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Articles 1231 - 1260 of 2768
Full-Text Articles in Social and Behavioral Sciences
Coordination Failure In Repeated Games With Almost-Public Monitoring, George J. Mailath, Stephen Morris
Coordination Failure In Repeated Games With Almost-Public Monitoring, George J. Mailath, Stephen Morris
Cowles Foundation Discussion Papers
Some private-monitoring games, that is, games with no public histories, can have histories that are almost public. These games are the natural result of perturbing public-monitoring games towards private monitoring. We explore the extent to which it is possible to coordinate continuation play in such games. It is always possible to coordinate continuation play by requiring behavior to have bounded recall (i.e., there is a bound L such that in any period, the last L signals are sufficient to determine behavior). We show that, in games with general almost-public private monitoring, this is essentially the only behavior that can coordinate …
Coordination Failure In Repeated Games With Almost-Public Monitoring, George J. Mailath, Stephen Morris
Coordination Failure In Repeated Games With Almost-Public Monitoring, George J. Mailath, Stephen Morris
Cowles Foundation Discussion Papers
Some private-monitoring games, that is, games with no public histories, can have histories that are almost public. These games are the natural result of perturbing public monitoring games towards private monitoring. We explore the extent to which it is possible to coordinate continuation play in such games. It is always possible to coordinate continuation play by requiring behavior to have bounded recall (i.e., there is a bound L such that in any period, the last L signals are sufficient to determine behavior). We show that, in games with general almost-public private monitoring, this is essentially the only behavior that can …
Xenophobia And Distribution In France: A Politico-Economic Analysis, John E. Roemer, Karine Van Der Straeten
Xenophobia And Distribution In France: A Politico-Economic Analysis, John E. Roemer, Karine Van Der Straeten
Cowles Foundation Discussion Papers
Anti-immigrant feeling (xenophobia) among voters has been proposed as a key factor explaining why, in the 2002 French national election, Jean Le Pen’s National Front Party won second place. Here, we study the effect of anti-immigrant sentiments among voters on the equilibrium position of political parties on the economic issue, which we take to be the size of the public sector. We model political competition among three parties (Left, Right, and Extreme Right) on a two-dimensional policy space (public sector size, immigration issue) using the PUNE model. We calibrate the model to French data for the election years 1988 and …
Impartiality And Priority. Part 1: The Veil Of Ignorance, Juan D. Moreno-Ternero, John E. Roemer
Impartiality And Priority. Part 1: The Veil Of Ignorance, Juan D. Moreno-Ternero, John E. Roemer
Cowles Foundation Discussion Papers
The veil of ignorance has been used often as a tool for recommending what justice requires with respect to the distribution of wealth. We complete Harsanyi’s model of the veil of ignorance by appending information permitting interpersonal comparability of welfare. We show that the veil-of-ignorance conception of John Harsanyi, so completed, and Ronald Dworkin’s, when modeled formally, recommend wealth allocations in conflict with the prominently espoused view that priority should be given to the worse off with respect to wealth allocation.
Impartiality, Solidarity, And Priority In The Theory Of Justice, Juan D. Moreno-Ternero, John E. Roemer
Impartiality, Solidarity, And Priority In The Theory Of Justice, Juan D. Moreno-Ternero, John E. Roemer
Cowles Foundation Discussion Papers
The veil of ignorance has been used often as a tool for recommending what justice requires with respect to the distribution of wealth. We show that John Harsanyi’s and Ronald Dworkin’s conceptions of the veil, when modeled formally, recommend wealth allocations in conflict with the prominently espoused view that priority should be given to the worse off with respect to wealth allocation. It follows that those who believe that justice requires impartiality and priority must seek some method of assuring the former other than the veil of ignorance. We propose that impartiality and solidarity are fundamentals of justice, and study …
Impartiality And Priority. Part 2: A Characterization With Solidarity, Juan D. Moreno-Ternero, John E. Roemer
Impartiality And Priority. Part 2: A Characterization With Solidarity, Juan D. Moreno-Ternero, John E. Roemer
Cowles Foundation Discussion Papers
The ethic of ‘priority’ is a compromise between the extremely compensatory ethic of ‘welfare equality’ and the needs-blind ethic of ‘income equality’. We propose an axiom of priority, and characterize resource allocation rules that are impartial, prioritarian, and solidaristic. They comprise a class of rules which equalize across individuals some index of resources and welfare. Consequently, we provide an ethical rationalization for the many applications in which such indices have been used (e.g., the ‘human development index,’ ‘index of primary goods,’ etc.).
Grading Exams: 100, 99, ..., 1 Or A, B, C? Incentives In Games Of Status, Pradeep Dubey, John Geanakoplos
Grading Exams: 100, 99, ..., 1 Or A, B, C? Incentives In Games Of Status, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We show that if students care primarily about their status (relative rank) in class, they are best motivated to work not by revealing their exact numerical exam scores (100,99,…,1), but instead by clumping them in broad categories (A,B,C). If their abilities are disparate, the optimal grading scheme awards fewer A’s than there are alpha-quality students, creating small elites. If their abilities are common knowledge, then it is better to grade them on an absolute scale (100 to 90 is an A, etc.) rather than on a curve (top 15% is an A, etc.). We develop criteria for optimal grading schemes …
Limit Theory For Moderate Deviations From A Unit Root, Peter C.B. Phillips, Tassos Magdalinos
Limit Theory For Moderate Deviations From A Unit Root, Peter C.B. Phillips, Tassos Magdalinos
Cowles Foundation Discussion Papers
An asymptotic theory is given for autoregressive time series with a root of the form ρ n = 1 + c/ n α , which represents moderate deviations from unity when α in (0,1). The limit theory is obtained using a combination of a functional law to a diffusion on D [0,∞) and a central limit law to a scalar normal variate. For c > 0, the results provide a n (1+α)/2 rate of convergence and asymptotic normality for the first order serial correlation, partially bridging the squareroot of n and n convergence rates for the stationary (α = 0) and …
Regression Asymptotics Using Martingale Convergence Methods, Rustam Ibragimov, Peter C.B. Phillips
Regression Asymptotics Using Martingale Convergence Methods, Rustam Ibragimov, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Weak convergence of partial sums and multilinear forms in independent random variables and linear processes to stochastic integrals now plays a major role in nonstationary time series and has been central to the development of unit root econometrics. The present paper develops a new and conceptually simple method for obtaining such forms of convergence. The method relies on the fact that the econometric quantities of interest involve discrete time martingales or semimartingales and shows how in the limit these quantities become continuous martingales and semimartingales. The limit theory itself uses very general convergence results for semimartingales that were obtained in …
Competition, Consumer Welfare And Monopoly Power, Donald J. Brown, G. A. Wood
Competition, Consumer Welfare And Monopoly Power, Donald J. Brown, G. A. Wood
Cowles Foundation Discussion Papers
An applied general equilibrium analysis of monopoly power is proposed as an alternative to the partial equilibrium analyses of monopoly pricing current in antitrust economics. This analysis introduces a new notion of market equilibrium where firms with monopoly power are cost-minimizing price-takers in competitive factor markets and make supracompetitive profits in equilibrium, i.e., the monopoly price exceeds the marginal cost of production. We assume that the primary goals of antitrust policy are the promotion of competition and the enhancement of consumer welfare. To that end, we use Debreu’s coefficient of resource utilization to determine the counterfactual competitive price levels in …
Hac Estimation By Automated Regression, Peter C.B. Phillips
Hac Estimation By Automated Regression, Peter C.B. Phillips
Cowles Foundation Discussion Papers
A simple regression approach to HAC and LRV estimation is suggested. The method exploits the fact that the quantities of interest relate to only one point of the spectrum (the origin). The new estimator is simply the explained sum of squares in a linear regression whose regressors are a set of trend basis functions. Positive definiteness in the estimate is therefore automatically enforced and the technique can be implemented with standard regression packages. No kernel choice is needed in practical implementation but basis functions need to be chosen and a smoothing parameter corresponding to the number of basis functions needs …
Uniform Limit Theory For Stationary Autoregression, Liudas Giraitis, Peter C.B. Phillips
Uniform Limit Theory For Stationary Autoregression, Liudas Giraitis, Peter C.B. Phillips
Cowles Foundation Discussion Papers
First order autoregression is shown to satisfy a limit theory which is uniform over stationary values of the autoregressive coefficient ρ = ρ n in [0,1) provided (1 - ρ n )n approaches infinity. This extends existing Gaussian limit theory by allowing for values of stationary rho that include neighbourhoods of unity provided they are wider than ( n 1 ), even by a slowly varying factor. Rates of convergence depend on rho and are at least squareroot of / n but less than n . Only second moments are assumed, as in the case of stationary autoregression with fixed …
An Alternative Test Of Racial Prejudice In Motor Vehicle Searches: Theory And Evidence, Shamena Anwar, Hanming Fang
An Alternative Test Of Racial Prejudice In Motor Vehicle Searches: Theory And Evidence, Shamena Anwar, Hanming Fang
Cowles Foundation Discussion Papers
We exploit a simple but realistic model of trooper behavior to design empirical tests that address the following two questions. Are police monolithic in their search behavior? Is racial profiling in motor vehicle searches motivated by troopers’ desire for effective policing (statistical discrimination) or by their racial prejudice (racism)? Our tests require data sets with race information about both the motorists and troopers. When applied to vehicle stop and search data from Florida, our tests can soundly reject the null hypothesis that troopers of different races are monolithic in their search behavior, but fail to reject the null hypothesis that …
Collateral Restrictions And Liquidity Under-Supply: A Simple Model, Ana Fostel, John Geanakoplos
Collateral Restrictions And Liquidity Under-Supply: A Simple Model, Ana Fostel, John Geanakoplos
Cowles Foundation Discussion Papers
We show that very little is needed to create liquidity under-supply in equilibrium. Credit constraints on demand by themselves can cause an under-supply of liquidity, without the uncertainty, intermediation, asymmetric information or complicated international financial framework used in other models in the literature. We show that the under-supply is a non-monotone function of the demand distortion that causes it, a result that may have interesting implications for emerging markets economies. Finally, when we make the credit constraint endogenous, the inefficiency can be large due to the presence of a multiplier.
Automated Discovery In Econometrics, Peter C.B. Phillips
Automated Discovery In Econometrics, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Our subject is the notion of automated discovery in econometrics. Advances in computer power, electronic communication, and data collection processes have all changed the way econometrics is conducted. These advances have helped to elevate the status of empirical research within the economics profession in recent years and they now open up new possibilities for empirical econometric practice. Of particular significance is the ability to build econometric models in an automated way according to an algorithm of decision rules that allow for (what we call here) heteroskedastic and autocorrelation robust (HAR) inference. Computerized search algorithms may be implemented to seek out …
Expansions For Approximate Maximum Likelihood Estimators Of The Fractional Difference Parameter, Offer Lieberman, Peter C.B. Phillips
Expansions For Approximate Maximum Likelihood Estimators Of The Fractional Difference Parameter, Offer Lieberman, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper derives second-order expansions for the distributions of the Whittle and profile plug-in maximum likelihood estimators of the fractional difference parameter in the ARFIMA(0, d ,0) with unknown mean and variance. Both estimators are shown to be second-order pivotal. This extends earlier findings of Lieberman and Phillips (2001), who derived expansions for the Gaussian maximum likelihood estimator under the assumption that the mean and variance are known. One implication of the results is that the parametric bootstrap upper one-sided confidence interval provides an o ( n -1 ln n ) improvement over the delta method. For statistics that are …
Optimal Invariant Similar Tests For Instrumental Variables Regression, Donald W.K. Andrews, Marcelo J. Moreira, James H. Stock
Optimal Invariant Similar Tests For Instrumental Variables Regression, Donald W.K. Andrews, Marcelo J. Moreira, James H. Stock
Cowles Foundation Discussion Papers
This paper considers tests of the parameter on endogenous variables in an instrumental variables regression model. The focus is on determining tests that have some optimal power properties. We start by considering a model with normally distributed errors and known error covariance matrix. We consider tests that are similar and satisfy a natural rotational invariance condition. We determine tests that maximize weighted average power (WAP) for arbitrary weight functions among invariant similar tests. Such tests include point optimal (PO) invariant similar tests. The results yield the power envelope for invariant similar tests. This allows one to assess and compare the …
Non-Monotone Liquidity Under-Supply, Ana Fostel, John Geanakoplos
Non-Monotone Liquidity Under-Supply, Ana Fostel, John Geanakoplos
Cowles Foundation Discussion Papers
We define liquidity as the flexibility to move goods (money) from one project (investment) to another. We show that credit constraints on demand by themselves can cause an under-supply of liquidity, without the uncertainty, intermediation, asymmetric information or complicated international financial framework used in other models in the literature. In this respect liquidity is like a commodity: according to our offsetting distortions principle, a distortion in the demand for any good can often be understood as an inefficiency of supply. We show that the liquidity under-supply is a non-monotone function of the credit constraint. This result is also a particular …
Challenges Of Trending Time Series Econometrics, Peter C.B. Phillips
Challenges Of Trending Time Series Econometrics, Peter C.B. Phillips
Cowles Foundation Discussion Papers
We discuss some challenges presented by trending data in time series econometrics. To the empirical economist there is little guidance from theory about the source of trend behavior and even less guidance about practical formulations. Moreover, recent proximity theorems reveal that trends are more elusive to model empirically than stationary processes, with the upshot that optimal forecasts are also harder to estimate when the data involve trends. These limitations are implicitly acknowledged in much practical modeling and forecasting work, where adaptive methods are often used to help keep models on track as trends evolve. The paper discusses these broader issues …
Time-Inconsistency And Welfare Program Participation: Evidence From The Nlsy, Hanming Fang, Dan Silverman
Time-Inconsistency And Welfare Program Participation: Evidence From The Nlsy, Hanming Fang, Dan Silverman
Cowles Foundation Discussion Papers
We empirically implement a dynamic structural model of labor supply and welfare program participation for agents with potentially time-inconsistent preferences. Using panel data on the choices of single women with children from the NLSY 1979, we provide estimates of the degree of time-inconsistency, and of its influence on the welfare take-up decision. With these estimates, we conduct counterfactual experiments to quantify the utility loss stemming from the inability to commit to future decisions, and the potential utility gains from commitment mechanisms such as welfare time limits and work requirements.
Racism And Redistribution In The United States: A Solution To The Problem Of American Exceptionalism, Woojin Lee, John E. Roemer
Racism And Redistribution In The United States: A Solution To The Problem Of American Exceptionalism, Woojin Lee, John E. Roemer
Cowles Foundation Discussion Papers
The two main political parties in the United States put forth policies on redistribution and on issues pertaining directly to race. We argue that redistributive politics in America can be fully understood only by taking account of the interconnection between these issues, and the effects of political competition upon the multi-dimensional party platforms. We identify two mechanisms through which racism among American voters decreases the degree of redistribution that would otherwise obtain. Many authors have suggested that voter racism decreases the degree of redistribution due to an anti-solidarity effect: that (some) voters oppose government transfer payments to minorities whom they …
Monopoly Pricing Of Experience Goods, Dirk Bergemann, Juuso Välimäki
Monopoly Pricing Of Experience Goods, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
We develop a dynamic model of experience goods pricing with independent private valuations. We show that the optimal paths of sales and prices can be described in terms of a simple dichotomy. In a mass market, prices are declining over time. In a niche market, the optimal prices are initially low followed by higher prices that extract surplus from the buyers with a high willingness to pay. We consider extensions of the model to integrate elements of social rather than private learning and turnover among buyers.
Monopoly Pricing Of Experience Goods, Dirk Bergemann, Juuso Välimäki
Monopoly Pricing Of Experience Goods, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
We develop a dynamic model of experience goods pricing with independent private valuations. We show that the optimal paths of sales and prices can be described in terms of a simple dichotomy. In a mass market, prices are declining over time. In a niche market, the optimal prices are initially low followed by higher prices that extract surplus from the buyers with a high willingness to pay. We consider extensions of the model to integrate elements of social rather than private learning and turnover among buyers.
The Social Cost Of Monopoly Power, Donald J. Brown, G. A. Wood
The Social Cost Of Monopoly Power, Donald J. Brown, G. A. Wood
Cowles Foundation Discussion Papers
A general equilibrium analysis of monopoly power is proposed as an alternative to the partial equilibrium analyses of monopolization common to most antitrust texts. This analysis introduces the notion of a cost minimizing market equilibrium. The empirical implications of this equilibrium concept for antitrust policy is derived in terms of a family of equilibrium inequalities over market data from observations on a market economy with competitive factor markets. The social cost of monopoly power is measured using Debreu’s coefficient of resource utilization. That is, we propose Pareto optimality as the ultimate objective of antitrust policy.
Household Reaction To Changes In Housing Wealth, Robert J. Shiller
Household Reaction To Changes In Housing Wealth, Robert J. Shiller
Cowles Foundation Discussion Papers
It is widely claimed that housing wealth, as well as stock prices, have an impact on consumption and hence on aggregate economic activity. This paper presents a broad overview of the issues that arise in evaluating this claim in the context of recent research in behavioral economics. Particular attention is paid to a model of the response of consumption to wealth components produced by Christopher Carroll [2004].
Radical Financial Innovation, Robert J. Shiller
Radical Financial Innovation, Robert J. Shiller
Cowles Foundation Discussion Papers
Radical financial innovation is the development of new institutions and methods that permit risk management to be extended far beyond its former realm, covering important new classes of risks. This paper compares past such innovation with potential future innovation, looking at the process that produced past success and the possibilities for future financial innovation.
Gold, Fiat And Credit: An Elementary Discussion Of Commodity Money, Fiat Money And Credit. Part Ii, Thomas Quint, Martin Shubik
Gold, Fiat And Credit: An Elementary Discussion Of Commodity Money, Fiat Money And Credit. Part Ii, Thomas Quint, Martin Shubik
Cowles Foundation Discussion Papers
In this paper we present a series of models, all within the context of a simple two-good economy, which bring out the distinctions between the different types of money and financial institutions. The models emphasize the physical properties of the economic goods, moneys, and trading systems. In Part 1 of the paper, we covered models in which the money is a consumable storable; here in Part 2 we consider economies using durable money, fiat money, or credit. Under this framework we are able to successfully contrast the role of private money lenders, banks, bilateral credit systems, and credit clearinghouses. We …
Schumpeterian Profits In The American Economy: Theory And Measurement, William D. Nordhaus
Schumpeterian Profits In The American Economy: Theory And Measurement, William D. Nordhaus
Cowles Foundation Discussion Papers
The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits. We then estimate the value of these profits for the non-farm business economy. We conclude that only a miniscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.
Neighborhood Complexes And Generating Functions, Herbert E. Scarf, Kevin M. Woods
Neighborhood Complexes And Generating Functions, Herbert E. Scarf, Kevin M. Woods
Cowles Foundation Discussion Papers
Given a 1 , a 2 ,…, a n in Z d , we examine the set, G , of all nonnegative integer combinations of these a i . In particular, we examine the generating function f ( z ) = Sum {b in G} z b . We prove that one can write this generating function as a rational function using the neighborhood complex (sometimes called the complex of maximal lattice-free bodies or the Scarf complex) on a particular lattice in Z n . In the generic case, this follows from algebraic results of D . Bayer and B. …
A Quantilogram Approach To Evaluating Directional Predictability, Oliver B. Linton, Yoon-Jae Whang
A Quantilogram Approach To Evaluating Directional Predictability, Oliver B. Linton, Yoon-Jae Whang
Cowles Foundation Discussion Papers
In this note we propose a simple method of measuring directional predictability and testing for the hypothesis that a given time series has no directional predictability. The test is based on the correlogram of quantile hits. We provide the distribution theory needed to conduct inference, propose some model free upper bound critical values, and apply our methods to stock index return data. The empirical results suggests some directional predictability in returns especially in mid range quantiles like 5%-10%.