
on Computational Economics 
Issue of 2016‒03‒29
seven papers chosen by 
By:  Christoph Böhringer (University of Oldenburg); Nicholas Rivers (University of Ottawa); Hidemichi Yonezawa (ETH Zurich, Switzerland) 
Abstract:  We show that imposition of a statelevel environmental tax in a federation crowds out preexisting federal taxes. We explain how this vertical fiscal externality can lead unilateral statelevel environmental policy to generate a welfare gain in the implementing state, at the expense of other states, even absent any environmental benefits. Using a computable general equilibrium model of the Canadian federation, we show that vertical fiscal externalities can be the major determinant of the welfare change following environmental policy implementation by a state government. Our numerical simulations indicate that  as a consequence of vertical fiscal externalities  state governments can reduce greenhouse gas emissions by over 20 percent without any net cost to themselves. 
Keywords:  fiscal externality, climate policy, federalism, computable general equilibrium 
JEL:  C68 H77 Q54 
Date:  2016–03 
URL:  http://d.repec.org/n?u=RePEc:eth:wpswif:16234&r=cmp 
By:  Katarzyna Maciejowska; Arkadiusz Jedrzejewski; Anna KowalskaPyzalska; Rafal Weron 
Abstract:  Empirical studies suggest that wordofmouth (WOM) strongly influences the innovation diffusion process and is responsible for the 'S' shape of the adoption curve. However, it is not clear how WOM affects demand curves for innovative products and strategic decisions of producers. Using an agentbased model of innovation diffusion, which links consumer opinions with reservation prices, we show that a relatively strong WOM effect can lead to the creation of two separated pricequantity regimes, with a nonlinear transition between them. A small shift of the product's market price can result in a drastic change of the demanded quantity and, hence, the revenues of a firm. Using Monte Carlo simulations and meanfield treatment we demonstrate that WOM may have ambiguous consequences and should be taken into account when designing marketing strategies. 
Keywords:  Wordofmouth; Innovation diffusion; Agentbased model; Demand curve; Marketing strategy 
JEL:  C63 O33 Q55 
Date:  2016–03–10 
URL:  http://d.repec.org/n?u=RePEc:wuu:wpaper:hsc1604&r=cmp 
By:  Prieto, Francisco J.; Martín Barragán, Belén; Liu, Ling 
Abstract:  The objective functions of Support Vector Machine methods (SVMs) often includeparameters to weigh the relative importance of margins and training accuracies.The values of these parameters have a direct effect both on the optimal accuraciesand the misclassification costs. Usually, a grid search is used to find appropriatevalues for them. This method requires the repeated solution of quadraticprograms for different parameter values, and it may imply a large computationalcost, especially in a setting of multiclass SVMs and large training datasets. Formulticlass classification problems, in the presence of different misclassificationcosts, identifying a desirable set of values for these parameters becomes evenmore relevant. In this paper, we propose a partial parametric path algorithm, basedon the property that the path of optimal solutions of the SVMs with respect tothe preceding parameters is piecewise linear. This partial parametric path algorithmrequires the solution of just one quadratic programming problem, and anumber of linear systems of equations. Thus it can significantly reduce the computationalrequirements of the algorithm. To systematically explore the differentweights to assign to the misclassification costs, we combine the partial parametricpath algorithm with a variable neighborhood search method. Our numerical experimentsshow the efficiency and reliability of the proposed partial parametricpath algorithm. 
Keywords:  Variable neighborhood search; Partial parametric path algorithm; Piecewise linearity; Multiclass SVM 
Date:  2016–02 
URL:  http://d.repec.org/n?u=RePEc:cte:wsrepe:22390&r=cmp 
By:  Arango, Carlos; Bouhdaoui, Yassine; Bounie, David; Eschelbach, Martina; Hernandez, Lola 
Abstract:  Despite various payment innovations, today, cash is still heavily used to pay for lowvalue purchases. This paper proposes a simulation model based on two optimal cash management and payment policies in the payments economics literature to explain cash usage. First, cash is preferred to other payment instruments whenever consumers have enough balances at hand. Second, it is optimal for consumers to hold a stock of cash for precautionary reasons. Exploiting survey payment diaries from Canada, France, Germany and the Netherlands, the results of the simulations show that both optimal policies are well suited to understand the high shares of lowvalue cash payments in Canada, France and Germany. Yet, they do not perform as well in the case of the Netherlands, overestimating the share of lowvalue cash payments. We discuss how the differences in payment markets across countries may explain the limitations of the two optimal policies. 
Keywords:  cash management, payment choices, international comparison 
JEL:  C61 E41 E47 
Date:  2015–11–25 
URL:  http://d.repec.org/n?u=RePEc:bof:bofrdp:urn:nbn:fi:bof201511251450&r=cmp 
By:  Breugem, T.; Dollevoet, T.A.B.; van den Heuvel, W. 
Abstract:  We propose a new FPTAS for the multiobjective shortest path problem. The algorithm uses elements from both an exact labeling algorithm and an FPTAS proposed by Tsaggouris and Zaroliagis (2009). We analyze the running times of these three algorithms both from a the oretical and a computational point of view. Theoretically, we show that there are instances for which the new FPTAS runs an arbitrary times faster than the other two algorithms. Fur thermore, for the biobjective case, the number of approximate solutions generated by the proposed FPTAS is at most the number of Paretooptimal solutions multiplied by the number of nodes. By performing a set of computational tests, we show that the new FPTAS performs best in terms of running time in case there are many dominated paths and the number of Paretooptimal solutions is not too small. 
Keywords:  Shortest Path Problem, MultiObjective Optimization, FPTAS, Complexity Analysis 
Date:  2016–02–02 
URL:  http://d.repec.org/n?u=RePEc:ems:eureir:79908&r=cmp 
By:  Roberto Roson (Department of Economics, University Of Venice Cà Foscari); Martina Sartori (Department of Economics, University Of Trento) 
Abstract:  Climate change damage (or, more correctly, impact) functions relate variations in temperature (or other climate variables) to economic impacts in various dimensions, and are at the basis of quantitative modeling exercises for the assessment of climate change policies. This document provides a summary of results from a series of metaanalyses aimed at estimating parameters for six specific damage functions, referring to: sea level rise, agricultural productivity, heat effects on labor productivity, human health, tourism flows and households' energy demand. All parameters of the damage functions are estimated for each of the 140 countries and regions in the GTAP9 dataset. To illustrate the salient characteristics of our estimates, we approximate the change in real GDP for the different effects, in all regions, corresponding to an increase in average temperature of +3°C. After considering the overall impact, we highlight which factor is the most significant one in each country, and we elaborate on the distributional consequences of climate change. 
Keywords:  Climate change, integrated assessment, computable general equilibrium, damage function, climate impacts 
JEL:  C68 C82 D58 Q51 Q54 
Date:  2016 
URL:  http://d.repec.org/n?u=RePEc:ven:wpaper:2016:06&r=cmp 
By:  Andrea Roventini (Laboratory of Economics and Management (Pisa) (LEM)); Maria Enrica Virgillito; Manoela Carrera Pereira (Universidade Estadua del Campinas); Giovanni Dosi (Laboratory of Economics and Management) 
Abstract:  Wages are an element of cost crucially affecting the competitiveness of individual rms. But the wage bill is also a crucial element of aggregate demand. Hence it could be that more “flexible"and fluid labour markets, while allowing for faster interfirm reallocation of labour, may also render the whole economic system more fragile, more prone to recession, more volatile. In this work we investigate some conditions under which such a conjecture applies. The paper presents an agentbased model that investigates the effects of two “archetypes of capitalism", in terms of regimes of labour governance  defined by the mechanisms of wage determination, firing, labour protection and productivity gains sharing  upon (i) labour market regularities and (ii) macroeconomic dynamics (longterm rates of growth, GDP fluctuations, unemployment rates, inequality, etc..). The model is built upon the \Keynes meets Schumpeter" family of models (Dosi et al.,2010), explicitly incorporating different microfounded labour market regimes. Our results show that seemingly more rigid labour markets and labour relations are conducive to coordination successes with higher and smoother growth. 
Keywords:  Involuntary unemployment; Aggregate demand; Wage determination; Labour market regimes; Keynesian coordination failures; Agent based models 
JEL:  C63 E2 E12 E24 
Date:  2016–03 
URL:  http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/9d007rc2q9huruni0kde2vr73&r=cmp 