An austerity-driven energy reform

In July 2013, the government approved a major overhaul of the Spanish electricity sector to correct existing imbalances that have led to an exponential increase of regulated electricity costs and a huge tariff deficit. The reform addresses the problem of financial sustainability of the sector, severely affected by weak demand and overcapacity. Previous regulation introduced in 2012 and early 2013, also aimed at restoring financial stability of the sector, failed to correct the tariff shortfall and new regulatory measures were needed to reduce the 4.5 billion euros forecasted deficit for 2013. The frequent change of the rules of the game in the sector has created regulatory uncertainty, more so as it is not clear that the present reform will be sufficient to eliminate the deficit. Moreover, the government has left the door open to new regulation that would deal with the price formation system. In general, short run financial criteria have prevailed, while efficiency principles and a long run perspective have little weight in the reform.Financial support from MEC (ECO2012‐35820), the Basque Government (DEUI, IT783‐13) and UPV/EHU (UFI 11/46 BETS

On the strategic equivalence of multiple-choice test scoring rules

A disadvantage of multiple-choice tests is that students have incentives to guess. To discourage guessing, it is common to use scoring rules that either penalize wrong answers or reward omissions. These scoring rules are considered equivalent in psychometrics, although experimental evidence has not always been consistent with this claim. We model students' decisions and show, first, that equivalence holds only under risk neutrality and, second, that the two rules can be modified so that they become equivalent even under risk aversion. This paper presents the results of a field experiment in which we analyze the decisions of subjects taking multiple-choice exams. The evidence suggests that differences between scoring rules are due to risk aversion as theory predicts. We also find that the number of omitted items depends on the scoring rule, knowledge, gender and other covariates.risk aversion, scoring rules, field experiment, multiple choice tests

Understanding Tariff Deficit and its Challenges

Regulators and market participants have become increasingly concerned about the Spanish electricity tariff deficit due to its size and the difficulties to control its growth. The deficit can be traced to inefficiencies in market organization and solutions should be designed to mitigate those inefficiencies. Tariff deficits have allowed for the transfer of part of the present costs of electricity services to future consumers, but this situation has reached a limit and a deep revision of regulation in this market cannot be postponed. In general, solutions that interfere with market prices and signals are not appropriate.Financial support from MEC (ECO2012-35820), the Basque Government (DEUI, IT-313-07) and UPV/EHU (UFI 11/46 BETS) is gratefully acknowledged

Optimal Correction for Guessing in Multiple-Choice Tests

Building on Item Response Theory we introduce students’ optimal behavior in multiple-choice tests. Our simulations indicate that the optimal penalty is relatively high, because although correction for guessing discriminates against risk-averse subjects, this effect is small compared with the measurement error that the penalty prevents. This result obtains when knowledge is binary or partial, under different normalizations of the score, when risk aversion is related to knowledge and when there is a pass-fail break point. We also find that the mean degree of difficulty should be close to the mean level of knowledge and that the variance of difficulty should be high.Item Response Theory, formula scoring, multiple choice tests

Product Differentiation with Consumer Arbitrage

Also published as Working Paper DFAEII 2003-01spatial price discrimination, product differentiation, personal arbitrage

Endogenous Unions Formation

This paper analyzes the process of endogenous union formation in the context of a sequential bargaining model between a firm and several unions and tries to explain why workers may be represented by several unions of different sizes. We show that the equilibrium number of unions and their relative size depend on workers' attitudes toward the risk of unemployment and union configuration is independent of labor productivity.endogenous union formation, constant relative risk aversion, sequential bargaining, monopoly union

Market Power in the Spanish Electricity Auction

Published as an article in: Journal of Regulatory Economics, 2010, vol. 37, issue 1, pages 42-69.market power, electricity market

Altruism with Social Roots: An Emerging Literature

Revised: 2007-01.-- Published as an article in: Revista Desarrollo y Sociedad (2006), Semestre II, pp. 245-260.social networks, reciprocity, giving, social integration

The Impact of Regulation on Pricing Behavior in the Spanish Electricity Market

In this paper we measure the impact of regulatory measures which affected the Spanish electricity wholesale market in the period 2002-2005. Our approach is based on the fact that regulation changes firms' incentives and therefore their market behavior. In the absence of any regulation firms would choose profit- maximizing prices on their residual demands so that the observed gap between optimal and actual prices provides a measure of the effect of regulation. Our results indicate that regulation has decreased wholesale prices considerably, but became less effective at the end of the sample period which explains the change of regulatory regime introduced in 2006.regulation, pricing, electricity market

A Supply Function Competition Model for the Spanish Wholesale Electricity Market

We model the Spanish wholesale market as a multiplant linear supply function competition model. According to the theory, the larger generators should have supply curves for each plant which are to the left of the supply curves of plants owned by smaller generators. We test this prediction for fuel plants using data from the Spanish Market Operator (OMEL) from May 2001 to December 2003. Our results indicate that the prediction of the model holds.supply function competition, electricity market