nep-cmp New Economics Papers
on Computational Economics
Issue of 2008‒09‒20
nine papers chosen by
Stan Miles
Thompson Rivers University

  1. Merger Simulation in Competition Policy: A Survey By Oliver Budzinski; Isabel Ruhmer
  2. Regionalism as an Engine of Multilateralism: A Case for a Single East Asian FTA By Kawai, Masahiro; Wignaraja, Ganeshan
  3. Exploring agent-based methods for the analysis of payment systems: a crisis model for StarLogo TNG By Luca Arciero; Claudia Biancotti; Leandro DÂ’Aurizio; Claudio Impenna
  4. The Dynamics of General Equilibrium: A Comment on Professor Gintis By Ennio Bilancini; Fabio Petri
  5. Learning About Learning in Dynamic Economic Models By David A. Kendrick; Hans M. Amman; Marco P. Tucci
  6. Comparison of Policy Functions from the Optimal Learning and Adaptive Control Frameworks By Hans M. Amman; David A. Kendrick
  7. Curse of Mediocrity - On the Value of Asymmetric Fundamental Information in Asset Markets By Michael Kirchler
  8. An agent-based model of payment systems By Galbiati, Marco; Soramaki, Kimmo
  9. Structural changes in economics during the last fifty years By Mishra, SK

  1. By: Oliver Budzinski (Faculty of Business Administration and Economics, Philipps Universitaet Marburg); Isabel Ruhmer (Center for Doctoral Studies in Economics (CDSE) University of Mannheim)
    Abstract: Advances in competition economics as well as in computational and empirical methods have offered the scope for the employment of merger simulation models in merger control procedures during the past almost 15 years. Merger simulation is, nevertheless, still a very young and innovative instrument of antitrust and, therefore, its ‘technical’ potential is far from being comprehensively exploited and teething problems in its practical use in the antitrust environment prevail. We provide a classification of state-of-the-art merger simulation models and review their previous employment in merger cases as well as the problems and limitations currently associated with their use in merger control. In summary, merger simulation models represent an important and valuable extension of the toolbox of merger policy. However, they do not qualify as a magic bullet and must be combined with other, more traditional instruments of competition policy in order to comprehensively unfold its beneficial effects.
    Keywords: merger simulation, merger control, antitrust, oligopoly theory, auction models, mergers & acquisitions
    JEL: L40 C15 K21
    Date: 2008
  2. By: Kawai, Masahiro (Asian Development Bank Institute); Wignaraja, Ganeshan (Asian Development Bank)
    Abstract: As East Asia becomes increasingly integrated through market-driven trade and FDI activities, free trade agreements (FTAs) are proliferating. Consolidation of multiple and overlapping FTAs into a single East Asian FTA can help mitigate the harmful noodle bowl effects of different or competing tariffs, standards, and rules. A region-wide FTA will also encourage participation of low-income countries and reduce trade-related business costs, particularly for small and medium enterprises. A computable general equilibrium (CGE) model examines the economic impact of various types of FTAs in East Asia (among ASEAN+1's, ASEAN+3, and ASEAN+6) finding that consolidation at the ASEAN+6 level would yield the largest gains to East Asia among plausible regional trade arrangements.
    Keywords: Free Trade Agreement; ASEAN; multilateralism
    JEL: F10 F13 F40
    Date: 2008–02–01
  3. By: Luca Arciero (Bank of Italy); Claudia Biancotti (Bank of Italy); Leandro DÂ’Aurizio (Bank of Italy); Claudio Impenna (Bank of Italy)
    Keywords: agent-based modeling, payment systems, RTGS, liquidity, crisis simulation Abstract: This paper presents an exploratory agent-based model of a real time gross settlement (RTGS) payment system. Banks are represented as agents who exchange payment requests, which are settled according to a set of simple rules. The model features the main elements of a real-life system, including a central bank acting as liquidity provider, and a simplified money market. A simulation exercise using synthetic data of BI-REL (the Italian RTGS) predicts the macroscopic impact of a disruptive event on the flow of interbank payments. The main advantage of agent - based modeling is that we can dynamically see what happens to the major variables involved. In our reduced-scale system, three hypothetical distinct phases emerge after the disruptive event: 1) a liquidity sink effect is generated and the participants’ liquidity expectations turn out to be excessive; 2) an illusory thickening of the money market follows, along with increased payment delays; and, finally 3) defaulted obligations dramatically rise. The banks cannot staunch the losses accruing on defaults, even after they become fully aware of the critical event, and a scenario emerges in which it might be necessary for the central bank to step in as liquidity provider. The methodology presented differs from traditional payment systems simulations featuring deterministic streams of payments dealt with in a centralized manner with static behavior on the part of banks. The paper is within a recent stream of empirical research that attempts to model RTGS with agent – based techniques.
    JEL: C63 E47 G21
    Date: 2008–08
  4. By: Ennio Bilancini; Fabio Petri
    Abstract: This is a comment on Gintis (2007, 'The Dynamics of General Equilibrium', Economic Journal 117 (523) , 1280–1309), who provides an agent-based model of a Walrasian economy where the tâtonnement is replaced by imitation. His simulations show that the economy converges to the Walrasian equilibrium. Gintis concludes that 1) his stability results provide some justification for the importance placed upon the Walrasian model, and 2) models allowing agents to imitate successful others lead to an economy with a reasonable level of stability and efficiency. Since these conclusions appear to be intended as general, we caution that Gintis's findings can only be accepted for Walrasian models without capital goods; in models with capital goods imitation-based adjustments alter the equilibrium's data (which makes the demonstration of stability impossible) and raise other important problems (absent from Gintis's simulations) still awaiting exploration.
    Keywords: Walrasian equilibrium, imitation, stability, agent-based simulations, capital goods
    JEL: D51 D58 B12 B13
    Date: 2008–08
  5. By: David A. Kendrick; Hans M. Amman; Marco P. Tucci
    Abstract: This chapter of the Handbook of Computational Economics is mostly about research on active learning and is confined to discussion of learning in dynamic models in which the systems equations are linear, the criterion function is quadratic and the additive noise terms are Gaussian. Though there is much work on learning in more general systems, it is useful here to focus on models with these specifications since more general systems can be approximated in this way and since much of the early work on learning has been done with these quadratic-linear-gaussian systems. We begin with what has been learned about learning in dynamic economic models in the last few decades. Then we progress to a discussion of what we hope to learn in the future from a new project that is just getting underway. However before doing either of these it is useful to provide a short description of the mathematical framework that will be used in the chapter.
    Keywords: Active learning, dual control, optimal experimentation, stochastic optimization, time-varying parameters, forward looking variables, numerical experiments.
    JEL: C63 E61
    Date: 2008–08
  6. By: Hans M. Amman; David A. Kendrick
    Abstract: In this paper we turn our attention to comparing the policy function obtained by Beck and Wieland (2002) to the one obtained with adaptive control methods. It is an integral part of the optimal learning method used by Beck and Wieland to obtain a policy function that provides the optimal control as a feedback function of the state of the system. However, computing this function is not necessary when doing Monte Carlo experiments with adaptive control methods. Therefore, we have modified our software in order to obtain the policy function for comparison to the BW results.
    Keywords: Active learning, dual control, optimal experimentation, stochastic optimization, time-varying parameters, numerical experiments
    JEL: C63 E61
    Date: 2008–08
  7. By: Michael Kirchler
    Abstract: In this paper we present results from experimental asset markets and simulations with traders who receive asymmetric information about the fundamental value of an asset. In the experimental markets with repetition insiders outperform the market and uninformed random traders perform equally well as average informed traders. This is in line with the results of the equilibrium simulation output in which traders choose be- tween a random strategy and their fundamental strategy. We further ¯nd that the persistent underperformance of the average informed is not due to their overcon¯dence but due to the asymmetric information structure of the market.
    Keywords: Information economics, experimental economics, agent-based model, overconfidence, value of information
    JEL: C91 C92 G14
    Date: 2008–09
  8. By: Galbiati, Marco (Bank of England); Soramaki, Kimmo (Helsinki University of Technology)
    Abstract: This paper lays out and simulates a multi-agent, multi-period model of an RTGS payment system. At the beginning of the day, banks choose how much costly liquidity to allocate to the settlement process. Then, they use it to execute an exogenous, random stream of payment orders. If a bank's liquidity stock is depleted, payments are queued until new liquidity arrives from other banks, imposing costs on the delaying bank. The paper studies the equilibrium level of liquidity posted in the system, performing some comparative statics and obtaining: i) a liquidity demand curve which links liquidity to delay costs and ii) insights on the efficiency of alternative system configurations.
    Keywords: Payment systems; liquidity; RTGS; agent-based modelling; learning; fictitious play.
    JEL: C79
    Date: 2008–08
  9. By: Mishra, SK
    Abstract: This essay portrays the major currents in recent economic thinking against the orthodoxy and dogmatism of neoclassical economics. It places behavioral economics, experimental economics, evolutionary economics, ecological economics, new institutional economics, agent-based computational economics and post-autistic economics vis-à-vis the classical and the neoclassical economics. It concludes that we may expect a synthesis of all these strands of economic thinking in the near future that will replace neoclassical economics from the citadel of mainstream. Teaching of these strands of new economics has already begun in many universities, although in an un-integrated manner. However, until the neoclassical microeconomics and macroeconomics are replaced by their alternatives and necessary as well as convincing tools of economic analysis are developed, neoclassicism would not give way to modern economics.
    Keywords: Behavioral; experimental; evolutionary; ecological; new institutional; agent-based computational; post-autistic; classical; neoclassical; economics; bounded rationality; heterodox; individualism; pluralism
    JEL: B20 B29 B25 B15
    Date: 2008–09–17

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