nep-cmp New Economics Papers
on Computational Economics
Issue of 2011‒10‒01
thirteen papers chosen by
Stan Miles
Thompson Rivers University

  1. Stratégie optimale pour la réduction de la variance de la prime ajustée. application en assurance automobile By Kmar Fersi; Kamel Boukhetala; Samir Ben Ammou
  2. A fuzzy-based scoring rule for author ranking By Marta Cardin; Marco Corazza; Stefania Funari; Silvio Giove
  3. Simulating tourists’ behaviour using multi-agent modelling By Corniglion, Sébastien; Tournois, Nadine
  4. Equality of opportunities, redistribution and fiscal policies : the case of Liberia By Abras, Ana; Cuesta, Jose
  5. Concave Generalized Flows with Applications to Market Equilibria By Laszlo A. Vegh
  6. Should the Indonesian pension funds invest abroad? By Kariastanto, Bayu
  7. Minimum Income Proposal in Québec By Nicholas-James Clavet; Jean-Yves Duclos; Guy Lacroix
  8. A critical analysis of Mudarabah & a new approach to equity financing in Islamic finance By Shaikh, Salman Ahmed
  9. Teacher Pension Incentives and the Timing of Retirement By Shawn Ni; Michael Podgursky
  10. Energy taxes and oil price shock By Cremer, Helmuth; Gahvari, Firouz; Ladoux, Norbert
  11. Market equilibrium with heterogeneous behavioural and classical investors' preferences By Matteo Del Vigna
  12. A Bayesian nonparametric approach to modeling market share dynamics By Igor Prünster; Matteo Ruggiero
  13. Mapping the state of financial stability By Peter Sarlin; Tuomas A. Peltonen

  1. By: Kmar Fersi (Computational Mathematics Laboratory Faculté des Sciences de Monastir - Faculté des Sciences de Monastir); Kamel Boukhetala (Faculté des Mathématiques - Université des Sciences et de la Technologie Houari Boumediène); Samir Ben Ammou (Computational Mathematics Laboratory Faculté des Sciences de Monastir - Faculté des Sciences de Monastir)
    Abstract: The estimator of the adjusted premium developed by Necir and Boukhetala (2004) is considered. The problem of reducing the variance of this estimator is formulated as an optimization program with nonlinear stochastic constraints. An hybrid genetic algorithm is used for finding global optimal solutions, statistically explicable. An application to automobile insurance is developed.
    Date: 2011–09–22
  2. By: Marta Cardin (Department of Economics, Ca’ Foscari University of Venice.); Marco Corazza (Department of Economics, Ca’ Foscari University of Venice; Advanced School of Economics in Venice.); Stefania Funari (Department of Management, Ca’ Foscari University of Venice.); Silvio Giove (Department of Economics, Ca’ Foscari University of Venice.)
    Abstract: The measurement of the quality of research has reached nowadays an increasing interest not only for scientific reasons but also for the critical problem of researchers' ranking, due to the lack of grant assignments. The most commonly used approach is based on the so-called $h$-index, even if the current literature debated a lot about its pros and cons. This paper, after a brief review of the $h$-index and of alternative models, focuses on the characterization and the implementation of a modified scoring rule approach by means of a fuzzy inference system a là Sugeno.
    Keywords: Research evaluation, bibliometrics, author ranking, $h$-index, scoring rules, fuzzy inference system.
    JEL: C02 I23 Z19
    Date: 2011
  3. By: Corniglion, Sébastien; Tournois, Nadine
    Abstract: We discuss who should be in charge of providing data relevant to marketing segmentation for the tourism industry. We describe the difficulties of using the most commonly found consumer behavioural models within an information system, and oppose them to a novel approach in marketing segmentation, based on outgoings analysis. We use agent-modelling techniques, based on cellular automaton rules and stochastic processes to implement our model and generate sales data. We then present our algorithm to identify similarly behaved tourists, showing that the commonly used “nationality” variable for segments discrimination is not efficient. We conclude with some test runs results discussion and possible further research tracks.
    Keywords: Simulation; Stochastic processes; Cellular automata; Tourism; Business; Public Policy Issues; Management techniques; Marketing; Market segmentation; Customer behaviour model
    JEL: M31 C63 L83
    Date: 2011–05–19
  4. By: Abras, Ana; Cuesta, Jose
    Abstract: This paper brings back the fiscal angle to the analysis of equal opportunities both by connecting traditional benefit-incidence analysis of public spending with equal opportunities and by conducting ex-ante micro-simulations on the fiscal cost of equal opportunity policies in education. Four simulations are conducted in Liberia, a country devastated by a civil war, with serious educational enrollment gaps and fiscal policies highly dependent on international aid. Results for the simulated policy scenarios (increases in teachers'salaries, elimination of both fee and non-fee costs borne by households, and targeting public spending on education to rural schools) point to very modest redistributive effects but very different patterns of winners and losers among groups of children in Liberia.
    Date: 2011–09–01
  5. By: Laszlo A. Vegh
    Abstract: We consider a nonlinear extension of the generalized network flow model, with the flow leaving an arc being an increasing concave function of the flow entering it, as proposed by Truemper and Shigeno. We give the first polynomial time combinatorial algorithm for solving corresponding optimization problems, finding a epsilon-approximate solution in O(m(m+\log n)\log(MUm/epsilon)) arithmetic operations and value oracle queries, where M and U are upper bounds on simple parameters. For (linear) generalized flows, our algorithm can be seen as a variant of the highest-gain augmenting path algorithm by Goldfarb, Jin and Orlin. We show that this general convex programming model serves as a common framework for several market equilibrium problems, including the linear Fisher market model and its various extensions. Our result immediately enables us to extend these market models to more general settings and to solve some open problems in the literature.
    Date: 2011–09
  6. By: Kariastanto, Bayu
    Abstract: Currently, the Indonesian pension fund is prohibited from investing in international assets. In this paper, I quantitatively investigate the benefit and/or the cost, if any, caused by this constraint. Standard mean-variance techniques will be used along with Monte Carlo simulation to check the robustness of the findings. Under various assumptions, including international assets in the pension fund’s portfolio could potentially aid pension funds to have higher returns and accumulated wealth. Accordingly, the findings suggest possible reform to lessen these restrictions. Given the controversy over international diversification, a reasonable compromise that would help capture many of the potential benefits for risk-averse investors could be to create a ceiling of 20 percent for international assets.
    Keywords: Pension Fund; International Diversification; Asset Allocation; Hypothetical Worker; Indonesia
    JEL: G11
    Date: 2011–09–19
  7. By: Nicholas-James Clavet; Jean-Yves Duclos; Guy Lacroix
    Abstract: In 2002 the Government of Quebec enacted Bill 112, known as An Act to Combat Poverty and Social Exclusion. It has also instituted an advisory committee whose role is to advise the government on policies that may have a direct or indirect impact on poverty and social exclusion. The Committee published a series of recommendations in 2009 that more or less amount to a Guaranteed Minimum Income scheme. We investigate the likely consequences of the recommendations on employment and income of all individuals residing in the Province of Quebec. We do this through the use of a behavioural micro-simulation model. Our results show that the proposed recommendations would have a large negative impact on hours of work and labor force participation – and mostly so among low-income workers. The recommendations would involve outlays in the order of $2.2 billion per year.
    Keywords: Poverty, Guaranteed minimum income (GMI), Micro-simulation, Behavioural response, Cost of GMI
    JEL: I38 J22 J48
    Date: 2011
  8. By: Shaikh, Salman Ahmed
    Abstract: Financial intermediation serves a valuable purpose, but it can also be structured using equity modes of financing. This can relieve the financee and increase diversity of entrepreneurial undertakings as in debt based commercial financing, there is little room for diversity with obligatory and stipulated servicing of debt. Using Islamic equity modes of financing poses the challenge of the agency problem and moral hazard. The extent of this agency problem in Mudarabah and its impact on economic payoffs between counterparties is analyzed in this study with a simulation model. Based on review of alternate solutions proposed, the author presents two possible covenants which could make Mudarabah mode of financing more acceptable and widely usable in financial intermediation. This would also further the egalitarian objectives of an Islamic economic order.
    Keywords: Interest free economy; Islamic Economic System; Mudarabah; Agency Problem; Moral Hazard; Adverse Selection
    JEL: L38 I31 O10
    Date: 2011–07–01
  9. By: Shawn Ni (Department of Economics, University of Missouri-Columbia); Michael Podgursky (Department of Economics, University of Missouri-Columbia)
    Abstract: The rising costs and large unfunded liabilities of defined benefit (DB) teacher retirement systems raise questions about their efficacy and viability. Reform of teacher pension plans depends critically on reliable predictions of behavioral responses to alternative pension rules. We estimate an option-value model of individual teacher retirement using administrative data for Missouri teachers. The model fits the observed aggregate retirement behavior very well. We use the estimated structural parameters to simulate retirement behavior under alternative pension rules. Our simulations show that on net the enhancements of Missouri teacher pension benefits in the 1990's lowered the average retirement age for teachers. Conversion from the current DB plan to a defined contribution (DC) plan would have the opposite effect, and would dampen "spikes" in teacher retirement timing. The 1990's enhancements raised welfare for all teachers, however, the DC plan that we simulate has a mixed welfare impact, raising welfare for teachers near retirement but reducing it for teachers with less experience.
    Keywords: teacher pensions, school staffing, school finance
    JEL: H30 I22 J26 J38
    Date: 2011–09–14
  10. By: Cremer, Helmuth; Gahvari, Firouz; Ladoux, Norbert
    Abstract: This paper examines if an energy price shock should be compensated by a reduction in energy taxes to mitigate its impact on consumer prices. Such an adjustment is often debated and advocated for redistributive reasons. Our investigation is based on a model that characterizes second-best optimal taxes in the presence of an externality generated by energy consumption. Energy is used by households as a consumption good and by the productive sector as an input. We calibrate this model on US data and proceed to simulations of this empirical model. We assume that energy prices are subject to an exogenous shock. For different levels of this shock, we calculate the optimal tax mix including income, commodity and energy taxes. We show that optimal energy taxes are affected by redistributive consideration and that optimal energy tax is less than the Pigouvian tax (marginal social damage). The difference is an implicit subsidy representing roughly 10% of the Pigouvian price. Interestingly, the simulations show that an variation in the energy price only has an almost negligible effect on this percentage. In other words, even a very large oil price increase will only have a small effect on the optimal tax on energy. Nevertheless, it appears that the energy tax is used to mitigate the impact of the energy shock. However, this result is not explained by redistributive consideration but by the fact that the Pigouvian tax (rate) decreases as the price of energy increases. This is a purely arithmetic adjustment due to the fact that the marginal social dammage does not change. Consequently, the marginal dammage as a percentage of the energy price (which defines the Pigouvian tax rate) decreases as the price increases.
    JEL: H21 H23
    Date: 2011–09
  11. By: Matteo Del Vigna (Dipartimento di Statistica e Matematica Applicata all'Economia, Universita' di Pisa & CEREMADE , Universite' Paris-Dauphine)
    Abstract: Starting from the theory of portfolio selection under Cumulative Prospect Theory (CPT) in a one period model, we firstly present some remarks connected with the violation of the so-called loss aversion in the case of power utility functions. The main contribution of this paper comes from the analysis of two equilibrium models. In the first one, an Expected Utility (EU) maximizer, a CPT agent and an accommodating market maker are allowed to interact. We show that there can be equilibria with null, positive or total risky investment by the CPT trader. Our results are then compared to an analogous model with two EU maximizers. On the contrary, the second financial market is populated by a sufficiently large number of EU agents and CPT agents, each of them being price maker and endowed with possibly heterogeneous preferences, these two facts being new to the literature. This time EU traders fully invest in stocks whereas CPT traders stay out of the risky market. For both models, equilibrium existence and robustness is shown using analytical and numerical methods.
    Keywords: Cumulative Prospect Theory, equilibrium models, loss aversion, heterogeneous preferences, portfolio optimisation, volatility impact
    JEL: C62 D53 D81 G11
    Date: 2011–04
  12. By: Igor Prünster; Matteo Ruggiero
    Abstract: We propose a flexible stochastic framework for modeling the market share dynamics over time in a multiple markets setting, where firms interact within and between markets. Firms undergo stochastic idiosyncratic shocks, which contract their shares, and compete to consolidate their position by acquiring new ones in both the market where they operate and in new markets. The model parameters can meaningfully account for phenomena such as barriers to entry and exit, fixed and sunk costs, costs of expanding to new sectors with different technologies, competitive advantage among firms. The construction is obtained in a Bayesian framework by means of a collection of nonparametric hierarchical mixtures, which induce the dependence between markets and provide a generalization of the Blackwell-MacQueen Polya urn scheme, which in turn is used to generate a partially exchangeable dynamical particle system. A Markov Chain Monte Carlo algorithm is provided for simulating trajectories of the system, by means of which we perform a simulation study for transitions to different economic regimes. Moreover, it is shown that the infinite-dimensional properties of the system, when appropriately transformed and rescaled, are those of a collection of interacting Fleming-Viot diffusions.
    Keywords: Bayesian Nonparametrics; Gibbs sampler; interacting Polya urns; particle system; species sampling models; market dynamics; interacting Fleming-Viot processes
    Date: 2011
  13. By: Peter Sarlin (Åbo Akademi University, Turku Centre for Computer Science, Joukahaisenkatu 3–5, 20520 Turku, Finland.); Tuomas A. Peltonen (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt, Germany.)
    Abstract: The paper uses the Self-Organizing Map for mapping the state of financial stability and visualizing the sources of systemic risks as well as for predicting systemic financial crises. The Self-Organizing Financial Stability Map (SOFSM) enables a two-dimensional representation of a multidimensional financial stability space that allows disentangling the individual sources impacting on systemic risks. The SOFSM can be used to monitor macro-financial vulnerabilities by locating a country in the financial stability cycle: being it either in the pre-crisis, crisis, post-crisis or tranquil state. In addition, the SOFSM performs better than or equally well as a logit model in classifying in-sample data and predicting out-of-sample the global financial crisis that started in 2007. Model robustness is tested by varying the thresholds of the models, the policymaker’s preferences, and the forecasting horizons. JEL Classification: E44, E58, F01, F37, G01.
    Keywords: Systemic financial crisis, systemic risk, Self-Organizing Map (SOM), visualization, prediction, macroprudential supervision.
    Date: 2011–09

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