Economic theory workshop a huge success

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Professor Lawerence Rose.

The organisers of a conference on economic theory say the ideas that were shared will eventually impact on the way business and government operate.

Dr Simona Fabrizi and Dr Steffen Lippert say in the longer-term the work that is being carried out by academics will lead to better ways economists can advise decision makers.

The Department of Commerce and the Department of Economics and Finance organised the 27th Australasian Economic Theory Workshop at the Albany campus last Friday and Saturday.

Dr Fabrizi says they were delighted to host the event, which attracted 60 participants from all over Australasia.

“There were contributions on how international trade and criminality are intertwined; on the regulation of banks; on environmental policy and climate change; on the pricing in telecommunications industries; as well as on health economics and health care. All those works used the tools of game theory, decision theory, or industrial organisation.

“In addition to these applications of theoretical concepts, there were also numerous presentations on new conceptual economic research, which promise to provide economists with enhanced tools for analysing economic decisions and policy questions, as well as their impact on society.

“This event considerably raised Massey’s profile in the research area of economic theory,” she says.
There were presentations on theoretical work on foreign direct investments and international trade, for which two PhD students received awards sponsored by the New Zealand Institute of Economic Research (NZIER). College of Business Pro Vice-Chancellor Professor Lawrence Rose and NZIER CEO Jean-Pierre de Raad  presented the awards to Onur Koska, of University of Otago, and Xuan T. Nguyen, of University of New South Wales.

Dr Martin Berka, Dr Kim Hang Pham Do, Dr Otto Reich, and Dr Christoph Schumacher were also involved in organising the event.


Summaries of the keynote speeches are below.
 
Professor Clemens Puppe (Karlsruhe Institute of Technology, Germany) presented work that gives insights into how voting mechanisms can be designed in order to induce individual voters to reveal their preferences truthfully in the casting of a vote on alternatives that involve more than one dimension. This is an extremely important question as this so-called "strategy proofness" is a necessary input into finding a decision rule that ensures individual voters cannot manipulate the result to deviate from "the correct" outcome even in the presence of multidimensionality. It applies to voting in social situations as much as to voting in general assemblies, where stockholders are to vote about the future of companies, or to voting in board meetings, where directors of a company are deciding about the future of a CEO.

Professor Julian Wright (National University of Singapore) talked about a new solution concept for strategic situations, in which decision makers in firms take unobservable actions that affect their interactions in later periods. Applications include firms signalling their choice of quality through their chosen price and advertising or the revelation of entrepreneurs' project quality, as determined by their effort, through corporate financing decisions. His solution concept reduces the set of possible outcomes of a strategic situation considerably, which ultimately helps in predicting what decision makers will do in these situations. That is important because it reduces strategic uncertainty, for example, in competition policy-making as well as in decisions in private business.

Professor Mamoru Kaneko (University of Tsukuba, Japan) advocated a new approach to modelling strategic games as a consequence of the fact that our Earth is becoming increasingly small and narrow while its population and global interdependence are rising. He argued that in a small world with a large number of actors, conventional modelling of strategic interaction involves too high requirements on the information individuals have about the strategic interaction they are in and instead advocated a more experiential approach. This approach is based on individuals learning from the outcomes of their interactions and using this learned experiences in their future interactions.

Professor Michael Riordan (Columbia University, US) demonstrated that if firms compete in both the quality and the price of their products or services, the equilibrium outcome of their interaction in the marketplace is less clear-cut than previous research had shown. In fact, there is a multitude of reasonable equilibriums in this situation, which leads to high strategic uncertainty and makes policy and business decisions very complex. This will have to be taken into account, for example, when governments take decisions on competition policy or regulate industries, such as the telecommunications industry.

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