nep-cmp New Economics Papers
on Computational Economics
Issue of 2013‒07‒20
five papers chosen by
Stan Miles
Thompson Rivers University

  1. Determinants and Policy Simulation of Firms Cooperation in Innovation By Heshmati, Almas; Lenz-Cesar, Flávio
  2. Identity, Authority and Evolution of Order: the trajectory of dueling simulated By Behrooz Hassani-Mahmooei , Behrooz; Vahabi, Mehrdad
  3. Merger Simulation with Nested Logit Demand - Implementation using Stata By Björnerstedt, Jonas; Verboven, Frank
  4. The tragedy of the park: an agent-based model on endogenous and exogenous institutions for the management of a forest. By Vallino, Elena
  5. Effects of Tax on Investment Portfolios and Financial Markets Under Mixed Integer Stochastic Programming By Shijie Liu; Andrew Adams; Boulis M. Ibrahim

  1. By: Heshmati, Almas (Sogang University); Lenz-Cesar, Flávio (Brazil Ministry of Communications)
    Abstract: This research introduces an agent-based simulation model representing the dynamic processes of cooperative R&D in the manufacturing sector of South Korea. Firms' behavior is defined according to empirical findings on the Korean Innovation Survey 2005 and captured in a multivariate probit regression model. The econometrics model identifies the determinants on firms' likelihood to participate in cooperation with other organizations when conducting innovation activities. These determinants are translated into simulation parameters which are calibrated to the point that the simulated artificial world are equivalent to the one observed in the real world. The aim of the simulation game is to investigate the differences in sector responses to internal and external changes, including cross-sector spillovers, when applying three different policy strategies to promote cooperation in innovation. The findings indicate possible appropriate (or non-appropriate) policy strategies to be applied depending on the target industries.
    Keywords: agent-based simulation, collaborative R&D, innovation networks, simulation game, policy strategy
    JEL: C15 C71 D21 D85 L20 O31
    Date: 2013–07
  2. By: Behrooz Hassani-Mahmooei , Behrooz; Vahabi, Mehrdad
    Abstract: Borrowing from public choice literature, while aristocratic civil wars can be regarded as anarchy, and the monopoly of violence by the state as Leviathan, duel of honor is an orderly anarchy. The sudden or gradual withering of duel of honor as an institution marks the transition to the monopoly of violence by the state in Europe. In this paper, we endeavor to capture this transition by introducing a computational model where a simulated agent considers three sets of factors to make its dueling decision: 1) its own characteristics such as dueling skill; 2) its identity such as the reaction received from other members of its own social group; and finally 3) the reaction of the authority such as the possible punishment that could be inflicted by the state against dueler. These factors then interact through a dynamic utility function affected by both optimization and learning processes. The results of our agent-based computational model which are validated against the historical evidence from England, France, and Germany show that a complex, aggregative historical process may be consistently explained on the basis of rational choice of heterogeneous individual agents conditioned by their group identity and authority (organizational) influence.
    Keywords: Agent-based Computational Economics, Conflict theory, Duel of honor, Identity Economics, Orderly anarchy
    JEL: C6 C63 D2 D7 D74 N43 P16
    Date: 2013–01
  3. By: Björnerstedt, Jonas (Swedish Competition Authority); Verboven, Frank (University of Leuven)
    Abstract: In this article we show how to implement merger simulation in Stata after estimating an aggregate nested logit demand system with a linear regression model. We also show how to implement merger simulation when the demand parameters are not estimated, but instead calibrated to be consistent with outside information on average price elasticities and profit margins.
    Keywords: mergersim; merger simulation; aggregate nested logit model; unit demand; constant expenditures demand
    JEL: C63 C87 D40 L10
    Date: 2013–04–15
  4. By: Vallino, Elena (University of Turin)
    Abstract: Many scholars of common pool resources discovered that institutions may solve the tragedy of the commons. I will address a particular situation of management of natural resources: that of a protected area. In this situation interests differ. Local rural inhabitants care about the quality of their environment, but also need to exploit the resources for livelihood reasons. An external entity, being the State or a donor, or an NGO, or all of them together, decides that there is the need of nature Conservation in that area. Because of some evidence of failure of strictly top-down conservationist approach, the external entity decides to apply the concept of participatory conservation: the local inhabitants become stakeholders in the management of the area and they become collectively responsible for conservation, having in turn the right to exploit the resources up to so me degree. I argue that project designers try to find a solution to nature conservation through the creation of a situation of a commons: creating a community that has rights and duties towards a particular natural area that is endowed with some resources. Many scholars rely mostly on institutions which are endogenously created within the users’ community in order to avoid the “tragedy”. However, what happens if institutions are imposed? In participatory conservation initiatives the community has collective rights over the resources, and in this sense the issue of endogenous rules for the commons management is relevant. However, the level to which the community should exploit the resource is usually i mposed by the external project designers. Using agent-based simulations we develop a theoretical model in order to look at the consequences of an imposed institution on the state of a forest and on the profit of the users, taking into account the possibilities of violating the imposed rules, and that of facing enforcement. We compare the consequences of this imposed institution with those deriving from an endogenously created institution. We will also analyze the interaction between the different kinds of institutions and the individual perceptions of each agent. Many results of the model confirm quantitative and qualitative findings of the literature: the presence of institutions and enforcement improve the management of the resource with respect to an open access situation, with different degree of success depending on the kind of institution in place. The two main counterintuitive findings are the following. First, an exogenous institution imposed by external agents may crowd out agents’ intrinsic environmental motivations. Second, when an imposed exogenous institution is in place, the most effective rule is one allowing sufficient degree of access to the resources for the agents, provided that an adequate rule enforcement is implemented.
    Date: 2013–05
  5. By: Shijie Liu; Andrew Adams; Boulis M. Ibrahim
    Abstract: This paper investigates the micro and macro effects of income tax on large scale portfolio optimization. Stochastic integer programming is used to optimize post-tax large-scale portfolios when the global market is segmented by regional tax rules. A broad range of realistic trading rules and inequality constraints as well as a large number of assets are considered. The increased complexity and scale of the problem renders theoretical methods infeasible. A new numerical approach based on basic Greedy heuristics, in which integer and non-linear restrictions are considered simultaneously, is proposed. The superiority of this approach is demonstrated through a comparison with extant BONMIN’s Branch-and-Bound (B&B) methods, for problems with up to 288 assets whereas previous efforts under mixed-integer non-linear programming (MINLP) were limited to 200 assets. The approach is used to test and extend extant theoretical work on post-tax portfolio management. The same generic conclusion that taxation affects the portfolio composition dramatically, is reached, but the new approach reveals greater detail of the implications of the combination of various factors. A study of price effects finds that market equilibrium prices are affected by relative as well as absolute tax rates across assets and global regions. The implication is that the market's response to tax rate changes across assets and countries can now, at least partially, be predictable prior to implementation by government. Investors are also better able to forecast how the markets will react in the short term.
    Date: 2013

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