Showing papers by "Central Economics and Mathematics Institute published in 2001"

Sharing Nonconvex Costs

Abstract: The paper analyzes cooperative games with side payments. Each player faces a possibly non-convex optimization problem, interpreted as production planning, constrained by his resources or technology. Coalitions can aggregate (or pool) members' contributions. We discuss instances where such aggregation eliminates or reduces the lack of convexity. Core solutions are computed or approximated via dual programs associated to the grand coalition.

Option pricing by large risk aversion utility¶under transaction costs

Abstract: We consider a multi-asset continuous-time model of a financial market with transaction costs and prove that, for a strongly risk-averse investor, the reservation price of a contingent claim approaches the super-replication price increased by the liquidation value of the initial endowment.

The Monge—Kantorovich problems and stochastic preference relations

Abstract: A method in mathematical utility theory based on the duality theorems for the general Monge—Kantorovich problem proves to be fruitful in various parts of mathematical economics. In the present survey we give further development of that method and study its applications to closed preference relations (resp. correspondences) on a topological space (resp. between two topological spaces) and to their convex stochastic extensions on the corresponding spaces of lotteries. Among other results, we prove characterization theorems: for a functionally closed preorder (Theorem 2.1); for the corresponding strong stochastic dominance (Theorems 2.2 and 3.1); for the convex stochastic extension of an arbitrary closed correspondence between two topological spaces (Theorem 4.1).

Rent Seeking, Tax Policy, and Economic Growth

Abstract: It is suggested a Romer-Barro - type model of endogenous economic growth where producers contest for distribution of a fixed share of the government’s tax revenue. The proportional contest mechanism is assumed. We studied conditions under which consumers gain or lose due to existence of the Rent seeking, tax policy, and economic growth (RS) opportunities. It is found that RS always decreases rate of growth but nevertheless may raise consumer’s overall utility. RS is advantageous if tax rate is too high or rate of production return is too low. The area of parameters, where RS has positive effect, is larger for more impatient consumers. We study also a static RS production model with heterogeneous producers and show that excessive tax burden creates incentives for RS (which is interpreted as corruption). It is argued that the producers’ support of corruption-free regimes depends on the marginal cost elasticity of the production technologies and may be reached due to technical progress. The results demonstrate that the connection, observed in a number of empirical papers, between economic development and RS may be two - way since it may be caused by factors that influence both RS and economic growth.

A Refinement of the Black-Scholes Formula of Pricing Options

Abstract: A central problem of actuarial mathematics, i.e., the problem of pricing options (documents of a certain form that grant rights to buy or sell securities in the future), is considered. The well-known Black-Scholes approximate formula for pricing options is refined.

Currency Crises in Russia and Other Transition Economies

Abstract: In recent years currency crises affected not only Southeast Asian countries, but transition economies as well. The Russian crisis of August 1998 was perhaps the most spectacular example, but it was preceded by currency crises in Bulgaria and Romania in 1996-97, in Ukraine and Belarus in 1997-98 and followed by the currency crisis in Kyrghyzstan and Georgia in late 1998, and in Kazakhstan in early 1999. Were these crises the result of financial contagion spreading in the global economy? Or were they of "the national making", but caused by reasons similar to that in Southeast Asia? The paper argues that neither of the above explanations is true and embraces a third explanation: currency crises in transition economies resulted mostly from domestic policy mistakes, but of different nature than those in Southeast Asia.

Reform Strategies and Economic Performance of Russia's Regions

Abstract: The paper examines major non-policy and policy factors that account for the varying patterns of change of output and incomes in Russia's regions. It is found that initial conditions (resource advantages) and institutional capacity has had considerable impact on performance, but there is no evidence that economic reforms has led to better output and investment dynamics. In contrast, for interpreting regional differences in per capita income change, reform progress (controlling for federal-regional financial transfers) is an important explanatory variable. Thus, the major impact of reforms has not been to boost output and investment, but to redirect incomes into pro-reform regions.

On Generic Uniqueness of Optimal Solutions for the General Monge-Kantorovich Problem

Abstract: We show that a multifunction a, which assignes to a cost function c the set a(c) of optimal solutions for the corresponding Monge-Kantorovich problem, is generically single-valued.

On graded algebras of global dimension 3

Abstract: Assume that a graded associative algebra A over a field k is minimally presented as the quotient algebra of a free algebra F by the ideal I generated by a set f of homogeneous elements. We study the following two extensions of A :t he algebra F = F/I⊕ I/I 2 ⊕ · ·· associated with F with respect to the I-adic filtration, and the homology algebra H of the Shafarevich complex Sh(f,F ) (which is a non- commutative version of the Koszul complex). We obtain several characterizations of algebras of global dimension 3. In particular, the A-algebra H in this case is free, and the algebra F is isomorphic to the quotient algebra of a free A-algebra by the ideal generated by a so-called strongly free (or inert )s et.