ALBERT

Description: 〈p〉Publication date: February 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Ecological Economics, Volume 156〈/p〉 〈p〉Author(s): Zia Wadud, Phani Kumar Chintakayala〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Personal carbon trading is a downstream version of the cap and trade approaches to mitigating carbon emissions from individual energy use. Although there are studies that investigate the theoretical and implementation issues, there is little evidence over the potential ways people could reduce their emissions when subject to a PCT policy. Especially little is understood about how people make tradeoff between or complement reducing emissions from transport and in-home energy use. This paper addresses this gap by reporting the findings of a questionnaire survey of stated intentions under the policy. Results show that, more people (53.6%) preferred to reduce their emissions from both transport and in-home energy use compared to from only one of these. This shows the flexibility offered by a cap including transport and in-home energy use is more efficient compared to a PCT covering either of these separately. Nearly three-fourths (76.2%) opted to reduce their emissions following a PCT policy. However, among those with above-budget initial emissions, a large share (79.6%) still could not reduce their emissions to below the budget and opted to purchase at least some permits to cover their emissions, indicating the difficulty in reducing emissions at the personal and household level.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 1 November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Omega〈/p〉 〈p〉Author(s): Shih-Sian (Sherwin) Jhang, Joseph P. Ogden, Nallan C. Suresh〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper develops and tests a stylized model of a manufacturing firm's operational and financial configuration that integrates the effects of market competition and integration abilities of firms. Market power is predicted to drive trade credit balances of suppliers and customers, capital structure, and firm value. These predicted relationships are tested using data for publicly traded U.S. manufacturing firms for the period 1984–2014. A two-step procedure is adopted wherein, in the first step, the model variables of profitability, asset turnover, inventory, and cash are subjected to a factor analysis to determine the existence of a common factor based on theoretical arguments. In the second step, scores of the major factor (MPscore) are used in regressions with accounts receivable, accounts payable, market leverage, and Tobin's 〈em〉Q〈/em〉 as alternative dependent variables. Evidence from cross-sectional and time series analyses provides strong support for the hypothesized relationships. Market power is not otherwise explained by firm size and asset tangibility. Additional results indicate that U.S. manufacturers generally increased their market power over this timeframe. We also find that firms with high market power tend to have higher survival rates.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 31 October 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research〈/p〉 〈p〉Author(s): Alexandre M. Florio, Richard F. Hartl, Stefan Minner〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We present a model for the single-vehicle routing problem with stochastic demands (SVRPSD) with optimal restocking. The model is derived from a characterization of the SVRPSD as a Markov decision process (MDP) controlled by a certain class of policies, and is valid for general discrete demand probability distributions. We transform this MDP into an equivalent mixed-integer linear model, which is then used to solve small instances to optimality. By doing so, we are able to quantify the drawbacks associated with the detour-to-depot restocking policy, an assumption of many exact approaches for the (multivehicle) VRPSD. We also examine the tradeoff between the deterministic a priori cost and the stochastic restocking cost for varying route load scenarios. Finally, a wait-and-see model for the SVRPSD is proposed, and is used within a parallel heuristic to solve larger literature instances with up to 150 nodes and Poisson distributed demands. Computational experiments demonstrate the effectiveness of the heuristic approach, and also indicate under which circumstances near-optimal solutions can be obtained by the myopic strategy of a priori route cost minimization.〈/p〉〈/div〉

Description: 〈p〉Publication date: 16 April 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 274, Issue 2〈/p〉 〈p〉Author(s): Damiano Brigo, Marco Francischello, Andrea Pallavicini〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉 〈p〉Since the 2008 global financial crisis, the banking industry has been using valuation adjustments to account for default risk and funding costs. These adjustments are computed separately and added together by practitioners as if the valuation equations were linear. This assumption is too strong and does not allow to model market features such as different borrowing and lending rates and replacement default closeout. Hence we argue that the full valuation equations are nonlinear, and this paper is devoted to studying the nonlinear valuation equations introduced in Pallavicini et al (2011).〈/p〉 〈p〉We illustrate all the cash flows exchanged by the parties involved in a derivative contract, in presence of default risk, collateralisation with re-hypothecation and funding costs. Then we show how to obtain semi-linear PDEs or Forward Backward Stochastic Differential Equations (FBSDEs) from present-valuing said cash flows in an arbitrage-free setup, and we study the well-posedness of these PDEs and FBSDEs in a viscosity and classical sense.〈/p〉 〈p〉Moreover, from a financial perspective, we discuss cases where classical valuation adjustments (XVA) can be disentangled. We show how funding costs are offset by treasury valuation adjustments when one takes a whole-bank perspective in the valuation, while the same costs are not offset by such adjustments when taking a shareholder perspective. We show that although we use a risk-neutral valuation framework based on a locally risk-free bank account, our final valuation equations do not depend on the risk-free rate. Finally, we show how to consistently derive a netting set valuation from a portfolio level one.〈/p〉 〈/div〉

Description: 〈p〉Publication date: February 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 78〈/p〉 〈p〉Author(s): Xiwen Bai, Jasmine Siu Lee Lam〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Global liquefied petroleum gas (LPG) trade shows an increasing trend but is under-researched. This paper focuses on the LPG market and aims to model the dependence dynamics among LPG freight rates, crude oil price and propane location arbitrage. Conditional copula-GARCH model is applied to estimate dependencies. Different types of copulas with both time-invariant and time-varying dependence structures are fitted and their suitability has been compared. The findings suggest that firstly, Baltic LPG (BLPG) freight rate and the arbitrage between propane Far East and Middle East prices have conditional time-varying dependence and the dependence is higher in market downturns. Furthermore, BLPG and the arbitrage between Far East and US propane prices, have symmetric dependence and such a relationship has strengthened since 2013. Secondly, Middle East propane price is found to have the strongest correlation with crude oil prices compared to Far East and US propane prices, indicating higher sensitivity to crude oil price changes. Last but not least, the relationship between crude oil and BLPG is relatively weak and mostly positive.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: February 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 78〈/p〉 〈p〉Author(s): Gernot Müller, Armin Seibert〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We develop a Bayesian estimation procedure for the electricity spot price model in Benth et al. (2014). This model incorporates a trend and seasonality component, a stable CARMA process for the price spikes, and an additional Lévy process for mid-range price level changes. Our MCMC algorithm has two advantages over the existing stepwise estimation procedure presented in Benth et al. (2014): First, since our algorithm produces samples from the full posterior distribution over all parameters, we can estimate the parameters much more accurately, which is shown in simulation studies. Second, we can provide accuracy measures as credibility intervals in addition to the point estimates. The approach is quite general, so that it can be adapted also to other similar pricing models. For illustration, we analyse spot and future prices from the EEX using the new Bayesian method and provide estimates for the risk premium together with credibility regions.〈/p〉〈/div〉

Description: 〈p〉Publication date: December 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Geoforum, Volume 97〈/p〉 〈p〉Author(s): Rebecca Sandover, Samuel Kinsley, Stephen Hinchliffe〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Geographers and other social scientists have for some time been interested in how scientific and environmental controversies emerge and become public or collective issues. Social media are now key platforms through which these issues are publically raised and through which groups or publics can organise themselves. As media that generate data and traces of networking activity, these platforms also provide an opportunity for scholars to study the character and constitution of those groupings. In this paper we lay out a method for studying these ‘issue publics’: emergent groupings involved in publicising an issue. We focus on the controversy surrounding the state-sanctioned cull of wild badgers in England as a contested means of disease management in cattle. We analyse two overlapping groupings to demonstrate how online issue publics function in a variety of ways – from the ‘echo chambers’ of online sharing of information, to the marshalling of agreements on strategies for action, to more dialogic patterns of debate. We demonstrate the ways in which digital media platforms are themselves performative in the formation of issue publics and that, while this creates issues, we should not retreat into debates around the ‘proper object’ of research but rather engage with the productive complications of mapping social media data into knowledge (Whatmore, 2009). In turn, we argue that online issue publics are not homogeneous and that the lines of heterogeneity are neither simple or to be expected and merit study as a means to understand the suite of processes and novel contexts involved in the emergence of a public.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: December 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Transportation Research Part B: Methodological, Volume 118〈/p〉 〈p〉Author(s): Qian-Wen Guo, Shumin Chen, Paul Schonfeld, Zhongfei Li〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We address optimal rail transit investment issues considering time-inconsistent preferences and population uncertainty. Instead of adopting the typical real options approach which assumes that authorities possess a constant discount rate over time, we propose an extension of real options analysis by modeling authorities’ intertemporal choices with a quasi-hyperbolic discount function. Depending on the assumption about the strategies guiding the behaviors of future authorities, we consider three types of authorities, namely time-consistent authority, naïve authority and sophisticated authority, of which the latter two are time-inconsistent. First, an optimal transit investment timing model is proposed. Then, solutions for the above three types of authorities are derived and compared. We demonstrate the performance of the proposed model by conducting numerical tests and applying it to Dalian, China. Main findings include: (1) an authority with time-inconsistent preferences makes decisions earlier than a standard, time-consistent authority; (2) the sophisticated authority invests earlier than the naïve authority. Other implications of considering time-inconsistent preferences are also identified.〈/p〉〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Suhyun Jung, Stephen Polasky〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Environmental protection, even with strong environmental laws on the books, often fails in developing countries because of limited government ability to monitor and enforce environmental laws. An alternative route to government monitoring and enforcement involves partnerships with private firms and non-governmental organizations. In this paper, we evaluate the performance of the Responsible Soy Project, a partnership between Cargill and The Nature Conservancy, to curb deforestation following the opening of a new soybean export facility in the Brazilian Amazon. We find that the project significantly decreased deforestation rates in properties enrolled in the project, despite its late arrival two years after the opening of the export facility. Theoretical predictions and empirical results show that the impacts of the project were greater on smaller properties that are more likely to be credit-constrained, and on properties initially not in compliance with Brazil's Forest Code that faced binding constraints on deforestation.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 2 November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Omega〈/p〉 〈p〉Author(s): Robert W. Hanks, Brian J. Lunday, Jeffery D. Weir〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉 〈p〉Robust goal programming (RGP) is a recently developed, powerful new optimization modeling technique that conjoins two widely accepted operations research disciplines: robust optimization (RO) and goal programming (GP). In lieu of applying a probability distribution over possible outcomes, an approach considered by stochastic programming, RO utilizes uncertainty sets to account for data uncertainty. This characteristic of RO is an important attribute because identifying such a probability distribution is challenging, at best. Given this RO context, RGP additionally incorporates GP, traditionally a deterministic procedure, to address optimization problems having multiple objectives. As such, RGP has potential to help address a wide array of data-driven applications, ranging from financial management to engineering design.〈/p〉 〈p〉As a motivating use case for the utility of an RGP approach, this paper demonstrates the applicability of RGP by way of the data-driven United States Transportation Command (USTRANSCOM) liner rate setting problem. USTRANSCOM is responsible for the technical direction and supervision of over $7 billion [1] of annual passenger, cargo, mobility, and personal property movements in support of the Department of Defense (DoD). Transporting people and material with both organic and contracted assets, USTRANSCOM supports DoD organizations and agencies on a reimbursable basis, annually setting and charging rates for air and liner (i.e., sea) transport for their customers and reimbursing the transportation providers accordingly. The Cost Recovery Branch within TCJ8, the Financial Management and Program Analysis staff organization for USTRANSCOM, annually sets liner shipping rates specific to each combination of origin, destination, commodity type, booking terms, and container size for the upcoming fiscal year (FY). As a government entity, USTRANSCOM seeks to neither make a profit nor operate at a loss in any given FY. The current rate setting methodology assumes existing data is deterministic, resulting in process inaccuracies that contribute to unexpected surpluses or deficits each FY. Moreover, the current method fails to consider an additional USTRANSCOM objective: meeting customer's expectations that liner rates will change annually in accordance with industry-specific inflation. Considering the different goals and inherent parametric variance, the use case herein incorporates a decision maker's risk preference regarding parametric variability via 〈em〉a priori〈/em〉 analysis to inform RGP techniques and improve the USTRANSCOM liner rate setting process.〈/p〉 〈/div〉

Description: 〈p〉Publication date: January 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 International Journal of Production Economics, Volume 207〈/p〉 〈p〉Author(s): Xin Wen, Tsan-Ming Choi, Sai-Ho Chung〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Over the past decades, we have witnessed the rapid development of giant fashion brands in the retail market which inspires a lot of operational research (OR) studies in fashion retail supply chains (FRSCs). In fact, FRSCs are highly consumer-demand driven and face many operational challenges coming from high demand and supply side uncertainties. Realizing the significance of fashion retail supply chain management (FRSCM) and a lack of comprehensive review on the topic, we develop this paper which examines the operational models on FRSCM in the mainstream OR literature. We organize this review systematically with respect to the core functional areas of FRSCs, namely the manufacturer, retailer, consumer, and fashion retail supply chain system. In each functional area, insights regarding the related studies as well as the specific OR model features and assumptions are generated. Finally, we conclude the review by summarizing the major findings and proposing promising future research areas (from both OR modeling and practical perspectives).〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 1 November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Computers & Operations Research〈/p〉 〈p〉Author(s): P.A. Grossman, M. Brazil, J.H. Rubinstein, D.A. Thomas〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Given a binary rooted tree in which each edge has an associated value and an associated discount factor, the problem addressed here is to determine which nodes should be visited and in what order so as to maximise the net present value calculated from the values and discount factors of the traversed edges. A process for determining which nodes to exclude is identified, some key properties of the solution are established, and an algorithm for generating an optimal sequence of nodes is presented. A key concept is the priority of a sequence of nodes, which is a certain function of the values and discount factors that determines whether the order of adjacent nodes in the sequence should be swapped. The problem was motivated by the need to determine an optimal sequence in which the network of access tunnels in an underground mine should be developed and the resources extracted when there is a limit on the equipment available.〈/p〉〈/div〉

Description: 〈p〉Publication date: March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Computers & Operations Research, Volume 103〈/p〉 〈p〉Author(s): Zhenzhen Zhang, Brenda Cheang, Chongshou Li, Andrew Lim〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This study addresses a multi-commodity many-to-many vehicle routing problem with simultaneous pickup and delivery (M-M-VRPSPD) for a fast fashion retailer in Singapore. Different from other widely studied pickup and delivery problems, the unique characteristics are: (1) collected products from customers are encouraged to be reallocated to fulfill demands of other customers; (2) it is multi-commodity and the number of involved commodities can be over 10,000. To solve this problem, we provide a nonvehicle-index arc-flow formulation and some strengthening strategies. Moreover, for large-scale instances, an adaptive memory programming based algorithm combined with techniques such as the regret insertion method for initializing the solution pool, the segment-based evaluation scheme, and advanced pool management method, is proposed. We test our algorithm on 66 real-world and 96 newly generated instances, and provide the results for future-use comparisons. The experiments on small-scale instances show that the proposed algorithm can quickly reach the optimality obtained by solving the mathematical formulation. In addition, the proposed algorithm is shown to perform well and stably on medium and large scale instances. Finally, we analyze some features of this problem, and find that relocation of commodities increases their utilization.〈/p〉〈/div〉

Description: 〈p〉Publication date: February 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Ecological Economics, Volume 156〈/p〉 〈p〉Author(s): Sara Latorre, Antonio Malo-Larrea〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Over the last five decades the discursive debate on sustainability has reached prominence as the socio-ecological impacts of the human presence on Earth have grown rapidly. Nature discourses are interwoven with those of sustainability. Within this discursive field, a diverse set of competing discourses have emerged. Among the most radical ones, the discourse of Buen Vivir has recently gained relevance in Latin America. This position aims to depart from modern western ideologies, mainly those of nature-society dualism and Eurocentric universalism. In this study, the social perspectives about nature-society of subnational policy makers and other social actors involved in territorial planning in the city of Cuenca, Ecuador are examined. Four main social discourses are identified, which instead of breaking away from the society-nature divide, embrace it. Therefore, the case of Cuenca suggests that Ecuadorian citizens (including policy-makers) are still captured by the same discourses on nature-society belonging to the discursive field of modernity and its more contemporary corollaries: development and sustainable development. Hence, relational ontologies promoted by the discourse of Buen Vivir still do not resonate among Ecuadorian policy-related actors.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: February 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Ecological Economics, Volume 156〈/p〉 〈p〉Author(s): Yau-Huo (Jimmy) Shr, Richard Ready, Brian Orland, Stuart Echols〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This article provides new evidence on how images influence survey responses, using a split-sample choice experiment. Our results suggest that, when respondents are presented with both images and text, they exhibit stronger preferences for attributes with high visual salience than when presented with either images or text alone. Furthermore, respondents are less likely to ignore individual attributes when both images and text are provided. However, the provision of images makes responses more random, i.e., respondents' preferences for attributes are less consistent across choice questions.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: October 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 76〈/p〉 〈p〉Author(s): Yingzhu Li, Bin Su, Shyamasree Dasgupta〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉While input-output (IO) tables have been widely employed to study energy and environmental issues, Social Accounting Matrix (SAM) which further considers the interactions of the production system, primary factors, households and social institutions in the economy is rarely seen in this field. This paper thus compares the transmission dynamics under an IO framework and a SAM framework with the help of structural path analysis (SPA) technique, which decomposes the IO and SAM analysis results by extracting the interconnections in the economic system. A case study is performed to investigate India's carbon emissions based on its latest publicly available IO and SAM tables. As the fourth largest emitter in the world, India's large population base, fast population growth and huge unmet demand imply a surge of carbon emissions following future economic development. There have been a few studies on India's energy and emission issues using IO tables, but more research from different perspectives is still needed to better support policy making. This is the first study on India's carbon emissions under a SAM framework and using SPA techniques, and also the first study that extends the use of SPA by transmission path to the energy and environmental literature.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: January 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Air Transport Management, Volume 74〈/p〉 〈p〉Author(s): Tathiana Figueiredo, Rafael Castro〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This study examines the passengers perceptions of Tom Jobim International Airport – RIOgaleão branding strategies and its impact to their experiences in light of the airport branding elements proposed by the literature. To achieve these aims it was conducted a semi-structured interview with the airport's branding manager and a questionnaire with the passengers (n = 92). The findings showed that the airport's new management company has been employing tourist branding strategies using a mix of elements, but it is possible that these actions have had the main objective of raising the airport to international service standards, whereby the operation of terminals by large companies is a trend. It was also concluded that some of the airport branding elements (i.e. logos and slogans) are well developed and represent a higher impact on passenger experience, while others (i.e. retail pricing strategies) require further attention and new approaches in order to improve passenger experience in the terminal.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 12 September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Omega〈/p〉 〈p〉Author(s): Leonie Hutter, Florian Jaehn, Simone Neumann〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The topic of airplane boarding is receiving increasing attention in practice and in the scientific literature. Shorter boarding times can reduce the time an airplane spends at the gate (the airplane turn-around time), resulting in annual cost savings of several hundred thousand dollars per airplane. Although several researchers have analyzed the boarding process purely theoretically or with simulation models, little empirical research has been performed, even though empirical research is the basis for any theoretical or simulation model. In this paper, we provide the fundamentals for this research area by presenting the results of an empirical study conducted at a large European airport. The aim of this study is to determine whether and to what extent certain factors, such as the number of passengers, the capacity of the airplane, and the amount of carry-on baggage, influence boarding times. Boarding times and additional data for short- and medium-haul flights with single-aisle airplanes have been manually collected in a field study and analyzed. The analyses yield the counter-intuitive result that a significant effect on the boarding time of a flight by the average amount of carry-on baggage per passenger cannot be demonstrated. Finally, we develop a regression model to predict boarding times based on the number of passengers and the capacity of the airplane. This straightforward model explains more than 85% of the variance in the boarding time and could therefore easily be used in the daily business of an airline to estimate the expected boarding times per flight. Furthermore, we compare our regression model to various simulation and analytical models as well as other empirical data for validation and out-of-sample testing.〈/p〉〈/div〉

Description: 〈p〉Publication date: January 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Omega, Volume 82〈/p〉 〈p〉Author(s): Jin Li, Victor Shi〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉A conventional wisdom in industry and academia is that firms suffer from decentralized procurement. In this paper, we demonstrate an important and counter-intuitive benefit of procurement decentralization in a common setting where a firm with multiple divisions procures a durable good from a supplier. We start with a two-period model and obtain analytic equilibrium results on the supplier's wholesale prices, and the firm's procurement quantities and profits under procurement centralization and decentralization. These results show that the firm's profit will benefit from decentralization if and only if the product is durable. We further show that the profit improvement always increases in durability and the number of divisions. To generalize the basic model with two periods, we design an iterative algorithm to compute the equilibrium results for any number of periods. Our extensive numerical simulations show the robustness of our analytic results and managerial insights.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 10 August 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Omega〈/p〉 〈p〉Author(s): Amir Shabani, Franco Visani, Paolo Barbieri, Wout Dullaert, Daniele Vigo〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉 〈p〉Total cost of ownership (TCO) is a management accounting technique that evaluates the total cost of a business partnership using a time-consuming activity-based costing procedure. Studies have suggested that TCO-based data envelopment analysis (DEA) can effectively estimate the results of TCO with substantially less effort and time; however, its adoption in practice is limited due to certain shortcomings. First, managers struggle to understand and accept the uncommon weighting schemes of existing TCO-based DEA models because traditional TCO analyses require a common set of weights. Second, both the traditional TCO approach and TCO-based DEA models are designed to handle precise data, whereas TCO analyses often involve imprecise data from conflicting data sources and estimations.〈/p〉 〈p〉To address the managerial and technical issues of handling weighting schemes and imprecise data, this paper proposes a novel TCO-based model: common set of weights imprecise DEA (CSW-IDEA). We validate the proposed methodology using real-life datasets from 175 suppliers that serve five key components to two multinational mechanical manufacturers. For both precise data and imprecise data, the proposed CSW-IDEA reliably approximates traditional TCO calculations significantly better than existing TCO-based DEA. The cost savings that can be theoretically generated by applying the CSW-IDEA approach are similar to the cost savings estimated by the traditional TCO approach.〈/p〉 〈/div〉

Description: 〈p〉Publication date: Available online 20 August 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Omega〈/p〉 〈p〉Author(s): Nina Yan, Xiuli He, Ye Liu〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This study examines two supply chain financing schemes for the capital-constrained retailer: supplier finance (SF) and supplier investment (SI). SF allows a downstream capital-constrained retailer to pay partially with all the initial working capital, and delays the outstanding balance with a deferred interest rate until the end of the selling season. Under SI, the supplier invests in the capital-constrained retailer’s operations as equity and then obtains a portion of dividends in return. Considering the retailer’s aversion to loss, we comparatively analyze the retailer’s ordering decision and the supplier’s pricing decision under these two schemes. We then investigate the value of each scheme and the participation motivations for both parties. We find that loss aversion influences the participants’ decisions. When the retailer is loss-averse, she will make more conservative order decisions, and the supplier will set a higher wholesale price. The loss-averse retailer will order more under the SI than under the SF. Also, the lower the retailer’s initial working capital, the higher the benefit from pure SF or SI for both supply chain members. In particular, if the retailer is highly capital-constrained, both participants prefer SI to SF. Finally, we explore the financing portfolio of pure SF and SI. Our results show that the supplier can achieve the highest profit when offering the financing portfolio and the retailer may accept this menu.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 9 August 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Omega〈/p〉 〈p〉Author(s): Forough Enayaty-Ahangar, Chase E. Rainwater, Thomas C. Sharkey〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This research details the creation of a large-scale optimization approach for solving an application of a multi-period bilevel network interdiction problem (NIP). In this class of multi-period NIP, interdiction activities must be scheduled to minimize the cumulative maximum flow over a finite time horizon. A logic-based decomposition (LBD) approach is proposed that utilizes constraint programming to exploit the scheduling nature of this multi-period NIP. Computational results–comparing solutions obtained using the proposed approach versus traditional mixed-integer programming approach–suggest that the LBD approach is more efficient in finding solutions for medium to large problem instances.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 19 June 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Omega〈/p〉 〈p〉Author(s): Kannan Govindan, Miłosz Kadziński, Ronja Ehling, Grzegorz Miebs〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Pressure from legislation and customers has motivated companies to consider reverse logistics (RL) in their operations. Since it is a complex procedure that requires an adequate system, the recent trend consists in outsourcing RL to third-party reverse logistics providers (3PRLPs). This paper provides the background of sustainable triple bottom line theory with focus on economic, environmental, and social aspects under 3PRL concerns. The relevant sustainability criteria are used in a case study conducted in cooperation with an Indian automotive remanufacturing company. To select the most preferred service provider, we use a hybrid method combining a variant of ELECTRE I accounting for the effect of reinforced preference, the revised Simos procedure, and Stochastic Multi-criteria Acceptability Analysis. The incorporated approach exploits all parameters of an outranking model compatible with the incomplete preference information of the Decision Maker. In particular, it derives the newly defined kernel acceptability and membership indices that can be interpreted as a support given to the selection of either a particular subset of alternatives or a single option. The proposed ELECTRE-based method enriches the spectrum of multiple criteria decision analysis approaches that can be used to effectively approach the problem of the 3PRLP selection. As indicated by the extensive review presented in the paper, this application field was so far dominated by Analytic Hierarchy Process and TOPSIS, whose weaknesses can be overcome by applying the outranking methods.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 6 September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Omega〈/p〉 〈p〉Author(s): Meysam Arvan, Behnam Fahimnia, Mohsen Reisi, Enno Siemsen〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Product forecasts are a critical input into sourcing, procurement, production, inventory, logistics, finance and marketing decisions. Numerous quantitative models have been developed and applied to generate and improve product forecasts. The use of human judgement, either solely or in conjunction with quantitative models, has been well researched in the academic literature and is a popular forecasting approach in industry practice. In the context of judgemental forecasting, methods that integrate an expert's judgement into quantitative forecasting models are commonly referred to as “integrating forecasting” methods. This paper presents a systematic review of the literature of judgemental demand forecasting with a focus placed on integrating methods. We explore the role of expert opinion and contextual information and discuss the application of behaviourally informed support systems. We also provide important directions for further research in these areas.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 19 September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Omega〈/p〉 〈p〉Author(s): Pietro De Giovanni, Georges Zaccour〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉A manufacturer invests in product quality to encourage consumers who have purchased in the past to substitute their current product version with a new release. Since price deters the adoption of an upgraded quality product, consumers evaluate both the quality improvements and the new release price before deciding whether to return a good. The returns can be either voluntary (passive returns) or dependent on the firm’s controls (active returns), while the pricing strategies can be either fixed (constant intertemporal pricing) or varying over time (updated intertemporal pricing) depending on the quality improvements. By combining these two ingredients (return type and pricing policy) we formulate a two-period model in which a manufacturer invests in quality improvements and sets the product prices over time. Our results show that when consumers passively return old product versions, the manufacturer should always update its pricing strategies according to the quality improvements. However, when consumer returns are sensitive to quality improvements and price, the manufacturer can be indifferent between setting a constant or an updated pricing policy depending on the effect that quality has on returns. If the manufacturer can choose between a market in which consumer returns are passive or active, it decides according to how quality impacts the returns: When the consumers’ willingness to return according to the quality effect is negligible, the manufacturer prefers to work in a market with passive attitudes towards returns. While the choice of updating the price is always dominant from an economic point of view, it turns out to be suboptimal from an environmental perspective when the effects of quality and price on returns are balanced. When the price effect on returns also depends on the discount granted to consumers, then the discrepancy between economic and environmental returns is amplified.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 20 June 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Omega〈/p〉 〈p〉Author(s): Bayi Cheng, Huijun Zhu, Kai Li, Yongjun Li〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Motivated by applications in art tile manufacturing and metal working industries, we study the optimization problem with a truncated batch-position-based learning effect. In production, a set of semi-products need to be processed on a single batch facility which has a fixed capacity. Several semi-products can be processed together in one batch if their total size does not exceed the facility capacity. We consider a truncated batch-position-based learning effect which is a typical behavior of workers. During the learning period, the worker can finish the task more and more quickly because of learning effects. After the learning period, the worker reaches the best ability and the ability keeps steady. Then we consider two models of manufacturing with batch operations. In the first model, semi-products have identical sizes and we propose an optimal algorithm with time complexity of 〈em〉O〈/em〉(〈em〉n〈/em〉log 〈em〉n〈/em〉). In the second model, semi-products have arbitrary sizes which are proportional to their processing times and the model is shown to be NP-hard in the strong sense. We propose two types of learning effects including fast and slow truncated batch-position-based learning effects. Then we propose an approximation algorithm with an absolute and asymptotic worst-case ratio less than 2. Finally, we conduct computational experiments and the results show the effectiveness of our algorithms. We also provide managerial insights and detailed suggestions for decision makers of manufacturing companies based on our results.〈/p〉〈/div〉

Description: 〈p〉Publication date: 1 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 273, Issue 2〈/p〉 〈p〉Author(s): Zhenyu Cui, J. Lars Kirkby, Duy Nguyen〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this paper, we propose a general approximation framework for the valuation of (path-dependent) options under time-changed Markov processes. The underlying background process is assumed to be a general Markov process, and we consider the case when the stochastic time change is constructed from either discrete or continuous additive functionals of another independent Markov process. We first approximate the underlying Markov process by a continuous time Markov chain (CTMC), and derive the functional equation characterizing the double transforms of the transition matrix of the resulting time-changed CTMC. Then we develop a two-layer approximation scheme by further approximating the driving process in constructing the time change using an independent CTMC. We obtain a single Laplace transform expression. Our framework incorporates existing time-changed Markov models in the literature as special cases, such as the time-changed diffusion process and the time-changed Lévy process. Numerical experiments illustrate the accuracy of our method.〈/p〉〈/div〉

Description: 〈p〉Publication date: 1 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 273, Issue 2〈/p〉 〈p〉Author(s): Xiaole Wu, Yu Zhou〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Managers broadly agree that the entry of third-party remanufacturers (TPRs) is detrimental to original equipment manufacturers (OEMs), and social planners broadly agree that a nondiscriminatory uniform pricing policy is more desirable than a buyer-specific pricing policy. In this study, we develop a game theoretical model to revisit the effects of these policies in a closed-loop supply chain in which one supplier sells a component that cannot be remanufactured to one OEM and one TPR. The supplier must charge the same wholesale price in the uniform pricing model. Our analysis shows that regardless of the pricing policy, third-party remanufacturing could lead to a triple win to the supplier, the OEM, and the TPR. When compared with a buyer-specific pricing policy, a uniform pricing policy may result in a fourfold loss to the supplier, the OEM, the TPR, and the consumers, and hence an absolute reduction in social welfare. The key intuition driving the findings is that under certain conditions, the buyer-specific pricing policy facilitates third-party remanufacturing, which may increase the total profit of the supply chain and improve social welfare. Therefore, the OEM should not always attempt to deter the entry of TPRs. In addition, the government should allow the supplier to charge buyer-specific wholesale prices to foster the remanufacturing sector, particularly in its infancy.〈/p〉〈/div〉

Description: 〈p〉Publication date: 1 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 273, Issue 2〈/p〉 〈p〉Author(s): Joydeep Paul, Niels Agatz, Remy Spliet, René De Koster〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉More and more retailers allow customers to order goods online and then pick them up in a store. In this setting, these orders are typically served from a dedicated warehouse. This often means that the stores are visited by different vehicles to replenish the store inventory and to supply the pick-up points. Motivated by a collaboration with an omni-channel grocery retailer in the Netherlands, we study how to best share capacity between the routes associated with these different sales channels. As operational constraints prevent jointly planning the routes, we consider the replenishment routes as fixed when planning the routes to serve the pick-up orders. An order can be transferred to the replenishment route, if capacity allows. We consider the problem of deciding which customer orders to transfer and which to deliver directly such that the total costs are minimized. We present an exact and a heuristic approach to solve this problem. Computational experiments on both real-world and artificial instances show that substantial savings can be achieved by sharing vehicle capacity across different channels.〈/p〉〈/div〉

Description: 〈p〉Publication date: 1 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 273, Issue 2〈/p〉 〈p〉Author(s): Xinchang Wang, Qiang Meng〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The 〈em〉congestion effect〈/em〉 refers to the phenomenon that more customers choosing to use the same facility reduces the facility’s utility. This work addresses the optimal pricing problem for a firm operating a joint-venture terminal under the congestion effect. The firm is formed between a port terminal operator and a shipping line, thus being able to provide a bundle of ocean transportation and port terminal solutions to cargo suppliers. The objective is to determine the optimal prices charged to cargo suppliers to maximize the total profit of the firm. First, we develop a tractable flow-based optimization model that uses a fixed-point equation to capture the interaction between the congestion effect and cargo suppliers’ choice. Second, we characterize the optimal solution for a variety of cases, including the single origin-destination case, partially homogeneous case that includes the fully homogeneous case as a special case, and heterogeneous case. Third, we evaluate the profit loss incurred by ignoring the congestion effect with numerical studies. Moreover, we propose one-variable and two-variable search methods for the partially homogeneous and heterogeneous cases, respectively. We learn that the firm should quote the same price to all cargo suppliers under the fully homogeneous case. However, this is not necessarily optimal under the partially homogeneous or heterogeneous cases. The profit loss incurred by neglecting the congestion effect can be significant and increases as cargo suppliers become less tolerant of congestion.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 3 November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research〈/p〉 〈p〉Author(s): Matthieu Guillot, Gautier Stauffer〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this paper, we give a new framework for the stochastic shortest path problem in finite state and action spaces. Our framework generalizes both the frameworks proposed by Bertsekas and Tsitsiklis 〈em〉(An analysis of stochastic shortest path problems. Math. Oper. Res., 16(3):580-595, Aug. 1991)〈/em〉and by Bertsekas and Yu 〈em〉(Stochastic shortest path problems under weak conditions, to appear in Math. Oper. Res., 2016)〈/em〉. We prove that the problem is well-defined and (weakly) polynomial when (i) there is a way to reach the target state from any initial state and (ii) there is no transition cycle of negative costs (a generalization of negative cost cycles). These assumptions generalize the standard assumptions for the deterministic shortest path problem and our framework encapsulates the latter problem (in contrast with prior works). In this new setting, we can show that (a) one can restrict to deterministic and stationary policies, (b) the problem is still (weakly) polynomial through linear programming, (c) Value Iteration and Policy Iteration converge, and (d) we can extend Dijkstra’s algorithm.〈/p〉〈/div〉

Description: 〈p〉Publication date: 1 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 273, Issue 2〈/p〉 〈p〉Author(s): Marco Botte, Anita Schöbel〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉 〈p〉In robust optimization, the parameters of an optimization problem are not deterministic but uncertain. Their values depend on the scenarios which may occur. 〈em〉Single-objective〈/em〉 robust optimization has been studied extensively. Since 2012, researchers have been looking at robustness concepts for 〈em〉multi-objective〈/em〉 optimization problems as well.〈/p〉 〈p〉In another line of research, single-objective uncertain optimization problems are transformed to deterministic multi-objective problems by treating every scenario as an objective function. In this paper we combine these two points of view. We treat every scenario as an objective function also in uncertain 〈em〉multi-objective〈/em〉optimization, and we define a corresponding concept of dominance which we call 〈em〉multi-scenario efficiency〈/em〉. We sketch this idea for finite uncertainty sets and extend it to the general case of infinite uncertainty sets. We then investigate the relation between this dominance and the concepts of highly, locally highly, flimsily, and different versions of minmax robust efficiency. For all these concepts we prove that every 〈em〉strictly〈/em〉 robust efficient solution is multi-scenario efficient. On the other hand, under a compactness condition, the set of multi-scenario efficient solutions contains a robust efficient solution for all these concepts which generalizes the 〈em〉Pareto robustly optimal〈/em〉(PRO) solutions from single-objective optimization to 〈em〉Pareto robust efficient〈/em〉 (PRE) solutions in the multi-objective case. We furthermore present two results on reducing an infinite uncertainty set to a finite one which are a basis for computing multi-scenario efficient solutions.〈/p〉 〈/div〉

Description: 〈p〉Publication date: 1 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 273, Issue 2〈/p〉 〈p〉Author(s): Defeng Sun, Lixin Tang, Roberto Baldacci〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this paper, we study the Quay Crane Scheduling Problem (QCSP) in container terminals. We describe a new mathematical formulation for the QCSP and by addressing the structure of workload assignments we develop an easier way to handle non-crossing constraints. The proposed mathematical formulation is used in an exact solution framework based on logic-based Benders decomposition. The proposed approach decomposes the problem into a workload-assignment master problem and operation-sequence slave subproblems. Logic-based cuts are proposed to ensure the convergence of the approach. Computational results show the effectiveness of the proposed solution approach.〈/p〉〈/div〉

Description: 〈p〉Publication date: 1 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 273, Issue 2〈/p〉 〈p〉Author(s): Pamela J. Palomo-Martínez, M. Angélica Salazar-Aguilar〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this work we introduce a variant of the well-known Traveling Purchaser Problem in which the purchased products must be delivered to a set of customers. The objective is to minimize the total cost (purchasing plus traveling costs) and the waiting time of the customers, simultaneously, while satisfying the total demand. This problem is called the bi-objective Traveling Purchaser Problem with Deliveries. In order to approximate Pareto fronts for this problem, a relinked variable neighborhood search is proposed and tested over a large set of artificial instances. Our results show that our algorithm is highly competitive compared to the ϵ-constraint method in small instances. On the other hand, experiments carried out over large instances show that our algorithm is able to find Pareto front approximations with more points in a shorter running time for uncapacitated instances than for capacitated ones. Also, computational results show that the performance of some local searches used in our algorithm depends on the characteristics of the instances, this underlines the importance of designing a metaheuristic based on multiple local searches.〈/p〉〈/div〉

Description: 〈p〉Publication date: 1 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 273, Issue 2〈/p〉 〈p〉Author(s): Inmaculada Rodríguez-Martín, Juan-José Salazar-González, Hande Yaman〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The Periodic Vehicle Routing Problem is a generalization of the classical capacitated vehicle routing problem in which routes are determined for a planning horizon of several days. Each customer has an associated set of allowable visit schedules, and the objective of the problem is to design a set of minimum cost routes that give service to all the customers respecting their visit requirements. In this paper we study a new variant of this problem in which we impose that each customer should be served by the same vehicle/driver at all visits. We call this problem the Periodic Vehicle Routing Problem with Driver Consistency. We present an integer linear programming formulation for the problem and derive several families of valid inequalities. We solve it using an exact branch-and-cut algorithm, and show computational results on a wide range of randomly generated instances.〈/p〉〈/div〉

Description: 〈p〉Publication date: 1 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 273, Issue 2〈/p〉 〈p〉Author(s): Spiridon Penev, Pavel V. Shevchenko, Wei Wu〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We quantify model risk of a financial portfolio whereby a multi-period mean-standard-deviation criterion is used as a selection criterion. In this work, model risk is defined as the loss due to uncertainty of the underlying distribution of the returns of the assets in the portfolio. The uncertainty is measured by the Kullback–Leibler divergence, i.e., the relative entropy. In the worst case scenario, the optimal robust strategy can be obtained in a semi-analytical form as a solution of a system of nonlinear equations. Several numerical results are presented which allow us to compare the performance of this robust strategy with the optimal non-robust strategy. For illustration, we also quantify the model risk associated with an empirical dataset.〈/p〉〈/div〉

Description: 〈p〉Publication date: 1 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 273, Issue 2〈/p〉 〈p〉Author(s): Teresa Cardoso-Grilo, Marta Monteiro, Mónica Duarte Oliveira, Mário Amorim-Lopes, Ana Barbosa-Póvoa〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Medical training is an intricate and long process, which is compulsory to medical practice and often lasts up to twelve years for some specialties. Health stakeholders recognise that an adequate planning is crucial for health systems to deliver necessary care services. However, proper planning needs to account for complexity related with the setting of medical school vacancies and of residency programs, which are highly influenced by multiple stakeholders with diverse perspectives and views, as well as by the specificities of medical training. Aiming at building comprehensive models with a potential to assist health decision-makers, this article develops a multi-methodological framework to assist the planning of medical training under such a complex environment. It combines the structuring of the objectives and specificities of the medical training problem with a Soft Systems Methodology through the CATWOE (Customer, Actor, Transformation, 〈em〉Weltanschauung〈/em〉, Owner, Environment) approach, and the formulation of a Mixed Integer Linear Programming model that considers all relevant aspects. Considering the specificities of countries based on a National Health Service structure, a multi-objective planning model emerges, informing on how many vacancies should be opened/closed per year in medical schools and in each specialty. This model aims at (i) minimizing imbalances between medical demand and supply; (ii) minimizing costs; and (iii) maximizing equity across medical specialties. A case study in Portugal is explored so as to illustrate the applicability of the proposed multi-methodology, showing the relevance of proper structuring for planning models having the potential to inform health decision-makers and planners in practice.〈/p〉〈/div〉

Description: 〈p〉Publication date: 1 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 273, Issue 2〈/p〉 〈p〉Author(s): Chi Seng Pun, Hoi Ying Wong〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper studies the mean-variance (MV) portfolio problems under static and dynamic settings, particularly for the case in which the number of assets (〈em〉p〈/em〉) is larger than the number of observations (〈em〉n〈/em〉). We prove that the classical plug-in estimation seriously distorts the optimal MV portfolio in the sense that the probability of the plug-in portfolio outperforming the bank deposit tends to 50% for 〈em〉p〈/em〉 ≫ 〈em〉n〈/em〉 and a large 〈em〉n〈/em〉. We investigate a constrained ℓ〈sub〉1〈/sub〉 minimization approach to directly estimate effective parameters that appear in the optimal portfolio solution. The proposed estimator is implemented efficiently with linear programming, and the resulting portfolio is called the linear programming optimal (LPO) portfolio. We derive the consistency and the rate of convergence for LPO portfolios. The LPO procedure essentially filters out unfavorable assets based on the MV criterion, resulting in a sparse portfolio. The advantages of the LPO portfolio include its computational superiority and its applicability for dynamic settings and non-Gaussian distributions of asset returns. Simulation studies validate the theory and illustrate its finite-sample properties. Empirical studies show that the LPO portfolios outperform the equally weighted portfolio and the estimated optimal portfolios using shrinkage and other competitive estimators.〈/p〉〈/div〉

Description: 〈p〉Publication date: 1 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 273, Issue 2〈/p〉 〈p〉Author(s): Phil Scarf, Rishikesh Parma, Ian McHale〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this paper we investigate the relationship between outcome uncertainty and scoring rates in the framework of a “Poisson match”. We argue that increasing scoring rates in the hope of increasing entertainment may have a detrimental impact on the popularity of sport. The basis of our argument is that higher scoring-rates decrease outcome uncertainty. We use international rugby to demonstrate our findings and show that scoring rates have indeed increased significantly over the previous half-century in this sport. Therefore, administrators should recognise our general point and we suggest that rugby union administrators in particular ought to consider the introduction of new laws to reduce scoring-rates. Scenarios in which the scoring-rate is radically reduced are illustrated through a simulation of the Rugby World Cup tournament.〈/p〉〈/div〉

Description: 〈p〉Publication date: 1 March 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 European Journal of Operational Research, Volume 273, Issue 2〈/p〉 〈p〉Author(s): Nils Löhndorf, Alexander Shapiro〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We consider the multistage stochastic programming problem where uncertainty enters the right-hand sides of the problem. Stochastic Dual Dynamic Programming (SDDP) is a popular method to solve such problems under the assumption that the random data process is stagewise independent. There exist two approaches to incorporate dependence into SDDP. One approach is to model the data process as an autoregressive time series and to reformulate the problem in stagewise independent terms by adding state variables to the model (TS-SDDP). The other approach is to use Markov Chain discretization of the random data process (MC-SDDP). While MC-SDDP can handle any Markovian data process, some advantages of statistical analysis of the policy under the true process are lost. In this work, we compare both approaches based on a computational study using the long-term operational planning problem of the Brazilian interconnected power systems. We found that for the considered problem the optimality bounds computed by the MC-SDDP method close faster than its TS-SDDP counterpart, and the MC-SDDP policy dominates the TS-SDDP policy. When implementing the optimized policies on real data, we observe that not only the method but also the quality of the stochastic model has an impact on policy performance and that using an 〈math xmlns:mml="http://www.w3.org/1998/Math/MathML" altimg="si1.gif" overflow="scroll"〉〈mrow〉〈mi mathvariant="sans-serif"〉AV〈/mi〉〈mo〉@〈/mo〉〈mi mathvariant="sans-serif"〉R〈/mi〉〈/mrow〉〈/math〉 formulation is effective in making the policy robust against a misspecified stochastic model.〈/p〉〈/div〉

Description: 〈p〉Publication date: February 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 78〈/p〉 〈p〉Author(s): Nicholas Apergis, Giray Gozgor, Chi Keung Marco Lau, Shixuan Wang〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The hidden semi-Markov model (HSMM) is more flexible than the hidden Markov model (HMM). As an extension of the HMM, the sojourn time distribution in the HSMM can be explicitly specified by any distribution, either nonparametric or parametric, facilitating the modelling for the stylised features of electricity prices, such as the short-lived spike and the time-varying mean. By using a three-regime HSMM, this paper investigates the hidden regimes in five Australian States (Queensland, New South Wales, Victoria, South Australia, and Tasmania), spanning the period from June 8, 2008 to July 3, 2016. Based on the estimation results, we find evidence that the three hidden regimes correspond to a low-price regime, a high-price regime, and a spike regime. Running the decoding algorithm, the analysis systemically finds the timing of the three regimes, and thus, we link the empirical results to the policy changes in the Australian National Electricity Market. We further discuss the contributing factors for the different characteristics of the Australian electricity markets at the state-level.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: October 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 76〈/p〉 〈p〉Author(s): Jiawen Luo, Qiang Ji〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper investigates the realised volatility connectedness of US crude oil futures and five China's agricultural commodity futures using connectedness measures and high-frequency data. Time-varying volatility connectedness characteristics are identified by combining a multivariate heteroscedastic autoregressive (HAR) model with the DCC-GARCH model. The results verify the existence of volatility spillover from the US crude oil market to China's agricultural commodity markets, although the magnitude of this spillover is weak. Furthermore, the realised volatility is decomposed into positive and negative components to identify the asymmetric effect of volatility connectedness. The results show that market interdependence has obviously increased for negative volatility relative to positive volatility, implying that volatility transmission has a leverage effect across markets.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: October 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 76〈/p〉 〈p〉Author(s): Bowen Xiao, Ying Fan, Xiaodan Guo〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Due to the uncertain effects on economic growth and economic fluctuations caused by environmental policies, the best means of choosing the most appropriate environmental policy remains controversial. In the face of various uncertain economic factors, economic fluctuation is an important criterion for evaluating different environmental policies. Thus, we established an environmental dynamic stochastic general equilibrium model under New Keynesian framework embodying nominal price rigidities, environmental policies, pollutant emissions and real uncertainties with the aim of comparing the impacts of different environmental policies on the macroeconomic fluctuations. The results are as follows. First, the responses indicate that all kinds of environmental policies are counter-cyclical. Emissions intensity policy has the strongest effect on curbing fluctuations. Second, a positive energy efficiency shock will lead to a corresponding increase in energy inputs, which is referred to as the energy rebound effect, as well as a rise in pollutant emissions. Third, an emissions intensity shock will exert greater impacts than environmental tax rate shock and emissions cap shock. Fourth, the lower is the price dispersion the less intermediate goods are needed, and, consequently, the lower are the pollutant emissions. Taken together, the results highlight the policy implications associated with choosing an environmental policy.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 20 September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management〈/p〉 〈p〉Author(s): Alistair Ulph, David Ulph〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We present a model of consumer behaviour when consumers value conformity and examine the implications for environmental policy. The model shares a feature set out in Dasgupta et al. (2016) of having a structure of preferences for conformity which induces a mass of consumers to adhere exactly to a norm level of consumption (clumping). However we extend our previous analysis by analysing the conditions for the existence and potential uniqueness of consumption norms. In doing so we introduce threshold effects whereby individuals adhere to a norm only if sufficiently many others do so. Taken together these have striking implications for environmental policy in the case where the norm good generates pollution emissions. Clumping means many individuals will not change behaviour unless the norm changes while threshold effects plus clumping means that it may be hard to change a norm. We show that the use of Pigovian taxes to control behaviour may be either ineffective or welfare reducing, and that the optimal Pigovian tax will work only if it is above some threshold level. There are parameter values for which quantity-based injunctive policies raise welfare relative to no intervention while optimal Pigovian taxes would lower welfare.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Renaud Foucart, Cheng Wan〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We study strategic decentralization in the provision of a global public good. A federation, with the aim of maximizing the aggregate utility of its members, may find it advantageous to decentralize the decision-making, so that its members act autonomously to maximize their own utility. If utility is fully transferable within a federation, the larger a federation is or the more sensitive it is to the public good, the more it has incentives to remain centralized. If an overall increase in the sensitivity to the public good induces some federation(s) to decentralize, it may lead to a decrease in the aggregate provision. With non-transferable utility within a federation, those members that are smaller or less sensitive to the public good are more likely to prefer decentralization. Some members within a federation becoming more sensitive to the public good may thus lead to a lower aggregate provision, because the increased heterogeneity of the federation makes it more inclined to decentralize.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 12 August 2017〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management〈/p〉 〈p〉Author(s): Javier de Frutos, Guiomar Martín-Herrán〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We analyze a transboundary pollution differential game where pollution control is spatially distributed among a number of agents with predetermined spatial relationships. The analysis emphasizes, first, the effects of the different geographical relationships among decision makers; and second, the strategic behaviour of the agents. The dynamic game considers a pollution stock (the state variable) distributed among one large region divided in subregions which control their own emissions of pollutants. The emissions are also represented as distributed variables. The dynamics of the pollution stock is defined by a parabolic partial differential equation. We numerically characterize the feedback Nash equilibrium of a discrete-space model that still captures the spatial interactions among agents. We evaluate the impact of the strategic and spatially dynamic behaviour of the agents on the design of equilibrium environmental policies.〈/p〉〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Lassi Ahlvik, Antti Iho〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We characterize optimal investment in pollution control measures with uncertain effects that can be learned by experimentation. The anticipation of learning through experimentation introduces two effects. The Inquisitive Effect appears because the planner wants to invest in geoengineering to gather socially valuable information on its effects. This effect encourages investments in geoengineering and may justify field tests even where the expected benefits fall short of the costs. The Flexibility Effect stems from the planner optimally preparing for the post-learning stage, where the field test is either ramped up or scaled down, depending on the outcome of the experiment. This effect can encourage or discourage investments in geoengineering. We demonstrate this set-up through an economic analysis of an artificial oxygenation scheme designed to mitigate eutrophication in the Baltic Sea and find that while the expected marginal benefit falls short of costs, a field test representing some 10 percent of full deployment would be optimal.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Larry D. Qiu, Mohan Zhou, Xu Wei〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The Porter Hypothesis (PH) posits that well-designed environmental regulations can stimulate innovation, which may lead to efficiency gains or even profit increase in regulated firms. In this study, we revisit the PH under monopolistic competition by incorporating two important features in our model and analysis, namely, firm heterogeneity and general equilibrium. We show that the PH holds for high-capability firms, but not for low-capability firms. Heterogeneous responses exist in innovation investment, but the average industry productivity increases. We obtain an interesting finding that adds a new feature to the PH. This finding indicates that strict environmental regulations can encourage firm entry and exit, thereby improving the composition of firms in the regulated industry.〈/p〉〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Susana Ferreira, Haiyan Liu, Brady Brewer〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Using data from a county severely affected by the increased seismicity associated with injection wells since 2009 in Oklahoma, we recover hedonic estimates of property value impacts from nearby shale oil and gas development that vary with earthquake risk exposure. Results suggest that the seismic activity has enhanced the perceived risks associated with wastewater injection but not shale gas production. This risk perception is limited to injection wells within 2 km of the properties.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 91〈/p〉 〈p〉Author(s): Eric English, Roger H. von Haefen, Joseph Herriges, Christopher Leggett, Frank Lupi, Kenneth McConnell, Michael Welsh, Adam Domanski, Norman Meade〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The 2010 Deepwater Horizon oil spill in the Gulf of Mexico was the largest ever in U.S. waters, eclipsing the 1989 Exxon Valdez spill in terms of the sheer quantity of oil released and the scale and scope of activities impacted. We developed a recreation demand model to monetize economic damages associated with lost shoreline recreational user days attributable to the spill. The unprecedented magnitude of the spill disruption led to a variety of innovations. We estimate a model of shoreline recreation trips to the Gulf Coast region from the general population of the contiguous U.S., combining single and multiple-day trips, calculating travel costs that incorporate detailed information on flying costs and transportation mode choice, and using alternative-specific constants to control for site characteristics. Losses per recreational user day are assessed using utility adjustments that reproduce the decline in recreation observed through onsite counts. Sensitivity analyses demonstrate our lost user day value is robust to changes in income imputation, nesting structure, site aggregation and spill calibration, and show the importance of accounting for flying as a mode choice. Estimated losses from the primary shoreline study are $520 million (〈math xmlns:mml="http://www.w3.org/1998/Math/MathML" altimg="si1.gif" overflow="scroll"〉〈mo〉±〈/mo〉〈/math〉166) out of the total recreational damages of $661 million (2015$).〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 91〈/p〉 〈p〉Author(s): Pamela Campa〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This study investigates the effects of media on corporate environmental decisions. Using data on plant-level toxic emissions from 1996 to 2009 from the US Environmental Protection Agency's Toxics Release Inventory, and newly collected data on the location and content of newspapers, I find that the probability that a plant's emissions are featured in a nearby newspaper increases with the plant's proximity to the newspaper's headquarter. Further, plants located near a larger number of newspapers' headquarters produce lower toxic emissions. The latter result is specific to plants operating in those industries that produce consumer goods, suggesting an important role of accountability through consumer demand. An event-study analysis also shows that when newspapers cover the emissions of consumer goods producers, these reduce their emissions by 29% with respect to those plants that were not covered, whereas there is no evidence of differential trends in the years that lead up to coverage.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 12 August 2017〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management〈/p〉 〈p〉Author(s): Xiaoguang Chen, Lu Yang〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We pair a firm-level panel of annual industrial output with a fine-scale daily weather data set, to estimate the responses of industrial output to temperature changes in China. We have four primary findings. First, industrial output is nonlinear in temperature changes. With seasonal average temperatures as temperature variables, output responds positively to higher spring temperatures and negatively to elevated summer temperatures. With temperature bins as temperature variables, output increases linearly with temperature up to 21–24 °C, and then declines sharply at higher temperatures. Second, lagged temperature changes exert large and significant impacts on current year’s output. Third, higher summer temperatures have larger detrimental effects on output in low-temperature regions than in high-temperature regions, which suggests that adaptation to warming may have been actively undertaken in high-temperature regions in China. Lastly, industrial output in China is projected to decrease by 3–36% by 2080 under the slowest warming scenario (B1) and by 12–46% under the most rapid warming scenario (A2) under the global climate models UKMO-HadCM3 and PCM.〈/p〉〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Teevrat Garg, Stuart E. Hamilton, Jacob P. Hochard, Evan Plous Kresch, John Talbot〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Waterborne diseases, often arising from freshwater pollution, are a leading cause of mortality in developing countries. However, data limitations inhibit our understanding of the extent of damage arising from freshwater pollution. We employ a novel hydrological approach combined with village census data to study the effect of upstream polluting behavior on downstream health in Indonesia. We find that upstream use of rivers for bathing and associated sanitary practices can explain as many as 7.5% of all diarrhea-related deaths annually. We also find suggestive evidence for differential avoidance behavior in response to different pollutants. Our approach relies on publicly available satellite data, open source hydrological models, and coarse village census data allowing us to estimate health externalities from river pollution in particularly vulnerable and data poor environments.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 91〈/p〉 〈p〉Author(s): Zhiyu Wang〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Water pollutants are non-uniformly mixed across space and different in the persistence of environmental damage. Their marginal environmental damage could vary to a large degree with emission locations. The efficient pollution control should integrate heterogeneity in the marginal environmental damage caused by pollutants. However, little literature on permit trading has considered the scale and the persistence of environmental damage in the meantime. This paper designs proper trading ratios in permit trading to alleviate environmental damage from both aspects. It finds that it is not only important but also indispensable to incorporate the decay rate of pollutant, the discount rate, and the initial pollutant stock into permit trading, so as to achieve the efficient pollution control.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): David J. Lewis, Stephen Polasky〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The provision of many ecosystem services depends on the spatial pattern of land use across multiple landowners. Even holding land use constant, ecosystem service provision may change through time due to climate change. This paper develops an auction mechanism that implements an optimal solution for providing ecosystem services through time with multiple landowners who have private information about the net benefits of alternative uses of their land. Under the auction, each landowner has a dominant strategy to truthfully reveal their private information. With this information a regulator can then implement the optimal landscape pattern, which maximizes the present value of net benefits derived from the landscape, following the rules of the auction mechanism. The auction can be designed as a subsidy auction that pays landowners to conserve or a tax auction where landowners pay for the right to develop. Our mechanism optimizes social adaptation of ecosystem management to climate change.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 21 July 2017〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management〈/p〉 〈p〉Author(s): Lucas Bretschger, Alexandra Vinogradova〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The paper develops a general framework for the analysis of environmental shocks in growing economies. Endogenous capital investments allow identifying the dual role of capital as a buffer against shocks and a source of pollution. We study the effects of recurring natural disasters on optimal growth and efficient environmental policies. Emissions may cause continuous fluctuations, entail discrete and recurring jumps, or trigger so-called “tipping points” with large costs to the economy. Closed-form solutions are provided for all the model variants. We discuss possible applications in environmental economics and identify current research gaps.〈/p〉〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Yun Qiu, Sathya Gopalakrishnan〈/p〉

Description: 〈p〉Publication date: January 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 93〈/p〉 〈p〉Author(s): Jing Li, James H. Stock〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We examine the pass-through of wholesale prices to retail prices in the market for E85, which contains 51%–83% ethanol, and in the much larger market for E10, which contains 10% ethanol. We use a panel dataset consisting of monthly observations from 2007 to March 2015 on wholesale and retail prices for 274 Minnesota gas stations that sell both E10 and E85. Consistent with prior research, the cumulative pass-through coefficient for E10 is 1.00 after one month. In contrast, the E85 market is sparse, and although pass-through increased over time, we estimate it to be only 0.53 statewide from 2012 to 2015. Pass-through is higher at stations with more local E85 competitors. In the Twin Cities, which has a high density of E85 stations, pass-through is nearly complete, but outside the Twin Cities slightly less than half the wholesale discount of E85, relative to E10, is passed on to the consumer.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Wolfgang Habla〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In a general equilibrium model with two periods and a finite fossil resource, I analyze the non-cooperative climate policies of symmetric countries that are in competition for mobile factors of production (capital and fossil energy). The paper shows that countries that want to slow down climate change but are also concerned about tax revenues from mobile tax bases have a rationale to supplement environmental taxes on fossil fuels with source-based capital taxes (or subsidies). More specifically, countries find it beneficial to subsidize capital in period one and tax it in period two. The first-period subsidy on capital facilitates a higher environmental tax by counteracting its adverse effects, and increases national and global welfare in equilibrium. By contrast, the capital tax in period two induces inter- and intratemporal distortions that lead to lower welfare. The rate of resource extraction is inefficiently high in equilibrium, no matter which tax portfolio is at the governments' disposal. Furthermore, unintended (‘Green Paradox’) effects of demand-side policies are shown to arise even in general equilibrium with factor mobility. Finally, factor mobility does not necessarily lead to a higher rate of extraction and lower welfare compared to autarky.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Olli Tahvonen, Martin F. Quaas, Rüdiger Voss〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We develop the age-structured fishery model by including endogenous harvesting selectivity and stochastic recruitment, as a growing body of fishery ecological evidence suggests these factors to be critical for fisheries management. Optimal harvesting selectivity aims to direct fishing towards age classes that are preferable to catch given information on fish growth, natural mortality, and recruitment in addition to implications on harvesting cost. We analytically show that maximum sustainable yield (MSY) leads to potentially serious and previously unrecognized deviation from economic optimality, as it neglects the dependence of harvesting costs on gear selectivity. We further show that the steady-state population level may fall below the MSY population even with zero discounting and stock-dependent harvesting costs. We quantify our results using empirical data for Baltic cod. Applying the age-structured model with endogenous harvesting selectivity, we find large differences between maximum sustainable yield and the economic optimum, although the classic biomass model suggests that these differences should be unimportant. Stochastic recruitment implies a threefold increase in young age classes, but the stochastic solution can be accurately approximated by the certainty equivalence principle.〈/p〉〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Chunhua Wang, JunJie Wu, Bing Zhang〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In recent years, China's environmental regulation efforts have mainly focused on severely polluted “key regions.” The central government has designated the “three rivers and three lakes basins” (3Rs3Ls) as key regions for water pollution control and has imposed a variety of regulations to improve water quality in those basins. This paper evaluates the effects of the water quality regulations on firms' emissions of chemical oxygen demand (COD) and productivity in the 3Rs3Ls basins. We find that although the water quality regulations forced many small, heavily-polluting firms to shut down, they had no statistically significant effects on surviving firms' productivity because they were ineffective in reducing their COD emissions. A policy that forces the surviving firms to reduce their emissions would reduce their output values and productivity, at least in the short run. However, the effect is likely to be small. Specifically, a 10% reduction in total COD emissions from the industrial sectors would require only a 0.1% reduction in output values under the current production technologies. These findings are robust to alternative specifications and sampling strategies.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Karine Nyborg〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Do reciprocal preferences matter for participation in international environmental agreements? Combining the two canonical models of Barrett (2003) and Rabin (1993), I find that 1) the empty coalition is always stable; 2) the grand coalition is stable if reciprocity preferences are sufficiently strong; 3) if a minority of countries are not reciprocal, a majority coalition can still be stable, if reciprocity is sufficiently strong and widespread; and 4) there is also a stable minority coalition, if costs are moderate and the number of countries is not too small. The latter coalition is weakly larger than the maximum stable coalition with standard preferences, but barely improves on welfare, and is characterized by negative sentiments. The analysis illustrates that although models of reciprocity tend to be complex, the context of a specific applied game may reduce this complexity.〈/p〉〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Akshaya Jha, Nicholas Z. Muller〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Burning coal is known to have environmental costs; this paper demonstrates that the environmental costs of storing and handling coal are also sizable. We find that a 10% increase in the coal stockpiles held by U.S. power plants results in a 0.09% increase in average 〈em〉PM〈/em〉〈sub〉2.5〈/sub〉 concentration levels within 25 miles of these plants. Unlike most sources of variation in local air pollution, coal storage and handling impacts 〈em〉PM〈/em〉〈sub〉2.5〈/sub〉 but not other pollutants such as 〈em〉SO〈/em〉〈sub〉2〈/sub〉 and 〈em〉NO〈/em〉〈sub〉2〈/sub〉. Consequently, using coal stockpiles as an instrument, we show that a 10% increase in 〈em〉PM〈/em〉〈sub〉2.5〈/sub〉 causes a 1.1% (3.2%) increase in average adult (infant) mortality rates. Using a value of statistical life approach, our estimates indicate that a one ton increase in coal stockpiles results in local air pollution costs of $197. Economic policies that subsidize coal stockpiles highlight the importance of implementing environmental regulations specifically directed at coal storage and handling.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 26 April 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management〈/p〉 〈p〉Author(s): Karine Constant〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper analyzes the economic implications of an environmental policy when we account for the life expectancy of heterogeneous agents. In a framework in which everyone suffers from pollution but health status also depends on individual human capital, we find that the economy may be stuck in a trap in which inequality rises steadily, especially when the initial pollution intensity of production is too high. We emphasize that such inequality is in the long run costly for the economy in terms of health and growth. Therefore, we study whether a tax on pollution associated with an investment in pollution abatement can be used to address this situation. We show that a stricter environmental policy may allow the economy to escape from the inequality trap while enhancing the long-term growth rate when the initial inequality in human capital is not too large.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Jan Abrell, Sebastian Rausch, Giacomo A. Schwarz〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper examines pollution tax differentiation across industries in light of social equity concerns using theoretical and numerical general equilibrium analyses in an optimal tax framework. We characterize the drivers for non-uniform optimal taxes stemming from the interaction of household heterogeneity with social preferences. Quantitatively assessing the case of price-based CO〈sub〉2〈/sub〉 emissions control in the U.S. economy, we find that uniform emissions pricing is approximately optimal when social concerns are defined over inequity induced by the environmental tax. The deviation from uniform emissions pricing, however, becomes non-negligible when pollution tax rebates deviate much from optimal transfer schemes or when social concerns are defined over both policy-induced impacts and inequity unrelated to environmental policy. Our results are robust to a number of model extensions including the stringency of the environmental target, downstream vs. upstream taxation, pre-existing distortionary taxes, and parametric uncertainty in firms’ and households’ equilibrium tax responses.〈/p〉〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 91〈/p〉 〈p〉Author(s): Dale Squires, Niels Vestergaard〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The commons problem is even more severe than standard economic analysis suggests due to accumulated and new technology accompanied by spillovers of nonrival knowledge, creating a second market failure. The resulting endogenous dynamic increasing returns to scale external to producers that create endogenous growth of production lead to ongoing and accelerating rates of natural capital depletion. Optimum and open-access steady-state equilibriums indicated by canonical models may not exist, and corresponding resource stocks vary considerably from conventional wisdom. Market-based solutions alone for the commons problem are insufficient to achieve optimal economic welfare, and require a complementary technology policy for the second market failure and dynamic increasing returns to scale arising from nonrival ideas and knowledge spillovers and social learning. An empirical example illustrates the impact of technological change and accompanying knowledge spillovers and social learning.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 91〈/p〉 〈p〉Author(s): Jamie T. Mullins〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This article empirically compares the effectiveness of relative versus absolute performance standards in motivating compliance actions. By leveraging a unique set of Chilean administrative panel data, I examine a natural experiment created by a change in the performance standard used to incentivize the reduction of particulate matter in the atmospheric emissions of stationary pollution sources in the Santiago Metropolitan Region. I find that the absolute standard drove ∼21% less emissions cleanup than did the relative standard. I also demonstrate how sharp heterogeneity in responses to the change in standards is predictable based on an ex-ante identifiable type-categorization, which leads to the broadly-applicable conclusion that stricter regimes drive more compliance actions when imposed via an absolute performance standard compared to a relative standard. The extension of this framework provides a general means of anticipating whether an absolute or relative performance standard will drive higher rates of compliance actions in other settings.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 91〈/p〉 〈p〉Author(s): Krystal M. Drysdale, Nathan P. Hendricks〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We estimate how farmers adapted to a water restriction imposed through local governance. The restriction imposed a uniform quota on water use with a 5-year allocation and allowed trading of the quota within the restricted area. Our analysis exploits unique micro-level data on irrigated water use, irrigated acreage, and crops. We use a difference-in-differences econometric strategy that also includes farmer-time fixed effects to estimate the response to the restriction, where we exploit water rights between 2 and 5 miles of the policy boundary as a control group. Results indicate that farmers reduced water use by 26% due to the policy with most of the response due to reductions in water use intensity on the same crops rather than through reductions in irrigated acreage or changes in crops. The results imply that the short-run welfare impact of the policy was smaller than a policy that reduces irrigated acreage.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 91〈/p〉 〈p〉Author(s): Rikard Forslid, Toshihiro Okubo, Karen Helene Ulltveit-Moe〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper proposes a detailed mechanism for why exporting firms may have a lower emission intensity when emissions are subject to an environmental tax. This mechanism of our model is supported by Swedish firm-level data. Our mechanism runs through firms' endogenous investments in abatement. Firms' abatement investments depend on their production volumes, since a larger scale allows them to spread the fixed costs of abatement investment across more units. Production volumes increase in firm productivity and, as a consequence, firms' emission intensity is negatively related to firm productivity. Exporting also leads to higher production volumes and thereby to a lower emission intensity. Thus, trade has an effect on emissions independently of firm productivity. Trade therefore leads to higher but cleaner production. The overall effect of trade on emissions is neutral in our model. Trade liberalization does not affect aggregate emissions in our benchmark case of symmetric countries.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Guy Meunier, Juan-Pablo Montero, Jean-Pierre Ponssard〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We study pollution permit markets in which a fraction of permits are allocated to firms based on their output. Output-based allocations, which are receiving increasing attention in the design of carbon markets around the world (e.g., Europe, California, New Zealand), are shown to be optimal under demand and supply volatility despite the output distortions they may create. In a market that covers multiple sectors, the optimal design combines auctioned permits with output-based allocations that are specific to each sector and increasing in its volatility. When firms are better informed about the latter or must self select, the regulator resorts to some free (i.e., lump-sum) allocations to sort firms out.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 3 April 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management〈/p〉 〈p〉Author(s): Niko Jaakkola, Frederick van der Ploeg〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Global warming can be curbed by pricing carbon emissions and thus substituting fossil fuel with renewable energy consumption. Breakthrough technologies (e.g., fusion energy) can reduce the cost of such policies. However, the chance of such a technology coming to market depends on investment. We model breakthroughs as an irreversible tipping point in a multi-country world, with different degrees of international cooperation. We show that international spill-over effects of R&D in carbon-free technologies lead to double free-riding, strategic over-pollution and underinvestment in green R&D, thus making climate change mitigation more difficult. We also show how the demand structure determines whether carbon pricing and R&D policies are substitutes or complements.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 5 July 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management〈/p〉 〈p〉Author(s): Luca A. Panzone, Alistair Ulph, Daniel John Zizzo, Denis Hilton, Adrian Clear〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This study uses an incentive-compatible experimental online supermarket to assess whether prior environmentally-friendly behaviour outside the store and carbon taxes motivate sustainable consumption. Previous research suggests that past decisions may influence current decisions because consumers compensate morally desirable and undesirable acts over time, and carbon taxes have been promoted as effective tools to reduce the carbon footprint of food baskets. After controlling for past consumption, results show that being required to recall past environmentally-friendly behaviour before shopping led consumers to purchase more sustainable food baskets. Carbon taxation also strongly reduces the carbon footprint of food baskets, showing no interaction with the task of recalling past behaviours.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Esther Blanco, Tobias Haller, James M. Walker〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Public goods often provide external benefits to individuals beyond those who actively provide the goods. This paper addresses institutional arrangements between subjects who can provide a public good (insiders) and subjects who also benefit from the public good but cannot provide it (outsiders) due to technical, physical or institutional reasons. Using laboratory experiments, we compare a setting of passive outsiders to situations where outsiders can either make unconditional or conditional transfers to the group of insiders, in environments where transfers are shared equally among insiders. The primary behavioral questions are to what extent outsiders will use the opportunity to subsidize the contributions of insiders and how insiders will respond to those subsidies. In summary, outsiders make transfers to insiders, but reciprocal increases in contributions by insiders to transfers are small. Both transfers and contributions decay over time. Indeed, contributions to the public good with transfer institutions are no greater than those without such institutions.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 24 February 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management〈/p〉 〈p〉Author(s): Erik Ansink, Hans-Peter Weikard, Cees Withagen〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We augment the standard cartel formation game from non-cooperative coalition theory, often applied in the context of international environmental agreements, with the possibility that singletons support coalition formation without becoming coalition members themselves. We assume their support takes the form of a monetary transfer to the coalition, in order to induce larger coalitions, higher levels of public good provision and higher payoffs. We show that, under mild conditions on the costs and benefits of contributing to the public good (e.g. abatement of greenhouse gas emissions), there exist equilibria with support. Allowing for support increases payoffs to each of three types of agents: members, supporters and free-riders.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 24 April 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management〈/p〉 〈p〉Author(s): Marie-Catherine Riekhof, Esther Regnier, Martin F. Quaas〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Conservation of renewable natural resources and promotion of economic growth are both sustainable development goals. Here, we study the interdependency between economic growth, international trade, and the use of renewable natural resources—under alternative institutional settings of either open access or full property rights—in an endogenous growth model. We find that if the resource is depleted over time, consumption growth is reduced. Economic growth and international trade only impact resource use when the resource is harvested under full property rights. Then, widening international trade can lead countries to shift from conservation to depletion. Changes in the institutional setting of resource use in one country may have repercussions on trading partners. Our results indicate potential trade-offs between the sustainable development goals and imply that policies focusing on resource use or trade (e.g., international trade bans or certified trade) are not sufficient to prevent resource depletion.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: November 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 92〈/p〉 〈p〉Author(s): Roland Kube, Andreas Löschel, Henrik Mertens, Till Requate〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper provides a contemporary analysis of how research issues have developed in the 〈em〉Journal of Environmental Economics and Management〈/em〉 (〈em〉JEEM〈/em〉) over the four decades of its existence. We have classified the articles in the journal along five dimensions: content, methods, environmental media, the regional dimension of studies, and cross-cutting issues. While up to about 10 years ago, non-market valuation and cost-benefit analysis, natural resource economics, and environmental policy instruments represented the lion's share of articles published in the journal, more recently we observe a significant shift towards a more diversified array of research areas, with climate change and energy issues finding their way into the journal. In addition, increasing methodological plurality becomes apparent, reflected in a significant shift away from economic theory and towards empirical approaches. We also analyze key distinctions between the major environmental economics journals. Finally, we analyze 〈em〉JEEM〈/em〉's external influence on leading general economics (A+) journals. We find that A+ citations are positively correlated with a focus on climate change economics, market-based environmental policies and policy comparisons, the use of econometric and statistical methods or experimental approaches, and negatively correlated with a focus on water pollution and other pollutants such as pesticides.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 21 December 2017〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management〈/p〉 〈p〉Author(s): Mark Schopf, Achim Voss〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉 〈p〉We consider the resource-extraction policy of a government that is lobbied by an environmental organization and an extraction firm from foreign countries. To analyze this situation, we propose a sequential Nash bargaining solution: The government bargains with both lobbies simultaneously. Should this trilateral negotiation fail, it chooses one lobby for a bilateral negotiation. The disagreement point then is to bargain with the other lobby. Finally, should this second bilateral negotiation break down, the government chooses the welfare-maximizing policy.〈/p〉 〈p〉As long as cumulative extraction is low, such that stock-dependent extraction costs are also low and extraction profits are high, the environmental organization has a weak bargaining position, but it takes influence to reduce extraction. Once that cumulative extraction has increased so much that extraction profits are below a threshold, the bargaining positions change, and the environmental organization gets compensated by the extraction firm for not letting the trilateral negotiation fail.〈/p〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 91〈/p〉 〈p〉Author(s): Martin Karlsson, Nicolas R. Ziebarth〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This study assesses the short and medium-term impact of extreme temperatures on population health and health-related costs in Germany. For 1999 to 2008, we link the universe of 170 million hospital admissions and all 8 million deaths with weather and pollution data at the day-county level. Extreme heat significantly and immediately increases hospitalizations and deaths. This finding holds irrespective of whether we employ econometric models that are standard in economics or models that are standard in epidemiology; we compare and discuss both approaches. We find evidence for partial “harvesting.” At the end of a 30-day window, the immediate health effects are, on average, one quarter lower, but this reduction is primarily evident for cardiovascular and neoplastic diseases. Moreover, aggregating at the yearly level reduces the effect size by more than 90 percent. The health-related economic costs accumulate up to €5 million per 10 million population per hot day with maximum temperatures above 30 °C (86 °F).〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Journal of Environmental Economics and Management, Volume 91〈/p〉 〈p〉Author(s): Andrew B. Ayres, Eric C. Edwards, Gary D. Libecap〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Collective action to remedy the losses of open access to common-pool resources often is late and incomplete, extending rent dissipation. Examples include persistent over-exploitation of oil fields and ocean fisheries, despite general agreement that production constraints are needed. Contracting costs encountered in assigning property rights are an explanation, but analysis of their role is limited by a lack of systematic data. We examine governance institutions in California's 445 groundwater basins using a new dataset to identify factors that influence the adoption of extraction controls. In 309 basins, institutions allow unconstrained pumping, while an additional 105 basins have weak management plans. Twenty of these basins are severely overdrafted. Meanwhile, users in 31 basins have defined groundwater property rights, the most complete solution. We document the critical role of the transaction costs associated with contracting in explaining this variation in responses. This research adds to the literatures on open access, transaction costs, bargaining, and property rights.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 75〈/p〉 〈p〉Author(s): Tim Felling, Christoph Weber〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉New and alternative delimitations of price zones for Central Western Europe (CWE) might constitute a mid-term solution to cope with the increasing congestion in the electricity transmission grids. The significantly growing infeed from renewable energy sources puts more and more pressure on the grid and emphasizes the need for improved congestion management. Thus, a new delimitation of price zones is frequently considered in current discussions and research. The present paper applies a novel hierarchical cluster algorithm that clusters locational marginal prices and weights nodes depending on their demand- and supply situation to identify possible new price zone configurations (PZCs). The algorithm is applied in a scenario analysis of six scenarios reflecting main drivers that influence the future development of European Electricity markets in line with the trilemma of energy policy targets. Robustness of the new configuration is an important criterion for price zone configurations according to the European Guideline on Capacity Allocation and Congestion Management (CACM). Therefore, a robust price zone configuration is computed taking into account all the six individual scenarios. Results show that shape, size and price variations of price zones on the one hand strongly depend on the individual scenario. On the other hand, the identified robust configuration is shown to outperform other configurations, particularly also the current price zone configuration in CWE.〈/p〉〈/div〉 〈/div〉 〈div xml:lang="en"〉 〈h5〉Graphical abstract〈/h5〉 〈div〉〈p〉〈figure〉〈img src="https://ars.els-cdn.com/content/image/1-s2.0-S0140988318303840-ga1.jpg" width="301" alt="Unlabelled Image" title="Unlabelled Image"〉〈/figure〉〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 75〈/p〉 〈p〉Author(s): Ravi Prakash Ranjan, Malay Bhattachharyya〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this article, we explore the dynamics of memory and the correlation structure in investor attention. Information on whether a time series is a pure noise or has a short or long range memory is important for predictive modeling of the series and analyzing its relationship with other variables. Existing studies on time series memory of stock variables are limited to price, volume, returns and conditional variance of returns. We carry out an in-depth analysis to understand the dependence structure of stock's investor attention time series (IATS) for energy market. In this process, we first investigate the existence of correlated dependence in IATS and analyze its dynamics using detrended fluctuation analysis. Further, we check how this dependence changes a) with frequency of sampled data b) during volatility clustering periods of price and volume of underlying stocks. Finally, we perfom detrended cross correlation analysis on local and global IATS to find any cross correlation dependence between the two. We use relative search query volume in Google to quantify IATS for a particular stock and analyze top 20 energy companies based on their market capitalization. The obtained detrended fluctuation coefficients for stock's IATS differ significantly from 0.5 indicating the existence of memory in the series. The dynamics of this memory exhibits persistent and mean reverting behavior. We also observed a reasonably high positive cross correlation dependence between local and global IATS. Finally we find that volatility clustering has little effect on dependence structure of investor attention time series. We also include a few examples to illustrate practical implications of these results.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 15 September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Wensheng Kang, Fernando Perez de Gracia, Ronald A. Ratti〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This study shows that the effect of oil price shocks on the real price of gasoline is interrelated with economic policy uncertainty. Economic policy shocks are linked with increased real price of gasoline and reduced consumption of gasoline. There is evidence that the fluctuation of both real gasoline prices and of gasoline consumption is associated with uncertainty of tax legislation expiration expectation as well as other components of economic policy uncertainty. Positive shocks to economic policy uncertainty have relatively larger effects on gasoline prices than do negative shocks to economic policy uncertainty. Economic policy uncertainty responds asymmetrically to increases and decreases in real oil price. Shocks to economic policy uncertainty account for 16.1% of variation in real gasoline prices and for 4.9% of variation in gasoline consumption in the long-run.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 22 May 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Anson T.Y. Ho, Kim P. Huynh, David T. Jacho-Chávez〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Tail dependence of crude oil price returns between four major benchmark markets are analyzed through the lenses of nonparametric copula models. This paper illustrates that nonparametric copula is flexible to incorporate important empirical patterns of tail dependence and provides better goodness-of-fit to the data than the optimal parametric copula. Estimation results show that the level and the structure of tail dependence of crude oil returns vary significantly depending on data frequency and the time period covered.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 12 April 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): P. Montalbano, S. Nenci〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This work explores the relationship between energy efficiency, productivity and exporting for a sample of firms located in thirty Latin American and Caribbean (LAC) countries. This relationship has not been studied in depth although it is important and relevant to policymaking. We apply a standard constant returns to scale Cobb-Douglas production function with labor, capital, and knowledge expanded to exports and energy efficiency. We also investigate the relationship between energy efficiency and exporting and take heterogeneity by firms and industries into account. Firm-level data come from the national representative World Bank Enterprise Survey (WBES). Our empirical analysis finds heterogeneous results by firm size and industrial sector both in the relationship between energy efficiency and productivity and between energy efficiency and exporting. These outcomes are robust to different measures of energy efficiency and controlling for heterogeneity among countries and provinces. By providing for the first time an extensive investigation of energy intensity and firm performance for such a large sample of LAC countries, this work contributes to the lively debate on LAC energy efficiency and weak productivity. By adopting a broader productivity and international trade perspective, it opens the ground to a rethinking of the priorities of energy saving policies and their environmental impacts.〈/p〉〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 75〈/p〉 〈p〉Author(s): Arthur Guillouzouic-Le Corff〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper documents an innovation burst in biofuels in the second half of the years 2000s, and empirically confronts it to the massive variations of oil prices between 1985 and 2009. Our results show that increases in oil prices greatly spurred innovation in biofuels. The elasticity of the number of patent families in biofuels with respect to oil prices is greater than 1, and holds both at the country and at the firm level. We find that the effect cannot be caused by the contagion of oil prices to cereal prices, an important input for biofuels. Similarly, we find that the effect is very specific: no such effect is found substituting oil prices with electricity prices, or substituting biofuel patents with biotechnology or environment-related patents. Delving into applicants' sectors suggests that specialized biofuel firms were less responsive to oil price variations than diversified firms.〈/p〉〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 75〈/p〉 〈p〉Author(s): Saeed Moshiri, Mohsen Bakhshi Moghaddam〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Oil price shocks generate heterogeneous effects across and within countries. The primary effects of the shocks are on the supply side of the economy in oil-importing countries and on the demand-side in oil-exporting countries. However, in addition to these direct effects, which are widely studied in the literature, the oil price shocks also generate spillover effects through trade and labour migration. The multi-country studies often do not consider the heterogeneities and spillover effects and cannot fully capture the differences in institutions and political structures across countries. In this study, we investigate the heterogeneous effects of oil price shocks on the Canadian economy, which includes autonomous oil-exporting and oil-importing provinces in a federal system under the same institutions, monetary policy, and political structure. Furthermore, trade and labour migration take place across provinces without significant barriers observed in international relations. We set up a panel VAR model to estimate the dynamic responses of provinces to oil price shocks accounting for the provincial heterogeneities and the spillover effects. We also test for asymmetric effects of positive and negative oil price shocks on provinces and examine the differences in the pre- and post-2000 periods. The results indicate that the oil price shocks generate positive impacts on both oil-exporting and oil-importing provinces, which is in contrast to the results often reported for individual countries or regions. The effects are asymmetric for positive and negative oil price shocks and more pronounced in the post-2000 period.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 75〈/p〉 〈p〉Author(s): Yunji Her, Youngho Chang, Youngsub Chun, Yanfei Li〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The ASEAN Power Grid (APG) is the grand plan for an integrated regional power grid system in Southeast Asia designed to benefit its member countries by optimizing the use of energy resources. In this paper, we study how to fairly distribute the benefit of the APG to its member countries by focusing on the Greater Mekong Subregion (GMS), which includes Cambodia, Laos, Myanmar, Thailand, and Vietnam. Using data from two different years, 2012 and 2020, we analyze 12 scenarios with different combinations of the generation and the transmission capacities together with the maximum percentage of power trade allowed. We propose to allocate the total cost saving of the GMS by using the Myerson (1977) value. We show that the resulting Myerson value allocation from the 2020 plan satisfies two stability properties: (1) 〈em〉core stability,〈/em〉 which implies that it belongs to the core when the core is nonempty, so that no country has an incentive to leave the APG, and (2) 〈em〉pairwise stability,〈/em〉 which implies that no country has an incentive to add a new transmission line or delete an existing transmission line.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: October 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 76〈/p〉 〈p〉Author(s): Carolin Geginat, Rita Ramalho〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper presents new data on the procedures, time and costs associated with first time electricity connections for small, energy-intensive businesses in 183 economies. The study finds significant variation in the time and cost to obtain an electricity connection across countries. In low-income countries, for instance, the cost of an electricity connection is 70 times higher than in high income countries. The study finds that income levels and a newly constructed “Getting Electricity” index that combines data for the three measures (procedures, cost and time) are strongly correlated and that the new index cannot predict electrification rates and losses in the electricity system once differences in income level are considered. However, the new index presented has explanatory power for economic losses that firms report due to the poor quality of electricity supply and the likelihood of bribe payments asked from firms by electric utilities. The paper also finds that procedures for connection processes tend to be more cumbersome in countries where other regulatory processes are also complex, suggesting a persistence of bureaucracy across public sector entities in countries. Finally, the study finds that simpler and less costly electricity connection processes are associated with better firm performance in industries with high electricity needs, such as manufacturing motor vehicles.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 75〈/p〉 〈p〉Author(s): Yibing Zhao, Can Wang, Yuwei Sun, Xianbing Liu〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper studies the effect of carbon emission trading schemes in China and identifies the factors that influence companies' willingness to pay for carbon emissions, as expressed by the increase in energy costs due to the national carbon market. A questionnaire with a multiple-bounded discrete choice format was designed and 555 valid samples were gathered in this analysis. On average, companies are willing to pay 8.3% more on energy costs, while those participating in pilot trading schemes are willing to pay 10.2% more. Pilot companies also have higher investment in energy-saving technology, better awareness of both carbon mitigation technology and carbon policy, and clearer expectations of the national carbon market. The regression analysis shows that the willingness to pay (WTP) is influenced by several factors. The perception of the high pressure of energy costs will significantly decrease the WTP of the non-pilot companies. If a pilot company presumes that it will participate in the national trading schemes sooner, its willingness to pay will be higher. Participation or not in pilot trading schemes exerts an effect on companies' WTP because of two factors: awareness of carbon mitigation technology and the reduction ratio expected by the companies. Among all manufacturing sectors, companies involved in the non-ferrous, chemical, paper-making and iron and steel sectors can be brought into the national carbon market as priority participants, because they have a higher WTP for carbon emissions, or they have a shorter time expectation for participating in the national carbon market.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 75〈/p〉 〈p〉Author(s): Qiang Cui, Ye Li〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this paper, we propose a Dynamic Range Adjusted Measure with unified natural & managerial disposability to evaluate the dynamic efficiency of 29 airlines during 2009–2015. In a dynamic period, the new model can judge automatically whether the airline should be under natural disposability or managerial disposability in the premise of optimizing the overall efficiency. We get some findings: 1. Scandinavian has the highest overall efficiency among these 29 airlines while Norwegian's overall efficiency is the least. 2. Improving undesirable outputs is not the most urgent work of these airlines. 3. In order to optimize the overall efficiency, most airlines should be under managerial disposability. 4. Most airlines' efficiencies have no obvious fluctuation in this period.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 75〈/p〉 〈p〉Author(s): Yifan Shen, Xunpeng Shi, Hari Malamakkavu Padinjare Variam〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The Global Financial Crisis (GFC) of 2007–2009 that originated in the US has revealed the need for measuring and monitoring the transmission of extreme downside market risk. This paper investigates the risk transmission mechanism between the oil and natural gas markets. We apply the recently introduced test statistics based on cross-quantilogram function and the multivariate quantile regression model (VAR for VaR) to the US oil and natural gas prices, which are independently formed. Our results show two asymmetric patterns. First, the shocks in the oil market substantially increase the Value at Risk (VaR) in the natural gas market, but the reverse impact does not exist. Second, we highlight the significant asymmetric response of gains and losses transmission in energy markets, cautioning about the underlying weakness of adopting volatility to measure risk in the energy market. Moreover, an extreme market risk is more easily transmitted across markets than moderate risks. Our results are in general robust in application to other regional energy markets, such as Europe and Asia, but the heterogeneities in responses are underpinned by the different role of natural gas in regions. The findings in this paper have important implications for academic researchers, policy makers in gas-dependent economies, and business practitioners in light of projected increases in the use of natural gas worldwide as well as the development of independent gas-on-gas competitive (hub) prices in Asia and Europe.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 75〈/p〉 〈p〉Author(s): Tony Klein〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This article examines the interconnectedness of WTI and Brent prices on different resolutions of price movements. Firstly, within a multivariate BEKK framework we identify high but volatile correlations with recurring highs around 0.8 and multiple periods of decoupling. OPEC meetings increase the correlation in the short run. Secondly, linear 〈em〉ℓ〈/em〉〈sub〉1〈/sub〉-trends reveal that long-term movements of WTI and Brent are driven by the same dynamics, confirming the ‘one great pool’ hypothesis. OPEC meetings have only little impact on long-term price trends. Thirdly, we find leading effects of WTI over Brent by short-term trends of several days, especially in a negative direction. These trends have an asymmetrical effect on volatility; negative trends cause a stronger increase than positive trends. These findings are of interest to policy makers as well as hedging strategies of crude oil portfolios and provide insight into long-term movements of crude prices.〈/p〉〈/div〉

Description: 〈p〉Publication date: Available online 2 March 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Firmin Doko Tchatoka, Virginie Masson, Sean Parry〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In this paper, we revisit the debate on the relationship between oil price shocks and stock market returns by replicating the quantile-on-quantile (QQ) regression model for the US stock market in Sim and Zhou (2015, Journal of Banking and Finance), and extending it to 15 countries. The classification of these countries as oil importers or oil exporters depends on their net position in crude oil trade. Our results indicate that the main finding by Sim and Zhou (2015) that large negative oil price shocks can bolster stock returns when markets are performing well is only partially supported by the three largest oil importers in our sample – China, Japan and India – during the period 1988:1–2007:12. However, when extending the study to more recent data (period 1988:1–2016:12), we find that China and India experience higher returns when markets perform well and there is a large positive oil price shock. Also, large positive oil price shocks often lead to higher stock market returns when markets perform well for both oil exporting countries – Canada, Russia, Norway – and moderately oil dependent countries – such as Malaysia, Philippines and Thailand. In most cases large negative oil price shocks depress further already poorly performing markets, as in Sim and Zhou (2015). These findings highlight that the relationship between the distributions of oil price shocks and stock market returns is not stable over time in most countries studied. Furthermore, the asymmetric effect between positive and negative oil price shocks observed in the US market by Sim and Zhou (2015) is less evident in most countries for both the baseline and extended periods.〈/p〉〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 75〈/p〉 〈p〉Author(s): Raúl Bajo-Buenestado〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉In his seminal paper, Nunn (2007) finds that countries with good contract enforcement have a comparative advantage and, therefore, specialize in exporting goods for which relationship-specific investments are most important. We argue that this result cannot be extrapolated to all industries: there is substantial heterogeneity regarding the effect of contract enforcement on exports. In particular, we empirically demonstrate that there is a disconnection between judicial quality and exporting in relationship-specific natural resource related industries. Due to the lack of input factor mobility, for such industries, the quality of contract enforcement cannot explain the pattern of trade, but rather other factors that are widely discussed in the literature. We discuss some relevant implications of this disconnection between judicial quality and relationship-specific industries in terms of the natural resource curse and the impact of natural resources trade on economic development.〈/p〉〈/div〉

Description: 〈p〉Publication date: February 2019〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 78〈/p〉 〈p〉Author(s): Dong-Hyeon Kim, Yu-Bo Suen, Shu-Chin Lin〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉The relationship between trade and environmental quality is a major controversial issue. The paper intends to provide robust evidence and new insights into the discussion. Specifically, it examines the effect of trade on carbon dioxide emissions (CO〈sub〉2〈/sub〉) systematically in a North-North, North-South, South-North, and South-South context. It employs a panel data instrumental-variable quantile approach to control for endogeneity and account for potential (quantile) parameter heterogeneity. Some important results emerge. First, trade with the North increases CO〈sub〉2〈/sub〉 emissions whereas trade with the South mitigates CO〈sub〉2〈/sub〉 emissions with a relatively larger effect for less polluted host countries. Second, for advanced countries, their trade with the South or the North leads to a reduction in CO〈sub〉2〈/sub〉 emissions, the effect that seems relatively stronger for less polluted advanced countries. Third, for developing countries, their trade with the North worsens CO〈sub〉2〈/sub〉 emissions whereas their trade with the South mitigates CO〈sub〉2〈/sub〉 emissions with a larger effect for less polluted developing countries. Last, the environmental Kuznets hypothesis is also detected across quantiles for the full sample and both developing and advanced countries subsamples. The findings suggest that trade benefits the advanced countries but could hurt the developing countries when trade with high-income trading partners occurs, in terms of CO〈sub〉2〈/sub〉 emissions.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 10 October 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Stephan B. Bruns, Johannes König, David I. Stern〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We replicate Stern (1993), who argues and empirically demonstrates that it is necessary (i) to use quality-adjusted energy use and (ii) to include capital and labor as control variables in order to find Granger causality from energy use to GDP. Though we could not access the original dataset, we can verify the main original inferences using data that are as close as possible to the original. We analyze the robustness of the original findings to an alternative estimation approach, alternative definitions of variables, and alternative model specifications for both the (almost) original time span (1949–1990) and an extended time span (1949–2015). 〈em〉p〈/em〉-values tend to be substantially smaller if energy use is quality adjusted rather than measured by total joules and if capital is included. Including labor has mixed results. These findings tend to largely support Stern's (1993) two main conclusions and emphasize the importance of accounting for changes in the energy mix in time series modeling of the energy-GDP relationship and controlling for other factors of production. We also discuss how the inclusion of the original author in designing the replication study using a pre-analysis plan can help to counterbalance the incentive of replicating authors to disconfirm major findings of the original article to increase the probability of getting published.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: October 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 76〈/p〉 〈p〉Author(s): Miao Wang, Chao Feng〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper used an extended logarithmic mean Divisia index (LMDI) approach to decompose the changes of China's industrial CO〈sub〉2〈/sub〉 emissions into four traditional factors and three investment and R&D expenditure related factors, including: carbon dioxide emissions coefficient effect, energy structure effect, energy intensity effect, R&D efficiency effect, R&D intensity effect, investment intensity effect, and industrial activity effect. The results show that: (1) industrial activity was the largest stimulating factor in industrial CO〈sub〉2〈/sub〉 emissions. Investment intensity and R&D intensity changes displayed overall positive effects in emissions growth but with some fluctuations in different periods and provinces. (2) Energy intensity was the prominent factor to facilitate emissions-reduction, followed by the R&D efficiency. The two factors contributed to a considerable decrease in industrial CO〈sub〉2〈/sub〉 emissions. (3) Among all factors, energy structure effect was the weakest, and showed alternative influencing directions in different periods and provinces. (4) The effects exerted from various factors were distinctly varied in different economic stages and provinces. And generally, the curbing effects cannot counteract the promoting effects. Finally, the empirical results show that continue to decrease energy intensity, facilitate the investment and R&D efforts aiming at energy-saving and emission-reduction, and reduce the reliance on coal while further raise the renewable energy utilization are beneficial to alleviate industrial CO〈sub〉2〈/sub〉 emissions.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: October 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 76〈/p〉 〈p〉Author(s): Christoph Funk〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉This paper sheds light on the questions whether it is possible to generate an accurate forecast of the real price of oil and how it can be improved using forecast combinations. For this reason, the following paper will investigate the out-of-sample performance of seven individual forecasting models. The results show that it is possible to construct better forecasts compared to a no-change benchmark for horizons up to 24 months with gains in the MSPE ratio as high as 25%. In addition, some of the existing models will be extended, e.g. the U.S. inventories model by introducing more suitable real-time measures for the Brent crude oil price and the VAR model of the global oil market by using different measures for the economic activity. Furthermore, the time performance investigated by constructing recursively estimated MSPE ratios discovers potential weaknesses of the used models. Hence, several different combination approaches are tested with the goal of demonstrating that a combination of individual models is beneficial for the forecasting performance. Thereby, a combination consisting of four models has proven to have a lower MSPE ratio than the best individual models over the medium run and, in addition, to be remarkably stable over time.〈/p〉〈/div〉

Description: 〈p〉Publication date: September 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics, Volume 75〈/p〉 〈p〉Author(s): Li Liu, Yudong Wang, Li Yang〈/p〉 〈div xml:lang="en"〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉We forecast the density of crude oil futures returns using both macroeconomic variables and technical indicators over the period January 1986 through December 2015. The macro variables reflect oil market fundamentals while the technical indicators are constructed based on the popular moving average rules. Several combination strategies over both constant and time-varying parameter models are employed to generate density forecasts. The out-of-sample result shows statistical and economic significance of the predictability. Forecast combination over technical indicators generates more accurate density forecasts than the combination over macro variables. Technical indicators also perform better in terms of Sharpe ratio and certainty equivalent return for risk-averse investors who seek a trade-off between risk and return in the oil market. Technical indicators can better predict oil return density during the expansion period, while macroeconomic variables generate more accurate out-of-sample forecasts during the economic recession period, providing complementary information over the business cycle.〈/p〉〈/div〉 〈/div〉

Description: 〈p〉Publication date: Available online 21 May 2018〈/p〉 〈p〉〈b〉Source:〈/b〉 Energy Economics〈/p〉 〈p〉Author(s): Loretta Mastroeni, Pierluigi Vellucci, Maurizio Naldi〈/p〉 〈h5〉Abstract〈/h5〉 〈div〉〈p〉Energy commodity prices have been examined over the last 20 years to detect the presence of chaos as an alternative to stochastic models, with contrasting results. In this paper, we wish to reassess the chaotic paradigm in the light of two new pieces of information with respect to the literature: the appearance of noise-aware estimation methods for the correlation entropy and the availability of longer time series. Our analysis shows that the literature has heavily underestimated the presence of noise, and that chaotic characteristics coexist with stochastic ones in the time series of prices. Through the recurrence quantification analysis, we have also observed the presence of intermittency, where periods of regular behaviour are replaced by periods of chaotic behaviour, which could explain the emergence of bubbles.〈/p〉〈/div〉