Demand Uncertainty and the Regulated Firm

Demand uncertainty is an important element of many regulated markets. Firms often must select plant size before actual demand is observed, and with some expectation of regulatory action if the actual levels of profit or rate of return do not fall within accepted ranges. We analyze a model of a regulated firm that faces a relatively complex regime of price regulation, reflecting to at least some extent the multiple aspects suggested by Joskow (1974). The firm behaves as though it expects the current tariff to remain in effect unless, at the actual demand observed after plant size is chosen, one of two things occurs. First, if profits are negative, the firm plans to petition for and expects to receive a new tariff yielding zero economic profits. Second, if the rate of return on capital exceeds some specified maximum, the firm expects the regulator to reduce the tariff so that the firm earns only that maximum

Demand Uncertainty and the Regulated Firm

[Introduction] In this paper, we investigate the impact of demand uncertainty on the choice of plant capacity by a regulated firm. Over the past few years, demand uncertainty has become a major element in the decision-making of utilities, and particularly in their decision-making with respect to capacity choices. In a recent study by SRI [1977], it was reported that to maximize expected consumers' surplus, more generating capacity was required for the electric utility industry when operating under demand uncertainty than under demand certainty.1 This finding raises the question whether the structure of rate regulation of electric utilities provides the appropriate incentives for them to invest in more capacity under demand uncertainty then under certainty. The present paper addresses such questions

Demand Uncertainty and the Regulated Firm

[Introduction] In this paper, we investigate the impact of demand uncertainty on the choice of plant capacity by a regulated firm. Over the past few years, demand uncertainty has become a major element in the decision-making of utilities, and particularly in their decision-making with respect to capacity choices. In a recent study by SRI [1977], it was reported that to maximize expected consumers' surplus, more generating capacity was required for the electric utility industry when operating under demand uncertainty than under demand certainty.1 This finding raises the question whether the structure of rate regulation of electric utilities provides the appropriate incentives for them to invest in more capacity under demand uncertainty then under certainty. The present paper addresses such questions

Demand Uncertainty and the Regulated Firm

Demand uncertainty is an important element of many regulated markets. Firms often must select plant size before actual demand is observed, and with some expectation of regulatory action if the actual levels of profit or rate of return do not fall within accepted ranges. We analyze a model of a regulated firm that faces a relatively complex regime of price regulation, reflecting to at least some extent the multiple aspects suggested by Joskow (1974). The firm behaves as though it expects the current tariff to remain in effect unless, at the actual demand observed after plant size is chosen, one of two things occurs. First, if profits are negative, the firm plans to petition for and expects to receive a new tariff yielding zero economic profits. Second, if the rate of return on capital exceeds some specified maximum, the firm expects the regulator to reduce the tariff so that the firm earns only that maximum

Magnetoencephalographic Signals Identify Stages in Real-Life Decision Processes

We used magnetoencephalography (MEG) to study the dynamics of neural responses in eight subjects engaged in shopping for day-to-day items from supermarket shelves. This behavior not only has personal and economic importance but also provides an example of an experience that is both personal and shared between individuals. The shopping experience enables the exploration of neural mechanisms underlying choice based on complex memories. Choosing among different brands of closely related products activated a robust sequence of signals within the first second after the presentation of the choice images. This sequence engaged first the visual cortex (80-100 ms), then as the images were analyzed, predominantly the left temporal regions (310-340 ms). At longer latency, characteristic neural activetion was found in motor speech areas (500-520 ms) for images requiring low salience choices with respect to previous (brand) memory, and in right parietal cortex for high salience choices (850-920 ms). We argue that the neural processes associated with the particular brand-choice stimulus can be separated into identifiable stages through observation of MEG responses and knowledge of functional anatomy

Shared origins of a key enzyme during the evolution of C-4 and CAM metabolism

CAM and C4 photosynthesis are two key plant adaptations that have evolved independently multiple times, and are especially prevalent in particular groups of plants, including the Caryophyllales. We investigate the origin of photosynthetic PEPC, a key enzyme of both the CAM and C4 pathways. We combine phylogenetic analyses of genes encoding PEPC with analyses of RNA sequence data of Portulaca, the only plants known to perform both CAM and C4 photosynthesis. Three distinct gene lineages encoding PEPC exist in eudicots (namely ppc-1E1, ppc-1E2 and ppc-2), one of which (ppc-1E1) was recurrently recruited for use in both CAM and C4 photosynthesis within the Caryophyllales. This gene is present in multiple copies in the cacti and relatives, including Portulaca. The PEPC involved in the CAM and C4 cycles of Portulaca are encoded by closely related yet distinct genes. The CAM-specific gene is similar to genes from related CAM taxa, suggesting that CAM has evolved before C4 in these species. The similar origin of PEPC and other genes involved in the CAM and C4 cycles highlights the shared early steps of evolutionary trajectories towards CAM and C4, which probably diverged irreversibly only during the optimization of CAM and C4 phenotypes

Early Category-Specific Cortical Activation Revealed by Visual Stimulus Inversion

Visual categorization may already start within the first 100-ms after stimulus onset, in contrast with the long-held view that during this early stage all complex stimuli are processed equally and that category-specific cortical activation occurs only at later stages. The neural basis of this proposed early stage of high-level analysis is however poorly understood. To address this question we used magnetoencephalography and anatomically-constrained distributed source modeling to monitor brain activity with millisecond-resolution while subjects performed an orientation task on the upright and upside-down presented images of three different stimulus categories: faces, houses and bodies. Significant inversion effects were found for all three stimulus categories between 70–100-ms after picture onset with a highly category-specific cortical distribution. Differential responses between upright and inverted faces were found in well-established face-selective areas of the inferior occipital cortex and right fusiform gyrus. In addition, early category-specific inversion effects were found well beyond visual areas. Our results provide the first direct evidence that category-specific processing in high-level category-sensitive cortical areas already takes place within the first 100-ms of visual processing, significantly earlier than previously thought, and suggests the existence of fast category-specific neocortical routes in the human brain