APEC411/611

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APEC411/611 Economic Modeling and Decision Analysis

I. Syllabus
Syllabus(pdf) (Acrobat Reader required; you may download it from here)
Course Topics and Schedule - this schedule subject to changes without notice
Term Paper Guideline - here

II. Textbooks:

Required

McCarl, B.A., and Spreen, T.H. (2002) Applied Mathematical Programming Using Algebraic System, Department of Agricultural Economics, Texas A&M University. URL for download: http://agecon2.tamu.edu/people/faculty/mccarl-bruce/books.htm
Richardson, J.W. (2006) Simulation for Applied Risk Management, SIMETAR, Inc.

     Recommended
        Hiller, F.S. and Lieberman, G.J. (2005) Introduction to Operations Research, Eighth Edition, McGraw-Hill, Inc.
        Hardaker, J, Huirne, R.B.M., Anderson, J.R., and Lien G. (2004) Coping with Risk in Agriculture, Second Edition, CABI Publishing

III. Lecture Note - Powerpoints in the class (all are in the format of PDF)
    - When you print ppt-pdf you may want to use multiple page print option.
    - MS - McCarl and Spreen (2002); HL - Hillier and Lieberman (2005)
    - R - Richardson (2006); HH - Hardaker et al (2004)

Lectures
0. Course outline - Lecture ppt0

Mathematical Programming
1. Introduction to Mathematical Programming - Lecture ppt1 (MS Chapters 1, 2 and HL Chapters 2, 3)
2. Formulating and Solving LP on Excel - Lecture ppt2
3. Solving LP: Simplex Method - Lecture ppt3 (MS Chapter 3.2, HL Chapter 4); LPonExcel_JoeVan.xls
3-1 Joe's example revisit - Lecture ppt3-1
4. Postoptimality Analysis - Lecture ppt4 (MS Chapter 3.3, HL Chapter 6)
5. Adapting to Other Model Forms - Lecture ppt5 (MS Chapter 3.3 and 3.4, HL Chapter 4)
6. Duality - Lecture ppt6 (MS Chapter 4, HL Chapter 6)
7. LP Modeling - Lecture ppt7 (MS Chapter 5); betterEZchair.gms, feedMixing.gms
8. LP Modeling, cont'd. - Lecture ppt8 (MS Chapter 7); Chapter7_Examples.xls
9. Non-Linear Optimization - Lecture ppt9 (MS Chapter 12, HL Chapter 12)
9-1. NLP Search Algorithms - Lecture ppt9-1
10. Price Endogenous Modeling (MS Chapter 13) - Lecture ppt10; PriceEndo.gms, SpatialEq.gms, SpatialEqPolicy.gms, MultiMkt.gms, MultiMkt_ImpFactor.gms
11. Risk Modeling (MS Chapter 14) - Lecture ppt11;EV1.gms, MOTAD1.gms, Unified1.gms
12. Risk Modeling Cont'd - Lecture ppt12
13. Integer Programming (MS Chapter 15, 16) - Lecture ppt13
14. Proper Modeling (Part of MS Chapters 6, 10, 17, and 18) - Lecture ppt14

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Simulation
15. Introduction to Risk and Simulation (R Chapters 1 and 2; HH Chapters 1 and 2) - Lecture ppt15
16. Stochastic Simulation and SIMETAR (R Chapter 4; Part of HH Chapter 8) - Lecture ppt16
17. Distributions for Simulation (R - Chapter 5) - Lecture ppt17; AlfalfaHay_Demo.xls
18. Univariate Parameter Estimation (R - Chapter 6) - Lecture ppt18; EmpParamEsti.xls
19. Multivariate Parameter Estimation (R - Chapter 7) - Lecture ppt19; MultDist_Demo
20. Review of Expected Utility Hypothesis (R - Chapter 10; HH Chapters 5-7; Mas-Colell et al Chapter 6) - Lecture ppt20
21. Probabilistic Forecasting (R - Chapter 15) - Lecture ppt21; ProbForecast_Demo.xls
22. Simulating Alternative Scenarios and Selecting the Best Scenario (R - Chapter 10) - Lecture ppt22; Best_Rain.xls, Best2.xls
23. Scenario and Sensitivity Analysis (R - Chapter 10, 16.7~16.9) - Lecture ppt23; Sensitivity_Demo.xls23. Model Validation (R - Chapter 3) - Lecture ppt24 ; Validation_Demo.xls

IV. Homework
1. Homework 1 Due February 5, 2008 - Solution 1; Excel (Don't open it here; download it first)
2. Homework 2 Due February 21, 2008 - Solution 2; Excel (Don't open it here; download it first), WinterVege.gms
3. Homework 3 Due March 11, 2008 - Solution 3; hw3_SpatialEqModel.gms; hw3_RiskAllInOne.gms
4. Homework 4 Due April 10, 2008
5. Homework 5 Due April 29, 2008

V. Exam
Mock Midterm - Mock Exam SolutionMidterm - Midterm Solution; Take-home Answer Key; MidTerm_TakeHome.gms
Mock Final
Final - Final Solution for selective problems

CLASS PRESENTATION -----------------------------------------------------------------------------
May 1 (Thursday)
Presenter               Tentative Title
   Carol Bishop        Optimal Crop Mix for Varying Levels of Water Availability and Capital
   Yiheng Li             Who will Feed China?
    Aubrey Oliphint    Forecast of Acid Rain and Potential Impact on Recreation
    Erqian Zhu           Modeling NV Investment Scale with LP

May 6 (Tuesday)
Presenter               Tentative Title
     Moses Anabila     Lyme diseases and Climate Change
     Sarah Ganschow Spatially Endogenous Modeling of Fuel Treatment wrt Costs and Fire Risk
     Amy Phillips        Forecasting Gross Revenues at Movie Box Office
     Charles Morton    LP/SAM - BLM Land Management and Tourism
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VI. Reading Assignments

Mathematical Programming

Howitt, R.E. (1995) "Positive Mathematical Programming," American Journal of Agricultural Economics 77 (May): 329-342.
Kim, M., and McCarl, B.A. (2005) "The Agricultural Value of Information on the North Atlantic Oscillation: Yield and Economic Effects," Climatic Change 71: 117-139
McCarl, B.A., and Schneider, U.A. (2001) "Greenhouse Gas Mitigation in U.S. Agriculture and Forestry." Science 294 (December 21): 2481-2482.
McCarl, B.A., and Spreen, T.H. (1980) "Price Endogenous Mathematical Programming as a Tool for Sector Analysis," American Journal of Agricultural Economics, 62(1): 87-102.
Nordhaus, W.D., and Yang, Z. (1996) "A Regional Dynamic General-Equilibrium Model of Alternative Climate-Change Strategies." American Economic Review 86(4): 741 - 765.
Rosenthal, R.E. A GAMS Tutorial, available at http://www.gams.com/docs/gams/Tutorial.pdf
Roy, A., DeFalomir, E.E., and Lasdon, L. (1982) “An Optimization-Based Decision Support System for a Product Mix Problem,” Interfaces 12(2):26-33.
Spreen, T.H. (2006) "Price Endogenous Mathematical Programming Models and Trade Analysis," Journal of Agricultural and Applied Economics 38(2):249-253.
Varian, H.R. (1994) How to Build an Economic Model in Your Spare Time, Available at http://people.ischool.berkeley.edu/~hal/Papers/how.pdf

Simulation

Hardar, J. and Russell, W.R. (1969) "Rules for Ordering Uncertain Prospects." American Economic Review 59(1):25-34.
Hardaker, J.B., Richardoson, J.W., Lien, G., and Schumann, K.D. (2004) "Stochastic Efficiency Analysis with Risk Aversion Bound: A Simplified Approach." Australian Journal of Agricultural and Resource Economics 48(2):253-270.
Harwood, J., Heifner, R., Coble, K., Perry, J., and Somwaru, A. (1999) Managing Risk in Farming: Concepts, Research and Analysis. Market and Trade Economics Division and Resource Economics Division, Economic Research Service, U.S. Department of Agriculture. Agricultural Economic Report No. 774. Available at http://www.ers.usda.gov/publications/aer774/aer774.pdf
Just, R.E., and Weninger, Q. (1999) "Are Crop Yields Normally Distributed?" American Journal of Agricultural Economics 81(2):287-304.
Ker, A.P., and Coble, K. (2003) "Modeling Conditional Yield Densities." American Journal of Agricultural Economics 85(2):291-304.
Meyer, J. (1977) "Choice Among Distributions." Journal of Economic Theory 14(2):326-336.
Richardson, J.W et al (2007) "Including Risk in Economic Feasibility Analyses: The Case of Ethanol Production in Texas," Journal of Agribusiness 25(2):115-132.
Richardson, J.W, S.L. Klose, and A.W. Gray (2000) "An Applied Procedure for Estimating and Simulating Multivariate Empirical (MVE) Probability Distributions in Farm-Level Risk Assessment and Policy Analysis." Journal of Agricultural and Applied Economics 32(2):299-315.
Wilson, W.W., Dahl, B.L., and Maxwell, B.J. (2007) "Grower Response to Contracts and Risk in Genetically Modified (GM) Crops." Journal of Agricultural and Resource Economics 32(1):135-153.

VII. Useful Links
Software
GAMS Home Page
SIMETAR Home Page

Linear Programming: Foundations and Extensions - Online book written by Robert J. Vanderbei (Department of Operation Research and Financial Engineering, Princeton University)

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