Petr Fiala

A Procedure for Negotiating Pollution Reduction under Information Asymmetry. Surface Water Quality Case

This paper considers an alternative approachto surface water quality management whensociety is faced with the need to reduce waterpollution in a region with a complicatedregulatory environment. The paper is focusedon a specific kind of negotiation betweenpolluters and an authority, leading toresolution of the problem when there is theinformation asymmetry between the authorityand the polluters, i.e., the true pollutionabatement costs are known to the pollutersonly. This paper reports a laboratory experimentalcase prepared at the Department ofEnvironmental Economics, the University ofEconomics in Prague. The comparison withtheoretical computed first-best results underconditions of full information is included.Political and economic aspects of thesuggested approach are also discussed.

CRAB—CombinatoRial Auction Body Software System

Auctions are important market mechanisms for the allocation of goods and services. Combinatorial auctions are those auctions in which buyers can place bids on combinations of items. Combinatorial auctions have many applications. The paper presents the CRAB software system. CRAB is a non-commercial software system for generating, solving, and testing of combinatorial auction problems. The system solves problems by Balas’ method or by the primal-dual algorithm. CRAB is implemented in Ruby and it is distributed as the file crab.rb. The system is freely available on web pages for all interested users.

Profit allocation games in supply chains

The paper considers a supply chain where a number of agents are connected in some network relationship. Game theory is a very powerful framework for studying decision making problems, involving a group of agents in a supply chain. Allocation games examine the allocation of value among agents connected by a network. The ongoing actions in the supply chain are a mix of cooperative and non-cooperative behavior of the participants. The paper proposes a two-stage procedure for profit allocation based on combination of non-cooperative and cooperative game approaches. In the first stage, retailers meet customer price-dependent stochastic demand and seek to maximize total profit from the sale. Retailers are trying to align goals with producers on a contract basis and share the total profit with them. In the second stage, the cooperating producers allocate individual profits.

A framework for solving network revenue management problems with customer choice behavior

Revenue management is the process of understanding, anticipating and influencing consumer behavior in order to maximize revenue. Network revenue management models attempt to maximize revenue when customers buy bundles of multiple resources. The dependence among the resources in such cases is created by customer demand. Network revenue management can be formulated as a stochastic dynamic programming problem whose exact solution is computationally intractable. Solutions are based on approximations of various types. Customer choice behavior modeling has been gaining increasing attention in the revenue management. A framework for solving network revenue management problems with customer choice behavior is proposed. The modeling and solving framework is composed from three inter-related network structures: basic network model, Petri net, and neural net.

Project portfolio designing using data envelopment analysis and De Novo optimisation

AbstractIn a rapidly evolving economic world, projects become tools to support organization goals. Project portfolio is set of all projects that are implemented in the organisation at a time. Possible projects are characterized by sets of inputs and outputs, where inputs are resources for project realisation and outputs measure multiple goals of the organisation. The data envelopment analysis (DEA) is an appropriate approach to select efficient projects. The organisation has its total resources in limited quantities. Designing a portfolio of efficient projects not exceeding the limited resources does not always lead to the most efficient portfolio. De Novo optimisation is an approach for designing optimal systems by reshaping the feasible set. The paper proposes a new approach for project portfolio designing based on a systemic combination of DEA model and De Novo optimisation approach. A total available budget is a restriction on project portfolio. The proposed concept provides designing of optimal project portfolio with the minimal budget. Performance measures of the designed project portfolio are the efficiency of the portfolio and the effectiveness of outputs. Possible extensions of the concept are formulated and discussed.

Water Pollution Reduction: Reverse Combinatorial Auctions Modelling Supporting Decision-Making Processes

This paper presents a model that contributes to finding cost-effective solutions when making decisions about building wastewater treatment plants in the planning process defined in the Framework Directive 2000/60/EC of the European Parliament and of the European Council. The model is useful especially when construction and operation of joint wastewater treatment plants is possible for several (neighbouring) municipalities, where a huge number of theoretical coalitions is possible. The paper presents the model principles for one pollutant and for multiple pollutants, describes the CRAB software used for computing the optimal solutions and presents selected applications. It concludes that the computations can contribute directly to decision-making concerning environmental protection projects and also serve for calculating background models for economic laboratory experiments in the area.

Modelling of Environmental Risk Management under Information Asymmetry

The Environmental risk management is an important component of governmental environmental policies. Alternative mechanisms for achieving cost-effective environmental risk reduction have been discussed in environmental economics. The paper presents a relatively new approach to environmental risk management – a model of negotiation between polluters and authorities under information asymmetry when also economic instruments are applied. A combinatory model that serves computing the first best solution was developed. The CRAB software (CombinatoRial Auction Body Software System) was used for this model. The computed first best solution was compared to the results of small economic laboratory experiments. Students played the role of the subjects in the experiments. The research concluded that under economic pressure in the form of known limitation of financial resources, the experiment results are closer to minimal financial supports. Even in a one-round game, a more cost-effective solution is achieved compared to experiments where such limitation was not introduced.

Negotiation Between Authority and Polluters - Model for Support of Decision-Making in Environmental Policy: Principles and Experimental Case Test

The paper describes a relatively new approach to pollution reduction problem solving that relies on negotiation between polluters and authorities in which traditional economic tools of environmental policies are used and where there is the economic information asymmetry between the polluters and the authority. The approach can result in negotiated voluntary environmental agreements between authorities and polluters. Design and results of a laboratory environmental policy experiment on air pollution reduction in a city are presented in the paper to illustrate the efficacy of the suggested approach. The case is created based on field data. A step toward a verification of the hypothesis of a possibility to establish the suggested approach as a new institution for environmental pollution management in practice is the most important result. The case also shows the usefulness of laboratory environmental policy experiments both for research and teaching. Some problems of practical applications of this kind of environmental policy tool mix are also discussed in the paper.

Environmental Modelling with Reverse Combinatorial Auctions: CRAB Software Modification for Sensitivity Analysis

This paper builds on reverse combinatorial auctions theory and its selected environmental applications, which were presented at ISESS 2013 and ISESS 2015. It provides an approach for calculating the sensitivity and proposals for necessary adjustments of CombinatoRial Auction Body Software System (CRAB), which makes its use for the relevant decision-making tasks more user friendly. Two possibilities are suggested. The first approach is appropriate for cases with relatively small numbers of subjects, where it is possible to compute all feasible solutions ordered by total cost. In such cases it is possible to analyse changes of coalition structures with increasing the cost. The second one suggests modification of the CRAB software, which would make it possible to analyse cases with high numbers of feasible coalition structures located between the optimal coalition (i.e. the cost-effective one) and the structure consisting of individual projects. This approach is appropriate for complex real applications involving setting of cost levels.

Special issue of the Czech Society for Operations Research

This special issue contains selected papers of the 28th International ConferenceMathematical Methods in Economics (MME) that took place in the city of Ceske Budejovice in September 2010. It is a traditional annual meeting of professionals from universities and business who are interested in the theory and applications of operations research and econometrics organized by the Czech Society for Operations Research (CSOR) together with the Czech Econometric Society in various places within the Czech Republic. The number of participants is rapidly increasing in the last years. Usually between 100 and 200 professionals are presenting their research results every year. Although the conference is the annual meeting of the CSOR there are always participants from all around the world especially from surrounding countries as Slovakia, Poland, Austria, Germany, Slovenia, etc. Accepted papers presented at the conference are published in the Book of Proceedings that is indexed in CPCI (Conference Proceedings Citation Index) since 2003. Main organizer of theConferenceMME is theCSOR. It is a quite small professional society with approx. 50 regular members but its activities are numerous. Except the mentioned international conference Mathematical Methods in Economics the main international activity was organization of the 22nd European Conference on Operational Research EURO XXII in 2007. This conference was organized by the CSOR in cooperation with the University of Economics, Prague. EURO XXII was a very successful event, by attending of more than two thousands of participants from all over the world it was one of the largest EURO conferences at all. The conferencesMME cover both theoretical and application aspects of mathematical modeling of economic processes. The scope of the conference involves operations