General Economics

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New submissions for Wed, 29 May 24

[1]  arXiv:2405.17682 [pdf, ps, other]

Title: Managing Financial Climate Risk in Banking Services: A Review of Current Practices and the Challenges Ahead

Authors: Victor Cardenas

Subjects: General Economics (econ.GN)

The document discusses the financial climate risk in the context of the banking industry, emphasizing the need for a comprehensive understanding of climate change across different spatial and temporal scales. It highlights the challenges in estimating physical and transition risks, specifically extreme events and limitations of current climate models. The document also reviews current gaps in assessing physical and transition risks, including the development, improvement of modeling frameworks, highlighting the need for detailed databases of exposed physical assets and climatic hazard modeling. It also emphasizes the importance of integrating financial climate risks into financial risk management practices, particularly in smaller banks and lending organizations.

[2]  arXiv:2405.17762 [pdf, ps, other]

Title: Tuition too high? Blame competition

Authors: Oleg V. Pavlov, Evangelos Katsamakas

Journal-ref: Journal of Economic Behavior & Organization (2023), 213, 409-431

Subjects: General Economics (econ.GN)

We develop a feedback theory that includes reinforcing and balancing feedback effects that emerge when colleges compete for reputation, applicants, and tuition revenue. The feedback theory is replicated in a formal duopoly model consisting of two competing colleges. An independent ranking entity determines the relative order of the colleges. College applicants choose between the two colleges based on the rankings and the financial aid offered by the colleges. Contrary to the conventional wisdom that competition lowers prices and benefits consumers, our simulations show that competition between academic institutions for resources and reputation leads to tuition escalation that negatively affects students and their families. Four of the five scenarios -- rankings, a capital campaign, facilities improvements, and an excellence campaign -- increase college tuition, institutional debt, and expenditures per student; only the scenario of ignoring the rankings decreases these measures. By referring to the feedback structure of academic competition, the article makes several recommendations for controlling tuition inflation. This article contributes to the literature on the economics of higher education and illustrates the value of feedback economics in developing economic theory.

Cross-lists for Wed, 29 May 24

[3]  arXiv:2405.17753 (cross-list from eess.SY) [pdf, other]

Title: Regression Equilibrium in Electricity Markets

Authors: Vladimir Dvorkin

Subjects: Systems and Control (eess.SY); General Economics (econ.GN); Optimization and Control (math.OC)

Renewable power producers participating in electricity markets build forecasting models independently, relying on their own data, model and feature preferences. In this paper, we argue that in renewable-dominated markets, such an uncoordinated approach to forecasting results in substantial opportunity costs for stochastic producers and additional operating costs for the power system. As a solution, we introduce Regression Equilibrium--a welfare-optimal state of electricity markets under uncertainty, where profit-seeking stochastic producers do not benefit by unilaterally deviating from their equilibrium forecast models. While the regression equilibrium maximizes the private welfare, i.e., the average profit of stochastic producers across the day-ahead and real-time markets, it also aligns with the socially optimal, least-cost dispatch solution for the system. We base the equilibrium analysis on the theory of variational inequalities, providing results on the existence and uniqueness of regression equilibrium in energy-only markets. We also devise two methods for computing the regression equilibrium: centralized optimization and a decentralized ADMM-based algorithm that preserves the privacy of regression datasets.

[4]  arXiv:2405.17924 (cross-list from cs.HC) [pdf, ps, other]

Title: Generative AI Enhances Team Performance and Reduces Need for Traditional Teams

Authors: Ning Li, Huaikang Zhou, Kris Mikel-Hong

Comments: 55 pages, 8 figures

Subjects: Human-Computer Interaction (cs.HC); Artificial Intelligence (cs.AI); General Economics (econ.GN)

Recent advancements in generative artificial intelligence (AI) have transformed collaborative work processes, yet the impact on team performance remains underexplored. Here we examine the role of generative AI in enhancing or replacing traditional team dynamics using a randomized controlled experiment with 435 participants across 122 teams. We show that teams augmented with generative AI significantly outperformed those relying solely on human collaboration across various performance measures. Interestingly, teams with multiple AIs did not exhibit further gains, indicating diminishing returns with increased AI integration. Our analysis suggests that centralized AI usage by a few team members is more effective than distributed engagement. Additionally, individual-AI pairs matched the performance of conventional teams, suggesting a reduced need for traditional team structures in some contexts. However, despite this capability, individual-AI pairs still fell short of the performance levels achieved by AI-assisted teams. These findings underscore that while generative AI can replace some traditional team functions, more comprehensively integrating AI within team structures provides superior benefits, enhancing overall effectiveness beyond individual efforts.

Replacements for Wed, 29 May 24

[5]  arXiv:2312.11484 (replaced) [src]

Title: Effects of Daily Exercise Time on the Academic Performance of Students: An Empirical Analysis Based on CEPS Data

Authors: Ningyi Li

Comments: the content is incomplete

Subjects: General Economics (econ.GN)

[6]  arXiv:2312.07614 (replaced) [pdf, other]

Title: Intergenerational Equitable Climate Change Mitigation: Negative Effects of Stochastic Interest Rates; Positive Effects of Financing

Authors: Christian P. Fries, Lennart Quante

Comments: 36 pages, 10 figures, arXiv admin note: text overlap with arXiv:2309.16186

Subjects: Mathematical Finance (q-fin.MF); General Economics (econ.GN)

[7]  arXiv:2402.09552 (replaced) [pdf, other]

Title: STEER: Assessing the Economic Rationality of Large Language Models

Authors: Narun Raman, Taylor Lundy, Samuel Amouyal, Yoav Levine, Kevin Leyton-Brown, Moshe Tennenholtz

Subjects: Computation and Language (cs.CL); General Economics (econ.GN)

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