Cost Sharing Mechanisms for Business Clusters with Strategic Firms

A business cluster is a co-located group of micro, small, medium scale enterprises. Such firms can benefit significantly from their co-location through shared infrastructure and shared services. Cost sharing becomes an important issue in such sharing arrangements especially when the firms exhibit strategic behavior. There are many cost sharing methods and mechanisms proposed in the literature based on game theoretic foundations. These mechanisms satisfy a variety of efficiency and fairness properties such as allocative efficiency, budget balance, individual rationality, consumer sovereignty, strategyproofness, and group strategyproofness. In this paper, we motivate the problem of cost sharing in a business cluster with strategic firms and illustrate different cost sharing mechanisms through the example of a cluster of firms sharing a logistics service. Next we look into the problem of a business cluster sharing ICT (information and communication technologies) infrastructure and explore the use of cost sharing mechanisms.

A mean-reverting stochastic model for the political business cycle

In this article, we look at the political business cycle problem through the lens of uncertainty. The feedback control used by us is the famous NKPC with stochasticity and wage rigidities. We extend the New Keynesian Phillips Curve model to the continuous time stochastic set up with an Ornstein-Uhlenbeck process. We minimize relevant expected quadratic cost by solving the corresponding Hamilton-Jacobi-Bellman equation. The basic intuition of the classical model is qualitatively carried forward in our set up but uncertainty also plays an important role in determining the optimal trajectory of the voter support function. The internal variability of the system acts as a base shifter for the support function in the risk neutral case. The role of uncertainty is even more prominent in the risk averse case where all the shape parameters are directly dependent on variability. Thus, in this case variability controls both the rates of change as well as the base shift parameters. To gain more insight we have also studied the model when the coefficients are time invariant and studied numerical solutions. The close relationship between the unemployment rate and the support function for the incumbent party is highlighted. The role of uncertainty in creating sampling fluctuation in this set up, possibly towards apparently anomalous results, is also explored.