A System Dynamics Model of Cyclical Office Oversupply

This article explores office market system dynamics through a simple simulation model. Model lag and adjustment parameters similar to real office markets generate explosive cycles. Simulations show that deviations from equilibrium can be reduced by changing the information structure of the system. System dynamics, principle/agent conflicts, a prisoners’ dilemma game, faulty information (poor forecasting, market research and valuation techniques), regulatory institutions, and differing equilibria in office space and financial markets all contribute to allocative inefficiency. Thinking of office markets as a "managed feedback control system" may be a useful representation of the oversupply problem. Leverage points for system improvement may be a municipal "queue" to address agency and prisoner's dilemma problems, improved forecasting techniques and more reliance on forecasting.

Price Formation under Small Numbers Competition: Evidence from Land Auctions in Singapore

This paper examines the price formation process under small numbers competition using data from Singapore land auctions. The theory predicts that bid prices are less than the zero-profit asset value in these first-price sealed-bid auctions. The model also shows that expected sales price increases with the number of bidders both because each bidder has an incentive to offer a higher price and because of a greater likelihood that a high-value bidder is present. The empirical estimates are consistent with auction theory and show that the standard land attributes are reflected in auction prices as expected. Working Paper No. 04-0

Land re-use, complexity and actor-networks: a framework for research

This paper will present a conceptual framework for the examination of land redevelopment based on a complex systems/networks approach. As Alvin Toffler insightfully noted, modern scientific enquiry has become exceptionally good at splitting problems into pieces but has forgotten how to put the pieces back together. Twenty-five years after his remarks, governments and corporations faced with the requirements of sustainability are struggling to promote an ‘integrated’ or ‘holistic’ approach to tackling problems. Despite the talk, both practice and research provide few platforms that allow for ‘joined up’ thinking and action. With socio-economic phenomena, such as land redevelopment, promising prospects open up when we assume that their constituents can make up complex systems whose emergent properties are more than the sum of the parts and whose behaviour is inherently difficult to predict. A review of previous research shows that it has mainly focused on idealised, ‘mechanical’ views of property development processes that fail to recognise in full the relationships between actors, the structures created and their emergent qualities. When reality failed to live up to the expectations of these theoretical constructs then somebody had to be blamed for it: planners, developers, politicians. However, from a ‘synthetic’ point of view the agents and networks involved in property development can be seen as constituents of structures that perform complex processes. These structures interact, forming new more complex structures and networks. Redevelopment then can be conceptualised as a process of transformation: a complex system, a ‘dissipative’ structure involving developers, planners, landowners, state agencies etc., unlocks the potential of previously used sites, transforms space towards a higher order of complexity and ‘consumes’ but also ‘creates’ different forms of capital in the process. Analysis of network relations point toward the ‘dualism’ of structure and agency in these processes of system transformation and change. Insights from actor network theory can be conjoined with notions of complexity and chaos to build an understanding of the ways in which actors actively seek to shape these structures and systems, whilst at the same time are recursively shaped by them in their strategies and actions. This approach transcends the blame game and allows for inter-disciplinary inputs to be placed within a broader explanatory framework that does away with many past dichotomies. Better understanding of the interactions between actors and the emergent qualities of the networks they form can improve our comprehension of the complex socio-spatial phenomena that redevelopment comprises. The insights that this framework provides when applied in UK institutional investment into redevelopment are considered to be significant

Assessing the Performance of Simple Contracts Empirically: The Case of Percentage Fees

This paper estimates the cost of using simple percentage fees rather than the broker optimal Bayesian mechanism, using data for real estate transactions in Boston in the mid-1990s. This counterfactual analysis shows that interme- diaries using the best percentage fee mechanisms with fees ranging from 5.4% to 7.4% achieve 85% or more of the maximum profit. With the empirically observed 6% fees intermediaries achieve at least 83% of the maximum profit and with an optimally structured linear fee, they achieve 98% or more of the maximum profit

New perspectives on realism, tractability, and complexity in economics

Fuzzy logic and genetic algorithms are used to rework more realistic (and more complex) models of competitive markets. The resulting equilibria are significantly different from the ones predicted from the usual static analysis; the methodology solves the Walrasian problem of how markets can reach equilibrium, starting with firms trading at disparate prices. The modified equilibria found in these complex market models involve some mutual self-restraint on the part of the agents involved, relative to economically rational behaviour. Research (using similar techniques) into the evolution of collaborative behaviours in economics, and of altruism generally, is summarized; and the joint significance of these two bodies of work for public policy is reviewed. The possible extension of the fuzzy/ genetic methodology to other technical aspects of economics (including international trade theory, and development) is also discussed, as are the limitations to the usefulness of any type of theory in political domains. For the latter purpose, a more differentiated concept of rationality, appropriate to ill-structured choices, is developed. The philosophical case for laissez-faire policies is considered briefly; and the prospects for change in the way we ‘do economics’ are analysed

Fee-Setting Mechanisms: On Optimal Pricing by Intermediaries and Indirect Taxation

Mechanisms according to which private intermediaries or governments charge transaction fees or indirect taxes are prevalent in practice. We consider a setup with multiple buyers and sellers and two-sided independent private information about valuations. We show that any weighted average of revenue and social welfare can be maximized through appropriately chosen transaction fees and that in increasingly thin markets such optimal fees converge to linear fees. Moreover, fees decrease with competition (or the weight on welfare) and the elasticity of supply but decrease with the elasticity of demand. Our theoretical predictions fit empirical observations in several industries with intermediaries

Land Re-Use, Complexity And Actor-Networks: A Framework For Research

This paper will present a conceptual framework for the examination of land redevelopment based on a complex systems/networks approach. As Alvin Toffler insightfully noted, modern scientific enquiry has become exceptionally good at splitting problems into pieces but has forgotten how to put the pieces back together. Twenty-five years after his remarks, governments and corporations faced with the requirements of sustainability are struggling to promote an ‘integrated’ or ‘holistic’ approach to tackling problems. Despite the talk, both practice and research provide few platforms that allow for ‘joined up’ thinking and action. With socio-economic phenomena, such as land redevelopment, promising prospects open up when we assume that their constituents can make up complex systems whose emergent properties are more than the sum of the parts and whose behaviour is inherently difficult to predict. A review of previous research shows that it has mainly focused on idealised, ‘mechanical’ views of property development processes that fail to recognise in full the relationships between actors, the structures created and their emergent qualities. When reality failed to live up to the expectations of these theoretical constructs then somebody had to be blamed for it: planners, developers, politicians. However, from a ‘synthetic’ point of view the agents and networks involved in property development can be seen as constituents of structures that perform complex processes. These structures interact, forming new more complex structures and networks. Redevelopment then can be conceptualised as a process of transformation: a complex system, a ‘dissipative’ structure involving developers, planners, landowners, state agencies etc., unlocks the potential of previously used sites, transforms space towards a higher order of complexity and ‘consumes’ but also ‘creates’ different forms of capital in the process. Analysis of network relations point toward the ‘dualism’ of structure and agency in these processes of system transformation and change. Insights from actor network theory can be conjoined with notions of complexity and chaos to build an understanding of the ways in which actors actively seek to shape these structures and systems, whilst at the same time are recursively shaped by them in their strategies and actions. This approach transcends the blame game and allows for inter-disciplinary inputs to be placed within a broader explanatory framework that does away with many past dichotomies. Better understanding of the interactions between actors and the emergent qualities of the networks they form can improve our comprehension of the complex socio-spatial phenomena that redevelopment comprises. The insights that this framework provides when applied in UK institutional investment into redevelopment are considered to be significant.chaos theory, complex systems, actor-networks, redevelopment, land re-use

Uniqueness Conditions for Point-Rationalizable

The unique point-rationalizable solution of a game is the unique Nash equilibrium. However, this solution has the additional advantage that it can be justified by the epistemic assumption that it is Common Knowledge of the players that only best responses are chosen. Thus, games with a unique point-rationalizable solution allow for a plausible explanation of equilibrium play in one-shot strategic situations, and it is therefore desireable to identify such games. In order to derive sufficient and necessary conditions for unique point-rationalizable solutions this paper adopts and generalizes the contraction-property approach of Moulin (1984) and of Bernheim (1984). Uniqueness results obtained in this paper are derived under fairly general assumptions such as games with arbitrary metrizable strategy sets and are especially useful for complete and bounded, for compact, as well as for finite strategy sets. As a mathematical side result existence of a unique fixed point is proved under conditions that generalize a fixed point theorem due to Edelstein (1962).