38,830 research outputs found
Optimal Mechanism Design with Flexible Consumers and Costly Supply
The problem of designing a profit-maximizing, Bayesian incentive compatible
and individually rational mechanism with flexible consumers and costly
heterogeneous supply is considered. In our setup, each consumer is associated
with a flexibility set that describes the subset of goods the consumer is
equally interested in. Each consumer wants to consume one good from its
flexibility set. The flexibility set of a consumer and the utility it gets from
consuming a good from its flexibility set are its private information. We adopt
the flexibility model of [1] and focus on the case of nested flexibility sets
-- each consumer's flexibility set can be one of k nested sets. Examples of
settings with this inherent nested structure are provided. On the supply side,
we assume that the seller has an initial stock of free supply but it can
purchase more goods for each of the nested sets at fixed exogenous prices. We
characterize the allocation and purchase rules for a profit-maximizing,
Bayesian incentive compatible and individually rational mechanism as the
solution to an integer program. The optimal payment function is pinned down by
the optimal allocation rule in the form of an integral equation. We show that
the nestedness of flexibility sets can be exploited to obtain a simple
description of the optimal allocations, purchases and payments in terms of
thresholds that can be computed through a straightforward iterative procedure.Comment: 8 pages. arXiv admin note: text overlap with arXiv:1607.0252
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Insufficient Incentives for Investment in Electricity Generation
In theory, competitive electricity markets can provide incentives for efficient investment in generating capacity. We show that if consumers and investors are risk averse, investment is efficient only if investors in generating capacity can sign long-term contracts with consumers. Otherwise the uncovered price risk increases financing costs, reduces equilibrium investment levels, distorts technology choice towards less capital-intensive generation and reduces consumer utility. We observe insufficient levels of long-term contracts in existing markets, possibly because retail companies are not credible counter-parties if their final customer can switch easily. With consumer franchise, retailers can sign long-term contracts, but this solution comes at the expense of the idea of retail competition. Alternative capacity mechanisms to stimulate investment are discussed
Contract Design for Energy Demand Response
Power companies such as Southern California Edison (SCE) uses Demand Response
(DR) contracts to incentivize consumers to reduce their power consumption
during periods when demand forecast exceeds supply. Current mechanisms in use
offer contracts to consumers independent of one another, do not take into
consideration consumers' heterogeneity in consumption profile or reliability,
and fail to achieve high participation.
We introduce DR-VCG, a new DR mechanism that offers a flexible set of
contracts (which may include the standard SCE contracts) and uses VCG pricing.
We prove that DR-VCG elicits truthful bids, incentivizes honest preparation
efforts, enables efficient computation of allocation and prices. With simple
fixed-penalty contracts, the optimization goal of the mechanism is an upper
bound on probability that the reduction target is missed. Extensive simulations
show that compared to the current mechanism deployed in by SCE, the DR-VCG
mechanism achieves higher participation, increased reliability, and
significantly reduced total expenses.Comment: full version of paper accepted to IJCAI'1
Liberalisation of European energy markets: challenges and policy options
The European electricity and gas markets have been going through a process of liberalisation since the early 1990s. This process has changed the sector from a regulated structure of, predominantly, publicly owned monopolists controlling the entire supply chain, into a market where private and public generators and retailers compete on a regulated and unbundled system of transport infrastructure. This report assesses the evidence of the effects of liberalisation on efficiency, security of energy supply and environmental sustainability.
Are We Taxing Ourselves? How Deliberation and Experience Shape Voting on Taxes
We let consumers vote on tax regimes in experimental markets. We test if taxes on sellers are more popular than taxes on consumers, i.e. on voters themselves, even if taxes on sellers are inefficiently high. Taxes on sellers are more popular if voters underestimate the extent of tax shifting in the market. We show that inexperienced voters are prone to such a tax-shifting bias, that experience is an effective de-biasing mechanism, but that pre-vote deliberation about tax regimes makes initially held opinions more extreme rather than correct. Our results suggest that voting on taxes is prone to bias and that easy-to-interpret facts are needed to de-bias voters.
Tax Salience, Voting, and Deliberation
Tax incentives can be more or less salient, i.e. noticeable or cognitively easy to process. Our hypothesis is that taxes on consumers are more salient to consumers than equivalent taxes on sellers because consumers underestimate the extent of tax shifting in the market. We show that tax salience biases consumers’ voting on tax regimes, and that experience is an effective de-biasing mechanism in the experimental laboratory. Pre-vote deliberation makes initially held opinions more extreme rather than correct and does not eliminate the bias in the typical committee. Yet, if voters can discuss their experience with the tax regimes they are less likely to be biased.Tax salience, learning, deliberation, voting
Tax Salience, Voting, and Deliberation
Tax incentives can be more or less salient, i.e. noticeable or cognitively easy to process. Our hypothesis is that taxes on consumers are more salient to consumers than equivalent taxes on sellers because consumers underestimate the extent of tax shifting in the market. We show that tax salience biases consumers’ voting on tax regimes, and that experience is an effective de-biasing mechanism in the experimental laboratory. Pre-vote deliberation makes initially held opinions more extreme rather than correct and does not eliminate the bias in the typical committee. Yet, if voters can discuss their experience with the tax regimes they are less likely to be biased.tax salience; learning; deliberation; voting
Different Approaches to Supply Adequacy in Electricity Markets
This paper studies the electricity market design long run problem of ensuring enough generation capacity to meet future demand (resource adequacy). Reform processes worldwide have shown that it is difficult for the market alone to provide incentives to attract enough investment in capacity reserves due to technical and institutional features. We study several measures that have been proposed internationally to cope with this problem including strategic reserves, capacity payments, capacity requirements, and call options. The analytical and practical strengths and weaknesses of each approach are discussed .Supply adequacy, electricity markets
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