Elasticity of substitution and technical efficiency: evidence from the US electricity generation

ABSTRACT

The implications of national or regional energy policies for technical efficiency and environmental outcomes in electricity generation depend on fossil fuel input substitution. This study uses state level data to examine fossil fuel (coal and natural gas) substitution in electricity generation under increased availability of natural gas in the United States. We observe that changes in elasticities of substitution from pre-2009 to post-2009 differ across states suggesting that the effects of increased availability of inexpensive natural gas on electricity generation have been spatially heterogeneous. We rely on the observed heterogeneity to assess the effects of fossil fuel input substitution on technical efficiency and CO₂ emissions. The results reveal that state level elasticity of substitution between natural gas and coal has a positive effect on technical efficiency and a negative effect on CO₂ emissions. Therefore, future policy design and analyses should reflect the implications for regional elasticities of fossil fuel substitution and associated environmental outcomes.     

Capacity Constrained Firms and Expansion Subsidies: Should Governments Avoid Generous Subsidies?

This paper examines entry deterrence and signaling when an incumbent firm experiences capacity constraints. Our results show that if the costs that constrained and unconstrained incumbents incur when expanding their facilities are substantially different, separating equilibria can be supported under large parameter values whereby information is perfectly transmitted to the entrant. If, in contrast, both types of incumbent face similar expansion costs, subsidies that reduce expansion costs can help move the industry from a pooling to a separating equilibrium with associated efficient entry. Nonetheless, our results demonstrate that if subsidies are very generous entry patterns remain unaffected, suggesting a potential disadvantage of policies that significantly reduce firms’ expansion costs.     

WHAT'S IN A NAME? A CAUTIONARY TALE OF PROFITABILITY ANOMALIES AND LIMITS TO ARBITRAGE

The recent literature investigating profitability anomalies defines profitability in various ways (i.e., gross, operating, and cash based). We show that limits to arbitrage are associated with returns of gross and cash-based operating profitability anomalies, suggesting mispricing. In contrast, returns from the operating profitability strategy have no relation with barriers to arbitrage and exhibit no evidence of mispricing. Additionally, we show that the differential effects of limited arbitrage-related mispricing of gross and cash-based operating profitability anomalies are attributable to their respective correlations with selling, general, and administrative (SG&A) expense and accruals anomalies. We find that SG&A return predictability, like that of accruals, is related to limits to arbitrage. These findings suggest that investors and researchers should proceed with caution when searching for return predictability by redefining profitability measures.     

Toward a Bakhtinian typology of ambient advertising

Ambient advertising represents a growing sector of creative advertising practice, but has garnered little academic research. This paper aims to provide a theoretical foundation for the examination of ambient advertising's place within the marketing communication mix. The author presents a typology of ambient advertising based on the theory of the chronotope by Mikhail Bakhtin (1895–1975), the creative expression of the intersection between temporal and spatial dimensions, arguing that this represents the most fecund model for exploring the way in which ambient advertising seeks to harness the matrix of time and place. The typology offers a rationale for comparing different ambient campaigns on the basis of the degree to which they clearly express a particular chronotope and goes on to link this to a consideration of rhetorical persuasiveness.     

The effect of investor service costs on mutual fund performance

We examine the effect of investor service costs on mutual fund performance. Benchmarking passive funds against ETFs managed by the same fund company with the same investment objectives, we show that passive funds on average underperform ETFs by 42 bps in annualized net returns, of which about 90% can be attributed to investor service costs. Further benchmarking active funds against passive funds, we show that active funds on average outperform passive funds by 31 bps in annualized gross returns. However, the higher expense ratios charged by active funds lead to about 28 bps of underperformance in annualized net fund returns.