Demand Reduction and Inefficiency in Multi-Unit Auctions

Auctions typically involve the sale of many related goods. The FCC spectrum auctions and the Treasury debt auctions are examples. With conventional auction designs, large bidders have an incentive to reduce demand in order to pay less for their winnings. This incentive creates an inefficiency in multi-unit auctions. Large bidders reduce demand for additional units and so sometimes lose to smaller bidders with lower values. We demonstrate this inefficiency in several auction settings: flat demand and downward-sloping demand, independent private values and correlated values, and uniform pricing and pay-your-bid pricing. We also establish that the ranking of the uniform-price and pay-your-bid auctions is ambiguous. We show how a Vickrey auction avoids this inefficiency and how the Vickrey auction can be implemented with a simultaneous, ascending-bid design (Ausubel 1997). Bidding behavior in the FCC spectrum auctions illustrates the incentives for demand reduction and the associated inefficiency.Auctions; Multi-Unit Auctions; Spectrum Auctions; Treasury Auctions

Hazard Perception and Demand for Insurance Among Selected Motorcyclists in Lagos, Nigeria

This study examines hazard perception effects on the demand for insurance withspecial focus on motorcycle riders in Lagos state. For this purpose, the researchershave been able to examine selected hazard perception determinants and theireffects on the insuring attitude and desire of motorcycle riders. An explanatoryresearch design was employed and a convenience sampling type of the nonprobabilitysampling technique was adopted.  Data was gathered by interviewsconducted at motorcycle parks along the Lagos-Badagry expressway.  The sampleconsisted of 126 respondents made up of commercial motorcycle riders within thesample areas. Data collected was analysed using multiple regression technique.The study was able to establish some level of contributory linkage between hazardperception and demand for motorcycle insurance. The findings show that whiledread and trust both appeared to have significant effect, publicity and controllabilityboth have positive contributory effect; furthermore, choice expressed an inverserelationship with demand for insurance among the motorcycle riders. The studytherefore recommends pre-loss and post-loss measures among the motorcycleriders so that unforeseen motorcycle risks can be managed. Also, insurancecompanies should endeavour to invest more on enlightening the motorcycle riders in order to lessen their dread of loss outcome, and thus, design policy that can instil trust in motorcycle riders in insurance as a loss control measure

Demand characteristics confound the rubber hand illusion

Reports of experiences of ownership over a fake hand following simple multisensory stimulation (the ‘rubber hand illusion’) have generated an expansive literature. Because such reports might reflect suggestion effects, demand characteristics are routinely controlled for by contrasting agreement ratings for ‘illusion’ and ‘control’ conditions. However, these methods have never been validated, and recent evidence that response to imaginative suggestion (‘phenomenological control’) predicts illusion report prompts reconsideration of their efficacy. A crucial assumption of the standard approach is that demand characteristics are matched across conditions. Here, a quasi-experiment design was employed to test demand characteristics in rubber hand illusion reports. Participants were provided with information about the rubber hand illusion procedure (text description and video demonstration) and recorded expectancies for standard ‘illusion’ and ‘control’ statements. Expectancies for control and illusion statements in synchronous and asynchronous conditions were found to differ similarly to published illusion reports. Therefore, rubber hand illusion control methods which have been in use for 22 years are not fit for purpose. Because demand characteristics have not been controlled in illusion report in existing studies, the illusion may be, partially or entirely, a suggestion effect. Methods to develop robust controls are proposed. That confounding demand characteristics have been overlooked for decades may be attributable to a lack of awareness that demand characteristics can drive experience in psychological science

Identification of Demand through Statistical Distribution Modeling for Improved Demand Forecasting

Demand functions for goods are generally cyclical in nature with characteristics such as trend or stochasticity. Most existing demand forecasting techniques in literature are designed to manage and forecast this type of demand functions. However, if the demand function is lumpy in nature, then the general demand forecasting techniques may fail given the unusual characteristics of the function. Proper identification of the underlying demand function and using the most appropriate forecasting technique becomes critical. In this paper, we will attempt to explore the key characteristics of the different types of demand function and relate them to known statistical distributions. By fitting statistical distributions to actual past demand data, we are then able to identify the correct demand functions, so that the the most appropriate forecasting technique can be applied to obtain improved forecasting results. We applied the methodology to a real case study to show the reduction in forecasting errors obtained

Residential demand management using individualised demand aware price policies

This paper presents a novel approach to Demand Side Management (DSM), using an “individualised” price policy, where each end user receives a separate electricity pricing scheme designed to incentivise demand management in order to optimally manage flexible demands. These pricing schemes have the objective of reducing the peaks in overall system demand in such a way that the average electricity price each individual user receives is non-discriminatory. It is shown in the paper that this approach has a number of advantages and benefits compared to traditional DSM approaches. The “demand aware price policy” approach outlined in this paper exploits the knowledge, or demand-awareness, obtained from advanced metering infrastructure. The presented analysis includes a detailed case study of an existing European distribution network where DSM trial data was available from the residential end-users

Foresighted Demand Side Management

We consider a smart grid with an independent system operator (ISO), and distributed aggregators who have energy storage and purchase energy from the ISO to serve its customers. All the entities in the system are foresighted: each aggregator seeks to minimize its own long-term payments for energy purchase and operational costs of energy storage by deciding how much energy to buy from the ISO, and the ISO seeks to minimize the long-term total cost of the system (e.g. energy generation costs and the aggregators' costs) by dispatching the energy production among the generators. The decision making of the entities is complicated for two reasons. First, the information is decentralized: the ISO does not know the aggregators' states (i.e. their energy consumption requests from customers and the amount of energy in their storage), and each aggregator does not know the other aggregators' states or the ISO's state (i.e. the energy generation costs and the status of the transmission lines). Second, the coupling among the aggregators is unknown to them. Specifically, each aggregator's energy purchase affects the price, and hence the payments of the other aggregators. However, none of them knows how its decision influences the price because the price is determined by the ISO based on its state. We propose a design framework in which the ISO provides each aggregator with a conjectured future price, and each aggregator distributively minimizes its own long-term cost based on its conjectured price as well as its local information. The proposed framework can achieve the social optimum despite being decentralized and involving complex coupling among the various entities