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Vidi-workshop.

Event details of Structural Analysis of Economic Optimisation Problems
Date 24 March 2006
Time 12:30 -16:00
Location Roeterseilandcampus - building E

Programme

  • 13:30 Reception with Coffee
  • 14:00 Aart de Zeeuw (Tilburg)
    The Shallow Lake
  • 14:30 Pim Heijnen (RuG)
    Informative Campaigning by Environmental Groups
  • 15:00 Cees Withagen (VU/Tilburg)
    Constant saving rates and quasi-arithmetic population growth under exhaustible resource constraints
  • 15:30 Tea
  • 16:00 Peter Kort (Tilburg)
    Brand Integrity and Brand Dilution in the Fashion Industry
  • 16:30 Florian Wagener (UvA)
    The VIDI-project Structural Stability in Economic Dynamics
  • 17:00 End

Abstracts

Aart de Zeeuw (Tilburg University)
The Shallow Lake

Shallow lakes are a metaphor for ecological systems that show hysteresis or irreversibilities. The typical story is that if phosphorus is gradually loaded into lakes (due to agricultural activities), the state of the lake initially does not change much. At some point, however, the lake flips to a bad state in terms of ecological services, and this can either not be repaired or only by a substantial reduction in
phosphorus loading. This can be explained and modelled by including internal feedback terms in the dynamics of the stock of phosphorus.
Management of the shallow lake is not only a matter of restoring its pristine state. Economists argue that one has to take both the costs to agriculture and the loss of ecological services into account. Furthermore, lakes are usually common property so that one has to take account of the strategic interaction between the users of the lake. The combination of dynamics with internal feedbacks, costs and benefits, and strategic interaction turns the management problem into a non-convex differential game. This motivates a research agenda that aims at analysing and understanding differential games with non-linearities that lead to decision problems that are not convex. A number of interesting results have been achieved by now but much more is needed.

Pim Heijnen (Rijksuniversiteit Groningen)
Informative Campaigning by Environmental Groups

We study a model where the environmental quality
of a good is unknown to the consumers, but both the firm
(through price) as well as an environmental group (through
campaigning) can signal this quality to the consumers.
First, we study a model in which environmental quality is
given but randomly drawn at the beginning of the game
(interpreted as the short-run). We show that the
environmental group, unlike the firm, is able to inform
the public. Both the firm and consumers potentially
benefit from this, but it always lowers the utility of the
environmental group. Second, we study a model where the
firm can choose the quality (interpreted as the long-run).
In this case, the social optimum is reached through the
campaigning of the environmental group.

Cees Withagen (Vrije Universiteit Amsterdam/Tilburg University)
Constant saving rates and quasi-arithmetic population growth
under exhaustible resource constraints

In the Dasgupta-Heal-Solow-Stiglitz model of capital
accumulation and resource depletion we show the following equivalence: If an efficient path has constant (gross and net of population growth) savings rates, then population growth must be quasi-arithmetic and the path is a maximin or a classical utilitarian optimum. Conversely, if a path is optimal according to maximin or classical utilitarianism (with constant elasticity of marginal utility) under quasiarithmetic population growth, then the (gross and net of population growth) savings rates converge asymptotically to constants

Peter Kort (Tilburg University)
Brand Integrity and Brand Dilution in the Fashion Industry

We develop a dynamic optimal control model of a fashion
designer's challenge of maintaining brand integrity in the face of short-term profit opportunities through expanded sales that risk brand dilution in the longer-run. The key state variable is the brand's reputation, and the key decision is sales volume. Depending on the brand's capacity to command higher prices, one of two regimes is observed. If the price mark-ups relative to production costs are modest, then the optimal solution may simply be to exploit whatever value can be derived from the brand in the short-run and retire the brand when that capacity is fully diluted. However, if the price markups are more substantial, then an existing brand should be preserved. It may even be worth incurring
short-term losses while increasing the brand's reputation, even if starting a new brand name from scratch is not optimal.

Florian Wagener (Universiteit van Amsterdam)
The VIDI-project "Structural Stability in Economic Dynamics"

In this talk, I will outline the research agenda of the
VIDI-project "Structural Stability in Economic Dynamics. In
particular, I will discuss some economic dynamic optimisation problems that are to be investigated by methods from the theory of structural stability, and I will try to sketch (and to guess) the kind of results that might be expected.

More Information: f.o.o.wagener@uva.nl

Contact

Florian Wagener: F.O.O.Wagener@uva.nl
Roeterseilandcampus - building E

Roetersstraat 11
1018 WB Amsterdam

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