Real Options: Applications in Public Economics

This paper illustrates the use of real options principles to value prototypical resource and industryinvestment projects. It captures important competitive/strategic dimensions in a step-by-stepanalysis of investment decisions (options) under uncertainty. It compares and contrasts staticdiscounted cash flow analysis (DCF) with real options analysis using three case studies. The initialexample values a resource extraction process using static DCF and then compares the projectvaluation when future information is valued and acted upon. The second example considers a coaldevelopment and uses the binomial valuation approach to capture the option value associated withhaving the right but not the obligation to exit the development. It contrasts this valuation approachagainst static DCF and highlights that future royalty payments could be underestimated if based onthe standard DCF valuation. The third example analyses the impact of providing a subsidy forhybrid vehicle production to accelerate potential uncertain environmental benefits. Lastly, thesuitability of the standard financial and economic evaluation tools used by treasury agencies isconsidered when projects contain real options.financial economics; investment decisions; public economics; externalities; subsidies; project evaluation

A Dynamic Optimisation Model of Weed Control

It is argued in this paper that static approaches to weed management, where the benefits and costs are only considered within a single season, are inappropriate for assessing the economic benefits of weed control technologies. There are carryover effects from weed management as weeds that escape control in one season may reproduce and replenish weed populations in following seasons. Consequently, it is appropriate to view weed control in the context of a resource management problem where the goal is to determine the optimal inter-temporal level of weed control that maximises economic benefits over some pre-determined period of time. A dynamic optimisation model for weed control is presented. Using the tools of comparative static analysis and Pontryagin's maximum principle, the conditions for optimal input use (ie weed control) are compared for static and dynamic situations. It is shown that a higher level of input use for a given weed population is optimal using a dynamic framework than would be derived under a static framework. The analysis is further extended by the incorporation of uncertainty and shows that the optimal level of weed control is also affected by uncertainty in herbicide efficacy and the survival of weed seeds produced. A case study of the optimal long-term management under deterministic and stochastic conditions of an annual cropping weed, Avena fatua, is presented.weed control, resource economics, optimal control, dynamic programming, wild oats, Farm Management,

Homo economicus in the post-socialist transition: looking for the most appropriate theoretical tools

In the recent decades the limitations of the neoclassical economics have been increasingly analysed. The criticism primarily tackles its assumptions on the rationality of atomised actors, efficient markets, availability of perfect information, and static foundations. Postsocialist transition additionally questioned straightforwardness of Western economists applying neoclassical tools. It became evident that other factors like institutions and values need to be included and thoroughly researched. At the same time, other approaches to analysis, often including findings from other social sciences, have been taken into account as more appropriate. This paper draws on the Eastern European transformation experience and focuses on the theoretical support that has been provided since the 1990s. Institutional analysis proved to be very adequate tool for the exploration of persistence of informal constraints and their interaction with the formal ones. Certain aspects of convergence of New Institutional Economics and New Economic Sociology appear to be very insightful for the observation of transitional reforms. Furthermore, ex post analyses clearly recommend the Evolutionary Institutionalist Perspective that was for a long time neglected by the Washington Consensus proponents despite the Post-Washington Consensus ideas. Finally, even though the theory on the transition processes is still in its development, it has become evident that economics as a discipline benefited through transition processes

Functional Data Analysis in Electronic Commerce Research

This paper describes opportunities and challenges of using functional data analysis (FDA) for the exploration and analysis of data originating from electronic commerce (eCommerce). We discuss the special data structures that arise in the online environment and why FDA is a natural approach for representing and analyzing such data. The paper reviews several FDA methods and motivates their usefulness in eCommerce research by providing a glimpse into new domain insights that they allow. We argue that the wedding of eCommerce with FDA leads to innovations both in statistical methodology, due to the challenges and complications that arise in eCommerce data, and in online research, by being able to ask (and subsequently answer) new research questions that classical statistical methods are not able to address, and also by expanding on research questions beyond the ones traditionally asked in the offline environment. We describe several applications originating from online transactions which are new to the statistics literature, and point out statistical challenges accompanied by some solutions. We also discuss some promising future directions for joint research efforts between researchers in eCommerce and statistics.Comment: Published at http://dx.doi.org/10.1214/088342306000000132 in the Statistical Science (http://www.imstat.org/sts/) by the Institute of Mathematical Statistics (http://www.imstat.org

Measuring third party tracker power across web and mobile

Third-party networks collect vast amounts of data about users via web sites and mobile applications. Consolidations among tracker companies can significantly increase their individual tracking capabilities, prompting scrutiny by competition regulators. Traditional measures of market share, based on revenue or sales, fail to represent the tracking capability of a tracker, especially if it spans both web and mobile. This paper proposes a new approach to measure the concentration of tracking capability, based on the reach of a tracker on popular websites and apps. Our results reveal that tracker prominence and parent-subsidiary relationships have significant impact on accurately measuring concentration

A critical perspective on heterodox production modeling

Production and distribution needs a proper place in heterodox economics. It has recently been suggested that the construction of production models needs to be empirically grounded. Also it has been stated that empirically grounded production models must be circular production models. This argument then marginalizes the contributions of important economists in heterodox thought. The paper will argue that heterodox production models need not be perfectly circular to make important contributions for heterodox production theory. Furthermore, it will be argued that models which consist of elements of hierarchial structures of production put emphasis on out of equilibrium traverse processes and historical time.Heterodox Economic Theory; Heterodox Price and Production Modeling

Evaluating Software Architectures: Development Stability and Evolution

We survey seminal work on software architecture evaluationmethods. We then look at an emerging class of methodsthat explicates evaluating software architectures forstability and evolution. We define architectural stabilityand formulate the problem of evaluating software architecturesfor stability and evolution. We draw the attention onthe use of Architectures Description Languages (ADLs) forsupporting the evaluation of software architectures in generaland for architectural stability in specific