Consumer Self-Generation and Monopoly Limit-Pricing under Timing Uncertainty of Deregulation in the Electricity Market

Due to uncertainty in the timing of deregulation for electric power generation, large and potentially self-generating consumers should consider a lost option value as part of the cost of any investment they consider. This paper uses a simple two-period model to analyze the role played by the timing anticipation of deregulation in the decision making of potential self-generators (PSGs) and for limit-contract pricing of local utilities. We develop an effective limit-pricing rule and conclude that a higher-probability of early deregulation will lead utilities to retain more consumers and to set higher limit prices before deregulation. A possible early deregulation might not harm utilities; it could even benefit utilities in finite lifetime periods. Finally, a simulation is provided which supports our main results and shows that the effects on utilities' expected profits of uncertainty about the coming deregulation will depend on the distribution of consumer types.     

A Puzzle or a Choice: Uniform Pricing for Motion Pictures at the Box

Consumer differentiated preferences over movies make the uniform pricing regime at the box office a puzzle in the motion picture business. This paper explores the nature of price rigidity at the current uniform price. It concludes that the high profit mark-up from concession sales helps to retain uniform pricing as the optimal choice for exhibitors, without distributors’ condemned intervention. Unless many successful event movies are expected, tiered pricing over regular and event movies will not benefit either exhibitors or distributors. The criteria for exhibitors to favor tiered pricing and the distributors’ choices to eliminate the agency problem are also developed.

Residential Consumer Switching and Electricity Restructuring Policy: The Pennsylvania Power Market

Without significant price reduction, high consumer switching rates to competitive power suppliers have been criticized as a result of either the artificially high price to compare (PC) acting as the benchmark price that competitive generators must meet, or the critical mass effect from switching consumers. This paper builds a simple model to explore how the restructuring policy determines residential switching behavior. When the PC increases over time, whether it reflects the rising wholesale price adequately or not, a consistent price reduction policy will naturally induce an early-stage high switching rate. In contrast, a required switching rate policy that is associated with both an artificial price cut at the early stage and a longer period of stranded cost recovery can accelerate switching effectively. Two high-cost Pennsylvania utilities, which demonstrate opposite movements of residential switching rate under different restructuring policies, are examined to confirm that the high switching rate just results from the policy design, not from the subsidy in PC discussed in (Joskow, Paul L. “Why Do We Need Electricity Retailers? Or, Can You Get It Cheaper Wholesale?” Center for Energy and Environmental Policy Research, MIT, Revised discussion draft, 2000b), or the critical mass effect concluded in (Reitzes, James D., Lisa V. Wood, J. A. Quinn, and Kelli L. Sheran. “Designing Standard-Offer Service to Facilitate Electric Retail Restructuring.” The Electricity Journal 15, 9, 2003, pp. 34–51). Switching rates play no role in evaluating the success or failure of a restructuring.     

Evaluation of Instructional Technologies in Cyberspace Economics Teaching: Does Hyperlink Really Matter?

This paper examines the impact from one of the most commonly used online instructional technologies, simulation and reference hyperlinks, on the learning outcomes over varied course assessments in MBA Economics online courses. The empirical results confirm the positive impact of effective hyperlink insertion on both overall performance and individual student’s performance over exams and discussion board. The learning pattern of voluntary hyperlink usage is also explored. For the average learning outcome improvement, a compulsory usage of hyperlinks should be designed. The evaluation of appropriate usage in the case can be of significant practice to school administrators seeking to implement a required instructional technology in a rigorous and pedagogically sound manner.