Switching Costs in Netherlands Energy Markets: Can Liberalisation Bring Benefits to Small Customers?

Summary We use data from a consumer survey to uncover factors deterring consumer switching in liberalised residential energy markets in The Netherlands. We find that actual or perceived switching costs represent an important barrier for switching energy suppliers. This enables incumbent firms to charge higher markups than entrants. We analyse the welfare consequences of switching costs in two scenarios, a pessimistic one in which switching costs remain at the level measured in the survey and an optimistic one in which they decline enough for the market to reach a competitive equilibrium level. The paper concludes with a discussion of policy options for reducing switching costs. We are grateful to the Dutch Consumer Union for providing the data for this analysis. We also would like to thank two anonymous referees and the editor for their comments and helpful suggestions.     

Selection from Many Investments with Managerial Private Information*

We investigate capital investment problems when a manager knows the costs of a set of available projects, while the owner only holds probabilistic beliefs about these costs. With mutually exclusive projects, an optimal policy can be defined by a series of cost targets, one for each of the possible projects. The project with the lowest reported cost relative to the target is chosen, and funded as if the cost were equal to the target. The optimal investment policy can deviate from a traditional policy of selecting the project with the highest, positive net present value (NPV) in a number of ways. First, under-investment arises to limit the manager's ability to capture the economic rents. Second, when investment takes place, it is not always the project with the highest NPV that is implemented. Third, projects with lower cost variability can be favored. We extend the analysis to non-mutually exclusive projects. With two independent projects, batch processing is superior to individual appraisal whenever both optimal individual appraisal cost targets are interior. Individual appraisal ignores the impact of individual targets on incentives to report the costs of other potential projects. Batch processing can improve individual assessment by cost effective switching of investment away from the individual projects and into the batch as a whole. The results suggest that the common practice of analyzing batches of capital requests in an annual capital budgeting cycle provides advantages in the organization's attempt to deal with asymmetric information and incentive problems.     

Vertical Integration and Exclusivity Contracts when Consumers Have Switching Costs

This article extends the literature on switching costs by considering what happens when retailers and manufacturers are separate entities and some customers are locked in with retailers. This separation introduces a dynamic inconsistency problem as manufacturers face the problem of extracting too much surplus from the retailer in which case the retailer has no incentive to build a subscriber base. It is shown that different trading relationships arise according to the nature and magnitude of switching costs. When switching costs are high, then integrated structures are always predicted (or exclusive dealerships in case vertical integration is banned). Vertical integration should be allowed as it provides high-powered incentives to acquire market shares.     

Asian finance and the role of bankruptcy: a model of the transition costs of financial liberalization

The degree to which bankruptcy is permitted to play a role in the allocation of capital is a key distinction of the state-directed financial regime of Japan, South Korea, and many other Asian economies. Focusing on the development and characteristics of the Japanese main-bank system and comparing it to the Anglo-American approach, this paper discusses the two approaches to finance and argues that a major problem with the bank-finance model used in many Asian countries is its minimization of bankruptcy risks. A three-sector development model is described and simulated to compare the outcomes of the two approaches separately and then to evaluate the transition costs of switching from a state-directed to a market-directed financial regime. The simulation results suggest that the market approach results in a higher long-run growth path because it eliminates inefficient firms through bankruptcy. The results also suggest that switching from a state-directed to a market-directed model can be very costly to the economy. These transition costs can be lowered by a phased-in liberalization but are increased by delay. We then discuss the policy implications.     

Credible Carbon Policy

The paper sets out the credibility problem in carbon policy,provides a number of examples of non-credibility in recent energypolicy, and identifies the costs of failing to address it. Thetime inconsistency of carbon policy—arising because ofmultiple objectives, the irreversibility of energy investments,and the scope for ex-post reneging on ex-ante commitments toset policy instruments, such as carbon taxes or emission permits,at appropriate levels—is set in a conceptual framework.Analogies with monetary policy are drawn, and a solution tothe time-inconsistency problem is proposed through the establishmentof an energy/carbon agency.     

Constrained Mean-Variance Portfolio Optimization with Alternative Return Estimation

This paper studies the problem of asset allocation in a mean-variance framework. The theoretical model of portfolio optimization is specified and then applied to a long panel data set from historic to most recent times, March 1990 – March 2013. The paper contributes in three ways. First, an alternative asset return model is proposed that combines the historical returns, capital asset pricing model (CAPM) and returns estimated based on firm fundamentals. These return estimates enter the optimization problem. The second contribution is the application of an improved covariance matrix estimator that has superior properties compared to the typical sample covariance estimator. Third, the paper proposes two investments strategies. The first proposition suggests always choosing the maximized Sharpe ratio portfolio and the second one, the portfolio with the highest information ratio. The nature of both strategies is designed for investors with different appetites for risk. The performance of these choices is analyzed in light of four types of constraints: upper/lower investment limits, group constraints and transaction costs. The one-period optimal investment portfolio is rebalanced at quarterly intervals. Both strategies are benchmarked against an alternative investment choice such as holding the S&P 500 index, or investing in a risk-free asset such as a bond. Portfolio analysis and backtesting reveal that the strategies are superior to simply holding an equally weighted portfolio, a risk-free asset or the S&P 500 index.     

北京市中小企业经营环境评估

我国中小企业的不断壮大为国民经济增长做出了巨大贡献，但目前仍存在市场竞争压力大、融资成本高等问题。以北京市中小企业为研究对象，从经济市场、政策法律、金融服务和创新发展四个维度构建指标评价体系，通过2013-2017年北京市中小企业各指标对其经营环境的影响进行评价。研究发现，近年来北京市中小企业经营环境逐年优化，但整体水平仍待提高，未来发展重点在于完善政策扶持、优化融资环境和推动创新发展。     

Land fragmentation and farm productivity in China in the 1990s

The main objective of this study is to examine the effects of fragmentation on farm productivity in China and to discuss policy implications. Some earlier work has questioned the importance of the economic costs of land fragmentation in developing economies. It has been argued that policymakers should focus instead on reducing the root causes of fragmentation: inefficiencies in land, labour, credit, and food markets. Our results, using a more recent and larger dataset from a household survey in China, find that fragmentation does have an economic cost in China. Production functions are estimated for each of the major grain crops in the sample provinces. We also argue that to reduce the economic costs, land consolidation in China should be undertaken with less government intervention. More attention should be given to the establishment of markets for land (or land use rights) and improvements in rural credit and grain markets.     

经济寒冬下的企业国际化状况——基于台州企业的实证研究

文章首先讨论了研究背景,认为成本、宏观货币政策、出口导向政策、汇率波动以及外部需求变化等是企业出口的主要影响因素。然后阐述了本研究的调查方法和内容,组织了30名学生对152家出口企业进行问卷调查以及20位企业经理进行访谈调查,从台州企业国际化经营基本状况,外部环境变化对企业国际化经营的影响,企业内部要素状况,企业的未来发展趋势及计划等几个方面进行分析。最后,得出结论,台州企业在国际化进程中还处在初级阶段,在危机中应立足转型升级,蓄势崛起,政府和行业协会的帮扶作用有待提高。     

Switching Costs in the Wholesale Distribution of Cigarettes

Recent theories of price wars triggered by entry assign a critical role to switching costs in explaining price and output changes. Earlier, Elzinga and Mills (1998) showed that actual switching patterns following an episode of new entry in an industry are driven by the fact that buyers have different switching costs. The current paper draws on transaction-specific price and shipments data surrounding the 1984-1985 price war in generic cigarettes to explore the size and determinants of switching costs among wholesale cigarette distributors. Results show that switching costs vary across firms and are nontrivial in magnitude. Several implications of the findings are discussed.     

Regulation, competition, and the structure of prices

Many competition policy issues in regulated industries concernthe structure of prices charged by multi-product firms - forexample price discrimination, non-linear pricing, cross-subsidies,and network access pricing. This article first sets out the(Ramsey) principles of optimal pricing to recover fixed costs.The sometimes conflicting aims of promoting competition andpursuing social objectives are brought into the analysis. Questionsof whether to allow pricing structure discretion to the firm,and how much, are considered next. With asymmetric information,some discretion is often desirable, but its optimal form ishard to characterize. The article then turns to the controversialnetwork access pricing problem - on what terms should an integrateddominant firm be required to supply inputs required by its rivals?Finally, there is discussion of pricing structure regulationin the transition from more to less regulation, which, it isto be hoped, is in prospect in parts of the regulated industriesas effective competition develops.     

中部四省商务成本水平结构比较研究

文章基于可量性原则从要素成本和交易成本两方面构建区域商务成本评价指标体系,选取中部安徽、河南、江西和广西为比较对象,依据各省市统计年鉴的指标数据进行水平间比较。主要结论是中部四省商业设施及土地成本和劳动力成本总体上呈现出上升态势,但具体指标上升速度存在明显差异性;政府运作效率、市场化和信息化程度、基础设施和研发能力等有所提高,但少数指标却呈现逐年下降态势,如第三产业占GDP等。文章主要贡献在于以详实的统计数据比较分析区域商务成本动态变化,并提出区域商务成本调控政策建议。     

Japanese fiscal reform: fiscal reconstruction and fiscal policy

This paper evaluates the recent movement of Japanese fiscal reform. We first summarize fiscal policy in 1990s. Then, we investigate several relevant topics of fiscal policy such as the macroeconomic impact of government debt and the sustainability problem. We then consider dynamic properties of fiscal reconstruction process by analyzing the dynamic game among various interest groups. This paper points out that the long-run structural reform is more important than the short-run Keynesian policy in Japan.     

抗战时期中共对土匪改造策略的研究

本文从抗战中共制定改造土匪策略的历史背景谈起,从而进一步研究中国共产党在抗战时期对土匪进行改造的策略,以及对土匪进行改造对于抗战胜利的意义。     

Optimal choice of monetary policy instruments when policymaking is costly

Poole's analysis of the optimal choice of monetary policy instruments assumes that stochastic disturbances are temporary, that a monetary authority determines instrument settings each period, and that policymaking is a costless activity. This paper considers an environment in which shocks are cumulative, the monetary authority precommits to instrument settings for an interval of its own choosing, and the authority incurs costs when it adjusts its instrument settings. The key result that arises in this framework is that costs of policymaking generally induce a monetary authority either to choose a socially suboptimal policy instrument or to adjust its policy instrument settings over time in a manner that appears to be inefficient.     

Tariffs and collection costs

Conclusion Tariffs and export taxes may comprise part of a first-best tax package if their cost of collection is lower than alternative means of raising revenue. Using various proxies for relative collection costs, and holding constant standard indices of development, we find evidence of a significant relationship between a country’s usage of trade taxes and the relative cost of raising revenue. This relationship holds for a large sample of developed and developing countries, and when only developing countries are studied. This research suggests that more attention should be paid to the administrative costs of raising revenue, in addition to the usual focus on the allocative effects of taxes and tariffs. Further study of the nature of these costs should prove valuable in understanding the optimal mix of these policy instruments. It would be particularly valuable to have empirical evidence on what characteristics of a country influence the relative collection cost of raising revenue in alternative ways. This would enable researchers to more precisely identify the effect of relative collection costs on observed tax policy, and facilitate the formulation of tax policy by policymakers.     

What caused the Asian currency and financial crisis?

The paper explores the view that the Asian currency and financial crises in 1997 and 1998 reflected structural and policy distortions in the countries of the region, even if market overreaction and herding caused the plunge of exchange rates, asset prices and economic activity to be more severe than warranted by the initial weak economic conditions. The first part of the paper provides an overview of economic fundamentals in Asia on the eve of the crisis, with emphasis on current account imbalances, quantity and quality of financial ‘overlending’, banking problems, and composition, maturity and size of capital inflows. The second part of the paper presents a reconstruction of the Asian crisis from the antecedents in 1995–1996 to the recent developments in early 1999 in parallel with a survey of the debate on the strategies to recover from the crisis, the role of international intervention, and the costs and benefits of capital controls.     

货币政策目标和篮子货币最优权重的选取——基于贸易收支稳定的视角

本文首先建立模型分析在使贸易收支变动方差最小化条件下,汇率指数最优权重的选取,也就是把汇率指数的构建和货币政策的目标结合起来。本文构建了国际收支变动关于篮子货币权重的理论模型,根据贸易收支方差波动最小获得篮子货币的最优权重。进一步,本文对最优权重进行了数值模拟分析,得到出口或进口稳定的最优篮子货币的权重,在此基础上,本文模拟了人民币对美元汇率的走势,并比较了有效汇率稳定目标下篮子货币的权重和人民币对美元汇率的变化。结合宏观经济政策目标重新确定参考篮子货币汇率指数权重,有利于完善和建立参考一篮子货币的汇率制度,为篮子货币制度制定提供理论指导。     

The optimal exploitation of exhaustible resources,a survey

Summary In this article a survey is given of the economic theory on the optimal exploitation of exhaustible resources. Attention is paid to Hotelling's pioneering work, the specification of welfare objectives, open economies, extraction costs, uncertainty, research and development and the relation between optimal economic growth and optimal extraction.I am indebted to C. Elbers, T. van der Meij, R. Ramer and H. Weddepohl for helpful comments.