An investigation of private public partnerships using real options analysis

<p>This thesis develops a model that investigates aspects of New Zealand’s largest public-private partnership project, the rollout of Ultra Fast Broadband. The model features four cities with different demand and construction-cost characteristics. It is used to study the different choices of the private party (Chorus) and the public party (Crown Fibre Holdings (CFH)). Using a real options approach, we identify two sorts of potential conflicts between the two parties: a timing conflict about the number of cities the two parties would like to develop in each period and a sequencing conflict about the order in which the UFB network is rolled out in different cities. Inspired by the incomplete contracting and information asymmetry literatures, we introduce several incentive schemes (including four subsidy schemes and two fine schemes) that help manage the possible conflicts. We compare both their ability to reduce the conflicts and their sensitivity to the model’s underlying parameters. Overall, there are four main findings. First, the magnitude of the conflict is a non-monotonic function of the inter-city demand differences and the inter-city construction-cost differences; it is an increasing function of the ratio of consumer surplus to producer surplus and of demand volatility. Second, a demand-dependent lump sum subsidy has the best performance among all included incentive schemes in controlling the possible conflicts. Third, the conflict level becomes quite sensitive to the subsidy scheme in two cases. A) When either the inter-city demand differences or the inter-city construction-cost differences turn out to be modest; B) When either the ratio of consumer surplus to producer surplus or demand volatility turns out to be large. The above result may provide some suggestions in managing the optimal subsidy. Last but not least, the requirement that Chorus is willing to participate in the partnership means that the fine schemes are generally outperformed by the subsidy schemes. Relating our findings to the undertaking UFB project, we provide CFH with several practical suggestions that may improve its management of possible conflicts.</p>

An investigation of private public partnerships using real options analysis

<p>This thesis develops a model that investigates aspects of New Zealand’s largest public-private partnership project, the rollout of Ultra Fast Broadband. The model features four cities with different demand and construction-cost characteristics. It is used to study the different choices of the private party (Chorus) and the public party (Crown Fibre Holdings (CFH)). Using a real options approach, we identify two sorts of potential conflicts between the two parties: a timing conflict about the number of cities the two parties would like to develop in each period and a sequencing conflict about the order in which the UFB network is rolled out in different cities. Inspired by the incomplete contracting and information asymmetry literatures, we introduce several incentive schemes (including four subsidy schemes and two fine schemes) that help manage the possible conflicts. We compare both their ability to reduce the conflicts and their sensitivity to the model’s underlying parameters. Overall, there are four main findings. First, the magnitude of the conflict is a non-monotonic function of the inter-city demand differences and the inter-city construction-cost differences; it is an increasing function of the ratio of consumer surplus to producer surplus and of demand volatility. Second, a demand-dependent lump sum subsidy has the best performance among all included incentive schemes in controlling the possible conflicts. Third, the conflict level becomes quite sensitive to the subsidy scheme in two cases. A) When either the inter-city demand differences or the inter-city construction-cost differences turn out to be modest; B) When either the ratio of consumer surplus to producer surplus or demand volatility turns out to be large. The above result may provide some suggestions in managing the optimal subsidy. Last but not least, the requirement that Chorus is willing to participate in the partnership means that the fine schemes are generally outperformed by the subsidy schemes. Relating our findings to the undertaking UFB project, we provide CFH with several practical suggestions that may improve its management of possible conflicts.</p>

Market Power and Income Taxation

This article analyzes concerns about market power and inequality in a model with multiple sectors, heterogeneous abilities, endogenous labor supply, and nonlinear income taxation. Proportional markups with no profit dissipation have no effect on the economy, and a policy that reduces a nonproportional markup raises (lowers) welfare when it is higher (lower) than a weighted average of other markups. With proportional (partial or full) profit dissipation, proportional markups are equivalent to a downward shift of the distribution of abilities, and the optimal policy rule with nonproportional markups maximizes consumer plus producer surplus despite concerns for distribution and labor supply distortion. (JEL D43, D61, H21, H23, H24, K21, L13, L40)

Welfare Effect of Adaptation Policy for Rice Price Variation under Climate Change in Bangladesh

This study was designed to evaluate the welfare effect of the climate adaptation policy for rice price variation in terms of producer surplus, consumer surplus, and net change in social welfare in Bangladesh, using the partial equilibrium model of the adaptation policy. The long-term trend of climate and policy adaptation for climate impact on price variation of the rice in Bangladesh is taken into economic model approach. The base period of this research is 1977-2009 and the extrapolation period is 2010-2030. To execute the designed analysis, the time series data from national and international organization are used. The results for the support price policy show that the total surplus that producers receive is equivalent to USD 1,164 million, substantially higher than the consumer surplus (USD 763 million) during the period 2010–2030. The net change in the social welfare owing to the support price policy is equivalent to –1483 million (USD) during the period 2010–2030. Moreover, analysis of the subsidized price policy shows that the total surplus that consumers receive (USD 1,958 million) is relatively higher than the producer surplus (USD 1,738 million) in the same period. The net change in social welfare owing to the subsidized price policy (–197 million USD) is much higher than that owing to price support –1483 million (USD). Implementing the dual price policy would result in a much higher net change in the society’s welfare (–1185 million USD) compared to that possible through each policy separately. In conclusion, these adaptation and price stabilization policies are recognized to be more useful in mitigating the severe price rise and fall in the future food market, in favour of both producers and consumers. Even though the change in net social welfare is higher, the higher cost of policy budget is imperative to make stable food supply and security.

Dampak Kebijakan Harga Pembelian Pemerintah Terhadap Produksi Gula Kristal Putih

The policy objective of Government Purchase Price (HPP) of plantation white sugar in Indonesia is to increase the production. However, while the government increase the HPP, the production was decreased. The purpose of this study was to analize the impact of HPP policy on production of plantation white sugar in Indonesia. This study uses ex-post simulation based on econometrics model (build from monthly time series data from 2012 until 2017, consist of 13 equations and estimated using 2SLS method). The results, ex-post simulation shows that an increase HPP causes an increase in plantation white sugar production and producer surplus. However, an increase in labor wages cause decreased in production. The increase HPP also causes an increase in producer surplus. Based on producer surplus, the biggest impact of the increase in HPP was felt by the farmers.

WELLBYs, cost-benefit analyses and the Easterlin Discount

The current practise of cost-benefit analysis inWestern countries consists of a collection of various incompatible ideas and methodologies to obtain replicable numbers for the costs and benefits of major public spending plans. This paper describes the main elements of the dominant methodology, which combines consumer and producer surplus, price-taking, government-inputs-as-outputs, hedonic pricing of externalities, and the issue-specific use of partial or general equilibrium thinking. The paper then discusses how that methodology can be augmented and partially replaced by looking at how prospective policies would change the total number of WELLBYs (life satisfaction-adjusted years of life) of the population. The ability of the WELLBY methodology to address complex externalities is illustrated by the Easterlin Discount, which is a proposed reduction factor of 75% on all estimates of private consumption benefits to offset the envy caused in others.

MANFAAT EKONOMI PEMBANGUNAN RUAS JALAN SIMPANG LAMIE – KUALA TUHA DITINJAU DARI ASPEK PRODUCER SURPLUS

The policy of Nagan Raya District Government to develop the Lamie - Kuala Tuha provincial road section aims to shorten travel time, reduce high mobility, facilitate travel, and support the movement of the plantation and agricultural sectors. This study aims to determine the magnitude of the benefits obtained from the producer surplus aspect in the plantation sector, agricultural sector and livestock sector and to evaluate economic feasibility based on Benefit Cost Ratio (BCR), Net Present Value (NPV), and Internal Rate of Return (IRR) . This research was conducted by collecting data related to the budget, wages, the Nagan Raya Regency Spatial Planning Book, the area of land and the production of the agricultural sector, the area of land and production of the plantation sector, and the amount and price of cattle. Data is processed by producer surplus method in the transportation economy, namely evaluating economic feasibility with BCR, NPV, IRR indicators. The results of this study indicate that the construction of the Lamie - Kuala Tuha Road in the 24th (twenty four) year or the 20th (twenty) year since the road was opened has met economic feasibility standards at a discount rate of 10, 12 and 15 percent with a value BCR 1.85, 1.54 and 1.15, NPV value of Rp. 64,828,481,000, Rp. 35,422,332,000 and Rp. 8,322,171,000. The IRR value obtained in this study is at the discount rate of 16.44 percent.

Commercializing the Milkfish Hatchery-Bred Fry Industry in the Philippines: A Welfare Analysis

This study aims to estimate the welfare gains of the Philippine milkfish industry in establishing local fry hatcheries to reduce imports from Indonesia and Taiwan. It also seeks to identify the industry stakeholders who gain from this import substitution endeavour. The economic surplus model was used to estimate the welfare gains from the commercialization of the hatchery-bred milkfish fry in the fishery sector. Specifically, the changes in consumer and/or producer surplus per stakeholder were compared to determine who the biggest gainers are. Results of the study showed that the consumer surplus from the milkfish fry industry was larger than its producer surplus. On the other hand, the reverse was true for the grow-out industry. It is interesting to note that the consumers in the fry industry and the producer in the grow-out industry were the same set of stakeholders, i.e., the milkfish grow-out operators, who gained the most from this development. The study also showed that commercializing the local milkfish hatchery technologies can bring about more benefits to the country than importing fry and fingerlings. Hence, the development of local hatcheries for other aquaculture species can be expected to bring similar welfare gains. More importantly, the technical and financial assistance that were extended by the government’s fishery institutions through the GAINEX project as pioneered by DOST-PCAARRD can serve as an effective catalyst to prospective hatchery operators in reducing the risks, especially when setting-up a new enterprise like the hatchery-bred fry for an emerging aquaculture species in the country.