The Italian Electricity Prices in Year 2025: an Agent-Based Simulation

In this paper, we build a realistic large-scale agent-based model of the Italian dayahead-electricity market based on a genetic algorithm and validated over several weeks of 2010, on the basis of exact historical data about supply, demand and network characteristics. A statistical analysis confirms that the simulator well replicates the observed prices. A future scenario for the year 2025 is then simulated, which takes into account market’s evolution and energy vectors’ price dynamics. The future electricity prices are contrasted with the ones that might arise considering also the possible (yet unlikely) construction of new nuclear power (NP) plants. It is shown that future prices will be higher than the actual ones. NP production can reduce the prices and their volatility, but the size of the impact depends on the pattern of the expected demand load, and can be negligible.Electricity market, PUN, Agent-based computational economics, Nuclear power.

Cost Efficiency and Returns to Scope in Italian Investment Firms

This paper estimates cost efficiency and returns to scope of Italian investment firms during the period 1998-2002, following the stochastic frontier function approach. Results indicate a large inefficiency for Italian investment firms (with a high standard deviation across sample) and the absence of significant returns to scopeStochastic Frontier, Efficiency, Returns to scope, Investment Firms

Quasi-option value under ambiguity

Real investments involving irreversibility and ambiguity embed a positive quasi-option value under ambiguity (q.o.v.a.), which modifies the evaluation of an investment decision involving depletion of natural resources by increasing the value of delaying. Q.o.v.a. depends on the specific decision-maker attitude towards ambiguity, expressed by a capacity on the state space. An empirical measure of q.o.v.a. is pointed out. Exploiting the properties of a capacity and its conjugate, the relationship has been established between the upper and lower Choquet integral with respect to a subadditive capacity and the bid and ask price of the underlying asset (output) of the investment decision. The empirical measure of q.o.v.a. is defined as the upper bound of the opportunity value. As an example, q.o.v.a. is applied to evaluate an off-shore petroleum lease under ambiguity.

Collective reputation with stochastic production and unknown willingness to pay for quality

In many cases, consumers cannot observe a single firm\u2019s investment in environmental quality or safety, but only the average quality of the industry. The outcome of the investment is stochastic, since firms cannot control perfectly the technology or external factors that may affect production. In addition, firms do not know consumers\u2019 valuation of quality. We characterize the solution of the firms\u2019 investment game and show that the value of stopping investments when firms are already investing in quality can be negative when the free-riding incentives dominate. The existence of systematic uncertainty on the outcome of investment slows down investment in quality, compared to a situation without uncertainty. The uncertainty on consumers\u2019 willingness to pay for quality can speed up or slow down investment. We also obtain the counterintuitive result that information acquisition may decrease the overall level of quality

Endogenous equilibria in liquid markets with frictions and boundedly rational agents

In this paper we propose a simple binary mean field game, where N agents may decide whether to trade or not a share of a risky asset in a liquid market. The asset's returns are endogenously determined taking into account demand and transaction costs. Agents' utility depends on the aggregate demand, which is determined by all agents' observed and forecasted actions. Agents are boundedly rational in the sense that they can go wrong choosing their optimal strategy. The explicit dependence on past actions generates endogenous dynamics of the system. We, firstly, study under a rather general setting (risk attitudes, pricing rules and noises) the aggregate demand for the asset, the emerging returns and the structure of the equilibria of the asymptotic game. It is shown that multiple Nash equilibria may arise. Stability conditions are characterized, in particular boom and crash cycles are detected. Then we precisely analyze properties of equilibria under significant examples, performing comparative statics exercises and showing the stabilizing property of exogenous transaction costs.Endogenous dynamics; Nash equilibria; Bounded rationality; Transaction costs; Mean field games; Random utility

Risk Heterogeneity, Productivity and Social Insurance

How does the unemployment risk and the personal risk may affect preferences on the desired (optimal) level of the tax rate (and public services) when workers have different productivities

The Zonal and Seasonal CO2 Marginal Emissions Factors for the Italian Power Market

This paper estimates the seasonal and zonal CO2 marginal emissions factors (MEFs) from electricity production in the Italian electricity system. The inclusion of the zonal configura- tion of the Italian wholesale power market leads to a complete measurement of marginal emission factors which takes into account the heterogeneous distribution of RES power plants, their penetration rate and their variability within the zonal power generation mix. This article relies on a flexible econometric approach that includes the fractional cointe- gration methodology to incorporate the typical features of long-memory processes into the estimation of MEFs. We find high variability in annual MEFs estimated at the zonal level. Sardinia reports the highest MEF (0.7189 tCO2/MWh), followed by the Center South (0.7022 tCO2/MWh), the Center North (0.4236 tCO2/MWh), the North (0.2018 tCO2/ MWh) and Sicily (0.146 tCO2/MWh). The seasonal analysis also shows a large variability of MEFs in each zone across time. The heterogeneity of results leads us to recommend that policymakers consider the zonal configuration of the power market and the large seasonal variability related to carbon emissions and electricity generation when designing incentives for renewable energy sources expansion and for achieving emission reduction targets

Pricing reliability options under different electricity price regimes

Reliability Options are capacity remuneration mechanisms aimed at enhancing security of supply in electricity systems. They can be framed as call options on electricity sold by power producers to System Operators. This paper provides a comprehensive mathematical treatment of Reliability Options. Their value is first derived by means of closed-form pricing formulae, which are obtained under several assumptions about the dynamics of electricity prices and strike prices. Then, the value of the Reliability Option is simulated under a real-market calibration, using data of the Italian power market. We perform sensitivity analyses to highlight the role of the level and volatility of both power and strike price, of the mean reversion speeds and of the correlation coefficient on the Reliability Options' value. Finally, we calculate the parameter model risk to quantify the impact that a model misspecification has on the equilibrium value of the RO

Probability and uncertainty: the legacy of Georgescu-Roegen

In this paper we consider Georgescu-Roegen's approach to uncertainty, showing that his characterization of expectations cannot be reduced to any probabilistic decision-making model. Drawing upon Georgescu-Roegen's lesson a lexicographical utility function is proposed and analysed in the mark of his own peculiar scientific methodology. It is demonstrated that such a formulation can be useful in solving the usual failure of the expected utility model, such as the Ellsberg paradoxes. The epistemic limits of our re-construction are considered