Unforeseen Contingencies Research Articles

Power System Security With Cyber-Physical Power System Operation

Cyber-attacks on a cyber-physical power system could lead to significant data failure, false data injection and cascading failure of physical power system components. This paper proposes an advanced approach based on a ternary Markovian model of cyber-physical components interactions to capture the subsystem layers’ interactions of the cyber-physical power system and to quantify the interdependency impacts on physical power system security. The approach models cyber-physical interactive operation based on interactions and characteristics of three subsystem layers of the system with the presence of random and unforeseen contingencies, load demand variations and then quantify the impacts with Monte Carlo simulation. The viability of the approach is investigated by simulating a set of scenarios, representing realistic physical power system operating conditions with the cyber network interactions. Findings justify the presence of cyber-attacks in a cyber-physical power system components operation could lead to severe insecurities. However, the impacts on physical power system security does not always correlate with the severity of cyber-attacks.

Impact of COVID-19 in the Nigerian Commercial Community: A Roadmap for Agencies

The COVID-19 is having an unprecedented impact in the commercial and trade sphere globally. Businesses of all sizes are finding it difficult to operate efficiently and many struggle to meet contractual obligations. Agency is a ubiquitous concept in trade and commerce. The sudden implosion of commercial activities has invariably affected agency relationships. This publication analyses the key ripple effects of COVID-19 on agency relationships and offer legal options for mitigating its downside effects. In addition, this paper proffers blueprints for future agency-related agreements to prepare for unforeseen contingencies.

Household Saving Behavior and Determinants of Savings in Financial Institutions: The Case of Derra District, Oromia Region, Ethiopia

Saving is the fraction of income not instantly consumed but kept for future investment, consumption or for unforeseen contingencies in the future. The aim of this study was to investigate the saving behavior of household and determinants of saving in the district using primary data from 249 samples of household. The analysis used descriptive and inferential analysis to achieve the objective the study. The descriptive part showed that about 14.5% of the household were not saving in financial institutions whereas about 85.5% saved in financial institution. The chi-square test of association revealed that Age of household head, education level of household head, main occupation, knowing about the interest rate of financial institution, having farm land, getting advice about saving were significantly associated the saving status of households. Additionally, the logistic regression showed that age of household, main occupations, knowing about interest rates, income of households and family size were significant determinants of households saving status. In order to enhance the households saving status in financial institutions, the district, the Oromia regional state and the government financial sectors should work on awareness creation about saving and increase the income of the household. Keywords: Financial institution; Logistic regression; Saving Status DOI : 10.7176/RJFA/10-23-03 Publication date: December 31 st 2019

The U.S.-China Trade Negotiation: A Contract Theory Perspective

International trade negotiations have traditionally been viewed as a two-level political bargain between trading nations and among domestic interest groups. While this bargaining model is helpful for predicting the political dynamics in trade negotiations, its focus on politics tends to obscure the economic consequences of trade agreements. Drawing upon insights from contract theory in economics, this Article analyzes three ingredients of transaction costs that lead to the incompleteness of a trade agreement — the unforeseen contingencies, cost of enforcing the contract and the cost of writing the agreement. Using the Sino-U.S. trade negotiation between 2018 to 2019 as a comprehensive case study, this Article illustrates the circumstances when a trade agreement is difficult to write, unlikely to succeed and impossible to enforce. As an alternative to a trade agreement, this Article advocates instead for greater economic integration as a commitment device. By allowing each country to hold the other’s assets hostage, economic integration can facilitate cooperation between nations when trust is lacking. This Article contributes to the existing literature by proposing an economic framework to analyze the promise and perils of trade negotiations. It also offers a cautionary tale of using economic sanction to force other countries to make legal concessions.

Impact of Formal Controls on Client Satisfaction and Profitability in Strategic Outsourcing Contracts

The reach and impact of outsourcing has grown rapidly to include a variety of strategic objectives. Significant issues of cooperation and coordination in strategic outsourcing necessitate investments in formal controls that specify and monitor execution of the outsourced task to mitigate unforeseen contingencies and improve predictability in the attainment of desirable goals. In this study, we investigate the nature of formal controls in strategic outsourcing contracts and their impact on client satisfaction and financial performance. Specifically, using rich field data on 390 strategic outsourcing contracts, we examine the differential impact of output controls, activity controls, and capability controls on client satisfaction and vendor profitability. We find that activity and capability controls are positively associated with client satisfaction and profitability; in contrast, output controls differentially impact satisfaction and profitability, reflecting potential tradeoffs between the two outcomes. Our results, in addition to contributing to the research in control theory, provide actionable insights for technology vendors into the appropriate strategy and tactics required to compete efficiently and effectively in strategic services markets.

System-level assessment of reliability and resilience provision from microgrids

Microgrids are emerging to coordinate distributed energy resources and locally increase reliability to expected events and resilience to extreme events. Furthermore, by deploying their inherent flexibility, grid-connected microgrids are capable to provide different services at the system-level too. However, these are often assessed independently and a comprehensive integrated framework that can assess benefits for the whole power system is missing. In this outlook, this paper introduces a system-level assessment framework based on the concept of different duration’s reserve services that can be provided by microgrids to the main electricity grid in response to both credible (reliability-oriented) and extreme, possibly unforeseen (resilience-oriented) contingencies. Probabilistic capacity tables accounting for different sources of uncertainty related to both microgrids’ operation and occurrences of unfavorable events are built to assess the microgrids’ potential capacity contribution to a particular reserve service. Case studies based on representative microgrids and a British test system clearly illustrate and quantify how aggregation of microgrids could provide significant contribution to both short-term reliability and longer-duration resilience services far beyond the simple summation of the individual contributions, thus demonstrating a clear synergic effect, as well as the key role played by different forms of energy storage. The proposed framework can assist policy makers and regulators on the strategic role of microgrids for energy system planning and policy developments, including design of ancillary services markets not only to enhance system reliability but also resilience.

Frustration of purpose and the French Contract Law reform

Frustration of purpose remains one of the most ill-defined concepts in the English law of contracts. The same problem has also recently attracted the attention of the French legislature in its modernization of the Code Civil. The French reform entitles courts with broad powers to adjust the contract when unforeseen contingencies have made the bargain unduly costly. This article argues that the introduction of an economically inspired adjustment rule in English contract law should be re-considered to maintain its current superior commercial position. If implemented, then the ‘ex ante division of surplus’ should be the governing principle in adjusting contract price, because such a remedy will not affect the agreed-upon division of the surplus. Moreover, this paper suggests that the recent French reform is indeed a long-awaited step toward a more effective regulation of the notorious ‘unforeseen contingencies’ phenomena, but also suggests that further improvements might be needed. Furthermore, it offers a set of arguments suggesting that the English law in its current form might still be the preferred option in the world of international business transactions. The international commercial attractiveness of English contract law, although being challenged by the new French Civil Code, remains undisputed.

A behavioral definition of unforeseen contingencies

The paper proposes a choice-theoretic definition of an unforeseen event and a model of behavior that accommodates such events. The analysis presumes an individual who is aware of their unawareness, which explains why all unforeseen events in this paper are non-null. Relative to existing work, the main contribution is to establish a distinction between unforeseen events and events whose likelihood is ambiguous. This is achieved by adopting a dynamic choice setting.

Procurement with Unforeseen Contingencies

A buyer who wants to procure a complex good is often aware that there may be flaws in her initial design, but she does not know what they look like. Potential sellers who discover flaws have no incentive to reveal them early if the buyer uses a price-only auction. We derive an efficient mechanism that induces all sellers to report flaws early and that allocates the project to the seller with the lowest cost. We show that this can be implemented with a simple two-stage auction that does not require any prior knowledge of the set of possible flaws. This paper was accepted by Yan Chen, decision analysis.

Critical challenges in managing offshore software development outsourcing contract from vendors' perspectives

Offshore software development outsourcing (OSDO) is a Global Software Engineering paradigm for developing high quality software at low cost in low-wage countries; where client organisation contracts out all or part of software development activities to vendor organisation. The vendor organisation provides the agreed software development work in return for remuneration. The objective of the research is to identify critical challenges faced by vendor organisations in management and execution of OSDO contract, and to analyse the identified challenges based on the variables such as time/year and organisational size. The authors have used systematic literature review for the identification of the challenges in OSDO contract. They have identified that 15 challenges faced by vendors in OSDO contract. Amongst these, nine challenges were marked as critical challenges. They have further analysed the identified challenges based on different variables such as organisational size, time and correlation analysis.Vendor organisations should concentrate on addressing the identified critical challenges such as `lack of project management', `poor monitoring system', `lack of outsourcing relationship management', `cultural and linguistic issues', `non-competitive price', `intellectual property rights (IPR) and regulatory issues', `failure to manage end-user expectation', `lack of negotiation strategies' and `unforeseen contingencies' for successful outcome of OSDO contract.

Strategy Constrained by Cognitive Limits, and the Rationality of Belief-Revision Policies

Strategy is formally defined as a complete plan of action for every contingency in a game. Ideal agents can evaluate every contingency. But real people cannot do so, and require a belief-revision policy to guide their choices in unforeseen contingencies. The objects of belief-revision policies are beliefs, not strategies and acts. Thus, the rationality of belief-revision policies is subject to Bayesian epistemology. The components of any belief-revision policy are credences constrained by the probability axioms, by conditionalization, and by the principles of indifference and of regularity. The principle of indifference states that an agent updates his credences proportionally to the evidence, and no more. The principle of regularity states that an agent assigns contingent propositions a positive (but uncertain) credence. The result is rational constraints on real people’s credences that account for their uncertainty. Nonetheless, there is the open problem of non-evidential components that affect people’s credence distributions, despite the rational constraint on those credences. One non-evidential component is people’s temperaments, which affect people’s evaluation of evidence. The result is there might not be a proper recommendation of a strategy profile for a game (in terms of a solution concept), despite agents’ beliefs and corresponding acts being rational.

Operating Reserve forecasting in a wind integrated power system using Hybrid Support Vector Machine-Fuzzy Inference System

— In a restructured power system, Ancillary services (AS) are required to balance load generation mismatches and to meet unforeseen contingencies. Operating Reserve is a major part of AS which is highly uncertain to forecast, mainly due to unpredictability of customer needs, over or under production of Energy and unpredictability in the integration of renewable energy sources. In this work wind integration is considered as a factor to forecast operating reserve. Increase of wind integration into power system, needs larger quantities of operating reserve. This demands an increase in the cost of generation and emissions. Forecasting the Operating Reserve Ancillary Service helps the system operators (SO) to plan scheduling of generators in advance and also in better bidding environment. Forecasting tools like feed-forward networks, Time series models were used to forecast load and Electricity price in the past. In this paper a hybrid method consisting of Support Vector Machines (SVM) and Fuzzy Interface System (FIS) is used to forecast Operating Reserve in Day-ahead market. Case studies using CAISO and ERCOT ISOs are presented. The SVM-FIS method is found to be better forecasting tool to predict the operating reserve Ancillary Service.

Supply Chain Structure Incentives for Corporate Social Responsibility: An Incomplete Contracting Analysis

Downstream firms increasingly recognize the importance of integrating social and environmental concerns with their businesses. As a consequence, they urge to create incentives for their suppliers to invest in corporate social responsibility (CSR) activities. Contracts to provide these incentives are rarely observed in practice. If not totally absent, contracts may be incomplete, in that unforeseen contingencies or some CSR attributes that are difficult to measure may not be included in the contract. We show that incentives for CSR investments can also be provided through the supply chain structure, which consists of the distribution of ownership rights over the firms' assets of production, and involves horizontal and/or vertical alliances among supply chain members. Motivated by examples in agricultural contexts, this study adopts the property rights approach to study the impact of supply chain structures on the adoption of CSR activities. We show that the structure that best incentivizes CSR investments depends on the interaction between CSR vertical synergy, free‐riding, and countervailing power. One of the main findings is that the alliance between suppliers is beneficial only if the revenues generated by a downstream investment are sufficiently high. In fact, only in this case, the suppliers can appropriate a sufficiently large stake of the revenues generated downstream, thanks to their countervailing power. When the upstream investment costs become high, however, the suppliers will invest in CSR only if the downstream distributor is vertically integrated. The resulting structure of a cooperative will best incentivize CSR investments only if the CSR vertical synergy between the two tiers of the supply chain is sufficiently high.

PRODUCT DIFFERENTIATION STRATEGY AND VERTICAL INTEGRATION: AN APPLICATION TO THE DOC RIOJA WINE INDUSTRY

This study evaluates the importance of product differentiation as a determinant of vertical integration in firms. The proposed model also controls for known determinants of integration, such as transaction costs and firm-level capabilities. By identifying transaction-, firm- and strategy-level determinants, we derive testable predictions about the vertical integration decision. To test these predictions we analyze the Rioja wine industry, using a representative sample of 187 firms. Our paper concludes that reaching judicious vertical integration decisions requires a thorough analysis of some very diverse aspects, especially those related to mitigating opportunism, dealing with unforeseen contingencies and product differentiation.

Lessons Learned from Good Practices During the Accident at Fukushima Daiichi Nuclear Power Station in Light of Resilience Engineering

Abstract: The accident at the Fukushima Daiichi Nuclear Power Station, which was triggered by the Great East Japan Earthquake, has presented significant issues about in which the safety of massive socio-technical systems is structured. We must derive the greatest number of lessons possible from this accident to ensure the safety of systems in the future, but the lessons learned so far have mainly focused on risks and been deduced from an analysis of failures that led to the accident. Meanwhile, with regard to the many actions executed in the field that allowed any “further catastrophe” to be avoided despite such a possibility having been assumed in circumstances where equipment and manuals could not be relied on, there has been almost no analysis, assessment nor lessons gleaned. This paper references the approach of Resilience Engineering which aims to extend successes in a changing environment, and focuses on the actions that prevented “further catastrophe” through an analysis of the Fukushima accident and derives new lessons to improve the capability to handle “unforeseen contingencies.”

Worst-case expected utility

The paper presents a model in which a decision maker, having a preference relation over purely subjective acts, slightly deviates from the Subjective Expected Utility decision rule, exhibiting an uncertainty averse behavior á-la Schmeidler (1989). The resulting representation is as if the decision maker adds to the formulation of the problem one new state, representing the occurrence of some unforeseen event. Each Savage act is extended to the new, endogenous state by assigning this state with the worst consequence the act obtains on all other, primitive states. On the extended decision problem a Subjective Expected Utility rule is applied. The representation thus expresses the common practice of a ‘worst-case scenario’ assumption as means to cope with unforeseen contingencies. The model is a special case of the neo-additive capacities model of Chateauneuf, Eichberger and Grant.

Information transfer among global supply chain participants: a study of relationships between Taiwan and the USA

In this study, we identify the participants and activities typically present in a supply chain to determine the links where knowledge transfer is most likely to occur. Based on responses to questionnaires from Taiwanese managers, we identified several key connections between members in the upstream and downstream supply chain. From this study, supply chain members can concentrate on activities most critical between them and their upstream or downstream partners and identify those operations that are most likely to enhance innovation and learning, thereby reducing costs and process times as well as providing for unforeseen contingencies.

Application of DEO Method to Solving Fuzzy Multiobjective Optimal Control Problem

In the present paper a problem of optimal control for a single-product dynamical macroeconomic model is considered. In this model gross domestic product is divided into productive consumption, gross investment, and nonproductive consumption. The model is described by a fuzzy differential equation (FDE) to take into account imprecision inherent in the dynamics that may be naturally conditioned by influence of various external factors, unforeseen contingencies of future, and so forth. The considered problems are characterized by four criteria and by several important aspects. On one hand, the problem is complicated by the presence of fuzzy uncertainty as a result of a natural imprecision inherent in information about dynamics of real-world systems. On the other hand, the number of the criteria is not small and most of them are integral criteria. Due to the above mentioned aspects, solving the considered problem by using convolution of criteria into one criterion would lead to loss of information and also would be counterintuitive and complex. We applied DEO (differential evolution optimization) method to solve the considered problem.

Private Security Firms and the Influence of Corporate Structure on Conflict Outcomes: Evidence from the Second Iraq – US War

Does the corporate structure of private security firms (PSFs) influence conflict outcomes? Employers’ inclusion of PSFs in conflicts generates a dilemma for government employers as the former are profit-maximizing agents contracted to provide services outside established military structures. Contracts provide the legal structure to govern the provision of services. But contracts between PSFs and state employers are incomplete, particularly in conflict zones where considerable unforeseen contingencies exist. One approach to mitigate incomplete contracts is to identify information about the PSFs. We expect that the severity of the dilemma varies across different types of PSFs’ corporate structures. PSFs are either publicly traded or individually owned firms — firms that have non-public ownership structures. Corporate structure of the firm influences information availability. Increased information reduces oversight and management costs for employers of PSFs which, in turn, is argued to improve firm effectiveness. Satisfying demand for security services requires utilizing both publicly traded and individually owned firms. Expectations are tested utilizing both U.S. and non-U.S. headquartered private security firms operating in Iraq from March 2003 to December 2007. Based on the U.S. objective of establishing law and order, conflict outcome is measured using insurgent attacks and civilian casualties. Publicly traded firms are associated with reductions in violence, while individually owned firms are not. My findings have important theoretical and policy implications for both PSFs and their employers.

Political Organizations, Interest Groups and Citizens Engagement: An Integrated Model of Democracy

The paper starts with a theoretical reinterpretation of some classical topics in the public choice literature, where specific elements of contract theory and the theory of the firm are introduced. By putting into contact these completely different fields of economics, it defines a general theoretical framework for political behaviors whose implications go beyond those determined by the standard self-interest assumption. Political organizations, as suppliers of public policies, are supposed to maximize a residual quantum consisting in the public authority that can actually be exercised after all the electoral commitments, with voters and interests groups, have been fulfilled. This residual right—which can be seen also as a degree of discretion necessary for ruling parties to deal with unforeseen contingencies—is based on the reputational capital (goodwill) accumulated over time by political organizations and represents the intangible asset that secures voters’ loyalty and, consequently, the legitimacy to exercise public authority in the long run. When a deficit of goodwill occurs, a chain of “exit” strategies by voters can lead to undesirable results unless an effective “voice” option for citizens exists.