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- Penalized sieve minimum distance (5)
- Asymptotic distribution (3)
- Asymptotic size (3)
- Autoregression (3)
- Bank (3)
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- Conditional heteroskedasticity (3)
- Dynamic mechanism design (3)
- Experimental gaming (3)
- Fiat money (3)
- Generalized least squares (3)
- Intertemporal returns (3)
- Least squares (3)
- Long memory (3)
- Modulus of continuity (3)
- Nonlinear ill-posed inverse (3)
- Partial identification (3)
- Sequential investment (3)
- Stage financing (3)
- Asymptotic expansion (2)
- Asymptotic power (2)
- Bayesian learning (2)
- Bootstrap (2)
- Censored regression (2)
- Climate change (2)
- Coase conjecture (2)
- Cointegration (2)
- Common knowledge (2)
- Compensated separability (2)
- Consistency (2)
- Convergence rate (2)
Articles 1 - 30 of 69
Full-Text Articles in Social and Behavioral Sciences
Estimation And Model Selection Of Semiparametric Multivariate Survival Functions Under General Censorship, Xiaohong Chen, Yanqin Fan, Demian Pouzo, Zhiliang Ying
Estimation And Model Selection Of Semiparametric Multivariate Survival Functions Under General Censorship, Xiaohong Chen, Yanqin Fan, Demian Pouzo, Zhiliang Ying
Cowles Foundation Discussion Papers
Many models of semiparametric multivariate survival functions are characterized by nonparametric marginal survival functions and parametric copula functions, where different copulas imply different dependence structures. This paper considers estimation and model selection for these semiparametric multivariate survival functions, allowing for misspecified parametric copulas and data subject to general censoring. We first establish convergence of the two-step estimator of the copula parameter to the pseudo-true value defined as the value of the parameter that minimizes the KLIC between the parametric copula induced multivariate density and the unknown true density. We then derive its root–n asymptotically normal distribution and provide a simple …
Managing Strategic Buyers, Johannes Hörner, Larry Samuelson
Managing Strategic Buyers, Johannes Hörner, Larry Samuelson
Cowles Foundation Discussion Papers
We consider the problem of a monopolist with an object to sell before some deadline, facing n buyers with independent private values. The monopolist posts prices but has no commitment power. We show that the monopolist can always secure at least the larger of the static monopoly profit and the revenue from a Dutch auction with a zero reserve price. When there are only a few buyers, her profits are higher than this bound, and she essentially posts unacceptable prices up to the very end, at which point prices collapse to a “reservation price” that exceeds marginal cost. When there …
Venture Capital And Sequential Investments, Dirk Bergemann, Ulrich Hege, Liang Peng
Venture Capital And Sequential Investments, Dirk Bergemann, Ulrich Hege, Liang Peng
Cowles Foundation Discussion Papers
We present a dynamic model of venture capital financing, described as a sequential investment problem with uncertain outcome. Each venture has a critical, but unknown threshold beyond which it cannot progress. If the threshold is reached before the completion of the project, then the project fails, otherwise it succeeds. The investors decide sequentially about the speed of the investment and the optimal path of staged investments. We derive the dynamically optimal funding policy in response to the arrival of information during the development of the venture. We develop three types of predictions from our theoretical model and test these predictions …
Venture Capital And Sequential Investments, Dirk Bergemann, Ulrich Hege, Liang Peng
Venture Capital And Sequential Investments, Dirk Bergemann, Ulrich Hege, Liang Peng
Cowles Foundation Discussion Papers
We analyze sequential investment decisions in an innovative project that depend on the investor’s information about the project failure risk and its potential final value. We consider the feedback effects between learning about the project parameters and the continuous adjustment of the investment strategy. Investors decide sequentially about the speed of investment and the optimal degree of involvement. We develop three types of predictions from our theoretical model and test these predictions in a large sample of venture capital investment in the U.S. for the period of 1987-2002. First, the investment flow starts cautiously if the failure risk is high …
Venture Capital And Sequential Investments, Dirk Bergemann, Ulrich Hege, Liang Peng
Venture Capital And Sequential Investments, Dirk Bergemann, Ulrich Hege, Liang Peng
Cowles Foundation Discussion Papers
We present a dynamic model of venture capital financing, described as a sequential investment problem with uncertain outcome. Each venture has a critical, but unknown threshold beyond which it cannot progress. If the threshold is reached before the completion of the project, then the project fails, otherwise it succeeds. The investors decide sequentially about the speed of the investment and the optimal path of staged investments. We derive the dynamically optimal funding policy in response to the arrival of information during the development of the venture. We develop three types of predictions from our theoretical model and test these predictions …
Managing Strategic Buyers, Johannes Hörner, Larry Samuelson
Managing Strategic Buyers, Johannes Hörner, Larry Samuelson
Cowles Foundation Discussion Papers
We consider the problem of a monopolist who must sell her inventory before some deadline, facing n buyers with independent private values. The monopolist posts prices but has no commitment power. The seller faces a basic trade-off between imperfect price discrimination and maintaining an effective reserve price. When there is only one unit and only a few buyers, the seller essentially posts unacceptable prices up to the very end, at which point prices collapse in a series of jumps to a “reserve price” that exceeds marginal cost. When there are many buyers, the seller abandons this reserve price in order …
A Principal-Agent Model Of Sequential Testing, Dino Gerardi, Lucas Maestri
A Principal-Agent Model Of Sequential Testing, Dino Gerardi, Lucas Maestri
Cowles Foundation Discussion Papers
This paper analyzes the optimal provision of incentives in a sequential testing context. In every period the agent can acquire costly information that is relevant to the principal’s decision. Neither the agent’s effort nor the realizations of his signals are observable. First, we assume that the principal and the agent are symmetrically informed at the time of contracting. We construct the optimal mechanism and show that the agent is indifferent in every period between performing the test and sending an uninformative message which continues the relationship. Furthermore, in the first period the agent is indifferent between carrying out his task …
Copula-Based Nonlinear Quantile Autoregression, Xiaohong Chen, Roger Koenker, Zhijie Xiao
Copula-Based Nonlinear Quantile Autoregression, Xiaohong Chen, Roger Koenker, Zhijie Xiao
Cowles Foundation Discussion Papers
Parametric copulas are shown to be attractive devices for specifying quantile autoregressive models for nonlinear time-series. Estimation of local, quantile-specific copula-based time series models offers some salient advantages over classical global parametric approaches. Consistency and asymptotic normality of the proposed quantile estimators are established under mild conditions, allowing for global misspecification of parametric copulas and marginals, and without assuming any mixing rate condition. These results lead to a general framework for inference and model specification testing of extreme conditional value-at-risk for financial time series data.
Asymptotic Equivalence Of Probabilistic Serial And Random Priority Mechanisms, Yeon-Koo Che, Fuhito Kojima
Asymptotic Equivalence Of Probabilistic Serial And Random Priority Mechanisms, Yeon-Koo Che, Fuhito Kojima
Cowles Foundation Discussion Papers
The random priority (random serial dictatorship) mechanism is a common method for assigning objects to individuals. The mechanism is easy to implement and strategy-proof. However this mechanism is inefficient, as the agents may be made all better off by another mechanism that increases their chances of obtaining more preferred objects. Such an inefficiency is eliminated by the recent mechanism called probabilistic serial, but this mechanism is not strategy-proof. Thus, which mechanism to employ in practical applications has been an open question. This paper shows that these mechanisms become equivalent when the market becomes large. More specifically, given a set of …
The Evolution Of Decision And Experienced Utilities, Arthur Robson, Larry Samuelson
The Evolution Of Decision And Experienced Utilities, Arthur Robson, Larry Samuelson
Cowles Foundation Discussion Papers
Psychologists report that people make choices on the basis of “decision utilities” that routinely overestimate the “experienced utility” consequences of these choices. This paper argues that this dichotomy between decision and experienced utilities may be the solution to an evolutionary design problem. We examine a setting in which evolution designs agents with utility functions that must mediate intertemporal choices, and in which there is an incentive to condition current utilities on the agent’s previous experience. Anticipating future utility adjustments can distort intertemporal incentives, a conflict that is attenuated by separating decision and experienced utilities.
The Value Of Fiat Money With An Outside Bank: An Experimental Game, Juergen Huber, Martin Shubik, Shyam Sunder
The Value Of Fiat Money With An Outside Bank: An Experimental Game, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
Why people accept intrinsically worthless fiat money in exchange for real goods and services has been a longstanding question. There are many competing sufficient explanations that may confound each other in practice but can be individually tested in isolation experimentally. In this paper we examine a sufficient explanation of the value of fiat money through the existence of a debt instrument which allows consumption to be moved earlier in time. We present experimental evidence that the theoretical predictions about the behavior of such economies work reasonably well in a laboratory setting. The import of this finding for the theory of …
Inference For Parameters Defined By Moment Inequalities: A Recommended Moment Selection Procedure, Donald W.K. Andrews, Panle Jai Barwick
Inference For Parameters Defined By Moment Inequalities: A Recommended Moment Selection Procedure, Donald W.K. Andrews, Panle Jai Barwick
Cowles Foundation Discussion Papers
This paper is concerned with tests and confidence intervals for parameters that are not necessarily identified and are defined by moment inequalities. In the literature, different test statistics, critical value methods, and implementation methods (i.e., the asymptotic distribution versus the bootstrap) have been proposed. In this paper, we compare these methods. We provide a recommended test statistic, moment selection critical value method, and implementation method. We provide data-dependent procedures for choosing the key moment selection tuning parameter kappa and a size-correction factor eta.
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
We present a model in which an outside bank and a default penalty support the value of fiat money, and experimental evidence that the theoretical predictions about the behavior of such economies, based on the Fisher-condition, work reasonably well in a laboratory setting. The import of this finding for the theory of money is to show that the presence of a societal bank and default laws provide sufficient structure to support the use of fiat money and use of the bank rate to influence inflation or deflation, although other institutions could provide alternatives.
Innovation And Equilibrium?, Martin Shubik
Innovation And Equilibrium?, Martin Shubik
Cowles Foundation Discussion Papers
A discussion is given of the problems involved in the formal modeling of the innovation process. The link between innovation and finance is stressed. The nature of how the circular flow of funds is broken and the role of finance in evaluation and control is discussed.
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
We present a model in which an outside bank and a default penalty support the value of fiat money, and experimental evidence that the theoretical predictions about the behavior of such economies, based on the Fisher-condition, work reasonably well in a laboratory setting. The import of this finding for the theory of money is to show that the presence of a societal bank and default laws provide sufficient structure to support the use of fiat money and use of the bank rate to influence inflation or deflation, although other institutions could provide alternatives.
Inference For Parameters Defined By Moment Inequalities: A Recommended Moment Selection Procedure, Donald W.K. Andrews, Panle Jai Barwick
Inference For Parameters Defined By Moment Inequalities: A Recommended Moment Selection Procedure, Donald W.K. Andrews, Panle Jai Barwick
Cowles Foundation Discussion Papers
This paper is concerned with tests and confidence intervals for partially-identified parameters that are defined by moment inequalities and equalities. In the literature, different test statistics, critical value methods, and implementation methods (i.e., asymptotic distribution versus the bootstrap) have been proposed. In this paper, we compare a wide variety of these methods. We provide a recommended test statistic, moment selection critical value method, and implementation method. In addition, we provide a data-dependent procedure for choosing the key moment selection tuning parameter and a data-dependent size-correction factor.
Financial Control Of A Competitive Economy Without Randomness, Ioannis Karatzas, Martin Shubik, William D. Sudderth
Financial Control Of A Competitive Economy Without Randomness, Ioannis Karatzas, Martin Shubik, William D. Sudderth
Cowles Foundation Discussion Papers
The monetary and fiscal control of a simple economy without outside randomness is studied here from the micro-economic basis of a strategic market game. The government’s bureaucracy is treated as a public good that provides services at a cost. A conventional public good is also considered.
A Dynamic Analysis Of Human Welfare In A Warming Planet, Humberto Llavador, John E. Roemer, Joaquim Silvestre
A Dynamic Analysis Of Human Welfare In A Warming Planet, Humberto Llavador, John E. Roemer, Joaquim Silvestre
Cowles Foundation Discussion Papers
Anthropogenic greenhouse gas (GHG) emissions have caused atmospheric concentrations with no precedents in the last half a million years, inducing serious uncertainties about future climates and their effects on human welfare. Recent climate science supports the view that the climate stabilization will require very low GHG emissions in the future. We ask: Is a path of low emissions compatible with sustainable levels of human welfare? With steady growth in human quality of life? Addressing these questions requires both defining welfare criteria and empirically estimating the possible paths of the economy. We specify and calibrate a dynamic model with four intertemporal …
A Dynamic Analysis Of Human Welfare In A Warming Planet, Humberto Llavador, John E. Roemer, Joaquim Silvestre
A Dynamic Analysis Of Human Welfare In A Warming Planet, Humberto Llavador, John E. Roemer, Joaquim Silvestre
Cowles Foundation Discussion Papers
Climate science indicates that climate stabilization requires low GHG emissions. Is this consistent with nondecreasing human welfare? Our welfare index, called quality of life (QuoL), emphasizes education, knowledge, and the environment. We construct and calibrate a multigenerational model with intertemporal links provided by education, physical capital, knowledge and the environment. We reject discounted utilitarianism and adopt, first, the Intergenerational Maximin criterion, and, second, Human Development Optimization, that maximizes the QuoL of the first generation subject to a given future rate of growth. We apply these criteria to our calibrated model via a novel algorithm inspired by the turnpike property. The …
The Dynamic Pivot Mechanism, Dirk Bergemann, Juuso Välimäki
The Dynamic Pivot Mechanism, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
We consider truthful implementation of the socially efficient allocation in an independent private-value environment in which agents receive private information over time. We propose a suitable generalization of the pivot mechanism, based on the marginal contribution of each agent. In the dynamic pivot mechanism, the ex-post incentive and ex-post participation constraints are satisfied for all agents after all histories. In an environment with diverse preferences it is the unique mechanism satisfying ex-post incentive, ex-post participation and efficient exit conditions. We develop the dynamic pivot mechanism in detail for a repeated auction of a single object in which each bidder learns …
The Dynamic Pivot Mechanism, Dirk Bergemann, Juuso Välimäki
The Dynamic Pivot Mechanism, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
We consider truthful implementation of the socially efficient allocation in an independent private-value environment in which agents receive private information over time. We propose a suitable generalization of the pivot mechanism, based on the marginal contribution of each agent. In the dynamic pivot mechanism, the ex-post incentive and ex-post participation constraints are satisfied for all agents after all histories. In an environment with diverse preferences it is the unique mechanism satisfying ex-post incentive, ex-post participation and efficient exit conditions. We develop the dynamic pivot mechanism in detail for a repeated auction of a single object in which each bidder learns …
Bootstrap For Interval Endpoints Defined By Moment Inequalities, Donald W.K. Andrews, Sukjin Han
Bootstrap For Interval Endpoints Defined By Moment Inequalities, Donald W.K. Andrews, Sukjin Han
Cowles Foundation Discussion Papers
This paper analyzes the finite-sample and asymptotic properties of several bootstrap and m out of n bootstrap methods for constructing confidence interval (CI) endpoints in models defined by moment inequalities. In particular, we consider using these methods directly to construct CI endpoints. By considering two very simple models, the paper shows that neither the bootstrap nor the m out of n bootstrap is valid in finite samples or in a uniform asymptotic sense in general when applied directly to construct CI endpoints. In contrast, other results in the literature show that other ways of applying the bootstrap, m out of …
Asymptotics For Ls, Gls, And Feasible Gls Statistics In An Ar(1) Model With Conditional Heteroskedasticity, Donald W.K. Andrews, Patrik Guggenberger
Asymptotics For Ls, Gls, And Feasible Gls Statistics In An Ar(1) Model With Conditional Heteroskedasticity, Donald W.K. Andrews, Patrik Guggenberger
Cowles Foundation Discussion Papers
This paper considers a first-order autoregressive model with conditionally heteroskedastic innovations. The asymptotic distributions of least squares (LS), infeasible generalized least squares (GLS), and feasible GLS estimators and t statistics are determined. The GLS procedures allow for misspecification of the form of the conditional heteroskedasticity and, hence, are referred to as quasi-GLS procedures. The asymptotic results are established for drifting sequences of the autoregressive parameter and the distribution of the time series of innovations. In particular, we consider the full range of cases in which the autoregressive parameter ρ n satisfies (i) n(1 - ρ n ) → ∞ and …
Estimating Derivatives In Nonseparable Models With Limited Dependent Variables, Joseph G. Altonji, Hidehiko Ichimura, Taisuke Otsu
Estimating Derivatives In Nonseparable Models With Limited Dependent Variables, Joseph G. Altonji, Hidehiko Ichimura, Taisuke Otsu
Cowles Foundation Discussion Papers
We present a simple way to estimate the effects of changes in a vector of observable variables X on a limited dependent variable Y when Y is a general nonseparable function of X and unobservables. We treat models in which Y is censored from above or below or potentially from both. The basic idea is to first estimate the derivative of the conditional mean of Y given X at x with respect to x on the uncensored sample without correcting for the effect of changes in x induced on the censored population. We then correct the derivative for the effects …
Rationalization And Cognitive Dissonance: Do Choices Affect Or Reflect Preferences?, Keith M. Chen
Rationalization And Cognitive Dissonance: Do Choices Affect Or Reflect Preferences?, Keith M. Chen
Cowles Foundation Discussion Papers
Cognitive dissonance is one of the most influential theories in psychology, and its oldest experiential realization is choice-induced dissonance. In contrast to the economic approach of assuming a person’s choices reveal their preferences, psychologists have claimed since 1956 that people alter their preferences to rationalize past choices by devaluing rejected alternatives and upgrading chosen ones. Here, I show that every study which has tested this preference-spreading effect has overlooked the potential that choices may reflect individual preferences. Specifically, these studies have implicitly assumed that subject’s preferences can be measured perfectly, i.e., with infinite precision. Absent this, their methods, even with …
Asymptotics For Ls, Gls, And Feasible Gls Statistics In An Ar(1) Model With Conditional Heteroskedaticity, Donald W.K. Andrews, Patrik Guggenberger
Asymptotics For Ls, Gls, And Feasible Gls Statistics In An Ar(1) Model With Conditional Heteroskedaticity, Donald W.K. Andrews, Patrik Guggenberger
Cowles Foundation Discussion Papers
This paper considers a first-order autoregressive model with conditionally heteroskedastic innovations. The asymptotic distributions of least squares (LS), infeasible generalized least squares (GLS), and feasible GLS estimators and t statistics are determined. The GLS procedures allow for misspecification of the form of the conditional heteroskedasticity and, hence, are referred to as quasi-GLS procedures. The asymptotic results are established for drifting sequences of the autoregressive parameter and the distribution of the time series of innovations. In particular, we consider the full range of cases in which the autoregressive parameter ρ n satisfies (i) n (1 - ρ n ) → ∞ …
Robust Implementation In General Mechanisms, Dirk Bergemann, Stephen Morris
Robust Implementation In General Mechanisms, Dirk Bergemann, Stephen Morris
Cowles Foundation Discussion Papers
A social choice function is robustly implemented if every equilibrium on every type space achieves outcomes consistent with it. We identify a robust monotonicity condition that is necessary and (with mild extra assumptions) sufficient for robust implementation. Robust monotonicity is strictly stronger than both Maskin monotonicity (necessary and almost sufficient for complete information implementation) and ex post monotonicity (necessary and almost sufficient for ex post implementation). It is equivalent to Bayesian monotonicity on all type spaces.
Rationalizing Choice With Multi-Self Models, Attila Ambrus, Kareen Rozen
Rationalizing Choice With Multi-Self Models, Attila Ambrus, Kareen Rozen
Cowles Foundation Discussion Papers
This paper studies a class of multi-self decision-making models proposed in economics, psychology, and marketing. In this class, choices arise from the set-dependent aggregation of a collection of utility functions, where the aggregation procedure satisfies some simple properties. We propose a method for characterizing the extent of irrationality in a choice behavior, and use this measure to provide a lower bound on the set of choice behaviors that can be rationalized with n utility functions. Under an additional assumption (scale-invariance), we show that generically at most five “reasons” are needed for every “mistake.”
Asymptotics For Ls, Gls, And Feasible Gls Statistics In An Ar(1) Model With Conditional Heteroskedaticity, Donald W.K. Andrews, Patrik Guggenberger
Asymptotics For Ls, Gls, And Feasible Gls Statistics In An Ar(1) Model With Conditional Heteroskedaticity, Donald W.K. Andrews, Patrik Guggenberger
Cowles Foundation Discussion Papers
This paper considers a first-order autoregressive model with conditionally heteroskedastic innovations. The asymptotic distributions of least squares (LS), infeasible generalized least squares (GLS), and feasible GLS estimators and t statistics are determined. The GLS procedures allow for misspecification of the form of the conditional heteroskedasticity and, hence, are referred to as quasi-GLS procedures. The asymptotic results are established for drifting sequences of the autoregressive parameter and the distribution of the time series of innovations. In particular, we consider the full range of cases in which the autoregressive parameter rhon satisfies (i) n (1 – ρ n ) → ∞ and …
Robust Implementation In General Mechanisms, Dirk Bergemann, Stephen Morris
Robust Implementation In General Mechanisms, Dirk Bergemann, Stephen Morris
Cowles Foundation Discussion Papers
A social choice function is robustly implemented if every equilibrium on every type space achieves outcomes consistent with it. We identify a robust monotonicity condition that is necessary and (with mild extra assumptions) sufficient for robust implementation. Robust monotonicity is strictly stronger than both Maskin monotonicity (necessary and almost sufficient for complete information implementation) and ex post monotonicity (necessary and almost sufficient for ex post implementation). It is equivalent to Bayesian monotonicity on all type spaces.