Allocation inequality in cost sharing problem

This paper considers the problem of cost sharing, in which a coalition of agents, each endowed with an input, shares the output cost incurred from the total inputs of the coalition. Two allocations—average cost pricing and the Shapley value—are arguably the two most widely studied solution concepts to this problem. It is well known in the literature that the two allocations can be respectively characterized by different sets of axioms and they share many properties that are deemed reasonable. We seek to bridge the two allocations from a different angle–allocation inequality. We use the partial order: Lorenz order (or majorization) to characterize allocation inequality and we derive simple conditions under which one allocation Lorenz dominates (or is majorized by) the other. Examples are given to show that the two allocations are not always comparable by Lorenz order. Our proof, built on solving minimization problems of certain Schur-convex or Schur-concave objective functions over input vectors, may be of independent interest.     

Cooperative game with nondeterministic returns

We study a non-traditional cooperative game where returns from coalitions are nondeterministic. The long-standing concept of core can be generalized to reflect players’ contentment with their allocations. It is now imperative to formalize the restrictions, such as those pertaining to information, on allocations. The latter are also at times more conducive to fractional representations. With probabilistic structures added, nondeterministic returns become random variables, utility functions attain risk-attitude connotations, and the timing of players’ allocation resolutions gains significance. Under various conditions for utility functions, we show how various core concepts of the general game can be related to its traditionally defined auxiliaries. These developments help pave the way for our illustrations, within two distinct settings, that players’ increased risk aversion would promote the formation of the grand coalition.     

The hybrid equilibria and core selection in exchange economies with externalities

This paper introduces a hybrid equilibrium concept that combines the elements of cooperative and non-cooperative behaviors in an exchange economy with externalities. For a fixed coalition structure (or a partition of traders), the hybrid equilibrium is a price and consumption bundle such that each coalition chooses a core solution from its budget set and the consumption bundles are feasible. It becomes the competitive equilibrium when the position is the finest, and it selects a core allocation when the partition is the coarsest. The paper provides sufficient conditions for the existence of a hybrid equilibrium for any coalition structure.     

A core equivalence theorem with an arbitrary communication structure

We formalize the concept of a communication structure by identifying it with a partition of the set of agents. Thus, a coalition can form if and only if it belongs to the given partition. Within this framework we are able to show that for every integer J≧2, if we put the uniform distribution on the space of partitions that contain exactly (or, no more than) J coalitions, the probability that such a partition will contain a blocking coalition for any Pareto optimal allocation which is bounded away from being competitive, is arbitrarily close to 1, as the number of individuals increases.     

中部地区金融资源有效配置的路径优化研究

金融资源的有效配置能够发挥金融资源功能,提高资金使用效率,促进经济结构的调整进而提高社会全要素生产率。由于受政策制度、初始经济条件以及效益指标等诸多因素影响,我国中部地区的金融资源在配置过程中呈现出失配、错配等非均质现象,金融资源无法释放其全部潜力,造成资金供需不均衡,有效供给严重不足等问题,金融能量很大程度上被抑制。为提升中部地区金融资源配置效率,应调整存量、优化增量,化解政策、市场、利益等单方面约束,选择差异性、多样性等不同层次的路径,促进金融资源有效应用,从而保障社会经济持续、稳定、和谐发展。     

Power and efficiency in production pillage games

A pillage game is a formal model of Hobbesian anarchy as a coalitional game. The technology of pillage is specified by a power function that determines the power of each coalition as a function of its members and their wealth. A coalition can despoil any other coalition less powerful than itself. The present paper studies the problem of achieving an efficient allocation of resources when the required reallocation changes the distribution of power. For example, land redistribution may increase total production, but may also deprive the original owners of the power they need to compel compensation. In this case the original owners would block the redistribution. Previous work on pillage games has focused on the stable set (von Neumann–Morgenstern solution) as a representation of a stable balance of power. However, the balance of power is typically too delicate to support all efficient allocations. The present paper shows that for a large class of power functions, a recently developed extension of the stable set, called the legitimate set, can be rich enough to support all efficient allocations.      

Owner-occupied housing in a model of exchange rate determination

This study explores the effect of owner-occupied housing asset holdings on the short and long run determination of exchange rates. In the presence of consumption goods that can simultaneously serve as investment allocation subject to capital gains—such as owner-occupied housing—the general equilibrium model, based on the Obstfeld and Rogoff Redux model, produces exchange rate overshooting both in the presence and in the absence of price rigidities in the markets for final goods. This effect depends on the size of owner-occupied housing expenditures relative to total consumption expenditures, the initial level of housing market inflation, capital gains in housing and other parameters of the model. Depending on parameter values and initial conditions, the model supports the possibility for exchange rate dynamics that include either overshooting or undershooting.     

An equivalence theorem for a differential information economy

In a pure exchange economy with differential information and a finite set of traders, physical commodities and states of nature, we characterize the Walrasian expectations or Radner equilibria by using the veto power of the grand coalition. We prove that an allocation x is a Radner equilibrium allocation if and only if it is “privately non-dominated” by the grand coalition in every economy obtained by perturbing the original initial endowments in the direction of x. The first and second welfare theorems become particular cases of our main result. Since the deterministic Arrow–Debreu–McKenzie model is a special case of the differential information economy model we also provide a new characterization of the Walrasian equilibria.     

Time horizons matter: the hazard rate of coalition governments and the size of government

This study examines how coalition governments affect the size of government, measured by total central government expenditure as a share of GDP. Existing studies suggest that the presence of multiple political parties within ruling coalitions generate common pool resource problems or bargaining inefficiencies which, in turn, leads to more government spending when coalition governments are in office. We demonstrate that coalition governments have shorter time horizons than single party governments and use that finding to motivate a simple formal model. The model shows that coalition governments have greater incentives to increase government spending because of a lower discount factor in office. Results from empirical models estimated on a global sample of 111 democracies between 1975 and 2007 provide strong statistical support for the aforementioned theoretical prediction. The empirical results remain robust when we control for alternative explanations, employ different estimation techniques, and use different measures of government spending.     

Forecasting crude oil futures market returns: A principal component analysis combination approach

To improve the predictability of crude oil futures market returns, this paper proposes a new combination approach based on principal component analysis (PCA). The PCA combination approach combines individual forecasts given by all PCA subset regression models that use all potential predictor subsets to construct PCA indexes. The proposed method can not only guard against over-fitting by employing the PCA technique but also reduce forecast variance due to extensive forecast combinations, thus benefiting from both the combination of information and the combination of forecasts. Showing impressive out-of-sample forecasting performance, the PCA combination approach outperforms a benchmark model and many related competing models. Furthermore, a mean–variance investor can realize sizeable utility gains by using the PCA combination forecasts relative to the competing forecasts from an asset allocation perspective.     

Stock volatility and trading

Both, rational and behavioral models predict that stock and market volatility affect trading by investors. Tax-induced trading hypothesis predicts that investors increase realization of capital losses short term and capital gains only long term as volatility increases. Behavioral models predict that disposition biases of holding on to losers and disposing of winners intensifies with volatility. We document that market and stock volatility influence stock trading. Evidence on trading in response to rise in market volatility supports tax-loss harvesting hypothesis – abnormal trading of losers increases and winners decreases. However, evidence on trading patterns conditional on individual stock volatility is in support of both tax-loss-harvesting and behavioral models: trading in both losing stocks (tax-loss-harvesting hypothesis) and winning stocks (disposition effect hypothesis) increases with rise in stock volatility.     

Explaining momentum profits with an epidemic diffusion model

We show that information diffusion is a function of its dissemination and assimilation. Whereas dissemniation is a function of observable factors such as volume and price volatility, assimilation is dependent on unobservable factors such as the usefulness and reliability of information. We find that buying low volume (or low volatility) past losers and shortselling low volume (or low volatility) past winners generates a positive net return across the entire sample period and especially during bear markets. Second, buying high volatility past winners and shortselling high volatility past losers generates a positive net return, especially during bear markets.     

Equity–Efficiency Optimizing Resource Allocation: The Role of Time Preferences in a Repeated Irrigation Game

We study repeated water allocation decisions among small scale irrigation users in Tanzania. In a treatment replicating water scarcity conditions, convexities in production make that substantial efficiency gains can be obtained by deviating from equal sharing, leading to an equity–efficiency trade‐off. In a repeated game setting, it becomes possible to reconcile efficiency with equity by rotating the person who receives the largest share, but such a strategy requires a longer run perspective. Correlating experimental data from an irrigation game with individual time preference data, we find that less patient irrigators are less likely to use a rotation strategy.     

The economic benefits of market timing the style allocation of characteristic-based portfolios

Many exchange traded funds track simple characteristic-based equity portfolios such as the market capitalization, the fundamental value or the inverse volatility portfolio. This paper provides theoretical and empirical evidence for the economic benefits in exploiting the timing-gains that result from the time-varying relative performance of these characteristic-based portfolios. Under a factor model for expected returns, we show that this dynamic portfolio allocation can be efficient across the low-dimensional set of characteristic-based portfolios. We assess the out-of-sample performance on the S&P 100 universe over the period 1990–2013 and show gains in stability and significant positive risk-adjusted returns for the dynamic style portfolio. We conduct several robustness tests and extensions confirming the benefits of dynamic style allocation across characteristic-based portfolios.     

Intergenerational risk shifting through social security and bailout politics

This paper adopts a stochastic overlapping generations framework to analyze the allocation of aggregate financial risks under different social security systems and a majority voting rule. We study whether there will be switches between pay-as-you-go (PAYG) and fully funded (FF) systems in such an economy. We show that in case of a negative aggregate shock, low-income young individuals will form a political coalition with the elderly to implement a PAYG system. PAYG scheme is shown to persist even after a good aggregate shock if the system is redistributive enough.     

Improving fuel utilization in steel mill operations using linear programming

This paper describes the use of linear programming to improve the fuel utilisation at a major Midwestern steel mill. In particular, linear programming is used to determine an efficient fuel allocation plan for this steel mill, which reduces the total fuel costs for the steel mill operations. The efficient fuel allocation plan that is developed utilises two externally purchased fuels: natural gas and fuel oil, and two gases: blast furnace gas and coke plant gas, which are internally generated as natural by-products of the production process. Test results from the application of the linear programming model are presented and discussed, and indicate that considerable cost savings can be achieved by utilizing a fuel allocation plan which more effectively utilizes the by-product gases which are produced within the steel making process.     

Adaptive algorithms for maximizing overall stock return

Deciding which stocks to purchase and how to optimally allocate the total investment among them is a nontrivial task for every investor. In this article, we propose two adaptive techniques that would provide an optimal allocation maximizing the return over the investment period. The first approach is the adaptive power method (PM) which is a modification of the proper orthogonal decomposition method. The adaptive PM uses only the currently available information to compute the optimal allocations, yet its long-term solution approaches the dominant eigen solution, even though that solution would require having a priori knowledge of all stocks’ performance. The second approach is derived from the well-known Least Mean Square (LMS) method, where the optimal allocation can be computed by adaptively steering the overall return toward a desired value. The experimental results have indicated promising gains even when the general market trend is downward.     

Performance lies are hazardous to organizational health

Performance lies arise both from individual and from situational causes, but in this article, the attention is on situational causes. These are generally triggered by loyalty to the coalition, which is expressed through the continued use of performance lies. Because performance lies help create a boundary around the coalition that insulates its activities from top management, performance lies enable members of the coalition to exercise a greater degree of internal control. Naturally, such lies are dysfunctional, resulting in the avoidance of difficult issues and problems and compromising the organization's ability to adapt to a changing environment based on accurate information.     

Tournament performance and “Agency” problems: An empirical investigation of “March madness”

Tournaments have long been used as a resource allocation device. Regardless of the margin of victory, a tournament’s champion is typically rewarded far more handsomely than are its losers. For this reason, a tournament can generally be expected to elicit spectacular levels of performance from a group of competitors; performances in professional golf tournaments are an example. Surprisingly, the analysis in this paper indicates the existence of no significant relationship between the rewards and performances of participants in the NCAA basketball tournament. To explain this finding we allude to the classic principal-agent problem.