nep-cmp New Economics Papers
on Computational Economics
Issue of 2013‒03‒16
thirteen papers chosen by
Stan Miles
Thompson Rivers University

  1. Simulation Modeling and Optimization of Competitive Electricity Markets and Stochastic Fluid Systems. By Ozdemir, O.
  2. The EU-Ukraine trade liberalization: How much do the costs of tariff elimination matter? By Miriam Frey; Zoryana Olekseyuk
  3. Why might climate change not cause conflict? an agent-based computational response By Hassani Mahmooei, Behrooz; Parris, Brett
  4. Evaluating CO2 reduction policy portfolios in the automotive sector By van der Vooren; Eric Brouillat
  5. Can Climate Policy Enhance Sustainability? By Lorenza Campagnolo; Carlo Carraro; Marinella Davide; Fabio Eboli; Elisa Lanzi; Ramiro Parrado
  6. Walrasian TatÈnnement by Sequential Pairwise Trading: Convergence and Welfare Implications By Maria-Augusta Miceli; Federico Cecconi; Giovanni Cerulli
  7. A global assessment of the economic effects of export taxes: By Laborde Debucquet, David; Estrades, Carmen; Bouёt, Antoine
  8. Solving the selective multi-category parallel-servicing problem By Range, Troels Martin; Lusby, Richard Martin; Larsen, Jesper
  9. Assessing interbank contagion using simulated networks By Grzegorz Hałaj; Christoffer Kok Sørensen
  10. Fiscal limits on first-best climate policy: A CGE analysis for Europe By Richard Tol; Stefano F Verde
  11. Scheduling resource-constrained projects with a flexible project structure By Kellenbrink, Carolin; Helber, Stefan
  12. Dynamics of effort allocation and evolution of trust: an agent-based model By Hassani Mahmooei, Behrooz; Parris, Brett
  13. Diffusion of innovation within an agent-based model: Spinsons, independence and advertising By Piotr Przybyla; Katarzyna Sznajd-Weron; Rafal Weron

  1. By: Ozdemir, O. (Tilburg University)
    Abstract: The second part of the thesis focuses on a different stochastic problem of finding the optimal hedging points in a manufacturing flow control system. Our simulation-based method allows solving large scale systems that are considered very difficult to solve by current standards in the literature.
    Date: 2013
  2. By: Miriam Frey; Zoryana Olekseyuk
    Abstract: The establishment of the currently negotiated Free Trade Agreement (FTA) between EU and Ukraine is the next significant step towards Ukraine’s deeper integration into the world economy, widely expected to result in additional welfare gains. As developing countries face some costs associated with trade liberalization, this paper contributes to the literature by analyzing the effects of the EU-Ukraine FTA taking into account the loss of tariff revenues as well as the changed economic conditions after Ukraine’s accession to the WTO in 2008. In particular, we calculate the effects of a unilateral tariff elimination in a Computable General Equilibrium (CGE) model for Ukraine simulating three scenarios reflecting different means to compensate for the loss in tariff revenues. It turns out to be important to take these costs into consideration while modeling trade liberalization, as the results vary significantly across the scenarios. In general, we find that tariff elimination has only a small impact on the country’s welfare because of the already strongly reduced tariff rates after Ukraine’s WTO accession. The effects can even be negative if the country tries to refinance the trade liberalization costs by means of tax policy. According to our simulations the most welfare enhancing option would be the provision of financial support by the EU, which is in fact suggested in the latest European Parliament resolution.
    Keywords: Ukraine, EU, Trade, Integration, CGE, Public Spending
    JEL: C68 F13 F15 H50 O52
    Date: 2013–02
  3. By: Hassani Mahmooei, Behrooz; Parris, Brett
    Abstract: In this paper, we first briefly review the recent literature on climate change, resource scarcity and conflict. This is then followed by introducing an agent based computational model based on the theory of production and conflict which is capable of simulating the dynamics of micro-level resource conflicts. The model considers differences in resource attributes, differentiates between conflict subjects, takes into account bounded rationality, non-linearity and feedback loops, and is enriched by a set of scenarios ranging between mild to severe resource shocks. Our results show that agents tend not to get engage in conflict during mild resource scarcity scenarios as they adapt to the changes and since the decreases in returns to resource predation and increases in their protective practices act as negative feedback loops, discouraging resource predators from allocating further effort to predation. The model results also show that scarcity is more likely to encourage product predation rather than resource predation among the agents.
    Keywords: Climate Change, Resource Scarcity, Conflict, Security, Agent-based Model, Social Simulation
    JEL: C61 C63 D74 Q34 Q54
    Date: 2012–11
  4. By: van der Vooren; Eric Brouillat
    Abstract: This paper presents an agent-based model that simulates the market for passenger cars in which firm strategies, market structure, consumer choices and policy instruments co-evolve. The main contribution of the paper is to show that this type of simulation model can be used to explore interactions and additional effects when different policy measures are combined to reduce CO2 emissions. We show the impact of policy portfolios on economic and technological decisions of firms, on consumer choice and on global CO2 emissions. In particular, we show how the dynamics of the system can lead to a technological lock-in into internal combustion technologies and demonstrate the ways in which policy instruments can help to break this lock-in. We show that policy portfolios can be relevant to achieve the best of different stand-alone policy measures, but not necessarily. Ex ante evaluation is therefore recommended.
    Keywords: agent-based simulation, CO2 emissions, low emission vehicle technologies, policy portfolio, technological change, transition
    Date: 2013–02
  5. By: Lorenza Campagnolo (Fondazione Eni Enrico Mattei, Euro-Mediterranean Center on Climate Change and Advanced School of Economics); Carlo Carraro (Fondazione Eni Enrico Mattei, Euro-Mediterranean Center on Climate Change and Ca’ Foscari University of Venice); Marinella Davide (Fondazione Eni Enrico Mattei, Euro-Mediterranean Center on Climate Change); Fabio Eboli (Fondazione Eni Enrico Mattei, Euro-Mediterranean Center on Climate Change); Elisa Lanzi (Fondazione Eni Enrico Mattei and Advanced School of Economics); Ramiro Parrado (Fondazione Eni Enrico Mattei, Euro-Mediterranean Center on Climate Change)
    Abstract: Implementing an effective climate policy is one of the main challenges for our future. Even though ambitious mitigation targets are necessarily costly, curbing GHG emissions can prevent future irreversible impacts of climate change on human kind and the environment. Climate policy is therefore crucial for present and future generations. Nonetheless, one may wonder whether the economic and social dimensions of future global development could be harmed by climate policy. This paper addresses this question by examining some recent developments in international climate policy and considering different levels of cooperation that may arise in light of the outcomes of the Conference of the Parties recently held in Doha. Then it explores whether the implementation of various climate policy scenarios would help enhancing sustainability or rather whether there is a trade-off between climate policy and economic development and/or social cohesion. This is done by using a new comprehensive indicator, the FEEM Sustainability Index (FEEM SI), which aggregates several economic, social, and environmental indicators. The FEEM SI index is built into a recursive-dynamic Computable General Equilibrium (CGE) model of the world economy, thus offering the possibility of projecting all indicators into the future, and therefore delivering a perspective assessment of sustainability under different future climate policy scenarios. We find that the environmental component of sustainability improves at the regional and world level thanks to the GHG emission reductions achieved through climate policy. However, the economic and social components are affected negatively yet marginally. Hence, overall sustainability increases in all scenarios. If the USA, Canada, Japan and Russia would not contribute to mitigating future GHG emissions, as envisioned in one of our scenarios, sustainability in these countries would decrease and the overall effectiveness of climate policy in enhancing global sustainability would be offset.
    Keywords: Climate policy, Computable General Equilibrium (CGE) Models, Sustainability, Indicators
    JEL: Q54 Q56 C68
    Date: 2013–01
  6. By: Maria-Augusta Miceli; Federico Cecconi; Giovanni Cerulli
    Abstract: This paper characterizes the out-of-equilibrium dynamics of a symmetric, pure exchange economy with two goods and N agents with uniformly distributed preferences and identical endowments. Relaxing the auctioneer assumption, but maintaining a global price rule, sequentially random pairwise trading at out-of-equilibrium prices is allowed. Initial mispricing implies rationing, determining excess demand (supply) fading away only at convergence, when the price of the initially cheaper (more expensive) good becomes more expensive (cheaper) than the walrasian one. The system converges when the sequential price reaches the walrasian price evaluated at current updated endowments. A perfectly symmetric setting, by initial mispricing and consequent rationed trading, creates asymmetric resource allocations even at convergence, where welfare is less than a standardized 1% lower than the auctioneer Pareto one. This model sketches a possible basis for price over-reaction microfoundation and captures endogenous "wealth divide" among the population, induced by whether agent trading is dominated by good preferences or just by speculation around their prices.
    Keywords: pairwise exchange, tatônnement, rationing, mispricing, general equilibrium, walrasian equilibrium, sequential equilibrium, auctioneer, price overreaction, wealth divide, agent-based models,agent-based simulations.
    JEL: C63 C68 D01 D03 D31 D51 D58
    Date: 2013–03
  7. By: Laborde Debucquet, David; Estrades, Carmen; Bouёt, Antoine
    Keywords: Computable General Equilibrium Models, export taxes,
    Date: 2013
  8. By: Range, Troels Martin (Department of Business and Economics); Lusby, Richard Martin (Department of Engineering Management); Larsen, Jesper (Department of Engineering Management)
    Abstract: In this paper we present a new scheduling problem and describe a shortest path based heuristic as well as a dynamic programming based exact optimization algorithm to solve it. The Selective Multi-Category Parallel-Servicing Problem (SMCPSP) arises when a set of jobs has to be scheduled on a server (machine) with limited capacity. Each job requests service in a prespecified time window and belongs to a certain category. Jobs may be serviced partially, incurring a penalty; however, only jobs of the same category can be processed simultaneously. One must identify the best subset of jobs to process in each time interval of a given planning horizon while respecting the server capacity and scheduling requirements. We compare the proposed solution methods with a MILP formulation and show that the dynamic programming approach is faster when the number of categories is large, whereas the MILP can be solved faster when the number of categories is small.
    Keywords: Machine scheduling; dynamic programming; node-disjoint shortest-path problem; preprocessing
    JEL: C61
    Date: 2013–03–05
  9. By: Grzegorz Hałaj (European Central Bank); Christoffer Kok Sørensen (European Central Bank)
    Abstract: This paper presents a new approach to randomly generate interbank networks while overcoming shortcomings in the availability of bank-by-bank bilateral exposures. Our model can be used to simulate and assess interbankcontagion effects on banking sector soundness and resilience. We find a strongly non-linear pattern across the distribution of simulated networks, whereby only for a small percentage of networks the impact of interbank contagion will substantially reduce average solvency of the system. In the vast majority of the simulated networks the system-wide contagion effects are largely negligible. The approach furthermore enables to form a view aboutthe most systemic banks in the system in terms of the banks whose failure would have the most detrimental contagion effects on the system as a whole. Finally, as the simulation of the network structures is computationally verycostly, we also propose a simplified measure - a so-called Systemic Probability Index (SPI) - that also captures the likelihood of contagion from the failure of a given bank to honour its interbank payment obligations but at the same time is less costly to compute. We find that the SPI is broadly consistent with the results from the simulated network structures.
    Keywords: Network theory; interbank contagion; systemic risk; banking; stress-testing
    Date: 2013–01
  10. By: Richard Tol (Department of Economics, University of Sussex; Institute for Environmental Studies, Vrije Universiteit, Amsterdam, The Netherlands; Department of Spatial Economics, Vrije Universiteit, Amsterdam, The Netherlands); Stefano F Verde (Climate Policy Research Unit, European University Institute, Florence, Italy)
    Abstract: We use a standard computable general equilibrium model to explore the fiscal implications of stringent carbon dioxide emission reduction in Europe. Both the immediate targets (20-30% by 2020) and the medium-term targets (80-90% by 2050) for abatement can be met with a carbon tax that is modest to sizeable. Imposing budget neutrality, a carbon tax that would allow all other taxes to fall by 5% (20%) would cut emissions by about 40% (80%). For 80% emission reduction, the carbon tax would only be the third largest tax in terms of revenue. A 40% emission reduction would cost about 1.5% of GDP. Costs are roughly exponential in abatement. The economic impact of emission reduction is minimized if the carbon tax revenue is preferentially used to reduce taxes on intermediates and import tariffs; such taxes, however, bring in little revenue at present. Emission reduction in Europe affects trade patterns across the world. It hampers the economies of West Asia and Africa, but has stimulating effect elsewhere. Economies everywhere outside Europe become more carbon-intensive. About one in four of emissions avoided in Europe are emitted elsewhere.
    Keywords: carbon tax, tax reform, greenhouse gas emission reduction
    JEL: H23 Q54
    Date: 2013–02
  11. By: Kellenbrink, Carolin; Helber, Stefan
    Abstract: In projects with a flexible project structure, the activities that have to be scheduled are not completely known beforehand. Instead, scheduling such a project includes the decision whether to carry out particular activities at all. This also effects precedence constraints between the finally implemented activities. However, established model formulations and solution approaches for the resource-constrained project scheduling problem (RCPSP) assume that the project structure is given in advance. In this paper, the traditional RCPSP is hence extended by a highly general model-endogenous decision on this flexible project structure. This is illustrated by the example of the aircraft turnaround process at airports. We present a genetic algorithm to solve this type of scheduling problem and evaluate it in an extensive numerical study.
    Keywords: Project scheduling, Genetic algorithms, RCPSP, Flexible projects
    JEL: C61 C44 M11
    Date: 2013–03
  12. By: Hassani Mahmooei, Behrooz; Parris, Brett
    Abstract: Trust is a dynamic and complex phenomenon and understanding the factors which affect its formation, evolution and disappearance is a critical research issue. It has been shown that trust plays a key role in how human and social capital develop, how economies grow and how societies progress. In this paper, we present an agent-based model of the relations between a dynamic effort allocation system, an evolving trust framework and a reputation module to study how changes in micro-level rent-seeking traits and decisions can shape the emergence of trust across the simulated environment. According to our results, variations in trust are correlated more with the returns to being productive, rather than rent-seeking. In line with previous studies, our model shows that higher than average levels of risk-taking by agents lead to further trust and gains during an interaction, though taken to an extreme, both trust and gain can decline as a result of reckless decisions. We also report on the formation of trust clusters in our model as an emergent phenomenon.
    Keywords: Trust, Rent-seeking, Agent-based Model, Reputation, Effort Allocation, Social Simulation
    JEL: C61 C63 D72
    Date: 2012–07
  13. By: Piotr Przybyla; Katarzyna Sznajd-Weron; Rafal Weron
    Abstract: We modify a two-dimensional variant of a two-state non-linear voter model and apply it to understand how new ideas, products or behaviors spread throughout the society in time. In particular, we want to find answers to two important questions in the field of diffusion of innovation: Why does the diffusion of innovation take sometimes so long? and Why does it fail so often? Because these kind of questions cannot be answered within classical aggregate diffusion models, like the Bass model, we use an agent-based modeling approach.
    Keywords: Agent-based model; Diffusion of innovation; Word of mouth marketing; Conformity; Advertising; Spinson
    JEL: C63 D70 M37
    Date: 2013

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