nep-cmp New Economics Papers
on Computational Economics
Issue of 2014‒02‒15
six papers chosen by
Stan Miles
Thompson Rivers University

  1. Structural change and income distribution: the case of Australian telecommunications By George Verikios; Xiao-guang Zhang
  2. Dynamics of Military Conflict: an Economics Perspective By Beckmann, Klaus; Reimer, Lennart
  3. Reducing disparity through a regions-focused development: A modeling approach of assessing the Indonesian MP3EI By Arief Anshory Yusuf; Mark Horridge; Edimon Ginting; Priasto Aji
  4. Maximizing Liquidity in Cloud Markets through Standardization of Computational Resources By Ivan Breskovic; Ivona Brandic; Jorn Altmann
  5. Rock around the Clock: An Agent-Based Model of Low- and High-Frequency Trading By Sandrine Jacob Leal; Mauro Napoletano; Andrea Roventini; Giorgio Fagiolo
  6. Modelling Investment Optimization on Smallholder Farms through Multi-criteria Decision Approaches: An Example from Ethiopia By William Seitz; D La Torre

  1. By: George Verikios; Xiao-guang Zhang
    Abstract: The Australian telecommunications sector experienced substantial structural change during the 1990s, change that increased productivity and reduced costs. At this time, telecommunications was already an important item of household expenditure and input to production. We estimate the effect of the structural change on households depending on their location in the distribution of income and expenditure. Our estimates are calculated by applying a computable general equilibrium model incorporating microsimulation behaviour with top-down and bottom-up links. We estimate significant increases in real income and small increases in inequality from the changes; the pattern of effects is largely uniform across regions. Sensitivity analysis indicates that our results are insensitive to variations in model parameters.
    Keywords: computable general equilibrium, income distribution, microeconomic reform, microsimulation, telecommunications
    JEL: C68 C69 D31 L99
    Date: 2014–02
  2. By: Beckmann, Klaus (Helmut Schmidt University, Hamburg); Reimer, Lennart (Helmut Schmidt University, Hamburg)
    Abstract: Using examples for each type of model, we consider dynamic games, differential games, and simulation as alternative ways of extending the standard static economic model of conflict to study patterns of conflict dynamics. It turns out that computational requirements and theoretical difficulties impose tight limits on what can be achieved using the first two approaches. In particular, we are unable to study dynamic military conflict as a series of ``battles'' that are resolved individually. A simulation study based on a new model of adaptive, boundedly rational decision making, however, is shown not to be subject to this limitation. Plausible patterns of conflict dynamics emerge, which we can link to both historical conflict and standard tenets of military theory.
    Keywords: conflict; dynamics; contest success functions; differential games; dynamic games; simulation; emergence of war
    JEL: C72 D74
    Date: 2014–01–30
  3. By: Arief Anshory Yusuf (Department of Economics, Padjadjaran University); Mark Horridge (Monash University); Edimon Ginting (Asian Development Bank); Priasto Aji (Asian Development Bank)
    Abstract: For the last 10 years, Indonesian economy suffers from a triple setback. First, it experiences a slowing-down in economic growth. Second, the rate of poverty reduction is also slowed down, and third, there has been no improvement in the inter-regional economic disparity. In 2011, Indonesian government set a new strategy by launching a master plan for the acceleration and expansion of economic development (MP3EI) in response to these challenges. The strategy divides Indonesia into 6 economic corridors with two aims: (1) to accelerate investment in each corridor focusing on sectors with high comparative advantage; (2) to accelerate infrastructure investment in each corridor. Using a multi-sectors and multi-regions computable general equilibrium model of the Indonesian economy, this paper evaluates the extent to which these strategies can reduce Indonesia's inter-regional disparity. The result of the analysis suggests that the direction of the MP3EI strategy is in line with its mission to reduce regional disparity as it can accelerate the growth of regions outside Java and Sumatera, particularly eastern regions (Maluku and Papua). However, it can be made more progressive by broadening the sectoral base of the investment target. The current strategy relies on sectors with high comparative advantage particularly capital-intensive resource-based sectors. A broad-based sectoral approach can generate more employment particularly in the least-developed regions and ensuring more progressive acceleration in the poverty reduction.
    Keywords: Regional development, MP3EI, Indonesia, Computable General Equilibrium
    JEL: R10 R11 R13
    Date: 2014–02
  4. By: Ivan Breskovic (Distributed Systems Group, Institute of Information Systems, Vienna University of Technology); Ivona Brandic (Distributed Systems Group, Institute of Information Systems, Vienna University of Technology); Jorn Altmann (College of Engineering, Seoul National University)
    Abstract: Low liquidity of cloud markets can result in market instability and inefficiency, preventing the successful implementation of ubiquitous computing on demand. To circumvent this issue, it has been suggested to channel demand and supply into a limited number of standardized services. These standardized services can even be automatically adapted to user requirements with the goal of continuously improving market performance. In this paper, we focus on answering how many standardized services should be placed in the market. This work is based on a new definition of liquidity for cloud resources, which in turn has been derived from liquidity definitions of financial markets. Using a simulation framework, we evaluate our method for estimating the optimal quantity of standardized services with respect to market liquidity and demonstrate the benefits of this approach in terms of increase in market efficiency and decrease in users' cost of participation in the market. The methods presented in this paper have the potential to be applied in other electronic markets as well.
    Keywords: Service Level Agreement, Electronic Markets, Cloud Economics, Autonomic Computing, Standardized Goods, Market Modeling, Market Liquidity.
    JEL: C61 C63 C88 D86 L14 L15 L86 M15 M21
    Date: 2013–02
  5. By: Sandrine Jacob Leal; Mauro Napoletano; Andrea Roventini; Giorgio Fagiolo
    Abstract: We build an agent-based model to study how the interplay between low- and high- frequency trading affects asset price dynamics. Our main goal is to investigate whether high-frequency trading exacerbates market volatility and generates flash crashes. In the model, low-frequency agents adopt trading rules based on chrono- logical time and can switch between fundamentalist and chartist strategies. On the contrary, high-frequency traders activation is event-driven and depends on price fluctuations. High-frequency traders use directional strategies to exploit market in- formation produced by low-frequency traders. Monte-Carlo simulations reveal that the model replicates the main stylized facts of financial markets. Furthermore, we find that the presence of high-frequency trading increases market volatility and plays a fundamental role in the generation of flash crashes. The emergence of flash crashes is explained by two salient characteristics of high-frequency traders, i.e., their ability to i) generate high bid-ask spreads and ii) synchronize on the sell side of the limit order book. Finally, we find that higher rates of order cancellation by high-frequency traders increase the incidence of flash crashes but reduce their duration.
    Keywords: Agent-based models, Limit order book, High-frequency trading, Low-frequency trading, Flash crashes, Market volatility
    Date: 2014–04–02
  6. By: William Seitz; D La Torre
    Abstract: We use data from the Ethiopia Rural Household Survey and the Ethiopian Central Statistics Agency to demonstrate a set of techniques for estimating optimal investment allocation in smallholder farming. The approaches treat farming tasks, constraints, and investments as a portfolio problem, characterized by multiple competing objectives. We formulate several versions of the multi-objective problem and solve them in three alternative ways; 1) using standard Markowitz portfolio optimization, 2) using a weighted goal programming model, and 3) a multi-horizon mean variance goal programming model, estimating all model parameters using real data. The main benefit of the goal programming formulation is the possibility to simplify in a single criterion problem complex situations in which the Decision Maker (DM) faces a trade-off between two or more objectives. We discuss the importance of portfolio allocations for smallholder farmers in minimizing risk and increasing return, and discuss how these approaches provide a framework that can be extended to practical applications in smallholder farming.
    Date: 2014

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