Is it still economic to build a new coal-fired power plant in the U.S.? A real option analysis

In the U.S., virtually no new coal-fired power plants have been built in recent years. Both industry experts and academics seem to believe that no rational firm will build a new coal-fired plant. Will such a trend continue in the future? To provide insights into this question, we investigate the optimal decision of an electricity company with an irreversible and deferrable opportunity to build either a new coal-fired or natural gas-fired power plant as its new base-load resource. According to our real option analysis, the optimal decision depends on the location. In the case of the eastern U.S., it is optimal to choose a natural gas plant if a firm is given a choice among a new natural gas plant, a new coal plant and deferring the investment. However, contrary to the common sentiment in the industry and academia, building a new coal plant in the western U.S. is still more economical than building a new natural gas plant in the absence of emission pricing. Furthermore, introducing carbon pricing to western U.S. states, as California did, can substantially increase the probability that a firm will optimally choose a natural gas plant over a coal plant.     

Critical representations of Southern African inequality: Transcending outmoded exhibition and museum politics

ABSTRACT

Illustrating inequality to a more general public – beyond those concerned purely with public policy and research – presents various challenges. Museums have often served a function of memorialising both the impressive steps forward and major barriers to social progress, as a form of remembrance and understanding, although the twentieth century format in South Africa was generally embedded within colonial and racist self-glorification. The potential to transcend outmoded exhibition and museum politics with a new approach based on dialogical not didactic presentation, arises with inequality. In this exploration of how such an approach might unfold in the world's most unequal major city (as judged by the Palma Ratio), Johannesburg, the concept of threshold is introduced. Physical and conceptual access through overcoming thresholds is explored through a specific site, the Old Post Office, and through two artifacts that reveal structural power that generates inequality: Durban's sanitation system and Eastern Zimbabwe's diamond fields.     

Buying reputation as a signal of quality: Evidence from an online marketplace

Seller reputation, generated by buyer feedback, is critical to fostering trust in online marketplaces. Marketplaces or sellers may choose to compensate buyers for providing feedback. Signaling theory predicts that only sellers of high-quality products will reward buyers for truthful feedback, especially when a product lacks any feedback and when the seller is not established. We confirm these hypotheses using Taobao's reward-for-feedback mechanism. High-quality products, especially without established feedback, are chosen for feedback rewards, which cause sales to increase by 36%. Marketplaces and consumers can therefore benefit from allowing sellers to buy feedback and signal their high-quality products in the process.     

The robustness of the independent private value model in Bayesian mechanism design

Summary. In a Bayesian model of group decision-making, dependence among the agents' types has been shown to have a beneficial effect on the design of incentive compatible mechanisms that achieve the efficient choice associated with complete information. This effect is shown here to depend as much upon the use of large monetary transfers among the agents as it does upon dependence: if the transfers are bounded in magnitude, then nonexistence in the case of independence of an efficient, incentive compatible, ex ante budget-balanced and interim individually rational mechanism is robust to the introduction of a small amount of dependence among types. This robustness result supports the use of the simplifying assumption of independence in mechanism design. Received: October 28, 1996; revised version: May 28, 1997     

Going the extra mile: Antecedents of salespeople's discretionary effort

Many sales organizations are scrambling for success in today's intensely competitive environment. An increasing number of firms are finding that tried and true traditional selling strategies are less effective, or not effective at all. Moreover, companies are discovering that what has been an acceptable level of performance no longer is adequate for maintaining or gaining competitive advantage. Consequently, managers need to focus on alternative means through which the organization can be successful. One alternative is for sales forces to engage in discretionary effort-work activities that entail going beyond the call of duty. This paper develops propositions regarding antecedents of salesperson discretionary effort, which provide managerial direction should the propositions be confirmed.     

Household Saving in Developing Countries: First Cross-Country Evidence

Although most studies have relied on domestic or private sectorsaving data, this article uses household data available fromthe U.N. System of National Accounts for a sample of 10 countries.Household saving functions are estimated using combined time-seriesand cross-country observations in order to test households'responses to income and growth, rates of return, monetary wealth,foreign saving, and demographic variables. The results showthat income and wealth variables affect saving strongly andin ways consistent with standard theories. Inflation and theinterest rate do not show clear effects on saving, which isalso consistent with their theoretical ambiguity. Foreign savingand monetary assets have strong negative effects on householdsaving, which suggests the importance of liquidity constraintsand monetary wealth in developing countries.     

The persistence of real estate cycles

This paper presents a model that attempts to explain the underlying causes of the prolonged cycles observed in real estate markets. In addition, the paper characterizes the features that make some property types more prone to such boom-and-bust behavior. The combination of demand uncertainty, adjustment costs, and construction lags leads to two phenomena that may help explain market persistence. The first phenomenon is the reluctance of owners to adjust occupancy levels, even in the face of large shifts in renter demand. The second phenomenon is the occurrence of periods of sustained overbuilding: the addition of new supply in the face of already high vacancy rates.     

Taxation,imperfect competition,and discontinuities

Most work on taxation assumes that market adjustments to taxation will be small and continuous and so analyzes the effects of taxation using standard marginal methods. However, the world often changes in large and discontinuous ways. This paper looks at the effects of taxation when discontinuities in market adjustments are allowed because market structure is determined endogenously by the discrete entry and exit decisions of firms. The results indicate that the potential for discontinuities generates tax effects that are considerably different from those that emerge when adjustments are small and continuous. With discontinuities, taxes can have large and discrete effects, for example, by increasing prices far in excess of the tax itself or by changing utility in a highly nonmarginal way. Of more significance, with discontinuities taxes can actually increase welfare even when they lessen competition and raise prices. Taxes can also have markedly different effects on the income and welfare of different groups. Consumers are always made worse off by a tax, but a tax may be supported by the firms in an industry if the tax limits entry and thereby increases firm profits.