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- Similarity (4)
- Coordination (3)
- Impartiality (3)
- Priority (3)
- Allocation rules (2)
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- Almost-public monitoring (2)
- Antitrust economics (2)
- Applied general equilibrium analysis (2)
- Automation (2)
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- Evolution of money (2)
- Experience goods (2)
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- Gold (2)
- HAC estimation (2)
- Innovation (2)
- Learning (2)
- Liquidity under-supply (2)
- Local to unity (2)
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Articles 1 - 30 of 54
Full-Text Articles in Social and Behavioral Sciences
Fact-Free Learning, Enriqueta Aragones, Itzhak Gilboa, Andrew Postlewaite, David Schmeidler
Fact-Free Learning, Enriqueta Aragones, Itzhak Gilboa, Andrew Postlewaite, David Schmeidler
Cowles Foundation Discussion Papers
People may be surprised by noticing certain regularities that hold in existing knowledge they have had for some time. That is, they may learn without getting new factual information. We argue that this can be partly explained by computational complexity. We show that, given a database, finding a small set of variables that obtain a certain value of R 2 is computationally hard, in the sense that this term is used in computer science. We discuss some of the implications of this result and of fact-free learning in general.
Probabilities As Similarity-Weighted Frequencies, Antoine Billot, Itzhak Gilboa, Dov Samet, David Schmeidler
Probabilities As Similarity-Weighted Frequencies, Antoine Billot, Itzhak Gilboa, Dov Samet, David Schmeidler
Cowles Foundation Discussion Papers
A decision maker is asked to express her beliefs by assigning probabilities to certain possible states. We focus on the relationship between her database and her beliefs. We show that, if beliefs given a union of two databases are a convex combination of beliefs given each of the databases, the belief formation process follows a simple formula: beliefs are a similarity-weighted average of the beliefs induced by each past case.
Predicting Electoral College Victory Probabilities From State Probability Data, Ray C. Fair
Predicting Electoral College Victory Probabilities From State Probability Data, Ray C. Fair
Cowles Foundation Discussion Papers
A method is proposed in this paper for predicting Electoral College victory probabilities from state probability data. A “ranking” assumption about dependencies across states is made that greatly simplifies the analysis. The method issued to analyze state probability data from the Intrade political betting market. The Intrade prices of various contracts are quite close to what would be expected under the ranking assumption. Under the joint hypothesis that the Intrade price ranking is correct and the ranking assumption is correct, President Bush should not have won any state ranked below a state that he lost. He did not win any …
Rule-Based And Case-Based Reasoning In Housing Prices, Gabrielle Gayer, Itzhak Gilboa, Offer Lieberman
Rule-Based And Case-Based Reasoning In Housing Prices, Gabrielle Gayer, Itzhak Gilboa, Offer Lieberman
Cowles Foundation Discussion Papers
People reason about real-estate prices both in terms of general rules and in terms of analogies to similar cases. We propose to empirically test which mode of reasoning fits the data better. To this end, we develop the statistical techniques required for the estimation of the case-based model. It is hypothesized that case-based reasoning will have relatively more explanatory power in databases of rental apartments, whereas rule-based reasoning will have a relative advantage in sales data. We motivate this hypothesis on theoretical grounds, and find empirical support for it by comparing the two statistical techniques (rule-based and case-based) on two …
Retrospective On The Postwar Productivity Slowdown, William D. Nordhaus
Retrospective On The Postwar Productivity Slowdown, William D. Nordhaus
Cowles Foundation Discussion Papers
The present study reviews the “productivity slowdown” of the 1970s and 1980s. The study also develops a new data set — industrial data available back to 1948 — as well as a new set of tools for decomposing changes in productivity growth. The major result of this study is that the productivity slowdown of the 1970s has survived three decades of scrutiny, conceptual refinements, and data revisions. The slowdown was primarily centered in those sectors that were most energy-intensive, were hardest hit by the energy shocks of the 1970s, and therefore had large output declines. In a sense, the energy …
Estimated Age Effects In Athletic Events And Chess, Ray C. Fair
Estimated Age Effects In Athletic Events And Chess, Ray C. Fair
Cowles Foundation Discussion Papers
Rates of decline are estimated using record bests by age for chess and for various track and field, road running, and swimming events. Using a fairly flexible functional form, the estimates show linear percent decline between age 35 and about age 70 and then quadratic decline after that. Chess shows much less decline than the physical activities. Rates of decline are generally larger for the longer distances, and for swimming they are larger for women than for men. An advantage of using best-performance records to estimate rates of decline is that the records are generally based on very large samples. …
Rationality Of Belief. Or: Why Bayesianism Is Neither Necessary Nor Sufficient For Rationality, Itzhak Gilboa, Andrew Postlewaite, David Schmeidler
Rationality Of Belief. Or: Why Bayesianism Is Neither Necessary Nor Sufficient For Rationality, Itzhak Gilboa, Andrew Postlewaite, David Schmeidler
Cowles Foundation Discussion Papers
Economic theory reduces the concept of rationality to internal consistency. The practice of economics, however, distinguishes between rational and irrational beliefs. There is therefore an interest in a theory of rational beliefs, and of the process by which beliefs are generated and justified. We argue that the Bayesian approach is unsatisfactory for this purpose, for several reasons. First, the Bayesian approach begins with a prior, and models only a very limited form of learning, namely, Bayesian updating. Thus, it is inherently incapable of describing the formation of prior beliefs. Second, there are many situations in which there is not sufficient …
On The Nonparametric Identification Of Nonlinear Simultaneous Equations Models: Comment On B. Brown (1983) And Roehrig (1988), C. Lanier Benkard, Steven T. Berry
On The Nonparametric Identification Of Nonlinear Simultaneous Equations Models: Comment On B. Brown (1983) And Roehrig (1988), C. Lanier Benkard, Steven T. Berry
Cowles Foundation Discussion Papers
This note revisits the identification theorems of B. Brown (1983) and Roehrig (1988). We describe an error in the proofs of the main identification theorems in these papers, and provide an important counterexample to the theorems on the identification of the reduced form. Specifically, contrary to the theorems, the reduced form of a nonseparable simultaneous equations model is not identified even under the assumptions of those papers. We conclude the note with a conjecture that it may be possible to use classical exclusion restrictions to recover some of the key implications of the theorems.
Toward An Economic Theory Of Dysfunctional Identity, Hanming Fang, Glenn C. Loury
Toward An Economic Theory Of Dysfunctional Identity, Hanming Fang, Glenn C. Loury
Cowles Foundation Discussion Papers
We advance a novel choice-theoretic model of “identity” based on the notions of categories and narratives. Identity is conceived as a matter of “reflexive perception” — how people understand themselves. Choosing an identity is equivalent to making a generalization about one’s past that highlights the most salient aspects of experience. When many individuals make a common choice in this regard, they embrace a collective identity which is dysfunctional if it is Pareto dominated by an alternative self-classificatory schema. Using a simple multi-stage risk sharing game, we explore conditions under which dysfunctional collective identities might be expected to emerge.
Axiomatization Of An Exponential Similarity Function, Antoine Billot, Itzhak Gilboa, David Schmeidler
Axiomatization Of An Exponential Similarity Function, Antoine Billot, Itzhak Gilboa, David Schmeidler
Cowles Foundation Discussion Papers
An agent is asked to assess a real-valued variable y based on certain characteristics x = ( x 1 ,…, x m ), and on a database consisting of n observations of ( x 1 ,…, x m ,y). A possible approach to combine past observations of x and y with the current values of x to generate an assessment of y is similarity-weighted averaging. It suggests that the predicted value of y , y s n +1, be the weighted average of all previously observed values y i , where the weight of y i is the similarity between …
Empirical Similarity, Itzhak Gilboa, Offer Lieberman, David Schmeidler
Empirical Similarity, Itzhak Gilboa, Offer Lieberman, David Schmeidler
Cowles Foundation Discussion Papers
An agent is asked to assess a real-valued variable Y p based on certain characteristics X p = ( X 1 p ,…, X m p ), and on a database consisting ( X 1 i ,…, X m i , Y i ) for i = 1,…, n . A possible approach to combine past observations of X and Y with the current values of X to generate an assessment of Y is similarity-weighted averaging. It suggests that the predicted value of Y , Y s p , be the weighted average of all previously observed values Y i …
Distribution And Politics: A Brief History And Prospect, John E. Roemer
Distribution And Politics: A Brief History And Prospect, John E. Roemer
Cowles Foundation Discussion Papers
A brief, historical review of the study of the interdependency between politics and economic distribution is offered. While the impact of economic interests on politics has been acknowledged for thousands of years, and the impact of politics on distribution for hundreds, it is only in the last thirty years that formal models of the interdependency between economic distribution and politics have been formulated. A general model of political-economic equilibrium is proposed, in which political competition and economic distribution jointly determine each other. Several examples are given. The author proposes that political economy, conceived of as studying this process of joint …
Modeling Party Competition In General Elections, John E. Roemer
Modeling Party Competition In General Elections, John E. Roemer
Cowles Foundation Discussion Papers
We survey critically the brief history of modeling party competition in general elections, beginning with the Hotelling-Downs model with a unidimensional policy space, and the Wittman model with endogenous parties, to the multi-dimensional citizen-candidate and PUNE models. Some applications of the newer models are discussed.
Competitive Experimentation With Private Information, Giuseppe Moscarini, Francesco Squintani
Competitive Experimentation With Private Information, Giuseppe Moscarini, Francesco Squintani
Cowles Foundation Discussion Papers
We study a winner-take-all R&D race where firms are privately informed about the uncertain arrival rate of the invention. Due to the interdependent-value nature of the problem, the equilibrium displays a strong herding effect that distinguishes our framework from war-of-attrition models. Nonetheless, equilibrium expenditure in R&D is sub-optimal when the planner is sufficiently impatient. Pessimistic firms prematurely exit the race, so that the expected discounted amount of R&D activity is inefficiently low. This result stands in contrast to the overinvestment in research that is typical of winner-take-all R&D races without private information. We conclude that secrecy in R&D inefficiently slows …
The Folk Theorem In Dynastic Repeated Games, Luca Anderlini, Dino Gerardi, Roger Lagunoff
The Folk Theorem In Dynastic Repeated Games, Luca Anderlini, Dino Gerardi, Roger Lagunoff
Cowles Foundation Discussion Papers
A canonical interpretation of an infinitely repeated game is that of a “dynastic” repeated game: a stage game repeatedly played by successive generations of finitely-lived players with dynastic preferences. These two models are in fact equivalent when the past history of play is observable to all players. In our model all players live one period and do not observe the history of play that takes place before their birth, but instead receive a private message from their immediate predecessors. Under very mild conditions, when players are sufficiently patient, all feasible payoff vectors (including those below the minmax) can be sustained …
Coordination Failure In Repeated Games With Almost-Public Monitoring, George J. Mailath, Stephen Morris
Coordination Failure In Repeated Games With Almost-Public Monitoring, George J. Mailath, Stephen Morris
Cowles Foundation Discussion Papers
Some private-monitoring games, that is, games with no public histories, can have histories that are almost public. These games are the natural result of perturbing public-monitoring games towards private monitoring. We explore the extent to which it is possible to coordinate continuation play in such games. It is always possible to coordinate continuation play by requiring behavior to have bounded recall (i.e., there is a bound L such that in any period, the last L signals are sufficient to determine behavior). We show that, in games with general almost-public private monitoring, this is essentially the only behavior that can coordinate …
Effective Labor Regulation And Microeconomic Flexibility, Ricardo J. Caballero, Kevin N. Cowan, Eduardo Engel, Alejandro Micco
Effective Labor Regulation And Microeconomic Flexibility, Ricardo J. Caballero, Kevin N. Cowan, Eduardo Engel, Alejandro Micco
Cowles Foundation Discussion Papers
Microeconomic flexibility is at the core of economic growth in modern market economies because it facilitates the process of creative-destruction, The main reason why this process is not infinitely fast, is the presence of adjustment costs, some of them technological, others institutional. Chief among the latter is labor market regulation. While few economists object to the hypothesis that labor market regulation hinders the process of creative-destruction, its empirical support is limited. In this paper we revisit this hypothesis, using a new sectoral panel for 60 countries and a methodology suitable for such a panel. We find that job security regulation …
Network Markets And Consumer Coordination, Attila Ambrus, Rossella Argenziano
Network Markets And Consumer Coordination, Attila Ambrus, Rossella Argenziano
Cowles Foundation Discussion Papers
This paper assumes that groups of consumers in network markets can coordinate their choices when it is in their best interest to do so, and when coordination does not require communication. It is shown that multiple asymmetric networks can coexist in equilibrium if consumers have heterogeneous reservation values. A monopolist provider might choose to operate multiple networks to price differentiate consumers on both sides of the market. Competing network providers might operate networks such that one of them targets high reservation value consumers on one side of the market, while the other targets high reservation value consumers on the other …
Locational Competition And The Environment: Should Countries Harmonize Their Environmental Policies?, William D. Nordhaus
Locational Competition And The Environment: Should Countries Harmonize Their Environmental Policies?, William D. Nordhaus
Cowles Foundation Discussion Papers
In debates about economic unification or trade liberalization, it is often asked whether harmonization should go beyond taxes and macroeconomic policies to include regulations, particularly environmental policy. This issue also arises when countries, states, and cities engage in competition for plants, jobs, or exports in what we might call “locational competition.” This essay analyzes locational competition with particular reference to environmental policy. The conclusions are the following: First, economic efficiency requires harmonization of policies for global environmental issues; second, for local public goods or externalities, there is a strong presumptive case against harmonization; and finally that a competitive “race to …
Coordination Failure In Repeated Games With Almost-Public Monitoring, George J. Mailath, Stephen Morris
Coordination Failure In Repeated Games With Almost-Public Monitoring, George J. Mailath, Stephen Morris
Cowles Foundation Discussion Papers
Some private-monitoring games, that is, games with no public histories, can have histories that are almost public. These games are the natural result of perturbing public monitoring games towards private monitoring. We explore the extent to which it is possible to coordinate continuation play in such games. It is always possible to coordinate continuation play by requiring behavior to have bounded recall (i.e., there is a bound L such that in any period, the last L signals are sufficient to determine behavior). We show that, in games with general almost-public private monitoring, this is essentially the only behavior that can …
Impartiality, Solidarity, And Priority In The Theory Of Justice, Juan D. Moreno-Ternero, John E. Roemer
Impartiality, Solidarity, And Priority In The Theory Of Justice, Juan D. Moreno-Ternero, John E. Roemer
Cowles Foundation Discussion Papers
The veil of ignorance has been used often as a tool for recommending what justice requires with respect to the distribution of wealth. We show that John Harsanyi’s and Ronald Dworkin’s conceptions of the veil, when modeled formally, recommend wealth allocations in conflict with the prominently espoused view that priority should be given to the worse off with respect to wealth allocation. It follows that those who believe that justice requires impartiality and priority must seek some method of assuring the former other than the veil of ignorance. We propose that impartiality and solidarity are fundamentals of justice, and study …
Xenophobia And Distribution In France: A Politico-Economic Analysis, John E. Roemer, Karine Van Der Straeten
Xenophobia And Distribution In France: A Politico-Economic Analysis, John E. Roemer, Karine Van Der Straeten
Cowles Foundation Discussion Papers
Anti-immigrant feeling (xenophobia) among voters has been proposed as a key factor explaining why, in the 2002 French national election, Jean Le Pen’s National Front Party won second place. Here, we study the effect of anti-immigrant sentiments among voters on the equilibrium position of political parties on the economic issue, which we take to be the size of the public sector. We model political competition among three parties (Left, Right, and Extreme Right) on a two-dimensional policy space (public sector size, immigration issue) using the PUNE model. We calibrate the model to French data for the election years 1988 and …
Impartiality And Priority. Part 1: The Veil Of Ignorance, Juan D. Moreno-Ternero, John E. Roemer
Impartiality And Priority. Part 1: The Veil Of Ignorance, Juan D. Moreno-Ternero, John E. Roemer
Cowles Foundation Discussion Papers
The veil of ignorance has been used often as a tool for recommending what justice requires with respect to the distribution of wealth. We complete Harsanyi’s model of the veil of ignorance by appending information permitting interpersonal comparability of welfare. We show that the veil-of-ignorance conception of John Harsanyi, so completed, and Ronald Dworkin’s, when modeled formally, recommend wealth allocations in conflict with the prominently espoused view that priority should be given to the worse off with respect to wealth allocation.
Impartiality And Priority. Part 2: A Characterization With Solidarity, Juan D. Moreno-Ternero, John E. Roemer
Impartiality And Priority. Part 2: A Characterization With Solidarity, Juan D. Moreno-Ternero, John E. Roemer
Cowles Foundation Discussion Papers
The ethic of ‘priority’ is a compromise between the extremely compensatory ethic of ‘welfare equality’ and the needs-blind ethic of ‘income equality’. We propose an axiom of priority, and characterize resource allocation rules that are impartial, prioritarian, and solidaristic. They comprise a class of rules which equalize across individuals some index of resources and welfare. Consequently, we provide an ethical rationalization for the many applications in which such indices have been used (e.g., the ‘human development index,’ ‘index of primary goods,’ etc.).
Grading Exams: 100, 99, ..., 1 Or A, B, C? Incentives In Games Of Status, Pradeep Dubey, John Geanakoplos
Grading Exams: 100, 99, ..., 1 Or A, B, C? Incentives In Games Of Status, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We show that if students care primarily about their status (relative rank) in class, they are best motivated to work not by revealing their exact numerical exam scores (100,99,…,1), but instead by clumping them in broad categories (A,B,C). If their abilities are disparate, the optimal grading scheme awards fewer A’s than there are alpha-quality students, creating small elites. If their abilities are common knowledge, then it is better to grade them on an absolute scale (100 to 90 is an A, etc.) rather than on a curve (top 15% is an A, etc.). We develop criteria for optimal grading schemes …
Limit Theory For Moderate Deviations From A Unit Root, Peter C.B. Phillips, Tassos Magdalinos
Limit Theory For Moderate Deviations From A Unit Root, Peter C.B. Phillips, Tassos Magdalinos
Cowles Foundation Discussion Papers
An asymptotic theory is given for autoregressive time series with a root of the form ρ n = 1 + c/ n α , which represents moderate deviations from unity when α in (0,1). The limit theory is obtained using a combination of a functional law to a diffusion on D [0,∞) and a central limit law to a scalar normal variate. For c > 0, the results provide a n (1+α)/2 rate of convergence and asymptotic normality for the first order serial correlation, partially bridging the squareroot of n and n convergence rates for the stationary (α = 0) and …
Regression Asymptotics Using Martingale Convergence Methods, Rustam Ibragimov, Peter C.B. Phillips
Regression Asymptotics Using Martingale Convergence Methods, Rustam Ibragimov, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Weak convergence of partial sums and multilinear forms in independent random variables and linear processes to stochastic integrals now plays a major role in nonstationary time series and has been central to the development of unit root econometrics. The present paper develops a new and conceptually simple method for obtaining such forms of convergence. The method relies on the fact that the econometric quantities of interest involve discrete time martingales or semimartingales and shows how in the limit these quantities become continuous martingales and semimartingales. The limit theory itself uses very general convergence results for semimartingales that were obtained in …
Competition, Consumer Welfare And Monopoly Power, Donald J. Brown, G. A. Wood
Competition, Consumer Welfare And Monopoly Power, Donald J. Brown, G. A. Wood
Cowles Foundation Discussion Papers
An applied general equilibrium analysis of monopoly power is proposed as an alternative to the partial equilibrium analyses of monopoly pricing current in antitrust economics. This analysis introduces a new notion of market equilibrium where firms with monopoly power are cost-minimizing price-takers in competitive factor markets and make supracompetitive profits in equilibrium, i.e., the monopoly price exceeds the marginal cost of production. We assume that the primary goals of antitrust policy are the promotion of competition and the enhancement of consumer welfare. To that end, we use Debreu’s coefficient of resource utilization to determine the counterfactual competitive price levels in …
Hac Estimation By Automated Regression, Peter C.B. Phillips
Hac Estimation By Automated Regression, Peter C.B. Phillips
Cowles Foundation Discussion Papers
A simple regression approach to HAC and LRV estimation is suggested. The method exploits the fact that the quantities of interest relate to only one point of the spectrum (the origin). The new estimator is simply the explained sum of squares in a linear regression whose regressors are a set of trend basis functions. Positive definiteness in the estimate is therefore automatically enforced and the technique can be implemented with standard regression packages. No kernel choice is needed in practical implementation but basis functions need to be chosen and a smoothing parameter corresponding to the number of basis functions needs …
Uniform Limit Theory For Stationary Autoregression, Liudas Giraitis, Peter C.B. Phillips
Uniform Limit Theory For Stationary Autoregression, Liudas Giraitis, Peter C.B. Phillips
Cowles Foundation Discussion Papers
First order autoregression is shown to satisfy a limit theory which is uniform over stationary values of the autoregressive coefficient ρ = ρ n in [0,1) provided (1 - ρ n )n approaches infinity. This extends existing Gaussian limit theory by allowing for values of stationary rho that include neighbourhoods of unity provided they are wider than ( n 1 ), even by a slowly varying factor. Rates of convergence depend on rho and are at least squareroot of / n but less than n . Only second moments are assumed, as in the case of stationary autoregression with fixed …