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on Contract Theory and Applications |
| By: | Angela Acocella; Chris Caplice; Yossi Sheffi |
| Abstract: | In the for-hire truckload market, firms often experience unexpected transportation cost increases due to contracted transportation service provider (carrier) load rejections. The dominant procurement strategy results in long-term, fixed-price contracts that become obsolete as transportation providers' networks change and freight markets fluctuate between times of over and under supply. We build behavioral models of the contracted carrier's load acceptance decision under two distinct freight market conditions based on empirical load transaction data. With the results, we quantify carriers' likelihood of sticking to the contract as their best known alternative priced load options increase and become more attractive; in other words, carriers' contract price stickiness. Finally, we explore carriers' contract price stickiness for different lane, freight, and carrier segments and offer insights for shippers to identify where they can expect to see substantial improvement in contracted carrier load acceptance as they consider alternative, market-based pricing strategies. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.02367&r= |
| By: | Arega Getaneh Abate; Rossana Riccardi; Carlos Ruiz |
| Abstract: | The interplay between risk aversion and financial derivatives has received increasing attention since the advent of electricity market liberalization. One important challenge in this context is how to develop economically efficient and cost-effective models to integrate renewable energy sources (RES) in the electricity market, which constitutes a relatively new and exciting field of research. This paper proposes a game-theoretical equilibrium model that characterizes the interactions between oligopolistic generators in a two-stage electricity market under the presence of high RES penetration. Given conventional generators with generation cost uncertainty and renewable generators with intermittent and stochastic capacity, we consider a single futures contract market that is cleared prior to a spot market where the energy delivery takes place. We introduce physical and financial contracts to evaluate their performance assess their impact on the electricity market outcomes and examine how these depend on the level of RES penetration. Since market participants are usually risk-averse, a coherent risk measure is introduced to deal with both risk-neutral and risk-averse generators. We derive analytical relationships between contracts, study the implications of uncertainties, test the performance of the proposed equilibrium model and its main properties through numerical examples. Our results show that overall electricity prices, generation costs, profits, and quantities for conventional generators decrease, whereas quantities and profits for RES generators increase with RES penetration. Hence, both physical and financial contracts efficiently mitigate the impact of uncertainties and help the integration of RES into the electricity system. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.09927&r= |
| By: | John Gilbert; Onur A. Koska (University of Canterbury); Reza Oladi |
| Abstract: | In the context of a model of international trade through reciprocal dumping with horizontally differentiated goods, we study the endogenous choice of quantities and prices as strategic variables. We show that while a Cournot outcome prevails under conditions of export rivalry, strategic asymmetry under foreign direct investment rivalry may be observed, especially when it is possible to initially deter FDI by committing to a price contract, and when switching is costly and/or takes time. |
| Keywords: | Exports vs. FDI; Horizontal Product Differentiation; Cournot-Bertrand-Nash Equilibrium |
| JEL: | D43 F12 F23 |
| Date: | 2022–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:22/04&r= |
| By: | Jacopo Bizzotto (Oslo Business School, Oslo Metropolitan University); Alessandro De Chiara (Universitat de Barcelona, BEAT) |
| Abstract: | A regulator hires an auditor to inspect a firm. Audits serve two purposes: to detect violations and to motivate the firm to invest in compliance. Auditor and firm can collude to hide violations. Honest audits require sufficient monetary incentives for the auditor, and more frequent audits call for larger incentives. We link the optimal audit frequency to the budget constraint faced by the regulator, and to the firm's bargaining power in the collusive agreement. We show that (i) the optimal audit frequency need not be monotonic in the regulator's budget size, (ii) tolerating collusion can foster ex-ante investment, and (iii) a regulator that enjoys more flexibility in designing the auditor's compensation scheme might be less willing to deter corruption. |
| Keywords: | Auditing, corruption, information design, regulation. |
| JEL: | D73 K42 L51 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ewp:wpaper:417web&r= |
| By: | Eckert, Sandra |
| Abstract: | Joint Institutional Frameworks in bilateral relations are circumscribed in policy scope, can lack adequate instruments for dynamic adaptation and provide limited access to decision-making processes internal to the contracting parties. Informal governance, the involvement of private actors as well as rules such as equivalence provide avenues to remedy these limits in bilateral relations in sectoral governance. Through bilateral agreements, the scope of territoriallybound political authority is expanded. The formalised and institutionalised frameworks and bodies established are, however, frequently accompanied by mechanisms of informal cooperation and special rules either to cover policy fields where no contractual relation exists, to provide for flexible solutions where needed, or to involve both public and private actors that otherwise do not have access to formal decision-making bodies. This SAFE working paper conceptualises formal and informal modes of cooperation and varying actor constellations. It discusses their relevance for the case of bilateral relations between the European Union (EU) andSwitzerland in sectoral governance. More specifically, it draws lessons from EU-Swiss sectoral governance of financial and electricity markets for the future relations of the EU with the United Kingdom (UK). The findings suggest that there are distinct governance arrangements across sectors, while the patterns of sectoral governance are expected to look very much alike in the United Kingdom and Switzerland in the years to come. The general takeaway is that Brexit will have repercussions for the EU's external relations with other third countries, putting ever more emphasis on formal and rule-based approaches, while leaving a need for sector-specific cross border co-operation. |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:341&r= |