a neoclassical model of the balance of payments this paper analyses the transitory and long run effects of devaluation and tariffs as well as the effects of alterations in the domestic money supply and the terms of trade for a small country on fixed exchange rates these issues are investigated in a self contained dynamic optimization model of the sort popularized by brock 1974 1975 familiar results in the trade literature are thereby explicated for the nonspecialist who is nonetheless familiar with brock s work there are some new results regarding the role played by income and substitution effects in determining the consequences of terms of trade shifts this paper introduces a perfect foresight optimizing model of the monetary approach to the balance of payments for a small country on fixed exchange rates the model is then used to analyse the effects on the balance of payments of devaluation of a tariff and of changes in the terms of trade the effects of devaluation tariffs and changes in the terms of trade have been analysed previously within the framework of nonoptimizing models dornbusch 1973 1980 and anderson and takayama 1977 have studied the effect of devaluation mussa 1974 1976 anderson and takayama 1978 1981 and batra and ramachandran 1980 have studied the effect of tariffs and rodriguez 1976 batra and ramachandran 1980 and anderson and takayama 1981 have studied the effect of changes in the terms of trade optimizing models in which real balances appear as an argument in the utility function are increasingly popular in international economics the general approach was inspired by sidrauski 1967 and brock 1974 1975 recent contributions to the trade literature using this framework include dornbusch and mussa 1975 calvo 1980 1981 liviatan 1981 and obstfeld 1981 a 1981 b 1982 the purpose of this paper is to translate the conventional small country fixed exchange rate model into this framework the results are generally congruent with those in the nonoptimizing literature which suggests that the money in the utility function approach works well here compared to the nonoptimizing literature the real advance is that price adjustment and price expectations are endogenous and rational among the benefits are that one need not postulate the ad hoc price adjustment mechanism used by anderson and takayama nor the backward looking and hence irrational permanent income formulation used by rodriguez furthermore there has been controversy over the balance of payments effects of a shift in the terms of trade while the model s predictions on this issue are theoretically ambiguous the model shows that the answer depends crucially on the magnitude of income effects this clarifies the conditions required for a terms of trade shift to improve or worsen the balance of payments

greenhouse gas emissions in the construction industry an analysis and evaluation of a concrete supply chain abstract significant anthropocentric environmental impact derives from civil construction in developing countries such as china turkey and brazil this sector plays a relatively larger economic role adopting sustainable concrete production and usage strategies not only reduces greenhouse gas ghg emissions but also decreases consumption of energy and water two critical commodities likely to be in short supply in developing economies moreover in developing countries there is uneven and inadequate access to social and economic benefits e g housing roads energy etc for a substantial segment of the society these emerging economy nations will have to engage in large scale civil construction and energy production projects to improve living conditions as a result transitioning to a low carbon economy becomes even more critical and at the same time more burdensome for developing countries due to the importance of the civil construction industry to turkey and the industry s adverse impact on ghg emissions and resulting climate change this study investigates measurement and management of the total ghg emissions for a major tunnel project by a turkish construction company as a case study emission values are calculated for the raw materials constituting tunnel construction rings which are the major structural component of the tunnel the ghg emissions measured in equivalent carbon dioxide co 2 e used in this study are the sum of the emissions during the production of the raw materials and emissions during their transportation from the suppliers to the company the results are also useful across countries who utilize similar concrete specifications as prescribed by regulators and industry associations a broader sustainability including socio economic concerns is included as complementary discussion to the emissions environmental calculations

perpetual randomness in evolutionary economics how can players learn to coordinate will they play nash if so which equilibrium traditional studies applying evolutionary game theory have used either static notions of evolutionary stability or deterministic dynamics to try to answer these questions the motivation for these studies is that behavior should be robust to a one time perturbation recent work first by foster and young 1990 and then by kandori et al 1993 has shown however that models with perpetual perturbations even if small can give very different results from models with one time perturbations suppose there is a population of players that is randomly paired to play the following symmetric game

devaluation capital mobility and expectations in an optimizing model abstract a simple optimizing model overlapping generations with a finance constraint is used to examine how the results of a devaluation are affected by a capital mobility and b the devaluation s being fully anticipated by the public the results are compared with those previously obtained using aggregative models of the portfolio balance type this comparison sheds some light on the robustness in general of the results of such models

making real progress toward more sustainable societies using decision support models and tools introduction to the special volume academics politicians professionals and the general public are aware that without stewarding our planet s natural resources man is on the pathway towards a global collapse over the next three decades mankind is expected to consume an estimated 140 billion tons of minerals ores fossil fuels and biomass per year three times current consumption social welfare and human wellbeing are threatened with the scarcity of natural resources consequently nations and their societies are also at risk of collapse the readers of this special volume will find a compilation of scholarly research papers with real life applications that take the challenge of proposing decision making models and tools to address sustainability challenges in integrative ways the main focus of this special volume is integration of sustainability dimensions economic social environmental ethical and time into decision support models and to identify pathways to achieve more sustainable societies the majority of the research in this special volume 74 percent focuses on environmental and economic dimensions only 26 percent integrated social dimensions with them methodologically a range of mathematical models and tools are presented to support prescriptive decision making with some descriptive models integrated to support decision makers in solving practical problems across a variety of industries and scenarios the breadth and complexity of issues facing organizations and society requires innovative applications of these methodologies the concerns cover a spectrum ranging from energy to solid waste management a multitude of levels from broad based policy concerns to strategic inter organizational sustainable supply chain management and significantly shop floor operational issues are also covered the variety of problems and solutions exemplifies the potential for modelling and operations research for addressing some of our world s most pressing concerns

the evolutionary stability of cooperation is cooperation without central authority stable if so how robust is it despite what might be the conventional wisdom the evolution of cooperation did not solve this problem deductively in fact results obtained later by others seem to have contradicted the book s main message reexamining this exceptionally influential work yields a new picture part of axelrod s evolutionary story turns out to be false but the main intuition that retaliatory strategies of conditional cooperation are somehow advantaged proves correct in one specific and significant sense under a standard evolutionary dynamic these strategies require the minimal frequency to stabilize hence they support the most robust evolutionary equilibrium the easiest to reach and retain moreover the less efficient a strategy the larger is its minimal stabilizing frequency hobbesian strategies of pure defection are the least robust our main theorems hold for a large class of games that pose diverse cooperation problems prisoner s dilemma chicken stag hunt and many others

unfolding social hierarchies abstract consider a large population of finitely lived agents organized into n different hierarchical levels every period all those placed at each level are randomly matched to play a given symmetric game based on the resulting outcome a fraction of agents who within their own level attain the highest payoffs are promoted upwards on the other hand newcomers replacing those who die every period enter at the lowest level and choose irreversibly the strategy to be played for the rest of their life this choice is made with some noise by imitating one of the strategies adopted at the highest level in this setup the unique long run behavior of the system is fully characterized for the whole class of 2 2 coordination games and two alternative variations of the model the results crucially depend on the key institutional parameters and n in particular it is shown that inefficient behavior prevails in the long run even when risk dominated if promotion is only mildly selective high and the social system is quite hierarchical large n in a stylized manner these parameter conditions may be viewed as reflecting a sort of institutional deficiency that impairs economic performance journal of economic literature classification numbers c70 c72 c73 d72

design of sustainable supply chains under the emission trading scheme increase in environmental concerns together with legislations are forcing industries to take a fresh look at the impact of their supply chain operations on the environment this paper introduces a mixed integer linear programming based framework for sustainable supply chain design that considers life cycle assessment lca principles in addition to the traditional material balance constraints at each node in the supply chain indeed the framework distinguishes between solid and liquid wastes as well as gaseous emissions due to various production processes and transportation systems the framework is used to evaluate the tradeoffs between economic and environmental objectives under various cost and operating strategies in the aluminum industry the results suggest that current legislation and emission trading schemes ets must be strengthened and harmonized at the global level in order to drive a meaningful environmental strategy moreover the model demonstrates that efficient carbon management strategies will help decision makers to achieve sustainability objectives in a cost effective manner

macroeconometric modeling and the theory of the representative agent the lucas critique of econometric policy evaluation 1976 argues that to the extent econometric models do not capture the primitive parameters of tastes and technology their coefficients can be expected to vary with changes in policy regimes several econometricians have undertaken empirical work that separates the parameters of tastes technology and policy estimating models that are in principle immune from this critique exemplary contributors to this effort have been thomas sargent 1978 and sargent and lars hansen 1980 the empirical work inspired by the lucas critique has proceeded using representative agent models and aggregate data the treatment of expectations and dynamic optimization has been careful although at times necessarily limited by the analytical requirements of attaining closed form solutions for dynamic programming problems under uncertainty potential problems due to aggregation have usually been ignored although when preferences and technology are quadratic it appears that they can be disposed of quickly assuming a representative firm is only a convenience as the model admits a tidy theory of aggregation sargent 1978 p 1016 it is ironic that a paradigm that emphasizes the isolation of the primitive parameters of tastes and technology has led to empirical work that has ben conducted almost exclusively with aggregate data there are exceptions t macurdy 1983 j biddle 1984 there are several difficulties with this development first the fact that representative agent models with exact aggregation can be constructed is unrelated to whether or not these models are adequate we can also construct models in which agents behavior is unaffected by the policy regime to exclusively model and test one but not the other appears to be a misplacement of emphasis second some of this work has proceeded using representative agents whose behavior cannot be aggregated exactly see m eichenbaum hansen and kenneth singleton 1984 for an example there is a third and most fundamental objection to empirical work which seeks to avoid the lucas critique yet uses aggregate data whenever econometric policy evaluation is undertaken using models estimated with aggregate data it is implicitly presumed that the aggregator function is structural with respect to the policy intervention in question formally aggregator functions are no more structural than are within regime reducedform relations of endogenous to policy variables as a modeling strategy ignoring the sensitivity of aggregators to policy changes seems no more compelling than ignoring the dependence of expectations on the policy regime this paper describes a very modest econometric model in which the effects of ignoring aggregation and of ignoring expectations each within the context of several representative agent models can be appreciated objective functions are quadratic and prices are disparate across agents in these respects the model s assumptions are in the mainstream of lucas and subsequent empirical work the model is carefully contrived so that exact aggregation is always possible this is not essential to the argument in any way but it drastically reduces the number of circumstances to be examined in constructing numerical examples the example pertains to neoclassical production and in each case there are three distinct representative agents one for production one for factor demand professor of economics duke university durham nc 27706 financial support from nsf grant ses8318778 and a sloan research fellowship are gratefully acknowledged a more detailed version of this paper is available on request from the author

equilibrium selection inn person coordination games abstract this paper investigates several approaches to equilibrium selection and the relationships between them the class of games we study are n person generalized coordination games with multiple pareto rankable strict nash equilibria the main result is that all selection criteria select the same outcome namely the risk dominant equilibrium in two person games and that most equivalences break for games with more than two players all criteria select the pareto efficient equilibrium in voting games of which pure coordination games are special cases journal of economic literature classification numbers c70 c72 d82

do people play nash equilibrium lessons from evolutionary game theory evolutionary game theory provides an answer to two of the central questions in economic modeling when is it reasonable to assume that people are rational and when is it reasonable to assume that behavior is part of a nash equilibrium and if it is reasonable which equilibrium the traditional answers are not compelling and much of evolutionary modeling is motivated by the need for a better answer evolutionary game theory suggests that in a range of settings agents do eventually play a nash equilibrium moreover evolutionary modeling has shed light on the relative plausibility of different nash equilibria

noisy directional learning and the logit equilibrium we specify a dynamic model in which agents adjust their decisions toward higher payoffs subject to normal error this process generates a probability distribution of players decisions that evolves over time according to the fokker planck equation the dynamic process is stable for all potential games a class of payoff structures that includes several widely studied games in equilibrium the distributions that determine expected payoffs correspond to the distributions that arise from the logit function applied to those expected payoffs this logit equilibrium forms a stochastic generalization of the nash equilibrium and provides a possible explanation of anomalous laboratory data

evolutionary consumers imply monopolies exit we address the question of how a monopolist should price when facing evolutionary consumers who gradually move in the direction of following their optimal strategy but may make temporary suboptimal choices we show that under a broad generalization of the most commonly used model of evolution the monopolist will set a path of prices such that all consumers eventually stop purchasing the monopolist s product

accelerating the transition towards sustainability dynamics into supply chain relationship management and governance structures abstract stakeholders and competitive priorities drive profit and non profit organizations towards the implementation of sustainability related measures in their internal operations and in their supply chains planning it is believed by some that investments in sustainability may help them to attain more successful futures by maintaining a healthy balance among economic environmental and social resources dimensions consequently some organizations have begun to integrate these dimensions in recent years researchers and practitioners are also working to accelerate the transition for more equitable sustainable post fossil carbon societies by working with all relevant stakeholders this special volume of journal of cleaner production is focused upon on diverse types of supply chain relationships governance mechanisms and innovations which can foster effective and efficient sustainable supply chain management this volume is comprised of twenty seven articles and a book review fifteen of the articles address the supply chain relationships domain while five focus primarily upon governance five upon innovation and two on relationships and governance however there is a huge potential to further explore the opportunities towards achieving sustainability by implementing proper governance mechanisms and eco innovation strategies research from low income countries dealing with sustainability issues are also urgently needed

economists models of learning abstract economic theorists have intensively studied learning in games and decisions over the last decade this essay puts some of the work in perspective and offers opinions about what still needs to be learned journal of economic literature classification numbers c73 d83

evolutionary game theory game theory has been developed as a theory of rational behavior in interpersonal conflict situations with economics and the other social sciences being the intended fields of application since the theory is based on an idealized picture of human rationality it is by no means obvious that it can be applied to situations in which the players cannot be attributed any intellectual capabilities however in their seminal paper the logic of animal conflict maynard smith and price showed that animal contests can be modeled as games and that game theory can be applied successfully in biology the objective of this chapter is to review some of the developments in this biological branch of game theory and to point out the distinctions and similarities with the classical branch also see parker and hammerstein 1985 the main emphasis will be on the mathematics involved lack of space prevents an extensive discussion of the underlying biological assumptions as well as an analysis of specific examples for these the reader is referred to the very stimulating book evolution and the theory of games by john maynard smith

learning to play limited forecast equilibria abstract this paper provides a learning justification for limited forecast equilibria i e strategy profiles such that 1 players choose their actions in order to maximize the discounted average payoff over their horizon of foresight as given by their forecasts and 2 forecasts are correct on and off the equilibrium path the limited forecast equilibria appear to be the stochastically stable outcomes of a simple learning process involving vanishing trembles journal of economic literatureclassification numbers c72 d83

match choice and ghettoization in evolutionary games abstract i study how having a choice about who to play affects the conventions that arise in a population playing a 2 2 common interest game match choice allows agents playing fragile but efficient strategies to isolate themselves raising their returns but making it harder for outsiders to duplicate their success when agents are myopic the second effect dominates long run play can shift toward either the risk dominant equilibrium with common interests in matching or toward the inefficient equilibrium with opposing interests in matching in contrast when agents are patient supra nash payoffs can be sustained

in defense of the finance constraint simple models of monetary trade commonly impose a finance constraint on expenditure it is often suggested that this finance constraint is artificial a result of money s being the only asset of the absence of credit and of the special time structure of such models this paper shows that the finance constraint on aggregate expenditure remains in force when other assets and credit are introduced and when the time structure is generalized to allow overlapping income periods of differing lengths most of the objections to the finance constraint are shown to involve fallacies of composition there are economists to whom a constraint of the form pc m in units t must appear unthinkable r e lucas jr 1980

chain to chain competition on product sustainability this paper studies the game model of two sustainable supply chains under competition in product sustainability derives the equilibrium structures of the two chain system and generates the managerial insights when the supplier and manufacturer within the reverse supply chain are competitive the sustainability degrees demands and profits under three structures of this two chain system are analyzed it is found that although vertical integration is always a nash equilibrium it is pareto optimal only when the competition degree is low on the other hand a more generalized case for the former model is investigated when the supplier and manufacturer are cooperative in bargaining the wholesale price and the effects of bargaining power to the sustainability degrees demands and chain member profits are studied it is further shown that the structure of vertical integration channels is not an equilibrium unless the two sustainable supply chains are independent

large deviations and equilibrium selection in large populations abstract this paper uses the theory of large deviations to analyse equilibrium selection in one dimensional games with large populations where the system evolves according to a jump markov process the equilibria selected maximise a quasi potential function which can be determined by solving a polynomial equation estimates of waiting times are also given it shows that the equilibria about which there is more noise are less likely to be selected and clarifies the role of the limiting deterministic dynamic in selection

evolutionary dynamics with aggregate shocks abstract we study the evolution of the continuous time replicator dynamics when payoffs are subject to aggregate shocks that take the form of a wiener process in the absence of mutation the system need not have an ergodic distribution with mutation the system does have an ergodic distribution in the limit as the mutation rate and the variance of the shocks converge to zero this distribution concentrates on the risk dominant equilibrium this result is not however robust to changes in the underlying deterministic dynamics

aggregation and the microfoundations of the monetary approach to the balance of payments an optimizing model with overlapping generations and finance constraints is used to develop microfoundations for the monetary adjustment process under fixed exchange rates the results are broadly consistent with those of the monetary approach to the balance of payments however it is shown that although the model exhibits comovements of money interest rate and income that seem consistent with an aggregate money demand function aggregate relation is not structural in the sense of r e lucas the model economy cannot be described as in the strong version of the monetary approach in terms of adjustment in an aggregate market for money

rule evolution and equilibrium selection abstract this paper studies rule evolution and its effect on selection between strict equilibria two rules are investigated the myopic best response and naive imitation if agents cannot change rules equilibrium selection is determined by the relative frequency of agents using the two rules when agents can only change rules through mutation the efficient equilibrium weakly dominates the risk dominant one if agents can change rules by updating then the efficient equilibrium strictly dominates the risk dominant one journal of economic literature classification numbers c72 c73 d81

a review of theories of the firm and their contributions to corporate sustainability corporate sustainability has arisen as an alternative to traditional short term profit oriented ap proaches to managing the firm by holistically balancing economic environmental and social issues in the present generation and for future ones although a number of theories of the firm have been pro posed within recent decades their application to corporate sustainability has been limited this paper presents an overview of the most widely used theories of the firm such as the stockholder theory the aggregate theory the contractual theory the resource based view and the stakeholder theory and analyses their contributions to corporate sustainability from an interpretative perspective the discus sion highlights the point that each of the theories on its own is limited in addressing sustainability s four dimensions i e the economic environmental social and time nonetheless each theory or group of theories has a particular perspective or principles that can contribute to one or more of the four dimensions the authors of this paper propose a sustainability oriented theory of the firm which is built upon elements of those theories as they relate to corporate sustainability this new theory can be useful in providing the firm s leaders and all of its stakeholders with a more complete vision of its ob ligations opportunities relations and processes that the firm should address as it engages in helping to make societies become more equitable and sustainable in the short and long terms

socially and environmentally responsible purchasing comparing the impacts on buying firm s financial performance competitiveness and risk abstract the paper presents a study that aims to compare the contribution of social and environmental practices along the purchasing process to economic performance competitiveness and risk mitigation of the buying firm the number of studies dealing with the topic has significantly increased in the last few years the majority of the extant research is focused on the environmental dimension whereas fewer studies have explored the social dimension or the combination of both factors the results are mixed with some scholars supporting the existence of a positive relationship between socially and environmentally oriented purchasing management and financial performance competitiveness and risk mitigation and others being more cautious relying on suggestions from earlier literature the study presents an analysis of a database made up of 189 international buying companies operating in italy and the results have provoked two main observations data were collected through a closed question questionnaire to purchasing managers which was defined from items and variables identified in the previous literature on the one hand the results corroborated the hypotheses of the study confirming that both dimensions contribute to firm performance on the other hand the findings showed that differences do exist and that the positive relationship between social and environmental dimensions and firm performance depends upon the stage into which those criteria are integrated the integration of social criteria has proven to impact only risk mitigation throughout the purchasing process whereas the environmental dimension contributes to risk mitigation and competitiveness when included in the supplier selection phase and to economic performance when considered in supplier relationship management