Competitive Market Model Research Articles

Mathematical model of managing of the generating company on the criterion of the profit maximization

The urgency of the work is conditioned by the electric power industry reforming, which implies a gradual transition to a competitive market model. So each producer will be interested in maximizing his own profit and independently determine the volumes of electric and heat energy production. On the basis of the developed criterion of maximizing profits, the following problems are considered in the article: the most advantageous distribution of electric energy of thermal power plants at given values of the rate for electricity; distribution of thermal energy between the plant’s units, taking into account the forced heating mode of operation of the stations; finding the optimal modes of operation of the stations for the combined method of producing electric and thermal energy; appointment of the most favorable operating modes of the generating company; substantiation of tariff rates for the products sold, depending on the optimal production volumes at thermal power plants that are part of the generating company, determining the optimal operating conditions of SIBEKO JSC (Novosibirsk, Russia). The results: methodology of optimization of CHPP for electric and heat energy has been developed in the work. And also a new criterion has been proposed for maximizing profits for managing the functioning of a generating company.

A Cut Generation Algorithm of Finding an Optimal Solution in a Market Competition

We consider a mathematical model of market competition between two parties. The parties sequentially bring their products to the market while aiming to maximize profit. The model is based on the Stackelberg game and formulated as a bilevel integer mathematical program. The problem can be reduced to the competitive facility location problem (CompFLP) with a prescribed choice of suppliers which belongs to a family of bilevel models generalizing the classical facility location problem. For the CompFLP with a prescribed choice of suppliers, we suggest an algorithm of finding a pessimistic optimal solution. The algorithm is an iterative procedure that successively strengthens an estimating problem with additional constraints. The estimating problem provides an upper bound for the objective function of the CompFLP and is resulted from the bilevel model by excluding the lower-level objective function. To strengthen the estimating problem, we suggest a new family of constraints. Numerical experiments with randomly generated instances of the CompFLP with prescribed choice of suppliers demonstrate the effectiveness of the algorithm.

Diffusion of Innovation in Competitive Markets - A Study on the Global Smartphone Diffusion

In this work, the aim is to study the diffusion of innovation of two competing products. The main focus has been to understand the effects of the competitive dynamic market on the diffusion of innovation. The global smartphone operating system sales are chosen as an example. The availability of the sales and the number of users data, as well as the predictions for the future number of users, make the smartphone diffusion a new laboratory to test the innovation of diffusion models for the competitive markets. In this work, the Bass model and its extensions which incorporate the competition between the brands are used. The diffusion of smartphones can be considered on two levels: the product level and the brand level. The diffusion of the smartphone as a category is studied by using the Bass equation (category-level diffusion). The diffusion of each competing operating system (iOS and Android) are considered as the competition of the brands, and it is studied in the context of competitive market models (product-level diffusion). It is shown that the effects of personal interactions play the dominant role in the diffusion process. Moreover, the volume of near future sales can be predicted by introducing appropriate dynamic market potential which helps to extrapolate the model results for the future.

Two Sides of a Platonic Coin: Marxism and Neoclassicism in the Socialist Calculation Debate

The socialist calculation debate occurred simultaneously with the development of increasingly idealized neoclassical market models in the early decades of the 20th century. Nonetheless, free market neoclassical economists were conspicuously absent from that debate, leaving the pro-market case to be made by Austrian economists. This paper puts forward an interpretation of the neoclassical school's relative absence based on certain shared philosophical premises of neoclassical market models and Marxism. It argues that the two schools' shared Platonic influences render the more devout exponents of static, perfectly competitive market models unable to contribute substantively to the defense of markets against advocates of socialism.

Is a Big Entrant a Threat to Incumbents? The Role of Demand Substitutability in Competition Among the Big and the Small

AbstractWe establish a model of market competition between large and small firms and investigate the way in which demand substitutability affects how the entry of big firms impacts incumbents. We focus on the relative strength of two opposing effects of entry on large incumbent firms’ demand: the direct substitution effect among large firms (negative) and the indirect feedback effect through the change in small firms’ aggregated behavior (positive). If the substitutability between large and small firms is sufficiently high, the indirect effect dominates the direct effect and large incumbents’ equilibrium prices and profits increase. We show that welfare effects are ambiguous, which calls for careful assessment when regulating large firms’ entry.

Three Hierarchical Levels of Big-Data Market Model Over Multiple Data Sources for Internet of Things

This paper proposes three hierarchical levels of a competitive big-data market model. We consider that a service provider gathers data from multiple data sources and provides valuable information from refined data as a service to its customers. Under our approach, a service provider determines optimal data procurement from multiple data sources within its budget constraint. The multiple data sources follow the service provider’s action by independently submitting bidding prices to the service provider. Further, customers decide whether to subscribe or not based on the subscription fee, their willingness-to-pay, and the quality of the refined data. We study the economic benefits of such a market model by analyzing the hierarchical decision making procedures as a Stackelberg game. We show the existence and the uniqueness of the Nash equilibrium (NE), and the NE solution is given as a closed form. Finally, we reveal that the obtained unique equilibrium solution maximizes the payoff of all market participants.

Pretending in Dynamic Games, Alternative Outcomes and Application to Electricity Markets

This work studies dynamic game situations with incomplete structural information, motivated by problems arising in electricity market modeling. Some adaptive/learning strategies are considered as an expression of the bounded rationality of the participants of the game. The adaptive strategies are typically not in Nash equilibrium. Thus, the possibility of manipulation appears. That is, a player may use the dynamic rule of the opponent in order to manipulate her. We focus on a smaller class of manipulating strategies, called pretending strategies, where each player acts as if she had different, not real, preferences. It turns out that under certain technical conditions, if only one player pretends, she can achieve the same cost as if she were the Stackelberg leader. The situation where all the players are pretending is then considered, and an auxiliary game, called pretenders’ game, is introduced. A class of quadratic games is then studied, and several relations among pretending and Stackelberg leadership are derived. A linear quadratic environmental game is also studied. We then study some competitive electricity market models. Particularly, a supply function model and the market mechanism described in Rasouli and Teneketzis (electricity pooling markets with strategic producers possessing asymmetric information ii: inelastic demand, arXiv: 1404.5539 , 2014) are considered. It turns out that pretending may increase competition or cooperation and in some cases pretending may cause behaviors making the system not working at all.

The Big Sort: College Reputation and Labor Market Outcomes

We explore how college reputation affects the “big sort,” the process by which students choose colleges and find their first jobs. We incorporate a simple definition of college reputation—graduates' mean admission scores—into a competitive labor market model. This generates a clear prediction: if employers use reputation to set wages, then the introduction of a new measure of individual skill will decrease the return to reputation. Administrative data and a natural experiment from the country of Colombia confirm this. Finally, we show that college reputation is positively correlated with graduates' earnings growth, suggesting that reputation matters beyond signaling individual skill. (JEL I23, I26, J24, J31)

Research on the Complexity of Dual-Channel Supply Chain Model in Competitive Retailing Service Market

This paper examines the optimal decisions of dual-channel game model considering the inputs of retailing service. We analyze how adjustment speed of service inputs affect the system complexity and market performance, and explore the stability of the equilibrium points by parameter basin diagrams. And chaos control is realized by variable feedback method. The numerical simulation shows that complex behavior would trigger the system to become unstable, such as double period bifurcation and chaos. We measure the performances of the model in different periods by analyzing the variation of average profit index. The theoretical results show that the percentage share of the demand and cross-service coefficients have important influence on the stability of the system and its feasible basin of attraction.

Optimal bidding strategy for price takers and customers in a competitive electricity market

AbstractBidding strategies are highly associated with the profit maximization and decreasing the risks for power utilities in a competitive market. For finding the optimal bidding strategies price takers need appropriate bidding structure. Thus, it is required to consider the model as a bi-level optimization problem. In the lower level price takers submit bid strategically to the ISO and in the upper level maximization of social welfare performed by solving the ISO Market clearing price (MCP). This paper aim to summarize the price taker’s bidding strategy modeling methods for competitive market models on the state-of-the art. A new genetic algorithm approach in a day-ahead electricity market in sealed auction with a pay-as-bid MCP has been employed to solve the problem from two different viewpoints i.e. with symmetrical and unsymmetrical information. The efficiency of the proposed method has been tested on the IEEE-30 bus system.

Welcoming Immigrants with Similar Occupational Interests: Experimental Survey Evidence from Hong Kong

Recent studies in America and Europe suggest that individual economic self-interest plays little role in explaining individual attitudes towards immigrants. A key piece of evidence for this proposition is that natives do not show particular hostility towards immigrants whose skill levels are similar to their own. We conducted an experimental survey of Hong Kong residents to examine their attitudes towards immigrants from Mainland China. We found that positive attitudes towards low-skilled immigrants were more prevalent among local labourers – whose job security would presumably be under greater threat from them – than among executives and professionals. Similarly, the premium attached to highly skilled immigrants increases significantly with locals’ occupational prestige, suggesting that immigrants are more likely to find support among natives who share similar occupational interests. Our results remain robust even after controlling for a range of potential explanatory variables. We conclude with a critical discussion of the use of skill levels to estimate the occupational interests of natives and assess the value of relying on the conventional labour market competition model to generate hypotheses about the role of economic self-interest in shaping immigration preferences.

Модель конкурентного равновесия на рынке электроэнергии с улучшенной адекватностью математического описания генерирующих компаний, системного оператора и электрической сети

Модель конкурентного равновесия на рынке электроэнергии с улучшенной адекватностью математического описания генерирующих компаний, системного оператора и электрической сети

Stochastic programming and market equilibrium analysis of microgrids energy management systems

Microgrids facilitate optimum utilization of distributed renewable energy, provides better local energy supply, and reduces transmission loss and greenhouse gas emission. Because the uncertainty in energy demand affects the energy demand and supply system, the aim of this research is to develop a stochastic optimization and its market equilibrium for microgrids in the electricity market. Therefore, a two-stage stochastic programming model for microgrids and the market competition model are derived in this paper. In the stochastic model, energy demand and supply uncertainties are considered. Furthermore, a case study of the stochastic model is conducted to simulate the uncertainties on the INER microgrids in Taiwanese market. The optimal investment of the generators and batteries installation and operating strategies are determined under energy demand and supply uncertainties for the INER microgrids. The results show optimal investment and operating strategies for the current INER microgrids are also determined by the proposed two-stage stochastic model in the market. In addition, trade-off between the battery capacity and microgrids performance is investigated. Battery usage and power trading between the microgrids and main grid systems are the functions of battery capacity.

Competitive Consumer Loan Market Model: Interest-Collateral Equilibrium

In this article we develop a fairly simple mathematical model of a competitive consumer loan market. Given the market deposit rate and the structure of the public’s time preference it predicts the equilibrium interest rate on consumer loans and the equilibrium degree of collateral coverage (the assets pledged – loans given ratio). Any borrower, according to his or her time preference, rate offered and collateral pledged decides whether he or she repays the loan or not and the banks try to deal with the arising information asymmetry. At the end of the paper we suggest the possible ways to further generalise the model.

Instituciones de educación en un contexto de mercado: El caso de la educación superior técnico-profesional en Chile

El presente estudio tiene por objeto caracterizar las tendencias recientes en el mercado de los Institutos Profesionales (IP) y Centros de Formación Técnica (CFT), identificando sus principales diferencias respecto a los resultados teóricamente esperables en un modelo de mercado competitivo. La investigación busca responder a dos grandes preguntas. Por un lado, qué tan posible es afirmar que, en un contexto de mercado, las instituciones educativas tengan incentivos para invertir en mejorar su calidad. Por otra parte, si los egresados y desertores de estas instituciones logran insertarse en el mercado del trabajo. Para ello, se trabaja a través de una metodología cuantitativa. Los resultados reflejan que la organización como mercado del sistema de ESTP ha traído consigo incentivos hacia la ineficiencia, independiente de los niveles de concentración de mercado en CFT e IP. En función de estos resultados, se ofrecen propuestas de política, orientadas a una revalorización de la educación superior técnico-profesional en el contexto de un nuevo sistema de educación superior, distinta al modelo de mercado, cuyo centro esté puesto en instituciones públicas y donde se incorpore el modelo de "universidad politécnica".

Competition for Attention

We present a model of market competition in which consumers' attention is drawn to the products' most salient attributes. Firms compete for consumer attention via their choices of quality and price. Strategic positioning of a product affects how all other products are perceived. With this attention externality, depending on the cost of producing quality some markets exhibit commoditized price salient equilibria, while others exhibit de-commoditized quality salient equilibria. When the costs of quality change, innovation can lead to radical shifts in markets, as in the case of decommoditization of the coffee market by Starbucks. In the context of financial innovation, the model generates the phenomenon of reaching for yield.

The Legal Constraint of Misrepresentation in Insurance Market and its Impact on Insurance Contracts

We advance the literature starting from the work by Dixit (2000), who considers the effect of the principle of good faith on adverse selection. Introducing a post-loss risk misrepresentation testing in a competitive insurance market model, we identify a sufficient condition to guarantee that a market equilibrium exists which is unique and characterized by a set of separating full coverage contracts if the test for misrepresentation is sufficiently accurate. We further investigate the case that the full-coverage equilibrium is not attained. Specifically, we show: (1) how the easiness of the post-loss test would impact the insurance contract, and (2) that the market equilibrium approximates the first-best under feasible conditions, which tend to be satisfied by the intrinsic nature of insurance contracts. Lastly, we describe the insurance contract after the introduction of a post-loss test given the use of underwriting, and show that the post-loss test completely takes the place of underwriting when either or both of the tests can be chosen.

Earnings Responses to Social Security Contributions

This paper exploits discontinuities induced by earnings caps for social security contributions (SSC) in Germany to analyse the effect of SSC on gross labour earnings. Empirical evidence is based on two complementary approaches utilising two administrative data sets. First, employment responses to SSC at the intensive margin are identified by a modified bunching approach that is applied to kinks in the budget set generated by the earnings caps. Second, I exploit an increase of a regional earnings cap of health and long-term care insurance as a natural experiment. In order to analyse economic incidence a difference-in-differences approach is used to estimate the effects on gross earnings. I find employment responses to be negligible and the burden of SSC to be shared equally between employers and employees. Both results turn out to be robust and are consistent with a competitive labour market model.

Are Consumer Decision-Making Phenomena a Fourth Market Failure?

This paper challenges the increasingly common view that the findings of behavioural economics constitute a fourth type of market failure. It shows how many behavioural phenomena, while they do imply departure from the standard competitive market model, undermine the use of this idealized model for policy analysis. A case study of the three-part tariff illustrates two problems: the validity of inferring that consumers’ choices after an intervention are superior to previous choices and the potential for distributional consequences when policy alters choice. These issues make behavioural phenomena fundamentally different from the standard market failures, as the deductive theoretical framework can no longer provide criteria to determine whether a policy improves consumer welfare. Thus, conceiving of behavioural phenomena as another form of market failure is to underestimate their implications for policymaking.

Distributed Channel Assignment in Cognitive Radio Networks: Stable Matching and Walrasian Equilibrium

We consider a set of secondary transmitter-receiver pairs in a cognitive radio setting. Based on channel sensing and access performances, we consider the problem of assigning channels orthogonally to secondary users through distributed coordination and cooperation algorithms. Two economic models are applied for this purpose: matching markets and competitive markets. In the matching market model, secondary users and channels build two agent sets. We implement a stable matching algorithm in which each secondary user, based on his achievable rate, proposes to the coordinator to be matched with desirable channels. The coordinator accepts or rejects the proposals based on the channel preferences which depend on interference from the secondary user. The coordination algorithm is of low complexity and can adapt to network dynamics. In the competitive market model, channels are associated with prices and secondary users are endowed with monetary budget. Each secondary user, based on his utility function and current channel prices, demands a set of channels. A Walrasian equilibrium maximizes the sum utility and equates the channel demand to their supply. We prove the existence of Walrasian equilibrium and propose a cooperative mechanism to reach it. The performance and complexity of the proposed solutions are illustrated by numerical simulations.