nep-cmp New Economics Papers
on Computational Economics
Issue of 2010‒11‒06
ten papers chosen by
Stan Miles
Thompson Rivers University

  1. Complementarities between Mathematical and Computational Modeling: The Case of the Repeated Prisoners' Dilemma By Xavier Vilà
  2. Modelling Gender Impacts of Policy Reforms in Bangladesh: a Study in a Sequential Dynamic CGE Framework By Selim Raihan; Rabeya Khatoon; M. Jami Husain; Suriya Rahman
  3. Socioeconomic Impacts of Cross-Border Transport Infrastructure Development in South Asia By John Gilbert; Nilanjan Banik
  4. Why did CPDOs fail? An analysis focused on credit spread modeling By Silvana Musti; Viviana Fanelli
  5. The linear dynamic lot size problem with minimum order quantities By Okhrin, Irena; Richter, Knut
  6. An O(Tˆ3) algorithm for the capacitated lot sizing problem with minimum order quantities By Okhrin, Irena; Richter, Knut
  7. Equilibrium Policy Simulations with Random Utility Models of Labour Supply By Colombino, Ugo
  8. Network Revenue Management with Product-Specific No-Shows By Sumit Kunnumkal; Kalyan Talluri; Huseyin Topaloglu
  9. How does a decrease in oil production affect the world's economy? By Naohiko Yahaba
  10. Incorporating ergonomic risks into assembly line balancing By Alena Otto; Armin Scholl

  1. By: Xavier Vilà
    Abstract: We study the properties of the well known Replicator Dynamics when applied to a finitely repeated version of the Prisoners' Dilemma game. We characterize the behavior of such dynamics under strongly simplifying assumptions (i.e. only 3 strategies are available) and show that the basin of attraction of defection shrinks as the number of repetitions increases. After discussing the difficulties involved in trying to relax the 'strongly simplifying assumptions' above, we approach the same model by means of simulations based on genetic algorithms. The resulting simulations describe a behavior of the system very close to the one predicted by the replicator dynamics without imposing any of the assumptions of the mathematical model. Our main conclusion is that mathematical and computational models are good complements for research in social sciences. Indeed, while computational models are extremely useful to extend the scope of the analysis to complex scenarios hard to analyze mathematically, formal models can be useful to verify and to explain the outcomes of computational models.
    Keywords: Computational Economics, Model-To-Model Analysis, Genetic Algorithms, Evolutionary Game Theory, Prisoners' Dilemma
    JEL: C63 C73
    Date: 2010–10–27
  2. By: Selim Raihan; Rabeya Khatoon; M. Jami Husain; Suriya Rahman
    Abstract: The research explores the gender aspects of policy reforms in Bangladesh in a sequential dynamic computational general equilibrium (CGE) framework. This research uses the most updated SAM of Bangladesh and is the first attempt to build a gendered sequential dynamic CGE model for the Bangladesh economy. A ‘home production’ version of the gendered CGE model for the Bangladesh economy is developed. The study tries to understand how gender interests are affected by greater exposure to trade and other policy reforms. The short-run and long-run impacts of policy reforms in the labour market and in the household in a gendered framework are also explored. The research performs two simulations to examine the impact of (1) domestic trade liberalisation in Bangladesh, and (2) the phasing-out of the Multi-Fibre Agreement (MFA) on textile and garments. This research builds a gendered social accounting matrix (SAM) for the year 2000 and uses it in a sequential dynamic computable general equilibrium framework, following the representative household approach. It is found that domestic trade liberalisation leads to a significant expansion of the ready-made garments sector in the economy, which then leads to an increase in the labour market supply share of unskilled female labour. However, this results in a fall in the shares of domestic labour supply and leisure of unskilled female members of the households. The fall in the share of leisure time may have significant negative implications for the time spent on education by this labour category. It is also observed that the long-run impacts are different from the short-run impacts with respect to the magnitude of the effects. In the case of the second simulation, it can be noted that the MFA phase-out works in completely the opposite direction. The share of market labour supply of unskilled female members of the households decreases, and the shares of domestic work and leisure increase for most of the households both in the short and long run.
    Keywords: Gender, trade liberalisation, market labour supply, home production, leisure, MFA phase-out
    JEL: C68 D58 F17 N75
    Date: 2010
  3. By: John Gilbert; Nilanjan Banik
    Abstract: Although the overall economic performance of economies in South Asia in recent years has been impressive, there is concern that an aging and increasingly inadequate infrastructure may limit the potential for further growth and economic development. A critical infrastructure component is the transportation network, and there are currently several transportation infrastructure projects in the South Asia Subregional Economic Cooperation (SASEC) region, connecting Nepal, eastern India, Bangladesh, and Bhutan. This paper uses computable general equilibrium (CGE) methods to address how these infrastructure developments might affect the broader economy in SASEC, and in particular impact on income distribution and poverty. The paper describes a new CGE model for South Asia, covering India, Sri Lanka, Bangladesh, Nepal, and Pakistan, which incorporates modifications to household structure in order to capture the implications of reform for changes in intra-household income. The scenarios that are considered reflect proposed investments in land transport infrastructure in the SASEC region. [ADBI Working Paper 211]
    Keywords: economic, South Asia, Asia Subregional Economic Cooperation (SASEC), poverty, India, Sri Lanka, Bangladesh, Nepal,intra-household income, investments
    Date: 2010
  4. By: Silvana Musti; Viviana Fanelli
    Abstract: In this paper we propose a model to evaluate the performance of a Constant Proportion Debt Obligation (CPDO) and assess its rating. We model credit spread evolution in a HJM framework and default events for CPDO are generated by using a reduced form approach. Implementing a numerical algorithm that simulates the strategy of a CPDO, we obtain a rating for CPDO by using Monte Carlo simulations. We find a rating inferior to the one assigned by rating agencies. Using our model for credit spread dynamics, the revealed default probability for CPDO could have been predicted.
    Date: 2010–06
  5. By: Okhrin, Irena; Richter, Knut
    Abstract: This paper continues the analysis of a special uncapacitated single item lot sizing problem where a minimum order quantity restriction, instead of the setup cost, guarantees a certain level of production lots. A detailed analysis of the model and an investigation of the particularities of the cumulative demand structure allowed us to develop a solution algorithm based on the concept of minimal sub-problems. We present an optimal solution to a minimal sub-problem in an explicit form and prove that it serves as a construction block for the optimal solution of the initial problem. The computational tests and the comparison with the published algorithm confirm the efficiency of the solution algorithm developed here. --
    Keywords: lot sizing problem,minimum order quantity,dynamic programming
    Date: 2010
  6. By: Okhrin, Irena; Richter, Knut
    Abstract: This paper explores a single-item capacitated lot sizing problem with minimum order quantity, which plays the role of minor set-up cost. We work out the necessary and suffcient solvability conditions and apply the general dynamic programming technique to develop an O(T³) exact algorithm that is based on the concept of minimal sub-problems. An investigation of the properties of the optimal solution structure allows us to construct explicit solutions to the obtained sub-problems and prove their optimality. In this way, we reduce the complexity of the algorithm considerably and confirm its efficiency in an extensive computational study. --
    Keywords: production planning,capacitated lot sizing problem,single item,minimum order quantities,capacity constraints,dynamic programming
    Date: 2010
  7. By: Colombino, Ugo (Collegio Carlo Alberto)
    Abstract: Many microeconometric models of discrete labour supply include alternative-specific constants meant to account for (possibly besides other factors) the density or accessibility of particular types of jobs (e.g. part-time jobs vs. full-time jobs). The most common use of these models is the simulation of tax-transfer reforms. The simulation is usually interpreted as a comparative static exercise, i.e. the comparison of different equilibria induced by different policy regimes. The simulation procedure, however, typically keeps fixed the estimated alternative-specific constants. In this note we argue that this procedure is not consistent with the comparative statics interpretation. Equilibrium means that the number of people willing to work on the various job types must be equal to the number of available jobs. Since the constants reflect the number of jobs and since the number of people willing to work change as a response to the change in tax-transfer regime, it follows that the constants should also change. A structural interpretation of the alternative-specific constants leads to the development of a simulation procedure consistent with the comparative static interpretation. The procedure is illustrated with an empirical example.
    Keywords: alternative-specific constants, simulation of tax reforms, labour supply, discrete choice, random utility, equilibrium simulation
    JEL: C35 C53 H31 J22
    Date: 2010–10
  8. By: Sumit Kunnumkal; Kalyan Talluri; Huseyin Topaloglu
    Abstract: Revenue management practices often include overbooking capacity to account for customers who make reservations but do not show up. In this paper, we consider the network revenue management problem with no-shows and overbooking, where the show-up probabilities are specific to each product. No-show rates differ significantly by product (for instance each itinerary/fare combination for an airline) as sale restrictions and the demand characteristics vary by product. However, models that consider no-show rates by each individual product are difficult to handle as the state-space (or the variable space in approximations) increases significantly. In this paper we propose a randomized linear program to jointly make the capacity control and overbooking decisions with product-specific no-shows. We establish that our formulation gives an upper bound on the optimal expected total profit and that this upper bound is tighter than a deterministic linear programming bound that appears in the existing literature. We describe how the randomized linear program can be used to obtain a bid price control policy. Numerical experiments indicate that our approach is fast, able to scale to industrial-size problems, and can provide significant improvements over standard benchmark methods.
    Keywords: Network revenue management, linear programming, simulation, overbooking, no-shows.
    JEL: M11 M31 L93 L83
    Date: 2010–10
  9. By: Naohiko Yahaba (Asia-Japan Research Centre)
    Abstract: The world's oil consumption has been increasing for more than a century with a few exceptions. However, there would be a possibility that the recent increase in oil consumption in developing countries such as China and India tighten the long term oil market. Since the exact amount of oil reserves is unknown, it is difficult to predict when the ultimate decrease in oil production will come. However, for the last two decades, the amount of oil consumption per year has surpassed the amount of oil reserves newly found. Therefore, the possibility of ultimate decrease in oil production may increase. This paper examines the impact of the decrease in oil production on major economies using a computable general equilibrium model. Under the simulations in this paper, the oil exporting economies increase their GDPs, the utilities and the terms of trade. The oil importing regions, especially in newly industrialised and developing regions, decrease their GDPs, utilities and the terms of trade. All industry sectors decrease their world output. Among industry sectors, oil industry affects most and the industry sectors which use large amount of oil such as petroleum industry and chemical industry decrease its outputs significantly.
    Keywords: oil consumption, oil reserves, oil shock, computable general equilibrium model
    JEL: Q30 Q43 C68
    Date: 2010
  10. By: Alena Otto (Graduate School Human Behaviour in Social and Economic Change (GSBC)); Armin Scholl (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: In manufacturing, control of ergonomic risks at manual workplaces is a necessity commanded by legislation, care for health of workers and economic considerations. Methods for estimating ergonomic risks of workplaces are integrated into production routines at most firms that use the assembly-type of production. Assembly line re-balancing, i.e., re-assignment of tasks to workers, is an effective and, in case that no additional workstations are required, inexpensive method to reduce ergonomic risks. In our article, we show that even though most ergonomic risk estimation methods involve nonlinear functions, they can be integrated into assembly line balancing techniques at low additional computational cost. Our computational experiments indicate that re-balancing often leads to a substantial mitigation of ergonomic risks.
    Keywords: scheduling, combinatorial optimization, ergonomic risk assessment, assembly line balancing, simulated annealing
    Date: 2010–10–28

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