Investment Incentives and Market Power: An Experimental Analysis

We examine investment incentives and market power in an experimental market. We characterize market power as the strategic interdependence of subjects' investment decisions and output decisions. The market is designed so that investment and output decisions can be jointly characterized as strategies within a game. A Nash-Cournot equilibrium of the game provides a way of characterizing how investment incentives and market power interact. Subjects could invest in two different production technologies and could produce output to serve as many as two different demand conditions. The technologies were analogous to "baseload" capacity and "peaking" capacity in wholesale electricity markets. The Nash-Cournot benchmark constituted a good indicator of subjects' output decisions in that output cycled around the Cournot benchmark. Thus, on average, consumers extracted the surplus available to them in the equilibrium. While we do not observe Edgeworth Cycles in prices or outputs, we do see them in the producer surplus series. Producers dissipated some of the surplus they could have extracted in the equilibrium by overinvesting in peaking capacity and underinvesting in baseload capacity. Inefficient investment diminished total system efficiency, but producers' investments in total production capacity tracked the Nash-Cournot benchmark. In contrast, monopoly explanations such as collusion do not characterize the data.capacity investment, Cournot, supply function equilibrium, Edgeworth Cycles, market power, electricity markets, investment incentives

KSC Vertical Launch Site Evaluation

RS&H was tasked to evaluate the potential available launch sites for a combined two user launch pad. The Launch sites were to be contained entirely within current Kennedy Space Center property lines. The user launch vehicles to be used for evaluation are in the one million pounds of first stage thrust range. Additionally a second evaluation criterion was added early on in the study. A single user launch site was to be evaluated for a two million pound first stage thrust vehicle. Both scenarios were to be included in the report. To provide fidelity to the study criteria, a specific launch vehicle in the one million pound thrust range was chosen as a guide post or straw-man launch vehicle. The RpK K-1 vehicle is a current Commercial Orbital Transportation System (COTS), contract awardee along with the SpaceX Falcon 9 vehicle. SpaceX, at the time of writing, is planning to launch COTS and possibly other payloads from Cx-40 on Cape Canaveral Air Force Station property. RpK has yet to declare a specific launch site as their east coast US launch location. As such it was deemed appropriate that RpK's vehicle requirements be used as conceptual criteria. For the purposes of this study those criteria were marginally generalized to make them less specifiC