Narrow Results

Public capacity complements urban density because externalities abound in cities and urban scale makes it possible to share infrastructure that needs to be managed. Yet, urban governments face limitations that are not experienced by private sector entities. A city cannot just stop policing if it decides it is bad at policing. Typically, public compensation and personnel policies are highly regulated either by law or by union contracts. City governments do, however, have one great advantage over private entities: a greater ability to learn from their peers. City governments do similar things throughout the world, while companies frequently specialize. Private companies have strong incentives to hide the trade secrets that make them more productive, cities do not. As individual cities do not have an incentive to make it easier for other governments to learn from them, multinational entities like the Asian Development Bank and the World Bank could enable that learning. Since climate-change-related crises are relatively rare events, city-to-city learning seems particularly important for adapting to climate change.

In this paper, we characterize dynamic trading in a voting model. We show that a dynamic trading process, called the Pivot algorithm, may converge from an initial vote allocation to an allocation which (though Pareto optimal) is not individually rational even in the weakest sense. Then, we propose an intuitive dynamic process which, unlike the Pivot algorithm, always converges from any initial vote allocation to an individually rational Pareto optimal allocation, is Condorcet consistent, and avoids unnecessary vote trading (i.e. trading that does not change the outcome). From a policy perspective, our analysis implies that a vote trade may be permitted only if no voter has objection to the trade. Without such a policy, myopic voters may participate in vote trades that are either unnecessary or eventually make them worse-off.

We consider a model of socially interacting individuals that make a binary choice in a context of positive additive endogenous externalities. It encompasses as particular cases several models from the sociology and economics literature. We extend previous results to the case of a general distribution of idiosyncratic preferences, called here Idiosyncratic Willingnesses to Pay (IWP). When j, the ratio of the social influence strength to the standard deviation of the IWP distribution, is small enough, the inverse demand is a classical monotonic (decreasing) function of the adoption rate. However, even if the IWP distribution is mono-modal, there is a critical value of j above which the inverse demand is non-monotonic. Thus, depending on the price, there are either one or several equilibria.

Beyond this first result, we exhibit the generic properties of the boundaries limiting the regions where the system presents different types of equilibria (unique or multiple). These properties are shown to depend only on qualitative features of the IWP distribution: modality (number of maxima), smoothness and type of support (compact or infinite). The main results are summarized as phase diagrams in the space of the model parameters, on which the regions of multiple equilibria are precisely delimited. We also discuss the links between the model and the random field Ising model studied in the physics literature.

Motivated by a mean field games stylized model for the choice of technologies (with externalities and economy of scale), we consider the associated optimization problem and prove an existence result. To complement the theoretical result, we introduce a monotonic algorithm to find the mean field equilibria. We close with some numerical results, including the multiplicity of equilibria describing the possibility of a technological transition.

In this paper the one-seller/two-buyer problem with buyer externalities is investigated under the assumption that the two buyers have legal opportunities to cooperate. It is shown that the Competitive equilibrium and the Core are robust with respect to negligible externalities and that the range of market prices in the Core belongs to range of Competitive equilibrium prices. However, these concepts yield no prediction for relatively severe externalities. Therefore, in order to provide a prediction the Bargaining set and the Multilateral Nash (MN) solution are also investigated. Surprisingly, in case of an empty Core the Bargaining set predicts a unique tuple of payoffs which are independent of the externalities and each pair of participants is equally likely. Markets with market imperfections are captured by the MN solution concept. The MN solution yields the paradox that the seller's price can be higher under imperfect competition than under perfect competition.

In this paper the management of straddling fish stocks is approached through a coalition game in partition function form. A two-stage game is applied, assuming ex ante symmetric players and the classical Gordon-Schaefer bioeconomic model. It is shown that the game is characterized by positive externalities — the merger of coalitions increases the payoffs of players who belong to other coalitions. A key result is that, apart from the case of two players, the grand coalition is not a Nash equilibrium outcome. Furthermore, in the case of three or more players the only Nash equilibrium coalition structure is the one formed by singletons. The results indicate that the prospects of cooperation in straddling stock fisheries are low if players can free ride cooperative agreements. Thus, in order to protect cooperation, under the aegis of regional fishery management organizations, unregulated fishing must be prevented.

The river sharing problem deals with the fair distribution of welfare resulting from the optimal allocation of water among a set of riparian agents. Ambec and Sprumont [Sharing a river, J. Econ. Theor. 107, 453–462] address this problem by modeling it as a cooperative TU-game on the set of riparian agents. Solutions to that problem are reviewed in this article. These solutions are obtained via an axiomatic study on the class of river TU-games or via a market mechanism.

In cooperative games, due to computational complexity issues, deviant agents are not able to base their behavior on the outsiders' status but have to follow certain beliefs as to how it is in their strategic interest to act. This behavior constitutes the main interest of this paper. To this end, we quantify and characterize the set of coalitional beliefs that support cooperation of such agents. Assuming that they are engaged in a differentiated Cournot competition, for every belief of the deviants we define a TU-game, the solution to which characterizes the set of coalitional beliefs that support core nonemptiness. For this we fix the number of coalitions that deviants S will face to, say, j in number and introduce the notion of j-belief of S as the least number of coalitions into which the outsiders N\S will reorganize. We then define for every j-belief a TU-game and the j-belief core of it. We prove that the worth of S is minimized when the n – s agents split approximately equally among the j coalitions, while the worth of S is maximized when j – 1 agents have one member and one coalition has n – s – (j – 1) members. Given the above, we prove that when goods are substitutes, the j-belief core is nonempty, provided that S believe the N\S will form a sufficiently large number of coalitions, while when goods are complements, the j-belief core is nonempty irrespective of the beliefs of the agents in S. Finally, in the case of homogeneous goods we prove that the j-belief core is nonempty and depends only on the number of the outsider coalitions and not on their size.

We model and analyze strategic interaction over time in a duopoly. Each period the firms independently and simultaneously take two sequential decisions. First, they decide whether or not to advertise, then they set prices for goods which are imperfect substitutes. Not only the own, but also the other firm's past advertisement efforts affect the current "sales potential" of each firm. How much of this potential materializes as immediate sales, depends on current advertisement decisions. If both firms advertise, "sales potential" turns into demand, otherwise part of it "evaporates" and does not materialize. We determine feasible rewards and equilibria for the limiting average reward criterion. Uniqueness of equilibrium is by no means guaranteed, but Pareto efficiency may serve very well as a refinement criterion for wide ranges of the advertisement costs.

The partition function approach is applied to study coalition formation in the Northeast Atlantic mackerel fishery in the presence of externalities. Atlantic mackerel is mainly exploited by the European Union (EU), the United Kingdom (UK), Norway, the Faroe Islands and Iceland. Two games are considered. First, a four-player game where the UK is still a member of the EU. Second, a five-player game where the UK is no longer a member of the union. Each game is modeled in two stages. In the first stage, players form coalitions following a predefined set of rules. In the second stage, given the coalition structure that has been formed, each coalition chooses the economic strategy that maximizes its own net present value of the fishery, given the behavior of the other coalitions. The game is solved using backward induction to obtain the set of Nash equilibria coalition structures in pure strategies, if any. We find that the current management regime is among the stable coalition structures in all eight scenarios of the four-player game but in only one case of the five-player game. In addition, stability in the five-player game is sensitive to the growth function applied and the magnitude of the stock elasticity parameter.

We consider strategic issues in one-to-one matching with externalities. We show that no core (stable) mechanism is strategy-proof, extending an impossibility result of [Roth, A. E. [1982] The economics of matching: Stability and incentives, Math. Oper. Res. 7(4), 617–628] obtained in the absence of externalities. Moreover, we show that there are no limits on successful manipulation of preferences by coalitions of men and women, in contrast with the result of [Demange, G., Gale, D. and Sotomayor, M. [1987] A further note on the stable matching problem, Discrete Appl. Math. 16(3), 217–222] obtained in the absence of externalities.

The article presents an economic analysis of Free Software. We insist on the role played by Public Licenses, which implement a very subtle and efficient way of dealing with positive externalities associated with creativity, in providing the software industry with such a new development methodology and business model, now already challenging some of Microsoft's main products. To test our argument, we turn to a stochastic interaction model to study the current competition between Linux and Windows NT/2000 in the market for Operating Systems, as this model allows us to deal with both local and global positive externalities. Its results enlighten the existence of different diffusion regimes depending on producer strategies, the main question having to do with the redistribution of positive external economies associated with diffusion of new technologies, therefore confirming our suggestion that Free Software might be a superior economic model than proprietary software.

This paper examines big data analytics implications on the central banking financial system’s technological progress. A digital technological progress framework and model is established to analyze the economy’s aggregate supply via covering the monetary policy, big data analytics, pollutants emissions as independent variables and the economy’s aggregate demand as a moderating variable in a modified extensive growth theory framework and model to compute the productivity indicators and the total factor productivity (TFP) as the central banking technological progress that combined the mentioned variables qualities contribution. Besides, data analytics positive and negative externalities that include data analytics shortcomings as unpriced undesirable output in the form of cybersecurity and pollutants’ emissions among other proxies are internalized in the framework and the model to integrate the digital technology innovation with digital technology shortcomings and climate change. This revised extensive theory framework and model is a remarkable technique comprehensive of the technological progress matters and sustainable economic development and is considered one of the most important sustainable development and long-run economic growth proportions in the central banking financial system functions to manage the economy’s aggregate supply and demand that unnoticed by previous studies.

Augmenting a Mincerian earnings function with regional data we estimate both private and external returns to education in Turkey using Instrumental Variables, Ordinary Least Squares, Quantile Regression and Instrumental Variables Quantile Regression methods. Our results indicate a median external return between 1.5% and 2.3% for 2006–2009. There is some evidence supporting the skill-biased technical change hypothesis. External returns are uniformly higher for women. We point out some policy implications.

Technological innovation is a key strategy for tackling climate change and other environmental problems. The required R&D expenditures however are substantial and fall on self-interested countries. Thus, the prospects of successful innovation critically depend on innovation incentives. This paper focuses on a specific mechanism for strategic distortions in this R&D game. In this mechanism, the outlook of future conflicts surrounding technology deployment directly impacts on the willingness to undertake R&D. Apart from free-riding, a different deployment conflict with distortive effects on innovation can occur. Low deployment costs and heterogeneous preferences might give rise to ‘free-driving’ (Weitzman, ML (2015). A voting architecture for the governance of free-driver externalities, with application to geoengineering. The Scandinavian Journal of Economics, 117(4), 1049–1068): The country with the highest preference for technology deployment, the free driver, may dominate the deployment outcome to the detriment of others. The present paper develops a simple two stage model for analyzing how technology deployment conflicts, free-riding and free-driving, shape R&D incentives of two asymmetric countries. The framework gives rise to rich findings, underpinning the narrative that future deployment conflicts extend to the R&D stage. While the outlook of free-riding unambiguously weakens innovation incentives, the findings for free-driving are more complex, including the possibility of excessive R&D as well as incentives for counter-R&D.

Aquifers created or sustained by seepage losses from Bureau of Reclamation (Reclamation) Projects extend over vast areas of western states. Yet agricultural water conservation measures such as canal lining top the list of State and Federal policies for mitigating the effect of water shortages brought about by climate change. Cost benefit analysis (CBA) of new Reclamation water conservation infrastructure such as canal lining or piping is too often Project-specific, and detached from basin hydrology. The value of canal seepage as a positive externality is thus ignored in CBA. A basin-wide approach to hydro-economic modeling that accounts for the externalized costs and benefits of both canal seepage and new canal lining conservation insures that incidental aquifer recharge is recognized in CBA of Federally financed irrigation water conservation measures. Integrated hydrologic and partial equilibrium models are employed in the Lower Boise River basin to calculate the foregone benefit to non-project groundwater and drain water irrigation of a hypothetical Boise Project canal lining response to projected climate change water shortages. Basin-wide hydrologic response data is used to compute shifts in non-project groundwater supply functions and drain water supply constraints, and a base-case water supply scenario is compared to six climate change scenarios in which projected water shortages are offset by lining of project canals. The foregone net benefit to non-project groundwater and drain water irrigation resulting from elimination of the canal seepage externality (US$4.4–22.6million depending on the scenario) outweighs the increase in net benefit to Boise Project irrigation by canal lining (US$1.4–19.3million). On average, foregone groundwater and drain water irrigation benefit exceeds restored canal irrigation benefit by about 38%. Canal lining conservation is unable to restore total basin-wide irrigation net benefit to the base-case level in any of the climate change scenarios; rather it shifts the foregone benefit of climate change shortages from project canal irrigation to non-project groundwater and drain water irrigation. The canal lining CPA is not a complete accounting of either costs or benefits of canal lining conservation. On the cost side, only the foregone benefits of eliminating the positive canal seepage externality are calculated; construction and maintenance costs of canal lining are omitted. On the benefit side, Arrowrock canal irrigators are assumed to be the sole beneficiary of reduced seepage losses.

This paper provides a comparative economics of physical water transfer and virtual water trade in India to deal with the problem of growing scarcity of water. This is based on a nuanced understanding of the difficulties in operationalizing the concept of virtual water trade from a regional perspective; a better appreciation of the differential economic value of water use of land-rich, water-scarce regions and land-scarce, water-rich regions; and a recognition of the various direct and indirect benefits of large water transfer projects as evident from recent empirical studies. We first attempt a comparative economics of physical water transfer (between water-rich regions of eastern India to water-scarce regions of peninsular India) and the “virtual water transfer” alternative, considering the anecdotal evidence of various direct and indirect costs and benefits. The direct costs included economic cost of infrastructure, and various damage costs and transaction costs. The indirect costs covered economic, social and environmental costs. These cost components are several and are also more pronounced for physical water transfer. The benefits considered in the analysis included direct economic benefits, and various indirect benefits that are social, economic and environmental in nature. These benefits are several and also more pronounced for physical water transfer. The analysis showed that the net benefits of physical water transfer outweigh virtual water transfer. Subsequently, the political transaction costs of executing water transfer projects were examined.

This paper addresses the effect of international trade on cultural outcomes from both economic and anthropological perspectives. Definitions of culture are informed by anthropology and then incorporated into a standard economic trade models in two distinct ways. In the “cultural affinity from work” model, workers receive a non-pecuniary cultural benefit from work in a particular industry. In the “cultural externality” model, consumers of a product receive utility from other consumer’s consumption of a domestic good. We show that resistance to change due to cultural concerns can reduce the national benefits from trade liberalization. Complete movements to free trade will have a positive national welfare impact in the cultural affinity case, whereas it may lower national welfare in the cultural externality case. We also show that a loss of cultural benefits is more likely to occur when culture is an externality.

Energy security is a highly contested concept since there is no common agreement about what it means and what elements it should include. On the contrary, the current academic literature is overloaded with a broad spectrum of conceptual and operational definitions of energy security. Nonetheless, in many respects, all these new concepts are essentially the intellectual development of the initial position on energy security as reliable supplies of energy at reasonable prices. Indeed, the essence of energy security is the question of where we are able to get the energy from and what societal costs—economic, political, and environmental—we are ready to pay for it. Since all societal costs are essentially value-laden, any debate about energy security involves assessment of not only technical indicators such as share of imported energy sources or diversity of energy mix but also national values and objectives. A good conceptualization of energy security should thus be built around it.

The following sections are included:

• Introduction

• The planning framework

• Appraisal methods for transport
  • Highways
  • Major public transport infrastructure
  • Bus operations
  • Walking and cycling
  • Railways
  • Comparing the methods

• A way forward?
  • Valuation of environmental impacts
  • Resource consumption
  • Multi-criteria approaches

• Conclusions

• References