Marginal Utility Research Articles

Optimal Emission Prices Over the Business Cycles

We prove that under the most typical circumstances optimal emission prices are procyclical, i.e., prices should be lower during recessions. The procyclicality is more likely when emissions propagate very slowly into environmental damage. A prime example of such process is hbox {CO}_2 emissions. We show that carbon prices should be closely linked to the fluctuations of the marginal utility of consumption, which implies relatively modest magnitude of carbon price fluctuations. Our findings imply that climate policies should focus on setting the carbon price to the optimal growth path level and give carbon price fluctuations only a secondary role. Opposite to the carbon price, the cyclicality of optimal emissions depends on the production technology in the energy sector, and may become countercyclical in future if the technology mix becomes less fossil dependent.

Solely economic mitigation strategy suggests upward revision of nationally determined contributions

Solely economic mitigation strategy suggests upward revision of nationally determined contributions

Determination of the price for a hydro resource with consideration of operating conditions of hydropower plants using complex criteria of profit maxmization

<span>In this paper, a universal method has been developed to determine the price of a hydro resource (one cubic meter) for the operational regulation of a hydropower plant (HPP), which is a combination of an optimization method and a method for assessing the marginal utility. The proposed approach is based on the correct representation of differential incremental rate characteristics of water at an HPP and fuel at a thermal power plant (TPP). To know the price of a hydro resource used for electricity generation at a hydropower plant. This gives the possibility to increase the efficiency of management both at a hydropower plant, and in a water utilization system as a whole. Using the examples of Novosibirsk HPP, it is expected to develop an estimation of economic effect from the implementation of the developed criteria, the proposed method of the calculation of a hydro resource price at HPP, and the method of separating fuel costs at CHPP. As a result of the implementation the developed method for the HPP, a price of electricity sold in the flexible energy market will be compared to the price of the electricity produced and sold at CHPP, being equal to approximately 330 rubles/MW h.</span>

Effective models of economic growth of enterprise performance: Classification, analysis, selection

Subject. The article considers the concept, classification and mechanisms of implementing the models of performance growth as tools to maintain the sustainability of enterprises in a volatile economic environment. Objectives. The study aims to develop recommendations for replacing the growth models focused on a certain way of generating results, due to a decrease in their marginal utility, which violates the stability of the enterprise. Methods. The proposed method rests on a comparison of values of marginal utility and incremental costs necessary for implementing the special-purpose growth models, which parameters are oriented toward the management of certain sources of net cash flow growth; hierarchical schemes, determining the causal relationships of the analyzed growth models, the factors of net cash flows and the contribution to the growth; the projected level of enterprise potential development and the volume of investment required for a new growth model. Results. We developed a methodology for selecting an economically feasible organizational growth model that increases the enterprise sustainability on the planning interval, as applied to the predicted economic conditions of the environment. Conclusions. Our methodology may serve as an analytical tool to justify strategies for improving the efficiency of enterprises to maintain their stability on the planning interval in a volatile economic environment.

Profitability of farm-scale management strategies against the boll weevil in the tropics: case study from the Colombian Caribbean

Decision making in pest management is a challenging task. While pest dynamics are often quite uncertain, such decisions are often based on tenuous assumptions of certainty (economic injury levels and marginal utility approximations). To overcome such assumptions and adequately consider uncertainty, we apply decision analysis to evaluate management strategies used by farmers in the Colombian Caribbean against the boll weevil (BW). We represent the decision to protect the crop using partial budget analysis. This allows us to capture key properties of BW control strategies, while accounting for uncertainty about pest infestation pressure, control effectiveness and cotton yield and price. Our results indicate that proactive pest management is more efficient than reactive control given the current BW infestation pressure. However, farmers may prefer the reactive strategy, since they have experienced seasons with low infestation pressure where no insecticide applications were required. The proactive strategy, in contrast, requires scheduled pesticide applications in all years. Results show that in seasons with high infestation pressure the expected revenues of the reactive strategy tend to decrease, mainly because more spray applications are required when fields are heavily infested by the weevil. Value of information analysis revealed that uncertainties related to the start of the infestation, loss damage rate and attainable yield have the greatest influence on the decision recommendation for crop protection. Narrowing these key knowledge gaps may offer additional clarity on the performance of the current management strategies and provide guidance for the development of strategies to reduce insecticide use. This is particularly important for the promotion of the proactive strategy, which, under the current infestation pressure, has potential to reduce insecticide use. While economic injury levels can only be applied to responsive measures, our approach of partial budget analysis under uncertainty allows us to assess and compare both responsive and preventive measures in the same methodological framework. This framework can be extended to non-pesticide control measures.

A Rehabilitation of the Law of Diminishing Marginal Utility: An Ordinal Marginal Utility Approach

Abstract The model in which an individual maximizes his ordinal or cardinal total utility has long been the paradigm of individual choice theory. However, the two mainstream utility theories, the ordinal and cardinal total utility theories, have caused a dilemma, i.e. one has to sacrifice one of the following two: the good property of utility ordinality, or common-sense notions such as the law of diminishing marginal utility. Ordinal theory keeps the former but gives up the latter, while cardinal theory keeps the latter but sacrifices the former. We propose an ordinal marginal utility approach aiming to solve this dilemma by changing the very first assumption regarding individual choice.

Agent-Based Simulation to Measure the Effectiveness of Citizen Sensing Applications—The Case of Missing Children

Citizen sensing applications need to have a number of users defined that ensures their effectiveness. This is not a straightforward task because neither the relationship between the size of the userbase or its effectiveness is easily quantified, nor is it clear which threshold for the number of users would make the application ‘effective’. This paper presents an approach for estimating the number of users needed for location-based crowdsourcing applications to work successfully, depending on the use case, the circumstances, and the criteria of success. It circumvents various issues, ethical or practical, in performing real-world controlled experiments and tackles this challenge by developing an agent-based modelling and simulation framework. This framework is tested on a specific scenario, that of missing children and the search for them. The search is performed with the contribution of citizens being made aware of the disappearance through a mobile application. The result produces an easily reconfigurable testbed for the effectiveness of citizen sensing mobile applications, allowing the study of the marginal utility of new users of the application. The resulting framework aims to be the digital twin of a real urban scenario, and it has been designed to be easily adapted and support decisions on the feasibility, evaluation, and targeting of the deployment of spatial crowdsourcing applications.

Modeling green roofs’ cooling effect in high-density urban areas based on law of diminishing marginal utility of the cooling efficiency: A case study of Xiamen Island, China

There is in general good awareness of the potential role of green roofs to regulate urban thermal environments, but a lack of effective spatial modeling of this cooling effect for a given roof greening scheme at the city scale. This study proposes a simplified and feasible approach to simulate the cooling effect provided by green roofs as a mitigation option to combat urban heat island effects in high-density urban areas. In this study, we established a spatial model of the cooling effect of green roofs, which integrated remote sensing methods and a statistical model based on the law of diminishing marginal utility of the cooling efficiency of green roofs (DMUCE) deduced from previous studies. A case study in Xiamen City, China demonstrates the applicability and implications of the model. Our modeling clearly simulated the size and strength of the urban cool island and its variation under different green roof scenarios. We found that green roofs play an important part in moderating the thermal environment in areas where larger green spaces and waterbodies are largely absent. When the proportion of green roofs is implemented at scale, roofs that are only partly green can also create some extra cool islands (not merely normal islands) in high-density urban areas, equivalent to small green spaces and waterbodies. The sensitivity analysis of the cooling effect indicated that the maximum potential benefit of heat island reduction ranged from 4.04 km2 to 9.75 km2 when the coverage of green roofs was extended to the entire Xiamen Island. Besides, our results suggested that all proposed strategies would not remarkably moderate the thermal environment in the north of Xiamen Island, where urban planners should pay more attention in the future.

Research on the Marginal Utility of Consumers in the Network Economy

Network economy is a form of economic activity formed with the development of modern information technology. The emergence of the network economy has changed the traditional way of commerce. Under the conditions of the network economy, some basic principles and concepts of Western economics have undergone revolutionary changes. This article sorts out and reviews how consumers' marginal utility changes under the network economy. Focus on the two major issues of the emergence of marginal consumer increase in the network economy and whether the law of diminishing marginal utility still exists. Further analysis points out the difference in applicability between the two. Finally, it summarizes the shortcomings of the existing literature and looks forward to future research directions.

Complementarity of Information Products

Abstract In “Marketing Information: A Competitive Analysis,” Sarvary, M., and P. M. Parker. 1997. “Marketing Information: A Competitive Analysis.” Marketing Science 16 (1): 24–38 (S&P) argue that in part of the parameter space that they considered, a reduction in the price of one information product can lead to an increase in demand for another information product, i.e. information products can be gross complements. This result is surprising and has potentially important marketing implications. We show that S&P obtain this complementarity result by implicitly making the following internally inconsistent assumptions: (i) after purchasing information products, consumers update their beliefs using a Bayesian updating rule that assumes they have a diffuse initial prior (i.e. their initial prior variance is ∞ before receiving any information); (ii) if consumers choose not to purchase any information product, it is assumed that their initial prior variance is 1 (implied by the utility function specification). This internal inconsistency leads to the possibility that when information products are uncorrelated and their variances are close to 1, marginal utility is increasing in the number of products purchased, and hence information products can be complements in their model. We show that if we remove this internal inconsistency, in the parameter space considered by S&P, information products cannot be complements because the marginal utility of information products will be diminishing. We also show that, in parts of the parameter space not considered by S&P, it is possible that information products are complements; this space of parameters requires consumer’s initial prior to be relatively precise and information products to be highly correlated (either positively or negatively).

The Influence of Introducing Autonomous Vehicles on Conventional Transport Modes and Travel Time

Introducing autonomous vehicles (AVs) on the market is likely to bring changes in the mobility of travelers. In this work, extensive research is conducted to study the impact of different levels of automation on the mobility of people, and full driving automation needs further study because it is still under development. The impacts of AVs on travel behavior can be studied by integrating AVs into activity-based models. The contribution of this study is the estimation of AVs’ impacts on travelers’ mobility when different travel demands are provided, and also the estimation of AVs’ impact on the modal share considering the different willingness of pay to travel by AVs. This study analyses the potential impacts of AVs on travel behavior by investigating a sample of 8500 travelers who recorded their daily activity plans in Budapest, Hungary. Three scenarios are derived to study travel behavior and to find the impacts of the AVs on the conventional transport modes. The scenarios include (1) a simulation of the existing condition, (2) a simulation of AVs as a full replacement for conventional transport modes, and (3) a simulation of the AVs with conventional transport modes concerning different marginal utilities of travel time in AVs. The simulations are done by using the Multi-Agent Transport Simulation (MATSim) open-source software, which applies a co-evolutionary optimization algorithm. Using the scenarios in the study, we develop a base model, determine the required fleet size of AVs needed to fulfill the demand of the different groups of travelers, and predict the new modal shares of the transport modes when AVs appear on the market. The results demonstrate that the travelers are exposed to a reduction in travel time once conventional transport modes are replaced by AVs. The impact of the value of travel time (VOT) on the usage of AVs and the modal share is demonstrated. The decrease in the VOT of AVs increases the usage of AVs, and it particularly decreases the usage of cars even more than other transport modes. AVs strongly affect the public transport when the VOT of AVs gets close to the VOT of public transport. Finally, the result shows that 1 AV can replace 7.85 conventional vehicles with acceptable waiting time.

The Problem of Quantifying Utility

Purpose of the study. Analysis of the literature shows that the ordinal theory of utility is widespread in the theory of consumer behavior. To analyze consumer preferences, a utility function is used, which characterizes the value of the utility of the consumed goods and services on a scale of order. Moreover, to find the marginal utility of a product, arithmetic operations are used, which are impossible on a scale of order. To allow arithmetic operations, a quantitative analysis of the utility function is required. Consequently, the problem of quantitative measurement of the utility function is relevant.The measurement problem also arises in decision theory. For example, the hierarchy analysis method is a popular method for solving multicriteria problems, but contains an erroneous model of subjective measurement. For this reason, other methods appear in decision-making theory that should replace the method of analyzing hierarchies. The theory of the importance of criteria is being actively developed. However, the theory of the importance of criteria also does not solve the problem of quantitative measurement.For a long time, the problem of measurement has also existed in psychophysics. The existence of two mismatched psychophysical laws contradicts the classical theory of measurements. Recently, a rating solution has been proposed. The equivalence of the basic laws of psychophysics has been proved. In this paper, it is proposed to use the rating method to measure preferences in utility theory and in decision theory.Materials and methods. The domain of the rating is the set of ordered pairs of objects. Moreover, the composition (operation of addition) of objects is defined on the set of ordered pairs. A rating is a number that is assigned during a measurement to an ordered pair of objects.The rating is assumed to preserve the operation of composition of ordered pairs.An arithmetic operation is selected to carry out the measurement. The measurement result must match the result of the arithmetic operation. The result of an arithmetic operation is the difference or ratio of the values of the quantity. The rating values coincide with the result of the arithmetic operation (up to isomorphism).The additivity of the rating is used to check the adequacy of the measurement results. For this, it is assumed that the rating is independent of the measurement method. The theoretical justification for independence is the isomorphism condition. The empirical confirmation of independence is the equivalence of the basic psychophysical laws.Results. The paper presents an axiomatic approach to the measurement problem. Measurement can be carried out in both objective and subjective ways. The axiomatic and classical definition of the rating has been formulated. The axiomatic definition implies the classical definition for a special set of objects. The classic definition is constructive. To check the adequacy of the measurement results, it is enough to compare the ratings obtained by different measurement methods (method of alternatives).Conclusion. The rating method is a quantitative measurement method. The rating method can be used to construct a model of consumer behavior and in decision-making theory.

A CRITERION UTILITY CONVERSION TECHNIQUE FOR PROBABILISTIC LINGUISTIC MULTIPLE CRITERIA ANALYSIS IN EMERGENCY MANAGEMENT

In multiple criteria decision making (MCDM), the even swaps method uses the relationships of criteria to make trade-offs but the burdens of experts are heavy; the linear programming technique for multidimensional analysis of preference (LINMAP) method cannot deal with the inter-dependencies among criteria but the cognitive burdens of experts are low. Taking the advantages of both these methods, this study proposes a criterion utility conversion (CUC) technique to solve probabilistic linguistic MCDM problems given that the probabilistic linguistic term set (PLTS) can reflect the psychology of experts when making evaluations. The utility conversion process is first proposed based on the marginal utilities of criteria. Then, the criterion preference ratios of experts are refined from the utility conversion process. Based on the criterion preference ratios and the operations of PLTSs, the adjusted probabilistic linguistic expected values of alternatives are calculated. The consistency and inconsistency indexes of alternatives and criteria are defined to set up the linear programming used to work out the criterion preference ratios. An illustration about the selection of emergency logistics supplier is given to validate the proposed method. The comparative analysis indicates the low cognitive burden, high stability, and strong applicability of the proposed method.

Study on Consumer Preference for Traceable Pork With Animal Welfare Attribute.

We determined consumer preferences for traceable pork attributes in 328 consumers in Wuxi City, Jiangsu Province, China, based on a traceable pork attribute system composed of traceability, animal welfare, place of origin, and price attributes. Preference was studied using a Choice Experiment and Bayesian inference analysis. Results showed that the marginal utility of health welfare was lower than that of high-level traceability information and similar to that of place of origin but was higher than that of middle-level traceability information. A complementary relationship existed between dietary animal welfare and high-level traceability information and between health welfare and non-indigenous production. A substitution relationship existed between health welfare and indigenous production and between environmental animal welfare and non-indigenous production. The marginal utilities of health welfare and dietary welfare were higher than those of all price levels, and consumers accept a higher price as a result of increased production costs due to the inclusion of animal welfare information. Due to the harsh realities of COVID-19, China has recently approved the animal welfare attribute to be integrated into traceability market systems of new animal-derived food. The government should encourage manufacturers to produce diverse traceable animal-derived food not only to protect animal welfare and promote the construction of an ecological civilization, but also to develop new animal-derived food markets to satisfy different levels of consumer demand.

Coining Neoliberalism: Interwar Germany and the Neglected Origins of a Pejorative Moniker

Widespread use of the term “neoliberalism” is of surprisingly recent origin, dating to only the late 20^th century. The “neoliberalism” literature has nonetheless settled on an origin story that depicts the term as a self-selected moniker from the 1938 Walter Lippmann Colloquium. This paper challenges the 1938 origin, positing an earlier adoption of the term by Marxist and fascist political writers in 1920s German-language texts. These writers used “neo/neu-liberalismus” as a derisive moniker for the “Marginal Utility School,” then anchored at the University of Vienna. Definitional commonalities link this earlier use to pejorative deployment of the term in the present.

Analysis of feature matrix in machine learning algorithms to predict energy consumption of public buildings

With the development of building information and energy consumption data, machine learning methods are increasingly being used for predicting and analyzing building energy consumption. In this study, based on the actual energy consumption data of 2370 public buildings in Chongqing, we used six machine learning algorithms and recursive feature elimination to analyze the importance of each feature in the dataset. First, it is necessary to establish optimal prediction models for analyzing the importance of features, and XGboost has demonstrated its superiority in terms of accuracy and efficiency. Regardless of the algorithm, the cumulative contribution rate of the top ten features exceeds 80%, and there is an obvious diminishing marginal utility when the number of features continues to increase. The learning algorithms with similar kernels have similarities in judging feature importance. Tree model-based algorithms can achieve a satisfactory performance with fewer features compared to linear kernel-based algorithms. Furthermore, the dataset plays a crucial role in model performance. To achieve professional supervised learning, two conditions need to be considered simultaneously in data collection: the importance of features in physical processes and whether the samples have adequate variance on these features. Thus, this study can provide a reference for database establishment and big data analysis of urban building energy consumption.

The Foreign Goods Demand, Cultural Beliefs and Consumer Choices: A Microeconomics Note

Consumers react to opportunities. So, given that free trade allows them more alternative goods, ¿How come that foreign goods shape consumer choices?. Is it either because of its price, consumer`s income, or their cultural beliefs?. How do it all influence business strategic decisions in international markets? The aim of this paper is to analyze the microeconomic relationship between utility maximization, and cultural values. In particular, its influence in the consumer decisions framework as well as its role for shaping business strategic decisions concerning international markets. The methodology is an inductive desk research. It begins with the theoretical background about consumer behavior and foreign good demand, as well as cultural values impact on business strategy in foreign markets, to conclude that as incomes rises and needs step up, consumers get involve in wider social interaction, such that it shapes the boundaries of rationality which make cultural values part of the marginal utility of income.

Constitutional monarchy as power sharing

In the transition to democracy some autocracies transformed to republics while others evolved to constitutional monarchies. The paper inquires how constitutional monarchy is established. It models a hereditary king and a liberal challenger who coexist over a succession of periods and fight for power which brings office rents and the right to decide one’s preferred policy. The outcome of the confrontation is uncertain and may vary from period to period. If the king wins, he establishes absolute monarchy, but if the liberal wins he establishes a republic. Instead of fighting they may agree on a constitutional monarchy and share office rents and policy making responsibilities. Whether constitutional monarchy is agreed depends on the marginal utilities from rents and policy preferences of the two actors, the sizes of the benefits from rents and policy, the rates by which they discount the future, and the probabilities of winning office. The contemporary European constitutional monarch as a ceremonial head of state who reigns but does not govern arises as a special case of the general model.

Simulating and mitigating extreme urban heat island effects in a factory area based on machine learning

Urban heat islands (UHIs) have caused radical changes in urban climates. However, the extreme UHI (E-UHI) formed in factory areas deserves more attention. To mitigate the E-UHI, machine learning is used for simulating and quantifying the marginal utility of the scale, shape, type, stage, and structure of the factory on the land surface temperature (LST), factory LST (LSTf), surrounding LST (LSTs) and increase value (ΔLST) level. The results show that the scale of all types of factories affects LSTf and LSTs, and the shape of steel factories affects LSTs and ΔLST. The LST in factories that require high-temperature environments (e.g., smelters) is significantly higher than that in other factories (e.g., sales plants). The ΔLST of green space (GS), staff activity ground (SG), material transfer ground (MG), material storage area (MA), factory building (FB), smelting area (SA) and casting building (CB) are 3.95 °C, 4.01 °C, 5.08 °C, 5.15 °C, 5.24 °C, 5.49 °C and 7.32 °C, and their optimal ranges are 8.84%–15.09%, 16.65%–25.52%, 3.91%–35.91%, 0.00%–8.70%, 5.06%–13.60%, 23.33%–48.02%, and 0.00%–5.73%, respectively. Appropriately standardizing the scale and shape, controlling the temperature of the high-temperature generation stage, reducing the proportion of CB, MG and MA, and increasing the proportion of GS and SG are effective ways to alleviate the E-UHI. The findings provide theoretical guidance for resource-based cities to mitigate E-UHIs.

Duality for optimal consumption with randomly terminating income

AbstractWe establish a rigorous duality theory, under No Unbounded Profit with Bounded Risk, for an infinite horizon problem of optimal consumption in the presence of an income stream that can terminate randomly at an exponentially distributed time, independent of the asset prices. We thus close a duality gap encountered in the Davis‐Vellekoop example in a version of this problem in a Black‐Scholes market. Many of the classical tenets of duality theory hold, with the notable exception that marginal utility at zero initial wealth is finite. We use as dual variables a class of supermartingale deflators such that deflated wealth plus cumulative deflated consumption in excess of income is a supermartingale. We show that the space of discounted local martingale deflators is dense in our dual domain, so that the dual problem can also be expressed as an infimum over the discounted local martingale deflators. We characterize the optimal wealth process, showing that optimal deflated wealth is a potential decaying to zero, while deflated wealth plus cumulative deflated consumption over income is a uniformly integrable martingale at the optimum. We apply the analysis to the Davis‐Vellekoop example and give a numerical solution.