nep-cmp New Economics Papers
on Computational Economics
Issue of 2016‒03‒29
seven papers chosen by
Stan Miles
Thompson Rivers University

  1. Vertical fiscal externalities and the environment By Christoph Böhringer; Nicholas Rivers; Hidemichi Yonezawa
  2. Impact of social interactions on demand curves for innovative products By Katarzyna Maciejowska; Arkadiusz Jedrzejewski; Anna Kowalska-Pyzalska; Rafal Weron
  3. A Partial parametric path algorithm for multiclass classification By Prieto, Francisco J.; Martín Barragán, Belén; Liu, Ling
  4. Cash management and payment choices: a simulation model with international comparisons By Arango, Carlos; Bouhdaoui, Yassine; Bounie, David; Eschelbach, Martina; Hernandez, Lola
  5. Analysis of FPTASes for the Multi-Objective Shortest Path Problem By Breugem, T.; Dollevoet, T.A.B.; van den Heuvel, W.
  6. Estimation of climate change damage functions for 140 regions in the GTAP9 database By Roberto Roson; Martina Sartori
  7. When more flexibility yields more fragility : the microfoundations of keynesian aggregate unemployment By Andrea Roventini; Maria Enrica Virgillito; Manoela Carrera Pereira; Giovanni Dosi

  1. By: Christoph Böhringer (University of Oldenburg); Nicholas Rivers (University of Ottawa); Hidemichi Yonezawa (ETH Zurich, Switzerland)
    Abstract: We show that imposition of a state-level environmental tax in a federation crowds out pre-existing federal taxes. We explain how this vertical fiscal externality can lead unilateral state-level 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
  2. By: Katarzyna Maciejowska; Arkadiusz Jedrzejewski; Anna Kowalska-Pyzalska; Rafal Weron
    Abstract: Empirical studies suggest that word-of-mouth (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 agent-based 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 price-quantity 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 mean-field treatment we demonstrate that WOM may have ambiguous consequences and should be taken into account when designing marketing strategies.
    Keywords: Word-of-mouth; Innovation diffusion; Agent-based model; Demand curve; Marketing strategy
    JEL: C63 O33 Q55
    Date: 2016–03–10
  3. 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. Formulti-class 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; Multi-class SVM
    Date: 2016–02
  4. 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 low-value 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 low-value cash payments in Canada, France and Germany. Yet, they do not perform as well in the case of the Netherlands, overestimating the share of low-value 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
  5. By: Breugem, T.; Dollevoet, T.A.B.; van den Heuvel, W.
    Abstract: We propose a new FPTAS for the multi-objective 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 bi-objective case, the number of approximate solutions generated by the proposed FPTAS is at most the number of Pareto-optimal 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 Pareto-optimal solutions is not too small.
    Keywords: Shortest Path Problem, Multi-Objective Optimization, FPTAS, Complexity Analysis
    Date: 2016–02–02
  6. 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 meta-analyses 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
  7. 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 inter-firm 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 agent-based 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 (long-term 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

This nep-cmp issue is ©2016 by Stan Miles. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.