Commitment Costs Research Articles

The dynamics of proximity in multiple-party innovation processes

PurposeProximity – that is, the closeness of parties – has been increasingly emphasized in studies on innovation networks. The idea of closeness has been discussed in relation to geographic proximity, and has also been referred to as knowledge overlaps and shared understandings between parties. In most of the studies dealing with proximity in relation to innovation networks, a static analysis is pursued. Such an analysis marks how the closeness or distance, often with the conclusion that parties should not be too close or too distant, is measured against innovation outcome at a specific point in time. However, innovation processes would include how parties increasingly converge in their knowledge and understanding, and how they may co-locate their businesses. The purpose of this paper is to discuss proximity in relation to multiple-party innovation processes and their development over time.Design/methodology/approachThe empirical part of this paper consists of a single case study on an innovation community and its development process. The development of the innovation community over time, whether and how geographic, knowledge and cognitive proximity is affected, and the outcome in terms of number of innovations, their newness (incremental or radical innovation), and variety are discussed in the paper.FindingsFindings indicate how geographic proximity leads to more knowledge overlaps, while it is not a prerequisite for it. Rather, it is in the commitment processes partly connected to cognitive proximity that knowledge increasingly converges, indifferent to the co-location of parties. The speed of such processes, however, is higher if parties co-locate. The commitment processes lead to an increased number of innovations, while these innovations become more and more similar. To avoid increased overlaps of knowledge and thereby maintain the production of a variety of innovations, interaction needs to occur through the introduction of new parties and the termination of previous interaction patterns. This, however, occurs at the cost of commitment, and the knowledge thereby becomes less developed and used in its capacities.Originality/valueThe paper contributes to previous research through discussing proximity in innovation networks in a processual manner. The link between various proximities and their effect on innovation outcome sheds light on how proximity, as discussed in various literature streams, often relates to similar issues that converge around the issue of commitment.

Stochastic Unit Commitment With Topology Control Recourse for Power Systems With Large-Scale Renewable Integration

In this paper, we model topology control through transmission switching as a recourse action in the day-ahead operation of power systems with large-scale renewable generation resources. We prove that transmission switching could only reduce the linear objective value of direct current optimal power flow when congestion exists. However, we also show, through a simple example, that unit commitment cost could be reduced by transmission switching even in the absence of congestion. To solve the stochastic unit commitment with topology control within reasonable computational time, we proposed a heuristic that first decomposes a practical system into zones and then solves the problem for each zone in parallel. The benefit of topology control recourse is demonstrated on a network representing the Central European System. We compare the costs of the network with different loading and renewable generation conditions. The cost reduction of the test system can reach 3.34% with heavy load and large-scale renewable generation while in a single zone the cost reduction can be above 7%.

Game Analysis on Return Costs of Dual Channel Supply Chain Considering Service

In order to solve the problem of return cost, this paper studies the retailer-led supply chain based on Stackelberg game theory, in which retailers and manufacturers are set up to maximize their profits as a goal considering service and the return cost. Discussing the problem of return cost when the retailer or the manufacturer exists in service. The study found when retailers exist services and the manufacturer bear the cost, the manufacturer reduce the cost of return to bear the loss of profits by increasing the wholesale price, the cost of return commitment will not affect the retailer's sales price and service levels, so the total profit of the supply chain no matter who is responsible for the return of the cost is equal. When the manufacturers has the service, the total profit of the supply chain when the retailer takes the return cost is greater than the total supply chain profit when the manufacturer assumes the return cost.

Commitment of Fast-Responding Storage Devices to Mimic Inertia for the Enhancement of Primary Frequency Response

One distinctive feature of renewable energy resources is that they contribute little inertia to power systems. With less system inertia, power grid is less capable of resisting frequency deviation from its nominal value in the first few seconds after disturbances. However, fast-responding storage devices can mimic inertial responses through some specified control algorithm. Thus, this paper focuses on the economic aspect of resource inertia as a service to the grid operation and aims to find a minimum-cost commitment of fast-acting storage devices for the enhancement of primary frequency responses. Costs are assigned to those storage resources and a commitment cost minimization problem is formulated with nonlinear primary frequency response constraints. A tractable iterative solution approach is developed and a sensitivity-based method through a rapidly solvable linear approximation of the nonlinear constraints is proposed to reduce the computational burdens of solving the optimization problem for large-scale systems. The effectiveness of the proposed methods is demonstrated using simulation results obtained using the 118-bus IEEE reliability test system.

Understanding and assessing complexity in cutting tool management

A high tool availability is usually named the most important goal in tool management. Ensuring that the tools are provided as required frequently results in excessive tool inventories and thus in high capital commitment costs. Modularization is one possibility to reduce the tool inventory by dismantling the entire system in subsystems, so-called modules. The utilization of modules is advantageous for tools if a high tool variety is needed. Since the trend towards a high product variety is continuing, tool variety is increasing as well. Therefore, the modularization of cutting tools is a current topic in research and industry. Advantages such as reduced setup times, the possibility of combining various components and using them on machines independent of their interface are going along. Although, there are also some disadvantages. One of the main disadvantages is the increased complexity in the tool cycle, especially in the tool assembly process. Even though there is high optimization potential in managing the complexity, it has not been addressed in research so far, but needs to be understood and assessed before being able to manage it. Therefore, approaches for understanding and assessing the complexity of the tool assembly process of modularized cutting tools are presented in this paper. In this context, well-known methods for assessing complexity such as the Variant Tree and the Petri-Net are checked for their suitability for cutting tool management.

Statistical reliability of wind power scenarios and stochastic unit commitment cost

Probabilistic wind power scenarios constitute a crucial input for stochastic day-ahead unit commitment in power systems with deep penetration of wind generation. To minimize the cost of implemented solutions, the scenario time series of wind power amounts available should accurately represent the stochastic process for available wind power as it is estimated on the day ahead. The high computational demands of stochastic programming motivate a search for ways to evaluate scenarios without extensively simulating the stochastic unit commitment procedure. The statistical reliability of wind power scenario sets can be assessed by approaches extended from ensemble forecast verification. We examine the relationship between the statistical reliability metrics and the results of stochastic unit commitment when implemented solutions encounter the observed available wind power. Lack of uniformity in a mass transportation distance rank histogram can eliminate scenario sets that might lead to either excessive no-load costs of committed units or high penalty costs for violating energy balance when the committed units are dispatched. Event-based metrics can help to predict results of implementing solutions found with the remaining scenario sets.

Transfer of Authority within Hierarchy

Bureaucracy is featured by vertical hierarchical structure in which the decision maker usually lacks direct access to informed agent, and the span of discretionary authority decreases top down. In this paper we analyze the performance of delegation mechanism in three-level hierarchies. The decision maker needs to delegate authority to a biased mediator, then the mediator makes further delegation decision. We provide a full characterization of the implemented delegation set. It's shown that the optimal outcome is implementable via delegation if and only if the mediator's bias lies between the DM and the sender. We then compare the performance of delegation with communication (mediator cheap talk), and reverse the conclusion in Dessein (2002) that delegation generates higher ex ante expected payoff than cheap talk. Therefore, the inability to access agent, in additional to commitment cost and ex post temptation to renege, is identified as a new reason for the observed absence of commitment.

Natural resources and sovereign expropriation

A government wants to exploit a renewable resource, yielding a time-varying flow of rent, by leasing it. Leasing contracts can be expropriated before expiration, albeit at a cost. To minimise transactions costs and avoid the ‘resource trap’ the government would prefer to enter into an infinitely long contract (i.e. sell the resource), if it could commit not to expropriate. However, with finite costs of expropriation credible commitment is impossible: the government either enters into finite contracts, expropriates with positive probability or does both. The value of the resource to the government is increasing in the cost of expropriation, but decreasing in the variability of the resource rent.

Association of Cost Sharing With Mental Health Care Use, Involuntary Commitment, and Acute Care

A higher out-of-pocket price for mental health care may lead not only to cost savings but also to negative downstream consequences. To examine the association of higher patient cost sharing with mental health care use and downstream effects, such as involuntary commitment and acute mental health care use. This difference-in-differences study compared changes in mental health care use by adults, who experienced an increase in cost sharing, with changes in youths, who did not experience the increase and thus formed a control group. The study examined all 2 780 558 treatment records opened from January 1, 2010, through December 31, 2012, by 110 organizations that provide specialist mental health care in the Netherlands. Data analysis was performed from January 18, 2016, to May 9, 2017. On January 1, 2012, the Dutch national government increased the out-of-pocket price of mental health services for adults by up to €200 (US$226) per year for outpatient treatment and €150 (US$169) per month for inpatient treatment. The number of treatment records opened each day in regular specialist mental health care, involuntary commitment, and acute mental health care, and annual specialist mental health care spending. This study included 1 448 541 treatment records opened from 2010 to 2012 (mean [SD] age, 41.4 [16.7] years; 712 999 men and 735 542 women). The number of regular mental health care records opened for adults decreased abruptly and persistently by 13.4% (95% CI, -16.0% to -10.8%; P < .001) per day when cost sharing was increased in 2012. The decrease was substantial and significant for severe and mild disorders and larger in low-income than in high-income neighborhoods. Simultaneously, in 2012, daily record openings increased for involuntary commitment by 96.8% (95% CI, 87.7%-105.9%; P < .001) and for acute mental health care by 25.1% (95% CI, 20.8%-29.4%; P < .001). In contrast to our findings for adults, the use of regular care among youths increased slightly and the use of involuntary commitment and acute care decreased slightly after the reform. Overall, the cost-sharing reform was associated with estimated savings of €13.4 million (US$15.1 million). However, for adults with psychotic disorder or bipolar disorder, the additional costs of involuntary commitment and acute mental health care exceeded savings by €25.5 million (US$28.8 million). Higher cost sharing for seriously ill and low-income patients could discourage treatment of vulnerable populations and create substantial downstream costs.

Alliance Proximity and Effectiveness of Extended Deterrence

ABSTRACTThis article examines whether geographical proximity between defensive allies and a protégé increases the likelihood of successful extended general deterrence. I argue that proximate allies are better at making a credible deterrent threat because proximate allies are more willing and able to help alliance partners in times of crisis than distant ones. This claim is theorized by examining how geographical distance influences the international and domestic costs of alliance commitments. The empirical tests reveal that a potential aggressor is less likely to initiate a militarized dispute against a target with proximate defensive allies. Furthermore, I find that the power of proximate defensive allies is a more significant determinant of successful extended general deterrence than that of distance allies. Interestingly, I also find that the constraining effects of geographical distance on the effectiveness of extended general deterrence have been alleviated by advancements in military technologies throughout history.

Equity Ownership in Cross‐border Mergers and Acquisitions by British Firms: An Analysis of Real Options and Transaction Cost Factors

The authors investigate the factors influencing the share of equity ownership sought in cross‐border mergers and acquisitions (CBM&amp;As). Drawing on real options theory and transaction cost economics (TCE), they address and hypothesize key factors linked to commitment under exogenous uncertainty and the separation of desired and non‐desired assets’ influence on share of equity sought by acquiring firms in CBM&amp;As. Empirical analysis based on 1872 CBM&amp;As undertaken by British firms in both developed and emerging economies shows that British MNEs are more likely to pursue a partial acquisition in a target foreign firm when those foreign firms are from culturally distant countries. Further, findings support the view that the high cost of separating desired assets from non‐desired assets motivates firms to make a partial acquisition rather than acquire the target completely. This is one of the first studies to use real options theory to address the cost of commitment under exogenous uncertainty, as well as TCE logic to address the separation of desired and non‐desired assets in the target firm while analysing equity ownership sought in CBM&amp;As. Empirically, this paper contributes by examining CBM&amp;As by British firms in both developed and emerging markets.

The Option Value of Membership in a Defense Alliance

Membership in a defense alliance is viewed as an insurance option for a country subject to military threat. The focus is on the trade-off between domestically and internationally provided security as tax-financed public goods under heterogeneous risk classes of the members. A sufficient condition for a low-risk potential member to abstain from participation and a necessary condition for the participation of a high-risk potential member are stated. Disincentives for membership can include the cost of commitment in terms of the required production of the collective good, preemptive maneuvers, and ex post punishments of the enemy. The optimal tax is shown to be declining in the safety classification of a member subject to an adverse incentive effect of free riding. Solutions for the alliance size and the cost of membership are derived in the alliance equilibrium resorting to the fixed-point solution. With costly termination of membership, multiple equilibria can arise.

Commitment Cost Allocation of Fast-Start Units for Approximate Extended Locational Marginal Prices

In the U.S. electricity markets, locational marginal prices (LMPs) are obtained in economic dispatch with fixed commitment decisions. The costs of committing or dispatching fast-start units at their minimum limits may not be covered by LMPs and significant uplift payments are thus needed. Extended LMPs (ELMPs) were established by MISO to appropriately reflect these costs, but are computationally expensive for market implementation. The approximate ELMP (aELMP) model is then developed with reduced complexity. An important design issue that highly affects aELMPs is to allocate commitment costs of fast-start units over time. However, it is difficult to obtain an allocation for the simplified model to effectively approximate the complex ELMPs. In this paper, allocation guidelines are derived in the day-ahead energy market without considering transmission capacity constraints for simplicity. The idea is to separate the ELMP problem into individual-hour problems resembling the aELMP model by using Lagrangain relaxation. Karush–Kuhn–Tucker (KKT) conditions are then innovatively used to derive guidelines for an easily implementable allocation that utilizes the commitment and dispatch results. To examine effectiveness of the guidelines, aELMPs are compared with ELMPs and LMPs. Numerical results show that the resulting aELMPs effectively approximate ELMPs and reduce uplift payments.

Cost Analysis Method for Estimating Dynamic Reserve Considering Uncertainties in Supply and Demand

The use of appropriate hourly reserve margins can maintain power system security by balancing supply and demand in the presence of errors in the forecast demand, generation outages, or errors in the forecast of wind power generation. Because the cost of unit commitment increases with larger reserve margins, cost analysis to determine the most economical reserve margin is an important issue in power system operation. Here, we define the “short-term reliability of balance” and describe a method to determine the reserve margin based on the short-term reliability of balance. We describe a case study, in which we calculate the reserve margin using this method with various standards of short-term reliability of balance. A cost analysis is then performed to determine the most economic standard, and a comparison between our method and a conventional method is carried out. The results show that our method with an economic short-term reliability of balance enables more reliable and efficient operation of the power system. Moreover, with an hourly reserve margin, we show that an increase in wind power generation can result in a significant decrease in the operating cost, which makes wind power generation economically viable.

TESTING COMMITMENT COST THEORY IN CHOICE EXPERIMENTS

In choice experiments, it is commonly assumed that individuals make choices in static and certainty decision‐making conditions. Real‐world choices, however, are usually made in a dynamic setting. Committing a purchase decision under conditions of uncertainty might have a “Commitment Cost” (CC). In this study, we test CC theory using a nonhypothetical choice experiment. Specifically, we test whether choice behavior and willingness to pay estimates differ when individuals have the option to gain present or delayed information or reverse the transaction. Our results suggest that the construction of a dynamic decision context can be relevant in the design of choice experiments. (JEL C90, C93, Q18)

Multi-Objective Unit Commitment With Renewable Energy Using GSA Algorithm

With increasing concerns of global warming and environmental change caused by the burning of fossil fuels, the operating paradigm of power system is shifting from minimum cost to minimum cost with minimum emission approach. Due to conflicting nature of economic and emission objectives, the generation scheduling becomes a multi-objective problem. In this paper, a multi-objective gravitational search algorithm (MOGSA) is used to provide Pareto optimal solutions which present the possible trade-off between the cost and emission objectives of unit commitment (UC) problem. The MOGSA technique is used for solving the environmental and economic dispatch problem considering hydro, pump storage plant, wind farm and solar farm, with and without ramp rates. The simulation results demonstrate the effectiveness of the proposed approach in solving multi-objective UC problem.

The Commitment of Interruptible Load to Ensure Adequate System Primary Frequency Response

The use of interruptible load (IL) resources to improve the primary frequency response (PFR) of an interconnected power system has been proposed and, for speed, it is likely that such resources would operate autonomously on local frequency measurements. The commitment of the resources, however, could be coordinated globally and frequently in accordance with the state of the system. This paper investigates the minimum cost commitment of IL resources to ensure the PFR of a system remains within specified limits. The binary integer programming problem considers the commitment cost of each IL resource and includes nonlinear frequency constraints specified by the transient stability simulation of the system. A method to estimate the contribution of an IL resource towards meeting a frequency constraint is proposed and incorporated into a solution approach that involves the iterative solving of a linear commitment problem. The sensitivity-based estimation method reduces the amount of computationally burdensome transient stability simulation required by the algorithm with little increase in the final solution cost. An IEEE 118-bus test case study with 1000 IL resources demonstrates the benefit of the estimation method.

Real-Time Markets for Flexiramp: A Stochastic Unit Commitment-Based Analysis

Markets for ramp products (called “flexiramp” in the California ISO and “ramp capability” in the Midcontinent ISO) have been proposed to address the need for generator flexibility due to increased renewable penetration. Flexiramp is committed capacity reserved to meet unexpected ramps in net load. We evaluate flexiramp market designs by comparing solutions of 1) an ISO real-time market simulation (a deterministic real-time unit commitment (RTUC) model with flexiramp requirements) with 2) a stochastic RTUC model, used as a baseline for evaluating flexiramp solutions. The flexiramp constraint improves the expected performance of ISO real-time markets, but is inefficient compared to stochastic RTUC. Flexiramp markets are inefficient in part because the deterministic model disregards the possibility of higher than anticipated energy production by capacity reserved for ramp. Thus, for instance, capacity with low commitment costs but high running costs might be overcommitted, increasing energy costs under high ramp outcomes. The amount of flexiramp acquired strongly affects costs. Too little results in under-commitment of generators and high price fluctuations and even demand curtailment; too much leads to over-commitment, inflating production costs. Hence, careful design of the ramp market and consideration of the use of full stochastic dispatch and commitment models is recommended.

Tsong kha pa and the Myth of the Given

Tsong kha pa and the Myth of the Given Edward Falls My thesis is that Tsong kha pa’s distinction between the methodological approaches of Svātantrika-Mādhyamikas and Prāsaṅgika-Mādhyamikas has been widely misinterpreted.1 As the distinction is usually construed, it is taken to turn on the different appraisals, by Svātantrikas and Prāsaṅgikas, of the epistemological and ontological costs and benefits of foundationalism. The standard interpretation of Tsong kha pa’s distinction ascribes to him the claim that Svātantrikas underestimate the ontological costs of foundationalism, in particular the cost of ontological commitment involved in accepting a form of the Given, as Svātantrikas seem to do in their use of svalakṣanas to claim authority for observation reports. A lemma in my argument here is that Sellars’s famous critique of foundationalism is misunderstood when taken as a total rejection of empiricist foundationalism. Sellars’s critique of the Given does not bear on the sort of foundationalism concerned with the authority of particular observation reports, such as are needed to block the inferential regress that lends significance to the metaphor of foundations. Sellars’s critique is concerned rather with the question of entitlement, which has to do, more fundamentally, with the kind of normativity associated with the very notion of ascribing justificational authority to any observation reports whatsoever. In light of this understanding of Sellars’s critique of the Given, I argue that Tsong kha pa’s Svātantrika-Prāsaṅgika distinction turns on what he sees as a divergence [End Page 132] in the therapeutic efficacy of their respective methodologies, and that it does not imply a difference in the two schools’ ontological commitments. For Tsong kha pa, the crux of the matter is that it is impossible for a Mādhyamika and a non-Mādhyamika to have commensurable perceptual apprehensions of the logical subject of an inference in any debate about intrinsic existence. Svātantrikas take one approach to dealing with this inevitable incommensurability, while Prāsaṅgikas take a different approach. The Prāsaṅgika approach involves the use of opponent acknowledged inferences (gzhan grags kyi rjes su dpag pa, or gzhan grags kyi sbyor ba), which, as I shall show, operate on the presupposition that even where total commensurability is impossible, partial commensurability, at the level of observation reports, is a necessary condition for the possibility of rational discourse between two individuals (or between opposing perspectives within a single individual’s divided consciousness). So, Tsong kha pa’s account of opponent-acknowledged inferences, as worked up in the final section of my paper, is relevant, more broadly, to the contemporary discussion of the foundations of rationality as evinced in the work of such figures as Habermas and Brandom. The doxographic distinction between Svātantrika-Mādhyamikas and Prāsaṅgika-Mādhyamikas is a topic that is of central importance for Tibetan Buddhist philosophers, with differences between the main “schools” or “sects” of Tibetan Buddhism finding expression in distinct interpretations of how to understand the difference between the two sub-schools of Madhyamaka philosophy. The basic difference between the two sub-schools arises from a procedural difference classically delineated in the works of Bhāvaviveka and Candrakīrti. Svātantrikas follow Bhāvaviveka in countenancing the use, by Mādhyamikas in debate with non-Mādhyamikas, of certain types of inferences which require both parties to the debate to agree as to the mode of presentation or ontological status of the parts of the inference (subject, predicate, reason, and so forth). Prāsaṅgikas, on the other hand, following Candrakīrti, insist that Mādhyamikas in debate with non-Mādhyamikas cannot use such inferences because it is precisely the mode of presentation and ontological status of the subject of debate that is in dispute for Mādhyamikas and non-Mādhyamikas. In the Tibetan context, there are, speaking generally, two basic types of interpretation of the significance of this procedural disagreement between Svātantrikas and Prāsaṅgikas. On one interpretation, the difference between Svātantrikas and Prāsaṅgikas is thought to involve no significant consequences for the way in which...

Why don't present-biased agents make commitments?

Present-biased preferences engender a demand for commitment. Commitment is a problematic prediction, since we see so little of it. I quantitatively explore the reasons for the “missing” commitment. Extending the procrastination model in Carroll et al. (2009), I show how equilibrium commitment is related to (i) the standard deviation of the opportunity cost of time, (ii) the cost of delay, (iii) the degree of partial naivete, and (iv) the direct cost of commitment. The calibrated model demonstrates that the perceived benefits of commitment are often overwhelmed by the costs of commitment. Demand for commitment is a special case rather than the general case.