Full employment and competition in the Aspen economic model: implications for modeling acts of terrorism.

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Acts of terrorism could have a range of broad impacts on an economy, including changes in consumer (or demand) confidence and the ability of productive sectors to respond to changes. As a first step toward a model of terrorism-based impacts, we develop here a model of production and employment that characterizes dynamics in ways useful toward understanding how terrorism-based shocks could propagate through the economy; subsequent models will introduce the role of savings and investment into the economy. We use Aspen, a powerful economic modeling tool developed at Sandia, to demonstrate for validation purposes that a single-firm economy converges to ... continued below

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28 p.

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Sprigg, James A. & Ehlen, Mark Andrew November 1, 2004.

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Description

Acts of terrorism could have a range of broad impacts on an economy, including changes in consumer (or demand) confidence and the ability of productive sectors to respond to changes. As a first step toward a model of terrorism-based impacts, we develop here a model of production and employment that characterizes dynamics in ways useful toward understanding how terrorism-based shocks could propagate through the economy; subsequent models will introduce the role of savings and investment into the economy. We use Aspen, a powerful economic modeling tool developed at Sandia, to demonstrate for validation purposes that a single-firm economy converges to the known monopoly equilibrium price, output, and employment levels, while multiple-firm economies converge toward the competitive equilibria typified by lower prices and higher output and employment. However, we find that competition also leads to churn by consumers seeking lower prices, making it difficult for firms to optimize with respect to wages, prices, and employment levels. Thus, competitive firms generate market ''noise'' in the steady state as they search for prices and employment levels that will maximize profits. In the context of this model, not only could terrorism depress overall consumer confidence and economic activity but terrorist acts could also cause normal short-run dynamics to be misinterpreted by consumers as a faltering economy.

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28 p.

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  • Report No.: SAND2004-5500
  • Grant Number: AC04-94AL85000
  • DOI: 10.2172/903422 | External Link
  • Office of Scientific & Technical Information Report Number: 903422
  • Archival Resource Key: ark:/67531/metadc888082

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Office of Scientific & Technical Information Technical Reports

Reports, articles and other documents harvested from the Office of Scientific and Technical Information.

Office of Scientific and Technical Information (OSTI) is the Department of Energy (DOE) office that collects, preserves, and disseminates DOE-sponsored research and development (R&D) results that are the outcomes of R&D projects or other funded activities at DOE labs and facilities nationwide and grantees at universities and other institutions.

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  • November 1, 2004

Added to The UNT Digital Library

  • Sept. 22, 2016, 2:13 a.m.

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  • Nov. 28, 2016, 6:08 p.m.

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Sprigg, James A. & Ehlen, Mark Andrew. Full employment and competition in the Aspen economic model: implications for modeling acts of terrorism., report, November 1, 2004; United States. (digital.library.unt.edu/ark:/67531/metadc888082/: accessed April 21, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.