Commodity cycles, a function of market complexity? Extending the cobweb experiment

Arango, Santiago; Moxnes, Erling

doi:10.1016/j.jebo.2012.04.002

Cited by 24 publications

(29 citation statements)

References 36 publications

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“…AMI enables the implementation of demand-response (DR) initiatives designed to encourage fuller demand-side participation in power system operations. Power system researchers are currently exploring three basic types of DR initiatives: 2 (i) Incentive-Based Load Control: Down/up adjustments in the power usage of business and household devices are undertaken, either in response to direct requests from designated parties, 3 or via device switches under the remote control of designated parties, with compensation at administratively set rates.…”

Section: Background Motivationmentioning

confidence: 99%

Braided Cobwebs: Cautionary Tales for Dynamic Pricing in Retail Electric Power Markets

Thomas

Tesfatsion

2018

IEEE Trans. Power Syst.

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This study investigates the effects of dynamic-price retail contracting on end-to-end power system operations. Performance is evaluated by means of carefully defined metrics for system stability, market efficiency, and market participant welfare. The study is carried out for an Integrated Retail and Wholesale (IRW) Test Case for which households have smart (price-responsive) air-conditioning (A/C) systems. A simplified version of the IRW Test Case with a directly postulated linear household demand curve is first used to derive, analytically, a set of necessary and sufficient conditions for system stability under dynamic-price retail contracting. A key finding is that dynamicprice retail contracts induce braided cobweb dynamics consisting of two interwoven cycles for power and price outcomes that can exhibit point convergence, limit-cycle convergence, or divergence depending on a small set of structural parameters. Outcomes are then reported for a dynamic welfare sensitivity study undertaken using the full IRW Test Case with smart household A/C systems. One surprising finding is that dynamic-price retail contracts with a positive price mark-up result in worse welfare outcomes for generators and household residents than flat-rate retail contracts for treatments exhibiting convergent cobweb dynamics.

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Section: Background Motivationmentioning

confidence: 99%

Braided Cobwebs: Cautionary Tales for Dynamic Pricing in Retail Electric Power Markets

Thomas

Tesfatsion

2018

IEEE Trans. Power Syst.

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“…This calls for models that capture delays, feedbacks, and nonlinearities. When such complications are in place, series of laboratory experiments, all replicating field data, show that misperceptions can lead to non-monotonic developments, for instance: asset market bubbles (Smith et al, 1988), renewable resource depletion (Moxnes, 1998), instability of supply chains (Sterman, 1989), bankruptcy of businesses with new and popular products (Paich and Sterman, 1993), and fluctuations in commodity markets (Arango and Moxnes, 2012). The Great Depression of the 1930s and the financial crisis of 2008 illustrate a widespread inability to forecast and, more importantly, a failure to prevent non-monotonic global developments via the enactment of stabilizing policies.…”

Section: First Questionnairementioning

confidence: 99%

Discounting, climate and sustainability

Moxnes¹

2014

Ecological Economics

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Climate policy recommendations differ widely because of disagreements over what discount rates to use. Disagreement reduces the impact of economic models and signals a need for improved methodology. The problem is related to the choice of intergenerational welfare functions. A first questionnaire finds that the standard welfare function (SWF) fails to capture people's dislike of overshooting and fluctuating consumption paths. A second questionnaire reveals that when very-long-term sustainability of well-being is threatened, people's implicit discount rates resemble the low estimates used by the Stern Review. An alternative welfare function (AWF) reflecting consumption growth can potentially capture the preference structure revealed in both questionnaires. This makes the AWF an interesting candidate when searching for policies for sustainable development under uncertainty. Importantly, the questionnaires demonstrate that people are able to choose among policies by inspecting time graphs of policy consequences. Thus, it is possible to circumvent the complexities and disagreements introduced by welfare functions and discounting.

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“…The system dynamics community has been at the forefront in developing and using microworld simulations in training and education (Meadows, ; Morecroft and Sterman, ; Özgün and Barlas, ; Sterman, ). In addition, an active research stream on misperceptions of feedback shows that learning and performance on complex microworld simulations is typically poor, even relative to the performance levels achieved using relatively simple decision heuristics (Arango and Moxnes, ; Diehl and Sterman, ; Gary et al , ; Gary and Wood, ; Moxnes, , b; Paich and Sterman, ; Sterman, , b). More research is needed that can provide guidance about the design of instructional materials to enhance learning and performance from microworlds.…”

Section: Introductionmentioning

confidence: 99%

Challenging learning goals improve performance in dynamically complex microworld simulations

Yang

Jiang

Gary

2016

System Dynamics Review

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The use of microworld simulators in classrooms and in experimental research has grown rapidly in recent years. Advocates suggest microworlds enhance learning compared with traditional instructional materials alone. However, people often have difficulty understanding the dynamics of microworld simulations, and learning and performance on microworlds typically plateau far below even simple behavioral benchmarks. Research from organization psychology suggests that assigning specific goals improves task learning and performance. This paper reports the results of two laboratory studies that examine the effects of two types of goals and two levels of goal difficulty on performance outcomes in the widely used People Express Microworld. We find that challenging compared with moderate learning goals result in higher performance outcomes. In contrast, there is no difference in performance outcomes between challenging and moderate performance goals. The findings show that including challenging learning goals in microworld instructional materials in classrooms and in experimental research will increase performance. Copyright © 2017 System Dynamics Society

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Commodity cycles, a function of market complexity? Extending the cobweb experiment

Cited by 24 publications

References 36 publications

Braided Cobwebs: Cautionary Tales for Dynamic Pricing in Retail Electric Power Markets

Braided Cobwebs: Cautionary Tales for Dynamic Pricing in Retail Electric Power Markets

Discounting, climate and sustainability

Challenging learning goals improve performance in dynamically complex microworld simulations

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