Component efficient solutions in line-graph games with applications

Recently, applications of cooperative game theory to economic allocation problems have gained popularity. We investigate a class of cooperative games that generalizes some economic applications with a similar structure. These are the so-called line-graph games being cooperative TU-games in which the players are linearly ordered. Examples of situations that can be modeled like this are sequencing situations and water distribution problems. We define four properties with respect to deleting edges that each selects a unique component efficient solution on the class of line-graph games. We interpret these solutions and properties in terms of dividend distributions, and apply them to economic situations. This research has been done while the third author was visiting Tinbergen Institute at the Free University, Amsterdam. The research is part of the Research Programme “Strategic and Cooperative Decision Making” at the Department of Econometrics. Financial support from the Netherlands Organization for Scientific Research (NWO) in the framework of the Russian-Dutch programme for scientific cooperation, is gratefully acknowledged. The third author also appreciates partial financial support from the Russian Leading Scientific Schools Fund (grant 80.2003.6) and Russian Humanitarian Scientific Fund (grant 02-02-00189a). We thank three anonymous referees for their valuable comments.     

Membership size in the educable cooperative facing uncertain demand

This article explicitly incorporates layoff and hiring costs into a discretetime dynamic model with stationary demand uncertainty, in which managers in a cooperative learn something about the demand process over time, and anticipate learning something about that process. It is shown how the opportunity to learn affects initial membership size and how the knowledge gained induces changes in membership, as well as how risk preferences impact on membership size at any point in time.     

Morphogenetic economics: Change- amplification by causal loops

The monetarist, Keynesian, and supply side theories are based on the concept of equilibria. But in reality the relations among variables may build causal loops that are change-amplifying. The morphogenetic economic the ory includes in its analysis both change-amplifying and change-counteracting causal loops. In the existing economic theories, the major policy tools are money supply and government expenditure. But in the morphogenetic economics, some other elements can be seen as effective policy tools, depending on the node factor, the velocity, and the strength of the causal loops they belong to. The present overdependence on money supply or government expenditure as main tools of economic policy is inadequate. Furthermore, the morphogenetic economics differs from the existing economic theories in its calculation of the level of equilibria and of crowdingout effects.     

Decomposing Redistributive Effects of Taxes and Transfers in Australia: Annual and Lifetime Measures

This paper decomposes the redistributive effect on annual and lifetime inquality of a range of taxes and transfers in Australia, using a dynamic cohort lifetime simulation model. The redistributive effect is decomposed into vertical, horizontal and reranking effects. Horizontal inequities in the tax and transfer system are found to be negligible. The extent of reranking is greater in the lifetime than in the annual context and is affected by the equivalence scales used to adjust household incomes. If no adjustment is made to household incomes, reranking is about nine per cent of the reduction in lifetime inequality. However, if each child is counted as equivalent to one-third of an adult, reranking is found to be less than one per cent.     

Interpretive structural modeling—A useful tool for technology assessment?

Interpretive Structural Modeling (ISM) is a computer based technique for helping small groups develop graphical representations of complex systems. In this paper, the rationale for the use of Interpretative Structural Modeling in activities such as technology assessment is developed and the basic concepts underlying the technique are explored. Several applications of ISM are described and from these experiences some observations are made about the nature and effectiveness of the ISM process and product. ISM was found to provide its users with a systematic and comprehensive method for integrating group judgments in the development of “first-cut‘ structural models. At the same time, however, the technique was found to be relatively inflexible and may, in some instances, inhibit group processes. Possible directions for the development of less rigid methods are suggested.     

Evolution of harvesting strategies: replicator and resource dynamics

Abstract. Economic theories of managing renewable resources, such as fisheries and forestry, traditionally assume that individual harvesters are perfectly rational and thus able to compute the harvesting strategy that maximizes their discounted profits. The current paper presents an alternative approach based on bounded rationality and evolutionary mechanisms. It is assumed that individual harvesters face a choice between two harvesting strategies. The evolution of the distribution of strategies in the population is modeled through a replicator dynamics equation. The latter captures the idea that strategies yielding above average profits are demanded more than strategies yielding below average profits, so that the first type ends up accounting for a larger part in the population. From a mathematical perspective, the combination of resource and evolutionary processes leads to complex dynamics. The paper presents the existence and stability conditions for each steady-state of the system and analyzes dynamic paths to the equilibrium. In addition, effects of changes in prices are analyzed. A main result of the paper is that under certain conditions both strategies can survive in the long-run. Correspondence to: J. Noailly