend to lead to higher levels of output for all of the firms in the chain however in response to the innovations of its partners a firm may have an incentive to opportunistically increase its own prices the possibility of such opportunistic behavior creates a hold up problem that leads supply chain partners to underinvest in innovation clearly this hold up problem could be eliminated by a pre commitment to price however by making an advance commitment to price a firm sacrifices an important means of responding to demand uncertainty in this paper we examine the trade off that is faced when a firm s channel partner has opportunities to invest in either cost reduction or quality improvement i e demand enhancement should it commit to a price in order to encourage innovation or should it remain flexible in order to respond to demand uncertainty we discuss several simple wholesale pricing mechanisms with respect to this trade off

list randomization for sensitive behavior an application for measuring use of loan proceeds abstract policymakers and microfinance institutions mfis often claim to target poor entrepreneurs who then invest loan proceeds in their businesses typically in non research settings these claims are assessed using readily available but unverified self reports from client loan applications alternatively independent surveyors could directly elicit how borrowers spent their loan proceeds that too however could suffer from deliberate misreporting we use data from the peru and the philippines in which independent surveyors elicited loan use both directly i e by asking how individuals spent their loan proceeds and indirectly i e through a list randomization technique that allows individuals to hide their answer from the surveyor we find that direct elicitation under reports the non enterprise uses of loan proceeds

reshaping markets for the benefit of energy saving abstract energy saving is an important option for preventing emission of greenhouse gases furthermore when energy saving is reducing the spatial and temporal density of energy consumption it supports a rising market share of renewable energy sources last but not the least energy saving plays a role in reducing the vulnerability for import dependency and supply disruptions despite these virtues energy saving and energy efficiency being typically demand side options appear to be harder to sell than the other options which focus on the supply side the currently prevailing market based approach in energy policy initially brought setbacks for energy saving the introductory article and the selected contributions to this special issue intend to show that markets can and should be shaped to the benefit of the uptake and of the potential of energy saving to this end all elements of the energy efficiency delivery context should be addressed in energy saving policies learning measurement and observation are important tools in this reshaping process all contributions are based on papers of the european council for an energy efficient economy 2003 summer study

a comparison of milestone based and buyout options contracts for coordinating r d partnerships we analyze optimal contractual arrangements in a bilateral research and development r d partnership between a risk averse provider that conducts early stage research followed by a regulatory verification stage and a risk neutral client that performs late stage development activities including production distribution and marketing the problem is formulated as a sequential investment game with the client as the principal where the investments are observable but not verifiable the model captures the inherent incentive alignment problems of double sided moral hazard risk aversion and holdup we compare the efficacy of milestone based options contracts and buyout options contracts from the client s perspective and identify conditions under which they attain the first best outcome for the client we find that milestone based options contracts always attain the first best outcome for the client when the provider has some bargaining power in renegotiation and identify their applicability to different r

integration of multiple national markets for electricity the case of norway and sweden during the second part of the 1990s the nordic denmark finland norway and sweden countries have created a unique multinational market for electricity this paper aims to analyse the degree of integration of the different national markets that constitute the nordic electricity market in particular the norwegian and swedish wholesale and retail electricity markets are analysed the results suggest that the wholesale markets are well integrated thus prices differ significantly only during periods with unusually high or low supply of hydropower however the retail markets are not integrated to the same degree thus retail prices and trade margins differ significantly differences in the national electricity market legislation seem to be a key factor behind these differences

capacity utilization measures underlying economic theory and an alternative approach measures of industrial capacity utilization hereafter cu have been used extensively in helping to explain changes in the rate of investment labor productivity and inflation the cu measures have also been used to obtain indices of capital in use as distinct from capital stock in place a number of alternative measures of cu are periodically calculated and published the 1980 economic report of the president for example contains three series that by the federal reserve board the u s department of commerce bureau of economic analysis and the wharton school of finance other publicly available series are those prepared by mcgraw hill publishing company the u s department of commerce bureau of the census and rinfret boston associates inc although a host of cu measures is publicly available it is not at all clear how one should interpret changes over time in each measure or variations among them a principal reason underlying these interpretation problems is that the crucial link between underlying economic theory and the constructed measure of cu is weak one way in which this issue has manifested itself in the policy domain over the last five years has been with respect to the uncertain effects of dramatic increases in energy prices on capacity output and on cu each of the cu measures noted above is computed in such a way that explicitly ignores any role for energy prices yet several times during the last decade though growth to apparently high rates of cu had taken place investment and average labor productivity were much lower than expected and the rate of price increase much greater in brief during the last decade the explanatory power of alternative cu measures has dropped sharply some have conjectured that post opec energy price increases may have brought about major changes in the u s economy so that old quantitative relationships between measured cu and investment labor productivity and price inflation may have been altered substantially in order to assess effects of changes in pe on cu a re examination of the notion and measurement of cu is needed based on the framework of the economic theory of the firm that is the focus of this paper

has democratization reduced infant mortality in sub saharan africa evidence from micro data does democracy help babies survive in sub saharan africa by using retrospective fertility surveys conducted in 28 african countries i compare the survival of infants born to the same mother before and after democratization to disentangle the effect of democracy from that of changes in population characteristics which is infeasible with country level statistics on infant mortality i find that infant mortality falls by 1 2 percentage points 12 of the sample mean after democratization in the post cold war period relevant aspects of democracy appear to be the combination of multiparty elections and leadership change

voting technology political responsiveness and infant health evidence from brazil this paper studies the introduction of electronic voting technology in brazilian elections estimates exploiting a regression discontinuity design indicate that electronic voting reduced residual error ridden and uncounted votes and promoted a large de facto enfranchisement of mainly less educated citizens estimates exploiting the unique pattern of the technology s phase in across states over time suggest that as predicted by political economy models it shifted government spending toward health care which is particularly beneficial to the poor positive effects on both the utilization of health services prenatal visits and newborn health low weight births are also found for less educated mothers but not for the more educated

on the measurement of capacity utilization capacity utilization is usually defined as the ratio of actual output to the output corresponding to 1 the minimum point on the short run average total cost curve and 2 the point of tangency between the long run average total cost and short run average total cost curves in practice however capacity utilization is often measured as the ratio of actual to the maximum potential output consistent with a given capital stock this paper demonstrates how to estimate the theoretical measures of capacity utilization and examines the correlation between three measures of capacity utilization and the mcgraw hill estimates of capacity utilization using data from a sample of u s privately owned electric utilities for 1961 83 copyright 1989 by blackwell publishing ltd

the slave trade and the origins of mistrust in africa in a recent study nunn 2008 examines the long term impacts of africa s slave trade he finds that the slave trade which occurred over a period of more than 400 years had a significant negative effect on long term economic development although the article arguably identifies a negative causal relationship between the slave trade and income today the analysis is unable to establish the exact causal mechanisms underlying this reduced form relationship in this article we examine one of the channels through which the slave trade may affect economic development today combining contemporary individual level survey data with historical data on slave shipments by ethnic group we ask whether the slave trade caused a culture of mistrust to develop within africa initially slaves were captured primarily through state organized raids and warfare but as the trade progressed the environment of ubiquitous insecurity caused individuals to turn on others including friends and family members and to kidnap trick and sell each other into slavery sigismund wilhelm koelle 1854 p e h hair 1965 charles piot 1996 we hypothesize that in this environment a culture of mistrust may have evolved which may persist to this day we show that current differences in trust levels within africa can be traced back to the transatlantic and indian ocean slave trades combining contemporary individual level survey data with historical data on slave shipments by ethnic group we find that individuals whose ancestors were heavily raided during the slave trade are less trusting today evidence from a variety of identification strategies suggests that the relationship is causal examining causal mechanisms we show that most of the impact of the slave trade is through factors that are internal to the individual such as cultural norms beliefs and values jel j15 n57 z13

malmquist productivity index decompositions a unifying framework in two widely cited but unpublished working papers simar and wilson 1998 and zofio and lovell 1998 proposed an alternative decomposition of the malmquist productivity index which retained what seemed to be the strongholds of previous proposals with regard to the contribution of technological and efficiency change to productivity change namely a technical change term with regard to the best practice variable returns to scale vrs technology which is to be found in ray and desli 1997 and a scale efficiency change term that illustrates a firm s situation with regard to optimal scale benchmark technology fare et al 1994 attaining this objective required the introduction of an additional term in the malmquist productivity index decomposition which would reflect the scale bias of technical change it is our objective to provide economic rationale for this term within a theory of production context the existing decompositions and recent articles that further elaborate on this issue the ide

the challenging economics of energy security ensuring energy benefits in support to sustainable development abstract energy is a key resource to economic development and is required to be available continuously and in adequate amounts also it is expected to be affordable and environmentally friendly ensuring this is a challenge yet strategic to maintain economies running under a sustainable pattern energy security is neither a new concept nor a new concern however because of new issues it requires a novel broader approach such an approach should address both demand security of supply and supply security of demand sides as well as take into account energy scarcity situations and surplus opportunities in addition it should allow for both private markets and public policies and regulations initiatives this paper presents a theoretical and practical basis for the economics of energy security energy security is defined in this context as the ability of an economy to provide sufficient affordable and environmentally sustainable energy services so as to maintain a maximum welfare state even when issues would press it otherwise we introduce the notion of energy security gap to represent the economy s failure to show such ability additionally we also propose a framework to support the evaluation planning and implementation of energy security in an economy this framework relies on the concepts of resilience adaptability and transformability walker et al 2004 to prescribe indicators to assess the energy security of an economy furthermore it proposes mechanisms to enhance energy security as well as a continuous process to increasingly achieve this

in praise of the old i o abstract old i o is the body of empirical regularities obtained by cross section statistical methods following their introduction by bain bain 1951 relation of profit rate to industry concentration american manufacturing 1936 1940 quarterly journal of economics 65 293 324 its researchers did not seek to fit particular theoretical oligopoly models to market data apart from theoretical conditions for sustainable collusion but they did establish a large number of empirical regularities cross section associations between dimensions of performance allocative efficiency productive efficiency turnover of suppliers in markets and their structural and behavioral features these associations continue to serve a wide range of uses for economic understanding and policy formation

linking consumer energy efficiency with security of supply most modern energy policies seek to achieve systematic ongoing incremental increases in consumer energy efficiency since this contributes to improved security of supply favourable environmental outcomes and increased economic efficiency yet realised levels of efficiency are typically well below the most cost effective equilibrium due to variety of behavioural and organisational barriers which are often linked to information constraints in addition efficient users are normally unrewarded for collective benefits to system security and to the environment thus reducing the incentives for energy consumers to invest in efficiency improvements this paper examines the dichotomies and symmetries between supply and demand side solutions to energy security concerns and reviews opportunities to overcome barriers to improved consumer efficiency a security market is identified as a mechanism to promote both demand and supply side investments that support electricity system security such a market would assist in setting the optimal quantity of reserves while achieving an efficient balance between supply and demand side initiatives it would also help to smooth overall investment throughout the energy system by encouraging incremental approaches such as distributed generation and demand side alternatives where they provide competitive value although the discussion is applicable to energy systems in general it focuses primarily on electricity in new zealand

ethnic diversity and economic development abstract this paper analyzes the role that different indices and dimensions of ethnicity play in the process of economic development firstly we discuss the advantages and disadvantages of alternative data sources for the construction of indices of religious and ethnic heterogeneity secondly we compare the index of fractionalization and the index of polarization we argue that an index of the family of discrete polarization measures is the adequate indicator to measure potential conflict we find that ethnic religious polarization has a large and negative effect on economic development through the reduction of investment and the increase of government consumption and the probability of a civil conflict

enfranchising your own experimental evidence on bureaucrat diversity and election bias in india this paper investigates the effects of polling station administrator diversity on elections in india using a natural experiment the random assignment of government officials to teams managing stations on election day together with surveys conducted with voters and election officers i demonstrate that changes in the religious and caste composition of officer teams impact voting at the polling station level causing shifts in coalition vote shares large enough to influence election outcomes effects are strongest when officers have greater discretion over the voting process i also provide evidence suggesting own group favoritism by election personnel as one relevant mechanism

does electoral accountability affect economic policy choices evidence from gubernatorial term limits this paper analyzes the behavior of u s governors from 1950 to 1986 to investigate a reputation building model of political behavior we argue that differences in the behavior of governors who face a binding term limit and those who are able to run again provides a source of variation in discount rates that can be used to test a political agency model we find evidence that taxes spending and other policy instruments respond to a binding term limit if a democrat is in office the result is a fiscal cycle in term limit states which lowers state income when the term limit binds

how much market do market based instruments create an analysis for the case of white certificates in the context of economic instruments for more energy efficiency and climate protection tradable certificates have been investigated for renewable energy and for a number of emissions in contrast tradable energy efficiency or white certificates have only lately been considered as a market based tool to foster energy efficiency as compared to standards and labelling for example theoretically there is little doubt about the advantages in practice however some fundamental problems arise critical issues are the design of an efficient artificial market for white certificates its compatibility with the european emissions trading system the identification of a suitable target group for an energy efficiency obligation and the measurement of energy savings as compared to a reference use of energy we use the theoretical framework of transaction cost economics to elaborate these issues we conclude that transaction costs and investment specificity will restrict markets for white certificates in practise long term contracts rather than spot trade will be the prevailing form of governance for energy efficiency investments

coordinating investment production and subcontracting we value the option of subcontracting to improve financial performance and system coordination by analyzing a competitive stochastic investment game with recourse the manufacturer and subcontractor decide separately on their capacity investment levels then demand uncertainty is resolved and both parties have the option to subcontract when deciding on their production and sales we analyze and present outsourcing conditions for three contract types 1 price only contracts where an ex ante transfer price is set for each unit supplied by the subcontractor 2 incomplete contracts where both parties negotiate over the subcontracting transfer and 3 state dependent price only and incomplete contracts for which we show an equivalence result while subcontracting with these three contract types can coordinate production decisions in the supply system only state dependent contracts can eliminate all decentralization costs and coordinate capacity investment decisions the minimally sufficient price only contract that coordinates our supply chain specifies transfer prices for a small number 6 in our model of contingent scenarios our game theoretic model allows the analysis of the role of transfer prices and of the bargaining power of buyer and supplier we find that sometimes firms may be better off leaving some contract parameters unspecified ex ante and agreeing to negotiate ex post also a price focused strategy for managing subcontractors can backfire because a lower transfer price may decrease the manufacturer s profit finally as with financial options the option value of subcontracting increases as markets are more volatile or more negatively correlated

stalemate in energy markets supply extension versus demand reduction abstract a demand curve for electricity intensity of the oecd economies is discussed based on a 1998 sample the long run price elasticity of intensity is assessed at 1 17 clearly not smaller than 1 refuting the allegation that lower prices guarantee lower bills the regression shows that electricity efficiency improvement is stronger than the height of the price and so that industrial nations with a high price tax policy reveal the smaller budget shares of electricity bills in gdp high end use prices taxes are not harmful to the economies but a necessity to trigger efficiency while efficiency seems not feasible without high end use prices nations as an aggregate react on electricity budget shares that they try to keep within acceptable affordable boundaries the analysis confirms that there still exist huge unexploited efficiency potentials but once the physical limits of efficiency are attained that non energy policies must take over to limit energy consumption end use demand reduction is discussed to be also more efficient and more effective than supply extension for meeting the energy needs the final question why the better options are overridden by the worse ones brings us to the discussion of barriers where the discussion is limited to a distinction between natural and artificial barriers to energy efficiency

the use of bootstrapped malmquist indices to reassess productivity change findings an application to a sample of polish farms this article assesses the extent to which sampling variation affects findings about malmquist productivity change derived using data envelopment analysis dea in the first stage by calculating productivity indices and in the second stage by investigating the farm specific change in productivity confidence intervals for malmquist indices are constructed using simar and wilson s 1999 bootstrapping procedure the main contribution of this article is to account in the second stage for the information in the second stage provided by the first stage bootstrap the dea ses of the malmquist indices given by bootstrapping are employed in an innovative heteroscedastic panel regression using a maximum likelihood procedure the application is to a sample of 250 polish farms over the period 1996 to 2000 the confidence intervals results suggest that the second half of 1990s for polish farms was characterized not so much by productivity regress but rather by stagnation as for the determinants of farm productivi

dea duality on returns to scale rts in production and cost analyses an occurrence of multiple solutions and differences between production based and cost based rts estimates this article discusses the concept of rts returns to scale in the framework of dea data envelopment analysis production and cost analyses focusing on an occurrence of multiple solutions and how to deal with such a difficulty dual relationships between production based and cost based rts estimates are also theoretically discussed in this study

ethnic diversity social sanctions and public goods in kenya abstract this paper examines ethnic diversity and local public goods in rural western kenya the identification strategy relies on the stable historically determined patterns of ethnic land settlement ethnic diversity is associated with lower primary school funding and worse school facilities and there is suggestive evidence that it leads to poor water well maintenance the theoretical model illustrates how inability to impose social sanctions in diverse communities leads to collective action failures and we find that school committees in diverse areas do impose fewer sanctions on defaulting parents we relate these results to the literature on social capital and economic development and discuss implications for decentralization in less developed countries

a framework to evaluate security of supply in the electricity sector security of electricity supply soes has become a major concern for regulators and policymakers over the last decade however most work focusses either more generally on energy security or on a single fuel we develop a comprehensive but flexible framework to assess the soes for a single jurisdiction taking into the account the specificities of electricity this framework has two aims i provide a snapshot of the situation to understand current weaknesses and determine what actions are required ii capture the evolution over time to evaluate progress and identify potential problems before they materialise the framework based on an extensive literature review consists of twelve dimensions that are critical for soes we develop metrics that capture the state and evolution of each dimension this framework is intended to be a management information tool for all stakeholders aimed at organising data and structuring its analysis to enable monitoring the evolution of the soes while also functioning as an early warning system by flagging potential future problems

the political economy of public goods some evidence from india we are interested in how public goods get allocated by a centralized state we use data on public goods and social structure from parliamentary constituencies in rural india to understand the allocation of these goods over the 1970s and 1980s national policies and political agendas during this period emphasized universal access to basic amenities and financed a rapid expansion in rural infrastructure we find evidence of considerable equalization in many of these facilities reflecting perhaps the importance of these commitments among the historically disadvantaged social groups those that mobilized themselves politically gained relative to the others measures of social heterogeneity that have been emphasized in the recent empirical literature on public goods are relevant but not overwhelming in their importance

competitive and cooperative inventory policies in a two stage supply chain we investigate a two stage serial supply chain with stationary stochastic demand and fixed transportation times inventory holding costs are charged at each stage and each stage may incur a consumer backorder penalty cost e g the upper stage the supplier may dislike backorders at the lower stage the retailer we consider two games in both the stages independently choose base stock policies to minimize their costs the games differ in how the firms track their inventory levels in one the firms are committed to tracking echelon inventory in the other they track local inventory we compare the policies chosen under this competitive regime to those selected to minimize total supply chain costs i e the optimal solution we show that the games nearly always have a unique nash equilibrium and it differs from the optimal solution hence competition reduces efficiency furthermore the two games equilibria are different so the tracking method influences strategic behavior we show that the system optimal solution can be achieved as a nash equilibrium using simple linear transfer payments the value of cooperation is context specific in some settings competition increases total cost by only a fraction of a percent whereas in other settings the cost increase is enormous we also discuss stackelberg equilibria

the malmquist productivity index and plant capacity utilization a new decomposition of the malmquist productivity index is proposed to account for changes in plant capacity utilization using a primal non parametric specification of technology the malmquist index is decomposed into technical efficiency change variations in plant capacity utilization and frontier shifts it provides an alternative to the available methods of incorporating capacity utilization changes into measures of productivity change such measures are based on parametric and in many cases dual technology specifications moreover they typically do not allow for technical inefficiency

the value of democracy evidence from road building in kenya ethnic favoritism is seen as antithetical to development this paper provides credible quantification of the extent of ethnic favoritism using data on road building in kenyan districts across the 1963 2011 period guided by a model it then examines whether the transition in and out of democracy under the same president constrains or exacerbates ethnic favoritism across the post independence period we find strong evidence of ethnic favoritism districts that share the ethnicity of the president receive twice as much expenditure on roads and have five times the length of paved roads built this favoritism disappears during periods of democracy jel d72 h54 j15 o15 o17 o22 r42

static efficiency decompositions and capacity utilisation integrating economic and technical capacity notions starting from existing static decompositions of overall economic efficiency on nonparametric production and cost frontiers this article proposes more comprehensive decompositions including several cost based notions of capacity utilization furthermore in case prices are lacking we develop additional decompositions of overall technical efficiency integrating a technical concept of capacity utilization these new efficiency decompositions provide a link between short and long run economic analysis and in empirical work avoid conflating inefficiency and differences in capacity utilization an empirical analysis using a monthly panel of chilean hydro electric power plants illustrates the potential of these decomposition proposals

an entry and exit model on the energy saving investment strategy with real options this paper presents an improved decision model based on the real options approach presented by ansar and sparks 2009 for the firms that have not yet established energy saving equipment under the entry and exit strategies furthermore the proposed model takes account of the inevitable equipment renewal and the occurrence of unexpected events under the poisson jump process the timing for terminating an investment when continuous operations of that business are unprofitable is also explored to realize the optimal timing of implementing the energy saving strategy the future discounted benefit b follows the geometric brownian motion with the poisson jump process and the replacement of investment equipment a numerical analysis is followed by a sensitivity study of various parameters to better realize their impacts on the entry and exit thresholds the results show that for the jump case the higher probability of occurrence of unfavorable events will result in a higher entry threshold and lower exit threshold investors are forced to request higher benefit thresholds to cover the higher probability of losses brought by unfavorable events

supply chain efficiency value creation and the economic crisis an empirical assessment of the european automotive industry 2002 2010 abstract this paper seeks to evaluate the development of supply chain sc efficiency and the resulting impacts on company value in a secondary data analysis of the european automotive industry the trends of cost efficiency and working capital performance in the years 2002 2010 and the resulting value impacts are assessed it is detected that many companies failed to manage cost and working capital in a balanced and value adding way which resulted in considerable value losses the economic crisis is identified as an amplifier but not the major cause of these negative trends originality and value of the paper arise from the scarcity of financial analyses that focus on the car sector or that measure and compare several factors of sc efficiency or value creation

controlling for supplier switching in the presence of real options and asymmetric information abstract applying a real option approach this paper examines how asymmetric information alters key variables of a firm s supplier switching process such as the timing of contracting hurried versus delayed contracting transfer payments set up switching and abandonment decisions in a symmetric information setting delayed contracting is unambiguously beneficial abandoning the once established relation with the entrant supplier is never an issue in contrast under asymmetric information hurried contracting with potentially abandoning the relation can be beneficial consistent with adverse selection models we find that under delayed contracting in equilibrium the firm switches less frequently to the entrant supplier switching inertia surprisingly we also find that under hurried contracting the firm switches more frequently to the entrant supplier switching acceleration and may abandon the relation finally we study how these key variables of the supplier switching process change when also the incumbent supplier has private information two sided asymmetric information case

barriers within firms to energy efficient investments abstract many investments in energy efficiency fail to be made despite their apparent profitability internal hurdle rates are often set at levels higher than the cost of capital to the firm reasons for these practices include bounded rationality principal agent problems and moral hazard the policy implication is that government can simultaneously improve overall energy efficiency and increase private sector productivity by providing informational and organizational services that go beyond the traditional regulatory framework

the political economy of government responsiveness theory and evidence from india the determinants of government responsiveness to its citizens is a key issue in political economy here we develop a model based on the solution of political agency problems having a more informed an politically active electorate strengthens incentives for governments to be responsive this suggests that there is a role both for democratic institutions and the mass media in ensuring that the preferences of citizens are reflected in policy the ideas behind the model are tested on panel data from india we show that public food distribution and calamity relief expenditure are greater controlling for shocks where governments face greater electoral accountability and where newspaper circulation is highest

a view from the macro side rebound backfire and khazzoom brookes abstract this paper attempts to delineate a few key insights extracted from theoretical macroeconomic considerations of the rebound issue the goal has been to reduce these thoughts to a clear set of assertions that if true would be useful points of reference in the ongoing discussion despite their non empirical nature

the observer effect in international politics evidence from a natural experiment by pressuring governments to hold democratic elections and by becoming directly involved in the electoral process through technical assistance and funding or as election monitors international actors now play a visible role in domestic elections and other democratic processes throughout the developing world although scholars have documented several macrolevel relationships between international level variables and movement toward democracy there has been little attention paid to the microlevel effects of international involvement in the democratization process this article examines the effects of international election observation as a prominent form of international involvement in domestic elections and exploits a natural experiment in order to test whether international observers reduce election fraud using data from the 2003 presidential elections in armenia the article demonstrates that although observers may not eliminate election fraud they can reduce election day fraud at the polling stations they visit the unusual advantage of experiment like conditions for this study offers unique causal evidence that international actors can have direct measurable effects on the level of election day fraud and by extension on the democratization process

the proof of the pudding making energy efficiency work abstract if western industrialized market economies are to realize a substantial proportion of the potential benefits of increased energy efficiency there is a need to move beyond engineering and economic estimates of efficiency potential and to consider seriously the implications of the behavioural and programme evaluation literature on energy efficiency that literature suggests that reliance upon market mechanisms alone will not permit realization of economically efficient levels of energy efficiency however if points the way toward designing energy efficiency programmes that show real promise of significantly achieving their potential in industrialized market economies

double sided moral hazard and the nature of share contracts contractual arrangements involving revenue profit sharing are often based on fairly simple often linear rules in addition in many contexts these contracts are not finely adjusted to the particular circumstances of individual agents or markets nor do they vary over time to the extent current theories based on optimal contracting suggest they should we develop a simple model of such revenue or profit sharing arrangements based on double sided moral hazard and show that this model can account for many of these stylized facts more specifically the model shows that linear contracts can be optimal and that benefits from customizing terms can in some cases be quite limited if not zero

theory general equilibrium and political economy in development economics i discuss the role of economic theory in empirical work in development economics with special emphasis on general equilibrium and political economy considerations i argue that economic theory plays should play a central role in formulating models estimates of which can be used for counterfactual and policy analysis i discuss why counterfactual analysis based on microdata that ignores general equilibrium and political economy issues may lead to misleading conclusions i illustrate the main arguments using examples from recent work in development economics and political economy

tax me if you can ethnic geography democracy and the taxation of agriculture in africa it is typically assumed that african leaders enact policies that benefit their ethnoregional group using all types of patronage crop production and political power are geographically concentrated in many african countries and this paper exploits this overlap to cast doubt on this conventional wisdom it shows using data on 50 country crop combinations that cash crop farmers who are ethnically identified with the head of state face higher taxes furthermore democratic regimes impose lower taxes this paper shows that farmers who have few alternatives face higher taxes african leaders have used local intermediaries to exert control over the countryside and to ensure that farmers do not support alternative candidates it suggests that as leaders are better at selecting and monitoring these intermediaries in their home areas they can extract more from the majority at home than abroad using taxes on cash crops which are regionally but not individually targetable

shared savings contracts for indirect materials in supply chains channel profits and environmental impacts there are many materials for which the quantity needed by a firm is at best indirectly related to the quantity of final product produced by that firm such as solvents in manufacturing processes or office supplies for any such indirect materials an inescapable incentive conflict exists the buyer wishes to minimize consumption of these indirect materials while the supplier s profits depend on increasing volume both buyer and supplier can exert effort to reduce consumption hence making the overall supply chain more efficient however no supplier will voluntarily participate unless contract terms are fundamentally revised this can be done through a variety of shared savings contracts where both parties profit from a consumption reduction this paper analyzes several such contracts currently in use for chemicals purchasing we show that such contracts can always increase supply chain profits but need not lead to reduced consumption we analyze equilibrium effort levels consumption and total profits and show how these change with the contract parameters we find that the goals of maximizing joint profits and minimizing consumption are generally not aligned also surprisingly a decrease in a cost parameter can lead to a decrease in profits it may be necessary but is always possible to renegotiate the shared savings contract to reap the benefits of a cost decrease

on manufacturing marketing incentives stereotypically marketing is mainly concerned about satisfying customers and manufacturing is mainly interested in factory efficiency using the principal agent agency paradigm which assumes that the marketing and manufacturing managers of the firm will act in their self interest we seek incentive plans that will induce those managers to act so that the owner of the firm can attain as much as possible of the residual returns one optimal incentive plan can be interpreted as follows the owner subcontracts to pay the manufacturing manager a fixed rate for all capacity he delivers each marketing manager receives all of the returns from his product in turn all managers pay a fixed fee to the owner under this plan the marketing managers will often complain about the stock level decisions even though these levels are announced in advance under a revised plan the owner can eliminate such complaints by delegating the stocking decisions to the respective marketing managers without any loss this plan is interpreted as requiring the owner to make a futures market for manufacturing capacity paying the manufacturing manager the expected marginal value for each unit of capacity delivered receiving the realized marginal value from the marketing managers and losing money on average in the process

percentage rent contracts between co stores abstract high rental rates and space scarcity in popular retail areas are encouraging retailers to share available space creating co stores co stores with complementary products enjoy a boost in foot traffic thus higher sales when the space is owned by one a common practice for retailers is to engage in a revenue sharing agreement we study the optimal design of a percentage rent contract between two co stores each having his her own random sales dependent on effort levels of both retailers since the effort level exerted by a retailer is often unverifiable it results in a double moral hazard problem we show that a linear percentage rent which is composed of a sales share and a based rent achieves the second best effort levels the landlord may also find it optimal to set a fixed rent by setting the sales share to zero with cobb douglas sales and power disutility of effort functions we obtain closed form expressions for the optimal contract we show that the landlord charges a high sales share for a tenant with low demand externality and a high sales scale the landlord is better off renting out space to a small but high revenue generating retailer rather than one generating larger traffic but with lower sales scale when the landlord s externality potential is low but he is successful in generating sales optimal sales share is low but the base rent is high the percentage rent can increase the landlord profit by up to 13 compared to the conventional fixed rent

energy efficiency fallacies a postscript a special issue of energy policy 28 2000 was devoted to a collection of papers edited by dr lee schipper these papers were addressed to various aspects of the debate on the role of raising energy efficiency as a contributor to meeting international obligations in the context of global warming the collection included a paper entitled energy efficiency fallacies revisited in which it was argued that economically justified measures to raise the productivity of energy increased the demand for it at the macroeconomic level 1 thus such measures had no part to play in meeting international obligations to reduce fuel consumption for environmental or other reasons it was claimed in that paper that an economic rather than an engineering definition of energy efficiency led to the conclusion that energy efficiency was simply part of general economic efficiency although the point was not pursued the following brief postscript to the paper offers a simple graphical justification for the claim and discusses the implications

long run profit functions for multiproduct firms a long run specification of the multiproduct profit function is developed from the restricted profit function the multiproduct restricted profit function and the envelope condition are used to estimate the optimal long run levels of the quasi fixed factor formulas for long run marshallian elasticities of substitution and transformation economies of scope product specific and overall economies of scale and economic measures of capacity utilization are developed for the translog functional form the methodology is illustrated by a case study of the new england otter trawl industry

inflow shortages in deregulated power markets reasons for concern in many countries hydropower constitutes a large share of the electricity producing capacity in the earlier regulated electricity markets production capacities exceeded demand due to security of supply concerns the present deregulated markets base investments upon profitability alone and security of supply issues are claimed to be less important market operators trust the pricing mechanism in competitive markets to clear then low inflow constitutes a less problem several markets both under regulated and deregulated regimes have faced serious droughts some of them have experienced problems with market clearance chile brazil california while other markets functioned well the nordic market important features to the market response are the flexibility of demand the pattern of inflow shortage the storage capacities the possibility of trade between regions with different production technologies and the market design and concentration we apply an empirical based market model to simulate the effects under two inflow shortage scenarios in an international market with combined hydro and thermal capacities and restricted transmission capacities we compare the scenarios with actual events and show that the model and the real market outcome are comparable the simulations do not reveal any problems with the functioning of the market which should calm down the anxiousness about security of supply in deregulated markets with stochastic energy supply

product warranties and double moral hazard this article explores a model of warranties in which moral hazard problems play a key role the goal is to understand the important characteristics of warranties including their provision of incomplete insurance and the relationship between product quality and coverage we analyze a model in which buyers and sellers take actions that affect a product s performance since these actions are not cooperatively determined an incentives problem arises we characterize the optimal warranty contract and undertake comparative statics to determine the predicted correlation of warranty coverage and product quality

process innovation product differentiation and channel structure strategic incentives in a duopoly in this paper we analyze the joint implications of two effects a inserting independent profit maximizing retailers into thechannel system provides buffering to the manufacturers from price competition when their products are highly substitutable and intrachannel contracts are observable as shown by mcguire and staelin 1983 under the assumption of constant marginal production costs and b lack of channel coordination results in a reduction in manufacturer s incentives to invest in efforts to reduce production costs as shown by jeuland and shugan 1983 for the case of bilateral monopoly we show that both these results are robust in the sense that the first holds even in the presence of the vertical externality of manufacturer s effort reduction in a noncoordinated channel and the second holds regardless of the degree of substitutability between the competing channel s products specifically we analyze a four stage game with two manufacturers and two retailers where the intrachannel contracts are linear and observable and manufacturers make investments in process improvements to reduce their production costs we find that the optimal channel structure decision depends on interactions between two parameters the degree of substitutability between products and the level of investments required to achieve production cost reduction these parameters represent what have been widely interpreted in the management literature as the two primary generic strategies that most organizations follow in order to gain competitive advantage cost leadership and product differentiation porter 1980 thus our analysis brings out the strategic and interdisciplinary nature of the channel structure decision that can significantly affect firm profitability our main results are as follows first we find that decentralized noncoordinated channels appear as more profitable equilibrium than integration or perfectly coordinated channels at high product substitutability even when process innovation dimension is accounted for in agreement with the literature however the range of substitutability over which decentralization is an equilibrium strategy is smaller the easier it is to reduce production costs intuitively the easier the cost reduction the larger the cost penalty that the channel incurs as a result of not coordinating investment and pricing decisions between channel members and thus smaller the range over which decentralization is an equilibrium this implies that there is an explicit tradeoff between efficiency and strategic incentives in distribution channel design second we show that decentralized manufacturers invest less in process innovation than integrated manufacturers do regardless of the structure of the competing channel and the degree of substitutability between products consequently a decentralized channel has higher costs charges higher prices and produces lower quantities than an integrated channel does moreover these differences get larger the easier the cost reduction the effect on manufacturer profits however is not that clear manufacturers make higher profits by decentralizing if products are highly substitutable inagreement with mcguire and staelin 1983 and coughlan and wernerfelt 1989 however we also find that the relative profitability of decentralization at high substitutability and of integration at low substitutability increases the easier the cost reduction moreover the range of substitutability over which decentralization is more profitable than integration is itself larger the easier the cost reduction though decentralization is an equilibrium strategy over a smallerrange thus process innovation accentuates the profit difference between integrated and decentralized channels andmakes the prisoner s dilemma situation worse in the choice of distribution channel structure finally we analyze two examples of coordinated decision making in a channel a divisional integrated system and franchising in the first case we find that decentralization can emerge as a unique and more profitable equilibrium at high product substitutability in contrast to mcguire and staelin 1983 in the second case we find that decentralization is not always a unique equilibrium and it is not always more profitable than integration in sharp contrast to the results by coughlan and wernerfelt 1989 thus franchising does not provide a sure way of achieving channel coordination when marginal production costs are not constant in sum this paper highlights the importance of simultaneously considering both the horizontal and the vertical dimensions of interorganizational relations on one hand and on the other paying attention to cross functional interactions across marketing and operational decisions to better understand the underlying incentives that shape firm and market structures conventional focus of marketing on demand side effects and of operations on cost side effects can lead to suboptimal decisions

capacity utilisation and profitability a decomposition of short run profit efficiency the principal aim of this paper is to measure the amount by which the profit of a multi input multi output firm deviates from maximum short run profit and then to decompose this profit gap into components that are of practical use to managers in particular our interest is in the measurement of the contribution of unused capacity along with measures of technical inefficiency and allocative inefficiency in this profit gap we survey existing definitions of capacity and after discussing their shortcomings we propose a new ray economic capacity measure that involves short run profit maximisation with the output mix held constant we go on to describe how the gap between observed profit and maximum profit can be calculated and decomposed using linear programming methods the paper concludes with an empirical illustration involving data on 28 international airline companies the empirical results indicate that these airline companies achieve profit levels which are on average us 815m below potential levels and that 70 of the gap may be attributed to unused capacity

should a team be homogeneous abstract should an organization hire people with similar backgrounds or with different backgrounds we formulate this question within the framework of team theory the team is formed by n agents the type of each agent is endogenous and determines his information structure and his cost for the team we show that the sign of complementarity between jobs determines workforce homogeneity with positive complementarities the team should be composed of agents of the same type while with negative complementarities workforce heterogeneity is optimal these results do not rely on the restrictions on the way uncertainty is modeled or on the feasible set of agent types they can be explained in terms of correlation between errors committed by different agents

the role of the reference technology in measuring productive efficiency after a twenty year lull the measurement of productive efficiency is enjoying a revival in particular the index of efficiency developed by debreu i95i and later utilised by farrell i957 has received considerable attention these measures have been used fairly extensively in empirical work in both the operations research and economic literature these types of indexes have also appeared in the growing literature on testing for regularity conditions in production e g in afriat i972 diewert and parkan i983 and varian 1984 since the farrell type measure is the focus in this paper a brief review is useful in the farrell framework overall efficiency oe can be decomposed into two multiplicative components allocative efficiency ae and technical efficiency te

best practice benchmarking in uk higher education new nonparametric approaches using financial ratios and profit efficiency methodologies the neglected issue of using profit efficiency for the best practice benchmarking of uk universities is explored to see whether this supports the policy stance of encouraging more specialized university production the article also investigates whether nonparametric modelling with financial ratios in contrast to nonparametric modelling based on the prices and quantities of each university s inputs and outputs can yield ready insights into this profit efficiency issue the empirical results using two new approaches confirm that more specialized university production yields relatively higher performance on average than less specialized production the results also highlight certain advantages of financial ratios modelling

a regional energy paradox the case of central norway abstract central norway is expected to have a gap of 8 twh in 2010 because of heavy investments in energy intensive industries the region has two landing sites for natural gas and a considerable potential for wind power to cover the gap small scale hydropower and upgrading of existing hydropower plants also constitute a regional energy potential paradoxically the most realistic investment prospect seems to be extensive investments in new transmission lines to cover the supply deficit the aim of this paper is to present a problem of regional supply security and public intervention to illustrate and discuss the challenges of arriving at long term capacity adequacy in deregulated electricity markets

conceptualizing energy security abstract energy security 1 is one of the main targets of energy policy however the term has not been clearly defined which makes it hard to measure and difficult to balance against other policy objectives we review the multitude of definitions of energy security they can be characterized according to the sources of risk the scope of the impacts and the severity filters in the form of the speed size sustention spread singularity and sureness of impacts using a stylized case study for three european countries we illustrate how the selection of conceptual boundaries along these dimensions determines the outcome this can be avoided by more clearly separating between security of supply and other policy objectives this leads us to the definition of energy security as the continuity of energy supplies relative to demand

the energy efficiency gap what does it mean abstract as renewed attention has been given by policy makers to energy conservation issues it has frequently been asserted that an energy efficiency gap exists between actual and optimal energy use the critical questions is how to define the optimal level of energy efficiency this paper seeks to disentangle some confusing strands of argument that are frequently brought to bear on this question by identifying the major conceptual issues that determine the set of feasible answers we identify five separate and distinct notions of optimality the economists economic potential the technologists economic potential hypothetical potential the narrow social optimum and the true social optimum each of these has associated with it a corresponding definition of the energy efficiency gap our analysis demonstrates that necessary preconditions for identifying the right measure of the energy efficiency gap include understanding and disentangling market failure and non market failure explanations for the gradual diffusion of energy efficient technologies

challenges when electricity markets face the investment phase abstract deregulation of electricity industry in europe has tended to start with a grace period of energy surplus inherited from the previously expansive coordinated economies and further amplified by better resource utilisation from extended international trade the regulatory challenge has therefore primarily been to allocate existing generation to consumers in an efficient way however as energy demand increases due to economic growth the challenge of providing new capacity surfaces the nordic region which has been a pioneer in internationalising and deregulating electricity is now approaching this stage ahead of most of the rest of europe while the nordic case is characterised by specificities related to hydropower it also raises the more general challenge of capacity expansion under a deregulated market economy the article therefore discusses how the nordic investment challenges of today shed light on more generic challenges that may become more general european challenges of tomorrow in a final section the article discusses policy options available to address the investment price hike challenge the argument is put forward that recursion to some degree of coordinated governance might seem necessary if solutions are confined within large scale technical systems however within the context of a small scale decentralised technological development one may be more confident of competitive solutions

feasible estimation of firm specific allocative inefficiency through bayesian numerical methods both the theoretical and empirical literature on the estimation of allocative and technical inefficiency has grown enormously to minimize aggregation bias ideally one should estimate firm and input specific parameters describing allocative inefficiency however identifying these parameters has often proven difficult for a panel of chilean hydroelectric power plants we obtain a full set of such parameters using gibbs sampling which draws sequentially from conditional generalized method of moments gmm estimates obtained via instrumental variables estimation we find an economically significant range of firm specific efficiency estimates with differing degrees of precision the standard gmm approach estimates virtually no allocative inefficiency for industry wide parameters copyright 2009 john wiley sons ltd

the quantity flexibility contract and supplier customer incentives consider a supply chain consisting of two independent agents a supplier e g a manufacturer and its customer e g a retailer the latter in turn serving an uncertain market demand to reconcile manufacturing procurement time lags with a need for timely response to the market such supply chains often must commit resources to production quantities based on forecasted rather than realized demand the customer typically provides a planning forecast of its intended purchase which does not entail commitment benefiting from overproduction while not bearing the immediate costs the customer has incentive to initially overforecast before eventually purchasing a lesser quantity the supplier must in turn anticipate such behavior in its production quantity decision this individually rational behavior results in an inefficient supply chain this paper models the incentives of the two parties identifying causes of inefficiency and suggesting remedies particular attention is given to the quantity flexibility qf contract which couples the customer s commitment to purchase no less than a certain percentage below the forecast with the supplier s guarantee to deliver up to a certain percentage above under certain conditions this method can allocate the costs of market demand uncertainty so as to lead the individually motivated supplier and customer to the systemwide optimal outcome we characterize the implications of qf contracts for the behavior and performance of both parties and the supply chain as a whole

on optimal service capacity allocation policy in an advance selling environment in continuous time abstract based on some general reasonable assumptions this paper employs the techniques of calculus of variations and optimal control theory to derive 10 main propositions associated with a service provider who aims at maximizing the present value of revenues profits over a planning horizon in continuous time employing an aggregate pricing response function that is dependent on excess capacity and a convex service cost formulation the results show that i for a zero discount rate and unanticipated competitive entry units of service capacity are allocated evenly over time ii for a zero discount rate and anticipated competitive entry units of allocated service capacity are increasing over time iii for a positive discount rate and unanticipated competitive entry units of allocated service capacity are decreasing over time and iv for a positive discount rate and anticipated competitive entry units of allocated service capacity are increasing over time or are decreasing at first then increasing later in addition the questions of how deep a service firm should advance sell whether advance selling is optimal in continuous time and whether excess capacity could be an optimal strategy have been addressed furthermore related sensitivity analyses are performed and endpoint constraints together with alternative shapes of the service cost function are discussed the managerial implications of the study s results have been demonstrated

dynamic business share allocation in a supply chain with competing suppliers this paper studies a repeated game between a manufacturer and two competing suppliers with imperfect monitoring we present a principal agent model for managing long term supplier relationships using a unique form of measurement and incentive scheme we measure a supplier s overall performance with a rating equivalent to its continuation utility the expected total discounted utility of its future payoffs and incentivize supplier effort with larger allocations of future business we obtain the vector of the two suppliers ratings as the state of a markov decision process and we solve an infinite horizon contracting problem in which the manufacturer allocates business volume between the two suppliers and updates their ratings dynamically based on their current ratings and the current performance outcome our contributions are both theoretical and managerial we propose a repeated principal agent model with a novel incentive scheme to tackle a common but challenging incentive problem in a multiperiod s

the complementarity effect effort and sharing in the entrepreneur and venture capital contract abstract this paper focuses on the relationship between the venture capitalist and the entrepreneur in particular it analyses how both players unobservable effort levels affect the equity share that the entrepreneur is willing to cede to the venture capitalist we solve the entrepreneur s maximization problem in the presence of double sided moral hazard in this scenario we show that the venture capitalist s share is binding and therefore there is no efficiency wage we simulate the model and show that the entrepreneur s effort does not monotonically decrease in the share allocated to the venture capital while the venture capitalist s effort does not monotonically increase in his share we show that as efforts tend to be more complementary the project cash flows are distributed nearly equally at approximately 50 for each partner this theoretical finding is actually observed in real contracts between entrepreneurs and venture capitalists

the economics of franchise contracts as an organizational arrangement the franchise contract lies between anonymous price mediated exchange and centralized intrafirm employment in contrast to conventional market exchange franchise contracts typically impose on franchisees retail quality standards common hours of business price controls and nonlinear payment schedules for example fixed initial royalty fees plus a percentage of gross retail revenues while franchisors typically provide national advertising and training programs monitor and inspect the franchisees performance with varying intensity across industries and hold the residual power to terminate the franchise agreement observations of actual terminations indicate that franchisors sometimes exclude this power franchisors sometimes face persistent queues of potential franchisees in contrast to simple employment contracts franchise agreements provide for sharing of profits through royalties on revenue or output and considerable freedom for independent decisions by local franchisees 1 why do these franchise contracts exist