For the Internet advertisement market, we consider a contract problem between advertisers and publishers. Among several ways of pricing online advertisements, the methods based on cost-per-impression (CPM) and costper-click (CPC) are the two most popular. The CPC fee is proportional to the click-through rate (CTR), which is uncertain and makes decisions of advertisers and publishers difficult. In this paper, we suggest a hybrid pricing scheme: advertisers pay the minimum of CPM and CPC fees by purchasing an option from publishers. To determine the option price, we consider a Nash bargaining game for negotiation between an advertiser and a publisher and provide the solution. Further, we show that such option contracts will help the advertiser avoid high cost and the publisher generate more revenue. The option contract will also improve the contract feasibility, compared to CPM and CPC.
Energy Storage Systems (ESSs) have recently been highlighted because of their many benefits such as load-shifting, frequency regulation, price arbitrage, renewables, and so on. Among those benefits, we aim at evaluating their economic value in frequency regulation application. However, unlike previous literature focusing on profits obtained from participating in the ancillary service market, our approach concentrates on the cost reduction from the perspective of a utility firm that has an obligation to pay energy fees to a power exchange. More specifically, we focus on the payments between the power exchange market and the utility firm as a major source of economic benefits. The evaluation is done by costbenefit analysis (CBA) with a dataset of the Korean market while considering operational constraint costs as well as scheduled energy payments, and a simulation algorithm for the evaluation is provided. Our results show the potential for huge profits to be made by cost reduction. We believe that this research can provide a guideline for a utility firm considering investing in ESSs for frequency regulation application as a source of cost reduction.
OPEN ACCESSEnergies 2015, 8 5001
This research utilizes real options theory to investigate how to break the winner's curse in contracting through effective contracting mechanisms. We focus on two contracting approaches: flexible price contract and gain-sharing contract. For reasons of analytical tractability, we first utilize the geometric Brownian motion as the dynamic model to obtain closed-form solutions to break the outsourcing winner's curse. Subsequently, we extend our model to the mean-reverting process and provide numerical examples to verify the validity of our closed-form results, which have not previously been presented in the outsourcing literature. Finally, we provide prescriptions for the problem of the winner's curse in outsourcing.
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