Price Regulation and the Cost of Capital

This paper investigates how price regulation under moral hazard can affect a regulated firm’s cost of capital. We consider stylised versions of the two most typical regulatory frameworks that have been applied over the last decades by regulators: Price Cap and Cost of Service. We show that there is a trade-off between lower operational costs and a higher cost of capital under Price Cap regulation and higher operational costs and lower cost of capital under Cost of Service regulation. As a result, when the extent of moral hazard is not significant, Price Cap regulation generates lower welfare than the Cost of Service regulation.

The Contamination Problem in Utility Regulation

This paper formally examines the implications of a utility’s diversification into an unregulated industry. In our framework, the utility is the most efficient provider in the unregulated industry (up to a particular capacity) and, as such, there is no question about the desirability of allowing it to operate in that market. Nevertheless, the risk faced by a diversified utility is greater than the risk faced by a utility that operates only in a regulated market. This additional risk can potentially affect the diversified utility’s credit rating and, therefore, increase the cost of capital for the regulated business that will be recovered from ratepayers. We show that by allowing a regulated firm to diversify into an unregulated market, the regulator faces a trade-off: a lower cost in the unregulated market versus a higher cost in the regulated market. If the regulator only cares about welfare in the regulated market, then a ringfencing requirement is optimal subject to implementation costs not being substantial. Of course, the ring-fencing requirement effectively prevents the firm from achieving a lower cost in the unregulated market. Therefore, if the regulator cares about welfare in both regulated and unregulated markets, ring-fencing may no longer be optimal.

Price Regulation and Investment: A Real Options Approach

This paper examines a three-period model of an investment decision in a network industry characterized by demand uncertainty, economies of scale and sunk costs. In the absence of regulation we identify the market conditions under which a monopolist decides to invest early as well as the underlying overall welfare output. In a regulated environment, we first consider a monopolist facing no downstream competition but subject to a price cap on the downstream retail (final good) market. We identify the welfare-maximising regulated prices using the unregulated market output as a benchmark. In particular, we show that the optimal regulation depends on market conditions (that is, the nature of demand) and there are three possible outcomes: (i) price regulation does not improve welfare; (ii) regulated prices include an option to delay value and provide a positive payoff to the firm; and (iii) regulated prices yield a zero payoff to the firm. Second, we consider a vertically integrated network provider that is required to provide access to downstream competitors. We show that when the regulator has only one instrument, namely the access price, an option-to-delay pricing rule generates (weakly) higher welfare than the Efficient Component Pricing Rule (ECPR), except under very specific conditions.

Realization of an all-optical zero to π cross-phase modulation jump

We report on the experimental demonstration of an all-optical π cross-phase modulation jump. By performing a preselection, an optically induced unitary transformation, and then a postselection on the polarization degree of freedom, the phase of the output beam acquires either a zero or π phase shift (with no other possible values). The postselection results in optical loss in the output beam. An input state may be chosen near the resulting phase singularity, yielding a pi phase shift even for weak interaction strengths. The scheme is experimentally demonstrated using a coherently prepared dark state in a warm atomic cesium vapor

Monte Carlo simulations of post-common-envelope white dwarf + main sequence binaries: The effects of including recombination energy

Detached WD+MS PCEBs are perhaps the most suitable objects for testing predictions of close-compact binary-star evolution theories, in particular, CE evolution. The population of WD+MS PCEBs has been simulated by several authors in the past and compared with observations. However, most of those predictions did not take the possible contributions to the envelope ejection from additional sources of energy (mostly recombination energy) into account. Here we update existing binary population models of WD+MS PCEBs by assuming that a fraction of the recombination energy available within the envelope contributes to ejecting the envelope. We performed Monte Carlo simulations of 10^7 MS+MS binaries for 9 different models using standard assumptions for the initial primary mass function, binary separations, and initial-mass-ratio distribution and evolved these systems using the publicly available BSE code. Including a fraction of recombination energy leads to a clear prediction of a large number of long orbital period (>~10 days) systems mostly containing high-mass WDs. The fraction of systems with He-core WD primaries increases with the CE efficiency and the existence of very low-mass He WDs is only predicted for high values of the CE efficiency (>~0.5). All models predict on average longer orbital periods for PCEBs containing C/O-core WDs than for PCEBs containing He WDs. This effect increases with increasing values of both efficiencies. Longer periods after the CE phase are also predicted for systems containing more massive secondary stars. The initial-mass-ratio distribution affects the distribution of orbital periods, especially the distribution of secondary star masses. Our simulations, in combination with a large and homogeneous observational sample, can provide constraints on the values of the CE efficiencies, as well as on the initial-mass-ratio distribution for MS+MS binary stars.Comment: 11 pages, 10 figures, accepted for publication in A&

Quantum-Mechanical Detection of Non-Newtonian Gravity

In this work the possibility of detecting the presence of a Yukawa term, as an additional contribution to the usual Newtonian gravitational potential, is introduced. The central idea is to analyze the effects at quantum level employing interference patterns (at this respect the present proposal resembles the Colella, Overhauser and Werner experiment), and deduce from it the possible effects that this Yukawa term could have. We will prove that the corresponding interference pattern depends on the phenomenological parameters that define this kind of terms. Afterwards, using the so called restricted path integral formalism, the case of a particle whose position is being continuously monitored, is analyzed, and the effects that this Yukawa potential could have on the measurement outputs are obtained. This allows us to obtain another scheme that could lead to the detection of these terms. This last part also renders new theoretical predictions that could enable us to confront the restricted path integral formalism against some future experiments.Comment: 17 pages, accepted in International Journal of Modern Physics

Monte Carlo simulations of post-common-envelope white dwarf + main sequence binaries: comparison with the SDSS DR7 observed sample

Detached white dwarf + main sequence (WD+MS) systems represent the simplest population of post-common envelope binaries (PCEBs). Since the ensemble properties of this population carries important information about the characteristics of the common-envelope (CE) phase, it deserves close scrutiny. However, most population synthesis studies do not fully take into account the effects of the observational selection biases of the samples used to compare with the theoretical simulations. Here we present the results of a set of detailed Monte Carlo simulations of the population of WD+MS binaries in the Sloan Digital Sky Survey (SDSS) Data Release 7. We used up-to-date stellar evolutionary models, a complete treatment of the Roche lobe overflow episode, and a full implementation of the orbital evolution of the binary systems. Moreover, in our treatment we took into account the selection criteria and all the known observational biases. Our population synthesis study allowed us to make a meaningful comparison with the available observational data. In particular, we examined the CE efficiency, the possible contribution of internal energy, and the initial mass ratio distribution (IMRD) of the binary systems. We found that our simulations correctly reproduce the properties of the observed distribution of WD+MS PCEBs. In particular, we found that once the observational biases are carefully taken into account, the distribution of orbital periods and of masses of the WD and MS stars can be correctly reproduced for several choices of the free parameters and different IMRDs, although models in which a moderate fraction (<=10%) of the internal energy is used to eject the CE and in which a low value of CE efficiency is used (<=0.3) seem to fit better the observational data. We also found that systems with He-core WDs are over-represented in the observed sample, due to selection effects.Comment: 15 pages, 7 figures, accepted for publication in A&

All-Optical Switching Demonstration using Two-Photon Absorption and the Classical Zeno Effect

Low-contrast all-optical Zeno switching has been demonstrated in a silicon nitride microdisk resonator coupled to a hot atomic vapor. The device is based on the suppression of the field build-up within a microcavity due to non-degenerate two-photon absorption. This experiment used one beam in a resonator and one in free-space due to limitations related to device physics. These results suggest that a similar scheme with both beams resonant in the cavity would correspond to input power levels near 20 nW.Comment: 4 pages, 5 figure