Open Access. Powered by Scholars. Published by Universities.®
Social and Behavioral Sciences Commons™
Open Access. Powered by Scholars. Published by Universities.®
- Keyword
-
- Mechanism design (33)
- Asymptotic size (26)
- Bayes correlated equilibrium (25)
- Incomplete information (25)
- Unit root (25)
-
- Adverse selection (24)
- Information structure (24)
- Test (24)
- Climate change (23)
- Cointegration (22)
- Identification (22)
- Asymptotics (21)
- Default (21)
- Moment inequalities (21)
- Nonstationarity (21)
- Confidence set (20)
- Productivity (20)
- Asymptotic theory (19)
- Robustness (19)
- Autoregression (18)
- Common knowledge (18)
- Game theory (18)
- Moral hazard (18)
- Weak instruments (18)
- Brownian motion (17)
- Correlated equilibrium (17)
- General equilibrium (17)
- Long memory (17)
- Unit roots (17)
- Experimentation (16)
- Publication Year
Articles 691 - 720 of 2768
Full-Text Articles in Social and Behavioral Sciences
Estimating Smooth Structural Change In Cointegration Models, Jiti Gao, Degui Li, Peter C.B. Phillips
Estimating Smooth Structural Change In Cointegration Models, Jiti Gao, Degui Li, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper studies nonlinear cointegration models in which the structural coefficients may evolve smoothly over time. These time-varying coefficient functions are well-suited to many practical applications and can be estimated conveniently by nonparametric kernel methods. It is shown that the usual asymptotic methods of kernel estimation completely break down in this setting when the functional coefficients are multivariate. The reason for this breakdown is a kernel-induced degeneracy in the weighted signal matrix associated with the nonstationary regressors, a new phenomenon in the kernel regression literature. Some new techniques are developed to address the degeneracy and resolve the asymptotics, using a …
Testing For Multiple Bubbles: Limit Theory Of Real Time Detectors, Peter C.B. Phillips, Shu-Ping Shi, Jun Yu
Testing For Multiple Bubbles: Limit Theory Of Real Time Detectors, Peter C.B. Phillips, Shu-Ping Shi, Jun Yu
Cowles Foundation Discussion Papers
This paper provides the limit theory of real time dating algorithms for bubble detection that were suggested in Phillips, Wu and Yu (2011, PWY) and Phillips, Shi and Yu (2013b, PSY). Bubbles are modeled using mildly explosive bubble episodes that are embedded within longer periods where the data evolves as a stochastic trend, thereby capturing normal market behavior as well as exuberance and collapse. Both the PWY and PSY estimates rely on recursive right tailed unit root tests (each with a different recursive algorithm) that may be used in real time to locate the origination and collapse dates of bubbles. …
Reflections On Macroeconometric Modeling, Ray C. Fair
Reflections On Macroeconometric Modeling, Ray C. Fair
Cowles Foundation Discussion Papers
I have been doing research in macroeconomics since the late 1960s, almost 50 years. In this paper I pause and take stock. The paper is part personal reflections on macroeconometric modeling, part a road map of the techniques of macroeconometric modeling, and part comments on what I think I have learned about how the macroeconomy works from my research in this area.
Bayes Correlated Equilibrium And The Comparison Of Information Structures In Games, Dirk Bergemann, Stephen Morris
Bayes Correlated Equilibrium And The Comparison Of Information Structures In Games, Dirk Bergemann, Stephen Morris
Cowles Foundation Discussion Papers
The set of outcomes that can arise in Bayes Nash equilibria of an incomplete information game where players may have access to additional signals beyond the given information structure is equivalent to the set of a version of incomplete information correlated equilibrium which we dub Bayes correlated equilibrium . A game of incomplete information can be decomposed into a basic game, given by actions sets and payoff functions, and an information structure. We identify a partial order on many player information structures (individual sufficiency) under which more information shrinks the set of Bayes correlated equilibria.
Correlated Equilibrium And The Comparison Of Information Structures In Games, Dirk Bergemann, Stephen Morris
Correlated Equilibrium And The Comparison Of Information Structures In Games, Dirk Bergemann, Stephen Morris
Cowles Foundation Discussion Papers
A game of incomplete information can be decomposed into a basic game and an information structure. The basic game defines the set of actions, the set of payoff states the payoff functions and the common prior over the payoff states. The information structure refers to the signals that the players receive in the game. We characterize the set of outcomes that can arise in Bayes Nash equilibrium if players observe the given information structure but may also observe additional signals. The characterization corresponds to the set of (a version of) incomplete information correlated equilibria which we dub Bayes correlated equilibria. …
The Evolution Of ‘Theory Of Mind’: Theory And Experiments, Erik O. Kimbrough, Nikolaus Robalino, Arthur Robson
The Evolution Of ‘Theory Of Mind’: Theory And Experiments, Erik O. Kimbrough, Nikolaus Robalino, Arthur Robson
Cowles Foundation Discussion Papers
This paper investigates the evolutionary foundation for our capacity to attribute preferences to others. This ability is intrinsic to game theory, and is a key component of “Theory of Mind,” perhaps the capstone of social cognition. We argue here that this component of theory of mind allows organisms to efficiently modify their behavior in strategic environments with a persistent element of novelty. Our notion of “Theory of Mind” ’ (ToM) yields a sharp, unambiguous advantage over less sophisticated approaches to strategic interaction because agents with ToM extrapolate to novel circumstances information about opponents’ preferences that was learned previously. We then …
Reviewing The Leverage Cycle, Ana Fostel, John Geanakoplos
Reviewing The Leverage Cycle, Ana Fostel, John Geanakoplos
Cowles Foundation Discussion Papers
We review the theory of leverage developed in collateral equilibrium models with incomplete markets. We explain how leverage tends to boost asset prices, and create bubbles. We show how leverage can be endogenously determined in equilibrium, and how it depends on volatility. We describe the dynamic feedback properties of leverage, volatility, and asset prices, in what we call the Leverage Cycle. We also describe some cross-sectional implications of multiple leverage cycles, including contagion, flight to collateral, and swings in the issuance volume of the highest quality debt. We explain the differences between the leverage cycle and the credit cycle literature. …
Optimal Sup-Norm Rates And Uniform Inference On Nonlinear Functionals Of Nonparametric Iv Regression, Xiaohong Chen, Timothy M. Christensen
Optimal Sup-Norm Rates And Uniform Inference On Nonlinear Functionals Of Nonparametric Iv Regression, Xiaohong Chen, Timothy M. Christensen
Cowles Foundation Discussion Papers
This paper makes several important contributions to the literature about nonparametric instrumental variables (NPIV) estimation and inference on a structural function h0 and its functionals. First, we derive sup-norm convergence rates for computationally simple sieve NPIV (series 2SLS) estimators of h0 and its derivatives. Second, we derive a lower bound that describes the best possible (minimax) sup-norm rates of estimating h0 and its derivatives, and show that the sieve NPIV estimator can attain the minimax rates when h0 is approximated via a spline or wavelet sieve. Our optimal sup-norm rates surprisingly coincide with the optimal root-mean-squared rates for severely ill-posed …
Identification And Estimation In Two-Sided Matching Markets, Nikhil Agarwal, William Diamond
Identification And Estimation In Two-Sided Matching Markets, Nikhil Agarwal, William Diamond
Cowles Foundation Discussion Papers
We study estimation and non-parametric identification of preferences in two-sided matching markets using data from a single market with many agents. We consider a model in which preferences of each side of the market are vertical, utility is non-transferable and the observed matches are pairwise stable. We show that preferences are not identified with data on one-to-one matches but are non-parametrically identified when data from many-to-one matches are observed. The additional empirical content in many-to-one matches is illustrated by comparing two simulated objective functions, one that does and the other that does not use information available in many-to-one matching. We …
Collateral Equilibrium: A Basic Framework, John Geanakoplos, William R. Zame
Collateral Equilibrium: A Basic Framework, John Geanakoplos, William R. Zame
Cowles Foundation Discussion Papers
Much of the lending in modern economies is secured by some form of collateral: residential and commercial mortgages and corporate bonds are familiar examples. This paper builds an extension of general equilibrium theory that incorporates durable goods, collateralized securities and the possibility of default to argue that the reliance on collateral to secure loans and the particular collateral requirements chosen by the social planner or by the market have a profound impact on prices, allocations, market structure and the efficiency of market outcomes. These findings provide insights into housing and mortgage markets, including the sub-prime mortgage market.
Afriat From Maxmin, John Geanakoplos
Afriat From Maxmin, John Geanakoplos
Cowles Foundation Discussion Papers
Afriat’s original method of proof is restored by using the minmax theorem.
Sequential Information Disclosure In Auctions, Dirk Bergemann, Achim Wambach
Sequential Information Disclosure In Auctions, Dirk Bergemann, Achim Wambach
Cowles Foundation Discussion Papers
We consider the design of an optimal auction in which the seller can determine the allocation and the disclosure rule of the mechanism. Thus, in contrast to the standard analysis of a optimal auctions, the seller can explicitly design the disclosure of the information received by each bidder as his private information. We show that the optimal disclosure rule is a sequential disclosure rule, implemented in an ascending price auction. In the optimal disclosure mechanism, each losing bidder learns his true valuation, but the winning bidder only learns that his valuation is sufficiently high to win the auction. We show …
Financial Innovation, Collateral And Investment, Ana Fostel, John Geanakoplos
Financial Innovation, Collateral And Investment, Ana Fostel, John Geanakoplos
Cowles Foundation Discussion Papers
Financial innovations that change how promises are collateralized can affect investment, even in the absence of any change in fundamentals. In C-models, the ability to leverage an asset always generates over-investment compared to Arrow Debreu. The introduction of CDS always leads to under-investment with respect to Arrow Debreu, and in some cases even robustly destroys competitive equilibrium. The need for collateral would seem to cause under-investment. Our analysis illustrates a countervailing force: goods that serve as collateral yield additional services and are therefore over-valued and over-produced. In models without cash flow problems there is never marginal under-investment on collateral.
Sequential Information Disclosure In Auctions, Dirk Bergemann, Achim Wambach
Sequential Information Disclosure In Auctions, Dirk Bergemann, Achim Wambach
Cowles Foundation Discussion Papers
We propose a sequential auction mechanism for a single object in which the seller jointly determines the allocation and the disclosure policy. A sequential disclosure rule is shown to implement an ascending price auction in which each losing bidder learns his true valuation, but the winning bidder’s information is truncated from below. As the auction ends, the winning bidder only has limited information, namely that his valuation is sufficiently high to win the auction. The sequential mechanism implements the allocation of the handicap auction of Esö and Szentes [10] but strengthens the participation constraints of the bidders from interim to …
Competing For Consumer Inattention, Geoffroy De Clippel, Kfir Eliaz, Kareen Rozen
Competing For Consumer Inattention, Geoffroy De Clippel, Kfir Eliaz, Kareen Rozen
Cowles Foundation Discussion Papers
Consumers purchase multiple types of goods and services, but may be able to examine only a limited number of markets for the best price. We propose a simple model which captures these features, conveying some new insights. A firm’s price can deflect or draw attention to its market, and consequently, limited attention introduces a new dimension of competition across markets. We fully characterize the resulting equilibrium, and show that the presence of partially attentive consumers improves consumer welfare as a whole. When consumers are less attentive, they are more likely to miss the best offer in each market; but the …
Nonparametric Analysis Of Random Utility Models: Testing, Yuichi Kitamura, Jörg Stoye
Nonparametric Analysis Of Random Utility Models: Testing, Yuichi Kitamura, Jörg Stoye
Cowles Foundation Discussion Papers
This paper develops new tools for the analysis of Random Utility Models (RUM). The leading application is stochastic revealed preference theory, that is, the modeling of aggregate choice behavior in a population characterized by individual rationality and unobserved heterogeneity. We test the null hypothesis that a repeated cross-section of demand data was generated by such a population, without restricting unobserved heterogeneity in any form whatsoever. Equivalently, we empirically test McFadden and Richter’s (1991) Axiom of Revealed Stochastic Preference (ARSP, to be defined later), using only nonsatiation and the Strong Axiom of Revealed Preference (SARP) as restrictions on individual level behavior. …
Financial Innovation, Collateral And Investment, Ana Fostel, John Geanakoplos
Financial Innovation, Collateral And Investment, Ana Fostel, John Geanakoplos
Cowles Foundation Discussion Papers
We show that financial innovations that change the collateral capacity of assets in the economy can affect investment even in the absence of any shift in utilities, productivity, or asset payoffs. First we show that the ability to leverage an asset by selling non-contingent promises can generate over-investment compared to the Arrow-Debreu level. Second, we show that the introduction of naked CDS can generate under-investment with respect to the Arrow-Debreu level. Finally, we show that the introduction of naked CDS can robustly destroy competitive equilibrium.
Affective Utilities: A Rational Theory Of Optimistic Bias In Asset Markets, Anat Bracha, Donald J. Brown
Affective Utilities: A Rational Theory Of Optimistic Bias In Asset Markets, Anat Bracha, Donald J. Brown
Cowles Foundation Discussion Papers
The equilibrium prices in asset markets, as stated by Keynes (1930): “…will be fixed at the point at which the sales of the bears and the purchases of the bulls are balanced.” We propose a descriptive theory of finance explicating Keynes’ claim that the prices of assets today equilibrate the optimism and pessimism of bulls and bears regarding the payoffs of assets tomorrow. This equilibration of optimistic and pessimistic beliefs of investors is a consequence of investors maximizing affective utilities subject to budget constraints defined by market prices and investor’s income. The set of affective utilities is a new class …
(Ir)Rational Exuberance: Optimism, Ambiguity And Risk, Anat Bracha, Donald J. Brown
(Ir)Rational Exuberance: Optimism, Ambiguity And Risk, Anat Bracha, Donald J. Brown
Cowles Foundation Discussion Papers
The equilibrium prices in asset markets, as stated by Keynes (1930): “…will be fixed at the point at which the sales of the bears and the purchases of the bulls are balanced.” We propose a descriptive theory of finance explicating Keynes’ claim that the prices of assets today equilibrate the optimism and pessimism of bulls and bears regarding the payoffs of assets tomorrow. This equilibration of optimistic and pessimistic beliefs of investors is a consequence of investors maximizing Keynesian utilities subject to budget constraints defined by market prices and investor’s income. The set of Keynesian utilities is a new class …
Adverse Selection And An Individual Mandate: When Theory Meets Practice, Martin B. Hackmann, Jonathan T. Kolstad, Amanda E. Kowalski
Adverse Selection And An Individual Mandate: When Theory Meets Practice, Martin B. Hackmann, Jonathan T. Kolstad, Amanda E. Kowalski
Cowles Foundation Discussion Papers
We develop a model of selection that incorporates a key element of recent health reforms: an individual mandate. We identify a set of key parameters for welfare analysis, allowing us to model the welfare impact of the actual policy as well as to estimate the socially optimal penalty level. Using data from Massachusetts, we estimate the key parameters of the model. We compare health insurance coverage, premiums, and insurer average health claim expenditures between Massachusetts and other states in the periods before and after the passage of Massachusetts health reform. In the individual market for health insurance, we find that …
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We analyze the welfare consequences of a monopolist having additional information about consumers’ tastes, beyond the prior distribution; the additional information can be used to charge different prices to different segments of the market, i.e., carry out “third degree price discrimination.” We show that the segmentation and pricing induced by the additional information can achieve every combination of consumer and producer surplus such that: (i) consumer surplus is non-negative, (ii) producer surplus is at least as high as profits under the uniform monopoly price, and (iii) total surplus does not exceed the efficient gains from trade. As well as characterizing …
Sieve Quasi Likelihood Ratio Inference On Semi/Nonparametric Conditional Moment Models, Xiaohong Chen, Demian Pouzo
Sieve Quasi Likelihood Ratio Inference On Semi/Nonparametric Conditional Moment Models, Xiaohong Chen, Demian Pouzo
Cowles Foundation Discussion Papers
This paper considers inference on functionals of semi/nonparametric conditional moment restrictions with possibly nonsmooth generalized residuals. These models belong to the difficult (nonlinear) ill-posed inverse problems with unknown operators, and include all of the (nonlinear) nonparametric instrumental variables (IV) as special cases. For these models it is generally difficult to verify whether a functional is regular (i.e., root-n estimable) or irregular (i.e., slower than root-n estimable). In this paper we provide computationally simple, unified inference procedures that are asymptotically valid regardless of whether a functional is regular or irregular. We establish the following new results: (1) the asymptotic normality of …
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We analyze the welfare consequences of a monopolist having additional information about consumers’ tastes, beyond the prior distribution; the additional information can be used to charge different prices to different segments of the market, i.e., carry out “third degree price discrimination.” We show that the segmentation and pricing induced by the additional information can achieve every combination of consumer and producer surplus such that: (i) consumer surplus is non-negative, (ii) producer surplus is at least as high as profits under the uniform monopoly price, and (iii) total surplus does not exceed the surplus generated by efficient trade.
Sieve Wald And Qlr Inferences On Semi/Nonparametric Conditional Moment Models, Xiaohong Chen, Demian Pouzo
Sieve Wald And Qlr Inferences On Semi/Nonparametric Conditional Moment Models, Xiaohong Chen, Demian Pouzo
Cowles Foundation Discussion Papers
This paper considers inference on functionals of semi/nonparametric conditional moment restrictions with possibly nonsmooth generalized residuals, which include all of the (nonlinear) nonparametric instrumental variables (IV) as special cases. For these models it is often difficult to verify whether a functional is regular (i.e., root-n estimable) or irregular (i.e., slower than root-n estimable). We provide computationally simple, unified inference procedures that are asymptotically valid regardless of whether a functional is regular or not. We establish the following new useful results: (1) the asymptotic normality of a plug-in penalized sieve minimum distance (PSMD) estimator of a (possibly irregular) functional; (2) the …
Sieve Wald And Qlr Inferences On Semi/Nonparametric Conditional Moment Models, Xiaohong Chen, Demian Pouzo
Sieve Wald And Qlr Inferences On Semi/Nonparametric Conditional Moment Models, Xiaohong Chen, Demian Pouzo
Cowles Foundation Discussion Papers
This paper considers inference on functionals of semi/nonparametric conditional moment restrictions with possibly nonsmooth generalized residuals, which include all of the (nonlinear) nonparametric instrumental variables (IV) as special cases. These models are often ill-posed and hence it is difficult to verify whether a (possibly nonlinear) functional is root- n estimable or not. We provide computationally simple, unified inference procedures that are asymptotically valid regardless of whether a functional is root- n estimable or not. We establish the following new useful results: (1) the asymptotic normality of a plug-in penalized sieve minimum distance (PSMD) estimator of a (possibly nonlinear) functional; (2) …
Likelihood Inference In Some Finite Mixture Models, Xiaohong Chen, Maria Ponomareva, Elie Tamer
Likelihood Inference In Some Finite Mixture Models, Xiaohong Chen, Maria Ponomareva, Elie Tamer
Cowles Foundation Discussion Papers
Parametric mixture models are commonly used in applied work, especially empirical economics, where these models are often employed to learn for example about the proportions of various types in a given population. This paper examines the inference question on the proportions (mixing probability) in a simple mixture model in the presence of nuisance parameters when sample size is large. It is well known that likelihood inference in mixture models is complicated due to 1) lack of point identification, and 2) parameters (for example, mixing probabilities) whose true value may lie on the boundary of the parameter space. These issues cause …
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We analyze the welfare consequences of a monopolist having additional information about consumers’ tastes, beyond the prior distribution; the additional information can be used to charge different prices to different segments of the market, i.e., carry out “third degree price discrimination.” We show that the segmentation and pricing induced by the additional information can achieve every combination of consumer and producer surplus such that: (i) consumer surplus is non-negative, (ii) producer surplus is at least as high as profits under the uniform monopoly price, and (iii) total surplus does not exceed the surplus generated by efficient trade.
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We analyze the welfare consequences of a monopolist having additional information about consumers’ tastes, beyond the prior distribution; the additional information can be used to charge different prices to different segments of the market, i.e., carry out “third degree price discrimination.” We show that the segmentation and pricing induced by the additional information can achieve every combination of consumer and producer surplus such that: (i) consumer surplus is non-negative, (ii) producer surplus is at least as high as profits under the uniform monopoly price, and (iii) total surplus does not exceed the efficient gains from trade. As well as characterizing …
Reflections On Finance And The Good Society, Robert J. Shiller
Reflections On Finance And The Good Society, Robert J. Shiller
Cowles Foundation Discussion Papers
After the financial crisis that began in 2007 many have expressed renewed doubts about the basic goodness of the financial sectors, doubts related to deeply-held moral principles and traditions of larger society. We need to reconcile these doubts with financial practice. We must acknowledge the important principle of reciprocity. We must understand that there are natural human tendencies towards aggression and hoarding, which no financial institutions and codes of ethics can completely eliminate. We must appreciate the important role of professional organizations in moderating these tendencies. When these principles are made part of financial education we can expect better public …
Biology And The Arguments Of Utility, Luis Rayo, Arthur Robson
Biology And The Arguments Of Utility, Luis Rayo, Arthur Robson
Cowles Foundation Discussion Papers
Why did evolution not give us a utility function that is offspring alone? Why do we care intrinsically about other outcomes, such as food, and what determines the intensity of such preferences? A common view is that such other outcomes enhance fitness and the intensity of our preference for a given outcome is proportional to its contribution to fitness. We argue that this view is incomplete. Specifically, we show that in the presence of informational asymmetries, the evolutionarily most desirable preference for a given outcome is determined not only by the significance of the outcome, but by the Agent’s degree …