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Un Modelo Principal-Agente Dinámico de Reducción de Perdidas de Energía Electrica en Tiempo Continuo
[A Dynamic Principal-Agent Model of Electric Power Loss Reduction in Continuous Time]

Author

Listed:
  • Zambrano, Juan Carlos
  • Astaiza-Gómez, José Gabriel
  • García, Juan David

Abstract

In this article we analyze the remuneration mechanism for the reduction of energy losses, through a dynamic principal-agent model in continuous time. The agent represents the power distribution company, which makes investments, or in other words, makes an effort to reduce energy losses. The principal represents the regulator, who offers a contract (regulation) to the agent, designed with the purpose of inducing the agent to exert the optimal effort, in the sense that such effort maximizes the expectation of power distribution minus the cost of compensating the agent. In our model, the energy distribution follows a process of diffusion with drift (drift), determined by the effort of the agent, not observable or verifiable by the principal. The optimal contract, carried out on the basis of the continuation value of the agent as a state variable, is calculated from a differential equation.

Suggested Citation

  • Zambrano, Juan Carlos & Astaiza-Gómez, José Gabriel & García, Juan David, 2021. "Un Modelo Principal-Agente Dinámico de Reducción de Perdidas de Energía Electrica en Tiempo Continuo [A Dynamic Principal-Agent Model of Electric Power Loss Reduction in Continuous Time]," MPRA Paper 110143, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:110143
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    References listed on IDEAS

    as
    1. Yolande Hiriart & David Martimort, 2012. "How much discretion for risk regulators?," RAND Journal of Economics, RAND Corporation, vol. 43(2), pages 283-314, June.
    2. David Martimort & Jérôme Pouyet & Carine Staropoli, 2020. "Use and abuse of regulated prices in electricity markets: “How to regulate regulated prices?”," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(3), pages 605-634, July.
    3. Yuliy Sannikov, 2008. "A Continuous-Time Version of the Principal-Agent Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 75(3), pages 957-984.
    4. Noah Williams & Rui Li, 2014. "Optimal Unemployment Insurance and Cyclical Fluctuations," 2014 Meeting Papers 804, Society for Economic Dynamics.
    5. Williams, Noah, 2015. "A solvable continuous time dynamic principal–agent model," Journal of Economic Theory, Elsevier, vol. 159(PB), pages 989-1015.
    6. Yolande Hiriart & David Martimort, 2012. "How much discretion for risk regulators?," RAND Journal of Economics, RAND Corporation, vol. 43(2), pages 283-314, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Natural Monopoly; Electric Power Losses; Remuneration; Asymmetric Information; Moral Hazard.;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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