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)
- Confidence set (20)
- Nonstationarity (20)
- Productivity (20)
- Asymptotic theory (19)
- Robustness (19)
- Common knowledge (18)
- Game theory (18)
- Moral hazard (18)
- Weak instruments (18)
- Autoregression (17)
- Brownian motion (17)
- Correlated equilibrium (17)
- General equilibrium (17)
- Long memory (17)
- Unit roots (17)
- Experimentation (16)
- Publication Year
Articles 31 - 60 of 2749
Full-Text Articles in Social and Behavioral Sciences
Dynamic Price Competition: Theory And Evidence From Airline Markets, Jose M. Betancourt, Ali Hortaçsu, Aniko Öry (Oery), Kevin R. Williams
Dynamic Price Competition: Theory And Evidence From Airline Markets, Jose M. Betancourt, Ali Hortaçsu, Aniko Öry (Oery), Kevin R. Williams
Cowles Foundation Discussion Papers
We introduce a model of dynamic pricing in perishable goods markets with competition and provide conditions for equilibrium uniqueness. Pricing dynamics are rich because both own and competitor scarcity affect future profits. We identify new competitive forces that can lead to misallocation due to selling units too quickly: the Bertrand scarcity trap. We empirically estimate our model using daily prices and bookings for competing U.S. airlines. We compare competitive equilibrium outcomes to those where firms use pricing heuristics based on observed internal pricing rules at a large airline. We find that pricing heuristics increase revenues (4-5%) and consumer surplus (3%).
Incorporating Sales And Arrivals Information In Demand Estimation, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Incorporating Sales And Arrivals Information In Demand Estimation, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Cowles Foundation Discussion Papers
We propose a demand estimation method 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 con-sumers solves a standard discrete choice problem. We present a Bayesian IV estima-tion approach that addresses sampling error in product shares and scales well to rich data environments. The data requirements are traditional market-level data as well as a measure of market sizes or consumer arrivals. After presenting simulation studies, we demonstrate the method in an empirical application of air travel demand.
Policies, Projections, And The Social Cost Of Carbon: Results From The Dice-2023 Model, Lint Barrage, William D. Nordhaus
Policies, Projections, And The Social Cost Of Carbon: Results From The Dice-2023 Model, Lint Barrage, William D. Nordhaus
Cowles Foundation Discussion Papers
The present study examines the assumptions, modeling structure, and preliminary results of DICE-2023, the revised Dynamic Integrated Model of Climate and the Economy (DICE), updated to 2023. The revision contains major changes in the carbon and climate modules, the treatment of non-industrial greenhouse gases, discount rates, as well as updates on all the major components. The major changes are a significant reduction in the target for the optimal (cost-beneficial) temperature path, a lower cost of reaching the 2 °C target, an analysis of the impact of the Paris Accord, and a major increase in the estimated social cost of carbon.
The Effect Of Education Policy On Crime: An Intergenerational Perspective, Costas Meghir, Marten Palme, Marieke Schnabel
The Effect Of Education Policy On Crime: An Intergenerational Perspective, Costas Meghir, Marten Palme, Marieke Schnabel
Cowles Foundation Discussion Papers
We study the intergenerational effect of education policy on crime. We use Swedish administrative data that links outcomes across generations with crime records and we show that the comprehensive school reform, gradually implemented between 1949 and 1962, reduced conviction rates both for the generation directly affected by the reform and for their sons. The reduction in conviction rates occurred across many types of crime. Key mediators for this reduction in the child generation are an increase in education and a decline in crime amongst their fathers.
When Do Consumers Talk?, Ishita Chakraborty, Joyee Deb, Aniko Öry (Oery)
When Do Consumers Talk?, Ishita Chakraborty, Joyee Deb, Aniko Öry (Oery)
Cowles Foundation Discussion Papers
The propensity of consumers to talk after a good versus bad experience with a product can differ based on information available from other marketing channels, for example the brand image or advertising. This can result in selection of positive/negative word-of-mouth for reasons outside of product quality. We develop a unifying framework of WOM, brand image, product advertising, and pricing with a focus on the instrumentality motive of word-of-mouth: early adopters talk to inform new buyers’ purchasing decisions. The different marketing channels shape the information sharing behavior of the early adopter as well as the target consumer’s purchase decision. We show …
The Optimality Of Constant Mark-Up Pricing, Dirk Bergemann, Tibor Heumann, Stephen Morris
The Optimality Of Constant Mark-Up Pricing, Dirk Bergemann, Tibor Heumann, Stephen Morris
Cowles Foundation Discussion Papers
We consider a nonlinear pricing environment with private information. We provide profit guarantees (and associated mechanisms) that the seller can achieve across all possible distributions of willingness to pay of the buyers. With a constant elasticity cost function, constant markup pricing provides the optimal revenue guarantee across all possible distributions of willingness to pay and the lower bound is attained under a Pareto distribution. We characterize how profits and consumer surplus vary with the distribution of values and show that Pareto distributions are extremal. We also provide a revenue guarantee for general cost functions.We establish equivalent results for optimal procurement …
Extreme Points Of First-Order Stochastic Dominance Intervals: Theory And Applications, Kai Hao Yang, Alexander K. Zentefis
Extreme Points Of First-Order Stochastic Dominance Intervals: Theory And Applications, Kai Hao Yang, Alexander K. Zentefis
Cowles Foundation Discussion Papers
We characterize the extreme points of first-order stochastic dominance (FOSD) intervals and show how these intervals are at the heart of many topics in economics. Using knowledge of these extreme points, we characterize the distributions of posterior quantiles under a given prior, leading to an analogue of a classical result regarding the distribution of posterior means. We apply this analogue to various economic subjects, including the psychology of judgement, political economy, and Bayesian persuasion. In addition, FOSD intervals provide a common structure to security design. We use the extreme points to unify and generalize seminal results in that literature when …
Influence Or Advertise: The Role Of Social Learning In Influencer Marketing, Ron Berman, Aniko Öry (Oery), Xudong Zheng
Influence Or Advertise: The Role Of Social Learning In Influencer Marketing, Ron Berman, Aniko Öry (Oery), Xudong Zheng
Cowles Foundation Discussion Papers
We compare influencer marketing to targeted advertising from information aggregation and product awareness perspectives. Influencer marketing leverages network effects by allowing consumers to socially learn from each other about their experienced content utility, but consumers may not know whether to attribute promotional post popularity to high content or high product quality. If the quality of a product is uncertain (e.g., it belongs to an unknown brand), then a mega influencer with consistent content quality fosters more information aggregation than a targeted ad and thereby yields higher profits. When we compare influencer marketing to untargeted ad campaigns or if the product …
Nonparametric Identification Of Differentiated Products Demand Using Micro Data, Steven T. Berry, Philip A. Haile
Nonparametric Identification Of Differentiated Products Demand Using Micro Data, Steven T. Berry, Philip A. Haile
Cowles Foundation Discussion Papers
We examine identification of differentiated products demand when one has “micro data” linking the characteristics and choices of individual consumers. Our model nests standard specifications featuring rich observed and unobserved consumer heterogeneity as well as product/market-level unobservables that introduce the problem of econometric endogeneity. Previous work establishes identification of such models using marketlevel data and instruments for all prices and quantities. Micro data provides a panel structure that facilitates richer demand specifications and reduces requirements on both the number and types of instrumental variables. We address identification of demand in the standard case in which non-price product characteristics are assumed …
Misinterpreting Yourself, Paul Heidhues, Botond Koszegi, Philipp Strack
Misinterpreting Yourself, Paul Heidhues, Botond Koszegi, Philipp Strack
Cowles Foundation Discussion Papers
We model an agent who stubbornly underestimates how much his behavior is driven by undesirable motives, and, attributing his behavior to other considerations, updates his views about those considerations. We study general properties of the model, and then apply the framework to identify novel implications of partially naive present bias. In many stable situations, the agent appears realistic in that he eventually predicts his behavior well. His unrealistic self-view does, however, manifest itself in several other ways. First, in basic settings he always comes to act in a more present-biased manner than a sophisticated agent. Second, he systematically mispredicts how …
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 facing complex objectives often decompose the problems they face, delegating different parts of the decision to distinct subordinates. Using comprehensive data and internal models from a large U.S. airline, we establish that airline pricing is inconsistent with canonical dynamic pricing models. However, we show that observed prices can be rationalized as an equilibrium of a game played by departments who each have decision rights for different inputs that are supplied to the observed pricing heuristic. Incorrectly assuming that the firm solves a standard profit maximization problem as a single entity understates overall welfare actually achieved but affects business and …
Robust Inference On Correlation Under General Heterogeneity, Liudas Giraitis, Yugei Li, Peter C. B. Phillips
Robust Inference On Correlation Under General Heterogeneity, Liudas Giraitis, Yugei Li, Peter C. B. Phillips
Cowles Foundation Discussion Papers
Considerable evidence in past research shows size distortion in standard tests for zero autocorrelation or cross-correlation when time series are not independent identically distributed random variables, pointing to the need for more robust procedures. Recent tests for serial correlation and cross-correlation in Dalla, Giraitis, and Phillips (2022) provide a more robust approach, allowing for heteroskedasticity and dependence in un-correlated data under restrictions that require a smooth, slowly-evolving deterministic heteroskedasticity process. The present work removes those restrictions and validates the robust testing methodology for a wider class of heteroskedastic time series models and innovations. The updated analysis given here enables more …
Heterogeneous Paths Of Industrialization, Federico Huneeus, Richard Rogerson
Heterogeneous Paths Of Industrialization, Federico Huneeus, Richard Rogerson
Cowles Foundation Discussion Papers
Industrialization experiences differ substantially across countries. We use a benchmark model of structural change to shed light on the sources of this heterogeneity and, in particular, the phenomenon of premature deindustrialization. Our analysis leads to three key findings. First, benchmark models of structural change robustly generate hump-shaped patterns for the evolution of the industrial sector. Second, heterogeneous patterns of catch-up in sectoral productivities across countries can generate variation in industrialization experiences similar to those found in the data, including premature deindustrialization. Third, differences in the rate of agricultural productivity growth across economies can account for the majority of the variation …
Marriage, Labor Supply And The Dynamics Of The Social Safety Net, Hamish Low, Costas Meghir, Luigi Pistaferri, Alessandra Voena
Marriage, Labor Supply And The Dynamics Of The Social Safety Net, Hamish Low, Costas Meghir, Luigi Pistaferri, Alessandra Voena
Cowles Foundation Discussion Papers
The 1996 US welfare reform introduced time limits on welfare receipt. We use quasi-experimental evidence and a lifecycle model of marriage, divorce, program participation, labor supply and savings to understand the impact of time limits on behavior and well-being. Time limits cause women to defer claiming in anticipation of future needs, an effect that depends on the probabilities of marriage and divorce. Time limits cost women 0.5% of life-time consumption, net of revenue savings redistributed by reduced taxation, with some groups affected much more. Expectations over future marital status are important determinants of the value of the social safety net.
Unified Factor Model Estimation And Inference Under Short And Long Memory, Shuyao Ke, Peter C. B. Phillips, Liangjun Su
Unified Factor Model Estimation And Inference Under Short And Long Memory, Shuyao Ke, Peter C. B. Phillips, Liangjun Su
Cowles Foundation Discussion Papers
This paper studies a linear panel data model with interactive fixed effects wherein regressors, factors and idiosyncratic error terms are all stationary but with potential long memory. The setup involves a new factor model formulation for which weakly dependent regressors, factors and innovations are embedded as a special case. Standard methods based on principal component decomposition and least squares estimation, as in Bai (2009), are found to suffer bias correction failure because the order of magnitude of the bias is determined in a complex manner by the memory parameters. To cope with this failure and to provide a simple implementable …
Robust Testing For Explosive Behavior With Strongly Dependent Errors, Yiu Lim Lui, Peter C. B. Phillips, Jun Yu
Robust Testing For Explosive Behavior With Strongly Dependent Errors, Yiu Lim Lui, Peter C. B. Phillips, Jun Yu
Cowles Foundation Discussion Papers
A heteroskedasticity-autocorrelation robust (HAR) test statistic is proposed to test for the presence of explosive roots in financial or real asset prices when the equation errors are strongly dependent. Limit theory for the test statistic is developed and extended to heteroskedastic models. The new test has stable size properties unlike conventional test statistics that typically lead to size distortion and inconsistency in the presence of strongly dependent equation errors. The new procedure can be used to consistently time-stamp the origination and termination of an explosive episode under similar conditions of long memory errors. Simulations are conducted to assess the finite …
Rural-Urban Migration And The Re-Organization Of Agriculture, Raahil Madhok, Frederik Noack, Ahmed Musfiq Mobarak, Olivier Deschenes
Rural-Urban Migration And The Re-Organization Of Agriculture, Raahil Madhok, Frederik Noack, Ahmed Musfiq Mobarak, Olivier Deschenes
Cowles Foundation Discussion Papers
This paper studies the response of agricultural production to rural labor loss during the process of urbanization. Using household microdata from India and exogenous variation in migration induced by urban income shocks interacted with distance to cities, we document sharp declines in crop production among migrant-sending households residing near cities. Households with migration opportunities do not substitute agricultural labour with capital, nor do they adopt new agricultural machinery. Instead, they divest from agriculture altogether and cultivate less land. We use a two-sector general equilibrium model with crop and land markets to trace the ensuing spatial reorganization of agriculture. Other non-migrant …
Order Statistics From Independent Non-Identical Exponentiated And Proportional Hazard Rate Random Variables, José-Antonio Espín-Sánchez, Tianhao Wu
Order Statistics From Independent Non-Identical Exponentiated And Proportional Hazard Rate Random Variables, José-Antonio Espín-Sánchez, Tianhao Wu
Cowles Foundation Discussion Papers
We study order statistics (OS) from independent non identically distributed (INID) samples for two large classes of statistical distributions: Exponentiated Distributions (ED) and Proportional Hazard Rate Models (PHRM). We show that for the analytical solution for the CDF (PDF) of OSs in ED and PHRM: i) each OS's CDF (PDF) depends on all shape parameters; ii) the CDF (PDF) of each OS is a weighted average of CDF (PDF) within the same family and with shape parameters equal to a partial sum of the original shape parameters; and iii) the weights are integers and sum up to 1. These properties …
The Boosted Hp Filter Is More General Than You Might Think, Ziwei Mei, Peter C. B. Phillips, Zhentao Shi
The Boosted Hp Filter Is More General Than You Might Think, Ziwei Mei, Peter C. B. Phillips, Zhentao Shi
Cowles Foundation Discussion Papers
The global financial crisis and Covid recession have renewed discussion concerning trend-cycle discovery in macroeconomic data, and boosting has recently upgraded the popular HP filter to a modern machine learning device suited to data-rich and rapid computational environments. This paper sheds light on its versatility in trend-cycle determination, explaining in a simple manner both HP filter smoothing and the consistency delivered by boosting for general trend detection. Applied to a universe of time series in FRED databases, boosting outperforms other methods in timely capturing downturns at crises and recoveries that follow. With its wide applicability the boosted HP filter is …
Boosting The Hp Filter For Trending Time Series With Long Range Dependence, Eva Biswas, Farzad Sabzikar, Peter C. B. Phillips
Boosting The Hp Filter For Trending Time Series With Long Range Dependence, Eva Biswas, Farzad Sabzikar, Peter C. B. Phillips
Cowles Foundation Discussion Papers
This paper extends recent asymptotic theory developed for the Hodrick Prescott (HP) filter and boosted HP (bHP) filter to long range dependent time series that have fractional Brownian motion (fBM) limit processes after suitable standardization. Under general conditions it is shown that the asymptotic form of the HP filter is a smooth curve, analogous to the finding in Phillips and Jin (2021) for integrated time series and series with deterministic drifts. Boosting the filter using the iterative procedure suggested in Phillips and Shi (2021) leads under well defined rate conditions to a consistent estimate of the fBM limit process or …
The Impact Of Carbon Taxes On The Value Of Fossil-Fuel Reserves And The Efficiency Of Climate Policy, William D. Nordhaus
The Impact Of Carbon Taxes On The Value Of Fossil-Fuel Reserves And The Efficiency Of Climate Policy, William D. Nordhaus
Cowles Foundation Discussion Papers
The present study analyzes the impact of carbon pricing along with other policies on the value of fossil fuel resources, CO2 emissions, and economic welfare. It employs a model based on the Hotelling analysis of resource values and calibrates this approach to data on fossil resources, costs, demands, and CO2 emissions. Total fossil-fuel resource rents are today estimated to be $17 trillion (2021 US$) without carbon pricing. Oil and gas rents are unchanged for low carbon taxes but would decline by 40% with a $100/tCO2 price. The losses in producer values would be only about 10% of …
Taxing Externalities Without Hurting The Poor, Mallesh Pai, Philipp Strack
Taxing Externalities Without Hurting The Poor, Mallesh Pai, Philipp Strack
Cowles Foundation Discussion Papers
We consider the optimal taxation of a good which exhibits a negative externality, in a setting where agents differ in their value for the good, their disutility from the externality, and their value for money, while the planner observes neither. Pigouvian taxation is the unique Pareto efficient mechanism, yet it is only optimal if the planner puts higher Pareto weights on richer agents. We derive the optimal tax schedule for both a narrow allocative objective and a utilitarian objective for the planner. The optimal tax is generically nonlinear, and Pareto inefficient. The optimal mechanism might take a “non-market” form and …
Data, Competition, And Digital Platforms, Dirk Bergemann, Alessandro Bonatti
Data, Competition, And Digital Platforms, Dirk Bergemann, Alessandro Bonatti
Cowles Foundation Discussion Papers
We propose a model of intermediated digital markets where data and heterogeneity in tastes and products are deÖning features. A monopolist platform uses superior data to match consumers and multiproduct advertisers. Consumers have heterogenous preferences for the advertisers' product lines and shop on- or o§-platform. The platform monetizes its data by selling targeted advertising space that allows advertisers to tailor their products to each consumer's preferences. We derive the equilibrium product lines and advertising prices. We identify search costs and informational advantages as two sources of the platform's bargaining power. We show that privacy-enhancing data-governance rules, such as those corresponding …
Dynamic Price Competition: Theory And Evidence From Airline Markets, Ali Hortaçsu, Aniko Öry, Kevin R. Williams
Dynamic Price Competition: Theory And Evidence From Airline Markets, Ali Hortaçsu, Aniko Öry, Kevin R. Williams
Cowles Foundation Discussion Papers
We introduce a model of oligopoly dynamic pricing where firms with limited capacity face a sales deadline. We establish conditions under which the equilibrium is unique and converges to a system of differential equations. Using unique and comprehensive pricing and bookings data for competing U.S. airlines, we estimate our model and find that dynamic pricing results in higher output but lower welfare than under uniform pricing. Our theoretical and empirical findings run counter to standard results in single-firm settings due to the strategic role of competitor scarcity. Pricing heuristics commonly used by airlines increase welfare relative to estimated equilibrium predictions.
Screening With Persuasion, Dirk Bergemann, Tibor Heumann, Stephen Morris
Screening With Persuasion, Dirk Bergemann, Tibor Heumann, Stephen Morris
Cowles Foundation Discussion Papers
We consider a general nonlinear pricing environment with private information. We characterize the information structure that maximizes the seller's profits. The seller who cannot observe the buyer's willingness to pay can control both the signal that a buyer receives about his value and the selling mechanism. The optimal screening mechanism has finitely many items even with a continuum of types. We identify sufficient conditions under which the optimal mechanism has a single item. Thus, the socially efficient variety of items is decreased drastically at the expense of higher revenue and lower information rents.
Climate Change Around The World, Per Krusell, Anthony A. Smith Jr.
Climate Change Around The World, Per Krusell, Anthony A. Smith Jr.
Cowles Foundation Discussion Papers
The economic effects of climate change vary across both time and space. To study these effects, this paper builds a global economy-climate model featuring a high degree of geographic resolution. Carbon emissions from the use of energy in production increase the Earth's (average) temperature and local, or regional, temperatures respond more or less sensitively to this increase. Each of the approximately 19,000 regions makes optimal consumption-savings and energy-use decisions as its climate (or regional temperature) and, consequently, its productivity change over time. The relationship between regional temperature and regional productivity has an inverted U-shape, calibrated so that the high-resolution model …
Trade, Leakage, And The Design Of A Carbon Tax, David A. Weisbach, Samuel Kortum, Michael Wang, Yujia Yao
Trade, Leakage, And The Design Of A Carbon Tax, David A. Weisbach, Samuel Kortum, Michael Wang, Yujia Yao
Cowles Foundation Discussion Papers
Climate policies vary widely across countries, with some countries imposing stringent emissions policies and others doing very little. When climate policies vary across countries, energy-intensive industries have an incentive to relocate to places with few or no emissions restrictions, an effect known as leakage. Relocated industries would continue to pollute but would be operating in a less desirable location. We consider solutions to the leakage problem in a simple setting where one region of the world imposes a climate policy and the rest of the world is passive. We solve the model analytically and also calibrate and simulate the model. …
Informational Intermediation, Market Feedback, And Welfare Losses, Kai Hao Yang, Wenji Xu
Informational Intermediation, Market Feedback, And Welfare Losses, Kai Hao Yang, Wenji Xu
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 fixed 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.
Screening With Persuasion, Dirk Bergemann, Tibor Heumann, Stephen Morris
Screening With Persuasion, Dirk Bergemann, Tibor Heumann, Stephen Morris
Cowles Foundation Discussion Papers
We consider a general nonlinear pricing environment with private information. The seller can control both the signal that the buyers receive about their value and the selling mechanism. We characterize the optimal menu and information structure that jointly maximize the seller's profit. The optimal screening mechanism has finitely many items even with a continuum of values. We identify sufficient conditions under which the optimal mechanism has a single item. Thus the seller decreases the variety of items below the efficient level in order to reduce the information rents of the buyers.
A General Limit Theory For Nonlinear Functionals Of Nonstationary Time Series, Qiying Wang, Peter C. B. Phillips
A General Limit Theory For Nonlinear Functionals Of Nonstationary Time Series, Qiying Wang, Peter C. B. Phillips
Cowles Foundation Discussion Papers
Limit theory is provided for a wide class of covariance functionals of
a nonstationary process and stationary time series. The results are relevant
to estimation and inference in nonlinear nonstationary regressions that involve unit root, local unit root or fractional processes and they include both parametric and nonparametric regressions. Self normalized versions of these
statistics are considered that are useful in inference. Numerical evidence reveals a strong bimodality in the finite sample distributions that persists for very large sample sizes although the limit theory is Gaussian. New self normalized versions are introduced that deliver improved approximations.