Network-based business process management: embedding business logic in communications networks

Advanced Business Process Management (BPM) tools enable the decomposition of previously integrated and often ill-defined processes into re-usable process modules. These process modules can subsequently be distributed on the Internet over a variety of many different actors, each with their own specialization and economies-of-scale. The economic benefits of process specialization can be huge. However, how should such actors in a business network find, select, and control, the best partner for what part of the business process, in such a way that the best result is achieved? This particular management challenge requires more advanced techniques and tools in the enabling communications networks. An approach has been developed to embed business logic into the communications networks in order to optimize the allocation of business resources from a network point of view. Initial experimental results have been encouraging while at the same time demonstrating the need for more robust techniques in a future of massively distributed business processes.active networks;business process management;business protocols;embedded business logic;genetic algorithms;internet distributed process management;payment systems;programmable networks;resource optimization

Palestine: a theoretical model of an Investment-Constrained Economy

The sixty-year-old Israeli-Palestinian conflict has deeply influenced the evolution of the Palestinian economy. In the last two decades persisting political instability and the Israeli closure policy have been sources of protracted economic stagnation and poor capital formation. The paper describes the consequences on the Palestinian economy of two particular conditions: high transaction costs and market fragmentation. We use a simple one-sector model which describes Palestine as a demand-driven economy and Palestinian capital accumulation as linked to desired investments by Palestinian firms. Into this framework, we show that high transaction costs discourage capital formation by curtailing expected profitability. Market fragmentation further reduces domestic investments by reducing the size of the market and depressing entrepreneurs’ animal spirits. We show that in the short-run, where expectations are given, the two above facts induce low levels of capacity utilization and of capital accumulation. The situation is even more worrying in the long-run when entrepreneurs can adapt their expectations. Depressed animal spirits and low levels of capacity use feed back into each other and give rise to a low-growth trap from which Palestine can hardly escape. We also highlight the possible positive impact of the removal of high transaction cost and of market fragmentation and the ensuing benefits on the long run equilibrium values of both capital accumulation and capacity utilization. The conclusions try to set this analytical results into the historical situation of the Palestinian economy and to envisage the roles of economics and politics in order to establish a sustained process of development.Palestine, low-growth trap, post-Keynesian models

Parallel computation of large-scale network equilibria and variational inequalities.

Equilibrium of a network is obtained when each user who competes to optimize his utility can not improve his utility any further. Equilibrium problems governed by distinct equilibrium concepts can be formulated in one general framework--that of variational inequalities. The synthesis of variational inequalities and networks induces the creation of highly efficient algorithms which are especially suited for the large-scale equilibrium problems. Motivated by the recent technological advances in parallel computing architectures, parallel algorithms of large-scale equilibrium problems were developed using the theory of variational inequalities. In the case where the feasible constraint set of a network equilibrium problem can be expressed as a Cartesian product of subsets, the application of variational inequality decomposition algorithms for the parallel computation becomes possible. A new spatial price equilibrium model, which is not based on the path flows, but, rather, on the link flows to allow the decomposition by time periods, was developed and used as a prototype of large-scale network equilibrium problems. The variational inequality formulations were decomposed first by commodities, then by time periods, and, subsequently, by markets. The coarse grain parallel architectures used were the IBM 3090-600E and the IBM 3090-600J at the Cornell Theory Center with six processors each. The maximum speed-ups obtained were 1.93 for two processors, 3.74 for four processors, and 5.15 for six processors. The market subproblems were further decomposed by links, resulting in a fine grain parallel implementation. The Thinking Machine\u27s Connection Machine, CM-2, with 32,768 processors was used for the numerical experimentation. The fine grain parallel algorithm solved input/output matrix problems more than 20 times faster, when compared to the results on the IBM 3090-600J. It is expected that further enhancements to parallel languages and parallel architectures will make even more efficient implementations realizable, and that parallel computing and the theory of variational inequalities can be successfully applied to solve more efficiently other large-scale problems with an underlying network structure, such as traffic equilibrium problems, general economic equilibrium problems, and financial equilibrium problems

Middlemen versus Market Makers: A Theory of Competitive Exchange

We present a model in which the microstructure of trade in a commodity or asset is endogenously determined. Producers and consumers of a commodity (or buyers and sellers of an asset) who wish to trade can choose between two competing types of intermediaries: 'middlemen' (dealer/brokers) and 'market makers' (specialists). Market makers post publicly observable bid and ask prices, whereas the prices quoted by different middlemen are private information that can only be obtained through a costly search process. We consider an initial equilibrium where there are no market makers but there is free entry of middlemen with heterogeneous transactions costs. We characterize conditions under which entry of a single market maker can be profitable even though it is common knowledge that all surviving middlemen will undercut the market maker's publicly posted bid and ask prices in the post-entry equilibrium. The market maker's entry induces the surviving middlemen to reduce their bid-ask spreads, and as a result, all producers and consumers who choose to participate in the market enjoy a strict increase in their expected gains from trade. We show that strict Pareto improvements occur even in cases where the market maker's entry drives all middlemen out of business, monopolizing the intermediation of trade in the market.

Market coupling and the organization of counter-trading: separating energy and transmission again?

The horizontal integration of the energy market and the organization of transmission services remain two open issues in the restructured European electricity sector. The coupling of the French, Belgian and Dutch electricity markets (the trilateral market) in November 2006 was a real success that the inclusion of Germany to the trilateral market should soon prolong. But the extension of market coupling whether in Central Western Europe or in other European regions encounters several difficulties and the future remains far from clear. The highly meshed grid of continental Europe complicates things and it is now sometimes recognized that the penetration of wind will further exacerbate these difficulties. The nodal system could go a long way towards solving these problems, but its implementation is not yet foreseen in the EU. This paper analyzes versions of market coupling that differ by the organization of counter- trading. While underplayed in current discussions, counter-trading will become a key element of market coupling as its geographic coverage expands and wind penetration develops. We consider a stylized six node example found in the literature and simulate market coupling for different assumptions of zonal decomposition and coordination of TSOs. We show that these assumptions matter: market coupling can be quite vulnerable to the particular situation on hand; counter-trading can work well or completely fail depending on the case and it is not clear beforehand what will prevail. Our analysis relies on standard economic notions such as social welfare, Nash and Generalized Nash equilibrium. But the use of these notions is probably novel. We also simplify matters by assuming away strategic behaviour. The nodal organization is the reference first best scenario: different zonal decompositions and degrees of coordinations are then studied with respect to this first best solution.D52, D58, Q40

Optimal pricing for urban road transport externalities.

A partial equilibrium model for the urban transport market is described. The urban transport market is represented as a set of interrelated transport submarkets, one per type of mode or vehicle and period. This allows to represent in detail the different external costs associated with the use of different modes: congestion, accidents, air pollution and noise. The model allows to find second best optima that combine optimally given pricing and environmental regulation instruments. The model is demonstrated for Brussels. For this city the welfare effects of alternative sets of instruments are compared.

Optimal Pricing for Urban Road Transport Externalities

A partial equilibrium model for the urban transport market is described. The urban transport market is represented as a set of interrelated transport submarkets, one per type of mode or vehicle and period. This allows to represent in detail the different external costs associated with the use of different modes: congestion, accidents, air pollution and noise. The model allows to find second best optima that combine optimally given pricing and environmental regulation instruments. The model is demonstrated for Brussels. For this city the welfare effects of alternative sets of instruments are compared.

Total factor productivity growth in European stock exchanges: A non-parametric frontier approach

This paper examines progressive changes in productivity of the European stock exchange industry using non-parametric frontier techniques. Within the framework of Malmquist indices, total factor productivity growth is decomposed into technological progress and technical efficiency change for a balanced panel of all major European stock exchanges over the period 1993–1999. The principal findings indicate an overall rise in productivity over the sample period, which is driven more by technological innovation than by efficiency improvements. According to organisational setup, technological innovation is more pronounced for exchanges with the following characteristics: automation, equity and derivatives trading, for-profit governance structure, large or medium-size capitalised markets. Technological progress can be interpreted as a sign of the dynamic nature of the whole exchange industry, in which stock exchanges take advantage of intense diffusion of new cost-effective technologies and information systems to leverage themselves onto a higher production frontier.stock exchanges; productivity; technological progress; Europe

Equilibrium bitcoin pricing

We offer an overlapping generations equilibrium model of cryptocurrency pricing and confront it to new data on bitcoin transactional benefits and costs. The model emphasizes that the fundamental value of the cryptocurrency is the stream of net transactional benefits it will provide, which depend on its future prices. The link between future and present prices implies that returns can exhibit large volatility unrelated to fundamentals. We construct an index measuring the ease with which bitcoins can be used to purchase goods and services, and we also measure costs incurred by bitcoin owners. Consistent with the model, estimated transactional net benefits explain a statistically significant fraction of bitcoin returns