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.

Executive pay and performance: did bankers’ bonuses cause the crisis?

This paper examines the pay-performance relationship between executive cash compensation (including bonuses) and company performance for a sample of large UK companies, focusing particularly on the financial services industry, since incentive misalignment has been blamed as one of the factors causing the global financial crisis of 2007–2008. Although we find that pay in the financial services sector is high, the cash-plus-bonus pay-performance sensitivity of financial firms is not significantly higher than in other sectors. Consequently, we conclude that it unlikely that incentive structures could be held responsible for inducing bank executives to focus on short-term results.

Farmers' willingness to pay for agricultural extension service: evidence from Nigeria

The study was undertaken to investigate how willing would farmers be to pay for agricultural extension service in Nigeria. A multistage random sampling technique was used to select 268 respondents. Results showed that most farmers (95.1 per cent) were willing to pay for improved extension service as long as the service remained relevant to their needs. Farmers were willing to pay N1000 annually as their own share of the service cost. The most important factors that influenced farmers’ willingness to pay were states of origin, items originally paid for, major occupation, minor occupation, number of years in school and sale of farm produce.

Farmers’ willingness to pay for a tuberculosis cattle vaccine

We use contingent valuation (CV) and choice experiment (CE) methods to assess cattle farmers’ attitudes to and willingness to pay (WTP) for a bovine tuberculosis (bTB) cattle vaccine, to help inform vaccine development and policy. A survey questionnaire was administered by means of telephone interviews to a stratified sample of 300 cattle farmers in annually bTB-tested areas in England and Wales. Farmers felt that bTB was a major risk for the cattle industry and that there was a high risk of their cattle getting the disease. The CE estimate produced a mean WTP of £35 per animal per single dose for a vaccine that is 90% effective at reducing the risk of a bTB breakdown and an estimated £55 for such a vaccine backed by 100% insurance of loss if a breakdown should occur. The CV estimate produced a mean WTP of nearly £17 per dose/per animal/per year for a vaccine (including 100% insurance) which, given the average lifespan of cattle, is comparable to the CE estimate. These WTP estimates are substantially higher than the expected cost of a vaccine which suggests that farmers in high risk bTB ‘hotspot’ areas perceive a substantial net benefit from buying the vaccine.

Developing “Best Practices” for bankers’ pay in line with Basel III

This paper proposes hybrid capital securities as a significant part of senior bank executive incentive compensation in light of Basel III, a new global regulatory standard on bank capital adequacy and liquidity agreed by the members of the Basel Committee on Banking Supervision. The committee developed Basel III in a response to the deficiencies in financial regulation brought about by the global financial crisis. Basel III strengthens bank capital requirements and introduces new regulatory requirements on bank liquidity and bank leverage. The hybrid bank capital securities we propose for bank executives’ compensation are preferred shares and subordinated debt that the June 2004 Basel II regulatory framework recognised as other admissible forms of capital. The past two decades have witnessed dramatic increase in performance-related pay in the banking industry. Stakeholders such as shareholders, debtholders and regulators criticise traditional cash and equity-based compensation for encouraging bank executives’ excessive risk taking and short-termism, which has resulted in the failure of risk management in high profile banks during the global financial crisis. Paying compensation in the form of hybrid bank capital securities may align the interests of executives with those of stakeholders and help banks regain their reputation for prudence after years of aggressive risk-taking. Additionally, banks are desperately seeking to raise capital in order to bolster balance sheets damaged by the ongoing credit crisis. Tapping their own senior employees with large incentive compensation packages may be a viable additional source of capital that is politically acceptable in times of large-scale bailouts of the financial sector and economically wise as it aligns the interests of the executives with the need for a stable financial system.

Social consensus, moral intensity and willingness to pay to address a farm animal welfare issue

An experimental contingent valuation (CV) survey of university students was undertaken to explore the impact of social consensus information on people's stated willingness to pay (wtp) to address a farm animal welfare issue. The survey found that additional information presented to respondents on social consensus concerning the moral dimensions of the issue led to a greater perception of social consensus by respondents. This greater perception of social consensus appeared to result in a higher level of moral intensity associated with the issue and a higher stated wtp by respondents for policy to address the issue. However, as for many CV studies of public goods, a question remains as to whether the estimated wtp is a true measure of people's preferences and relative values or merely a measure of attitudes on an arbitrary monetary scale.

Moral intensity and willingness to pay concerning farm animal welfare issues and the implications for agricultural policy

An experimental survey was undertaken to explore the links between the characteristics of a moral issue, the degree of moral intensity/moral imperative associated with the issue (Jones, 1991), and people's stated willingness to pay (wtp) for policy to address the issue. Two farm animal welfare issues were chosen for comparison and the contingent valuation method was used to elicit people's wtp. The findings of the survey suggest that increases in moral characteristics do appear to result in an increase in moral intensity and the degree of moral imperative associated with an issue. Moreover, there was a positive link between moral intensity/moral imperative associated with an issue and people's stated wtp for policy to address the issue. The paper discusses the relevance of the findings of the survey in the context of the debate concerning the relationship between moral and economic values and the use of the contingent valuation method to estimate people's wtp of policy options with moral dimensions.

Demand, supply and willingness-to-pay for extension services in an emerging-market setting

Although it may be wholly inappropriate to generalize, the most important resource available to a subsistence household is the total amount of time that its members have available to spend in productive enterprises. In this context, services that minimize the time that it takes to perform productive activities are valuable to the household. Consequently the household is willing to relinquish quantities of other resources in exchange for quantities of the time-saving service. These simple observations motivate a search for the values that subsistence households place on time-saving services. This search is especially important when it is realized that extension services promote productivity, enhance the surplus-generating potential of the household and can, as a consequence, promote immersion into markets that are currently constrained by thinness and instability. In this capacity, extension visitation has the potential to overcome one of the principal impediments to economic development, namely lack of density of market participation. In this article, we consider this issue in the context of a rich data set on milk-market participation by small-holder dairy producers in the Ethiopian highlands.

Simulated and observed fluxes of sensible and latent heat and CO2 at the WLEF-TV tower using SiB2.5

Three years of meteorological data collected at the WLEF-TV tower were used to drive a revised version of the Simple Biosphere (SiB 2.5) Model. Physiological properties and vegetation phenology were specified from satellite imagery. Simulated fluxes of heat, moisture, and carbon were compared to eddy covariance measurements taken onsite as a means of evaluating model performance on diurnal, synoptic, seasonal, and interannual time scales. The model was very successful in simulating variations of latent heat flux when compared to observations, slightly less so in the simulation of sensible heat flux. The model overestimated peak values of sensible heat flux on both monthly and diurnal scales. There was evidence that the differences between observed and simulated fluxes might be linked to wetlands near the WLEF tower, which were not present in the SiB simulation. The model overestimated the magnitude of the net ecosystem exchange of CO2 in both summer and winter. Mid-day maximum assimilation was well represented by the model, but late afternoon simulations showed excessive carbon uptake due to misrepresentation of within-canopy shading in the model. Interannual variability was not well simulated because only a single year of satellite imagery was used to parameterize the model.

Teen TV meets T4: assimilating 'The O.C.' into British youth television

This article explores the presence of imported US Teen TV in the schedules of British youth television and the relationship between the two national forms. Focusing on the broadcast of The O.C on Channel 4 youth strand T4, it considers the role of the spaces in-between programmes in framing the audience’s experience of the imported US text. It demonstrates how the T4 supertext employed presenter performance, critique and parody to assimilate the glamorously aspirational US Teen TV text into the cynically engaged flow of British youth television.