IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Economics of collective monitoring: a study of environmentally constrained electricity generators

Listed author(s):
  • J. Contreras

    ()

    (Universidad de Castilla–La Mancha)

  • J. B. Krawczyk

    (Victoria University of Wellington)

  • J. Zuccollo

    (HEFCE)

Abstract This paper investigates the costs of monitoring of a distributed multi-agent economic activity in the presence of constraints on the agents’ joint outputs. If the regulator monitors agents individually she calculates each agent’s optimal contribution to the constrains by solving a constrained welfare-maximisation problem. This will maximise welfare but may be expensive because monitoring cost rises with the number of agents. Alternatively, the regulator could monitor agents collectively, using a detector, or detectors, to observe if each constraint is jointly satisfied. This will ease implementation cost, but lower welfare. We define the welfare difference between each regime of monitoring for a fairly inclusive electricity generation model and formulate some predictions. The behaviour of two generators in a coupled-constrained, three-node case study reproduces these predictions. We find that the welfare loss from collective monitoring can be small if the constraints are tight. We also learn that, under either regime, the imposition of transmission and environmental restrictions may benefit the less efficient generator and shift surplus share towards the emitters, decreasing consumer surplus.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://link.springer.com/10.1007/s10287-015-0247-9
File Function: Abstract
Download Restriction: Access to the full text of the articles in this series is restricted.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Springer in its journal Computational Management Science.

Volume (Year): 13 (2016)
Issue (Month): 3 (July)
Pages: 349-369

as
in new window

Handle: RePEc:spr:comgts:v:13:y:2016:i:3:d:10.1007_s10287-015-0247-9
DOI: 10.1007/s10287-015-0247-9
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/business+%26+management/operations+research/journal/10287/PS2

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Boucekkine, Raouf & Krawczyk, Jacek B. & Vallée, Thomas, 2010. "Towards an understanding of tradeoffs between regional wealth, tightness of a common environmental constraint and the sharing rules," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1813-1835, September.
  2. Anna Heusinger & Christian Kanzow, 2009. "Optimization reformulations of the generalized Nash equilibrium problem using Nikaido-Isoda-type functions," Computational Optimization and Applications, Springer, vol. 43(3), pages 353-377, July.
  3. Masao Fukushima, 2011. "Restricted generalized Nash equilibria and controlled penalty algorithm," Computational Management Science, Springer, vol. 8(3), pages 201-218, August.
  4. Larry Karp, 2005. "Nonpoint Source Pollution Taxes and Excessive Tax Burden," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 31(2), pages 229-251, June.
  5. Segerson, Kathleen, 1988. "Uncertainty and incentives for nonpoint pollution control," Journal of Environmental Economics and Management, Elsevier, vol. 15(1), pages 87-98, March.
  6. Segerson, Kathleen & Wu, JunJie, 2006. "Nonpoint pollution control: Inducing first-best outcomes through the use of threats," Journal of Environmental Economics and Management, Elsevier, vol. 51(2), pages 165-184, March.
  7. Harker, Patrick T., 1991. "Generalized Nash games and quasi-variational inequalities," European Journal of Operational Research, Elsevier, vol. 54(1), pages 81-94, September.
  8. Anthony Downward, 2010. "Carbon Charges in Electricity Markets with Strategic Behavior and Transmission," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 159-166.
  9. Jong-Shi Pang & Masao Fukushima, 2005. "Quasi-variational inequalities, generalized Nash equilibria, and multi-leader-follower games," Computational Management Science, Springer, vol. 2(1), pages 21-56, January.
  10. Bengt Holmstrom, 1982. "Moral Hazard in Teams," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 324-340, Autumn.
  11. Krawczyk, Jacek B., 2005. "Coupled constraint Nash equilibria in environmental games," Resource and Energy Economics, Elsevier, vol. 27(2), pages 157-181, June.
  12. Xepapadeas, A. P., 1991. "Environmental policy under imperfect information: Incentives and moral hazard," Journal of Environmental Economics and Management, Elsevier, vol. 20(2), pages 113-126, March.
  13. Laurent Drouet & Alain Haurie & Francesco Moresino & Jean-Philippe Vial & Marc Vielle & Laurent Viguier, 2008. "An oracle based method to compute a coupled equilibrium in a model of international climate policy," Computational Management Science, Springer, vol. 5(1), pages 119-140, February.
  14. Jacek Krawczyk, 2007. "Numerical solutions to coupled-constraint (or generalised Nash) equilibrium problems," Computational Management Science, Springer, vol. 4(2), pages 183-204, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:spr:comgts:v:13:y:2016:i:3:d:10.1007_s10287-015-0247-9. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)

or (Rebekah McClure)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.