Use of decision modeling for substitution analysis: Application to acceptance of new electricity-generating technologies

Substitution theory is a trend forecasting technique which purports to forecast the rate of replacement of one product or technology for another. Most existing methods describe substitutions in which one item is substituting for another. The rate of substitution is usually determined by an S-shaped function based mainly on the rate of the substitution in its early stages. This paper presents an alternative approach, decision modeling, which not only expands the area of application to multiple substitutions occuring simultaneously but can also treat cases where new substitutions have not yet begun. An application to the substitution of new electricity generating technologies is discussed in detail.     

Combined forecast process: Combining scenario analysis with the technological substitution model

Forecasts can be improved by combining separate forecasts obtained by different methods. The complementary nature of the scenario analysis and technological substitution models means that combining the two can obtain improved forecasts. The former has the strength of dealing with the uncertain future, while the later offers data-based forecasts of quantifiable parameters. This study thus proposes a process for combining the scenario analysis with the technological substitution model for discussing new generation technological developments. The proposed process not only has the strengths of scenario analysis, but also contains features that scenario analysis lacks, including predicting annual developments for future years, considering old technology development, and forecasting substitution of old technologies. This study uses the forecast of the market share of Fiber to the x in Taiwan over the next ten years as an example illustrating the proposed combined forecast process.     

A note on the diffusion of innovation

The paper deals with the process of substitution between technologies in a framework of increasing returns to scale. The approach stresses the interaction between capacity expansion and market demand as explanations of the diffusion of technologies into their niches. The demand and supply sides of the diffusion process are therefore brought together to determine simultaneously patterns of output and prices.It analyzes the dynamics of the substitution path, where a logistic diffusion process for the new technology is assumed, and determines the substitution curve between the old technology and the new one.     

Assessing market penetration combining scenario analysis, Delphi, and the technological substitution model: The case of the OLED TV market

The technological substitution model, proposed in 1971, was designed to analyze the penetration process of new-generation technologies replacing old ones. It was expanded in 1979 to consider more than two generations and the substitution process among various entities in the market. However, this expanded model is often limited by a relative lack of data on the latest-generation technology.On the other hand, scenario analysis, as another breed to forecasting tool, provides rich and complex portraits of possible future development of technologies. However, it fails to provide quantifiable forecasts. Therefore, previous researchers combined these two methods to analyze the development of new technologies.Nevertheless, to make forecasting more holistic, the current opinions of seasoned experts should also be taken into account. However, because of the often-diverged expert opinions, a method for consensus building, such as the Delphi method, is also necessary. Therefore, we combined the scenario analysis with the Delphi method and the technological substitution model to analyze the development of a new technology, namely, the latest-generation television (TV), or the organic light-emitting diode (OLED) TV. We elaborate three possible scenarios, and forecast the market share of OLED TV and four other TV technologies in the global market over the next 10 years: cathode ray tube, rear projection, plasma display panel, and liquid crystal display.     

Substitution models for technology-fostered new production inputs

In this article an interpretative model has been developed to explain market penetration of technology- fostered new production inputs. The resulting market share model has been analyzed to assess suitability to the case of multiple substitution. It has been generalized to take into account the effect of prices, of other economic factors, and of the “pipeline effect” caused by inventories.The model has been applied to two important textile inputs: acrylic and polyester staple. Consumption of these goods has been accurately explained and the model appears to be sound with respect to important structural changes of the market.     

在位企业非连续性技术变革的技术代际桥研究

非连续性技术变革给在位企业带来巨大挑战，要求在位企业克服新技术研发困难和自身潜在惰性进行积极响应，在与新进入企业市场竞争中获取持续竞争优势，化解熊彼特提出的破坏性创新威胁。整合社会网络理论、知识管理理论及创新管理理论，以65家汽车综合型整车在位制造企业为样本，通过搭建发明家桥、合作研发桥、混合技术桥等3个维度的技术代际桥，探讨在位企业如何在维持两代技术阶段性平衡的前提下提高新技术创新绩效。结果发现：发明家桥与企业新技术创新绩效呈倒U型关系；合作研发桥和混合技术桥对企业新技术创新绩效具有显著促进作用；旧技术创新绩效负向调节发明家桥与新技术创新绩效的倒U型关系。研究旨在为在位企业应对非连续性技术变革，提高新技术创新绩效提供相应的对策建议。     

On delayed technological shifts

When a new technology capable of superseding an existing one appears, we sometimes observe the so-called sailing-ship effect, which consists of the old technology's improvements in response to the emergence of the new one. This helps explain why the old technology does not disappear quickly. However, some more aspects contribute to slowing down the process of substitution of the new for the old technology, such as users’ reluctance to switch to the new one, the degree of diffusion of the old technology, and other forces. In this work, we provide a formal model which takes into account both the technical improvements of the old technology as well as the other forces, where the latter are synthesised in what we define as a memory effect.     

对中国“知识失业”成因的一个解释

许多国家的经验表明,在教育快速发展的过程中往往伴随着“知识失业”。近年来,我国在经历教育快速发展的同时,也开始面临这样的问题。本文以扩展的工作搜寻模型为框架,分析了当前“知识失业”产生的原因。根据分析结果,现阶段出现的“知识失业”,在很大程度上是由劳动力市场的制度性分割引起的,因此应该逐步消除劳动力市场的制度性分割,鼓励大学毕业生到西部和农村等次要劳动力市场上就业,在确定高等教育的发展规模时要适当考虑劳动力市场的发育状况。     

An integer-based blackman innovation index: Hypothesis,evidence, and implications

Blackman, Seligman, and Sogliero [4] factor analyzed U.S. industrial data on innovation-related variables and defined an “innovation index.” This index was strongly correlated with a parameter which measures the propensity of an industrial sector toward adoption of new technology within the classic Mansfield market substitution model [7].Extension of their analysis to cover a 22-year period, along with consideration of certain methodological issues, suggests that the index values for industries in their data base are not free to vary continuously. Instead, the innovation index for each of the industries can be linked with some fundamental value which lies at an integral number of units (i.e., 0, 1, 2, or 3) above an absolute zero. Such an integer structure may signal the existence of fundamental, quantitative relationships between the behaviors of diverse sectors toward innovation— including both research and development effort and adoption of new technology. Understanding such relationships should prove relevant both to efforts to enhance innovation in the private sector and to evaluating proposals for selective emphasis on particular sectors as part of any national “industrial policy.”     

Generalized Lotka-Volterra equations and the mechanism of technological substitution

This paper demonstrates that if technological substitution is viewed as the result of competition between old and new technology in which new technology wins, and if generalized Lotka-Volterra equations are taken to describe this competition, then various models of technological substitution can be obtained as very special cases. It is argued that this could lead to a better understanding of the substitution process itself.     

Market Entry Regulation and International Competition*

We analyze a non‐cooperative two‐country game where each government decides whether to allow free market entry of firms or to regulate market access. We show that a Pareto‐efficient allocation may result in equilibrium. In particular, if the cost difference between home and foreign production is “significant,” production will be located in the cost‐efficient country exclusively; and if this cost difference is even “substantial,” the induced allocation is also Pareto efficient. Only if the cost difference is “insignificant,” production may take place in both countries and the allocation is inefficient.     

The Dowry Gift in South Asia: An Institution on the Intersection of Market and Patriarchy

Abstract

Dowry refers to marriage gifts that are instrumental to the negotiation of the marriage contract. Historically, the dowry gift was constituted by law across the Roman empire. While dowry has become largely irrelevant in Europe in contemporary times, it is still pervasive across the Brahmanical Hindu societies of South Asia. Moreover, what was traditionally token gifts from friends and well-wishers has taken on the form of “new dowry” since the colonial period. “New dowry” is heavily composed of cash and market goods, including land and is frequently accompanied by violence against new brides when their families fail to make larger dowry gifts with higher market value. This article examines the evolution of “new dowry” through a Polanyian lens. Unlike the neoclassical Beckerian approach which takes an ahistorical outlook to marriage as a “market” for matching partners and dowry as a market price, the substantivist lens à la Polanyi investigates the historical evolution of “new dowry” through the advent of market processes in the colonial period and the countermovement of legal reform in the post-colonial period.     

The Production Boundary Reconsidered

Hill and Hawrylyshyn rediscovered a classical contribution made by Margaret Reid as early as 1934, known now as the “third party criterion.” The general production boundary in SNA 1993 is defined by using this criterion. They considered that the property of “delegability” was the key to the concept of economic production. That is, an activity is called production in an economic sense if it can be delegated to another economic unit. The author calls due attention to the fact that the SNA includes another criterion, which he tentatively calls “World 1 criterion” meaning that an activity is called economic production only when it is a physical process, where the term World 1 is due to Karl Popper. It is claimed that this criterion can generate a more appropriate general production boundary for the SNA if it is used with “role‐exchangeability” criterion, another new criterion.     

Evaluating the potentials of technical cooperation among developing countries

The main purpose of this article is to show that “there are optimal partners for technology transfer to be most effective,” and for many countries this may, in fact, mean looking for “technical cooperation among developing countries (TCDC).” In this article a technology transfer model has been presented, in relatively simple mathematical form, which incorporates both the dynamic and the spatial aspects of the innovation diffusion process. The existing models of technological change at a particular location, i.e., technological substitution, are shown to be special cases of the developed time-level model of technology transfer. The model has been applied to evaluate the international transfer potentials of the “computerization” technology. Optimal partners are identified and the prospects for TCDC has been evaluated. Model usefulness and related policy implications have been discussed in detail.     

The Impossibility of Entrepreneurship Under the Neoclassical Framework: Open vs. Closed-Ended Processes

In spite of its use to explain market processes, neoclassical economics still has not integrated entrepreneurship into its analyses. This explanatory gap is the consequence of the analytical closed-endedness of the “market” processes described by the neoclassical framework, where social interactions do not result in new unpredictable information. However, entrepreneurship as profit-seeking under uncertainty is an open-ended process characterized by a creatively reflexive and emergent interactive behavior in society. This open-endedness involves the generation of novel, complex, and extensive future information that is not what anyone intended it to be. Neoclassical economics, with its predetermined assumptions on economic behavior, cannot really account for the fundamental uncertainty of open-ended processes because it cannot explain reflexivity or emergence. Therefore, it cannot explain entrepreneurship as either an innovatively cohesive or disruptive behavior that converges toward future market situations.     

Hitting SKEW for SIX

In this study, we propose “SIX” as a new forward-looking index of negative market skew derived from state-preference pricing. Specifically, SIX is a forecast of the ratio of lower to upper partial moment volatility over a 30-day horizon, for SPX market returns. Using SPX options data from 1996 to 2013, we conduct a comparison between SIX and the CBOE SKEW index. First, we document that the daily change in VIX and SIX (SKEW) are negatively (positively) related. Second, we show that the daily change of SIX (SKEW) adds (does not add) significant explanatory power for predicting the one-day ahead return. Third, though biased, SIX produces an efficient forecast of future physical skewness. In contrast, there is no statistically significant relationship between SKEW and physical skewness. Collectively, our results suggest that as an indicator of institutional anxiety, both theoretically and in practice, SIX (SKEW) is a more than useful (questionable) complement to VIX.     

Stochastic dominance and behavior towards risk: The market for Internet stocks

Internet stocks registered large gains in the late 1990s, followed by large losses from early 2000. Using stochastic dominance theory, we infer how investor risk preferences have changed over this cycle, and relate our findings to utility theory and behavioral finance. Our major findings are as follows. First, risk averters and risk seekers show a distinct difference in preference for Internet versus “old economy” stocks. This difference is most evident during the bull market period (1998–2000) where Internet stocks stochastically dominate old economy stocks for risk seekers but not risk averters. In the bear market, risk averters show an increased preference for old economy stocks, while risk seekers show a reduced preference for Internet stocks. These results are inconsistent with prospect theory and indicate that investors exhibit reverse S-shaped utility functions.     

Pricing to Firm: an Analysis of Firm‐ and Product‐level Import Prices*

We use Hungarian Customs data on product‐level imports of manufacturing firms to document that the import price of a particular product varies substantially across buying firms. We relate the level of import prices to firm characteristics such as size, foreign ownership, and market power. We develop a theory of “pricing to firm” (PTF), where markups depend on the technology and competitive environment of the buyer. The predictions of the model are confirmed by the data: import prices are higher for firms with greater market power, and for more essential intermediate inputs (with a high share in material costs). We take account of the endogeneity of the buyer’s market power with respect to higher import prices and unobserved cost heterogeneity within product categories. The magnitude of PTF is big: the standard deviation of price predicted by PTF is 21.5%.     

Old (Chicago) school,new century: the link between Knight and Simons’ Chicago plan to Buchanan’s constitutional money

James Buchanan had long been a champion of the early Chicago school’s emphasis on the essential role that institutions play in framing the market process. In his post-2009 analysis of the financial crisis, Buchanan echoed his old Chicago mentors like Frank Knight and Henry Simons in arguing that the Great Recession, like all previous financial crises, was primarily a failure of the rules governing our monetary-financial system. This “old Chicago” emphasis on the institutional “rules of the game” formed the basis of his essential post-2009 argument that the financial crisis fundamentally represented not a market failure, per say, but a constitutional failure. In this paper, I connect the dots in Buchanan’s post-2009 analysis of the Great Recession and his reaffirmation of the need for “constitutional money” to his old Chicago mentor’s strikingly similar calls for a radical restructuring of the monetary-financial system in the Chicago Plan of the 1930s. Though Buchanan’s twenty-first century resurrection of these ideas has yet to conjure up the academic support of his predecessors, certain elements of his “old school” monetary-financial reforms have experienced a strong revival since the financial crisis, as has Buchanan’s more general call to “constitutionalize money.”     

Efficient indirect regulation under Protection for Sale

Regulatory intervention is necessary to overcome market failures. However, this kind of intervention may also create Protection for Sale conditions in the market—which might, in turn, lead to an inefficient resource allocation. This paper examines the effect of an indirect intervention on regulated market welfare under Optimal Regulation and Protection for Sale conditions. Although under Optimal Regulation conditions there is zero welfare-loss as it derives from Differential Price Policy (DPP), it seems that under substantial Protection for Sale conditions this price policy increases the welfare-loss, and therefore a Uniform Price Policy (UPP) might achieve a smaller welfare-loss—due to the “free-riding” effect. Furthermore, this paper suggests that in between these two price policies lays a third option, a Combined Price Policy, that can balance between the accurate resource allocation (DPP) and the political pressure reduction (UPP) in order to reduce the welfare-loss and to increase the market efficiency.