New Economics Papers
on Computational Economics
Issue of 2010‒02‒20
thirteen papers chosen by

  1. Fuzzy clustering of univariate and multivariate time series by genetic multiobjective optimization By S. Bandyopadhyay; R. Baragona; U. Maulik
  2. Simulating the U.S. Recession with and without the Obama package: the role of excess capacity By Peter B. Dixon; Maureen T. Rimmer
  3. Statistical properties of agent-based models in markets with continuous double auction mechanism By Jie-Jun Tseng; Chih-Hao Lin; Chih-Ting Lin; Sun-Chong Wang; Sai-Ping Li
  4. Linearization and Decomposition Methods for Large Scale Stochastic Inventory Routing Problem with Service Level Constraints By Yu, Y.; Chu, C.; Chen, H.; Chu, F.
  5. A matheuristic for the school bus routing problem By Schittekat P.; Sörensen K.; Sevaux M.; Springael J.
  6. East-West Integration and the Economic Geography of Europe By Arne Melchior
  7. Long term issues to be addressed by regulators in liberalised electricity systems: generation adequacy and indicative planning. Justification, available mechanisms, and a simulation study on some concrete policies By Álvaro López-Peña; Efraim Centeno; Julián Barquín
  8. Alternative Policies for US Economic Recovery By Byron Gangnes
  9. Assessment of the Regional Economic Impacts of Catastrophic Events: CGE analysis of resource loss and behavioral effects of a RDD attack scenario By J.A. Giesecke; W.J. Burns; A. Barrett; E. Bayrak; A. Rose; M. Suher
  10. A metaheuristic for a teaching assistant assignment-routing problem By Maya P.; Sörensen K.; Goos P.
  11. Institutional Harmonization and Its Costs and Benefits in the Context of EU Cooperation with Its Neighbors. An overview By Anna Kolesnichenko
  12. Catching the maximum market value of electricity storage – technical, economic and regulatory aspect By Xian HE; Georg ZACHMANN
  13. Comparison of numerical and analytical approximations of the early exercise boundary of the American put option By Martin Lauko; Daniel Sevcovic

  1. By: S. Bandyopadhyay; R. Baragona; U. Maulik
    Abstract: Given a set of time series, it is of interest to discover subsets that share similar properties. For instance, this may be useful for identifying and estimating a single model that may fit conveniently several time series, instead of performing the usual identification and estimation steps for each one. On the other hand time series in the same cluster are related with respect to the measures assumed for cluster analysis and are suitable for building multivariate time series models. Though many approaches to clustering time series exist, in this view the most effective method seems to have to rely on choosing some features relevant for the problem at hand and seeking for clusters according to their measurements, for instance the autoregressive coe±cients, spectral measures or the eigenvectors of the covariance matrix. Some new indexes based on goodnessof-fit criteria will be proposed in this paper for fuzzy clustering of multivariate time series. A general purpose fuzzy clustering algorithm may be used to estimate the proper cluster structure according to some internal criteria of cluster validity. Such indexes are known to measure actually definite often conflicting cluster properties, compactness or connectedness, for instance, or distribution, orientation, size and shape. It is argued that the multiobjective optimization supported by genetic algorithms is a most effective choice in such a di±cult context. In this paper we use the Xie-Beni index and the C-means functional as objective functions to evaluate the cluster validity in a multiobjective optimization framework. The concept of Pareto optimality in multiobjective genetic algorithms is used to evolve a set of potential solutions towards a set of optimal non-dominated solutions. Genetic algorithms are well suited for implementing di±cult optimization problems where objective functions do not usually have good mathematical properties such as continuity, differentiability or convexity. In addition the genetic algorithms, as population based methods, may yield a complete Pareto front at each step of the iterative evolutionary procedure. The method is illustrated by means of a set of real data and an artificial multivariate time series data set.
    Keywords: Fuzzy clustering, Internal criteria of cluster validity, Genetic algorithms, Multiobjective optimization, Time series, Pareto optimality
    Date: 2010–02–08
  2. By: Peter B. Dixon; Maureen T. Rimmer
    Abstract: Simulations with dynamic, single-country, CGE models typically imply that reductions in domestic demand, e.g. a cut in investment, generate increases in exports and reductions in imports facilitated by real depreciation. However, currently in the U.S. a large reduction in investment is occurring simultaneously with a contraction in exports and little movement in the real exchange rate. We show that to describe this situation it is necessary to drop the standard CGE assumption that capital is always fully employed in every industry. After introducing an excess-capacity specification, we simulate the U.S. recession with and without the Obama stimulus package.
    Keywords: U S recession CGE modelling excess capacity sticky rents mark-up pricing
    JEL: C68 D50 E30 E60
    Date: 2010–01
  3. By: Jie-Jun Tseng; Chih-Hao Lin; Chih-Ting Lin; Sun-Chong Wang; Sai-Ping Li
    Abstract: Real world markets display power-law features in variables such as price fluctuations in stocks. To further understand market behavior, we have conducted a series of market experiments on our web-based prediction market platform which allows us to reconstruct transaction networks among traders. From these networks, we are able to record the degree of a trader, the size of a community of traders, the transaction time interval among traders and other variables that are of interest. The distributions of all these variables show power-law behavior. On the other hand, agent-based models have been proposed to study the properties of real financial markets. We here study the statistical properties of these agent-based models and compare them with the results from our web-based market experiments. In this work, three agent-based models are studied, namely, zero-intelligence (ZI), zero-intelligence-plus (ZIP) and Gjerstad-Dickhaut (GD). Computer simulations of variables based on these three agent-based models were carried out. We found that although being the most naive agent-based model, ZI indeed best describes the properties observed in real markets. Our study suggests that the basic ingredient to produce the observed properties from real world markets could in fact be the result of a continuously evolving dynamical system with basic features similar to the ZI model.
    Date: 2010–02
  4. By: Yu, Y.; Chu, C.; Chen, H.; Chu, F. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: A stochastic inventory routing problem (SIRP) is typically the combination of stochastic inventory control problems and NP-hard vehicle routing problems, for a depot to determine delivery volumes to its customers in each period, and vehicle routes to distribute the delivery volumes. This paper aims to solve a large scale multi-period SIRP with split delivery (SIRPSD) where a customer’s delivery in each period can be split and satisfied by multiple vehicles if necessary. The objective of the problem is to minimize the total inventory and transportation cost while some constraints are given to satisfy other criteria, such as the service level to limit the stockout probability at each customer and the service level to limit the overfilling probability of the warehouse of each customer. In order to tackle the SIRPSD with notorious computational complexity, we propose for it an approximate model, which significantly reduces the number of decision variables compared to its corresponding exact model. We develop a hybrid approach that combines the linearization of nonlinear constraints, the decomposition of the model into sub-models with Lagrangian relaxation, and a partial linearization approach for a sub model. A near optimal solution of the model can be found by the approach, and then be used to construct a near optimal solution of the SIRPSD. Numerical examples show that, for an instance of the problem with 200 customers and 5 periods that contains about 400 thousands decision variables where half of them are integer, our approach can obtain high quality near optimal solutions with a reasonable computational time on an ordinary PC.
    Keywords: inventory routing problem;stochastic demand;split delivery;vehicle routing
    Date: 2010–01–23
  5. By: Schittekat P.; Sörensen K.; Sevaux M.; Springael J.
    Abstract: Existing literature on routing of school buses has focused mainly on building intricate models that attempt to capture as many real-life constraints and objectives as possible. In contrast, the focus of this paper is on understanding the problem in its most basic form. To this end, we define the school bus routing problem (SBRP) as a variant of the vehicle routing problem in which three simultaneous decisions have to be made: (1) determine the set of stops to visit, (2) determine for each student which stop he should walk to and (3) determine routes that visit the chosen stops, so that the total traveled distance is minimized. We develop an MIP model of this basic problem. To efficiently solve large instances of the SBRP we develop an efficient GRASP+VND metaheuristic. Our method can be called a matheuristic because it uses an exact algorithm to optimally solve the subproblem of assigning students to stops and to routes. The results of our matheuristic approach on 112 artificially generated instances are compared to those obtained by implementing the MIP model in a commercial solver and solving it using a specially developed cutting plane procedure. Experiments show that our matheuristic outperforms the exact method in terms of speed and matched the exact method in terms of solution quality.
    Date: 2009–10
  6. By: Arne Melchior
    Abstract: Implementation of the European internal market and East-West integration has been accompanied by dramatic change in the spatial distribution of economic activity, with higher growth west and east of a longitude degree through Germany and Italy. In the east, income growth has been accompanied by increasing regional disparities within countries. We examine theoretically and empirically whether European integration as such can explain these developments. Using a numerical simulation model with 9 countries and 90 regions, theoretical predictions are derived about how various patterns of integration may affect the income distribution. Comparing with reality, we find that a reduction in distance-related trade costs combined with east-west integration is best able to explain the actual changes in Europe's economic geography. This suggests that the implementation of the European internal market or the Euro has "made Europe smaller". In Central Europe, capital regions grow faster and there are few east-west growth differences inside countries. There is no convincing support for the hypothesis that European integration had adverse effects on non-members.
    Keywords: Income distribution, regional inequality, economic growth and convergence, European integration.
    JEL: F12 F15 R12 O18
    Date: 2009
  7. By: Álvaro López-Peña; Efraim Centeno; Julián Barquín
    Abstract: For ensuring electricity security of supply in the long run, liberalised electric systems’ regulators have to worry, not only about the presence of enough installed capacity, but also about the generation mix. Hence, indicative planning must be taken into account as well, for limiting dependence upon nonindigenous fuels, for instance. This can, simultaneously, help in meeting growing environmental constraints: renewables promotion is a clear example. There exist several mechanisms for addressing the adequacy problem (having enough megawatts) and for promoting renewables (having the good megawatts). In this study, a brief review of these mechanisms is done, and some are chosen for assessing their efficacy and efficiency over a system similar to the Spanish one, concretely capacity payments and capacity markets for the first problem and renewable energy premiums for the second. A simulation study is performed, which confirms the better characteristics of capacity markets in stabilising reserve margins, but whose effects may be damaged by an inadequate renewables promotion policy.
    Keywords: system-dynamics, generation capacity investment analysis, feed-in-premiums, capacity mechanisms
    Date: 2009–12–22
  8. By: Byron Gangnes (Department of Economics, University of Hawaii at Manoa)
    Abstract: Recovery has begun in the United States and global economies. The US recovery is likely to be anemic by historical standards, raising the possibility that additional stimulus may be desirable. The President and Democrats in Congress have called for a “jobs bill,” and the Federal Reserve has demonstrated that it has a flexible toolkit for providing additional liquidity if deemed appropriate. The possible need for such stimulus will come up against the reality of an expanding public debt on the one hand, and inflationary concerns on the other. In this paper, I use simulations of the IHS Global Insight Model to assess the potential impact on the recovery path of alternative macro policies.
    Keywords: United States (US) recession and recovery, fiscal and monetary policy,econometric model forecast simulation, IHS Global Insight model
    JEL: E37 C53
    Date: 2010–02–08
  9. By: J.A. Giesecke; W.J. Burns; A. Barrett; E. Bayrak; A. Rose; M. Suher
    Abstract: Using a large-scale CGE model, we investigate the short-run and long-run regional economic consequences of a catastrophic event - attack via radiological dispersal device (RDD) - centered on the downtown Los Angeles area. We distinguish two main routes via which such a catastrophic event might affect regional economic activity: (i) reduction in effective resource supply (the resource loss effect) and (ii) shifts in the perceptions of economic agents (the behavioral effect). Broadly, the resource loss effect relates to the physical destructiveness of the event, while the behavioral effect relates to changes in fear and risk perception on the part of firms, households and government. Both affect the size of the regional economy. RDD detonation (Dirty Bomb) causes little direct capital damage and few casualties, but generates substantial short-run resource loss via business interruption. Changes in fear and risk perception increase the supply cost of resources to the affected region, while simultaneously reducing demand for goods produced in the region. In both the short-run and long-run in the affected region, households may require higher wages to work, investors may require higher returns to invest, and economic agents may switch their preferences away from goods produced. We show that because perception effects may have lingering long-term deleterious impacts on both the supply-cost of resources to a region and willingness to pay for regional output, they have the potential to generate changes in real regional GDP that are much greater than those generated by the resource loss effect. Implications for policy that might mitigate these effects are discussed.
    Keywords: RDD, economic impact, terrorism, risk perception
    JEL: H56 R13 C68 D58
    Date: 2010–01
  10. By: Maya P.; Sörensen K.; Goos P.
    Abstract: The Flemish Ministry of Education promotes the integrated education of disabled children by providing educational opportunities in common schools. In the current system, disabled children receive ambulant help from a teaching assistant (TA) employed at an institute for extra-ordinary education. The compensation that the TAs receive for driving to visit the students is a major cost factor for the institute that provides the assistance, therefore its management desires a schedule that minimizes the accumulated distance traveled by all TAs combined. We call this optimization problem the teaching assistants assignment routing problem (TAARP). It involves three decisions that have to be taken simultaneously: (1) pupils have to be assigned to TAs; (2) pupils assigned to a given TA have to be spread over the TA's dierent working days; and (3) the order in which to visit the pupils on each day has to be determined. We propose a solution strategy based on an auction algorithm and a variable neighborhood search which exhibit an excellent performance both in simulated and real instances. The total distance traveled in the solution obtained for the real data set improves the current solution by about 22% which represents a saving of around 9% on the annual budget of the institute.
    Date: 2009–11
  11. By: Anna Kolesnichenko
    Abstract: Institutional harmonization is an important part of European integration, and its effects are more far reaching than the effects of trade liberalization. In its policy towards neighbors (the European Neighborhood Policy, ENP), the EU puts a lot of stress on the desirability of institutional harmonization, at least in certain areas. In particular, the free trade agreements that the EU envisages concluding with its Eastern neighbors will involve substantial harmonization of product standards, competition policy and a range of other policies and processes. At the very least, the harmonization will have to focus on the areas that relate to improvement of market access, i.e. removing restrictions to trade, harmonizing product standards and the systems of quality control etc. But in order to implement the new standards and rules, the EU neighbors will have to reform many related areas, so that the harmonization will encompass the whole system of economic governance. Not only will such a revamp help attaining better access to the EU markets, but also (and probably more importantly) it will stimulate modernization of the neighbors' economies and bring much needed efficiency gains. In measurement of benefits of harmonization we refer to two methods: one based on the computable general equilibrium (CGE) modeling of welfare effects of better market access, and the other employing a growth model to estimate the wider effects of European institutions on growth. The estimation of costs of harmonization bases on extrapolation of the analogous costs in other countries, in particular CEE. These costs include expenses by a public sector on introduction of harmonization measures, as well as private sector expenses and investments related to their implementation.
    Keywords: Institutional harmonization, European integration, European Neighborhood Policy (ENP), market access, non-tariff barriers
    JEL: B41 F15 P33
    Date: 2009
  12. By: Xian HE; Georg ZACHMANN
    Abstract: The creation of competitive wholesale electricity markets allows to evaluate the “arbitrage value” of an electricity storage unit, which stems from buying and storing electricity when prices are low, and selling it when prices are high. The focus of this paper is to demonstrate that the arbitrage value can be highly sensitive with respect to the dimensioning of an electricity storage unit. A simulation model is explored to calculate the arbitrage value of different storage units by finding the optimal hourly operating strategy during one-year period. The results of simulation show that optimizing the dimensioning of a storage unit is as important as choosing the fittest technology. Furthermore we provide evidence that the optimal set-up of a storage unit can adapt to exogenous factors such as grid tariff and local electricity price characteristics. These findings suggest that the maximisation of market value of electricity storage should be based on the optimisation of the dimensioning of the storage unit in specific economic and regulatory environment.
    Keywords: Electricity storage,arbitrage value,regulation
    Date: 2010–02–08
  13. By: Martin Lauko; Daniel Sevcovic
    Abstract: In this paper we present qualitative and quantitative comparison of various analytical and numerical approximation methods for calculating a position of the early exercise boundary of the American put option paying zero dividends. First we analyze their asymptotic behavior close to expiration. In the second part of the paper, we introduce a new numerical scheme for computing the entire early exercise boundary. The local iterative numerical scheme is based on a solution to a nonlinear integral equation. We compare numerical results obtained by the new method to those of the projected successive over relaxation method and the analytical approximation formula recently derived by Zhu.
    Date: 2010–02

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