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Products: Tarui, Nori

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Electric Utility Regulation Under Enhanced Renewable Energy Integration and Distributed Generation

The economic environment for electric utilities is changing in the United States given increased penetration of distributed generation and limited rooms for sales growth. This paper reviews the recent development of relevant policies in the United States and their economic impacts. This review indicates both challenges and opportunities in improving the policies to enhance distributed generation, and in finding the directions in which electric utility regulation should be reformed.


Efficient Design of Net Metering Agreements in Hawaii and Beyond

In Hawaii, like most U.S. states, households installing rooftop solar photovoltaic (PV) systems receive special pricing under net-metering agreements. These agreements allow households with rooftop solar to buy and sell electricity at the retail rate, effectively using the larger grid to store surplus generation from their panels during sunny times and return it when the sun isn’t shining. If a household generates more electricity than it consumes over the course of a month, it obtains a credit that rolls over for use in future months. Net generation supplied to the grid in excess of that consumed over the course of a full year is forfeited to the utility. 

Project Report

Intergenerational Games with Dynamic Externalities and Climate Change Experiments

Dynamic externalities are at the core of many long-term environmental problems, from species preservation to climate change mitigation. We use laboratory experiments to compare welfare outcomes and underlying behavior in games with dynamic externalities under two distinct settings: traditionally studied games with infinitely-lived decision makers, and more realistic intergenerational games. We show that if decision makers change across generations, resolving dynamic externalities becomes more challenging for two distinct reasons. First, decision makers’ actions may be short-sighted due to their limited incentives to care about the future generations’ welfare. Second, even when the incentives are perfectly aligned across generations, increased strategic uncertainty of the intergenerational setting may lead to an increased inconsistency of own actions and beliefs about the others, making own actions more myopic. Access to history and advice from previous generations may improve dynamic efficiency, but may also facilitate coordination on noncooperative action paths.


Why Does Real-Time Information Reduce Energy Consumption?

A number of studies have estimated how much energy conservation is achieved by providing households with real-time information on energy use via in-home displays. However, none of these studies tell us why real-time information changes energy-use behavior. We explore the causal mechanisms through which real-time information affects energy consumption by conducting a randomized-control trial with residential households. The experiment disentangles two competing mechanisms: (i) learning about the energy consumption of various activities, the “learning effect”, versus (ii) having a constant reminder of energy use, the “saliency effect”. We have two main results. First, we find a statistically significant treatment effect from receiving real-time information. Second, we find that learning plays a more prominent role than saliency in driving energy conservation. This finding supports the use of energy conservation programs that target consumer knowledge regarding energy use.

Published version: Lynham, J., Nitta, K., Saijo, T., & Tarui, N. (n.d.). Why does real-time information reduce energy consumption? Energy Economics. http://doi.org/http://dx.doi.org/10.1016/j.eneco.2015.11.007

Working Paper



Payment schemes in random-termination experimental games

We consider payment schemes in experiments that model infinite-horizon games by using random termination. We compare paying subjects cumulatively for all periods of the game; with paying subjects for the last period only; with paying for one of the periods, chosen randomly. Theoretically, assuming expected utility maximization and risk neutrality, both the cumulative and the last period payment schemes induce preferences that are equivalent to maximizing the discounted sum of utilities. The last-period payment is also robust under different attitudes towards risk. In comparison, paying subjects for one of the periods chosen randomly creates a present-period bias. Experimentally, we find that the cumulative payment appears the best in inducing long-sighted behavior.


Learning-by-catching: Uncertain invasive-species populations and the value of information

This paper develops a model of invasive species control when the species’ population size is unknown. In the face of an uncertain population size, a resource manager’s species-control efforts provide two potential benefits: (1) a direct benefit of possibly reducing the population of invasive species, and (2) an indirect benefit of information acquisition (due to learning about the population size, which reduces uncertainty). We provide a methodology that takes into account both of these benefits, and show how optimal management decisions are altered in the presence of the indirect benefit of learning. We then apply this methodology to the case of controlling the Brown Treesnake (Boiga irregularis) on the island of Saipan. We find that the indirect benefit—the value of information to reduce uncertainty—is likely to be quite large.

Published: D'Evelyn, S. T., Tarui, N., Burnett, K. and Roumasset, J. A., 2008. Learning-by-catching: Uncertain invasive-species populations and the value of information.  Journal of Envrionmental Management, 89, 284-292.

working paper version