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Articles 901 - 930 of 2768
Full-Text Articles in Social and Behavioral Sciences
Dynamic Auctions: A Survey, Dirk Bergemann, Maher Said
Dynamic Auctions: A Survey, Dirk Bergemann, Maher Said
Cowles Foundation Discussion Papers
We survey the recent literature on designing auctions and mechanisms for dynamic settings. Two settings are considered: those with a dynamic population of agents whose private information remains fixed throughout time; and those with a fixed population of agents whose private information changes across time. Within each of these settings, we discuss both efficient (welfare-maximizing) and optimal (revenue-maximizing) mechanisms.
Affective Decision-Making: A Theory Of Optimism-Bias, Anat Bracha, Donald J. Brown
Affective Decision-Making: A Theory Of Optimism-Bias, Anat Bracha, Donald J. Brown
Cowles Foundation Discussion Papers
Optimism-bias is inconsistent with the independence of decision weights and payoffs found in models of choice under risk, such as expected utility theory and prospect theory. Hence, to explain the evidence suggesting that agents are optimistically biased, we propose an alternative model of risky choice, affective decision-making, where decision weights — which we label affective or perceived risk — are endogenized. Affective decision making (ADM) is a strategic model of choice under risk, where we posit two cognitive processes: the “rational” and the “emotional” processes. The two processes interact in a simultaneous-move intrapersonal potential game, and observed choice is the …
Estimated Macroeconomic Effects Of The U.S. Stimulus Bill, Ray C. Fair
Estimated Macroeconomic Effects Of The U.S. Stimulus Bill, Ray C. Fair
Cowles Foundation Discussion Papers
This paper uses a multicountry macroeconometric model to estimate the macroeconomic effects of the U.S. stimulus bill passed in February 2009. The analysis has the advantage of taking into account many endogenous effects. Real U.S. output is estimated to be $554 billion larger when summed over the 12-year period 2009:1–2020:4 (0.29 percent of the total sum of output). The average number of jobs is 509 thousand larger (0.37 percent). There is some redistribution of output and employment away from 2012–2015. At the end of 2020 the federal government debt is larger by $637 billion in real terms (the debt/GDP ratio …
Dynamic Auctions: A Survey, Dirk Bergemann, Maher Said
Dynamic Auctions: A Survey, Dirk Bergemann, Maher Said
Cowles Foundation Discussion Papers
We survey the recent literature on designing auctions and mechanisms for dynamic settings. Two settings are considered: those with a dynamic population of agents or buyers whose private information remains fixed throughout time; and those with a fixed population of agents or buyers whose private information changes across time. Within each of these settings, we discuss both efficient (welfare-maximizing) and optimal (revenue-maximizing) mechanisms.
Targeting In Advertising Markets: Implications For Offline Vs. Online Media, Dirk Bergemann, Alessandro Bonatti
Targeting In Advertising Markets: Implications For Offline Vs. Online Media, Dirk Bergemann, Alessandro Bonatti
Cowles Foundation Discussion Papers
We develop a model with many advertisers (products) and many advertising markets (media). Each advertiser sells to a different segment of consumers, and each medium has a different ability to target advertising messages. We characterize the competitive equilibrium in the media markets and evaluate the implications of targeting in advertising markets. An increase in the targeting ability leads to an increase in the total number of purchases (matches), and hence in the social value of advertising. Yet, an improved targeting ability also increases the concentration of firms advertising in each market. Surprisingly, we then find that the equilibrium price of …
The Role Of Commitment In Bilateral Trade, Dino Gerardi, Johannes Hörner, Lucas Maestri
The Role Of Commitment In Bilateral Trade, Dino Gerardi, Johannes Hörner, Lucas Maestri
Cowles Foundation Discussion Papers
We examine the buyer-seller problem under different levels of commitment. The seller is informed of the quality of the good, which affects both his cost and the buyer’s valuation, but the buyer is not. We characterize the allocations that can be achieved through mechanisms in which, unlike with full commitment, the buyer has the option to “walk away” after observing a given offer. We further characterize the equilibrium payoffs that can be achieved in the bargaining game in which the seller makes all the offers, as the discount factor goes to one. This allows us to identify how different levels …
Targeting In Advertising Markets: Implications For Offline Vs. Online Media, Dirk Bergemann, Alessandro Bonatti
Targeting In Advertising Markets: Implications For Offline Vs. Online Media, Dirk Bergemann, Alessandro Bonatti
Cowles Foundation Discussion Papers
We develop a model with many heterogeneous advertisers (products) and advertising markets (media). Each advertiser has a different consumer segment for its product, and each medium has a different ability to target advertisement messages. We characterize the competitive equilibrium in the media markets and investigate the role of targeting for the price and allocation of advertisements across media markets. An increase in the targeting ability leads to an increase in the total number of purchases (matches), and hence in the social value of advertisements. Yet, an improved targeting ability also increases the concentration of advertising firms in each market. Surprisingly, …
Estimated Macroeconomic Effects Of A Chinese Yuan Appreciation, Ray C. Fair
Estimated Macroeconomic Effects Of A Chinese Yuan Appreciation, Ray C. Fair
Cowles Foundation Discussion Papers
This paper uses a multicountry macroeconometric model to estimate the macroeconomic effects of a Chinese yuan appreciation. The estimated effects on U.S. output and employment are modest. Positive effects on U.S. output from a decrease in imports from China are offset by negative effects on U.S. output from increased inflation and from a decrease in U.S. exports to China because of a Chinese contraction.
Introduction To Judgment Aggregation, Christian List, Ben Polak
Introduction To Judgment Aggregation, Christian List, Ben Polak
Cowles Foundation Discussion Papers
This introduces the symposium on judgment aggregation. The theory of judgment aggregation asks how several individuals’ judgments on some logically connected propositions can be aggregated into consistent collective judgments. The aim of this introduction is to show how ideas from the familiar theory of preference aggregation can be extended to this more general case. We first translate a proof of Arrow’s impossibility theorem into the new setting, so as to motivate some of the central concepts and conditions leading to analogous impossibilities, as discussed in the symposium. We then consider each of four possible escape-routes explored in the symposium.
Stochastic Search Equilibrium, Giuseppe Moscarini, Fabien Postel-Vinay
Stochastic Search Equilibrium, Giuseppe Moscarini, Fabien Postel-Vinay
Cowles Foundation Discussion Papers
We analyze a stochastic equilibrium contract-posting model. Firms post employment contracts, wages contingent on all payoff-relevant states. Aggregate productivity is subject to persistent shocks. Both employed and unemployed workers search randomly for these contracts, and are free to quit at any time. An equilibrium of this contract-posting game is Rank-Preserving [RP] if larger firms offer a larger value to their workers in all states of the world. We show that every equilibrium is RP, and equilibrium is unique, if firms differ either only in their initial size, or also in their fixed idiosyncratic productivity but more productive firms are initially …
Leverage Causes Fat Tails And Clustered Volatility, Stefan Thurner, J. Doyne Farmer, John Geanakoplos
Leverage Causes Fat Tails And Clustered Volatility, Stefan Thurner, J. Doyne Farmer, John Geanakoplos
Cowles Foundation Discussion Papers
We build a simple model of leveraged asset purchases with margin calls. Investment funds use what is perhaps the most basic financial strategy, called “value investing,” i.e. systematically attempting to buy underpriced assets. When funds do not borrow, the price fluctuations of the asset are normally distributed and uncorrelated across time. All this changes when the funds are allowed to leverage, i. e. borrow from a bank, to purchase more assets than their wealth would otherwise permit. During good times competition drives investors to funds that use more leverage, because they have higher profits. As leverage increases price fluctuations become …
Leverage Causes Fat Tails And Clustered Volatility, Stefan Thurner, J. Doyne Farmer, John Geanakoplos
Leverage Causes Fat Tails And Clustered Volatility, Stefan Thurner, J. Doyne Farmer, John Geanakoplos
Cowles Foundation Discussion Papers
We build a simple model of leveraged asset purchases with margin calls. Investment funds use what is perhaps the most basic financial strategy, called “value investing,” i.e., systematically attempting to buy underpriced assets. When funds do not borrow, the price fluctuations of the asset are approximately normally distributed and uncorrelated across time. This changes when the funds are allowed to leverage, i.e., borrow from a bank, which allows them to purchase more assets than their wealth would otherwise permit. During good times funds that use more leverage have higher profits, increasing their wealth and making them dominant in the market. …
Pricing In Matching Markets, George J. Mailath, Andrew Postlewaite, Larry Samuelson
Pricing In Matching Markets, George J. Mailath, Andrew Postlewaite, Larry Samuelson
Cowles Foundation Discussion Papers
Different markets are cleared by different types of prices — a universal price for all buyers and sellers in some markets, seller-specific prices that are uniform across buyers in others, and personalized prices tailored to both the buyer and the seller in yet others. We introduce the notion of premuneration values — the values in the absence of any muneration (payments) — created by the buyer-seller match. We characterize the premuneration values under which uniform-price and personalized-price equilibria agree. In this case, we have efficient allocations, including pre-match investment decisions, without the costs of personalized pricing. We then examine the …
Power Maximization And Size Control In Heteroskedasticity And Autocorrelation Robust Tests With Exponentiated Kernels, Yixiao Sun, Peter C.B. Phillips, Sainan Jin
Power Maximization And Size Control In Heteroskedasticity And Autocorrelation Robust Tests With Exponentiated Kernels, Yixiao Sun, Peter C.B. Phillips, Sainan Jin
Cowles Foundation Discussion Papers
Using the power kernels of Phillips, Sun and Jin (2006, 2007), we examine the large sample asymptotic properties of the t -test for different choices of power parameter (τ). We show that the nonstandard fixed-τ limit distributions of the t -statistic provide more accurate approximations to the finite sample distributions than the conventional large-τ limit distribution. We prove that the second-order corrected critical value based on an asymptotic expansion of the nonstandard limit distribution is also second-order correct under the large-τ asymptotics. As a further contribution, we propose a new practical procedure for selecting the test-optimal power parameter that addresses …
Identification In Differentiated Products Markets Using Market Level Data, Steven T. Berry, Philip A. Haile
Identification In Differentiated Products Markets Using Market Level Data, Steven T. Berry, Philip A. Haile
Cowles Foundation Discussion Papers
We present new identification results for nonparametric models of differentiated products markets, using only market level observables. We specify a nonparametric random utility discrete choice model of demand allowing rich preference heterogeneity, product/market unobservables, and endogenous prices. Our supply model posits nonparametric cost functions, allows latent costs shocks, and nests a range of standard oligopoly models. We consider identification of demand, identification of changes in aggregate consumer welfare, identification of marginal costs, identification of firms’ marginal cost functions, and discrimination between alternative models of firm conduct. We explore two complementary approaches. The first demonstrates identification under the same nonparametric instrumental …
Two New Zealand Pioneer Econometricians, Peter C.B. Phillips
Two New Zealand Pioneer Econometricians, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Two distinguished New Zealanders pioneered some of the foundations of modern econometrics. Alec Aitken, one of the most famous and well-documented mental arithmeticians of all time, contributed the matrix formulation and projection geometry of linear regression, generalized least squares (GLS) estimation, algorithms for Hodrick Prescott (HP) style data smoothing (six decades before their use in economics), and statistical estimation theory leading to the Cramér Rao bound. Rex Bergstrom constructed and estimated by limited information maximum likelihood (LIML) the largest empirical structural model in the early 1950s, opened up the field of exact distribution theory, developed cyclical growth models in economic …
Identification In Differentiated Products Markets Using Market Level Data, Steven T. Berry, Philip A. Haile
Identification In Differentiated Products Markets Using Market Level Data, Steven T. Berry, Philip A. Haile
Cowles Foundation Discussion Papers
We consider nonparametric identification in models of differentiated products markets, using only market level observables. On the demand side we consider a nonparametric random utility model nesting random coefficients discrete choice models widely used in applied work. We allow for product/market-specific unobservables, endogenous product characteristics (e.g., prices), and high-dimensional taste shocks with arbitrary correlation and heteroskedasticity. On the supply side we specify marginal costs nonparametrically, allow for unobserved firm heterogeneity, and nest a variety of equilibrium oligopoly models. We pursue two approaches to identification. One relies on instrumental variables conditions used previously to demonstrate identification in a nonparametric regression framework. …
Uniform Asymptotic Normality In Stationary And Unit Root Autoregression, Chirok Han, Peter C.B. Phillips, Donggyu Sul
Uniform Asymptotic Normality In Stationary And Unit Root Autoregression, Chirok Han, Peter C.B. Phillips, Donggyu Sul
Cowles Foundation Discussion Papers
While differencing transformations can eliminate nonstationarity, they typically reduce signal strength and correspondingly reduce rates of convergence in unit root autoregressions. The present paper shows that aggregating moment conditions that are formulated in differences provides an orderly mechanism for preserving information and signal strength in autoregressions with some very desirable properties. In first order autoregression, a partially aggregated estimator based on moment conditions in differences is shown to have a limiting normal distribution which holds uniformly in the autoregressive coefficient rho including stationary and unit root cases. The rate of convergence is root of n when |τ| < 1 and the limit distribution is the same as the Gaussian maximum likelihood estimator (MLE), but when τ = 1 the rate of convergence to the normal distribution is within a slowly varying factor of n . A fully aggregated estimator is shown to have the same limit behavior in the stationary case and to have nonstandard limit distributions in unit root and near integrated cases which reduce both the bias and the variance of the MLE. This result shows that it is possible to improve on the asymptotic behavior of the MLE without using an artificial shrinkage technique or otherwise accelerating convergence at unity at the cost of performance in the neighborhood of unity.
X-Differencing And Dynamic Panel Model Estimation, Chirok Han, Peter C.B. Phillips, Donggyu Sul
X-Differencing And Dynamic Panel Model Estimation, Chirok Han, Peter C.B. Phillips, Donggyu Sul
Cowles Foundation Discussion Papers
This paper introduces a new estimation method for dynamic panel models with fixed effects and AR( p ) idiosyncratic errors. The proposed estimator uses a novel form of systematic differencing, called X -differencing, that eliminates fixed effects and retains information and signal strength in cases where there is a root at or near unity. The resulting “panel fully aggregated” estimator (PFAE) is obtained by pooled least squares on the system of X -differenced equations. The method is simple to implement, free from bias for all parameter values, including unit root cases, and has strong asymptotic and finite sample performance characteristics …
Optimal Estimation Under Nonstandard Conditions, Werner Ploberger, Peter C.B. Phillips
Optimal Estimation Under Nonstandard Conditions, Werner Ploberger, Peter C.B. Phillips
Cowles Foundation Discussion Papers
We analyze optimality properties of maximum likelihood (ML) and other estimators when the problem does not necessarily fall within the locally asymptotically normal (LAN) class, therefore covering cases that are excluded from conventional LAN theory such as unit root nonstationary time series. The classical Hájek-Le Cam optimality theory is adapted to cover this situation. We show that the expectation of certain monotone “bowl-shaped” functions of the squared estimation error are minimized by the ML estimator in locally asymptotically quadratic situations, which often occur in nonstationary time series analysis when the LAN property fails. Moreover, we demonstrate a direct connection between …
Solving The Present Crisis And Managing The Leverage Cycle, John Geanakoplos
Solving The Present Crisis And Managing The Leverage Cycle, John Geanakoplos
Cowles Foundation Discussion Papers
The present crisis is the bottom of a recurring problem that I call the leverage cycle, in which leverage gradually rises too high then suddenly falls much too low. The government must manage the leverage cycle in normal times by monitoring and regulating leverage to keep it from getting too high. In the crisis stage the government must stem the scary bad news that brought on the crisis, which often will entail coordinated write downs of principal; it must restore sane leverage by going around the banks and lending at lower collateral rates (not lower interest rates), and when necessary …
Selling Information, Johannes Hörner, Andrzej Skrzypacz
Selling Information, Johannes Hörner, Andrzej Skrzypacz
Cowles Foundation Discussion Papers
We characterize optimal selling protocols/equilibria of a game in which an Agent first puts hidden effort to acquire information and then transacts with a Firm that uses this information to take a decision. We determine the equilibrium payoffs that maximize incentives to acquire information. Our analysis is similar to finding ex ante optimal self-enforcing contracts since information sharing, outcomes and transfers cannot be contracted upon. We show when and how selling and transmitting information gradually helps. We also show how mixing/side bets increases the Agent’s incentives.
Selling Information, Johannes Hörner, Andrzej Skrzypacz
Selling Information, Johannes Hörner, Andrzej Skrzypacz
Cowles Foundation Discussion Papers
We study a dynamic buyer-seller problem in which the good is information and there are no property rights. The potential buyer is reluctant to pay for information whose value to him is uncertain, but the seller cannot credibly convey its value to the buyer without disclosing the information itself. Information comes as divisible hard evidence. We show how and why the seller can appropriate a substantial fraction of the value through gradual revelation, and how the entire value can be extracted with the help of a mediator.
Selling Information, Johannes Hörner, Andrzej Skrzypacz
Selling Information, Johannes Hörner, Andrzej Skrzypacz
Cowles Foundation Discussion Papers
An Agent who owns information that is potentially valuable to a Firm bargains for its sale, without commitment and certification possibilities, short of disclosing it. We propose a model of gradual persuasion and show how gradualism helps mitigate the hold-up problem (that the Firm would not pay once it learns the information). An example illustrates how it is optimal to give away part of the information at the beginning of the bargaining, and sell the remainder in dribs and drabs. The Agent can only appropriate part of the value of information. Introducing a third-party allows her to extract the maximum …
Recursive Methods In Discounted Stochastic Games: An Algorithm For Delta Approaching 1 And A Folk Theorem, Johannes Hörner, Takuo Sugaya, Satoru Takahashi, Nicolas Vieille
Recursive Methods In Discounted Stochastic Games: An Algorithm For Delta Approaching 1 And A Folk Theorem, Johannes Hörner, Takuo Sugaya, Satoru Takahashi, Nicolas Vieille
Cowles Foundation Discussion Papers
We present an algorithm to compute the set of perfect public equilibrium payoffs as the discount factor tends to one for stochastic games with observable states and public (but not necessarily perfect) monitoring when the limiting set of (long-run players’) equilibrium payoffs is independent of the state. This is the case, for instance, if the Markov chain induced by any Markov strategy profile is irreducible. We then provide conditions under which a folk theorem obtains: if in each state the joint distribution over the public signal and next period’s state satisfies some rank condition, every feasible payoff vector above the …
A Specification Test For Instrumental Variables Regression With Many Instruments, Yoonseok Lee, Ryo Okui
A Specification Test For Instrumental Variables Regression With Many Instruments, Yoonseok Lee, Ryo Okui
Cowles Foundation Discussion Papers
This paper considers specification testing for instrumental variables estimation in the presence of many instruments. The test proposed is a modified version of the Sargan (1958, Econometrica 26(3): 393-415) test of overidentifying restrictions. The test statistic asymptotically follows the standard normal distribution under the null hypothesis of correct specification when the number of instruments increases with the sample size. We find that the new test statistic is numerically equivalent up to a sign to the test statistic proposed by Hahn and Hausman (2002, Econometrica 70(1): 163-189). We also assess the size and power properties of the test.
Belief-Free Equilibria In Games With Incomplete Information: Characterization And Existence, Johannes Hörner, Stefano Lovo, Tristan Tomala
Belief-Free Equilibria In Games With Incomplete Information: Characterization And Existence, Johannes Hörner, Stefano Lovo, Tristan Tomala
Cowles Foundation Discussion Papers
We characterize belief-free equilibria in infinitely repeated games with incomplete information with N > 2 players and arbitrary information structures. This characterization involves a new type of individual rational constraint linking the lowest equilibrium payoffs across players. The characterization is tight: we define a set of payoffs that contains all the belief-free equilibrium payoffs; conversely, any point in the interior of this set is a belief-free equilibrium payoff vector when players are sufficiently patient. Further, we provide necessary conditions and sufficient conditions on the information structure for this set to be non-empty, both for the case of known-own payoffs, and for …
On A Markov Game With One-Sided Incomplete Information, Johannes Hörner, Dinah Rosenberg, Eilon Solan, Nicolas Vieille
On A Markov Game With One-Sided Incomplete Information, Johannes Hörner, Dinah Rosenberg, Eilon Solan, Nicolas Vieille
Cowles Foundation Discussion Papers
We apply the average cost optimality equation to zero-sum Markov games, by considering a simple game with one-sided incomplete information that generalizes an example of Aumann and Maschler (1995). We determine the value and identify the optimal strategies for a range of parameters.
Nonparametric Tests Of Conditional Treatment Effects, Sokbae Lee, Yoon-Jae Whang
Nonparametric Tests Of Conditional Treatment Effects, Sokbae Lee, Yoon-Jae Whang
Cowles Foundation Discussion Papers
We develop a general class of nonparametric tests for treatment effects conditional on covariates. We consider a wide spectrum of null and alternative hypotheses regarding conditional treatment effects, including (i) the null hypothesis of the conditional stochastic dominance between treatment and control groups; (ii) the null hypothesis that the conditional average treatment effect is positive for each value of covariates; and (iii) the null hypothesis of no distributional (or average) treatment effect conditional on covariates against a one-sided (or two-sided) alternative hypothesis. The test statistics are based on L 1 -type functionals of uniformly consistent nonparametric kernel estimators of conditional …
Biased Social Learning, Helios Herrera, Johannes Hörner
Biased Social Learning, Helios Herrera, Johannes Hörner
Cowles Foundation Discussion Papers
This paper examines social learning when only one of the two types of decisions is observable. Because agents arrive randomly over time, and only those who invest are observed, later agents face a more complicated inference problem than in the standard model, as the absence of investment might reflect either a choice not to invest, or a lack of arrivals. We show that, as in the standard model, learning is complete if and only if signals are unbounded. If signals are bounded, cascades may occur, and whether they are more or less likely than in the standard model depends on …