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The goal of this dissertation is to examine the theoretical and empirical implications of the inventory theoretic approach to the demand for money. Chapter 1 reviews the existing inventory theoretic frameworks and empirical money demand literature and provides an overview of this thesis. One of the main conclusions is that the elasticity results from the existing inventory theoretic models are not robust. Chapter 2 develops a partial equilibrium inventory theoretic model, in which a fixed cost is involved per cash transfer. The key feature is that a firm endogenously chooses the frequency of pay periods, which a household takes as given. When the firm must borrow working capital and pay wages by cheque, I show that both the firm and the household choose to transfer cash every payday only. The model keeps the basic result from the classical inventory theoretic approach that both the income and interest elasticity of money demand are 0.5. Chapter 3 extends the partial equilibrium model into a general equilibrium framework and shows that the partial equilibrium elasticity results no longer apply in the general equilibrium. First, the income elasticity is 1 in the general equilibrium. Second, the interest elasticity has two values depending on a threshold interest rate. When interest rates are below this threshold, the model is the Cash-In-Advance model with a constant income velocity of money and zero interest elasticity; otherwise the interest elasticity is close to 0.5 and the velocity fluctuates in response to variations in interest rates. Finally, the general equilibrium elasticity results are robust across alternative specifications of the agent's utility. Chapter 4 calibrates the general equilibrium model to the last 40 years of US data for M1. By constructing a residual measure of money transaction costs from the structural money demand function, I find that a structural break in the transaction costs occurred in 1981 might have been responsible for the instability of long-run money demand. The benefit of this approach is that it can explain this pattern of money demand without appealing to an exogenous structural break in the money demand function.

The goal of this dissertation is to examine the theoretical and empirical implications of the inventory theoretic approach to the demand for money. Chapter 1 reviews the existing inventory theoretic frameworks and empirical money demand literature and provides an overview of this thesis. One of the main conclusions is that the elasticity results from the existing inventory theoretic models are not robust. Chapter 2 develops a partial equilibrium inventory theoretic model, in which a fixed cost is involved per cash transfer. The key feature is that a firm endogenously chooses the frequency of pay periods, which a household takes as given. When the firm must borrow working capital and pay wages by cheque, I show that both the firm and the household choose to transfer cash every payday only. The model keeps the basic result from the classical inventory theoretic approach that both the income and interest elasticity of money demand are 0.5. Chapter 3 extends the partial equilibrium model into a general equilibrium framework and shows that the partial equilibrium elasticity results no longer apply in the general equilibrium. First, the income elasticity is 1 in the general equilibrium. Second, the interest elasticity has two values depending on a threshold interest rate. When interest rates are below this threshold, the model is the Cash-In-Advance model with a constant income velocity of money and zero interest elasticity; otherwise the interest elasticity is close to 0.5 and the velocity fluctuates in response to variations in interest rates. Finally, the general equilibrium elasticity results are robust across alternative specifications of the agent's utility. Chapter 4 calibrates the general equilibrium model to the last 40 years of US data for M1. By constructing a residual measure of money transaction costs from the structural money demand function, I find that a structural break in the transaction costs occurred in 1981 might have been responsible for the instability of long-run money demand. The benefit of this approach is that it can explain this pattern of money demand without appealing to an exogenous structural break in the money demand function.

The goal of this dissertation is to examine the theoretical and empirical implications of the inventory theoretic approach to the demand for money. Chapter 1 reviews the existing inventory theoretic frameworks and empirical money demand literature and provides an overview of this thesis. One of the main conclusions is that the elasticity results from the existing inventory theoretic models are not robust. Chapter 2 develops a partial equilibrium inventory theoretic model, in which a fixed cost is involved per cash transfer. The key feature is that a firm endogenously chooses the frequency of pay periods, which a household takes as given. When the firm must borrow working capital and pay wages by cheque, I show that both the firm and the household choose to transfer cash every payday only. The model keeps the basic result from the classical inventory theoretic approach that both the income and interest elasticity of money demand are 0.5. Chapter 3 extends the partial equilibrium model into a general equilibrium framework and shows that the partial equilibrium elasticity results no longer apply in the general equilibrium. First, the income elasticity is 1 in the general equilibrium. Second, the interest elasticity has two values depending on a threshold interest rate. When interest rates are below this threshold, the model is the Cash-In-Advance model with a constant income velocity of money and zero interest elasticity; otherwise the interest elasticity is close to 0.5 and the velocity fluctuates in response to variations in interest rates. Finally, the general equilibrium elasticity results are robust across alternative specifications of the agent's utility. Chapter 4 calibrates the general equilibrium model to the last 40 years of US data for M1. By constructing a residual measure of money transaction costs from the structural money demand function, I find that a structural break in the transaction costs occurred in 1981 might have been responsible for the instability of long-run money demand. The benefit of this approach is that it can explain this pattern of money demand without appealing to an exogenous structural break in the money demand function. / Arts, Faculty of / Vancouver School of Economics / Graduate

We focus on three different types of multi-party cryptographic protocols. The first is in the area of unconditionally secure signature schemes, the goal of which is to provide users the ability to electronically sign documents without the reliance on computational assumptions needed in traditional digital signatures. The second is on cooperative protocols in which users help each other maintain privacy while querying a database, called user-private information retrieval protocols. The third is concerned with the generalized Russian cards problem, in which two card players wish to communicate their hands to each other via public announcements without the third player learning the card deal. The latter two problems have close ties to the field of combinatorial designs, and properly fit within the field of combinatorial cryptography. All of these problems have a common thread, in that they are grounded in the information-theoretically secure or unconditionally secure setting.

Upon making an optimal timing decision, a player takes into consideration not only the actions of the other players, but also the uncertainty of the environment. I use the real options approach to study the strategic timing decisions of asymmetric firms in an environment with uncertainty. When firms make timing decisions, they take into account the opportunity cost of immediate action today. The second chapter studies the identification in an asymmetric duopoly. The two potential entrants contemplate entering a new market where the demand follows a geometric Brownian motion. I show that under certain parameter conditions there will be an equilibrium triggered by preemption, and both firms could preempt. Moreover, the equilibrium may no longer be only triggered by preemption. I identify the joint distribution of the unobserved investment costs and find the probability of the first entry being triggered by preemption. Given the observation of the first entrant, I can predict the probability of observing the second entrant. The third chapter studies the spillover effect of exit in a vertical relationship. I extend the methodology of irreversible investment under uncertainty to consider exits in a vertical market structure. When the exogenous demand shock is low, one party of the supply chain wants to exit first and will thus lead to the exit of the remaining party. The firm which wants to exit later strategically acts to delay the exit of its counterpart and therefore prevents its own exit. When the state level drops below the unique equilibrium exit threshold, both firms will exit simultaneously. The expected delay in exit timing is derived. The fourth chapter studies the strategic optimal timing of entry in the competition between one-way essential complements under demand uncertainty. The value of a new add-on to its consumers is uncertain. While the rational essential good producing firm recognizes the value of waiting under uncertainty when it contemplates entering the add-on market and endogenously self-selects between the two entry options- to produce or to acquire, the add-on producing firm strategically decides when to agree on acquisition. The impact of profit sharing in the case of acquisition and relative fixed costs of entry on the size and form of the waiting region and the responses of both firms are analyzed. / text

The major objective of this dissertation is extending the capabilities of game theoretic distributed control to more general settings. In particular, we are interested in drifting environments and/or constrained communications. The first part of the dissertation concerns slowly varying dynamics, i.e., drifting environments. A standard assumption in game theoretic learning is a stationary environment, e.g., the game is fixed. We investigate the case of slow variations and show that for sufficiently slow time variations, the limiting behavior “tracks” the stochastically stable states. Since the analysis is regarding Markov processes, the results could be applied to various game theoretic learning rules. In this research, the results were applied to log-linear learning. A mobile sensor coverage example was tested in both simulation and laboratory experiments. The second part considers a problem of coordinating team players' actions without any communications in team-based zero-sum games. Generally, some global signalling devices are required for common randomness between players, but communications are very limited or impossible in many practical applications. Instead of learning a one-shot strategy, we let players coordinate a periodic sequence of deterministic actions and put an assumption on opponent's rationality. Since team players' action sequences are periodic and deterministic, common randomness is no longer required to coordinate players. It is proved that if a length of a periodic action sequence is long enough, then opponents with limited rationality cannot recognize its pattern. Because the opponents cannot recognize that the players are playing deterministic actions, the players' behavior looks like a correlated and randomized joint strategy with empirical distribution of their action sequences. Consequently players can coordinate their action sequences without any communications or global signals, and the resulting action sequences have correlated behavior. Moreover, the notion of micro-players are introduced for efficient learning of long action sequences. Micro-player matching approach provides a new framework that converts the original team-based zero-sum game to a game between micro-players. By introducing a de Bruijn sequence to micro-player matching, we successfully separate the level of opponent's rationality and the size of the game of micro-players. The simulation results are shown to demonstrate the performance of micro-player matching methods. Lastly, the results of the previous two topics are combined by considering a problem of coordinating actions without communications in drifting environments. More specifically, it is assumed that the opponent player in the team-based zero-sum games tries to adjust its strategy in the set of bounded recall strategies. Then the time-varying opponent's strategy can be considered as a dynamic environment parameter in a coordination game between the team players. Additionally, we develop a human testbed program for further study regarding a human as an adaptive opponent in the team-based zero-sum games. The developed human testbed program can be a starting point for studying game theoretic correlated behavior learning against a human.

We focus on three different types of multi-party cryptographic protocols. The first is in the area of unconditionally secure signature schemes, the goal of which is to provide users the ability to electronically sign documents without the reliance on computational assumptions needed in traditional digital signatures. The second is on cooperative protocols in which users help each other maintain privacy while querying a database, called user-private information retrieval protocols. The third is concerned with the generalized Russian cards problem, in which two card players wish to communicate their hands to each other via public announcements without the third player learning the card deal. The latter two problems have close ties to the field of combinatorial designs, and properly fit within the field of combinatorial cryptography. All of these problems have a common thread, in that they are grounded in the information-theoretically secure or unconditionally secure setting.

A Mobile Ad Hoc Network (MANET) adopts a decentralized communication architecture which relies on cooperation among nodes at each layer of the protocol stack. Its reliance on cooperation for success and survival makes the ad hoc network particularly sensitive to variations in node behavior. Specifically, for functions such as routing, nodes which are limited in their resources may be unwilling to cooperate in forwarding for other nodes. Such selfish behavior leads to degradation in the performance of the network and possibly, in the extreme case, a complete cessation of operations. Consequently it is important to devise solutions to encourage resource-constrained nodes to cooperate. Incentive schemes have been proposed to induce selfish nodes to cooperate. Though many of the proposed schemes in the literature are payment-based, nodes can be incentivized to cooperate by adopting policies which are non-monetary in nature, but rather are based on the threat of retaliation for non-cooperating nodes. These policies, for which there is little formal analysis in the existing literature on node cooperation, are based on observed node behavior. We refer to them as behavior-based incentives. In this work, we analyze the effectiveness of behavior-based incentives in inducing nodes to cooperate. To determine whether an incentive scheme is effective in fostering cooperation we develop a game-theoretic model. Adopting a repeated game model, we show that nodes may agree to cooperate in sharing their resources and forward packets, even if they perceive a cost in doing so. This happens as the nodes recognize that refusing to cooperate will result in similar behavior by others, which ultimately would compromise the viability of the network as a whole. A major shortcoming in the analysis done in past works is the lack of consideration of practical constraints imposed by an ad hoc environment. One such example is the assumption that a node, when making decisions about whether to cooperate, has perfect knowledge of every other node's actions. In a distributed setting this is impractical. In our work, we analyze behavior-based incentives by incorporating such practical considerations as imperfect monitoring into our game-theoretic models. In modeling the problem as a game of imperfect public monitoring (nodes observe a common public signal that reflects the actions of other nodes in the network) we show that, under the assumption of first order stochastic dominance of the public signal, the grim trigger strategy leads to an equilibrium for nodes to cooperate. Even though a trigger-based strategy like grim-trigger is effective in deterring selfish behavior it is too harsh in its implementation. In addition, the availability of a common public signal in a distributed setting is rather limited. We, therefore, consider nodes that individually monitor the behavior of other nodes in the network and keep this information private. Note that this independent monitoring of behavior is error prone as a result of slow switching between transmit and promiscuous modes of operation, collisions and congestion due to the wireless medium, or incorrect feedback from peers. We propose a probability-based strategy that induces nodes to cooperate under such a setting. We analyze the strategy using repeated games with imperfect private monitoring and show it to be robust to errors in monitoring others" actions. Nodes achieve a near-optimal payoff at equilibrium when adopting this strategy. This work also characterizes the effects of a behavior-based incentive, applied to induce cooperation, on topology control in ad hoc networks. Our work is among the first to consider selfish behavior in the context of topology control. We create topologies based on a holistic view of energy consumption " energy consumed in forwarding packets as well as in maintaining links. Our main results from this work are to show that: (a) a simple forwarding policy induces nodes to cooperate and leads to reliable paths in the generated topology, (b) the resulting topologies are well-connected, energy-efficient and exhibit characteristics similar to those in small-world networks. / Ph. D.

Global warming is currently a major challenge facing the world. There are widespread ongoing efforts in the form of summits, conferences, etc., to find satisfactory ways of surmounting this challenge. The basic objective of all such efforts can be summarized as conception and formation of protocols to reduce the pace of global carbon levels. Game theory and mechanism design provide a natural modeling tool for capturing the strategic dynamics involved in global warming related problems. This dissertation explores for the first time the use of voting mechanisms in the context of solving the central problems, namely, allocation of emission caps and reduction quotas to strategic emitting agents (countries). The contribution of this dissertation is two-fold. The first contribution is to develop an elegant game theoretic model that accurately captures the strategic interactions among different emitting agents in a global warming setting. This model facilitates a convenient way of exploring a mechanism design approach for solving important allocation problems in the global warming context. The second contribution is to propose and explore a novel approach, based on voting mechanisms, to solve two problems: (1) allocating emission caps and (2) allocating reduction quotas to strategic agents. Our work investigates the use of voting mechanisms that satisfy four desirable properties: (1) non-dictatorship, (2) strategy-proofness, (3) efficiency, and (4) anonymity. In particular, we explore the median selection, maximum order statistic selection, and general Kth order statistic selection voting mechanisms. Our results clearly show that only trivial allocations satisfy all the above properties simultaneously. We next investigate the use of voting mechanisms for the dual problem, namely, allocation of emission reductions to emitting agents. Here, we show that non-trivial allocations are possible, however an important property, individual rationality, might be compromised. The investigations in the thesis bring out certain limitations in applying voting mechanisms that satisfy all the four properties above. Nevertheless, the insights obtained provide valuable guidelines for solving emission allocation related problems in a principled and informed way.