A substitute for the classical Neumann--Morgenstern characteristic function in cooperative differential games

In this paper, we present a systematic overview of different endogenous optimization-based characteristic functions and discuss their properties. Furthermore, we define and analyze in detail a new, $\eta$-characteristic function. This characteristic function has a substantial advantage over other characteristic functions in that it can be obtained with a minimal computational effort and has a reasonable economic interpretation. In particular, the new characteristic function can be seen as a reduced version of the classical Neumann-Morgenstern characteristic function, where the players both from the coalition and from the complementary coalition use their previously computed strategies instead of solving respective optimization problems. Our finding are illustrated by a pollution control game with $n$ non-identical players. For the considered game, we compute all characteristic functions and compare their properties. Quite surprisingly, it turns out that both the characteristic functions and the resulting cooperative solutions satisfy some symmetry relations

From Pollution Control Cooperation of Lancang-Mekong River to “Two Mountains Theory”

peer reviewed“Lucid waters and lush mountains are invaluable assets” (referred to as the “Two Mountains Theory”) plays an important role in the process of controlling environmental pollution. This article introduces this practice with an example of pollution control in the Lancang-Mekong River Basin (LMRB). The research considers that the upstream and downstream countries can carry out water pollution control by imposing fines on enterprises that cause ecological damage and investing in pollution control resources. Firstly, the differential game model of pollution control by individual countries and international cooperation is established. Then, a differential game model of joint pollution control with compensation mechanism is established under the cooperation framework. Finally, the feedback Nash equilibrium of each state is obtained. The study shows that in the process of industrial pollution control by countries in the LMRB alone, due to the one-way externality of water pollution control, the more downstream countries are, the more resources will be invested in pollution control and the fewer fines will be imposed on enterprises that cause ecological damage. At the beginning stage of management, if more pollution control resources are input, fewer countries will participate in cooperation, and the fines for polluting enterprise would be less. When the amount of fines for enterprises is relatively small, the establishment of a river pollution compensation mechanism is not conducive to the input of pollution control resources. On the contrary, it is beneficial for the state to invest in pollution control resources. The coordinated development of economic development and ecological civilization construction is the core purpose of the “Two Mountains Theory”. Therefore, the case of the LMRB fully illustrates the feasibility of the “Two Mountains Theory” based on cooperation. © 2022 by the authors. Licensee MDPI, Basel, Switzerland

Tencent Holdings Limited : an IPO case study

The purpose of this case study is to empirically investigate the phenomenon of initial public offerings (IPOs) by applying it to Tencent Holdings Limited (Tencent). Tencent is a Chinese internet and telecommunications value-added service provider that launched its IPO on 16 June 2004. Tencent is China’s largest internet firm and Asia’s most valuable brand, boasting a current market capitalization of HK$1.224 trillion (US$157.9 billion). The origins of Tencent’s success story trace back to its IPO decision, an important topic in the field of finance. The aim of this study is to investigate the structure of Tencent’s IPO, its listing decision and determining an intrinsic value of its IPO shares on its listing date. It was found that Tencent’s IPO extensively relates to academic literature surrounding IPO under-pricing and valuing unlisted companies. The results reveal that Tencent left money on the table by underpricing its offer shares and exercised its over-allotment option as a form of price stabilization. It was further found that Tencent’s underpricing was not influenced by competitor IPOs but rather by stringent IPO allotment policies and other signals of firm quality. It was also discovered that there might have been bias in the allocation of Tencent’s shares. An investigation into Tencent’s listing on the Hong Kong Stock Exchange (HKEx) revealed that while its competitors listed on the NASDAQ Stock Market, there was a clear correlation between Tencent’s operations and corporate structure to the HKEx listing and regulatory requirements. The decisive factors included domiciling in the British Virgin Island and Cayman Islands, the cost of listing on the HKEx Main Board versus the NASDAQ National Market as well as the effects of US GAAP and the Sarbanes-Oxley Act of 2002. The study was concluded with the application of a relative valuation and discounted cash flow (DCF) valuation. The relative valuation estimated a price range of HK$14.40-HK$18.72 for Tencent’s IPO shares, while the DCF estimated the intrinsic value of the shares to be HK$18.68. The analysis was comprehensive and in-depth and suggests that Tencent’s IPO shares were five times undervalued and were offered to shareholders at a deep discount

Regional Governance, Institutions and Development

Across the world, the regional level is becoming increasingly important in economic development with a proliferation of regionally based initiatives. This has important consequences for how institutional capacity is able to take and influence decisions with regard to the long-term future development of particular localities: in short the patterns of regional governance. This book focuses on two relevant aspects: (i) the question of governance - how does the ongoing process of institution-building affect the ways in which the regions and localities are governed, including questions of democracy, participation, regional self-determination, public-private partnerships and accountability; and (ii) what are the consequences of new modes of governance and institutional change for regional development strategies and policies, particularly in the context of large-scale industrial restructuring and city-region and urban regeneration.https://researchrepository.wvu.edu/rri-web-book/1029/thumbnail.jp

Essays on Foreign Aid, Government Spending and Tax Effort

This dissertation comprises two essays that attempt to determine, empirically, the fiscal response of governments’ to international assistance. The first essay examines whether an increasingly popular recommendation in international aid policy to switch from tied foreign assistance to untied foreign assistance affects investment in critical development expenditure sectors by developing countries. In the past, most international aid has been in the form of tied assistance as donors believed that tying aid will improve its effectiveness. It has been argued, that if tied aid is well designed and effectively managed then its overall effectiveness can be improved. On the contrary, it is also believed that tied aid acts as an impediment to donor cooperation and the building of partnership with developing countries. In addition, it is also argued that it removes the ‘feeling’ of ownership and responsibility of projects from partner countries in aid supported development. Two other more popular arguments used to challenge the effectiveness of foreign aid is that it is compromised when tied to the goods and services of the donor countries because almost 30 percent of its value is eliminated and also because it does not allow recipient countries to act on their priorities for public spending. These problems bring into question whether tied aid is truly the most effective way to help poor countries. A recommendation by the international community is that a switch to untied aid would be necessary. With untied aid, the recipient country is not obligated to buy the goods of the donor country neither is it compelled to pursue the public expenditure priorities of donors. Instead with untied aid they will have greater flexibility over spending decisions and can more easily pursue the priorities of their countries as they see fit. Hence, one could expect that a one dollar increase in untied aid will increase spending in the critical priority sectors by more than a one dollar increase in tied assistance. The question therefore is whether national domestic priorities coincide or not with what the international community has traditionally deemed should be priority. Empirically, we test this prediction using country-by-country data for 57 countries for the period 1973 to 2006. The results suggest that on average untied aid has a greater impact on pro-poor spending than do tied aid. In addition, the results also suggest that fungibility is still an issue even after accounting for the effects of untied aid. However, one could argue that fungibility may not be as bad as it appears since the switch to untied aid improves spending in the sectors that are essential for growth and development. The second essay explores the hypothesis that the expectations of debt forgiveness can discourage developing countries from attaining fiscal independence through an improvement of their tax effort. On the one hand, the international financial community typically advises poor countries to improve revenue mobilization but, on the other hand, the same international community routinely continues to bail-out poor countries that fail to meet their loan repayment obligations. The act of bailing-out these countries creates an expectation on the part of developing country governments that they will receive debt forgiveness time and again in the future. Therefore, the expectation of future bail outs creates a moral hazard that leads to endemic lower tax efforts. The key prediction of our simple theoretical model is that in the presence of debt forgiveness, tax ratios will decline and this decline will be stronger the higher the frequency and intensity of the bailouts. Empirically, we test this prediction using country-level data for 66 countries for the period 1989 to 2006. The results strongly suggest that debt forgiveness plays a significant role in the low tax effort observed in developing countries. Our empirical model allows for the endogeneity of tax effort and debt forgiveness. Interestingly we find that more debt forgiveness is actually provided to countries with lower tax effort. The results are robust to various specifications