A new approach to modeling decision-making under uncertainty

This paper presents two axiomatic models of decision making under uncertainty that avoid the use of a state space. The first is a subjective expected utility model with action-dependent subjective probabilities and effect-dependent preferences (the case of effect-independent preferences is obtained as a special instance). The second is a nonexpected utility model involving well-defined families of action-dependent subjective probabilities on effects and a utility representation that is not necessarily linear in these probabilities (a probabilistic sophistication version of this model, with action-dependent subjective probabilities is obtained as a special case). The hospitality of EUREQua, University of Paris 1, and financial support by the National Science Foundation grant SES-0314249 are gratefully acknowledged.     

A new approach to modeling waste in physical input-output analysis

It is important to treat waste properly in physical input-output analysis and a series of publications discussed this topic in this journal recently. In this paper, we propose a new approach to deal with physical input-output table (PIOT) measured in a single mass unit, by which the structure of PIOT need not be changed. The new approach yields consistent and reasonable results. It not only is simpler than the existing approaches but also can reflect the physical reality of economic systems. We first discuss and clarify the concept of different kinds of inputs and outputs of economic systems. We then present the details of the new approach. During the process we define a new multiplier, which builds a bridge between the total input and the final demand in PIOT, just like the traditional Leontief inverse in MIOT. We select the three-sector PIOT for Germany 1990 as a case study to show the validity of the new approach. Finally, we prove the equivalence between the new approach, Suh's approach and Dietzenbacher's approach and the equivalence of non-waste part and waste part multiplier of the new approach and Dietzenbacher's approach.     

Location choice by households and polluting firms: An evolutionary approach

This paper examines several policy regimes to deal with the problem of households suffering from environmental damage by firms in the same region. We employ an evolutionary framework to analyze migration movements in the course of time, since firms and households will not relocate immediately in response to payoff differentials. We show that taxation gives firms and households an incentive to stay away from each other. Laissez faire (compensation) only gives households (firms) an incentive to stay away from firms (households). We find that taxation creates the right incentives to reach a local welfare maximum. However, when there are multiple local maxima, circumstances may arise under which compensation leads to a better outcome than taxation.     

Collective voluntary agreements to eliminate polluting products

Recently some industries have collectively agreed not to produce models of a product that do not meet an environmental standard. We present a model to examine a voluntary agreement of this type. The conditions under which an agreement is profitable include the stringency of the agreement, the relative performance of the greener product, industry size and the number of participants. While an agreement can be profitable for all firms (both participants and non-participants), i.e., all firms can be better off with the agreement than without it, nonetheless, a free-rider incentive exists. Thus, despite the potential for a profitable agreement, absent an effective enforcement mechanism, the agreement is not part of a Nash equilibrium. We suggest that this provides a possible explanation for the initial success of the European washing machines agreement, as well as a recent move by the industry to abandon the voluntary approaches and call for mandatory standards.     

A theory of mutual migration of polluting firms

Abstract.  Suppose that governments care about their tax revenue and local firms have some say in environmental regulations. Then, the level of employment and environmental compliance may be negotiated. We find that firms located in different countries can improve their threat‐point payoffs by mutual migration. This in turn affects the negotiated output/employment and environmental regulations, which causes profits to increase if the firm's threat‐point payoff is higher than that of the local government. The model predicts that pollution‐intensive firms or firms with highly inelastic demands are more likely to move out. Increases in the government's valuation of the environment, or in the degree of globalization also cause mutual migration of dirty firms. The effect of a government caring about consumer surplus leads to a lower pollution tax, reducing firms' incentives to move out. JEL classification: F2, Q0     

Environmental tariffs on polluting imports

This paper examines the implications for the use of trade measures as weapons to address global environmental concerns. There are already proposals in the U.S. senate to impose an environmental tariff against foreign nations whose cost advantages stem from less stringent environmental standards than the U.S. The paper argues that trade policy measures typically are not the first best instruments for achieving environmental objectives. Even theoretically they could be shown to be welfare improving only under a very narrow range of circumstances. Their use in place of more efficient policy instruments may not only end up distorting the patterns of world trade but also may worsen the overall patterns of environmental quality. Simulation exercises undertaken here suggest that it is highly unlikely that countries would alter their environmental behavior because of the imposition of the proposed U.S. tariff. Hence the proposed legislation has very uncertain environmental consequences. Even if the policy has been mainly designed to protect domestic industries, it would only provide a minor margin of protection because the costs of complying with the environmental standards represent a relatively small element in the total costs. The analysis suggests that trade policy introduced in this fashion will have no significant impact on the patterns of world trade and pollution.     

世界上的十大污染物

世界上的十大污染物@苗斌     

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.     

A dynamic ecological–economic modeling approach for aquaculture management

This paper presents a Modeling Approach to Resource economics decision-maKing in EcoaquaculTure (MARKET model). The MARKET model was developed as a scenario-testing tool to provide insights on the ecological and economic interactions, which is a critical issue for sustainable aquaculture management. As a case study, the model was applied to simulate shellfish production in an embayment located in the East China Sea. A set of scenarios was used to compare the model outputs with expected trends and to test its capability to simulate relevant management scenarios. The comparison of simulated scenarios indicates that the MARKET model outputs followed the expected trends regarding both standard economic theory for consumption and production, and ecological economic theory. In all the scenarios we tested the area available for aquaculture was found to impose a limitation on production before it became less profitable to expand production. As such, in this case study, the production in the long run does not meet increasing demand. Reduction of the maximum cultivation area was simulated in one of the scenarios as an example of a conservation measure. As expected there was a reduction of the net profit of the farmers compared with the standard simulation. On the other hand, this scenario combined with an increase in price growth rate simulates a compensatory measure that led to a net profit in the same range as observed in the standard simulation. Overall the MARKET model provides insights and raises questions useful for the implementation of an ecosystem approach to aquaculture. Further developments include the simulation of waste generated by cultivated species in order to better support sustainable management objectives.     

Optimal linear taxation of polluting oligopolists

A linear ad valorem tax can induce homogeneous oligopolists to produce at socially optimal levels, achieving the first-best allocation, in the presence of external costs that vary exogenously with aggregate output. The optimal tax rate is independent of private cost functions and thus reduces informational requirements on the regulator. Alternatively, if the regulator knows marginal private costs but not the pattern of firms' conduct or the slope of the demand curve, an iterative implementation of the tax is possible. Both blockaded and endogenous entry are considered, as is strategic behavior by firms toward the regulator.The views expressed in this paper are those of the author and do not necessarily reflect the views of the Federal Reserve Bank of Philadelphia or of the Federal Reserve System. The author is grateful to Paul Calem for helpful discussions and to two anonymous referees for helpful comments.     

Rational inattention and revealed preference: The data-theoretic approach to economic modeling

Beliefs have as pervasive a role as utility functions in economic models of choice, and are no more visible to the naked eye. This suggests the value of a data-theoretic approach to imperfect information along the lines of Samuelson's “revealed preference” approach to utility maximization. I introduce a recently developed approach of this nature (Caplin and Martin, 2013a, Caplin and Dean, 2013a, Caplin and Dean, 2013b). I highlight the broader potential of the data-theoretic approach to answer questions of an inter-disciplinary nature and to discipline an oncoming flood of behaviorally-relevant data.     

A diffusion model with application to evolving medical technologies

This paper reports on a system dynamics simulation model which was developed to study the diffusion of medical technologies but which should be applicable to other sorts of technologies as well. The model addresses both the adoption and the changing extent of use of an evolving, product-based technology and also endogenously accounts for changes in actual and perceived performance. Two specific medical case studies provide background to the model and are used for testing the model's ability to reproduce various aspects of historical behavior. The model's relatively complex structure is presented in the form of influence diagrams showing major flows and relationships. The paper concludes with a discussion of contributions and possible future uses and modifications of the model.     

A categorical modeling approach to analyzing new product adoption and usage in the context of the building-materials industry

A high proportion of non-adopters is prevalent in any market where the product under consideration is relatively new or has a low acceptance rate. This results in a low proportion of adopters in a representative sample. In adoption or product usage modeling such high proportion of zeros in the dependent variable may be addressed by zero-inflated models, by modeling the product adoption and usage as a function of two latent processes. This paper considers a zero-inflated ordinal-probit model for investigating adoption and usage of innovative wall-cavity insulation materials among residential homebuilders in the US. This study assumes a three-step adoption process of innovative housing materials, namely, trial adoption, intermediate adoption and complete adoption. The study uses 5757 responses from a combined ‘Annual Builder Practices Survey’ dataset comprising ten cross-sectional yearly surveys, undertaken by the NAHB Research Center, from 1996 to 2005. The research results indicate that though a higher proportion of large firms are more likely to adopt innovative insulation material, they continue using established products while slowly increasing their use of the innovative material over time. However, when smaller homebuilders adopt an innovative insulation material, it replaces the existing product from their material usage portfolio at a faster rate.     

A new approach to modeling co-movement of international equity markets: evidence of unconditional copula-based simulation of tail dependence

Analyzing equity market co-movements is important for risk diversification of an international portfolio. Copulas have several advantages compared to the linear correlation measure in modeling co-movement. This paper introduces a copula ARMA-GARCH model for analyzing the co-movement of international equity markets. The model is implemented with an ARMA-GARCH model for the marginal distributions and a copula for the joint distribution. After goodness of fit testing, we find that the Student’s t copula ARMA(1,1)-GARCH(1,1) model with fractional Gaussian noise is superior to alternative models investigated in our study where we model the simultaneous co-movement of nine international equity market indexes. This model is also suitable for capturing the long-range dependence and tail dependence observed in international equity markets. Rachev’s research was supported by grants from Division of Mathematical, Life and Physical Science, College of Letters and Science, University of California, Santa Barbara, and the Deutschen Forschungsgemeinschaft (DFG). Sun’s research was supported by grants from the Deutschen Forschungsgemeinschaft (DFG) and Chinese Government Award for Outstanding Ph.D Students Abroad 2006, No. 2006-180. Kalev’s research was supported with a NCG grant from the Faculty of Business and Economics, Monash University. Data are supplied by Securities Industry Research Center of Asia-Pacific (SIRCA) on behalf of Reuters. The constructive comments of two anonymous referees, the Associate Editor, A.S. Wirjanto, and the Editor-in-charge, Baldev Raj, are gratefully acknowledged. The reviewers and editors are not responsible for any residual errors and omissions.     

更加严格的环境政策能否使得污染度较小的产品具有比较优势？

一、概述贸易自由化对环境的影响在今天是一个有广泛争论的议题。贸易在最近几十年间的飞速增长,导致了各种对生产专业化的提高可能会对环境产生有害的影响的担心,尤其是对发展中国家,这些国家对环境保护所做的努力充其量不过是微不足道的。贸易与环境这一议题已产生了许多的研     

A compatibility approach to scenario evaluation

This article presents a novel approach for evaluating scenarios that represent combinations of a given set of possible events. The approach utilizes compatibility assessment, a heuristic method for inferring relative compatibilities of different scenario combinations. An illustration of its application is taken from a technology assessment study prepared for the National Science Foundation.     

A signaling approach to soft budgets

A new explanation for soft budget constraints is given. Projects of an agent are often the more profitable, the more confident the agent is in the principal's competence and/or supports. Principals can signal support and/or competence through a soft budget constraint.     

A social contract approach to sustainability

This paper asks whether it is possible to derive a concern for future generations (“sustainability”) from an account of the firm as a social contract (SC) among its stakeholders. Two aspects of a leading SC model of the firm limit its usefulness for an analysis of sustainability. First, the stakeholders provide investments to the firm over time. Second, the relationship between contemporaries and future generations is marked by asymmetries of power and knowledge that need to be considered while reconstructing the SC today. I discuss three reformulations of the SC that are all, in principle, capable of introducing within the SC a concern for future generations. The first describes the contractors as heads of families. The second envisages a grand meeting of stakeholders of all generations. The third, which I find most defensible, views the SC as an ahistorical agreement reached behind a thick veil of ignorance. This agreement is based on John Rawls’s norm of reciprocity, whereby the stakeholders adopt today the decision they wish all previous (and future) generations had made regarding the rate of consumption of natural resources and emission of pollutants.     

A quantile approach to US GNP

In this paper we fitted a quantile self-exciting threshold autoregressive (QSETAR) time series model to the growth rate of real US GNP. We also presented a forecasting method for QSETAR models. This forecasting method makes it possible to obtain the predictive quantiles and predictive distribution function of x_t+m given x_t for m > 0, and hence any quantities of interest can be derived. Therefore, this new approach allows us to study the US GNP from a distribution point view, rather than from a mean point of view. The results obtained in this paper show that the method works very well in practice.