The Implications of Skewed Risk Perception for a Dutch Coastal Land Market: Insights from an Agent-Based Computational Economics Model

Dutch coastal land markets are characterized by high amenity values but are threatened by potential coastal hazards, leading to high potential damage costs from flooding. Yet, Dutch residents generally perceive low or no flood risk. Using an agent-based land market model and Dutch survey data on risk perceptions and location preferences, this paper explores the patterns of land development and land rents produced by buyers with low, highly skewed risk perceptions. We find that, compared to representative agent and uniform risk perception models, the skewed risk perception distribution produces substantially more, high-valued development in risky coastal zones, potentially creating economically significant risks triggered by the current Dutch flood protection policy.land markets, risk perceptions, agent-based modeling, the Netherlands, survey, Community/Rural/Urban Development, Environmental Economics and Policy, Land Economics/Use, Research Methods/ Statistical Methods, Risk and Uncertainty,

The Implications of Skewed Risk Perception for a Dutch Coastal Land Market: Insights from an Agent-Based Computational Economics Model

Dutch coastal land markets are characterized by high amenity values but are threatened by potential coastal hazards, leading to high potential damage costs from flooding. Yet, Dutch residents generally perceive low or no flood risk. Using an agent-based land market model and Dutch survey data on risk perceptions and location preferences, this paper explores the patterns of land development and land rents produced by buyers with low, highly skewed risk perceptions. We find that, compared to representative agent and uniform risk perception models, the skewed risk perception distribution produces substantially more, high-valued development in risky coastal zones, potentially creating economically significant risks triggered by the current Dutch flood protection polic

Agent-Based Urban Land Markets: Agent's Pricing Behavior, Land Prices and Urban Land Use Change

We present a new bilateral agent-based land market model, which moves beyond previous work by explicitly modeling behavioral drivers of land-market transactions on both the buyer and seller sides; formation of bid prices (of buyers) and ask prices (of sellers); and the relative division of the gains from trade from the market transactions. We analyze model output using a series of macro-scale economic and landscape pattern measures, including land rent gradients estimated using simple regression models. We first demonstrate that our model replicates relevant theoretical results of the traditional Alonso/Von Thünen model (structural validation). We then explore how urban morphology and land rents change as the relative market power of buyers and sellers changes (i.e., we move from a 'sellers' market' to a 'buyers' market'). We demonstrate that these strategic price dynamics have differential effects on land rents, but both lead to increased urban expansion

Designing Intelligent Software Agents for B2B Sequential Dutch Auctions: A Structural Econometric Approach

We study multi-unit sequential Dutch auctions in a complex B2B context. Using a large real-world dataset, we apply structural econometric analysis to recover the parameters governing the distribution of bidders’ valuations. The identification of these parameters allows us to simulate auction results under different designs and perform policy counterfactuals. We also develop a dynamic optimization approach to guide the setting of key auction parameters. Given the bounded rationality of human decision makers, we propose to augment auctioneers’ capabilities with high performance decision support tools in the form of software agents. Our paper contributes to both theory and practice of auction design. From the theoretical perspective, this is the first study that explicitly models the sequential aspects of Dutch auctions using structural econometric analysis. From the managerial perspective, this paper offers useful implications to business practitioners for complex decision making in B2B auctions

Wall Street and Silicon Valley : a delicate interaction

September 23, 200

The use of indicators for unobservable product qualities: inferences based on consumer sorting

Using the dietary supplement black cohosh to demonstrate our method, we employ data on a product characteristic unobservable to consumers to decompose the contribution to consumers’ valuations of observable characteristics into surrogate indicator and direct components. Because consumers are not all “expert appraisers” of the unobservable characteristic, the measured relationship of indicators to the unobservable quality is generally not the one consumers perceive. Consequently, biases that depend upon the nature of consumers’ ineptitude are introduced into the component estimation. The researcher’s inference problem is solved by recognizing that consumers with greater appraisal expertise sort disproportionately to higher quality products. This enables feasible measurement of inept consumers’ relative valuations and conjectures through separate hedonic estimation on high- and low-quality product subsamples. We find that, relative to experts, inept consumers likely underestimate the value of most observable characteristics in indicating black cohosh product authenticity; however they overweight online product ratings.hedonic analysis; surrogate indicators; asymmetric information; pricing strategy; product strategy

Agent-Based Urban Land Markets: Agent\'s Pricing Behavior, Land Prices and Urban Land Use Change

We present a new bilateral agent-based land market model, which moves beyond previous work by explicitly modeling behavioral drivers of land-market transactions on both the buyer and seller side; formation of bid prices (of buyers) and ask prices (of sellers); and the relative division of the gains from trade from the market transactions. We analyze model output using a series of macro-scale economic and landscape pattern measures, including land rent gradients estimated using simple regression models. We first demonstrate that our model replicates relevant theoretical results of the traditional Alonso/Von Th�nen model (structural validation). We then explore how urban morphology and land rents change as the relative market power of buyers and sellers changes (i.e., we move from a \'sellers\' market\' to a \'buyers\' market\'). We demonstrate that these strategic price dynamics have differential effects on land rents, but both lead to increased urban expansion.Location Choice, Urban Land Market, Agent-Based Computational Economics, Land Use, Land Rent Gradient, Spatial Simulation

Implications for liquidity from innovation and transparency in the European corporate bond market

This paper offers a new framework for the assessment of financial market liquidity and identifies two types: search liquidity and systemic liquidity. Search liquidity, i.e. liquidity in “normal” times, is driven by search costs required for a trader to find a willing buyer for an asset he/she is trying to sell or vice versa. Search liquidity is asset specific. Systemic liquidity, i.e. liquidity in “stressed” times, is driven by the homogeneity of investors - the degree to which one’s decision to sell is related to the decision to sell made by other market players at the same time. Systemic liquidity is specific to market participants’ behaviour. This framework proves fairly powerful in identifying the role of credit derivatives and transparency for liquidity of corporate bond markets. We have applied it to the illiquid segments of the European credit market and found that credit derivatives are likely to improve search liquidity as well as systemic liquidity. However, it is possible that in their popular use today, credit derivatives reinforce a concentration of positions that can worsen systemic liquidity. We also found that post-trade transparency has surprisingly little bearing on liquidity in that where it improves liquidity it is merely acting as a proxy for pre-trade transparency or transparency of holdings. We conclude that if liquidity is the objective, pre-trade transparency, as well as some delayed transparency on net exposures and concentrations, is likely to be more supportive of both search and systemic liquidity than post-trade transparency. JEL Classification: G14, G15, G18.Financial market functioning, liquidity, transparency, credit markets and financial innovation.

The Essential Role of Securities Regulation

This Article posits that the essential role of securities regulation is to create a competitive market for sophisticated professional investors and analysts (information traders). The Article advances two related theses-one descriptive and the other normative. Descriptively, the Article demonstrates that securities regulation is specifically designed to facilitate and protect the work of information traders. Securities regulation may be divided into three broad categories: (i) disclosure duties; (ii) restrictions on fraud and manipulation; and (iii) restrictions on insider trading-each of which contributes to the creation of a vibrant market for information traders. Disclosure duties reduce information traders\u27 costs of searching and gathering information. Restrictions on fraud and manipulation lower information traders\u27 cost of verifying the credibility of information, and thus enhance information traders\u27 ability to make accurate predictions. Finally, restrictions on insider trading protect information traders from competition from insiders that would undermine information traders\u27 ability to recoup their investment in information. Normatively, the Article shows that information traders can best underwrite efficient and liquid capital markets, and, hence, it is this group that securities regulation should strive to protect. Our account has important implications for several policy debates. First, our account supports the system of mandatory disclosure. We show that, although market forces may provide management with an adequate incentive to disclose at the initial public offering (IPO) stage, they cannot be relied on to effect optimal disclosure thereafter. Second, our analysis categorically rejects calls to limit disclosure duties to hard information and self-dealing by management. Third, our analysis supports the use of the fraud-on-the-market presumption in all fraud cases even when markets are inefficient. Fourth, our analysis suggests that in cases involving corporate misstatements, the appropriate standard of care should, in principle, be negligence, not fraud