A Review of the Monitoring of Market Power The Possible Roles of TSOs in Monitoring for Market Power Issues in Congested Transmission Systems

The paper surveys the literature and publicly available information on market power monitoring in electricity wholesale markets. After briefly reviewing definitions, strategies and methods of mitigating market power we examine the various methods of detecting market power that have been employed by academics and market monitors/regulators. These techniques include structural and behavioural indices and analysis as well as various simulation approaches. The applications of these tools range from spot market mitigation and congestion management through to long-term market design assessment and merger decisions. Various market-power monitoring units already track market behaviour and produce indices. Our survey shows that these units collect a large amount of data from various market participants and we identify the crucial role of the transmission system operators with their access to dispatch and system information. Easily accessible and comprehensive data supports effective market power monitoring and facilitates market design evaluation. The discretion required for effective market monitoring is facilitated by institutional independence.Electricity, liberalisation, market power, regulation

Game theoretic pricing models in hotel revenue management: an equilibrium choice-based conjoint analysis approach

This paper explores a game-theoretically founded approach to conjoint analysis that determines equilibrium room rates under differentiated price competition in an oligopolistic hotel market. Competition between hotels is specified in terms of market share functions that can be estimated using multinomial logit models of consumer choice. The approach is based on choice-based conjoint analysis that permits the estimation of attributes weights (“part-worths”) for an additive utility formulation of the utility function. From this, room rates that equilibrate the market, conditioned on the differences in services and facilities offered by competing hotels, can be determined. The approach is illustrated by an example

Three essays on the economics of air transportation

Cette thèse est constituée de trois essais en économie du transport aérien. Le premier essai, intitulé "Effects of Corruption on Efficiency of the European Airports", établit un lien entre la corruption et l’efficacité opérationnelle des aéroports européens. Plusieurs États ont privatisé et commercialisé leurs aéroports publics dans le but d’améliorer l’efficacité de leurs opérations. Cependant, un niveau élevé de corruption dans le pays pourrait compromettre la réalisation de cet objectif. La littérature économique suggère que l’exposition à la corruption peut interférer dans l’allocation des ressources, surtout lorsqu’il s’agit de grandes infrastructures. En utilisant des données sur 47 aéroports européens observés au cours de la période de 2003 à 2009 et un indicateur de corruption provenant de "International Country Risk Guide", nous montrons que la corruption a des effets négatifs sur l’efficacité des aéroports et l’ampleur des impacts dépend des structures de propriété et de gestion des aéroports (public, privé et mixte). En particulier, la corruption réduit l’efficacité des aéroports privés. Ces derniers deviennent même moins efficaces que les aéroports publics lorsque l’environnement est fortement corrompu. Nous concluons que la privatisation n’améliore pas nécessairement la performance des aéroports lorsque la corruption est élevée. Le deuxième essai, intitulé "Flexible Estimation of an Airport Choice Model : The Case of Quebec Airports", analyse les déterminants de choix des voyageurs entre un aéroport régional et une plate-forme de correspondance aéroportuaire au Québec. Parmi les modèles les plus populaires, nous explorons le logit à coefficients fixes et variables, le logit additif généralisé et les estimateurs de probabilités conditionnelles de noyaux pour variables continues et discrètes. Les modèles empiriques utilisent les résultats d’une enquête sur la qualité des services aux aéroports réalisée auprès des passagers embarquant à l’un des deux aéroports principaux de Québec en 2010. Les résultats économétriques soulignent l’importance de la fréquence de vol et de l’accessibilité à l’aéroport dans le choix des voyageurs. Le prix du service, la raison du déplacement ainsi que la destination et l’horaire du vol paraissent aussi pertinents. Bien que les modèles logistiques testés ont des fondements théoriques basés sur les modèles d’utilité aléatoire, les tests économétriques d’adéquation de la forme fonctionnelle rejettent ces modèles. Les estimateurs de noyaux offrent une alternative flexible pour capturer des non-linéarités et des effets d’interaction entre les variables explicatives qui échappent aux modèles logistiques. Le troisième essai, intitulé "When Hotelling Meets Vickrey - Spatial Differentiation and Service Timing in the Airline Industry", développe un modèle de concurrence duopolistique entre deux aéroports desservis chacun par un transporteur. Les transporteurs offrent un seul vol vers une même destination. L’interaction entre les aéroports et les transporteurs est modélisée à l’aide d’un jeu séquentiel à trois étapes. Dans un premier temps, les aéroports fixent (simultanément) la taxe aéroportuaire chargée aux transporteurs et annoncent la plage horaire disponible pour le vol. Ensuite, les transporteurs fixent chacun l’heure de leur vol. À la dernière étape, les transporteurs décident du prix du voyage. Les voyageurs, répartis sur un espace géographique linéaire de taille fixe et dotés de préférences hétérogènes pour les heures de départ, choisissent le couple aéroport-transporteur en fonction du prix du billet d’avion, du coût de déplacement vers les infrastructures et du coût de déshorage (coût monétaire de partir avant ou après l’heure préférée). Ce cadre d’analyse est utilisé pour explorer l’impact de l’emplacement géographique des aéroports et de l’horaire du vol sur les taxes aéroportuaires, les prix du billet d’avion, la demande des voyageurs et les profits. Les résultats montrent qu’un aéroport qui bénéficie d’une meilleure localisation géographique charge une taxe aéroportuaire plus élevée que son concurrent et que son transporteur profite également de cet avantage en localisation pour accroître ses prix vis-à-vis du transporteur concurrent. Lorsque les coûts opérationnels des transporteurs ne dépendent pas de l’heure de départ, ils fixent un horaire identique et la concurrence pour attirer les voyageurs se fait exclusivement par les prix des billets. Si leurs coûts varient selon l’heure de départ, les transporteurs différencient en général leur horaire, et cela même lorsque ces coûts horaires sont identiques entre transporteurs. La différenciation des temps de départ permet aux aéroports et aux transporteurs de se concurrencer en horaire, ce qui peut réduire ou renforcer l’avantage géographique.My thesis is composed of three essays on the economics of air transportation. My first essay, entitled "Effects of Corruption on Efficiency of the European Airports", analyzes the effect of corruption on airport productive efficiency in Europe. Many governments have privatized and commercialized their airports in order to improve efficiency of their operations. However, this objective may not be achieved if the business-operating environment is very corrupt. According to the economics literature, corruption may be a hindrance to efficiency, especially when it comes to large infrastructures. Using an unbalanced panel data of 47 major European airports from 2003 to 2009 and the corruption measure provided by International Country Risk Guide (ICRG), we show that corruption has a negative impact on airport operating efficiency and the effect depends on the ownership form (private, public and mixed). Airports under mixed public-private ownership with private majority achieve lower levels of efficiency when located in more corrupt countries. They even operate less efficiently than fully and/or majority government owned airports in highly corruption environment. We conclude that privatization may not lead to efficiency gains in countries that suffer from higher levels of corruption. My second essay, entitled "Flexible Estimation of an Airport Choice Model: The Case of Quebec airports", explores the determinants of passengers’ choice between a primary hub and a secondary airport in Quebec. Among the most popular models, we explore fixed- and randomcoefficients logistic models along with two flexible alternatives including an additive logistic model and a kernel-based conditional density with continuous and discrete variables. Using an original dataset from the 2010 Airport Service Quality survey conducted in Quebec airports, we show that flight frequency, access time and access mode to airports, among others, are the main factors of airports’ choice across all specifications. Airfare, the reason for travel, flight destination and departure times also appear to have significant impacts. While the logistic models have strong theoretical foundations based on the random utility models, the recent kernel-based tests reject these specifications. The nonparametric kernel estimators provide flexible tools to capture non linearities and interactions effects between selected explanatory variables without imposing shape constraints on the conditional probability. My third essay, entitled "When Hotelling Meets Vickrey - Spatial Differentiation and Service Timing in the Airline Industry", investigates rivalry between transport facilities in a model that includes two sources of horizontal differentiation: geographical location and departure time. We explore how both sources influence facility fees and the price of the service offered by downstream carriers. The interactions between the facilities and their carriers are represented as a sequential three-stage game in fees, departure times and fares with simultaneous choices at each stage. Travellers’ cost includes a fare, a transportation cost to the facility and a schedule delay cost, which captures the monetary cost of departing earlier or later than desired. One carrier operates at each facility and schedules a single departure time. We show that duopolistic competition drives to an identical departure time across carriers when their operational cost does not vary with the time of day, but generally leads to distinct service times when this cost depends on the time of the day. When a facility possesses a location advantage, it can set a higher fee and its downstream carrier can charge a higher fare. Departure time differentiation allows the facilities and their carrier to compete along an additional differentiation dimension that can reduce or strengthen the advantage in location

A Review of the Monitoring of Market Power The Possible Roles of TSOs in Monitoring for Market Power Issues in Congested Transmission Systems

The paper surveys the literature and publicly available information on market power monitoring in electricity wholesale markets. After briefly reviewing definitions, strategies and methods of mitigating market power we examine the various methods of detecting market power that have been employed by academics and market monitors/regulators. These techniques include structural and behavioural indices and analysis as well as various simulation approaches. The applications of these tools range from spot market mitigation and congestion management through to long-term market design assessment and merger decisions. Various market-power monitoring units already track market behaviour and produce indices. Our survey shows that these units collect a large amount of data from various market participants and we identify the crucial role of the transmission system operators with their access to dispatch and system information. Easily accessible and comprehensive data supports effective market power monitoring and facilitates market design evaluation. The discretion required for effective market monitoring is facilitated by institutional independence

Spatial competition in networks under delivered pricing *

Abstract. We consider a two-stage non-cooperative Bertrand game with location choice involving r firms. There are n spatially separated markets located at the vertices of a network. Each firm first selects the location of a facility and then selects the delivered price in the markets in order to maximise its profit. The article extends the duopolistic model with completely inelastic demand (Lederer and Thisse 1990) to the oligopolistic scenario. Under moderate assumptions, a pure strategy equilibrium, which minimises social costs, exists. Furthermore, an equilibrium location can be obtained by finite steps and consists of vertices only. JEL classification: L13, R32, D4

Mathematics in the Supply Chain

[no abstract available

New MAXCAP Related Problems: Formulation and Model Solutions: A class of competitive location problems

In this paper three related problems of the maximum capture (MAXCAP) model are proposed. These include the case where facilities provide a certain amount of service level for the customers, the possibility where customers do not allocate their demand completely to one facility but prorate their demand based on the service level, and finally we explore the situation where customers will not opt for sharing their demand irrespective of the service level if the next attractive facility is too far way which we express by a distance threshold. These models are put forward to mimic realistic situations related to customer behaviour when it comes to selecting a facility. Their respective mathematical formulations are put forward and tested on a case study and also over a range of larger data sets

A comparative performance analysis of intelligence-based algorithms for optimizing competitive facility location problems

Most companies operate to maximize profits and increase their market shares in competitive environments. Since the proper location of the facilities conditions their market shares and profits, the competitive facility location problem (CFLP) has been extensively applied in the literature. This problem generally falls within the class of NP-hard problems, which are difficult to solve. Therefore, choosing a proper solution method to optimize the problem is a key factor. Even though CFLPs have been consistently solved and investigated, an important question that keeps being neglected is how to choose an appropriate solution technique. Since there are no specific criteria for choosing a solution method, the reasons behind the selection approach are mostly unclear. These models are generally solved using several optimization techniques. As harder-to-solve problems are usually solved using meta-heuristics, we apply different meta-heuristic techniques to optimize a new version of the CFLP that incorporates reliability and congestion. We divide the algorithms into four categories based on the nature of the meta-heuristics: evolution-based, swarm intelligence-based, physics-based, and human-based. GAMS software is also applied to solve smaller-size CFLPs. The genetic algorithm and differential evolution of the first category, particle swarm optimization and artificial bee colony optimization of the second, Tabu search and harmony search of the third, and simulated annealing and vibration damping optimization of the fourth are applied to solve our CFLP model. Statistical analyses are implemented to evaluate and compare their relative performances. The results show the algorithms of the first and third categories perform better than the others