Contributions in Merlin

In this contribution, portfolio theory is applied to power technologies of the United States and Switzerland. A current user view is adopted to determine the efficient frontier of generation technologies in terms of expected return and risk. Since shocks in generation costs per kWh (the inverse of expected returns) are correlated, seemingly unrelated regression estimation (SURE) is applied to filter out the systematic components of the covariance matrix. Since some of the portfolios of particular interest (minimum variance, maximum expected return) call for a high share of one technology, security of supply becomes an issue. Shannon-Wiener and Herfindahl-Hirschman indices are calculated to see the trade-off between efficiency and security of supply. Results suggest that riskaverse utilities (and ultimately, consumers) in the United States would have gained from adopting a feasible portfolio containing more coal, gas and oil at a price of a somewhat reduced security of supply. In the case of Switzerland, the realistic portfolio consists of nuclear, storage hydro, run of river and solar, with shares identical to those of the actual portfolio in 2003. Therefore, the current mix of Swiss generating technologies in Switzerland may be deemed efficient.

In Germany, competitive franchising is increasingly being used to procure passenger railway services that were previously provided by a state monopolist. This paper analyzes 77 tenders that differ with respect to network size, service frequency, contract duration and the proximity to other lines that are already run by competitors of DB Regio, a subsidiary of the successor of the former state monopolist. Our analysis shows that competitors are more likely to win small networks and more recent auctions. Other controls such as contract duration and the adjacency to other lines run by entrants are insignificant.

The acknowledged importance of uncertainty in economic decision making has stimulated the search for neural signals that could influence learning and inform decision mechanisms. Current views distinguish two forms of uncertainty, namely risk and ambiguity, depending on whether the probability distributions of outcomes are known or unknown. Behavioural neurophysiological studies on dopamine neurons revealed a risk signal, which covaried with the standard deviation or variance of the magnitude of juice rewards and occurred separately from reward value coding. Human imaging studies identified similarly distinct risk signals for monetary rewards in the striatum and orbitofrontal cortex (OFC), thus fulfilling a requirement for the mean variance approach of economic decision theory. The orbitofrontal risk signal covaried with individual risk attitudes, possibly explaining individual differences in risk perception and risky decision making. Ambiguous gambles with incomplete probabilistic information induced stronger brain signals than risky gambles in OFC and amygdala, suggesting that the brain's reward system signals the partial lack of information. The brain can use the uncertainty signals to assess the uncertainty of rewards, influence learning, modulate the value of uncertain rewards and make appropriate behavioural choices between only partly known options.

In this paper, we introduce the fairness approach to efficiency wages into a standard model of international fragmentation. This gives us a theoretical framework in which wage inequality and unemployment rates are co-determined and therefore the public concern can be addressed that international fragmentation and outsourcing to low wage countries lead to domestic job-losses. We develop a novel diagrammatic tool to illustrate the main labour market effects of international fragmentation. We also explore how preferences for fair wages and the size of unemployment benefits govern the employment effects of outsourcing and critically assess the role of political intervention that aims to reduce unemployment benefits under internationally fragmented production.