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on Economic Design |
| By: | Michael P. Leung |
| Abstract: | Cluster-randomized trials often involve units that are irregularly distributed in space without well-separated communities. In these settings, cluster construction is a critical aspect of the design due to the potential for cross-cluster interference. The existing literature relies on partial interference models, which take clusters as given and assume no cross-cluster interference. We relax this assumption by allowing interference to decay with geographic distance between units. This induces a bias-variance trade-off: constructing fewer, larger clusters reduces bias due to interference but increases variance. We propose new estimators that exclude units most potentially impacted by cross-cluster interference and show that this substantially reduces asymptotic bias relative to conventional difference-in-means estimators. We then study the design of clusters to optimize the estimators' rates of convergence. We provide formal justification for a new design that chooses the number of clusters to balance the asymptotic bias and variance of our estimators and uses unsupervised learning to automate cluster construction. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2310.18836&r=des |
| By: | Brown, David P. (University of Alberta, Department of Economics); Sappington, David E. M. (University of Florida) |
| Abstract: | In industries with extensive infrastructure needs and pronounced scale economies, consumers can be better served by well-designed regulation than by competition. Regulation that replicates the discipline of competitive markets can enhance the welfare of electricity consumers. However, replicating competitive discipline is challenging when regulators have limited knowledge of relevant industry conditions and when the regulators’ policy instruments are restricted. Incentive regulation attempts to harness the regulated firm’s superior knowledge of industry conditions to achieve regulatory objectives. This paper reviews key principles of incentive regulation, and examines how incentive regulation can be designed to enhance performance in the electricity sector. |
| Keywords: | Incentive Regulation; Electricity |
| JEL: | L51 L94 Q40 Q48 |
| Date: | 2023–11–16 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2023_010&r=des |
| By: | Luigi Viola (University of Campinas, Campinas-SP, Brazil); Saeed Nordin (KTH Royal Institute of Technology, Stockholm, Sweden); Daniel Dotta (University of Campinas, Campinas-SP, Brazil); Mohammad Reza Hesamzadeh (KTH Royal Institute of Technology, Stockholm, Sweden); Ross Baldick (University of Texas at Austin, Austin, TX, USA); Damian Flynn (University College Dublin, Dublin, Ireland) |
| Abstract: | The expansion of variable generation has driven a transition toward a 100\% non-fossil power system. New system needs are challenging system stability and suggesting the need for a redesign of the ancillary service (AS) markets. This paper presents a comprehensive and broad review for industrial practitioners and academic researchers regarding the challenges and potential solutions to accommodate high shares of variable renewable energy (VRE) generation levels. We detail the main drivers enabling the energy transition and facilitating the provision of ASs. A systematic review of the United States and European AS markets is conducted. We clearly organize the main ASs in a standard taxonomy, identifying current practices and initiatives to support the increasing VRE share. Furthermore, we envision the future of modern AS markets, proposing potential solutions for some remaining fundamental technical and market design challenges. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.02090&r=des |