Collective-Consumption Services of Individual-Consumption Goods

Weisbrod, Burton A.

doi:10.2307/1879478

Cited by 565 publications

(155 citation statements)

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“…A founding paper is Weisbrod (1964). Krutilla (1967) argued that decisions made in private markets do not lead to socially desirable use, allocation and conservation of nature and natural lands.…”

Section: Inspiration From Existing Economic and Evolutionary Modelsmentioning

confidence: 99%

Optimal diversity: Increasing returns versus recombinant innovation

Bergh

2008

Journal of Economic Behavior & Organization

133

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Choices regarding diversity play an important role in economics and innovation management, but often remain implicit. Once made explicit, the objectives of efficiency and diversity are usually posed as in conflict, as efficiency relates positively and diversity negatively to various increasing returns to scale in markets. Such a perspective, however, neglects the benefits of diversity in terms of realizing system improvements through recombinant innovation or spillovers. The latter implies a contribution of diversity to long-term efficiency. Dominant economic approaches that address diversity, such as option value and real options theories, regard benefits of diversity as exogenous. This paper proposes a simple model of variable, endogenous diversity to analyze the optimal balance between increasing returns to scale and recombinant innovation. It is discussed under which conditions one of four solutions is optimal: complete specialization regardless of which option, complete specialization in one specific option, symmetric diversity (perfect balance), and asymmetric diversity. The results give rise to a number of policy insights.

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Section: Inspiration From Existing Economic and Evolutionary Modelsmentioning

confidence: 99%

Optimal diversity: Increasing returns versus recombinant innovation

Bergh

2008

Journal of Economic Behavior & Organization

133

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“…Real Options Analysis has been utilized as a tool for the evaluation of flexibility in various decision-making problems with the option value of making a certain decision being traditionally defined as the benefit that the decision maker accrues from making the decision under uncertainty [11]. Uncertainty and irreversibility have long been recognized as principal factors driving the option value up [12].…”

Section: Real Option Valuation Frameworkmentioning

confidence: 99%

Stochastic optimisation-based valuation of smart grid options under firm DG contracts

Giannelos

Konstantelos

Štrbac

2016

2016 IEEE International Energy Conference (ENERGYCON)

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Abstract-Under the current EU legislation, Distribution Network Operators (DNOs) are expected to provide firm connections to new DG, whose penetration is set to increase worldwide creating the need for significant investments to enhance network capacity. However, the uncertainty around the magnitude, location and timing of future DG capacity renders planners unable to accurately determine in advance where network violations may occur. Hence, conventional network reinforcements run the risk of asset stranding, leading to increased integration costs. A novel stochastic planning model is proposed that includes generalized formulations for investment in conventional and smart grid assets such as Demand-Side Response (DSR), Coordinated Voltage Control (CVC) and Soft Open Point (SOP) allowing the quantification of their option value. We also show that deterministic planning approaches may underestimate or completely ignore smart technologies. Power drawn by SOP at terminal (pu) Index Terms-Firm DG contracts, Option Value of smart technologies, Planning under uncertainty, Real Options I. NOMENCLATURE Sets and indices

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“…As pointed out in Section 1, irreversibilities in investments lead firms to value the option of delaying commitment [22,28,38]. Under delayed differentiation in the presence of demand uncertainty the marginal value of quality may be higher than under ex-ante versioning where an adaptation of the product portfolio to the realization of the uncertain demand is not possible.…”

Section: The Product Development Decisionmentioning

confidence: 99%

Delayed multiattribute product differentiation

Weber

2008

Decision Support Systems

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We develop a two-stage model for versioning products with respect to both vertical and horizontal attributes. At first, a firm positions its top-quality "flagship" product in a market with an imperfectly known distribution of tastes and reservation prices. In the second stage, the firm learns these consumer characteristics and has the option of extending its product line by versioning the flagship product using pure horizontal differentiation, quality degrading, or both. The firm's nonconvex versioning problem is solved analytically for the two-product case. We find that ex ante extending the product line through vertical differentiation is optimal for low marginal cost of quality (development cost); otherwise pure horizontal differentiation is superior. Given quasilinear consumer preferences and a uniform distribution of consumer characteristics, versioning with respect to both horizontal and vertical attributes is never optimal. Under delayed differentiation the optimal policy is contingent on the observed demand realization and may lead to horizontal cannibalization and price dispersion for equal-quality products. The firm tends to increase its investment in product quality unless it adopts a state-contingent policy of horizontal versioning for high and vertical versioning for low demand realizations. Following a state-contingent policy, the optimal upfront development effort may be significantly lower than under full ex-ante commitment. The option value of delayed differentiation is generally nonmonotonic in the firm's development cost.

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Collective-Consumption Services of Individual-Consumption Goods

Cited by 565 publications

References 0 publications

Optimal diversity: Increasing returns versus recombinant innovation

Optimal diversity: Increasing returns versus recombinant innovation

Stochastic optimisation-based valuation of smart grid options under firm DG contracts

Delayed multiattribute product differentiation

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