Neo-Schumpeterian Simulation Models

The use of simulation modelling techniques by neo-Schumpeterian economists dates back to Nelson and Winter’s 1982 book “An Evolutionary Theory of Economic Change”, and has rapidly expanded ever since. This paper considers the way in which successive generations of models have extended the boundaries of research (both with respect to the range of phenomena considered and the different dimensions of innovation that are considered), and while simultaneously introducing novel modelling techniques. At the same time, the paper will highlight the distinct set of features that have emerged in these neo-Schumpeterian models, and which set them apart from the models developed by other schools. In particular, they share a distinct view about the type of world in which real economic agents operate, and a invariably contain a generic set of algorithms. In addition to reviewing past models, the paper considers a number of pressing issues that remain unresolved and which modellers will need to address in future. Notable amongst these are the methodological relationship between empirical studies and simulation (e.g. ‘history friendly modelling’), the development of common standards for sensitivity analysis, and the need to further extend the boundaries of research in order to consider important aspects of innovation and technical change.macroeconomics ;

A review of agent-based modelling of climate-energy policy

Unidad de excelencia María de Maeztu CEX2019-000940-MAltres ajuts: Russian Science Foundation. Grant Number: 19-18-00262Agent-based models (ABMs) have recently seen much application to the field of climate mitigation policies. They offer a more realistic description of micro behaviour than traditional climate policy models by allowing for agent heterogeneity, bounded rationality and non-market interactions over social networks. This enables the analysis of a broader spectrum of policies. Here, we review 61 ABM studies addressing climate-energy policy aimed at emissions reduction, product and technology diffusion, and energy conservation. This covers a broad set of instruments of climate policy, ranging from carbon taxation and emissions trading through adoption subsidies to information provision tools such as smart meters and eco-labels. Our treatment pays specific attention to behavioural assumptions and the structure of social networks. We offer suggestions for future research with ABMs to answer neglected policy question

Efficient operation of recharging infrastructure for the accommodation of electric vehicles: a demand driven approach

Large deployment and adoption of electric vehicles in the forthcoming years can have significant environmental impact, like mitigation of climate change and reduction of traffic-induced air pollutants. At the same time, it can strain power network operations, demanding effective load management strategies to deal with induced charging demand. One of the biggest challenges is the complexity that electric vehicle (EV) recharging adds to the power system and the inability of the existing grid to cope with the extra burden. Charging coordination should provide individual EV drivers with their requested energy amount and at the same time, it should optimise the allocation of charging events in order to avoid disruptions at the electricity distribution level. This problem could be solved with the introduction of an intermediate agent, known as the aggregator or the charging service provider (CSP). Considering out-of-home charging infrastructure, an additional role for the CSP would be to maximise revenue for parking operators. This thesis contributes to the wider literature of electro-mobility and its effects on power networks with the introduction of a choice-based revenue management method. This approach explicitly treats charging demand since it allows the integration of a decentralised control method with a discrete choice model that captures the preferences of EV drivers. The sensitivities to the joint charging/parking attributes that characterise the demand side have been estimated with EV-PLACE, an online administered stated preference survey. The choice-modelling framework assesses simultaneously out-of-home charging behaviour with scheduling and parking decisions. Also, survey participants are presented with objective probabilities for fluctuations in future prices so that their response to dynamic pricing is investigated. Empirical estimates provide insights into the value that individuals place to the various attributes of the services that are offered by the CSP. The optimisation of operations for recharging infrastructure is evaluated with SOCSim, a micro-simulation framework that is based on activity patterns of London residents. Sensitivity analyses are performed to examine the structural properties of the model and its benefits compared to an uncontrolled scenario are highlighted. The application proposed in this research is practice-ready and recommendations are given to CSPs for its full-scale implementation.Open Acces

Simulating the conflict between reputation and profitability for online rating portals

We simulate the process of possible interactions between a set of competitive services and a set of portals that provide online rating for these services. We argue that to have a profitable business, these portals are forced to have subscribed services that are rated by the portals. To satisfy the subscribing services, we make the assumption that the portals improve the rating of a given service by one unit per transaction that involves payment. In this study we follow the 'what-if' methodology, analysing strategies that a service may choose from to select the best portal for it to subscribe to, and strategies for a portal to accept the subscription such that its reputation loss, in terms of the integrity of its ratings, is minimised. We observe that the behaviour of the simulated agents in accordance to our model is quite natural from the real-would perspective. One conclusion from the simulations is that under reasonable conditions, if most of the services and rating portals in a given industry do not accept a subscription policy similar to the one indicated above, they will lose, respectively, their ratings and reputations, and, moreover the rating portals will have problems in making a profit. Our prediction is that the modern portal-rating based economy sector will eventually evolve into a subscription process similar to the one we suggest in this study, as an alternative to a business model based purely on advertising

Evolutionary macroeconomic assessment of employment and innovation impacts of climate policy packages

Climate policy has been mainly studied with economic models that assume representative, rational agents. Such policy aims, though, at changing carbon-intensive consumption and production patterns driven by bounded rationality and other-regarding preferences, such as status and imitation. To examine climate policy under such alternative behavioral assumptions, we develop a model tool by adapting an existing general-purpose macroeconomic multi-agent model. The resulting tool allows testing various climate policies in terms of combined climate and economic performance. The model is particularly suitable to address the distributional impacts of climate policies, not only because populations of many agents are included, but also as these are composed of different classes of households. The approach accounts for two types of innovations, which improve either the carbon or labor intensity of production. We simulate policy scenarios with distinct combinations of carbon taxation, a reduction of labor taxes, subsidies for green innovation, a price subsidy to consumers for less carbon-intensive products, and green government procurement. The results show pronounced differences with those obtained by rational-agent model studies. It turns out that a supply-oriented subsidy for green innovation, funded by the revenues of a carbon tax, results in a significant reduction of carbon emissions without causing negative effects on em ployment. On the contrary, demand-oriented subsidies for adopting greener technologies, funded in the same manner, result in either none or considerably less re- duction of carbon emissions and may even lead to higher unemployment. Our study also contributes insight on a potential double dividend of shifting taxes from labor to carbon

Consumer finance: challenges for operational research

Consumer finance has become one of the most important areas of banking, both because of the amount of money being lent and the impact of such credit on global economy and the realisation that the credit crunch of 2008 was partly due to incorrect modelling of the risks in such lending. This paper reviews the development of credit scoring—the way of assessing risk in consumer finance—and what is meant by a credit score. It then outlines 10 challenges for Operational Research to support modelling in consumer finance. Some of these involve developing more robust risk assessment systems, whereas others are to expand the use of such modelling to deal with the current objectives of lenders and the new decisions they have to make in consumer finance. <br/

Operations research in consumer finance: challenges for operational research

Consumer finance has become one of the most important areas of banking both because of the amount of money being lent and the impact of such credit on the global economy and the realisation that the credit crunch of 2008 was partly due to incorrect modelling of the risks in such lending. This paper reviews the development of credit scoring,-the way of assessing risk in consumer finance- and what is meant by a credit score. It then outlines ten challenges for Operational Research to support modelling in consumer finance. Some of these are to developing more robust risk assessment systems while others are to expand the use of such modelling to deal with the current objectives of lenders and the new decisions they have to make in consumer financ

Top-Down versus Bottom-Up Macroeconomics

I distinguish two types of macroeconomic models. The first type are top-down models in which some or all agents are capable of understanding the whole picture and use this superior information to determine their optimal plans. The second type are bottom-up models in which all agents experience cognitive limitations. As a result, these agents are only capable of understanding and using small bits of information. These are models in which agents use simple rules of behavior. These models are not devoid of rationality. Agents in these models behave rationally in that they are willing to learn from their mistakes. These two types of models produce a radically different macroeconomic dynamics. I analyze these differences.DSGE-model, imperfect information, heuristics, animal spirits

Scenario analysis report with policy recommendations: An assessment of sustainability, resilience, efficiency and fairness and effective chain relationships in VALUMICS case studies : Deliverable 8.4

This is an open access article distributed under the Creative Commons Attribution License, to view a copy of the license, see: https://creativecommons.org/licenses/by/4.0/. The final version of this report is available at https://doi.org/10.5281/zenodo.6534011The functioning of food value chains entails a complex organisation from farm to fork which is characterised by various governance forms and externalities which have shaped the overall food system. VALUMICS food value chain case studies: wheat to bread, dairy cows to milk, beef cattle to steak, farmed salmon to fillets and tomato to processed tomato were selected to enable explorative and empirical analysis to better understand the functioning of the food system and, to identify the main challenges that need to be addressed to improve sustainability, integrity, resilience, and fairness of European food chains. The VALUMICS system analysis was executed through four operational phases starting with Groundwork & analysis including mapping specific attributes and impacts of food value chains and their externalities. This was followed by Case study baseline analysis, which provided input to the third phase on Modelling and exploration of future scenarios and finally Policy and synthesis of the overall work. This report is an overall synthesis of the VALUMICS results as follows: • Key findings from the VALUMICS project on the functioning of European food value chains and their impacts on more sustainable, resilient, fairer, and transparent food system are summarised through a compilation of 25 Research Findings and Policy Briefs. • By highlighting the major contributions from the research activities throughout the four phases of the VALUMICS project, this report delivers an assessment of various factors influencing sustainability, resilience, efficiency and fairness and effective chain relationships of different food value chains, and their determinants. • The synthesis of the outcome allows the identification of opportunities and challenges characterising the functioning of food supply chains, and thus, the prospects and potentials for strengthening the EU food sector