a regional energy hub for achieving a low carbon energy transition abstract the transition to a low carbon energy economy will remain a cornerstone of national energy policies of countries committed to the climate change accord for decades to come we think that transmission investment is one key policy instrument amongst other to help with this transition we propose an enhanced role for investing in transmission capacity for inter regional trade to allow effective fuel switching among countries through a physically connected market we develop a conceptual framework of regional energy hubs and propose a cost minimization model in support of a transmission investment strategy that integrates i a key geopolitical parameter for countries that are geographically close in a region but under different political jurisdictions judged as stable and receptive to firm trading arrangements ii an economic parameter related to the fuel mix where the differences in a country s supply and demand characteristics are significant enough for allow mutual benefits to be realized through cost reduction iii an environmental parameter linked to a country s carbon intensity that could benefit from the resources of a neighboring jurisdiction with lower intensities and iv a financial parameter for each country within a region capable of attracting investment capital a connected regional energy hub offers large economic and environmental benefit for transition to a low carbon energy economy

individual taxpayer response to tax cuts 1982 1984 with implications for the revenue maximizing tax rate abstract this paper measures the response of taxpayers to the u s personal rate reductions from 1982 to 1984 a baseline income distribution is created to describe what level and distribution could be expected in the absence of tax changes comparison of this baseline with actual tax return data shows that at least one sixth and probably one quarter of the revenue ascribable to the rate reductions was recouped by changes in taxpayer behavior the data also show that federal income tax revenue would have been maximized at a tax rate of about 35 percent and total income tax revenue maximized at a total tax rate of about 40 percent

the nature of government expenditures and the shape of the laffer curve abstract the existence of a negatively sloped section on the tax revenue tax rate relationship is shown to crucially depend on the nature of government expenditures it is proved that a sufficient condition for existence is that the government expenditures should take the form of cash transfers to consumers rather than being used to provide a government good

strategic eurasian natural gas market model for energy security and policy analysis formulation and application to south stream abstract the mathematical formulation of a strategic eurasian natural gas market model is presented the model represents horizontal oligopolistic relationships among producers bilateral market power between producer russia and transit ukraine countries detailed transport constraints and operation decisions over a 20 year time horizon to demonstrate the model s capabilities a financial and market analysis of the proposed south stream gas pipeline from russia via the black sea to south europe is summarized insights obtained include the following first expectations of high demand growth in europe and or transit risks do not justify the construction of the south stream pipeline because under all demand and ukraine transit interruption scenarios the net benefits to the south stream participants are negative the npv ranges from 1 9 billion bn to 7 4 bn second ukraine s perception of high transit market power vis a vis russia may trigger the construction of the otherwise unprofitable south stream project thus under ukraine s high transit market power scenario the npv of south stream ranges between 2 4 bn and 24 5 bn third we find that the south stream investment increases the efficiency of the european gas market under the following conditions i when gas demand in europe grows 2 per year up to 2030 ii when ukraine poses high transit market power or iii under a combination of severe transit risks through ukraine and low demand scenarios in europe it should be noted that the value of south stream to both its project sponsors and the market as a whole is much higher when ukraine exercises transit market power than under the high demand scenario therefore whether ukraine is likely to wield market power is crucial to the success of the south stream project because that is the only scenario in which the project yields both a positive expected npv to its sponsors and the highest value to the market as a whole

investment options and bargaining power the eurasian supply chain for natural gas we use cooperative game theory to analyze how the architecture of the pipeline network determines the power structure in the supply chain for russian gas if the assessment is narrowly focused on the abilities to obstruct flows in the existing system the main transit countries belarus and ukraine appear to be strong if investment options are accounted for however russia achieves clear dominance we show that options to bypass one of the transit countries are of little strategic importance compared to russia s direct access to its customers through the baltic sea comparing the results of our calibrated model with empirical evidence obtained from transit and import agreements we find that the shapley value explains the power of major transit countries better than the core and the nucleolus

greener more integrated and less volatile a quantile regression analysis of italian wholesale electricity prices abstract this paper provides estimates of quantile regression models of the relationship between italian day ahead electricity prices the supply of renewables and the inception of a new cable sapei linking sardinia with the italian peninsula in the 2006 2015 time window the results confirm the merit order effects detected in the existing literature both for photovoltaics and wind power more strongly in market conditions characterised by moderately low price levels and with some implied increase in volatility the new cable has apparently challenged the ability of power generating companies to extract value through price spikes has mitigated volatility and its effects have been complementary with those of renewables effects from photovoltaics are more sensitive to robustness checks differences across zonal markets are nonetheless detected

progress in behavioral game theory i s game theory meant to describe actual choices by people and institutions or not it is remarkable how much game theory has been done while largely ignoring this question the seminal book by von neumann and morgenstern the theory of games and economic behavior was clearly about how rational players would play against others they knew were rational in more recent work game theorists are not always explicit about what they aim to describe or advise at one extreme highly mathematical analyses have proposed rationality requirements that people and firms are probably not smart enough to satisfy in everyday decisions at the other extreme adaptive and evolutionary approaches use very simple modelsmostly developed to describe nonhuman animals in which players may not realize they are playing a game at all when game theory does aim to describe behavior it often proceeds with a disturbingly low ratio of careful observation to theorizing this paper describes an approach called behavioral game theory which aims to describe actual behavior is driven by empirical observation mostly experiments and charts a middle course between over rational equilibrium analyses and under rational adaptive analyses the recipe for behavioral game theory i will describe has three steps start with a game or naturally occurring situation in which standard game theory makes a bold prediction based on one or two crucial principles if behavior differs from interested readers familiar with game theory should read crawford 1997 whose approach is more eclectic than mine he concludes p 236 that most strategic behavior can be understood via a synthesis that combines elements from each of the leading theoretical frameworks traditional game theory evolutionary game theory and adaptive learning with a modicum of empirical information about behavior behavioral game theory adds psychological interpretations to this synthesis

a preliminary assessment of the market coupling arrangement on the kontek cable this paper presents a preliminary assessment of the market coupling arrangement on the kontek kt cable between east denmark and germany and an assessment of the original auction mechanism kt the new spot price area was introduced in germany on october 5 2005 to facilitate a market coupling arrangement on the kt cable between east denmark and germany we would expect the kt price to correlate more with the european energy exchange eex price because arbitrage normally levelizes the price however spot prices in late 2005 were both high and volatile because congestion management practices in sweden transferred internal bottlenecks to the cable between sweden and east denmark since spot prices were equal in east denmark and the kt area for a substantial time it implies that some hours had no congestion on the kt cable market players valued the previous monthly auctions for transmission capacity more than the daily auctions compared to the daily auctions market players received smaller payoffs on average for the market coupling arrangement and the smallest payoffs for the monthly auctions

on the possibility of an inverse relationship between tax rates and government revenues abstract when arthur laffer and other supply side advocates plot total tax revenue as a function of a particular tax rate they draw an upward sloping segment called the normal range followed by a downward sloping segment called the prohibitive range a brief literature review indicates that tax rates on the prohibitive range in theoretical and empirical models have been the result of particularly high tax rates high elasticity parameters or both the labor tax rate which maximizes total revenue for example will depend on the assumed labor supply elasticity this paper introduces a new curve which summarizes the tax rate and elasticity combinations that result in maximum revenues separating the normal area from the prohibitive area a general purpose empirical u s general equilibrium model is used to plot the laffer curve for several elasticities and to plot the newly introduced curve using the labor tax example results indicate that the u s could conceivably be operating in the prohibitive area but that the tax wedge or labor supply elasticity would have to be much higher than most estimates would suggest

how much redistribution is possible through commodity taxes abstract this paper aims to quantify the redistribution which can be attained as the outcome of indirect taxation this question is of crucial relevance to many countries which are constrained to depend primarily on indirect taxes i assess the maximum possible redistribution by imposing the most redistributive indirect taxation the public budget is balanced and the real income gain to the worst off is taken as the metric of redistribution ceilings on this metric are first obtained within a general set up and then in a number of specific models the resulting redistribution is found to be meager as this is the outcome of the most redistributive taxation redistribution from any real world indirect taxation will be even smaller

the geopolitics of cross border electricity grids the israeli arab case abstract countries often attempt to establish regional electricity grids however whereas research on natural resources frequently seeks to understand policy outcome through a geopolitical prism when it comes to electricity studies the prism is always economic or technical hence this study is a first attempt to identify the geopolitical dimension of cross border electricity grids the study argues that success in establishing electricity grids requires identifying how the geopolitical dimension interplays with the physical dimension to examine the role of these geopolitical bottlenecks the study examines negotiation protocols spanning over 15 years on establishing ten grid connections between israel and its arab neighbors it finds that electricity geopolitics has been used both as a platform for deeper international cooperation and as a stick against neighboring states when policies are driven by a peace dividend proposals for grid connection appear to evolve and overcome the dependency and the security economy bottlenecks when relations deteriorate proposals for grid connections appear to undergo reconsideration and to be held hostage by higher politics if when and how electricity grids materialize is a function of the nature of the electricity network as a twofold package and of the ability of the planning process to accommodate geopolitical uncertainty

some analytics of the laffer curve abstract it is shown that in a general equilibrium model with one private good one public good labour and an income tax certain widely assumed properties of the laffer curve do not necessarily hold for well behaved functional forms it may not be continuous and may not have an interior maximum its slope depends on technology as well as on the tax elasticity of labour supply for certain technologies a more negative elasticity may imply a more positive slope moreover the relevant tax elasticity is a general equilibrium one which may differ in sign from the widely quoted partial equilibrium one

speculative trading of electricity contracts in interconnected locations abstract we derive an investor s optimal trading strategy of electricity contracts traded in two locations joined by an interconnector the investor employs a price model which includes the impact of her own trades the investor s trades have a permanent impact on prices because her trading activity affects the demand of contracts in both locations additionally the investor receives prices which are worse than the quoted prices as a result of the elasticity of liquidity provision of contracts furthermore the investor is ambiguity averse so she acknowledges that her model of prices may be misspecified and considers other models when devising her trading strategy we show that as the investor s degree of ambiguity aversion increases her trading activity decreases in both locations and thus her inventory exposure also decreases finally we show that there is a range of ambiguity aversion parameters where the sharpe ratio of the trading strategy increases when ambiguity aversion increases

interpreting concentration indices in the secondary market for natural gas transportation the implication of pipeline residual rights abstract in 1992 the u s federal energy regulatory commission created a secondary market for natural gas transportation whereby shippers holding firm transportation capacity on interstate natural gas pipelines can compete with the pipeline in the provision of transportation services however if a shipper does not use some of its contracted firm transportation capacity the pipeline can resell that capacity as interruptible transportation that is the pipeline has residual rights with respect to firm transportation capacity contracted for by shippers we demonstrate that these residual rights can have a significant effect on the competitiveness of the secondary market for natural gas transportation a consequence of these residual rights is that the secondary market for natural gas transportation may be considerably more competitive than indicated by measures of concentration like the widely used herfindahl hirschman index

implementation in economies with a continuum of agents we study a general implementation problem for exchange economies with a continuum of players and private information and test the robustness of the results for sequences of approximating finite economies assuming that the designer knows the distribution of the characteristics in the economy we consider continuous and unique implementation in both its equilibrium and dominant strategies versions and obtain results for general self selective first and second best allocations an upper hemicontinuity property of bayesian equilibria of approximating economies for continuous mechanisms is demonstrated using this we can for example conclude that if a given continuous mechanism implements uniquely a walrasian allocation in the continuum economy then all bayesian equilibria of large approximation economies will with probability close to one yield an allocation which is almost ex post pareto optimal

the optimality of boiteux ramsey pricing consider an economy with one public enterprise that is subject to a budgetary constraint and charges prices according to the first order necessary conditions suggested by boiteux 1956 or in another context by ramsey 1972 we state restrictive conditions sufficient to ensure that the resulting allocation is second best author s abstract

the benefits of integrating european electricity markets this paper builds on and extends work under contract ener b1 491 1 2012 published as newbery et al 2013

on marginal cost pricing with given tax subsidy rules we provide an existence proof for generalized marginal cost pricing with given tax subsidy rules the novelty is that our approach allows for economic environments where all the generalized marginal cost pricing equilibria are inefficient in the aggregate an example is recalled in order to suggest how non pathological these environments are

renewable energy and geopolitics a review this article reviews the literature on the geopolitics of renewable energy it finds that while the roots of this literature can be traced back to the 1970s and 1980s most of it has been published from 2010 onwards the following aggregate conclusions are extracted from the literature renewable energy has many advantages over fossil fuels for international security and peace however renewable energy is thought to exacerbate security risks and geopolitical tensions related to critical materials and cybersecurity former hydrocarbon exporters will likely be the greatest losers from the energy transition many of the reviewed publications share some weaknesses a failure to define geopolitics an unwarranted assumption that very little has been published in the field previously limited use of established forecasting scenario building or foresight methodologies a lack of recognition of the complexity of the field a lack of theorisation most authors do not distinguish between the geopolitical risks associated with different types of renewable energy and only a few distinguish clearly between the geopolitics of the transitional phase and the geopolitics of a post energy transition world a disproportionately large part of the literature is dedicated to critical materials and cybersecurity while only a small part concerns the decline of former fossil fuel powers among those publications that do discuss the decline of fossil fuels there is also an over focus on oil producers and a lack of attention to the countries that rely heavily on coal for example australia china germany indonesia poland and the united states

the genealogy of modern theoretical public economics from first best to second best abstract the development of second best modelling in the seventies has shaped modern theoretical economics the paper discusses some key changes in the economists conceptions the first two sections examine the efficiency equity dilemma the study of non convexities has shown that counterintuitive efficiency enhancing income redistribution might occur the introduction of asymmetric information has shed doubts on virtues of lump sum compensation the last sections focus on the intricate geometry of second best optimisation and the ambiguous value of the signals provided by the price system outside a first best world

multimarket contact and collusive behavior traditional analyses of industrial behavior typically link the exercise of market power in an industry to internalfeatures such as demand conditions concentration and barriers to entry nevertheless some economists have remained concerned that external factors such as contact across markets may also play a significant role in determining the level of competitiveness in any particular industry in this article we examine the effect of multimarket contact on the degree of cooperation that firms can sustain in settings of repeated competition we isolate conditions under which multimarket contact facilitates collusion and show that these collusive gains are achieved through modes of behavior that have been identified in previous empirical studies of multimarketfirms

taxation as a social choice problem the scope of the laffer argument abstract this paper studies the form of the tax equilibrium set in simple diamond mirrlees models and characterizes the corresponding laffer curves the curves need not ever slope downward and can have multiple local maxima local information about them is thus not sufficient to place restrictions on optimal choice among tax systems in this simple framework the problem of choice among tax systems is shown to have no more structure than an abstract social choice problem

externalities in economies with imperfect information and incomplete markets this paper presents a simple general framework for analyzing externalities in economies with incomplete markets and imperfect infonnation by identifying the pecuniary effects of these externalities that net out the paper simplifies the problem of determining when tax interventions are pareto improving the approach indicates that such tax interventions almost always exist and that equilibria in situations of imperfect information are rarely constrained pareto optima it can also lead to simple tests based on readily observable indicators of the efficacy of particular tax policies in situations involving adverse selection signaling moral hazard incomplete contingent claims markets and queue rationing equilibria traditional discussions of externalities have emphasized the distinction between technological externalities in which the action of one individual or firm directly affects the utility or profit ofanother and pecuniary externalities in which one individual s or firm s actions affect another only through effects on prices while the presence of technological externalities imply in general that a competitive equilibrium may not be pareto efficient pecuniary externalities hy themselves are not a source of inefficiency the fact that prices change has of course important consequences there are both distributional and allocational effects but the distribution effects net out gains for example hy firms whose prices increase are precisely offset by losses e g to individuals who must pay higher prices and there are no welfare losses from the allocation effects as long as the price changes involved are small if firms are maximizing profits and individuals are maximizing utility both facing prices that correctly refiect opportunity costs then standard envelope theorem arguments imply that changes in profits or utility induced by changes in allocations resulting from any small change in prices are negligible

taxes budgetary rule and majority voting this paper studies majority voting outcomes fora specific class of two dimensional policies one policyinstrument influences efficiency and the other redistribution absent the political process the two dimensions can beaddressed separately with a two dimensional vote the twoaspects will interact in a non trivial way the illustrativepolicy we consider requires taxing an externality generatinggood and determining a budgetary rule which specifies theproportions of the tax proceeds that go to wage earners and tocapital owners we show first a sequential vote wherein thetax rate is determined first and the budgetary rule second always possesses an equilibrium and that this equilibrium isthe median endowed individual s most preferred policy second the reverse sequential choice implies that the median endowedindividual may but need not be decisive third the shepsle procedure also implies that the equilibrium is thepolicy most favored by the median individual fourth thisequilibrium constitutes under certain circumstances thecondorcet winner for the unrestricted simultaneous votinggame

minimum wage legislation as a second best policy mass unemployment is a striking phenomenon of the present economic situation of european market economies although the profession of economists has been criticized for not providing satisfactory cures it has produced a number of different explanations either complementary or contradictory for the occurrence of mass unemployment in this paper we examine the argument that unemployment is the consequence of minimum wage legislation which is socially desirable the observation of current wage legislations suggests that the above argument is broadly at least partly accepted by policy makers curiously enough a defence of this argument meeting the rigorous requirements of modern theory seems to be missing symmetrically attacks against minimum wage legislation often rely upon reasonings of dubious relevance i e the obvious remark that unemployment is a waste with first best efficiency criteria the present paper proposes a second best analysis where second best stems from informational asymmetries which prevent the implementation of lump sum transfers needed for a first best redistribution policy the question under scrutiny can be reformulated in a more precise way as follows does a second best optimal redistribution policy lead to minimum wage legislation and unemployment our elements of answer are gathered in 3 sections in section 2 the principles of the analysis of the desirability of quantity controls and existing results are recalled in section 3 the analysis of section 2 is specified to a simple prototype model for the study of linear income taxation in section 4

a strategic model of european gas supply gasmod abstract this paper presents a model of the european natural gas supply gasmod which is structured as a two stage game of successive natural gas exports to europe upstream market and wholesale trade within europe downstream market and which explicitly includes infrastructure capacities we compare three possible market scenarios cournot competition in both markets perfect competition in both markets and perfect competition in the downstream with cournot competition in the upstream market eu liberalization we find that cournot competition in both markets is the most accurate representation of today s european natural gas market where suppliers at both stages generate a mark up at the expense of the final customer double marginalization our results yield a diversified supply portfolio with newly emerging lng exporters gaining market shares enforcing competition in the european downstream market would lead to lower prices and higher quantities by avoiding the welfare reducing effects of double marginalization binding infrastructure capacity restrictions strongly influence the results and we identify bottlenecks mainly for intra european trade relations whereas transport capacity in the upstream market is globally sufficient in the cournot scenario

estimating bounded rationality and pricing performance uncertainty abstract this paper estimates bounded rationality in two outcome strictly competitive extensive form games of perfect information without chance moves in the baseline sessions the average subject can reason effectively to about rank 6 twelve percent of these subjects have a perfect bound on their ability to achieve the substantively rational outcome they win all simpler games and they lose all games more complicated than the estimated rationality bound most subjects do not have accurate expectations about their performance against a procedurally rational opponent usually they value the games at more than they are likely to earn if they actually play them

a boundedly rational decision algorithm cognition requires scarce inputs including time and concentration since cognition is costly sophisticated decision makers should use mental shortcuts or heuristics to reduce cognitive burdens a model is proposed and tested that is motivated by these principles it is believed this model achieves four goals first the model makes quantitative behavioral predictions and hence provides a precise alternative to the rational actor hypothesis second the model is psychologically plausible because it is based on the actual decisions algorithms that subjects claim to use third the model is empirically testable such a test is provided in this paper fourth the model is broadly applicable because it can be used to analyze decision problems that can be represented in tree form

an assessment of the danish german cross border auctions abstract this paper presents an analysis of the auction prices at the cross border auction between west denmark and germany and between east denmark and germany the kontek cable monthly and annual transmission capacities appear to be more highly valued than daily transmission capacity on average the two cross border auctions show different trends the auctions between west denmark and germany exhibit a higher level of prices in the southbound direction and between east denmark and germany higher prices in the northbound direction we find a relatively strong correspondence in the pricing of products over different time frames daily monthly and annual auctions between west denmark and germany and a weak correspondence for the products between east denmark and germany in the daily auctions market players can decide whether to use their capacity after the clearing of the day ahead market while in the monthly and annual auctions they must decide whether to use their capacity prior to clearing if they choose not to use their capacity the use it or lose it principle applies the capacity is then subsequently released to the daily market since the daily cross border auctions are free of commitment they should be valued as options likewise in the monthly and annual auctions market players can choose not to nominate their capacity but as this must occur before the clearing of the day ahead market they will not know the directions of the power flows a priori if they nominate the capacity they must use it if the direction turns out to be wrong it is then possible to purchase capacity in the opposite direction in the daily auctions if market players can accurately predict the outcome of the spot markets day ahead the value of monthly and annual capacity should more closely reflect the value of an option thus one would expect the value of the monthly and annual capacity to be between the value of an option and an obligation although this suggests that the average price of daily capacity should be greater than monthly and annual capacity our data do not support this hypothesis the daily monthly and annual capacity auctions do not reflect the value of the underlying asset as specified by the appropriate valuation of the energy price differentials between west denmark and germany and east denmark and germany therefore market players are exposed to substantial variation in fees for congestion management on the cross border we study whether arbitrage improves over time and discern no obvious trend since the explicit auction procedure has not been cost efficient a better approach appears to be the new market coupling arrangement introduced on the kontek cable and on the border between west denmark and germany with the result that market players will pay a congestion management fee i e area price difference equal to the energy price differential resulting from the market coupling mechanism

third degree price discrimination and consumer surplus this paper considers the effects of monopoly third degree price discrimination on aggregate consumer surplus discrimination is likely to reduce surplus relative to that obtained with a uniform price but surplus can rise under reasonable conditions if the ratio of the pass through coefficient to the price elasticity at the uniform price is higher in the market with the higher price elasticity then surplus is larger with discrimination for a large set of demand functions the relatively high pass through coefficient implies a large price reduction in this market with logit demand functions surplus is higher with discrimination if pass through is above 0 5

implicit auctioning on the kontek cable third time lucky implicit auctioning in europe is about eliminating cross border trade inefficiencies by internalizing crossborder trade into the day ahead auction procedures of the power exchanges that are already organizing trade nationally on the kontek cable implicit auctioning has first been implemented with no coupling between the relevant power exchanges followed by a volume coupling implementation and finally a one way price coupling implementation that is still operational today the main contribution of this paper is to compare the theoretical properties of these three implementations and to analyze their performance empirically we find that the third implementation is significantly outperforming the previous two implementations but in this third implementation stakeholders partly abandoned the volume coupling approach they initially believed to be a viable alternative and institutionally easier to implement

fair allocations in large economies the purpose of this paper is the study of problems of equity in an economy with many agents conditions are given under which every equitable and pareto optimal allocation is a competitive equilibrium with equal incomes for all agents the results are also of potential relevance for the literature on incentive compatibility since the allocations that are obained through incentive mechanisms in large economies turn out to be equitable

from micro to macro via production networks amodern economy is an intricately linked web of specialized production units each relying on the flow of inputs from their suppliers to produce their own output which in turn is routed towards other downstream units in this essay i argue that the structure of this production network is key in determining whether and how microeconomic shocks affecting only a particular firm or technology along the chain propagate throughout the economy and shape aggregate outcomes therefore understanding the structure of this production network can better inform both academics on the origins of aggregate fluctuations and policy makers on how to prepare for and recover from adverse shocks that disrupt these production chains two recent events have brought to the forefront the importance of interconnections between firms and sectors in aggregate economic performance consider first the 2011 earthquake in japan while the triple tragedy of the earthquake the ensuing tsunami and the near nuclear meltdown at fukushima surely resulted in a significant destruction of human and physical capital its effects would have been largely restricted to the affected areas were it not for the disruption of national

strengthening of energy security low carbon growth in asia role of regional energy cooperation through trade abstract prudent demand supply management of energy is pivotal for the energy security of the countries and transitions towards the sustainable low carbon energy system this study empirically investigates the existing demand supply gaps of energy in the south though east asian stea countries and analyzes how the gaps can be minimized most efficiently through intraregional energy trade stochastic frontier gravity model extended with the determinants of efficiency models used for both primary energy and renewable energy goods reg trade the result implies that for most of the countries intraregional export of primary energy as well as reg are positively influenced by gross domestic products gdp of the exporting and importing countries tariff and distance adversely affect the exports while the implication of cross exchange ratio seems minimal in both cases regional trade agreements rta are also found to have notable positive impact on intraregional trade results show that china and thailand are the most efficient in this intraregional primary energy export while bangladesh and myanmar remain the least efficient china and japan are the most efficient in reg exports while bangladesh remains the least efficient on average the whole region has the weighted export efficiency of 56 5 in intraregional primary energy trade and 63 1 in reg trade the determinants of efficiency model reveals that institutional quality better infrastructure goods market efficiency and technological readiness have reasonable impacts to enhance the countries intraregional energy trade efficiencies

the existence of marginal cost pricing equilibria with increasing returns the competitive mechanism fails in economies with nonconvex technologies competitive equilibria do not exist in general and pareto optima are no longer equilibria the search for alternative mechanisms in economies with increasing returns was developed and resulted in the principle of marginal cost pricing modern economic theory has returned to the foundations of marginal cost pricing theory in a general equilibrium framework the existence of equilibria with marginal cost pricing in economies with increasing returns and a more general type of nonconvexities is analyzed in this paper the case of differentiable economies where all production sets are limited by smooth surfaces is developed the principles of the proof are also extended to the nondifferentiable case