Individual Surplus Research Articles

Utility-based power control for a two-cell CDMA data network

Power allocation across users in two adjacent cells is studied for a code-division multiple access (CDMA) data service. The forward link is considered and cells are modeled as one-dimensional with uniformly distributed users and orthogonal signatures within each cell. Each user is assumed to have a utility function that describes the user's received utility, or willingness to pay, for a received signal-to-interference-plus-noise ratio (SINR). The objective is to allocate the transmitted power to maximize the total utility summed over all users subject to power constraints in each cell. It is first shown that this optimization can be achieved by a pricing scheme in which each base station announces a price per unit transmitted power to the users, and each user requests power to maximize individual surplus (utility minus cost). Setting prices to maximize total revenue over both cells is also considered, and it is shown that, in general, the solution is different from the one obtained by maximizing total utility. Conditions are given for which independent optimization in each cell, which leads to a Nash equilibrium (NE), is globally optimal. It is shown that, in general, coordination between the two cells is needed to achieve the maximum utility or revenue.

On walrasian equilibrium for pool-based electricity markets

We present a single time period decentralized electricity market clearing model that includes reactive power and demand responsiveness in addition to the more common framework of generation-side competition for the real power commodity. The approach allows self-interested agents, namely producers and consumers, independently to maximize their individual surpluses subject to prices. This is consistent with the very notion of a competitive market as defined in equilibrium theory. An auctioneer computes equilibrium prices that achieve power balance at every network node as required by Kirchhoff 's laws. The overall scheme is justified by duality theory for which there is a rich theoretical support, and convergence is achieved using a Newton price-updating algorithm.

On Walrasian Equilibrium for Pool-Based Electricity Markets

We present a single time period decentralized electricity market clearing model that includes reactive power and demand responsiveness in addition to the more common framework of generation-side competition for the real power commodity. The approach allows self-interested agents, namely producers and consumers, independently to maximize their individual surpluses subject to prices. This is consistent with the notion of a competitive market as defined in equilibrium theory. An auctioneer computes equilibrium prices that achieve power balance at every network node, as required by Kirchhoff's laws. The overall scheme is justified by duality theory, for which there is a rich theoretical support, and convergence is achieved using a Newton price-updating algorithm.

Political Criterion Functions and the Analysis of Wealth Transfers

Agricultural economics devotes much attention to analyzing market interventions and their distributional implications. Recent research emphasis has shifted from the analysis of policy effects toward explaining the underlying causes of farm policy (Gardner 1983). One popular research tool in analyzing the latter issue is the metaphor of aggregate rationality: policies are the outcome of a single optimization problem that balances the welfare of conflicting pressure groups. The criterion function that rationalizes policies is often called a political preference function (e.g., Rausser and Freebairn). In the present paper we investigate two assumptions underlying agricultural economic models of the political economy of wealth transfers: that the political process is indeed characterized by aggregate rationality (as questioned by Bates 1989), and that governments' objectives are limited to fiscal concerns and political rewards from pressure groups. Many studies posit that individual rationality in rent seeking leads to a form of aggregate rationality in policy outcome (Gardner 1983; Rausser and Freebairn). Other studies describe policy formation as a bargaining game leading to the maximization by a single policy maker of a criterion function of groups' welfare measures (Zusman). Rent-seeking activities by interest groups determine the weights given individual surplus measures in the criterion function (Roe and Graham-Tomasi, Rausser and de Gorter). A surplus-possibility (or transformation) set constrains this maximization of a weighted sum of surpluses. One infers the relative weights on group's welfare from the marginal rates of transformation of one surplus measure into another. Why might this model of aggregate rationality make sense? The political process often leads to enforceable contracts (e.g., the U.S. Farm Bill), which are outcomes of a recurring and predictable process (e.g., five-year farm bill cycle). Enforcement mechanisms and the repeated nature of the political-economic process make plausible the use of cooperative-game-theoretic arguments, i.e, the assumption of a Pareto efficient political equilibrium (Shubik). Studies typically treat the government as a monolithic actor (Fafchamps, Sadoulet, and de Janvry; Lopez; Oehmke and Yao), and some studies additionally posit cooperation of all players in the political-economic game (Love, Rausser, and Burton). The aggregation of individual rational behaviors of rent seekers and government agencies may not lead to a cooperative game equilibrium (Bates 1990, North 1991). The Folk theorem admits many solutions to a bargaining game and does not necessarily lead to Pareto optimality (Fudenberg and Maskin). By contrast, the original rent-seeking literature, as opposed to the cooperative/efficient view of government choice, posits government inefficiency as a cornerstone (Tullock): the existence of deadweight losses associated with transfers is prima facie evidence of inefficiency. In addition, enforcement mechanisms are often incomplete and costly (North 1990), and governments may have a vested interest in incompletely-enforced property rights, which exacerbate rent seeking and inefficient outcomes. This problem of aggregate rationality we term the integrability problem of policy choice. That is, can one recover a well-behaved criterion function from a set of equations describing observed policy outcomes? The second assumption, regarding government behavior, has a strong and weak form. The strong assumption excludes government as a fullfledged player in the political-economic game. Algebraically speaking, the government's obJohn Beghin and William Foster are assistant professors, Department of Agricultural and Resource Economics, North Carolina State University. The authors thank D. S. Bullock for his comments, D. Burton, L. Karp, A. Love, and G. Rausser for helpful discussions.

Pressures to adjust balance of payments disequilibria: an analysis of the powers of the International Monetary Fund

In view of recent proposals to grant the International Monetary Fund new instruments to press countries to adjust balance of payments disequilibria, the question arises of the efficacy of such means of pressure. An analysis of the Fund's power shows, inter alia, that conditions attached to currency purchases by deficit countries can only influence the techniques of adjustment but not the length of the adjustment period, that it is normally not possible for the Fund to expose individual surplus countries to inflationary or expansionary pressures, that the scarce currency clause is unworkable in present monetary conditions, and that the Fund's system of charges and remunerations cannot be used to exert financial pressure on countries in imbalance. The general avoidance of sanctions by the Fund's Executive Directors suggests that it would only be useful to make additional pressures available to the Fund, as contemplated by the Committee of Twenty, if the authority to take decisions on sanctions were transferred to a separate judicial or quasi-judicial body.