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Articles 91 - 120 of 2768
Full-Text Articles in Social and Behavioral Sciences
Gerrymandering And The Limits Of Representative Democracy, Kai Hao Yang, Alexander K. Zentefis
Gerrymandering And The Limits Of Representative Democracy, Kai Hao Yang, Alexander K. Zentefis
Cowles Foundation Discussion Papers
We assess the capacity of gerrymandering to undermine the will of the people in a representative democracy. Citizens have political positions represented on a spectrum, and electoral maps separate people into districts. We show that unrestrained gerrymandering can severely distort the composition of a legislature, potentially leading half the population to lose all representation of their views. This means that, under majority rule in the congress, gerrymandering enables politicians to enact any legislation of their choice as long as it falls within the interquartile range of the political spectrum. Just as worrisome, gerrymandering can rig any legislation to pass instead …
Consumer Bankruptcy, Mortgage Default And Labor Supply, Wenli Li, Costas Meghir, Florian Oswald
Consumer Bankruptcy, Mortgage Default And Labor Supply, Wenli Li, Costas Meghir, Florian Oswald
Cowles Foundation Discussion Papers
We specify and estimate a lifecycle model of consumption, housing demand and labor supply in an environment where individuals may file for bankruptcy or default on their mortgage. Uncertainty in the model is driven by house price shocks, education specific productivity shocks, and catastrophic consumption events, while bankruptcy is governed by the basic institutional framework in the US as implied by Chapter 7 and Chapter 13. The model is estimated using micro data on credit reports and mortgages combined with data from the American Community Survey. We use the model to understand the relative importance of the two chapters (7 …
Framing Human Action In Physics: Valid Reconstruction, Invalid Reduction, Shabnam Mousavi, Shyam Sunder
Framing Human Action In Physics: Valid Reconstruction, Invalid Reduction, Shabnam Mousavi, Shyam Sunder
Cowles Foundation Discussion Papers
We propose framing human action in physics before reaching to biology and social sciences, rearranging the order of their usual deployment. As an example, consider efforts to model altruism that start in a frame of psychological or social attributes such as reciprocity, empathy, and identity. Evolutionary roots might also be used by appeal to survival of the species from biology. Only then the modeler abstracts to work on notations, and to establish relationships using mathematical apparatus from physics. This top-down deployment of principles from various scientific disciplines has generated a body of coherent models, partially generalizable theories, and disagreements. In …
Distributions Of Posterior Quantiles And Economic Applications, Kai Hao Yang, Alexander K. Zentefis
Distributions Of Posterior Quantiles And Economic Applications, Kai Hao Yang, Alexander K. Zentefis
Cowles Foundation Discussion Papers
We characterize the distributions of posterior quantiles under a given prior. Unlike the distributions of posterior means, which are known to be mean-preserving contractions of the prior, the distributions of posterior quantiles coincide with a first-order stochastic dominance interval bounded by an upper and a lower truncation of the prior. We apply this characterization to several environments, ranging across political economy, Bayesian persuasion, industrial organization, econometrics, finance, and accounting.
Is Selling Complete Information (Approximately) Optimal?, Dirk Bergemann, Yang Cai, Grigoris Velegkas, Mingfei Zhao
Is Selling Complete Information (Approximately) Optimal?, Dirk Bergemann, Yang Cai, Grigoris Velegkas, Mingfei Zhao
Cowles Foundation Discussion Papers
We study the problem of selling information to a data-buyer who faces a decision problem under uncertainty. We consider the classic Bayesian decision-theoretic model pioneered by Blackwell [Bla51, Bla53]. Initially, the data buyer has only partial information about the payoff-relevant state of the world. A data seller offers additional information about the state of the world. The information is revealed through signaling schemes, also referred to as experiments. In the single-agent setting, any mechanism can be represented as a menu of experiments. A recent paper by Bergemann et al. [BBS18] present a complete characterization of the revenue-optimal mechanism in a …
Optimal Inter-Release Time Between Sequentially Released Products, Jackie Luan, K. Sudhir
Optimal Inter-Release Time Between Sequentially Released Products, Jackie Luan, K. Sudhir
Cowles Foundation Discussion Papers
Marketers routinely use timing as a segmentation device through sequential product releases. While there has been much theoretical research on the optimal introduction strategy of sequential releases, there is little empirical research on this problem. This paper develops an econometric model to empirically solve the inter-release timing problem: it involves (1) developing and estimating a structural model of consumers’ choice for sequentially released products and (2) using the estimates of the structural model to solve for the optimal inter-release time. The empirical application focuses on the movie industry, where we specifically address the issue of the inter-release time between a …
A Panel Clustering Approach To Analyzing Bubble Behavior, Yanbo Liu, Peter C. B. Phillips, Jun Yu
A Panel Clustering Approach To Analyzing Bubble Behavior, Yanbo Liu, Peter C. B. Phillips, Jun Yu
Cowles Foundation Discussion Papers
This study provides new mechanisms for identifying and estimating explosive bubbles in mixed-root panel autoregressions with a latent group structure. A post-clustering approach is employed that combines a recursive k-means clustering algorithm with panel-data test statistics for testing the presence of explosive roots in time series trajectories. Uniform consistency of the k-means clustering algorithm is established, showing that the post-clustering estimate is asymptotically equivalent to the oracle counterpart that uses the true group identities. Based on the estimated group membership, right-tailed self-normalized t-tests and coefficient-based J-tests, each with pivotal limit distributions, are introduced to detect the explosive roots. The usual …
The Value Of Arbitrage, Eduardo Dávila, Daniel Graves, Cecilia Parlatore
The Value Of Arbitrage, Eduardo Dávila, Daniel Graves, Cecilia Parlatore
Cowles Foundation Discussion Papers
This paper studies the social value of closing price differentials in financial markets. We show that arbitrage gaps (price differentials between markets) exactly correspond to the marginal social value of executing an arbitrage trade. We further show that arbitrage gaps and measures of price impact are sufficient to compute the total social value from closing an arbitrage gap. Theoretically, we show that, for a given arbitrage gap, the total social value of arbitrage is higher in more liquid markets. We apply our framework to compute the welfare gains from closing arbitrage gaps in the context of covered interest parity violations …
Consumer Guilt And Sustainable Choice: Environmental Impact Of Durable Goods Innovation, K. Sudhir, Ramesh Shankar, Yuan Jin
Consumer Guilt And Sustainable Choice: Environmental Impact Of Durable Goods Innovation, K. Sudhir, Ramesh Shankar, Yuan Jin
Cowles Foundation Discussion Papers
The paper develops a modeling framework to study how sustainability interventions impact consumer adoption of durable goods innovation, firm profit and environmental outcomes in equilibrium. Our two period model with forward looking consumers and a monopoly firm introducing an innovation in the second period accommodates three key features: (1) it builds on the psychology literature linking reactive and anticipatory guilt to consumers’ environmental sensitivity on initial purchase and upgrade decisions; (2) it disentangles environmental harm over the product life into that arising from product use and dumping at replacement; and (3) it clarifies how a taxonomy of innovations (function, fashion …
Market-Minded Informational Intermediary And Unintended Welfare Loss, Wenji Xu, Kai Hao Yang
Market-Minded Informational Intermediary And Unintended Welfare Loss, Wenji Xu, Kai Hao Yang
Cowles Foundation Discussion Papers
This paper examines the welfare effects of informational intermediation. A (short-lived) seller sets the price of a product that is sold through a (long-lived) informational intermediary. The intermediary can disclose information about the product to consumers, earns a fixed percentage of the sales revenue in each period, and has concerns about its prominence---the market size it faces in the future, which in turn is increasing in past consumer surplus. We characterize the Markov perfect equilibria and the set of subgame perfect equilibrium payoffs of this game and show that when the market feedback (i.e., how much past consumer surplus affects …
Informational Intermediation, Market Feedback, And Welfare Losses, Wenji Xu, Kai Hao Yang
Informational Intermediation, Market Feedback, And Welfare Losses, Wenji Xu, Kai Hao Yang
Cowles Foundation Discussion Papers
This paper examines the welfare implications of third-party informational intermediation. A seller sets the price of a product that is sold through an informational intermediary. The intermediary can disclose information about the product to consumers and earns a fied percentage of sales revenue in each period. The intermediary's market base grows at a rate that increases with past consumer surplus. We characterize the stationary equilibria and the set of subgame perfect equilibrium payoffs. When market feedback (i.e., the extent to which past consumer surplus affects future market bases) increases, welfare may decrease in the Pareto sense.
Efficient Estimation Of Average Derivatives In Npiv Models: Simulation Comparisons Of Neural Network Estimators, Jiafeng Chen, Xiaohong Chen, Elie Tamer
Efficient Estimation Of Average Derivatives In Npiv Models: Simulation Comparisons Of Neural Network Estimators, Jiafeng Chen, Xiaohong Chen, Elie Tamer
Cowles Foundation Discussion Papers
Artificial Neural Networks (ANNs) can be viewed as \emph{nonlinear sieves} that can approximate complex functions of high dimensional variables more effectively than linear sieves. We investigate the computational performance of various ANNs in nonparametric instrumental variables (NPIV) models of moderately high dimensional covariates that are relevant to empirical economics. We present two efficient procedures for estimation and inference on a weighted average derivative (WAD): an orthogonalized plug-in with optimally-weighted sieve minimum distance (OP-OSMD) procedure and a sieve efficient score (ES) procedure. Both estimators for WAD use ANN sieves to approximate the unknown NPIV function and are root-n asymptotically normal …
A Game-Theoretic Analysis Of Childhood Vaccination Behavior: Nash Versus Kant, Philippe De Donder, Humberto Llavador, Stefan Penczynski, John E. Roemer, Roberto Vélez
A Game-Theoretic Analysis Of Childhood Vaccination Behavior: Nash Versus Kant, Philippe De Donder, Humberto Llavador, Stefan Penczynski, John E. Roemer, Roberto Vélez
Cowles Foundation Discussion Papers
Whether or not to vaccinate one’s child is a decision that a parent may approach in several ways. The vaccination game, in which parents must choose whether to vaccinate a child against a disease, is one with positive externalities (herd immunity). In some societies, not vaccinating is an increasingly prevalent behavior, due to deleterious side effects that parents believe may accompany vaccination. The standard game-theoretic approach assumes that parents make decisions according to the Nash behavioral protocol, which is individualistic and non-cooperative. Because of the positive externality that each child’s vaccination generates for others, the Nash equilibrium suffers from a …
The Measuring Of Assortativeness In Marriage, Pierre-André Chiappori, Monica Costa-Dias, Costas Meghir
The Measuring Of Assortativeness In Marriage, Pierre-André Chiappori, Monica Costa-Dias, Costas Meghir
Cowles Foundation Discussion Papers
Measuring the extent to which assortative matching
differs between two economies is challenging when the marginal distributions of the characteristic along which sorting takes place (e.g. education) also changes for either or both sexes. Drawing from the statistics literature we define simple conditions that any index has to satisfy to provide a measure of change in sorting that is not distorted by changes in the marginal distributions of the characteristic. While our characterisation of indices of assortativeness is not complete, and hence cannot exclude the possibility of multiple indices providing contradictory results, in an empirical application to US data we …
A Structural Model Of Organizational Buying For B2b Markets: Innovation Adoption With Share Of Wallet Contracts, Navid Mojir, K. Sudhir
A Structural Model Of Organizational Buying For B2b Markets: Innovation Adoption With Share Of Wallet Contracts, Navid Mojir, K. Sudhir
Cowles Foundation Discussion Papers
The paper develops the first structural model of organizational buying to study innovation diffusion in a B2B market. Our model is particularly applicable for routinized exchange relationships, whereby centralized buyers periodically evaluate and choose contracts, then downstream users or- der items on contracted terms. The model captures different utility tradeoffs for users and buyers while accounting for how buyer and user choices interact to impact user adoption/usage and buyer contracting. Further, the paper considers the dynamics induced by share of wallet (SOW) pricing contracts, commonly used in B2B markets to reward customer loyalty with discounts for buying more than a …
Endogenous Spatial Production Networks: Quantitative Implications For Trade & Productivity, Piyush Panigrahi
Endogenous Spatial Production Networks: Quantitative Implications For Trade & Productivity, Piyush Panigrahi
Cowles Foundation Discussion Papers
Larger Indian firms selling inputs to other firms tend to have more customers, tend to be used more intensively by their customers, and tend to have larger customers. Motivated by these regularities, I propose a novel empirical model of trade featuring endogenous formation of input-output linkages between spatially distant firms. The empirical model consists of (a) a theoretical framework that accommodates first order features of firm-to-firm network data, (b) a maximum likelihood framework for structural estimation that is uninhibited by the scale of data, and (c) a procedure for counterfactual analysis that speaks to the effects of micro- and macro- …
Incorporating Search And Sales Information In Demand Estimation, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Incorporating Search And Sales Information In Demand Estimation, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Cowles Foundation Discussion Papers
We propose an approach to modeling and estimating discrete choice demand that allows for a large number of zero sale observations, rich unobserved heterogeneity, and endogenous prices. We do so by modeling small market sizes through Poisson arrivals. Each of these arriving consumers then solves a standard discrete choice problem. We present a Bayesian IV estimation approach that addresses sampling error in product shares and scales well to rich data environments. The data requirements are traditional market-level data and measures of consumer search intensity. After presenting simulation studies, we consider an empirical application of air travel demand where product-level sales …
Organizational Structure And Pricing: Evidence From A Large U.S. Airline, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Organizational Structure And Pricing: Evidence From A Large U.S. Airline, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Cowles Foundation Discussion Papers
We study how organizational boundaries affect pricing decisions using comprehensive data from a large U.S. airline. We document that the firm’s advanced pricing algorithm, utilizing inputs from different organizational teams, is subject to multiple biases. To quantify the impacts of these biases, we estimate a structural demand model using sales and search data. We recover the demand curves the firm believes it faces using forecasting data. In counterfactuals, we show that correcting biases introduced by organizational teams individually have little impact on market outcomes, but coordinating organizational outcomes leads to higher prices/revenues and increased deadweight loss in the markets studied.
Optimal Unilateral Carbon Policy, Samuel Kortum, David A. Weisbach
Optimal Unilateral Carbon Policy, Samuel Kortum, David A. Weisbach
Cowles Foundation Discussion Papers
We derive the optimal unilateral policy in a general equilibrium model of trade and climate change where one region of the world imposes a climate policy and the rest of the world does not. A climate policy in one region shifts activities—extraction, production, and consumption—in the other region. The optimal policy trades off the costs of these distortions. The optimal policy can be implemented through: (i) a nominal tax on extraction at a rate equal to the global marginal harm from emissions, (ii) a tax on imports of energy and goods, and a rebate of taxes on exports of energy …
Coresets For Regressions With Panel Data, Lingxiao Huang, K. Sudhir, Nisheeth Vishnoi
Coresets For Regressions With Panel Data, Lingxiao Huang, K. Sudhir, Nisheeth Vishnoi
Cowles Foundation Discussion Papers
This paper introduces the problem of coresets for regression problems to panel data settings. We first define coresets for several variants of regression problems with panel data and then present efficient algorithms to construct coresets of size that depend polynomially on 1/ε (where ε is the error parameter) and the number of regression parameters – independent of the number of individuals in the panel data or the time units each individual is observed for. Our approach is based on the Feldman-Langberg framework in which a key step is to upper bound the “total sensitivity” that is roughly the sum of …
Organizational Structure And Pricing: Evidence From A Large U.S. Airline, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Organizational Structure And Pricing: Evidence From A Large U.S. Airline, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Cowles Foundation Discussion Papers
Although typically modeled as a centralized firm decision, pricing often involves multiple organizational teams that have decision rights over specific pricing inputs. We study team input decisions using comprehensive data from a large U.S. airline. We document that pricing at a sophisticated firm is subject to miscoordination across teams, uses persistently biased forecasts, and does not account for cross-price elasticities. With structural demand estimates derived from sales and search data, we find that addressing one team’s biases in isolation has little impact on market outcomes. We show that teams do not optimally account for biases introduced by other teams. We …
Organizational Structure And Pricing: Evidence From A Large U.S. Airline, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Organizational Structure And Pricing: Evidence From A Large U.S. Airline, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Cowles Foundation Discussion Papers
Firms often involve multiple departments for critical decisions that may result in coordination failures. Using data from a large U.S. airline, we document the presence of important pricing biases that differ significantly from dynamically optimal profit maximization. However, these biases can be rationalized as a “second-best” after accounting for department decision rights. We show that assuming prices are generated through profit maximization biases demand estimates and that second-best prices can persist, even under improvements to pricing algorithm inputs. Our results suggest caution in abstracting from organizational structure and drawing inferences from firms’ pricing decisions alone.
Herding With Heterogeneous Ability: An Application To Organ Transplantation, Stephanie De Mel, Kaivan Munshi, Soenje Reiche, Hamid Sabourian
Herding With Heterogeneous Ability: An Application To Organ Transplantation, Stephanie De Mel, Kaivan Munshi, Soenje Reiche, Hamid Sabourian
Cowles Foundation Discussion Papers
There are many economic environments in which an object is offered sequentially to prospective buyers. It is often observed that once the object for sale is turned down by one or more agents, those that follow do the same. One explanation that has been proposed for this phenomenon is that agents making choices further down the line rationally ignore their own assessment of the object’s quality and herd behind their predecessors. Our research adds a new dimension to the canonical herding model by allowing agents to di er in their ability to assess the quality of the offered object. We …
Estimation And Inference With Near Unit Roots, Peter C. B. Phillips
Estimation And Inference With Near Unit Roots, Peter C. B. Phillips
Cowles Foundation Discussion Papers
New methods are developed for identifying, estimating and performing inference with nonstationary time series that have autoregressive roots near unity. The approach subsumes unit root (UR), local unit root (LUR), mildly integrated (MI) and mildly explosive (ME) specifications in the new model formulation. It is shown how a new parameterization involving a localizing rate sequence that characterizes departures from unity can be consistently estimated in all cases. Simple pivotal limit distributions that enable valid inference about the form and degree of nonstationarity apply for MI and ME specifications and new limit theory holds in UR and LUR cases. Normalizing and …
Discrete Fourier Transforms Of Fractional Processes With Econometric Applications, Peter C. B. Phillips
Discrete Fourier Transforms Of Fractional Processes With Econometric Applications, Peter C. B. Phillips
Cowles Foundation Discussion Papers
The discrete Fourier transform (dft) of a fractional process is studied. An exact representation of the dft is given in terms of the component data, leading to the frequency domain form of the model for a fractional process. This representation is particularly useful in analyzing the asymptotic behavior of the dft and periodogram in the nonstationary case when the memory parameter d ≥ 1 2: Various asymptotic approximations are established including some new hypergeometric function representations that are of independent interest. It is shown that smoothed periodogram spectral estimates remain consistent for frequencies away from the origin in the nonstationary …
Limit Theory For Locally Flat Functional Coefficient Regression, Peter C. B. Phillips, Ying Wang
Limit Theory For Locally Flat Functional Coefficient Regression, Peter C. B. Phillips, Ying Wang
Cowles Foundation Discussion Papers
Functional coefficient (FC) regressions allow for systematic flexibility in the responsiveness of a dependent variable to movements in the regressors, making them attractive in applications where marginal effects may depend on covariates. Such models are commonly estimated by local kernel regression methods. This paper explores situations where responsiveness to covariates is locally flat or fixed. In such cases, the limit theory of FC kernel regression is shown to depend intimately on functional shape in ways that affect rates of convergence, optimal bandwidth selection, estimation, and inference. The paper develops new asymptotics that take account of shape characteristics of the function …
On Multicointegration, Peter C. B. Phillips, Igor Kheifets
On Multicointegration, Peter C. B. Phillips, Igor Kheifets
Cowles Foundation Discussion Papers
A semiparametric triangular systems approach shows how multicointegration can occur naturally in an I(1) cointegrated regression model. The framework reveals the source of multicointegration as singularity of the long run error covariance matrix in an I(1) system, a feature noted but little explored in earlier work. Under such singularity, cointegrated I(1) systems embody a multicointegrated structure and may be analyzed and estimated without appealing to the associated I(2) system but with consequential asymptotic properties that can introduce asymptotic bias into conventional methods of cointegrating regression. The present paper shows how estimation of such systems may be accomplished under multicointegration without …
Robust Inference With Stochastic Local Unit Root Regressors In Predictive Regressions, Yanbo Liu, Peter C. B. Phillips
Robust Inference With Stochastic Local Unit Root Regressors In Predictive Regressions, Yanbo Liu, Peter C. B. Phillips
Cowles Foundation Discussion Papers
This paper explores predictive regression models with stochastic unit root (STUR) components and robust inference procedures that encompass a wide class of persistent and time-varying stochastically nonstationary regressors. The paper extends the mechanism of endogenously generated instrumentation known as IVX, showing that these methods remain valid for short and long-horizon predictive regressions in which the predictors have STUR and local STUR (LSTUR) generating mechanisms. Both mean regression and quantile regression methods are considered. The asymptotic distributions of the IVX estimators are new and require some new methods in their derivation. The distributions are compared to previous results and, as in …
Lookalike Targeting On Others' Journeys: Brand Versus Performance Marketing, K. Sudhir, Seung Yoon Lee, Subroto Roy
Lookalike Targeting On Others' Journeys: Brand Versus Performance Marketing, K. Sudhir, Seung Yoon Lee, Subroto Roy
Cowles Foundation Discussion Papers
Lookalike Targeting is a widely used model-based ad targeting approach that uses a seed database of individuals to identify matching “lookalikes” for targeted customer acquisition. An advertiser has to make two key choices: (1) who to seed on and (2) seed-match rank range. First, we assess if and how seeding by others’ journey stages impact clickthrough (upstream behavior desirable for brand marketing) and donation (downstream behavior desirable in performance marketing). Overall, we find that lookalike targeting using other’s journeys can be effective-third parties can indeed identify factors unobserved to the advertiser merely from others’ journey stage to improve targeting. Further, …
Foundations Of Demand Estimation, Steven T. Berry, Philip A. Haile
Foundations Of Demand Estimation, Steven T. Berry, Philip A. Haile
Cowles Foundation Discussion Papers
Demand elasticities and other features of demand are critical determinants of the answers to most positive and normative questions about market power or the functioning of markets in practice. As a result, reliable demand estimation is an essential input to many types of research in Industrial Organization and other fields of economics. This chapter presents a discussion of some foundational issues in demand estimation. We focus on the distinctive challenges of demand estimation and strategies one can use to overcome them. We cover core models, alternative data settings, common estimation approaches, the role and choice of instruments, and nonparametric identification.