nep-cmp New Economics Papers
on Computational Economics
Issue of 2012‒04‒17
seventeen papers chosen by
Stan Miles
Thompson Rivers University

  1. Impact of Pricing Schemes on a Market for Software-as-a-Service and Perpetual Software By Juthasit Rohitratana; Jorn Altmann
  2. Stochastic finite differences and multilevel Monte Carlo for a class of SPDEs in finance By Michael B. Giles; Christoph Reisinger
  3. Computing Functionals of Multidimensional Diffusions via Monte Carlo Methods By Jan Baldeaux; Eckhard Platen
  4. Synthetic populations: review of the different approaches By BARTHELEMY Johan; CORNELIS Eric
  5. Designing Intergovernmental Transfers in Russia: A Simulation Study By Tao Zhang; Heng-fu Zou
  6. Welfare Changes and Sectoral Adjustments of Asia-Pacific Countries under Alternative Sequencings of Free Trade Agreements By Ken Itakura; Hiro Lee
  7. Assessment of the Impact of Avian Influenza Related Regulatory Policies on Poultry Meat Trade and Welfare By Wieck, Christine; Schlueter, Simon W.; Britz, Wolfgang
  8. The national bioenergy investment model: Technical documentation By Kemp-Benedict, Eric
  9. Reducing illegal immigration to South Africa: A dynamic CGE analysis By Heinrich R. Bohlmann
  10. Employment Effects of FTA Agreements: The Perspectives from Bangladesh By Raihan, Selim
  11. Description of the Operational Mechanics of a Basel Regulated Banking System By Jacky Mallett
  12. A Structural Dynamic Microsimulation Model of Household Savings and Labour Supply By Justin van de Ven
  13. Economic Corridors in South Asia: Exploring the Benefits of Market Access and Trade Facilitation By Raihan, Selim
  14. SAFTA and the South Asian Countries: Quantitative Assessments of Potential Implications By Raihan, Selim
  15. Selecting between different productivity measurement approaches: An application using EU KLEMS data By Giraleas, Dimitris; Emrouznejad , Ali; Thanassoulis, Emmanuel
  16. Mutual funds performance appraisal using stochastic multicriteria acceptability analysis By Babalos, Vassilios; Philippas, Nikolaos; Doumpos, Michael; Zompounidis, Constantin
  17. The Impact of Carbon Pricing on Wholesale Electricity Prices, Carbon Pass-Through Rates and Retail Electricity Tariffs in Australia. By Phil Wild; William Paul Bell; John Foster

  1. By: Juthasit Rohitratana (TEMEP, College of Engineering, Seoul National University); Jorn Altmann (TEMEP, College of Engineering, Seoul National University)
    Abstract: In this paper, we present an agent-based simulation system that allows modeling the interactions between software buyers and vendors in a software market. The market offers Software-as-a-Service (SaaS) and perpetual software (PS) licenses under different pricing schemes. Four dynamic pricing schemes are analyzed: derivative-follower pricing, demand-driven pricing, skimming pricing, and penetration pricing. Customer (buyer) agents respond to these prices by selecting the most appropriate software license scheme based on four criteria using the Analytic Hierarchy Process (AHP) decision support mechanism. The four decision criteria relate to finance, software capability, organization, and vendor. The simulation results show that the demand-driven pricing scheme is the most effective method but hard to implement since it requires perfect knowledge about market conditions. As an alternative, penetration pricing and skimming pricing could be used. In addition to this, it can be stated that SaaS is most attractive for small enterprises while PS is attractive for large enterprises.
    Keywords: SaaS, Software-as-a-Service pricing, perpetual software pricing, agent-based simulation, Analytic Hierarchy Process (AHP), dynamic pricing, decision support, demand-driven pricing, derivative-follower pricing, penetration pricing, skimming pricing.
    JEL: C15 C44 C51 C53 C61 C63 D40 D45 D81 L24 L86 M15
    Date: 2012–03
  2. By: Michael B. Giles; Christoph Reisinger
    Abstract: In this article, we propose a Milstein finite difference scheme for a stochastic partial differential equation (SPDE) describing a large particle system. We show, by means of Fourier analysis, that the discretisation on an unbounded domain is convergent of first order in the timestep and second order in the spatial grid size, and that the discretisation is stable with respect to boundary data. Numerical experiments clearly indicate that the same convergence order also holds for boundary-value problems. Multilevel path simulation, previously used for SDEs, is shown to give substantial complexity gains compared to a standard discretisation of the SPDE or direct simulation of the particle system. We derive complexity bounds and illustrate the results by an application to basket credit derivatives.
    Date: 2012–04
  3. By: Jan Baldeaux; Eckhard Platen
    Abstract: We discuss suitable classes of diffusion processes, for which functionals relevant to finance can be computed via Monte Carlo methods. In particular, we construct exact simulation schemes for processes from this class. However, should the finance problem under consideration require e.g. continuous monitoring of the processes, the simulation algorithm can easily be embedded in a multilevel Monte Carlo scheme. We choose to introduce the finance problems under the benchmark approach, and find that this approach allows us to exploit conveniently the analytical tractability of these diffusion processes.
    Date: 2012–04
    Abstract: Microsimulations may involve a large number of agents. It is then practically impossible or too expensive to obtain a fully and complete disaggregated data set about these agents of interest. Moreover, if such a dataset was available, its use would be potentially problematic in view of stringent privacy laws. To address this problem one may build an articial population starting from known aggregate data. Most of the known generation methods are explained in this paper. Their advantages and limitations are discussed and references are given for further details.
    Keywords: transport simulation; micro simulation; iterative proportional fitting procedures; optimization
    Date: 2012–04
  5. By: Tao Zhang (Public Economics Division, Policy Research Department, The World Bank); Heng-fu Zou (Public Economics Division, Policy Research Department, The World Bank)
    Date: 2012
  6. By: Ken Itakura (Graduate School of Economics, Nagoya City University); Hiro Lee (Osaka School of International Public Policy, Osaka University)
    Abstract: In this paper we compare welfare effects and the extent of sectoral adjustments of the member countries under alternative free trade agreement (FTA) sequencings in the Asia-Pacific region using a dynamic computable general equilibrium (CGE) model. If a Trans-Pacific Partnership (TPP) agreement under one sequencing and an East Asian FTA (EAFTA) under another sequencing will enter into force at the same time, followed by more enlarged FTAs, then a larger number of countries are expected to realize greater welfare gains under the Asia-track sequencing. However, given the uncertainty about the establishment of an Asia-wide FTA in the near future, the TPP-track sequencing appears to be an attractive option for most countries in the Asia-Pacific region. With respect to sectoral adjustments, there seem to be no significant differences among the alternative sequencings.
    Keywords: Sequencing, FTA, Asia-Pacific, CGE model
    JEL: F15 F17
    Date: 2012–03
  7. By: Wieck, Christine; Schlueter, Simon W.; Britz, Wolfgang
    Abstract: We use two methodological approaches to analyze avian influenza related quarantine measures. First, a Heckman type gravity model is used to estimate the trade impact and second, a spatial partial equilibrium simulation model is developed to simulate welfare changes. The simulation model considers spread and transmission risk according to the disease status of the importing country as well as parameter uncertainty of the calibrated coefficients by using a Monte Carlo approach. The econometric results show that the principle of regionalization is preferred to import trade bans for uncooked meat. The simulation results verify the negative welfare impact of currently implemented regulatory policies and indicate that significant trade diversion effects according to the disease status of countries occur. The welfare results confirm that a trade ban is not the most appropriate measure to address the infection risk resulting from the spread of the avian influenza virus.
    Keywords: animal disease, quarantine measure, non-tariff measure, welfare, gravity model, simulation model, Agricultural and Food Policy, Demand and Price Analysis, F14, F17, Q11, Q17, Q18,
    Date: 2012–02–13
  8. By: Kemp-Benedict, Eric
    Abstract: The National Bioenergy Investment Model is a scenario model that simulates the decisions of domestic and international investors on whether to invest in biofuel enterprises in a developing country. In the model, investors compare the profitability of different biofuel feedstock and fuel operations using a riskadjusted discount rate – taking market, currency, country and sector risks into account. Prices for biofuels and feedstocks are determined in part through exogenous international prices and in part through a dynamic, equilibrium-seeking price adjustment mechanism. The model is intended to be used within a participatory scenario exercise, and can be run interactively.
    Keywords: disequilibrium; investment; simulation; scenario model; FDI; ICAPM; biofuel; agriculture
    JEL: G11 O16 C61
    Date: 2012
  9. By: Heinrich R. Bohlmann (Department of Economics, University of Pretoria)
    Abstract: South African authorities are attempting to limit inflows of illegal immigrants. Evidence for the United States presented in Dixon et al (2011) suggests that a policy-induced reduction in labour supply from illegal immigrants generates a welfare loss for legal residents. I use a similar labour market mechanism within a dynamic CGE model for South Africa, but take into consideration a number of well-known facts about the local economy. With high unemployment rates among low skilled workers and a legal minimum wage in place, I find a net gain in employment and welfare for legal residents in South Africa when reducing the inflow of illegal immigrants.
    Keywords: Illegal immigration, dynamic CGE modelling
    JEL: J61 C68
    Date: 2012–04
  10. By: Raihan, Selim
    Abstract: Bangladesh has entered into several regional FTA agreements and is in the process of signing bilateral FTA agreements with a number of countries. The study uses several models such as WITS/SMART global partial equilibrium model, SAM multiplier model, CGE model and an employment satellite matrix to explore the employment effects in Bangladesh out of three different FTA scenarios. In the WITS/SMART model, three FTA scenarios are run which assume full elimination of bilateral tariff between Bangladesh and India (under Bangladesh-India bilateral FTA), full elimination of bilateral tariff between Bangladesh and Malaysia (under Bangladesh-Malaysia bilateral FTA) and full elimination of tariff on trade among the BIMSTEC member countries (under BIMSTEC). The analysis of the macro impacts of the FTA scenarios suggest that such bilateral and regional FTAs would be beneficial for Bangladesh in terms of impact on consumer prices, exports, real wages and employment. At the sectoral level, a number of export oriented sectors would gain from such FTAs. However, the sectoral level impacts also suggest that a large number of sectors would experience fall in production because of large inflow of imports, which will result in loss in employment in these sectors. Therefore, these FTAs have important sectoral implications in terms of production, exports, import and employment. It however appears that at the aggregate level employment would rise which would mean that the loss in employment in some sectors will be more than compensated by rise in employment in other sectors. Therefore, the net effect on employment is likely to be positive.
    Keywords: FTA; CGE Model; Partial Equilibrium Model; Employment; Bangladesh
    JEL: F15 C68 F17 F14
    Date: 2011–12
  11. By: Jacky Mallett
    Abstract: This paper presents a description of the mechanical operations of banking as used in modern banking systems regulated under the Basel Accords, in order to provide support for a verifiable and complete description of the banking system suitable for computer simulation. Feedback is requested on the contents of this document, both with respect to the operations described here, and any known national, regional or local variations in their structure and practice.
    Date: 2012–04
  12. By: Justin van de Ven
    Date: 2011–12
  13. By: Raihan, Selim
    Abstract: This paper shows that there are significant prospects of rise in intra-regional trade among the four Eastern South Asian countries. The partial equilibrium modelling exercise helps identify the products with high export potentiality. Simulation exercise based on a global general equilibrium model suggests that though there are prospects of welfare gains for India, Pakistan and Sri Lanka, there are risks of welfare loss for Bangladesh and other LDCs in South Asia out of FTA in goods under the SAFTA agreement because of the fact that the trade diversion effects could be larger than trade creation effects for these countries. However, such welfare loss could be well compensated by the rise in welfare due to improvement in trade facilitation among the South Asian countries. It also appears that the gains from trade facilitation are much bigger than the gains from trade liberalisation. Interactions with the stakeholders in Bangladesh helped identify a number of factors which are constraining trade in Eastern South Asia sub-region. These include inadequate facilities at the land and sea ports, weak physical infrastructure, inefficient bureaucracy, corruption and several forms of NTBs. Removal of such trade barriers though improvement in trade facilitation measures will generate significant rise in trade among these countries.
    Keywords: Economic Corridor; Market Access; Trade Facilitation; SAFTA
    JEL: F15 C68 F17
    Date: 2011–09
  14. By: Raihan, Selim
    Abstract: This paper has examined the implications of SAFTA for the South Asian countries. In doing so it has reviewed the pattern of intra-regional trade in South Asia. The paper has reviewed a number of studies which conducted qualitative and quantitative assessments of SAFTA. Using the global general equilibrium model the paper has also explored the welfare implications of tariff liberalisation under SAFTA and increased trade facilitation in South Asia. The simulation results suggest that the gains from trade facilitation in South Asia are much higher than the gains from mere reduction in tariff in goods. Therefore, in order to make SAFTA effective, trade liberalization is a necessary condition, but not a sufficient one. Utmost priority should be given to developing trade infrastructure facilities (hardware) and trade facilitation (software).
    Keywords: SAFTA; Regional Integration; Market Access; Trade Facilitation
    JEL: F15 C68 F17
    Date: 2012–02
  15. By: Giraleas, Dimitris; Emrouznejad , Ali; Thanassoulis, Emmanuel
    Abstract: Over the years, a number of different approaches were developed to measure productivity change, both in the micro and the macro setting. Since each approach comes with its own set of assumptions, it is not uncommon in practice that they produce different, and sometimes quite divergent, productivity change estimates. This paper introduces a framework that can be used to select between the most common productivity measurement approaches based on a number of characteristics specific to the application/dataset at hand; these were selected based on the results of previous simulation analysis that examined the accuracy of different productivity measurement approaches under different conditions. The characteristics in question include input volatility through time, the extent of technical inefficiency and noise present in the dataset and whether the parametric approaches are likely to suffer from functional form miss-specification and are examined using a number of well-established diagnostics and indicators. Once assessed, the most appropriate approach can be selected based on its relative accuracy under these conditions; accuracy can in turn be assessed using simulation analysis, either previously published or designed specifically to emulate the characteristics of the application/dataset at hand. As an example of how this selection framework can be implemented in practice, we assess the productivity performance of a number of EU countries using the EU KLEMS dataset.
    Keywords: Data envelopment analysis; Productivity and competitiveness; Simulation; Stochastic Frontier Analysis; Growth accounting
    JEL: O47 C15 D24
    Date: 2012–03
  16. By: Babalos, Vassilios; Philippas, Nikolaos; Doumpos, Michael; Zompounidis, Constantin
    Abstract: Mutual fund investors are concerned with the selection of the best fund in terms of performance among the set of alternative funds. This paper proposes an innovative mutual funds performance evaluation measure in the context of multicriteria decision making. We implement a multicriteria methodology using stochastic multicriteria acceptability analysis, on Greek domestic equity funds for the period 2000–2009. Combining a unique dataset of risk-adjusted returns such as Carhart’s alpha with funds’ cost variables,we obtain a multicriteria performance evaluation and ranking of the mutual funds, by means of an additive value function model. The main conclusion is that among employed variables, the sophisticated Carhart’s alpha plays the most important role in determining fund rankings. On the other hand, funds’ rankings are affected only marginally by operational attributes. We believe that our results could have serious implications either in terms of a fund rating system or for constructing optimal combinations of portfolios.
    Keywords: Mutual funds;Performance appraisal;Multicriteria analysis Simulation
    JEL: G11 G23 C02 G10
    Date: 2011
  17. By: Phil Wild (Department of Economics, University of Queensland); William Paul Bell (Department of Economics, University of Queensland); John Foster (Department of Economics, University of Queensland)
    Abstract: The purpose of this article is to investigate the impact that the introduction of a carbon price signal will have on wholesale electricity prices, carbon-pass-through rates and retail electricity rates in the states making up the Australian National Electricity Market (NEM). In order to assess this, we employ an agent based model of the NEM called the ANEM model which contains many of the salient features of the NEM: intra-state and inter-state transmission branches, regional location of generators and load centres and accommodation of unit commitment features. A DC OPF algorithm is used to determine optimal dispatch of generation plant and wholesale prices within the ANEM model. We utilise ANEM model scenario runs to examine the impact of carbon prices on wholesale prices and carbon passthrough rates. This information is then used to assess the impact on retail electricity tariff rates and shares of cost components making up residential retail tariff rate structures for different states in the NEM.
    Keywords: Electricity Markets, Carbon Trading
    JEL: Q40
    Date: 2012–03

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