Economics

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Using data generated by extensive simulations of a process where individuals interact globally in a coordination game and iteratively imitate the action of the most successful individual in their local neighbourhood, we study the characteristics of the observation network and distribution of initial choices that facilitate (a speedy) convergence to efficient coordination. Knowing these characteristics is crucial when intervening in social network structures with the intention to nudge society to a socially preferred outcome. The most important factor appears to be the share of individuals that are initially seeded with the socially desirable action. Only for a small window of this share, other factors, including the degree distribution in the network and the segregation of individuals using similar actions, have an influence on the dynamic process of achieving efficient coordination. Moreover, networks possessing the properties of a scale-free network are more likely to yield an efficient outcome compared to small-world networks. © 2015, The Author(s).

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Dynamic Games and Applications

Network Characteristics Enabling Efficient Coordination: A Simulation Study

We develop a nonsmooth approach to envelope theorems applicable to a broad class of parameterized constrained nonlinear optimization problems that arise typically in economic applications with nonconvexities and/or nonsmooth objectives. Our methods emphasize the role of the Strict Mangasarian-Fromovitz Constraint Qualification (SMFCQ), and include envelope theorems for both the convex and nonconvex case, allow for noninterior solutions as well as equality and inequality constraints. We give new sufficient conditions for the value function to be directionally differentiable, as well as continuously differentiable. We apply our results to stochastic growth models with Markov shocks and constrained lattice programming problems. © 2015 Elsevier B.V.

Journal of Mathematical Economics

A nonsmooth approach to envelope theorems

Water reform is occurring in many countries in a variety of ways. This reform has been underpinned by growing demand for water, growing populations, urbanization, decreasing quality of potential water supplies, and the challenges posed by climate change. Watershed development (WSD) policies have played a central role in its various guises in developing and developed countries. While sustainability of water resources management has been the underlying theme of WSD, this has been expressed in different priorities and goals. These are likely to lead to different social outcomes and different formulations of policies. For example, in Australia water reform began in the 1990s with the primary goal of environmental protection. As it developed environmental protection was seen in the separation of land and water resources, the introduction of concrete water entitlement policies, and the introduction of markets. Social goals have been muted and largely assessed in terms of western social impact methodology, which had the underlying assumption that so long as there were no unacceptable social impacts, WSD (or integrated water management) policies could be adopted. This approach has led to community wide discussion as to the "rights" of irrigators vis-á-vis other interests and the presentation of a variety of equity and ethical arguments in relation to WSD. These arguments have become confused as water allocation issues have moved from local to state arenas. In contrast, there has been a clear enunciation of social goals for Indian WSD and concern for equity issues in terms of the distribution of any benefits from WSD. Issues such as property rights and the role of markets, which have been so important in Australian circumstances, have been less than evident. Different underlying issues associated with karma also exist in India but not in Australia. City versus country issues in relation to water allocation have resulted in the development of informal markets. The social, ethical, and equity issues, as in Australia, have also been shown to change as the scale of WSD policy has been considered. In this chapter the empirical results of the Andhra Pradesh case studies and the findings of a comparative study in South Australia are used to examine how the different social and equity premises of the two countries could lead to different outcomes from WSD. It also examines the issues of whether the move toward property rights and markets evidenced in several developed countries are the inevitable or most successful approach for all countries concerned with improving the public good nature of WSD. © 2015 Elsevier Inc. All rights reserved.

Integrated Assessment of Scale Impacts of Watershed Intervention: Assessing Hydrogeological and Bio-Physical Influences on Livelihoods

Justice and Equity in Watershed Development in Andhra Pradesh

This paper generalizes the results in Aswal et al. (Econ Theory 22:45–62, 2003) on dictatorial domains. This is done in two ways. In the first, the notion of connections between pairs of alternatives in Aswal et al. (2003) is weakened to weak connectedness. This notion requires the specification of four preference orderings for every alternative pair. Domains that are linked in the sense of Aswal et al. (2003) with weak connectedness replacing connectedness, are shown to be dictatorial. In the second, the notion of connections for alternative pairs is strengthened relative to its counterpart in Aswal et al. (2003). However, a domain is shown to be dictatorial if the induced graph is merely connected rather than linked. This result generalizes the result in Sato (Rev Econ Design 14:331–342, 2010) on circular domains. © 2015, Springer-Verlag Berlin Heidelberg.

Social Choice and Welfare

Further results on dictatorial domains

Increasing frequency of drought threatens the long-term viability of agriculture in many regions of the world. Some farmers will exit the agricultural industry abruptly, but for many, the path out of agriculture is prolonged and involves several generations within a household. This paper presents a model of dynamic inter-generational preferences and occupational choices to explore possible transition paths out of agriculture. Differing preferences across generations within a farming household are incorporated through a dynamically-evolving utility function, which influences the time paths of optimal investments in human, social and natural capital. A dwindling natural resource base, such as groundwater, requires increasing reliance on urban livelihoods. However, inter-generational differences in preferences for rural versus urban lifestyles, modelled as different weights in the household’s utility function, may determine whether this occupational transition can be attained. © 2014, © 2014 Taylor & Francis.

Journal of Natural Resources Policy Research

Adapting to catastrophic water scarcity in agriculture through social networking and inter-generational occupational transitioning

A conceptual model of entrepreneurial uptake by water-scarce farmers explores how farmers accumulate social and human capitals while managing multiple risks in current and future livelihood choices. Social networking and human capital accumulation differentially impact on successes in agriculture and entrepreneurial ventures. The risk of farm subsidy removal and the uncertainties associated with finding and succeeding in a suitable enterprise, present the farmer with difficult trade-offs in terms of which type of capital to accumulate. Results suggest that in the presence of multiple risks, farmers may act to increase their investments in human capital even when chances of finding a suitable business opportunity are low; whereas in some cases, they may accumulate higher social capital to enhance their farm subsidy support even under better chances of finding suitable business opportunities. Further, an increase in risk of agricultural unviability, by itself, does not automatically lead to farmers shifting to enterprise. © 2015 World Scientific Publishing Company.

Journal of Developmental Entrepreneurship

HOW PROLONGED DROUGHTS and FARM SUBSIDIES INFLUENCE ENTREPRENEURIAL VENTURES by FARMERS

We study the evolution of imitation behaviour in a differentiated market where firms are located equidistantly on a (Salop) circle. Firms choose price and quantity simultaneously, leaving open the possibility for non-market-clearing outcomes. The strategy of the most successful firm is imitated. Behaviour in the stochastically stable outcome depends on the level of market differentiation and corresponds exactly with the Nash equilibrium outcome of the underlying stage game. For high level of differentiation, firms end up at the monopoly outcome. For intermediate level of differentiation, they gravitate to a "mutually non-aggressive" outcome where price is higher than the monopoly price. For low level of differentiation, firms price at a mark-up above the marginal cost. Market-clearing always results endogenously. © 2015 Elsevier B.V.

Journal of Economic Dynamics and Control

Imitation by price and quantity setting firms in a differentiated market

Crop choices made by farmers can make important contributions toward the sustainable management of groundwater resources in drought prone regions. However, farmers who would tend to maximize profits under normal circumstances face a trade-off between the choices of risky but more profitable high water intensive (HWI) crops on one hand and the low risk but less profitable low water intensive (LWI) and drought resistant (DR) crops on the other. In drought-hit regions of South India, institutional programs, such as crop water budgeting and farmer schools, have been promoted to provide support and information to the farmers in helping them make judicious crop choices. A multivariate probit (MVP) analysis reveals that crop water budget exercise and farmer field school participation, in fact, are positively associated with HWI crop choices, whereas participation in soil moisture conservation efforts is positively associated with growing LWI and DR crops. Our findings indicate that the objective of groundwater augmentation through institutional interventions that are solely based on educating and training farmers have been ineffective and have even been providing perverse incentives, and that there is a need for adding water extraction compliance components to such support programs in order for them to be efficacious. © 2015 World Scientific Publishing Company.

Water Economics and Policy

Do Institutional Programs Aimed at Groundwater Augmentation Affect Crop Choice Decisions under Groundwater Irrigation? Empirical Evidence from Andhra Pradesh, India

We analyze the quality (informativeness and efficiency) of advice obtained from a committee of careerist experts where voting is secret but voting profiles are 'leaked' with an exogenously given probability. We show that fully informative voting is achievable only when the common prior is not too informative, the committee uses the unanimity rule and faces random leakage. It is then shown that informativeness and efficiency are mutually exclusive properties of committees with careerist experts. © 2015 Elsevier Inc.

Games and Economic Behavior

Committees with leaks

Rural entrepreneurship is often promoted as an effective tool with which to confront developmental challenges in rural communities. An important question that has not been considered thus far is how climate change-induced water scarcity in agriculture may promote or hinder rural entrepreneurship. In this paper, a model is developed to explore the conditions under which rural enterprise may or may not be undertaken by farmers struggling to adapt to climate change-related water scarcity. The results derived here highlight the potential inter-generational trade-offs climate change could create in the pathways towards promoting developmental goals through rural enterprise. When farmers take on entrepreneurial activity, it also affects the human capital accumulation capability of their future generations through affecting their educational efforts. The risk of future reduction in rainfall availability makes the decision over whether or not to avail of the entrepreneurial opportunity challenging. Such risks may force less efficient farmers into taking to enterprise early on, thereby leading to suboptimal outcomes. However, several situations emerge under which, despite the lure of higher expected profits, farmers may not avail of an entrepreneurial opportunity or may delay it. © 2014 Taylor & Francis.