Browsing by Subject "Equilibrium (Economics)--Mathematical models"
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Item Confidence intervals for computable general equilibrium models(2003) Tuladhar, Sugandha Dhar; Wilcoxen, Peter J.Computable general equilibrium (CGE) models have expanded from being a simple theoretical tool to a widely accepted policy evaluation tool. Despite recognizing that model parameters involve uncertainty, virtually all modelers report their results without confidence intervals. This obscures the uncertainty inherent in the models and gives the impression that the results are far more certain than they actually are. CGE models with calibrated parameters and econometric CGE models using only the mean value of the parameters share a common flaw: their results are point estimates only, with no indication of the range of possible variation. A better analysis would include confidence intervals that communicate the underlying uncertainty. This would allow the policy makers to understand the precision of the results. In this dissertation a tractable formal technique for calculating confidence intervals is presented. The results from this approach are compared with sensitivity analysis, an alternative method sometimes used for assessing uncertainty. It is shown for the models presented that sensitivity analysis can produce misleading results and that the confidence intervals are feasible to compute and qualitatively superior. Next, the technique is applied to an econometric intertemporal general equilibrium model of the US economy to examine a current policy issue. The strong form of the double dividend hypothesis, which asserts that revenue-neutral substitution of an environmental tax for a distortionary income tax can improve welfare, is tested. The intertemporal equivalent variation (EV) for the policy is calculated. Unlike other studies, however, the 95 percent confidence interval for the EV is presented. The mean EV is slightly negative but the confidence interval is large and includes zero, so the model neither supports nor rejects the double dividend hypothesis. In addition, the short-run and the long-run intratemporal EV is calculated and compared to the intertemporal EV. The result implies that the long-run result supports the double dividend hypothesis even though the short-run does not. Finally, I present a detailed analysis of the general equilibrium effects that yield these distinct and contradictory results. In sum, this dissertation provides an econometric view of CGE modeling and statistical testing of CGE results that is acceptable to econometricians. It attempts to answer criticisms of CGE modeling and the wider challenge to empiricism in economics (Whalley, 1985).Item Game-theoretic equilibrium analysis applications to deregulated electricity markets(2008-08) Joung, Manho, 1972-; Baldrick, RossThis dissertation examines game-theoretic equilibrium analysis applications to deregulated electricity markets. In particular, three specific applications are discussed: analyzing the competitive effects of ownership of financial transmission rights, developing a dynamic game model considering the ramp rate constraints of generators, and analyzing strategic behavior in electricity capacity markets. In the financial transmission right application, an investigation is made of how generators’ ownership of financial transmission rights may influence the effects of the transmission lines on competition. In the second application, the ramp rate constraints of generators are explicitly modeled using a dynamic game framework, and the equilibrium is characterized as the Markov perfect equilibrium. Finally, the strategic behavior of market participants in electricity capacity markets is analyzed and it is shown that the market participants may exaggerate their available capacity in a Nash equilibrium. It is also shown that the more conservative the independent system operator’s capacity procurement, the higher the risk of exaggerated capacity offers.Item Intertemporal modeling: computable general equilibrium and environmental applications(2003) Fawcett, Allen Atchison; Wilcoxen, Peter J.The first chapter uses an intertemporal optimal control model to analyze the problem of transboundary pollution that has both stock and flow characteristics. In this theoretical model, firms produce a flow pollutant that adversely affects the state in which it was released and downstream states. The pollution can be cleaned-up by removing the damaging elements from the flow before they enter the environment, but the removed harmful elements do not simply disappear. Their disposal generates a stock pollutant that only affects the state in which it was generated. The model is solved for the optimal time path for cleanup of the flow pollutant, and the Pigouvian tax rate that will achieve the optimal result. In a transboundary setting, regulation chosen by the upstream polluting state will clean up less than the optimal amount of flow pollutant. The model also demonstrates that a federal regulation that ignores the stock pollutant will clean up more than the optimal amount of the flow pollutant. The second chapter presents an econometrically-estimated intertemporal computable general equilibrium model with labor and capital adjustment costs. Computable general equilibrium models are widely used for evaluating policies, but they generally fail to capture short run rigidities, especially in labor markets. This shortcoming has led to the continued use of old style reduced-form macro models for policy analysis in situations where short-run rigidities are likely to be important. Capturing labor market rigidities is particularly important in the analysis of environmental regulations or other policies that strongly affect narrow sections of the economy. In the long run, the industries adversely affected by such policies will shrink. In the short run, however, the labor employed in those industries is not able to move. The true cost of such a policy, therefore, depends critically on the transition path of the economy from the announcement of the policy to the new long run equilibrium. Including labor adjustment costs addresses this problem and will allow computable general equilibrium models to be used for a much broader range of policy analyses than they have been in the past.