C61 - Optimization Techniques; Programming Models; Dynamic AnalysisReturn

This paper establishes a two-stage Hotelling model to identify the implications of the upgrades of durable goods produced by a spatial monopoly. The major findings indicate that, due to the positive effects on profits of the upgrading of products, the monopoly has the motivation to launch upgraded versions with high quality instead of solely producing products with low quality. The monopoly, meanwhile, would not make a commitment to either the high-quality products or the low-quality ones. In addition, the price of the low-quality products decreases as upgraded ones appear on the market in a second stage, since no consumers would store the low-quality products for future consumption.

The second order stochastic dominance (SSD) has become exceedingly popular in recent years,
due to its ability to determine the dominance of one asset over another for all risk-averse investors
without a strict requirement in asset distribution. In this study, 33 OECD country indexes and their
enriched set of assets, which consists of some combinations of these indexes, are investigated
and compared between 2007 and 2015 by utilizing pairwise SSD comparisons, with different data
frequencies, such as daily, weekly, monthly and quarterly. This paper contributes to the literature
in three points: Firstly, a serious portion of the best performing OECD countries has the lowest GDP
(PPP) per capita level. Secondly, the SSD efficient set depends on data frequency. Thirdly, when
the data frequency is lowered, the difference between two SSD pairwise efficiency tests decreases.

This paper aims to model the day-ahead prices on the German EPEX SPOT exchange during the year 2011 using a fundamental mixed-integer programming model with focus on the changes in the volatility of prices. A model of the German market is built from publicly available data. Various constraints on the supply side such as operational characteristics of power plants are described, characterized and ultimately formulated as constraints of a cost-minimization problem. Unknown power plant characteristics are estimated by expert opinions or are inferred indirectly from other data. Several scenarios testing the impact of constraints and modelling approaches are analysed. In addition, a future scenario simulating the year 2016 is used to forecast price developments under the ongoing massive renewable energy growth. Finally, results are discussed with respect to price forecasting accuracy with a focus on the changes in the volatility of prices.

The Lithuanian agricultural sector still features the processes of land reform, farm structure development, and modernisation. Accordingly, there is a need to utilise the benchmarking techniques in order to fathom the underlying trends and sources of efficiency and productivity. This paper therefore aims at analysing the productive efficiency and the total factor productivity in the Lithuanian family farms. The research is based on the Farm Accountancy Network Data covering the period of 2004-2009. The Färe-Primont Indices were employed to estimate and decompose the total factor productivity changes. Furthermore, the stochastic kernels were applied to analyse the distributions of the efficiency scores along with the econometric analysis which aimed at revealing the relationships of the environmental variables and the efficiency scores. The results do indicate that the technical efficiency was a decisive factor causing decrease in TFP efficiency for crop and mixed farms. Meanwhile, the scale efficiency constituted a serious problem for mixed farms. Indeed, these farms were the smallest ones if compared to the remaining farming types. Finally, the mix efficiency was low for all farming types indicating the need for implementation of certain farming practices allowing for optimisation of the input-mix.

Each year, a part of the budget of the City of Prague is allocated among its city districts in the form of subsidies. The objective of the City of Prague is to find such a set of criteria and such a set of relative weights that estimate the expected cost of local public administration best. The objective of each city district is subsidy maximization by influencing the criteria and weights. Two quantitative methods that set the weights without participation of decision makers are presented. The first method is based on the multiple-criteria decision making and the second one on the zero-sum gains DEA model. The illustrative calculations for the year 2012 are presented. An application of the multiple-criteria decision making model requires re-allocation of 8.3% of the total subsidy budget in comparison to the real subsidy values in the year 2012. An application of the zero-some gains DEA model requires re-allocation of 14.0% of the total subsidy to city districts. We are not able to offer any definitive answers about which allocation model is the best one, however, an analysis of the subsidy allocation process can help us in understanding the nature of the subsidy allocation problem and its potential weaknesses.

Innovation is an important topic in economics. This paper highlights duopoly innovation under the Hotelling model with game theory approaches. This paper argues that market power, as measured by the cost advantage of a dominant firm over its rival, serves to enhance the incentive to innovate in a Hotelling model of spatial competition. This result implies that a firm with cost advantage will have a larger incentive than its rivals to further its cost advantage as new opportunities for innovation arise thereby implying that innovation increases concentration. This result is in contrast to the result obtained by Holmes et al. (2012) who use the Betrand model to show that "market power" lowers the incentive to innovate. We think that the inelastic demand causes this economic phenomenon.

Composite indicators as a tool for a ranking become more and more popular, because they illustrate a comprehensive view on a phenomenon that cannot be captured by only one single indicator. Indicators for Europe 2020 are set of indicators used for monitoring targets defined by the European Commission in the Strategy of Smart, Sustainable and Inclusive Growth. The main objective of this paper is the comparison of performance of the EU Member States using the composite indicator principles. Within constructing composite indicators several steps have to be made and corresponding methods have to be chosen. There is not only one correct method how to develop a composite indicator. Of course, the choice of the methods manipulates the results. Primarily, normalisation methods, weighting schemes and aggregation formulas are fundamental but very subjective. This paper deals with two types of normalisation (z-score and min-max) and four weighting and aggregation schemes (equal weighting with linear aggregation, principal components analysis, benefit of doubt method and multi-criteria analysis). European countries ranking is provided according to the seven different scenarios.

The paper estimates institutional efficiency of a sample of EU and OECD countries. We employ an output-oriented Data Envelopment Analysis (DEA-like) approach where six Worldwide Governance Indicators published by the World Bank in 2009 constitute a vector of outputs. Assuming that all countries should aim at the same level of institutional quality, inputs were considered unimportant. The results, as to in which areas and how much individual countries need to improve, were not surprising. Concerning the overall efficiency scores and rankings, the most institutionally efficient countries are situated in northern Europe. The Czech Republic ranked 24th in the overall sample and 3rd among New EU Member States. The biggest necessary improvements are in the area of government effectiveness and control of corruption. The robustness check using Principal Component Analysis revealed significant qualitative correlation with the DEA-like results, with the correlation coefficient of 0.9653. We propose that both sets of results could be used equally well as explanatory variables in growth and other regressions.

This paper highlights the monopoly firms' commitments for goods requiring high maintenance expenditure, such as elevators, televisions and computers. A guarantee time limit model to maintain these special goods is presented in this paper. Based on this model, several types of commitments with different guarantee time limits are compared under monopoly conditions. This paper finds that the guarantee pattern has no effect on the monopoly firm's profits if all information is known to both the consumer and the monopolist. It is also shown that if a monopoly firm exaggerates its product quality claims in its advertisements, then it cannot meet its warranty guarantees. Industrial organizational theory is employed to analyze maintenance guarantees in this work.

Municipalities with extended administration, in which public administration offices are located, were selected within the frame of public administration reform (Act No. 344/1997 Coll., on the Territorial Arrangement of the State and Establishment of Higher Territorial & Administrative Units). These municipalities with extended administration partly substitute the function of district authorities. The selection of municipalities was carried out on the basis of criteria set by the government and political subjects. From the point of view of citizens, the most important criterion for the dislocation of public administration branch offices is the transport availability. Nevertheless, transport availability was not paid relevant attention in the decision making process in question. This fact becomes more and more important in connection with the growing problems related to ensuring regional transport. The paper deals with the creation of a mathematical model of the optimisation of branch offices dislocation and subsequent implementation. The solution of this model has three outputs. The first output is the evaluation of the contemporary state from the point of view of accessibility of branch offices. The second one is the sensibility analysis of accessibility depending on the number of branch offices. The third output is the post-optimisation analysis, which brought about numerical expression of the relationship between the cost of running a branch office and losses due to citizens travelling to municipalities with extended administration.

A heterogeneous agents model with the Worst Out Algorithm (WOA) was considered for obtaining more realistic market conditions. The WOA replaces periodically the trading strategies that have the lowest performance level of all strategies presented on the market by the new ones. New strategies that enter on the market have the same stochastic structure as an initial set of strategies. This paper shows, by wavelets applications, strata influences of the trading strategies with the WOA.

The efficient market hypothesis (EMH) fails as a valid model of financial markets. The fractal market hypothesis (FMH) is a more general alternative way to the EMH. The FMH is formed on the following parameter space: agents' investment horizons. A financial market is more stable when a fractal character in the structures of agent's investment horizons is adopted. For computer simulations, the classical model is modified. This adjusted model shows that various frequency distributions on agents' investment horizons lead to different returns behaviour. The FMH focuses on matching of demand and supply of agents' investment horizons in the financial market. The FMH asserts that investors have different information based on temporal attributes. Since all investors in the market have different time investment horizons, the market remains stable. Our simulations of probability distributions of agents' investment horizons demonstrate that many investment horizons guarantee stability on the financial market.

The efficient markets hypothesis provides a theoretical basis on which technical trading rules (TTRs) are rejected as a viable trading strategy. TTRs, providing a signal to the user when to buy or sell asset based on such price patterns, should not be useful for generating excess returns. Technical traders tend to put little faith in strict efficient markets hypothesis. This approach relies on heterogeneity in the agent information and subsequent decisions either as fundamentalists or as technical traders. Switching between the technical trader's and fundamentalist's strategy is a basis of the cycle behaviour. This event is analysed by the Brock and Hommes (BH) model. Moreover, the memory case is added to this model because BH model was the memory-less model. This branch consists of a behaviour analysis among fundamentalists and technical traders. Here is a basis for endogenous source of the real business cycle.

In this paper I study the behavior of two TV broadcasters on a market where viewers perpetually make a decision whether to watch TV and which TV channel to watch. Both broadcasters optimally allocate time periods where their TV program is replaced by advertising. While TV programs represent broadcaster's costs, commercials bring in revenue that is proportional to the audience reach. I assume that viewers choose among products and the outside option following a Markov process where probabilities of transition reflect various attractiveness of the products. Given symmetrical positions of the broadcasters, I prove that their optimal strategy is to put their commercial breaks into the same or very close times. In the case when commercials overlap perfectly, both broadcasters are better off if they fragment their breaks into shorter breaks keeping the total amount of commercial time the same.

The paper studies the compliance of the CZK - EUR exchange rate with the uncovered parity of returns on assets denominated in the two named currencies. A comparison with the same property for the euro-dollar rate is made. An uncovered total return parity (UTRP) formula is derived from the equilibrium in a portfolio optimization model with liquidity constraints. It is shown that the uncovered parity of total returns, and not of short-term money market rates, is a natural outcome of stochastic equilibrium asset pricing models that generalize the International Consumption-based Capital Asset Pricing Model. Accordingly, the traditional uncovered interest rate parity should be replaced by UTRP in empirical analysis. UTRP tests for the CZK/EUR and the USD/EMU currency pairs are conducted using yields of long-term government bond yields. UTRP typically holds, although the time horizons and measures of exchange rate movements, for which it becomes visible, may vary.