NEWS

In 2022 Market Analysis collaborated with Europe Economics on the design of the initial auctions for the new EU emissions trading system covering fuel for buildings and road transport on behalf of the European Commission’s DG CLIMA. We are also collaborating on a market consultation and analysis of the participation of firms in the auctions and secondary markets.

Market Analysis was retained by AES Chivor Colombia to assist in formulating AES’s bidding strategy in the Colombian auction for long-term renewable energy contracts held October 22, 2019. This auction was unusual in design. For buyers it was a straightforward single product, sealed-bid, average-price auction; for sellers it was a multiproduct, combinatorial, pay as bid auction. This design meant that an optimizing algorithm was required to find the auction solution for any set of simulated demand and supply bids.

Phase 1 of the project consisted in assembling information relating to the demand and supply curves expected to pertain to the auction process. Phase 2 involved a series of increasingly realistic mock auctions using the computer program for solving the auction made publicly available by the Ministerio de Minas y Energía. This program allowed us to simulate the auction using up to 15 seller bids in any round and up to six firms.

On the Enforcement of Trade Embargoes by the Merchant Guilds by Nils-Henrik von der Fehr and David Harbord, 25 April 2018.

Abstract: Compensation from rulers of trading centres to merchants whose property rights had been violated was a notable feature of early European international trade. We demonstrate in a repeated-game model that demands for compensation made threats by merchant guilds to impose trade boycotts self-enforcing for individual merchants, thus removing incentives for embargo breaking that could otherwise have rendered guilds powerless. Long-distance merchants were thus protected from predation by medieval city rulers, possibly providing a foundation for the trade expansion of the `Commercial Revolution’. We also address the frequently neglected issue of whether the guilds and cities would have agreed on the level of trade which they wished to support.

A report written for the Colombian Comision de Regulacion de Energía y Gas (CREG), November 2016.

Abstract: The Colombian Comision de Regulacion de Energia y Gas (CREG) convened a panel of international experts to consider various proposals for electricity market reform on four topics: (1) the scarcity price, reliability charge and methods for the expansion of system capacity; (2) a forward market for energy contracts (MOR); (3) spot market reform and the creation of day-ahead and intra-day markets; and (4) mechanisms to elicit investment in nonconventional renewable energy (FNCERs) in Colombia. This report contains my analysis and recommendations on these topics.

Comment on Ghang and Nowak’s “Indirect reciprocity with optional interactions” by David Harbord and Nils-Henrik von der Fehr, 24 July 2016.

Abstract: We point out some simple mathematical errors in the article “Indirect reciprocity with optional interactions” (Journal of Theoretical Biology 365 (2015) 1–11) by Whan Ghang and Martin Nowak, which invalidate many of their results and conclusions. We note various ways that these errors could be fixed, but all require fundamental revisions of their model and lead to counterintuitive conclusions. We also discuss their use of a Nash equilibrium (as opposed to an evolutionary stability) approach in deriving conditions for the evolution of cooperation with indirect reciprocity, and mention some precedents for their model which have appeared in the biology and economics literature.

An article published in openDemocracy “Bargaining post-Brexit trade deals: worse even than project fear”  by David Harbord & Tim Lord, 14 June 2016.

Abstract: Brexiteers hope to convince us that Britain will, after exit, be able to retain its status as a global trading nation with special deals with its largest trading partners in the EU and elsewhere. Remain has painted a bleak picture of what will happen to the economy if Britain exits. Applying some elementary game theory to post-Brexit negotiations suggests that things might be worse for an EU trade deal than even Remain’s so-called “project fear” is arguing.

“Welfare Analysis of Regulating Mobile Termination Rates in the UK“ by David Harbord and Steffen Hoernig. Published in The Journal of Industrial Economics, 63: 673–703, 31 December 2015.

Abstract: We develop a calibrated simulation model of the UK mobile telephony market and use it to analyze the e¤ects of reducing mobile termination rates (MTRs) as recommended by the European Commission. We fi…nd that reducing MTRs is likely to increase both consumer surplus and networks’’ profi…ts. Depending on the strength of call externalities (i.e. benefi…ts to the recipient of a call), social welfare may increase by as much as £ 1 billion to £ 4.6 billion per year. We also use the model to estimate the welfare effects of the 2010 merger between Orange and T-Mobile and …find that the merger led to a substantial reduction in consumer surplus.

Visit Journal of Industrial Economics articles website

“What’s in a Game?“ by David Harbord, 17 March 2015.  A short comment on applying game theory to the Greek debt restructuring negotiations, published in openDemocracy.

“The Law and Economics of Vertical Restraints: An Overview“  by Nils-Henrik von der Fehr and David Harbord, 10 November 2014.

Summary: This article provides a brief overview of vertical restraints. discusses the treatment of vertical distribution arrangements in US and European competition law, and selectively surveys and explains the modern economics literature on exclusive dealing arrangements.