Generators supplying electricity markets are subject to volatile input and output prices and uncertain fuel availability. We show that a price-taking generator will generate only when the output price exceeds its operational marginal cost by the value of the option to delay the use of stored...

The last thirty years have witnessed a fundamental change in the regulation of infrastructure industries. Whereas firms were subject to rate of return regulation and protected from entry in the past, they now face various forms of incentive regulation, competition is actively promoted by many...

Real option analysis typically assumes that projects are continuously evaluated and launched at precisely the time determined to be optimal, but real world projects cannot be managed in this way because of the costs of formally evaluating an investment opportunity. This paper shows that...

This paper presents a model of competing payment schemes. Unlike previous work on generic two-sided markets, the model allows for the fact that in a payment system, users on one side of the market (merchants) compete to attract users on the other side (consumers, who may use cards for...

When interest rates are uncertain, the net-present-value threshold required to justify an irreversible investment is increasing in the length of a project's payback period. Therefore, slow-payback projects should face a higher hurdle than fast-payback projects, just as investment folklore...

"Market power in electricity wholesale spot markets is more likely if there is market segmentation. We show that principal component analysis is a natural tool for the qualitative and quantitative assessment of the presence of local markets. We study whether the New Zealand market has been a...

Most central banks currently implement monetary policy by targeting a short-term interest rate. This paper asks: "What is the optimal form for such interest rate targeting, given the objectives facing central banks?" We find the optimal rule is for the central bank to change the target rate...