nep-cmp New Economics Papers
on Computational Economics
Issue of 2013‒06‒09
ten papers chosen by
Stan Miles
Thompson Rivers University

  1. Standardization for Agent-based Modeling in Economics By Li, Xi Hao
  2. A Stochastic Search Algorithm for the Computation of Perfect and Proper Equilibria By Stuart McDonald; Liam Wagner
  3. A CGE Study of Economic Impact of Accession of Hong Kong to ASEAN-China Free Trade Agreement By Ken Itakura; Yoshifumi Fukunaga; Ikumo Isono
  4. Alternative Designs for Tariffs on Embodied Carbon:<br>A Global Cost-Effectiveness Analysis By Christoph Böhringer; Brita Bye; Taran Fæhn; Knut Einar Rosendahl
  5. Clean-Development Investments: An Incentive-Compatible CGE Modelling Framework By Christoph Böhringer; Thomas F. Rutherford; Marco Springmann
  6. Consistent iterated simulation of multi-variate default times: a Markovian indicators characterization By Damiano Brigo; Jan-Frederik Mai; Matthias Scherer
  7. Congestion, agglomeration, and the structure of cities By Jeffrey C. Brinkman
  8. The OURSE model: Simulating the World Refining Sector to 2030 By Frédéric Lantz; Valérie Saint-Antonin; Jean-François Gruson; Wojciech Suwala
  9. Checking bivariate first order dominance By Range, Troels Martin; Østerdal, Lars Peter
  10. Growth risks for the EU emanating from global imbalances By Tatiana Fic; Ali Orazgani

  1. By: Li, Xi Hao
    Abstract: By combining the general characteristics of economic system and economic agents with methodologies of multi-agent system analysis and development in the scope of software engineering and computer science, this work proposes an integrative framework that provides standardization for agent-based modeling in economics. This framework serves as a standard for analyzing from `bottom-up' the economic system that embeds with the properties of complexity in structure, heterogeneity in agents' beliefs, and interactions among agents' behaviors. It serves as a guidance on designing a standardized agent-based model for economic system. This standardized agent-based model works as the system model of economic system that can be used and reused among interdisciplinary research across economists and computer scientists.
    Keywords: agent-based modeling, economic system, software engineering, complexity, standard.
    JEL: B4 C6
    Date: 2013–06–04
  2. By: Stuart McDonald (School of Economics, The University of Queensland); Liam Wagner (School of Economics, University of Queensland)
    Abstract: This paper shows that stochastic search algorithms can be used to compute the perfect and proper equilibria of finite games. These type of equilibria use perturbations as a means of escape from local equilibria. Intuitively, there is always a small probability that an agent will select alternative strategy, even if that strategy is sub-optimal. This allows agents to escape from local equilibria in much the same way that stochastic search algorithms (like genetic algorithms and simulated annealing, for example) escape from local equilibria. This paper constructs a possibility result showing that if this equilibrium exists, then it can be found by using a stochastic search algorithm. This paper also shows by example, using the three player extensive game "Selten's Horse", that stochastic search can be used to locate a perfect equilibrium in an extensive form game.
    Keywords: Perfect and proper equilibria; computational methods; stochastic search.
    JEL: C72 C73 C62 G
    Date: 2013–05–25
  3. By: Ken Itakura (Faculty of Economics, Nagoya City University, Japan); Yoshifumi Fukunaga (Economic Research Institute for ASEAN and East Asia); Ikumo Isono (Economic Research Institute for ASEAN and East Asia)
    Abstract: We conduct a set of global computable general equilibrium (CGE) simulations to evaluate economic effects of Hong Kong’s accession to the ASEAN-China FTA (HK-ACFTA) by implementing tariff elimination, logistics, enhancement, and reduction in service trade barriers. All the participating countries can benefit from the accession, resulted in higher real GDP and economic welfare.The welfare gain becomes the largest when HK-ACFTA improves the existing agreement and trade facilitation programs between ASEAN and China. The simulation results indicate that such trade facilitation could generate considerable export volume increases for both ASEAN and China
    Keywords: FTA;computable general equilibrium (CGE) model;tariff elimination;services liberalization;trade facilitation
    JEL: F15 F17
    Date: 2013–05
  4. By: Christoph Böhringer (University of Oldenburg, Department of Economics, Germany); Brita Bye (Statistics Norway, Oslo, Norway); Taran Fæhn (Statistics Norway, Oslo, Norway); Knut Einar Rosendahl (Statistics Norway, Oslo, Norway)
    Abstract: In the absence of effective world-wide cooperation to curb global warming, import tariffs on embodied carbon have been proposed as a potential supplement to unilateral emissions pricing. We consider alternative designs for such tariffs, and analyze their effects on global welfare within a multi-region, multi-sector computable general equilibrium (CGE) model of global trade and energy. Our analysis suggests that the most cost-efficient policy could be region-specific tariffs on all products, based on direct plus electricity emissions. In the end, however, the potential cost savings through carbon tariffs must be weighed against the administrative costs as well as legal issues and political considerations.
    Keywords: carbon leakage, embodied carbon, border tariffs
    JEL: Q43 Q54 H2 D61
    Date: 2012–06
  5. By: Christoph Böhringer (University of Oldenburg, Department of Economics); Thomas F. Rutherford (University of Wisconisn-Madison); Marco Springmann (University of Oldenburg, Department of Economics)
    Abstract: The Clean Development Mechanism (CDM) established under the Kyoto Protocol allows industrialized Annex I countries to offset part of their domestic emissions by investing in emissionsreduction projects in developing non-Annex I countries. We present a novel CDM modelling framework which can be used in computable general equilibrium (CGE) models to quantify the sector-specific and macroeconomic impacts of CDM investments. Compared to conventional approaches that mimic the CDM as sectoral emissions trading, our framework adopts a microeconomically consistent representation of the CDM incentive structure and its investment<br>characteristics. In our empirical application we show that incentive compatibility implies that the sectors implementing CDM projects do not suffer, and that overall cost savings from the CDM tend to be lower than suggested by conventional modelling approaches.
    Keywords: Clean Development Mechanism, Computable General Equilibrium Modeling
    JEL: C68 Q58
    Date: 2013–03
  6. By: Damiano Brigo; Jan-Frederik Mai; Matthias Scherer
    Abstract: We question the industry practice of economic scenario generation involving statistically dependent default times. In particular, we investigate under which conditions a single simulation of joint default times at a final time horizon can be decomposed in a set of simulations of joint defaults on subsequent adjacent sub-periods leading to that final horizon. As a reasonable trade-off between realistic stylized facts, practical demands, and mathematical tractability, we propose models leading to a Markovian multi-variate default--indicator process. The well-known "looping default" case is shown to be equipped with this property, to be linked to the classical "Freund distribution", and to allow for a new construction with immediate multi-variate extensions. If, additionally, all sub-vectors of the default indicator process are also Markovian, this constitutes a new characterization of the Marshall--Olkin distribution, and hence of multi-variate lack-of-memory. A paramount property of the resulting model is stability of the type of multi-variate distribution with respect to elimination or insertion of a new marginal component with marginal distribution from the same family. The practical implications of this "nested margining" property are enormous. To implement this distribution we present an efficient and unbiased simulation algorithm based on the Levy-frailty construction. We highlight different pitfalls in the simulation of dependent default times and examine, within a numerical case study, the effect of inadequate simulation practices.
    Date: 2013–06
  7. By: Jeffrey C. Brinkman
    Abstract: Congestion pricing has long been held up by economists as a panacea for the problems associated with ever increasing traffic congestion in urban areas. In addition, the concept has gained traction as a viable solution among planners, policymakers, and the general public. While congestion costs in urban areas are significant and clearly represent a negative externality, economists also recognize the advantages of density in the form of positive agglomeration externalities. The long-run equilibrium outcomes in economies with multiple correlated, but offsetting, externalities have yet to be fully explored in the literature. To this end, I develop a spatial equilibrium model of urban structure that includes both congestion costs and agglomeration externalities. I then estimate the structural parameters of the model by using a computational solution algorithm and match the spatial distribution of employment, population, land use, land rents, and commute times in the data. Policy simulations based on the estimates suggest that naive optimal congestion pricing can lead to net negative economic outcomes.
    Keywords: Externalities (Economics) ; Urban economics
    Date: 2013
  8. By: Frédéric Lantz (IFP Energies nouvelles); Valérie Saint-Antonin (IFP Energies nouvelles); Jean-François Gruson (IFP Energies nouvelles); Wojciech Suwala (MEERI)
    Abstract: The development of a model of the World Refining for the POLES model aims to represent the oil product's supply at a world-wide level in a global energy model. The World oil refining industry faces to several challenges such as the increasing oil derivatives demand in the transport sector, the improvement of the specifications of these products, the crude oil availability and the limitation of carbon emissions. An aggregated refining model linked to the POLES energy model has been developed to study these questions. The OURSE (Oil is Used in Refineries to Supply Energy) model is a world-wide aggregated refining model which is designed to simulate the world oil product supply for the POLES (Prospective Outlook for the Long-term Energy System) model. OURSE is able to simulate the impact on the world refining industry of changes in the crude oil supply (in costs and qualities) as well as in the oil product demand (in terms of level, structure and specifications). OURSE also enables to assess the consequences of a carbon emission regulation (caps and taxes) as the adoption of various kinds of alternative fuel policies. More precisely, these impacts are evaluated as regards the world refining structure (investments), but also its balance (production and trade of petroleum products), its pollutant emissions (CO2 and SO2) and its costs (of production, investments, etc.). The OURSE model is based on a linear programming (LP) model, that is frequently used in the refining industry, both for refinery management and investment analysis, since a marginal cost pricing is relevant for the oil products. Designed to represent the world-wide refining industry into the POLES model, the OURSE model has to contain a restricted number of equations. This justifies that OURSE includes a representative upgrading refinery defined for nine aggregated refining regions in the world that are North and central America, Latin America, North and South Europe, CIS, Africa, Middle East, China, Other Asia and Oceania. Similarly, since directly linked to the number of crude oils considered, the model size is also reduced by considering, for each world refining area, an aggregated crude oil supply based on five representative crude oil qualities in the model. Lastly, a multi-plant approach is considered to make the OURSE model able to represent the oil product exchanges between the main regions in the world. Simulations for 2030 were performed. Thus, the paper presents the results of a prospective exercise for the oil refining industry which has been carried out with the worldwide refining model OURSE according to the oil product demand projections of European Commission for Europe with the PRIMES model (European Commission, 2010) and the IFP projections for the rest of the World. According to the European Commission's projections, the European oil product demand will slowdown by 14% between 2005 to 2030, reaching 566 Mtoe in 2030 (reference scenario). During the same period, the worldwide oil product demand will have increased by 23% up to 4411 Mtoe in 2030. The share of light, medium and heavy oil products will change with a decreasing share of heavy products and a more important consumption of medium distillates. Nevertheless, in the PRIMES European projections, the respective share of gasoline and diesel oil in the automotive fuel consumption are not strongly affected during the next two decades. However, the specification of the products will be more severe, especially for the marine bunkers (future IMO specifications as mentioned in the first part of the report which is dedicated to oil products). On the supply side, the crude oil supply has been estimated until 2030. This analysis is based on IFP geosciences expertises. In 2030, the API degree of the conventional crude oil will slowly decrease. However, this will be balanced by the increasing share of condensates in the refinery supply and the availability of upgraded crude oil from the extra-heavy oil. Finally, the API degree of the refineries supply should remain quite unchanged.
    Keywords: Oil sector, Refinery sector, greenhouse gasses, energy modelling
    JEL: Q40
    Date: 2012–02
  9. By: Range, Troels Martin (Department of Business and Economics); Østerdal, Lars Peter (Department of Business and Economics)
    Abstract: We consider the problem of checking first order dominance for finite bivariate distributions. We observe that this can be formulated as a special bipartite network problem related to the classical transportation problem. We exploit this observation to develop a new characterization of first order dominance and fast dominance-checking algorithms.
    Keywords: Multidimensional first order dominance; usual stochastic order; characterization; network problem; checking algorithm
    JEL: C61 D63 I31
    Date: 2013–05–27
  10. By: Tatiana Fic; Ali Orazgani
    Abstract: The objective of this paper is to examine the possible implications of the adjustment of global and intra-European imbalances, particularly in terms of the macroeconomic impacts. We design a series of macroeconomic scenarios and look at the impact of global and European shocks (corresponding to various policies aimed at reducing imbalances) on the economies of the biggest world players - the US, China, oil exporting countries, and the EU and its individual members. The methodological approach we adopt is based around a series of simulations using the National Institute’s global macroeconomic model NIGEM. Key findings suggest that while global imbalances may be adjusted either through policies in the US or in China, the adjustment on the Chinese side is somewhat less costly for Europe than the adjustment on the US side. Intra-European imbalances may be reduced through various policies; an appropriate policy mix is probably required.
    JEL: F17 F42
    Date: 2013–04

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