network regulation and regulatory institutional reform revisiting the case of australia it is well understood that the success of liberalizing the electricity supply industry depends crucially on the quality and design of the regulatory and institutional framework this paper analyses the regulatory arrangements that underpin the work of the australian energy regulator aer these arrangements are contrasted with the regulatory structure of electricity provision in norway a key difference between the reform processes in the two countries relates to the lack of privatization in norway and the co existence of private and publicly owned generators and distributors in australia this comparative analysis allows us to make several recommendations to improve regulatory arrangements in australia these include greater independence for the aer better coordination among regulatory institutions greater use of benchmarking analysis greater customer involvement and improving market transparency and privatization of government owned corporations however the success of privatization will hinge upon the effectiveness of the regulatory environment

the empirical analysis of the determinants for environmental technological change a research agenda abstract technological change is usually considered a necessary albeit not sufficient condition for a transition to sustainability however the empirical analysis of the determinants to environmental technological change has not received too much attention in the environmental ecological economics literature and many open questions remain in this context based on a careful review of the literature this paper argues that further analysis should address several issues at different levels i e regarding the conceptual framework the thematic scope of the studies some methodological issues and other aspects related to the environmental policy variable first an integrated conceptual framework which takes into account the interplay between relevant variables influencing environmental technological change i e factors internal and external to the firm and characteristics of the environmental technologies and all the stages of this process with a greater emphasis on the invention stage should be developed other aspects should then be tackled including a focus on several themes i e a greater attention to cross sectoral technologies the barriers to different types of environmental technologies the international dimension of environmental technological change and environmental technological change in small and medium size enterprises methodological issues combination of case studies and econometric modelling and several issues related to the environmental policy variable

measuring the efficiency of energy intensive industries across european countries abstract this study evaluates the energy efficiency trends of five energy intensive industries in 23 european union eu countries over the period 2000 2009 in particular the performance of the construction electricity manufacturing mining and quarrying and transport sectors is examined the analysis is based on data envelopment analysis dea combined with the malmquist productivity index mpi which allows for distinctions between efficiency and technology changes over time at the second stage of the analysis cross classified multilevel modelling is applied to analyse the main drivers behind efficiency performance using a number of sector and country characteristics based on dea results an overall improvement in efficiency is observed in all sectors over the period the decomposition of the mpi indicates that technology change is primarily responsible for the improvements achieved in most sectors the results obtained by the cross classified model show among other things that the high electricity prices energy taxes and market share of the largest generator in the electricity market have a negative effect on industrial energy efficiency

estimating the cost of improving quality in electricity distribution a parametric distance function approach abstract the quality of electricity distribution is being more and more scrutinized by regulatory authorities with explicit reward and penalty schemes based on quality targets having been introduced in many countries it is then of prime importance to know the cost of improving the quality for a distribution system operator in this paper we focus on one dimension of quality the continuity of supply and we estimated the cost of preventing power outages for that we make use of the parametric distance function approach assuming that outages enter in the firm production set as an input an imperfect substitute for maintenance activities and capital investment this allows us to identify the sources of technical inefficiency and the underlying trade off faced by operators between quality and other inputs and costs for this purpose we use panel data on 92 electricity distribution units operated by erdf electricite de france reseau distribution in the 2003 2005 financial years assuming a multi output multi input translog technology we estimate that the cost of preventing one interruption is equal to 10 7 for an average dso furthermore as one would expect marginal quality improvements tend to be more expensive as quality itself improves

the new institutional economics this outstanding book presents new original contributions from some of the world s leading economists including ronald coase douglass c north masahiko aoki oliver e williamson and harold demsetz it demonstrates the extent and depth of the new institutional economics research programme which is having a worldwide impact on the economics profession

a multi objective multi period stochastic programming model for public debt management while raising debt on behalf of the government public debt managers need to consider several possibly conflicting objectives and have to find an appropriate combination for government debt taking into account the uncertainty with regard to the future state of the economy in this paper we explicitly consider the underlying uncertainties with a complex multi period stochastic programming model that captures the trade offs between the objectives the model is designed to aid the decision makers in formulating the debt issuance strategy we apply an interactive procedure that guides the issuer to identify good strategies and demonstrate this approach for the public debt management problem of turkey

quality of service efficiency and scale in network industries an analysis of european electricity distribution quality of service qos is of major economic significance in natural monopoly infrastructure industries in this article we present an efficiency analysis of electricity distribution networks from seven european countries we apply the stochastic frontier analysis method to multi output translog input distance function models to estimate cost efficiency and scale economies we show that introducing the quality dimension into the analysis affects estimated efficiency significantly especially that smaller utilities efficiency seems to decrease our results emphasize that qos should be an integrated part of efficiency and economic analysis of regulated natural monopolies

financial portfolio management through the goal programming model current state of the art abstract since markowitz 1952 formulated the portfolio selection problem many researchers have developed models aggregating simultaneously several conflicting attributes such as the return on investment risk and liquidity the portfolio manager generally seeks the best combination of stocks assets that meets his her investment objectives the goal programming gp model is widely applied to finance and portfolio management the aim of this paper is to present the different variants of the gp model that have been applied to the financial portfolio selection problem from the 1970s to nowadays

why political reservations many countries are amending their political systems to set aside positions to groups such as women and racial or religious minorities that are perceived as being disadvantaged using evidence from india this article assesses the case for these reservations jel h4 o15 several countries have introduced procedures either explicit quotas or forms of gerrymandering to ensure political representation of disadvantaged groups such as women or ethnic minorities in 2001 quotas for women in parliaments were in force in more than 30 countries in india seats are reserved for historically disadvantaged groups scheduled castes or sc and scheduled tribes or st in federal or state legislative assemblies and for both historically disadvantaged groups and women at all levels of the panchayat system the system of decentralized decision making on the basis of evidence accumulated about the indian experience this paper reviews the case for reservation

preference disaggregation 20 years of mcda experience abstract the philosophy of preference disaggregation in multicriteria decision aid systems mcda is to assess infer global preference models from the given preferential structures and to address decision aiding activities this paper presents a panorama of preference disaggregation methods and summarises the most important results and applications over the last 20 years

why don t poor countries catch up a cross national test of an institutional explanation early neoclassical analyses predicted that poor countries would grow faster than wealthy countries because of technological advances and diminishing returns to capital in the latter the reverse has occurred poor countries are falling back rather than catching up we suggest here that deficient institutions underlie this divergence employing various indicators of institutional quality including the rule of law the pervasiveness of corruption and the risk of expropriation and contract repudiation we show that the ability of poor countries to catch up is determined in large part by the institutional environment in which economic activity in these countries takes place jel o00 o10

the principal agent relationship with an informed principal ii common values in many circumstances a principal may have relevant private information when she proposes a contract to an agent we analyze such a principal agent relationship as a noncooperative game the principal proposes a contract which is accepted or rejected by the agent who for most of our analysis has no private information the contract is executed if accepted otherwise the reservation allocation takes effect this allocation may be determined by a pre existing contract which the principal by her proposal is attempting to renegotiate or it may simply be the no trade point in this paper we assume that the principal s information directly affects the agent s payoff before solving the game we discuss pareto efficiency with asymmetric information we define an incentive compatible allocation to be weakly interim efficient wie if there exists no alternative incentive compatible allocation that both parties prefer for all possible beliefs that the agent might have about the principal s private information type we show that any wie allocation is interim efficient ie for some beliefs the rothschild stiglitz wilson rsw allocation relative to the reservation allocation l is the allocation that maximizes the payoff of each type of principal within the class of incentive compatible allocations that guarantee the agent at least the utility he gets from a irrespective of his beliefs about the principal s type the equilibrium set of the contract proposal game consists of the allocations that weakly pareto dominate the rsw allocation thus there is a unique equilibrium outcome if and only if the latter is ie and the equilibrium outcome is the rsw allocation itself after characterizing the equilibrium allocations we study those that are renegotiation proof when either the principal or the agent leads the renegotiation we then compare our contract proposal game which is a signaling model with its screening counterpart we conclude by extending our results to the case in which the agent as well as the principal has private information under the assumption of quasi linear preferences

productivity and efficiency of us gas transmission companies a european regulatory perspective on both sides of the atlantic the regulation of gas transmission networks has undergone major changes since the early 1990s whereas in the us the long standing regime of cost plus regulation was complemented by increasing pipe to pipe competition most european countries moved towards incentive regulation complemented by market integration we study the productivity development of a panel of us interstate companies using data envelopment analysis and malmquist productivity indices results are presented for changes in productivity as well as for several convergence tests the results indicate that taking productivity and convergence as performance indicators regulation has been rather successful in particular during a period where overall demand was flat however we argue that a benchmarking based regulation might have brought about stronger convergence lessons for european regulators are twofold first the us analysis shows that benchmarking of european transmission operators would be possible if data were available second our results suggest that in the long run market integration and competition are alternatives to the current european model

inter linking issues and dimensions in sustainability reporting during the last decade sustainability reporting sr has been increasingly adopted by corporations worldwide this is evidenced by the adoption of several guidelines such as the iso 14000 series the social accountability 8000 standard and the gri sustainability guidelines sr shows promise to help corporate leaders and their employees to contribute towards achieving sustainable societies however most of the guidelines and standards address sustainability issues through comparmentalisation thereby leading to the separation of the economic environmental and social dimensions due to these divisive approaches holistic assessments of the effects of their efforts are seldom properly integrated into coporate decisions and procedures to make improvements for example through cleaner production worker health and safety consumer safety and reductions in the negative short and long term social and environmental impacts this paper analyses sr reports from three companies with the help of grounded theory s constant comparative analysis this analytical framework helped the authors to systematically assess the degree to which the companies addressed economic ecological and social issues separately or in an integrated and inter linked manner from the inter linkages found a new category is proposed to be added to future sr this new category can help corporate sr planners and researchers on sustainability reports to better understand how the company leaders understand their responsibilities with regard to sd these inter connectednesses are highly relevant in many short and long term dimensions of supply chain management global warming ecological disruption and societal equity issues especially with regard to the local national and global energy issues of fuels and oils the central themes of the conference at which this paper was originally presented it also plays a key role in real long term changes towards sustainability where the time dimension plays a key role in human survival on planet earth

the efficiency of competitive equilibria in insurance markets with asymmetric information abstract this paper addresses the relationship between competitive equilibria and efficient allocations in an insurance market with asymmetric information using the definition of second best efficiency proposed by harris and townsend 1981 for environments characterized by informational assmmetry the efficiency properties of several proposed market equilibria are examined we find an analogue to the first optimality theorem a miyazaki wilson equilibrium always results in a second best allocation

health insurance without single crossing why healthy people have high coverage standard insurance models predict that people with high risks have high insurance coverage it is empirically documented that people with high income have lower health risks and are better insured we show that income differences between risk types lead to a violation of single crossing in an insurance model where people choose treatment intensity we analyse different market structures and show the following if insurers have market power the violation of single crossing caused by income differences and endogenous treatment choice can explain the empirically observed outcome our results do not rely on differences in risk aversion between types

complex biofuels related scenarios generated by qualitative reasoning under severe information shortages a review abstract there is a broad spectrum of br biofuel related models however the models are highly specific such models cannot flexibly support complex decision making activities to identify feasible trade offs among many objective functions they represent just one point of view e g engineering company economics therefore cbrms complex biofuel related model are studied in this paper cbrms must cover additional aspects e g macroeconomic ecology sociology and politics such models are inevitably unique partially subjective inconsistent vague and multidimensional ai artificial intelligence has developed a number of tools to solve such problems qualitative reasoning is one of them it is based on the least information intensive quantifiers i e trends there are just three trend qualitative values plus increasing zero constant negative decreasing there are many cbrm items related to soft aspects e g politics taxation etc which cannot be quantified by numbers they are too vague for example if the political sociological sensitivity of land ownership is increasing then the cost of biofuels is increasing such verbal knowledge item cannot be incorporated into a traditional numerical model the paper describes developments of cbrms based on expert knowledge and common sense a consensus among experts is often not reached because of substantial subjectivity of experts knowledge a qualitative intersection of cbrms developed by several experts is simple the case study presents a model based on integration of 10 heuristics using 9 variables e g refinery capacity cost of biofuel production and biofuel demand the result is represented by 13 scenarios the paper is self contained no a prior knowledge of qualitative models is required

finding the most preferred alliance structure between banks and insurance companies in this paper we have studied alternative alliances between banks and insurance companies first we defined six different possible structure models for such alliances and nine criteria used to evaluate the models the models and the criteria were introduced together with bank and insurance experts the experts are representatives of the top management of finnish banks and insurance companies searching for the most preferred alliance model is a multiple criteria decision making mcdm problem to solve the problem we used an expert panel and the analytic hierarchy process ahp based on the evaluations of the panel the alternatives financial conglomerate and cross selling agreement no overlapping service channels are most preferred which one is chosen depends on how risk is emphasized

on deciding how to decide designing participatory budget processes abstract participatory budgets are becoming increasingly popular in many municipalities all around the world the underlying idea is to allow citizens to participate in the allocation of a municipal budget many advantages have been suggested for such experiences including legitimization and more informed and transparent decisions there are many conceivable variants of such processes however in most cases both its design and implementation are carried out in an informal way in this paper we propose a methodology to design a participatory budget process based on a multicriteria decision making model

power sector reform in south asia why slow and limited so far although south asian developing countries had initiated some form of electric power sector reform in the 1990s often under external lending agency pressures not much progress has been made so far and there is hardly any noteworthy example of a successful reform in the region this paper provides a brief review of power sector reform efforts in five south asian countries and uses an institutional economics framework to identify the factors shaping the success of power sector reforms four factors namely instability of rule makers poor overall acceptance slow adaptation and poor transition management are identified and their effect on the reform process of south asia are analysed the paper finds that political instability has affected the power sector reform of the region making hard decisions difficult to take slow progress of reform has also affected the sector viability as signs of adverse effects on the power sector investment and performance are already visible

new approaches to cleaner production applying the sasi method to micro tanneries in colombia the literature on micro and small sized enterprises in developing countries shows their existential difficulties this is particularly true for those in marginal areas with multiple challenges including pollution prevention environmental agencies tend to require capital intensive end of pipe solutions or regulatory measures that close down polluting enterprises both knowledge of and interest in how to make poor micro enterprises more sustainable are needed this paper addresses this by a developing a problem driven and context oriented systematic approach to social inclusion sasi method and b applying it successfully in the context of micro tanneries in villapinzon colombia over a period of eight years the concept of cleaner production was systematically integrated into this method that was inspired by lewin s theory of change and insights from negotiation and conflict resolution the results show that cleaner production implementation needs comprehensive systemic policy mechanisms based on participatory approaches taking into account the socio economic constraints of the micro industries that combine supportive capacity building and command and control policies moreover rules encouraging cleaner production need to be sensitive to the regulatory context in which it is applied which in this case concerned land use planning and zoning regulations the sasi approach effectively encouraged micro tanners to make their industries more viable and clean while it simultaneously convinced the environmental agency to recognise and value these industries this paper argues that integrating cleaner production in sasi is a learning and socio technical change process urgently needed for micro industries

a cross country analysis of electricity market reforms potential contribution of new institutional economics abstract the paper explores whether the question of why some countries are able to implement more extensive reforms is closely related to the question of why some countries have better institutions than others we analyze this question by using an empirical econometric model based on poisson regression with cross section data covering 51 states in the us 13 provinces in canada and 51 other countries in the course of the study we check the validity of three important arguments of new institutional economics nie for the power market liberalization process the first argument is the path dependency to test its impact on the reform progress we try to explain whether the background of the chairperson of the regulatory agency when reforms started or that of the governor minister responsible for energy policy at that time has an impact on the subsequent reform progress the second argument is the impact of democracy as an institution on the reform progress we look at the effect of two important indicators of democracy i e civil liberties and political rights on the reform progress the final argument of nie is about transaction costs we concentrate on the level of corruption in a country as one of the key factors that determine transaction costs and try to explore its impact on the reforms the results show that the backgrounds of the chairperson and the minister governor the level of democracy and corruption in a country are significantly correlated with how far reforms have gone in that country the negative relationship between reform progress and civil liberties may indicate that reforms may be limited in democratic countries with strong civil society institutions such as trade unions or other organized structures in the society that may consider reforms as harmful to their self interest

the existence of equilibrium in discontinuous economic games ii applications in part i of this study we established two existence theorems for mixed strategy equilibrium in games with discontinuous payoff functions see theorems 4 4 and 5 5 in dasgupta and maskin 1986 hereafter d m 1986 in this second part we use the second of these two theorems to prove the existence of mixed strategy equilibrium in some wellknown discontinuous economic games that fail to have pure strategy equilibria the models we analyse are the bertrand edgeworth example of price setting duopolists with capacity constraints see section 2 2 price competition among firms producing differentiated products hotelling 1929 and d aspremont gabszewicz and thisse 1979 see section 2 3 spatial competition eaton and lipsey 1975 and shaked 1975 see section 3 and models of market dependent information rothschild and stiglitz 1976 and wilson 1977 section 4 the paper concludes section 5 with a classification of these models

pairs trading and outranking the multi step ahead forecasting case abstract pairs trading is a popular speculation strategy several implementation methods are proposed in the literature they can be based on a distance criterion or on co integration this article extends previous research in another direction the combination of forecasting techniques neural networks and multi criteria decision making methods electre iii the key contribution of this paper is the introduction of multi step ahead forecasts it leads to major changes in the trading system and raises new empirical and methodological questions the results of an application based on s p 100 index stocks are promising this methodology could be a powerful tool for pairs selection in a highly non linear environment

sustainable production and consumption systems cooperation for change assessing and simulating the willingness of the firm to adopt develop cleaner technologies the case of the in bond industry in northern mexico abstract over the last decade literature on the greening of industry and environmental policy has provided numerous important insights into the determinants of the firm s innovative behaviour in cleaner technologies however this literature still lacks empirically tested theoretical models this paper contributes to fill this gap proposing a definitional system that enables the testing of hypotheses of dependence between willingness to innovate in cleaner technologies and its determinants and to explore the conditions under which the firms innovative behaviour could be fostered regression and simulation outcomes indicate against the general wisdom that stringent environmental regulation without consideration to the dynamics of technical change and environmental and economic risk perceptions in the part of firms would play against the promotion of innovation in cleaner production

socially responsible investment a multicriteria approach to portfolio selection combining ethical and financial objectives abstract in a context of socially responsible investment sri this paper deals with portfolio selection for investors interested in ethical policies in the opportunity set there are ethical assets and other assets which are not characterized as ethical two goals are considered the traditional financial goal in the classical utility theory under uncertainty and an ethical goal in the same utility framework a new financial ethical bi criteria model is proposed with absolute risk aversion coefficients and targets depending on the investor s ethical profile this approach is relevant as an increasing number of mutual funds are becoming interested in sri strategies from the proposed model an actual case on green investment is developed concerning this case without generalizing to other contexts an analysis of the numerical results shows that efficient portfolios obtained by the traditional e v model outperform the strong green portfolios in terms of expected return and risk but this does not significantly occur with weak green investment

estimating the marginal cost of quality improvements the case of the uk electricity distribution companies the main aim of this paper is to develop an econometric approach to estimation of marginal costs of improving quality of service we implement this methodology by way of applying it to the case of the uk electricity distribution networks the estimated marginal costs allow us to shed light on the effectiveness of the current uk incentive regulation to improve quality and to derive optimal quality levels and welfare losses due to sub optimal quality levels the proposed method also allows us to measure the welfare effect of the observed quality improvements in the uk between 1995 and 2003 our results suggest that while the incentive schemes established by the regulator to encourage utilities to reduce network energy losses leads to improvement in sector performance they do not provide utilities with sufficient incentives to avoid power interruptions we find that the observed improvements in quality during the period of this study only represented 30 of the potential customer welfare gains and hence there was still significant scope for quality improvements

corporate failure prediction in the european energy sector a multicriteria approach and the effect of country characteristics this study examines the development of corporate failure prediction models for european firms in the energy sector using a large dataset from 18 countries the construction of the models is based on a multiple criteria decision aid mcda approach taking into account both ordinal criteria and nominal country sector effects the analysis is based on different modeling specifications first traditional financial variables are examined which are then extended with additional country level data related to the economic and business environment as well as data about the energy efficiency policies of the countries and the characteristics of their energy markets and networks the results indicate that energy related attributes have high discriminating power and add valuable information compared to the other attributes

an intelligent agent based fuzzy group decision making model for financial multicriteria decision support the case of credit scoring credit risk analysis is an active research area in financial risk management and credit scoring is one of the key analytical techniques in credit risk evaluation in this study a novel intelligent agent based fuzzy group decision making gdm model is proposed as an effective multicriteria decision analysis mcda tool for credit risk evaluation in this proposed model some artificial intelligent techniques which are used as intelligent agents are first used to analyze and evaluate the risk levels of credit applicants over a set of pre defined criteria then these evaluation results generated by different intelligent agents are fuzzified into some fuzzy opinions on credit risk level of applicants finally these fuzzification opinions are aggregated into a group consensus and meantime the fuzzy aggregated consensus is defuzzified into a crisp aggregated value to support final decision for decision makers of credit granting institutions for illustration and verification purposes a simple numerical example and three real world credit application approval datasets are presented

reforming the power sector in transition do institutions matter this paper aims to investigate the often poorly explored link between power sector reforms and wider institutional reforms in the economy across different groups of transition countries we use panel data econometrics based on bias corrected dynamic fixed effect analysis lsdvc to assess the impact of reforms on macroeconomic and power sector outcomes the results indicate that power sector reform is highly inter dependent with wider reforms in other sectors of the economy the findings indicate that failure to harmonize inter sector reforms leads to power sector reform measures being ineffective we conclude that the success of power sector reforms in developing countries largely depend on the extent to which they synchronize inter sector reforms in the economy

market equilibrium with hidden knowledge and self selection the problem of the existence of a competitive equilibrium in models with hidden knowledge and self knowledge has been discussed previously by m rothschild and j e stiglitz 1976 c a wilson 1977 and j g riley 1979 recent analyses of such models by i cho and d kreps 1986 and riley argue for a particular outcome the pareto dominant separating zero profit one the authors prove the existence of such an outcome under very general conditions and generalizing the reactive equilibrium concept introduced by riley they prove this outcome is the unique reactive equilibrium copyright 1987 by the econometric society

a cluster analysis study based on profitability and financial indicators in the italian gas retail market in the european union the natural gas market is increasingly being liberalized the liberalization process is aimed at leading to lower prices and higher volumes and hence higher consumer welfare this paper focuses on the changes in performance in the natural gas retail market by analyzing the profit and financial position of the companies concerned over the first three years following the market liberalization the balance sheets of 105 italian companies in this sector are analyzed after which a cluster analysis is performed employing the most significant performance indexes the companies are then analyzed within each cluster with respect to age size geographical location and business diversification the results of our analysis show that the majority of companies attained a high level of performance although this positive outcome was mitigated by the gradual decrease of the average values of performance indicators during the period concerned the companies that achieve the best performances belong to longstanding business groups are medium large sized and are located in the north of the country regarding business diversification in the first two years the specialised companies outperformed the diversified companies

multiple criteria decision making combined with finance a categorized bibliographic study abstract this paper provides a categorized bibliography on the application of the techniques of multiple criteria decision making mcdm to problems and issues in finance a total of 265 references have been compiled and classified according to the methodological approaches of goal programming multiple objective programming the analytic hierarchy process etc and to the application areas of capital budgeting working capital management portfolio analysis etc the bibliography provides an overview of the literature on mcdm combined with finance shows how contributions to the area have come from all over the world facilitates access to the entirety of this heretofore fragmented literature and underscores the often multiple criterion nature of many problems in finance

the new economics of regulation ten years after the new economics of regulation is an application of the principal agent methodology to the contractual relationship between regulators and regulated firms after a critique of the traditional paradigms of regulation from the point of view of information economics a canonical model of regulation under asymmetric information is developed a survey of the main results obtained in the new economics of regulation is then provided in particular concerning the implementation of optimal contracts by a menu of linear contracts the dichotomy between pricing and cost reimbursement rules the auctioning of incentive contracts the dynamics of contracting under limited commitment and the hierarchical problems in regulation empirical implications are then discussed and avenues of further research are described in the conclusion

on the incentives to experiment in federations abstract conventional wisdom has it that policy innovation is better promoted in a federal rather than in a unitary system recent research however has provided theoretical evidence to the contrary a multi jurisdictional system is characterized due to the existence of a horizontal information externality by under provision of policy innovation this paper presents a simple model that introduces political competition for federal office and emphasizes that such competition plays an important role in shaping the incentives for experimentation for in this case political actors use the innovative policies to signal ability to the electorate this effect may offset the effect that arises from the incentive to free ride and so a federal system may generate more innovation than a unitary one

the profitability of electricity generating firms and policies promoting renewable energy using a cross country firm level dataset this study empirically analyses how the implemented renewable electricity promotion systems tradable green certificates vs feed in tariffs affected the pro

a game theoretic foundation of competitive equilibria with adverse selection equilibria with adverse selection we construct a fully specified extensive form game that captures competitive markets with adverse selection in particular it allows firms to offer any finite set of contracts so that cross subsidization is not ruled out moreover firms can withdraw from the market after initial contract offers have been observed we show that a subgame perfect equilibrium always exists and that in fact when withdrawal is costless the set of subgame perfect equilibrium outcomes may correspond to the entire set of feasible contracts we then focus on robust equilibria that exist both when withdrawal costs are zero and when they are arbitrarily small but strictly positive we show that the miyazaki wilson contracts are the unique robust equilibrium outcome of our game this outcome is always constrained efficient and involves cross subsidization from low to high risk agents that is increasing in the share of low risks in the population under weak conditions on risk preferences

neutrally optimal mechanism under adverse selection the canonical insurance problem abstract this paper revisits the problem of adverse selection in the insurance market of rothschild and stiglitz 1976 we extend the three stage game in hellwig 1987 by allowing firms to endogenously choose whether or not to pre commit on their contractual offers menus we show how this mechanism can deliver the miyazaki wilson spence allocation as the unique perfect bayesian equilibrium this allocation is the unique incentive efficient and individually rational maximizer of the utility of the most profitable type in fact given that the informed player has only two types it is the unique core allocation and thus the unique neutral optimum in the sense of myerson 1983

the educational and professional background of central bankers and its effect on inflation an empirical analysis we assume that central banks can control inflation so that inflation rates reflect the preferences of the central bank council the hypothesis to be tested is that these preferences depend on the central bankers educational and or professional background in a panel data analysis for the euro area and eleven countries since 1973 we explain inflation either by the weights with which the educational and professional characteristics of the 391 council members were represented in the various central bank councils or by the education or profession of the median council members control variables are added using professional background weights we find that former members of the central bank staff and in some specifications former insurance executives commercial bankers other businessmen and public servants prefer significantly lower inflation rates than former union leaders and politicians do in the median voter analysis former central bankers commercial bankers businessmen and public servants are also significantly more inflation averse than economic scholars as for the education of the council members our results are less robust however if the median member of the central bank council has studied business the inflation rate is significantly lower than if she has studied economics taking educational and professional background together central banks seem to attract or produce primarily economists who are monetary conservatives whereas keynesian economists are more prominent in academia jel classification e42 e58

efficient competitive equilibria with adverse selection do walrasian markets function orderly in the presence of adverse selection in particular is their outcome efficient when exclusive contracts are enforceable this paper addresses these questions in the context of a rothschild stiglitz insurance economy we identify an externality associated with the presence of adverse selection as a special form of consumption externality consequently we show that competitive equilibria always exist but are not typically incentive efficient however as markets for pollution rights can internalize environmental externalities markets for consumption rights can be designed to internalize the consumption externality due to adverse selection with such markets competitive equilibria exist and incentive constrained versions of the first and second welfare theorems hold

multiple criteria decision aiding for finance an updated bibliographic survey finance is a popular field for applied and methodological research involving multiple criteria decision aiding mcda techniques in this study we present an up to date bibliographic survey of the contributions of mcda in financial decision making focusing on the developments during the past decade the survey covers all main areas of financial modeling as well as the different methodological approaches in mcda and its connections with other analytical fields on the basis of the survey results we discuss the contributions of mcda in different areas of financial decision making and identify established and emerging research topics as well as future opportunities and challenges

an example of non existence of riley equilibrium in markets with adverse selection abstract rothschild and stiglitz 1976 proposed a model of a competitive market with adverse selection and showed that a pure strategy nash equilibrium may not exist among the solutions proposed to deal with this problem a particularly influential one is the notion of riley or reactive equilibrium riley 1979 we give an example that shows that a riley equilibrium may not exist if consumers are not ordered

the institutional framework and economic development the compound growth rates of per capita output and farrell type efficiency measures for 115 market economies over the period 1960 80 were compared with measures of political civil and economic liberty it was found that the institutional framework has significant and large effects on the efficiency and growth rate of economies politically open societies which subscribe to the rule of law to private property and to the market allocation of resources grow at three times the rate and are two and one half times as efficient as societies in which these freedoms are abridged

corruption competition and democracy abstract this paper presents a model of the interaction between corrupt government officials and industrial firms to show that corruption is antithetical to competition it is hypothesized that a government agent that controls access to a formal market has a self interest in demanding a bribe payment that serves to limit the number of firms this corrupt official will also be subject to a detection technology that is a function of the amount of the bribe payment and the number of firms that pay it under quite normal assumptions about the shape of the graph of the detection function multiple equilibria can arise where one equilibrium is characterized by high corruption and low competition and another is characterized by low corruption and high competition some suggestive empirical evidence is presented that supports the main hypothesis that competition and corruption are negatively related

efficiency productivity and environmental policy a case study of power generation in the eu this study uses the eu public power generating sector as a case study to investigate the environmental efficiency and productivity enhancing performance of the european union s co2 emissions trading scheme eu ets in its first phase using data envelopment analysis methods we measure the environmental efficiency and the productivity growth registered in public power generation across the eu over the 1996 2007 period in the second stage of our analysis we attempt to explain changes in productivity and efficiency over time using econometric techniques our analysis suggests two conclusions carbon pricing led to an increase in environmental efficiency and to a shift outwards of the technological frontier and the overly generous allocation of emission permits had a negative impact on both measures these results are shown to be robust to changes in controls and specifications

incentive efficient price systems in large insurance economies with adverse selection we decentralize incentive efficient allocations in large adverse selection economies by introducing a competitive market for mechanisms that is for menus of contracts facing a budget constraint informed individuals purchase lottery tickets to enter mechanisms whereas firms sell tickets and supply slots at mechanisms at given prices beyond optimization market clearing and rational expectations an equilibrium requires that firms cannot favorably change or cut prices an equilibrium exists and is incentive efficient an equilibrium can be computed as the solution to a programming problem that selects the incentive efficient outcome preferred by the highest type within an appropriately defined set for two types economies this is the only equilibrium outcome

uncertain lifetimes and the welfare enhancing properties of annuity markets and social security this paper explores the implications of social security programs and annuity markets through which agents who are characterized by different distributions of length of lifetime share deathrelated risks when annuity markets operate a non discriminatory social security program affects only the intragenerational allocation of resources in the absence of private information regarding individual survival probabilities such a program will lead to a non optimal intragenerational allocation of resources however the presence of adverse selection considerations gives rise to a pareto improving role for a mandatory non discriminatory social security program

insurance self control and contract flexibility we study a competitive insurance market in which some consumers have too optimistic expectations regarding their future use of preventive measures when contracts are long term and inflexible such naive consumers would increase the costs of insurance for low risk consumers the competitive insurance market therefore offers flexible contracts that allow for switching between different tariffs sophisticated consumers choose a partial insurance tariff and remain low risks naive consumers choose the same tariff but later switch to full insurance and become high risks if there are sufficiently many naive consumers they pay a transfer to sophisticated consumers so that high risks subsidize low risks in contrast there are no such transfers when contracts are short term the model generates novel implications for the time frame of insurance contracts and insurance requirements

pareto optima and competitive equilibria with adverse selection and moral hazard this paper explores the extent to which standard general equilibrium analysis of pareto optima and of competitive equilibria can be applied to environments with moral hazard and adverse selection problems allowing for lotteries contracts with random components we first establish that an adverse selection insurance economy a moral hazard insurance economy a signaling economy and a private information labor market economy are all special cases of a simple general structure we then show that techniques for characterizing pareto optimal contracts as solutions to concave programming problems are useful and nice and appear to be broadly applicable allowing for lotteries we show how to characterize the optimal allocations for the adverse selection insurance and labor market economies we then show that standard existence and optimality theorems for competitive equilibria apply in the linear space containing lotteries if agents with characteristics which are distinct and privately observed at the time of initial trading enter the economy wide resource constraints in a homogeneous way other kinds of diversity are not critical for economies with moral hazard which satisfy the homogeneity condition competitive contract markets single out a subset of the optima and thus can be consistent with apparent unemployment and with a random allocation of labor supplied though all households are averse to risk the adverse selection insurance and signaling economies however do not satisfy the homogeneity condition and are difficult to decentralize efficiently with a price system

signalling to experts we study competitive equilibria in a signalling economy with heterogeneously informed buyers in terms of the classic spence 1973 the quarterly journal of economics 87 355 374 model of job market signalling firms have access to direct but imperfect information about worker types in addition to observing their education firms can be ranked according to the quality of their information i e their expertise in equilibrium some high type workers forgo signalling and are hired by better informed firms which make positive profits workers education decisions and firms use of their expertise are strategic complements allowing for multiple equilibria that can be pareto ranked we characterize wage dispersion and the extent of signalling as a function of the distribution of expertise among firms our model can also be applied to a variety of other signalling problems including securitization corporate financial structure insurance markets or dividend policy

eu emission allowances and the stock market evidence from the electricity industry this paper constitutes to our best knowledge the first econometric analysis on stock market effects of the eu emission trading scheme eu ets our results suggest that eu emission allowance eua price developments matter to the stock performance of electricity firms eua price changes and stock returns of the most important european electricity corporations are shown to be positively related this effect does not work asymmetrically so that stock markets do not seem to react differently to eua appreciations in comparison to depreciations the carbon market effect is shown to be both time and country specific it is particularly strong for the period of eua market shock in early 2006 and differs with respect to the countries where the electricity corporations analysed are headquartered stock market reactions to eua volatility could not be shown

freedom and growth do constitutions matter this paper uses an augmented solow model with cross section data to measure the effect on per capita income of a the entrenchment of various rights in a country s constitution and b the level of economic freedom in a country broadly construed the results suggest that entrenchment per se of any single right seldom has a significant general economic effect while the effect of economic freedom is significant and substantial the paper then considers whether such evidence could support the proposition that constitutions do not matter while it concludes otherwise it does caution against incurring excessive negotiation costs to obtain entrenchment of a comprehensive wish list of rights

nash equilibrium in competitive insurance i formalize a rather stylized insurance market with adverse selection as a standard duopoly i formally specify demand functions and profits and prove that a nash equilibrium in pure strategies exists if and only if the well known rothschild stiglitz allocation is efficient

combining accounting data and a structural model for predicting credit ratings empirical evidence from european listed firms abstract ratings issued by credit rating agencies cras play an important role in the global financial environment among other issues past studies have explored the potential for predicting these ratings using a variety of explanatory factors and modeling approaches this paper describes a multi criteria classification approach that combines accounting data with a structural default prediction model in order to obtain improved predictions and test the incremental information that a structural model provides in this context empirical results are presented for a panel data set of european listed firms during the period 2002 2012 the analysis indicates that a distance to default measure obtained from a structural model adds significant information compared to popular financial ratios nevertheless its power is considerably weakened when market capitalization is also considered the robustness of the results is examined over time and under different rating category specifications

competitive and responsible the relationship between corporate social and financial performance in the energy sector abstract our key research objective in this study is to examine whether investments in corporate social responsibility csr have an effect on corporate financial performance cfp or vice versa the context is the energy industry in which sustainability issues are of vital importance our data set is compiled from the kld database and thomson one we use panel data on energy sector companies covering the years 1991 and 2009 in order to assess granger causality between csr strengths concerns and cfp we consider strengths and concerns separately and use both accounting and market based measures of cfp our findings indicate differing impacts on financial performance csr concerns granger cause both profitability and market value whereas csr strengths seem only to granger cause market value these effects appear after different delays furthermore as cfp does not seem to granger cause csp in most of the model specifications our results do not support bidirectional causality between csp and cfp

institutional framework and economic development international evidence this paper examines the effect of quality of the institutional framework on economic development our empirical results support the hypothesis that good institutions improve efficiency and accelerate growth the positive effect of institutional quality is more pronounced with mutually reinforcing support of economic freedom our results also indicate that good institutions help developing countries grow faster to achieve conditional convergence we infer from the results that economic development requires not only physical and human capital formation but also freedom to choose and institutional support

competitive pooling rothschild stiglitz reconsidered we build a model of competitive pooling which incorporates adverse selection and signaling into general equilibrium pools are characterized by their quantity limits on contributions households signal their reliability by choosing which pool to join in equilibrium pools with lower quantity limits sell for a higher price even though each household s deliveries are the same at all pools the rothschild stiglitz model of insurance is included as a special case we show that by recasting their hybrid oligopolistic competitive story in our perfectly competitive framework their separating equilibrium always exists even when they say it does not and is unique

exploring the determinants of best practice benchmarking in electricity network regulation abstract in this paper we use a best practice index constructed from the survey responses of regulators in 40 countries to explore the determinants of the methods used in electricity network regulation drawing from the incentive regulation and institutional economics literature we construct an empirical model to investigate the impact of industry size political and economic institutions on the degree of best practice regulation our results suggest that the existence and experience of an independent regulator is the most important institutional determinant of best practice regulation in addition small numbers of network companies act as a constraint on the use of advanced benchmarking methods finally regional effects are also important these findings lead us to question whether one best practice model is in fact applicable to countries with very different political and economic contexts

competitive insurance markets under adverse selection and capacity constraints abstract ever since the seminal work by rothschild and stiglitz q j econom 90 1976 629 on competitive insurance markets under adverse selection the problem of non existence of equilibrium in pure strategies has received much attention in the literature we extend the original analysis by considering firms which face capacity constraints which might be due to limited capital we show that under mild assumptions an equilibrium exists where every consumer obtains his appropriate rothschild stiglitz contract

constrained efficient equilibria in selection markets with continuous types abstract we prove the existence of the constrained efficient miyazaki 1977 wilson 1977 spence 1978 equilibrium in competitive markets with adverse selection when the distribution of unobservable types is continuous our existence proof applies under extremely general assumptions about individual preferences when we restrict preferences to have the widely used in the selection markets literature quasilinear form we characterize the properties of this equilibrium by developing a simple and computationally efficient numerical method for constructing it applying this method we show in a natural setting how one would compute the equilibrium allocation potentially facilitating empirical work using the mws equilibrium we illustrate this empirical application in the context of policy interventions and show that the welfare implications of a coverage mandate critically hinge on whether the market implements a constrained efficient allocation like the mws equilibrium or a constrained inefficient allocation like in azevedo and gottlieb 2017

non discriminating renegotiation in a competitive insurance market abstract a variant of the rothschild stiglitz model of a competitive insurance market is considered where each uninformed firm is allowed to renegotiate the contracts that its customers initially sign subject to the restriction that renegotiated contracts be offered to all the firm s customers such non discriminating renegotiation is shown to weaken the profitability of cream skimming to the extent that there exists a unique equilibrium outcome this outcome is that of miyazaki and spence i e the incentive compatible pair of zero profit contracts if efficient and the incentive compatible zero profit pair of contracts maximizing low risk utility otherwise

competitive markets without commitment in the presence of a time inconsistency problem with agency contracts we show that competitive markets can implement allocations that pareto dominate those achieved by a benevolent government and they induce more effort we analyze a model with moral hazard and a two sided lack of commitment after agents have chosen their work firms can modify contracts and agents can switch firms if the ex post market outcome satisfies a weak notion of competitiveness and sufficiently separates individuals it is pareto superior to a government s allocation with a complete breakdown of incentives moreover competitive markets without commitment implement more effort in equilibrium under general conditions

distributive politics and economic growth a crude distinction between economics and politics would be that economics is concerned with expanding the pie while politics is about distributing it in this paper we analyze the relationship between the two we focus on how an economy s initial configuration of resources shapes the political struggle for income and wealth distribution and how that in turn affects long run growth our main conclusion is that inequality is conducive to the adoption of growth retarding policies we derive this result from a simple political economy model of growth and present cross country evidence consistent with it the key feature of our model is that individuals differ in their relative factor endowments we distinguish between two types of factors an accumulated factor called capital and a nonaccumulated factor called labor growth is driven by the expansion of the capital stock which is in turn determined by individual saving decisions long run growth is endogenous as the aggregate production function is taken to be linearly homogeneous in capital and productive government services taken together the provision of government services is financed by a tax on capital because government services are productive a small tax on

recovery rates default probabilities and the credit cycle in recessions the number of defaulting firms rises on top of this the average amount recovered on the bonds of defaulting firms tends to decrease this paper proposes an econometric model in which this joint time variation in default rates and recovery rate distributions is driven by an unobserved markov chain which we interpret as the credit cycle this model is shown to fit better than models in which this joint time variation is driven by observed macroeconomic variables we use the model to quantitatively assess the importance of allowing for systematic time variation in recovery rates which is often ignored in risk management and pricing models

a walrasian theory of markets with adverse selection the paper describes a walrasian theory of markets with adverse selection and shows how refinements of equilibrium can be used to characterize uniquely the equilibrium outcome equilibrium exists under standard conditions it is shown that under certain conditions a stable set exists and is contained in a connected set of equilibria for generic models there exists a stable outcome that is all the equilibria in the stable set have the same outcome these ideas are applied to markets with one sided and two sided uncertainty under standard monotonicity conditions it is shown that the stable outcome is separating and implies a particular pattern of matches of buyers and sellers

tri criterion inverse portfolio optimization with application to socially responsible mutual funds we present a framework for inverse optimization in a markowitz portfolio model that is extended to include a third criterion the third criterion causes the traditional nondominated frontier to become a surface until recently it had not been possible to compute such a surface but by using a new method that is able to generate the nondominated surfaces of tri criterion portfolio selection problems we are able to compute via inverse optimization the implied risk tolerances of given funds that pursue an additional objective beyond risk and return in applying this capability to a broad sample of conventional and socially responsible sr mutual funds we find that after the screening process there appears to be no significant di erence between how assets are allocated in socially responsible and conventional mutual funds which is likely to be di erent from what most sr investors would expect

does energy efficiency improve technological change and economic growth in developing countries abstract does a trade off exist between energy efficiency and economic growth this question underlies some of the tensions between economic and environmental policies especially in developing countries that often need to expand their industrial base to grow this paper contributes to the debate by analyzing the relationship between energy efficiency and economic performance at the micro total factor productivity and macro level countries economic growth it uses data on a large sample of manufacturing firms across 29 developing countries to find that lower levels of energy intensity are associated with higher total factor productivity for the majority of these countries the results are robust to a variety of checks suggestive cross country evidence points towards the same relation measured at the macro level as well

cleaner technology diffusion case studies modeling and policy abstract the development and application of cleaner technologies environmental technologies offer multiple benefits for the adopter reduced emissions less waste and cost savings from reduced resource use and savings on waste costs the question here is if cleaner technologies offer such great benefits why they are diffusing so slowly across the economy this special issue is about answering this question by presenting a collection of contributions that lay down a good foundation for students scholars practitioners and policy makers interested in making sustainable development more than a metaphor the contributions range from surveys of literature identifying gaps and directions in the field cleaner technology diffusion case studies advances in diffusion modeling and diffusion policy issues and recommendations in general the set of papers present an overview of the advances in the field of cleaner technologies diffusion research

constrained efficiency with adverse selection and directed search abstract this paper studies constrained efficiency in guerrieri et al s 2010 model of adverse selection and directed search buyers post contracts and sellers with private information about their type direct their search toward their preferred contract buyers and sellers then match bilaterally and trade if the guerrieri shimer wright equilibrium fails to achieve the first best then the planner subject to the frictions of the environment achieves strictly higher welfare than the equilibrium i e the equilibrium is not ex ante constrained efficient under certain conditions the planner achieves an allocation that even pareto dominates the equilibrium i e the equilibrium is not interim constrained efficient under other conditions the planner can completely undo the effects of adverse selection and achieves the first best cross subsidization is the key to these results

a literature survey on energy growth nexus abstract this paper provides a survey of the recent progress in the literature of energy consumption economic growth and electricity consumption economic growth causality nexus the survey highlights that most empirical studies focus on either testing the role of energy electricity in stimulating economic growth or examining the direction of causality between these two variables although the positive role of energy on growth has become a stylized fact there are some methodological reservations about the results from these empirical studies a general observation from these studies is that the literature produced conflicting results and there is no consensus neither on the existence nor on the direction of causality between energy consumption electricity consumption and economic growth as a policy implication to avoid from conflicting and unreliable results the authors may use the autoregressive distributed lags bounds test two regime threshold co integration models panel data approach and multivariate models including new variables such as real gross fixed capital formation labor force carbon dioxide emissions population exchange rates interest rates etc thus the authors should focus more on the new approaches and perspectives rather than by employing usual methods based on a set of common variables for different countries and different intervals of time

liberty and development a further empirical perspective this paper uses the wright ratings of economic freedom to investigate the relationship between economic freedom and economic development for most countries in the world this rela tionship is apparently strong and direct for such economic freedoms as freedom of property and freedom of movement but inverse for freedom of association these findings appear to be indepen dent of the type of economic system or civil liberties as measured by the gastil ratings which have their own important effects on economic development

team production in competitive labor markets with adverse selection abstract team production is a frequent feature of modern organizations combined with team incentives team production can create externalities among workers since their utility upon accepting a contract depends on their team s performance and therefore on their colleagues productivity we study the effects of such externalities in a competitive labor market if workers have private information on their productivity we find that in any competitive equilibrium there must be pareto efficient separation of workers according to their productivity we further find that externalities facilitate equilibrium existence where under a particular condition on workers indifference curves even arbitrarily small externalities guarantee equilibrium existence