Economic models and algorithms for distributed systems

Distributed computing paradigms for sharing resources such as Clouds, Grids, Peer-to-Peer systems, or voluntary computing are becoming increasingly popular. While there are some success stories such as PlanetLab, OneLab, BOINC, BitTorrent, and SETI@home, a widespread use of these technologies for business applications has not yet been achieved. In a business environment, mechanisms are needed to provide incentives to potential users for participating in such networks. These mechanisms may range from simple non-monetary access rights, monetary payments to specific policies for sharing. Although a few models for a framework have been discussed (in the general area of a "Grid Economy"), none of these models has yet been realised in practice. This book attempts to fill this gap by discussing the reasons for such limited take-up and exploring incentive mechanisms for resource sharing in distributed systems. The purpose of this book is to identify research challenges in successfully using and deploying resource sharing strategies in open-source and commercial distributed systems.

SORMA - business cases for an open grid market: concept and implementation

Economic mechanisms enhance technological solutions by setting the right incentives to reveal information about demand and supply accurately. Market or pricing mechanisms are ones that foster information exchange and can therefore attain efficient allocation. By assigning a value (also called utility) to their service requests, users can reveal their relative urgency or costs to the service. The implementation of theoretical sound models induce further complex challenges. The EU-funded project SORMA analyzes these challenges and provides a prototype as a proof-of-concept. In this paper the approach within the SORMA-project is described on both conceptual and technical level.

Means, motive and opportunity? Disentangling client influence on performance measurement appraisals

This paper investigates the extent to which clients were able to influence performance measurement appraisals during the downturn in commercial property markets that began in the UK during the second half of 2007. The sharp change in market sentiment produced speculation that different client categories were attempting to influence their appraisers in different ways. In particular, it was recognised that the requirement for open‐ended funds to meet redemptions gave them strong incentives to ensure that their asset values were marked down to market. Using data supplied by Investment Property Databank, we demonstrate that, indeed, unlisted open‐ended funds experienced sharper drops in capital values than other fund types in the last quarter of 2007, after the market turning point and at the time when redemptions were at their highest. These differences are statistically significant and cannot simply be explained by differences in portfolio composition. Client influence on appraisal forms one possible explanation of the results observed: the different pressures on fund managers resulting in different appraisal outcomes.

Means, motive and opportunity? Disentangling client influence on performance measurement appraisals

This paper investigates the extent to which clients were able to influence performance measurement appraisals during the downturn in commercial property markets that began in the UK during the second half of 2007. The sharp change in market sentiment produced speculation that different client categories were attempting to influence their appraisers in different ways. In particular, it was recognised that the requirement for open-ended funds to meet redemptions gave them strong incentives to ensure that their asset values were marked down to market. Using data supplied by Investment Property Databank, we demonstrate that, indeed, unlisted open ended funds experienced sharper drops in capital values than other fund types in the second half of 2007, after the market turning point. These differences are statistically significant and cannot simply be explained by differences in portfolio composition. Client influence on appraisal forms one possible explanation of the results observed: the different pressures on fund managers resulting in different appraisal outcomes.

Principal-agent issues in asset acquisition: UK institutions and their investment agents

This paper explores principal‐agent issues in the stock selection processes of institutional property investors. Drawing upon an interview survey of fund managers and acquisition professionals, it focuses on the relationships between principals and external agents as they engage in property transactions. The research investigated the extent to which the presence of outcome‐based remuneration structures could lead to biased advice, overbidding and/or poor asset selection. It is concluded that institutional property buyers are aware of incentives for opportunistic behaviour by external agents, often have sufficient expertise to robustly evaluate agents’ advice and that these incentives are counter‐balanced by a number of important controls on potential opportunistic behaviour. There are strong counter‐incentives in the need for the agents to establish personal relationships and trust between themselves and institutional buyers, to generate repeat and related business and to preserve or generate a good reputation in the market.

Expert judgement in the processes of commercial property market forecasting

In this paper, we investigate the role of judgement in the formation of forecasts in commercial property markets. The investigation is based on interview surveys with the majority of UK forecast producers, who are using a range of inputs and data sets to form models to predict an array of variables for a range of locations. The findings suggest that forecasts need to be acceptable to their users (and purchasers) and consequently forecasters generally have incentives to avoid presenting contentious or conspicuous forecasts. Where extreme forecasts are generated by a model, forecasters often engage in ‘self‐censorship’ or are ‘censored’ following in‐house consultation. It is concluded that the forecasting process is significantly more complex than merely carrying out econometric modelling, forecasts are mediated and contested within organisations and that impacts can vary considerably across different organizational contexts.

Expert judgement in the processes of commercial property market forecasting

In this paper we investigate the role of judgement in the formation of forecasts in commercial real estate markets. Based on interview surveys with the majority of forecast producers, we find that real estate forecasters are using a range of inputs and data sets to form models to predict an array of variables for a range of locations. The findings suggest that forecasts need to be acceptable to their users (and purchasers) and consequently forecasters generally have incentives to avoid presenting contentious or conspicuous forecasts. Where extreme forecasts are generated by a model, forecasters often engage in ‘self-censorship’ or are ‘censored’ following in-house consultation. It is concluded that the forecasting process is more complex than merely carrying out econometric modelling and that the impact of the influences within this process vary considerably across different organizational contexts.

Taking the LEED? Analyzing spatial variations in market penetration rates of eco-labeled properties

This paper investigates the impact of policies to promote the adoption of LEED-certified buildings across CBSA in the United States. Drawing upon a unique database that combines data from a large number of sources and using a number of regression procedures, the determinants of the proportion LEED-certified space for more than 170 CBSA in the US is modeled. LEED-certified space still accounts for a relatively small proportion of commercial stock in all markets. The average proportion is less than 1%. There is no conclusive evidence of a positive impact of policy intervention on the levels of LEED-certified space. However, after accounting for bias introduced by non-random assignment of policies, we find preliminary evidence of a positive impact of city-level green building incentives. There is a significant positive association between market size and indicators of economic vitality on proportions of LEED-certified space.

Making the least active pay: a simulation of rewards and penalties under Demand Side Participation programs

The orthodox approach for incentivising Demand Side Participation (DSP) programs is that utility losses from capital, installation and planning costs should be recovered under financial incentive mechanisms which aim to ensure that utilities have the right incentives to implement DSP activities. The recent national smart metering roll-out in the UK implies that this approach needs to be reassessed since utilities will recover the capital costs associated with DSP technology through bills. This paper introduces a reward and penalty mechanism focusing on residential users. DSP planning costs are recovered through payments from those consumers who do not react to peak signals. Those consumers who do react are rewarded by paying lower bills. Because real-time incentives to residential consumers tend to fail due to the negligible amounts associated with net gains (and losses) or individual users, in the proposed mechanism the regulator determines benchmarks which are matched against responses to signals and caps the level of rewards/penalties to avoid market distortions. The paper presents an overview of existing financial incentive mechanisms for DSP; introduces the reward/penalty mechanism aimed at fostering DSP under the hypothesis of smart metering roll-out; considers the costs faced by utilities for DSP programs; assesses linear rate effects and value changes; introduces compensatory weights for those consumers who have physical or financial impediments; and shows findings based on simulation runs on three discrete levels of elasticity.

The elasticity of demand is about occupancy, not prices: building European demand curves based on occupancy elasticity

The peak congestion of the European grid may create significant impacts on system costs because of the need for higher marginal cost generation, higher cost system balancing and increasing grid reinforcement investment. The use of time of use rates, incentives, real time pricing and other programmes, usually defined as Demand Side Management (DSM), could bring about significant reductions in prices, limit carbon emissions from dirty power plants, and improve the integration of renewable sources of energy. Unlike previous studies on elasticity of residential electricity demand under flat tariffs, the aim of this study is not to investigate the known relatively inelastic relationship between demand and prices. Rather, the aim is to assess how occupancy levels vary in different European countries. This reflects the reality of demand loads, which are predominantly determined by the timing of human activities (e.g. travelling to work, taking children to school) rather than prices. To this end, two types of occupancy elasticity are estimated: baseline occupancy elasticity and peak occupancy elasticity. These represent the intrinsic elasticity associated with human activities of single residential end-users in 15 European countries. This study makes use of occupancy time-series data from the Harmonised European Time Use Survey database to build European occupancy curves; identify peak occupancy periods; draw time use demand curves for video and TV watching activity; and estimate national occupancy elasticity levels of single-occupant households. Findings on occupancy elasticities provide an indication of possible DSM strategies based on occupancy levels and not prices.

Biofuel policies in the EU, US and Brazil

The development of biofuels has been one of the most visible and controversial manifestations of the use of biomass for energy. Biofuels policies in the EU, US and Brazil have been particularly important for the development of the industry in these three important markets. All three have used a variety of measures, including consumption or use mandates, tax incentives and import protection to promote the production and use of biofuels. Despite this, it is uncertain whether the EU will achieve its objective of a 10 per cent share for renewables in transport fuels by 2020. The US is also running into difficulties in meeting consumption mandates for biofuels. Questions are being raised about the continuation of tax credits and import protection. Brazil has liberalised its domestic ethanol market and adopted a more market-oriented approach to biofuels policy, but the management of domestic petroleum prices and the inter-relationship between the sugar market and ethanol production are important factors affecting domestic consumption and exports. In both the EU and the US an ongoing debate about the benefits of reliance on biofuels derived from food crops and concern about the efficacy of current biofuels policies may put their future in doubt.

The impact of energy performance certificates on the rental and capital values of commercial property assets: some preliminary evidence from the UK

This paper focuses on the effect of energy performance ratings on the capital values, rental values and equivalent yields of UK commercial property assets. Of which a small number are also BREEAM rated, the study is based upon 708 commercial property assets held in the IPD UK Universe drawn from across all PAS segments. Incorporating a range of controls such as unexpired lease term, vacancy rate and tenant credit risk, hedonic regression procedures are used to estimate the effect of EPC rating. The study finds no evidence of a strong relationship between environmental and/or energy performance and rental and capital value. Bearing in mind the small number of BREEAM rated assets, there was a small but statistically significant effect on equivalent yield only. Similarly, there was no evidence that the EPC rating had any effect on Market Rent or Market Value with only minor effects of EPC ratings on equivalent yields. The preliminary conclusion is that energy labelling is not yet having the effects on Market Values and Market Rents that provide incentives for market participants to improve the energy efficiency of their commercial real estate assets.

An investigation of the effect of eco-labeling on office occupancy rates

This paper investigates the extent to which clients were able to influence performance measurement appraisals during the downturn in commercial property markets that began in the UK during the second half of 2007. The sharp change in market sentiment produced speculation that different client categories were attempting to influence their appraisers in different ways. In particular, it was recognised that the requirement for open-ended funds to meet redemptions gave them strong incentives to ensure that their asset values were marked down to market. Using data supplied by Investment Property Databank, we demonstrate that, indeed, unlisted open ended funds experienced sharper drops in capital values than other fund types in the second half of 2007, after the market turning point. These differences are statistically significant and cannot simply be explained by differences in portfolio composition. Client influence on appraisal forms one possible explanation of the results observed: the different pressures on fund managers resulting in different appraisal outcomes.

Protecting developing countries' forests: enforcement in theory and practice

This paper relates the key findings of the optimal economic enforcement literature to practical issues of enforcing forest and wildlife management access restrictions in developing countries. Our experiences, particularly from Tanzania and eastern India, provide detail of the key pragmatic issues facing those responsible for protecting natural resources. We identify large gaps in the theoretical literature that limit its ability to inform practical management, including issues of limited funding and cost recovery, multiple tiers of enforcement and the incentives facing enforcement officers, and conflict between protected area managers and rural people's needs.

Institutional capacity and implementation issues in farmers' rights

Armed with the ‘equity’ and ‘conservation’ arguments that have a deep resonance with farming communities, developing countries are crafting a range of measures designed to protect farmers’ access to innovations, reward their contributions to the conservation and enhancement of plant genetic resources and provide incentives for sustained on-farm conservation. These measures range from the commericialization of farmers’ varieties to the conferment of a set of legally enforceable rights on farming communities – the exercise of which is expected to provide economic rewards to those responsible for on-farm conservation and innovation. The rights-based approach has been the cornerstone of legislative provision for implementing farmers’ rights in most developing countries. In drawing up these measures, developing countries do not appear to have systematically examined or provided for the substantial institutional capacity required for the effective implementation of farmers’ rights provisions. The lack of institutional capacity threatens to undermine any prospect of serious implementation of these provisions. More importantly, the expectation that significant incentives for on-farm conservation and innovation will flow from these ‘rights’ may be based on a flawed understanding of the economics of intellectual property rights. While farmers’ rights may provide only limited rewards for conservation, they may still have the effect of diluting the incentives for innovative institutional breeding programs – with the private sector increasingly relying on non-IPR instruments to profit from innovation. The focus on a rights-based approach may also draw attention away from alternative stewardship-based approaches to the realization of farmers’ rights objectives.