Does vertical integration reduce investment reluctance in production chains? An agent-based real options approach

This paper uses an agent-based real options approach to analyze whether stronger vertical integration reduces investment reluctance in pork production. A competitive model in which firms identify optimal investment strategies by using genetic algorithms is developed. Two production systems are compared: a perfectly integrated system and a system in which firms produce either the intermediate product (piglets) or the final product (pork). Simulations show that the spot market solution and the perfectly integrated system lead to a very similar production dynamics even with limited information on production capacities. The results suggest that, from a pure real options perspective, spot markets are not significantly inferior to perfectly integrated supply chains.real options, supply chain, agent-based models, genetic algorithms, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Institutional and Behavioral Economics, Productivity Analysis,

A Buffer Stocks Model for Stabilizing Price of Commodity under Limited Time of Supply and Continuous Consumption

Staple foods, in developing countries especially in Indonesia, have extremely volatile among harvest and planting season caused by inelastic of supply-demand and price disparity. When a staple food is shortage in market, it will trigger crisis of economics, political and social because it concerns with food security. This paper develops a buffer stock model for stabilizing price of commodity under limited time of supply and continuous consumption. The performance criterion of model will consider financial loss of producer, consumer and government side when market is interfered by price-stabilization program and price-support program simultaneously. The price fluctuation will be stabilized by market operation where buffer stocks are bought from domestic and import supply point. This paper provides a price band policy that attempts to bound domestic price variation between a set of upper and lower bounds on the level of domestic prices. We consider three sets of problems reflecting different three prices elasticity from 4 period of supply and demand. Numerical examples are found to be consistent with empirical estimates regarding the relationship price elasticity with price band and with government budget for the agenda of assisting household to assure availability a staple food with enough amounts at rational prices. Keywords: buffer stocks, price band, stabilization, limited time of supply, staple foods

Agricultural Economy of India and Macro-Economic Effects: Some Empirical Results and a Research Agenda based on the Literature

This paper focuses on macroeconomic linkages with agriculture. From an extensive literature review the question that emerges is: is there a structural constraint in Indian agriculture or does Indian agriculture work in a system in which as demand rises and prices rise, supply responds. The constraints maybe institutional or policy determined in the foodgrains part of the economy, with the non foodgrain economy being responsive to market forces. These kind of general hypotheses lead to analysis of macroeconomic policy variables particularly of impacts of government expenditure and money supply. What are the impacts of such policies on agricultural prices and interest rates for agriculture? How do they impact on agricultural demand, supplies and investment? If expansionary/ contractionary macro policy (Monetary-Fiscal policy mix) leads to rise/fall in money income, it will impact significantly on agricultural demand. Does this then lead to fluctuations in agricultural supply? There are many ways to analyze this kind of question. We use a partial economy framework using lags to help the specifications of our model. A Causal Chain model demonstrates econometrically that macro policies impact agriculture in a significant manner. The farm-nonfarm ratio determines supply with a Nerlovian lag and the model predicts supply oscillations in the non foodgrain agricultural economy. The work has possibilities of more complicated policy simulations of macro policy impacts on agriculture.

Open TURNS: An industrial software for uncertainty quantification in simulation

The needs to assess robust performances for complex systems and to answer tighter regulatory processes (security, safety, environmental control, and health impacts, etc.) have led to the emergence of a new industrial simulation challenge: to take uncertainties into account when dealing with complex numerical simulation frameworks. Therefore, a generic methodology has emerged from the joint effort of several industrial companies and academic institutions. EDF R&D, Airbus Group and Phimeca Engineering started a collaboration at the beginning of 2005, joined by IMACS in 2014, for the development of an Open Source software platform dedicated to uncertainty propagation by probabilistic methods, named OpenTURNS for Open source Treatment of Uncertainty, Risk 'N Statistics. OpenTURNS addresses the specific industrial challenges attached to uncertainties, which are transparency, genericity, modularity and multi-accessibility. This paper focuses on OpenTURNS and presents its main features: openTURNS is an open source software under the LGPL license, that presents itself as a C++ library and a Python TUI, and which works under Linux and Windows environment. All the methodological tools are described in the different sections of this paper: uncertainty quantification, uncertainty propagation, sensitivity analysis and metamodeling. A section also explains the generic wrappers way to link openTURNS to any external code. The paper illustrates as much as possible the methodological tools on an educational example that simulates the height of a river and compares it to the height of a dyke that protects industrial facilities. At last, it gives an overview of the main developments planned for the next few years

Dynamic Game Analysis of Coal Electricity Market Involving Multi-Interests

The coal consumption of China reached 2.75 billion tons of standard coal in 2013, which accounted for 67.5% of total energy consumption and more than 50% of global coal consumption. Therefore, the impact of coal price is huge on coal market and even energy market in China. As a large consumer of coal, thermal power enterprise has a strong sensitivity to coal price. In order to balance the rising cost of enterprises due to coal price, we need to analyze the interests of multiple stakeholders. Firstly, this paper combined the Nash equilibrium and cobweb model and proposed the characteristics in different cobweb model. Then, for coal, power, and energy companies, the dynamic game analysis model is constructed. This model gives a game analysis in four scenarios and quantifies the decision of each stakeholder in different coal prices. Finally, the impact figure of different coal prices on each stakeholder has been drawn. The impacts of different coal or thermal power prices on different markets have been put forward, so relevant policy recommendations have been proposed combined with the cobweb model

Price Expectations, Cobwebs and Stability

There is given a market for several perishable goods, supplied under technological randomness and price uncertainty. We study whether and how producers eventually may learn rational price expectations. The model is of cobweb type. Its dynamics fit standard forms of stochastic approximation. Relying upon quite weak and natural assumptions we prove new convergence results

Volatility Analysis on Producer Price of Red Pepper and Cayenne Pepper in West Java Province Indonesia

This study aims to determine the price volatility in producer of red pepper and cayenne pepper in West Java Province. The data used in this research was secondary data focusing on monthly price statistics of red pepper and cayenne pepper producer in West Java Province from 2008 to 2015. The method used in this research was ARCH/GARCH method with best model determination. Based on the research, it was found that the best model for the price of red pepper in producer was GARCH (1,1) with the volatility value of 0,96. It means that volatility of price of red pepper in producer level was influenced by the increase and fluctuations on producer price of red pepper one month before. The best model for the price of the cayenne pepper producer was ARCH (1) with the volatility value of 0,52. It means that price volatility of cayenne pepper in producer level was also influenced by fluctuations producer price of cayenne pepper one month before. The value of volatility price of red pepper in West Java Province is closed to one, so it can be categorized of high volatility. Meanwhile, the price on the producer of cayenne pepper in West Java Province can be categorized of low volatility

Heterogeneous Agent Models in Economics and Finance, In: Handbook of Computational Economics II: Agent-Based Computational Economics, edited by Leigh Tesfatsion and Ken Judd , Elsevier, Amsterdam 2006, pp.1109-1186.

This chapter surveys work on dynamic heterogeneous agent models (HAMs) in economics and finance. Emphasis is given to simple models that, at least to some extent, are tractable by analytic methods in combination with computational tools. Most of these models are behavioral models with boundedly rational agents using different heuristics or rule of thumb strategies that may not be perfect, but perform reasonably well. Typically these models are highly nonlinear, e.g. due to evolutionary switching between strategies, and exhibit a wide range of dynamical behavior ranging from a unique stable steady state to complex, chaotic dynamics. Aggregation of simple interactions at the micro level may generate sophisticated structure at the macro level. Simple HAMs can explain important observed stylized facts in financial time series, such as excess volatility, high trading volume, temporary bubbles and trend following, sudden crashes and mean reversion, clustered volatility and fat tails in the returns distribution.

Origins and Early Development of the Nonlinear Endogenous Mathematical Theory of the Business Cycle: Part I - The Setting

We study the emergence of the nonlinear, endogenous, theory of the business cycle, in mathematical modes, within the framework of a macroeconomic theory, which was itself going through its own formal 'birth pangs' at the same time, in the same years. The first part of the story begins in 1928 and ends, with the publication of Yasui's classic on Kaldor, Hicks and Goodwin, in 1953, and Hudson's classic of 1957. But there were other classics in the 1930s, even within some theories of the business cycles of the time - particularly the Austrian and that which may now be called the 'time-to-build' tradition, which originates in Marx and Aftalion, independently, and reaches its nonlinear formalization origins in Tinbergenís work of 1931, followed by Kalecki's theories of the business cycle, substantially influenced also by Tinbergen's classic for mathematical method. There is also what may, for want of a better name, be called the 'cobweb' tradition, on the one hand, and the tradition of Swedish Sequence Analysis, on the other (especially in the 1937 classic work of Lundberg, summarising the Swedish discussion on business cycle theory). The former having its origins, partly, in Austrian inspired search for an integration of dynamic method with equilibrium economic theory (especially represented by a series of classics by Rosenstein-Rodan, from about 1929); and partly in the well known phenomenon of lagged responses in the supply-demand interactions in agricultural and commodity markets, particularly elegantly formalised by Leontief in 1934. From the point of view of economic theory, they were all part of the emerging consensus on the need to incorporate money and áuctuations in nontrivial ways as intrinsic components of orthodox equilibrium economic theory which was characterised as static theory. The implication was that the search was for a synthesis of dynamic method with traditional static equilibrium economic theory. The origins of macroeconomic theory, generally attributed to the post-depression development of monetary theory, business cycle theory and the theory of policy, could be traced to this particular search for a synthesis and was brilliantly summarised by Kuznets in a series of pioneering contributions in 1929/30. The story we try to tell is of mathematical business cycle theory in its non-linear modes, and how it emerged from one strand of macroeconomic theory, which, as just mentioned, was itself being forged, ab initio, dynamically

The main transition management issues and the effects of environmental accounting on financial performance: with focus on cement industry

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