Social and Behavioral Sciences Commons^™

All-Pay Auctions With Ties, Alan Gelder, Dan Kovenock, Brian Roberson

ESI Working Papers

We study the two-player, complete information all-pay auction in which a tie ensues if neither player outbids the other by more than a given amount. In the event of a tie, each player receives an identical fraction of the winning prize. Thus players engage in two margins of competition: losing versus tying, and tying versus winning. Two pertinent parameters are the margin required for victory and the value of tying relative to winning. We fully characterize the set of Nash equilibria for the entire parameter space. For much of the parameter space, there is a unique Nash equilibrium which is …

A Perspective On Electronic Alternatives To Traditional Currencies, Gabriele Camera

ESI Working Papers

The institution of money is rapidly evolving thanks to developments in computer-based cryptography. Technological advances have made possible the creation of cost-effective electronic alternatives to banknotes and coins, which are the traditional physical currencies. This document aims to describe — based on scientific literature — the use and characteristics of money, some of the problems associated with issuing a new currency or a new payment instrument, and the possible comparative advantages of a central bank in leading the way relative to private issuers.

Asymmetric Social Norms, Gabriele Camera, Alessandro Gioffré

ESI Working Papers

Studies of cooperation in infinitely repeated matching games focus on homogeneous economies, where full cooperation is efficient and any defection is collectively sanctioned. Here we study heterogeneous economies where occasional defections are part of efficient play, and show how to support those outcomes through contagious punishments.

Factors Influencing Greenhouse Gas Emissions From Land Use, Land-Use Change, And Forest Activities, Pattarawan Watcharaanantapong

Doctoral Dissertations

Greenhouse gas (GHG) emissions are a major global issue because of their effects on climate and the resulting environmental and human impacts. The primary greenhouse gases (GHGs), carbon dioxide (CO₂), methane (CH₄), and nitrous oxide (N₂O), are emitted into the atmosphere from a myriad of human activities such as energy supply, manufacturing, transportation, commercial and residential buildings, and waste. Additionally, management activities on agricultural and forest lands can influence GHG emissions substantially. Even though GHGs can be released into the air via the sectors mentioned, GHGs, especially CO₂, can be removed from …

Rhode Island Current Conditions Index -- December 2016, Leonard Lardaro

The Rhode Island Current Conditions Index

No abstract provided.

Shrinkage Estimation Of Regression Models With Multiple Structural Changes, Junhai Qian, Liangjun Su

Research Collection School Of Economics

In this paper, we consider the problem of determining the number of structural changes in multiple linear regression models via group fused Lasso. We show that with probability tending to one, our method can correctly determine the unknown number of breaks, and the estimated break dates are sufficiently close to the true break dates. We obtain estimates of the regression coefficients via post Lasso and establish the asymptotic distributions of the estimates of both break ratios and regression coefficients. We also propose and validate a data-driven method to determine the tuning parameter. Monte Carlo simulations demonstrate that the proposed method …

Weak Convergence To Stochastic Integrals For Econometric Applications, Hanying Liang, Peter C. B. Phillips, Hanchao Wang, Qiying Wang

Research Collection School Of Economics

Limit theory involving stochastic integrals is now widespread in time series econometrics and relies on a few key results on functional weak convergence. In establishing such convergence, the literature commonly uses martingale and semimartingale structures. While these structures have wide relevance, many applications involve a cointegration framework where endogeneity and nonlinearity play major roles and complicate the limit theory. This paper explores weak convergence limit theory to stochastic integral functionals in such settings. We use a novel decomposition of sample covariances of functions of I (1) and I (0) time series that simplifies the asymptotics and our limit results for …

Panel Data Models With Interactive Fixed Effects And Multiple Structural Breaks, Degui Li, Junhui Qian, Liangjun Su

Research Collection School Of Economics

In this article, we consider estimation of common structural breaks in panel data models with unobservable interactive fixed effects. We introduce a penalized principal component (PPC) estimation procedure with an adaptive group fused LASSO to detect the multiple structural breaks in the models. Under some mild conditions, we show that with probability approaching one the proposed method can correctly determine the unknown number of breaks and consistently estimate the common break dates. Furthermore, we estimate the regression coefficients through the post-LASSO method and establish the asymptotic distribution theory for the resulting estimators. The developed methodology and theory are applicable to …

Using Experiments To Compare The Predictive Power Of Models Of Multilateral Negotiations, Cary Deck, Charles J. Thomas

ESI Working Papers

We conduct unstructured negotiations in a laboratory experiment designed to empirically assess the predictive power of three approaches to modeling the multilateral negotiations observed in diverse strategic settings. For concreteness we consider two sellers negotiating with a buyer who wants to make only one trade, with the modeling approaches distinguished by whether the buyer negotiates with the sellers sequentially, simultaneously, or in a “take-it-or-leave-it” fashion. Our experiment features two scenarios within which the three approaches have observationally distinct predictions: a differentiated scenario with one high-surplus and one low-surplus seller, and a homogeneous scenario with identical high-surplus sellers. In both scenarios …

Volatility Modelling With Applications To Equity And Foreign Exchange Markets, Sergii Pypko

Electronic Thesis and Dissertation Repository

My thesis consists of three chapters describing volatility forecasting during periods of financial booms and busts, the economic and statistical benefits of flexible data generating process of index returns, and multivariate model of exchange rate returns and their options. In the first chapter, I propose a non-linear threshold model for realized volatility of S\&P 500 index, allowing us to obtain a more accurate volatility forecast, especially during periods of financial crisis. The changes in volatility regimes are driven by negative past returns, where the threshold equals approximately $-$1\%. This finding remains robust to different functional forms of volatility and different …

The Economic Efficacy Of Reintegration Assistance For Former Child Soldiers, Jonathan B. Kaufmann

Undergraduate Economic Review

There is no consensus among scholars on the efficacy of reintegration assistance programs, including how their services affect reintegration outcomes. This research is the first statistical analysis of the economic impacts of reintegration assistance for former child soldiers. Several regression analyses were performed to determine the effect of reintegration assistance on earnings and social capital. The results indicate that no statistically significant relationship exists between reintegration assistance and earnings or social capital. Conversely, societal interventions such as increasing access to education and promoting traditional cleansing ceremonies were effective.

Price Escalation Verification Project - A Consultants’ Report, Tarun Kabiraj

Monographs

At the request of Coal India Limited (CIL) the “Price Escalation Verification Project” has been undertaken by a team of the Economic Research Unit, Indian Statistical Institute. The project examines the escalation clause associated with the price index formula to be used in contract agreements between CIL and Mine Developers.

The existing formulae for price escalation, both for open cast and underground coal mining, have been examined and certain modifications along with justification have been proposed. Using illustrative examples, it is found that the suggested escalation formulae have significant impact on the final prices.

Determining Yuan Valuation- An Extension Of The Imf External Balance Assessment Approach, Shantanu A. Banerjee

Undergraduate Economic Review

This paper applies the IMF EBA methodology to a China-specific time series analysis, using a 2SLS instrumented regression with Newey-West standard errors to determine the policy gap that results from PBOC intervention. We find the impact of reserve accumulation to be more significant in magnitude than indicated by the EBA, demonstrating a modest improvement in accuracy with the introduction of central bank liquidity swaps as a novel instrument. Evidence of a long term equilibrium relationship is also found between the real effective exchange rate and reserve accumulation, with the presence of medium level capital controls.

Three Essays On U.S. Household Debt And The Sources Of Systemic Financial Fragility, Thomas Herndon

Doctoral Dissertations

This dissertation consists of three essays which analyze the role of household debt in the financial crisis of 2007-2009, and weak recovery that followed. In these essays, I pursue the following research topics: 1) Estimation of the effects of mortgage fraud on losses to foreclosure, 2) Estimation of whether loan modifications increased or decreased debt, and 3) Analyzing the historical evolution of housing finance regulation to advance a proposal for reform. While formally independent, these essays share a common theoretical perspective located at the intersection of financial macroeconomics and political economy. These essays analyze how conflicts of interest and inside …

The Effects Of Review Prohibition Periods On Video Game Consumer Purchasing Decisions, Richard J. Applin

Posters-at-the-Capitol

Video game developers typically prohibit media outlets from publishing reviews of upcoming video games until some specified date. This study hypothesizes that review prohibition periods that give consumers relatively little time to digest reviews result in consumers being more likely to have a negative perception of an upcoming game – thus, resulting in lower initial sales. To test this, a number of video game releases from the past decade are considered in order to model the extent to which initial sales of a game are a function of review prohibition periods while holding a variety of other variables constant. The …

Inorganic Growth In The Organic Food Industry: Examining Barriers To Entry And Economic Rents, Jaime Elizabeth Staengel

Posters-at-the-Capitol

Recently in the organic food industry, more lines of organic food are being introduced in stores as demand for organic products continues to grow. The organic food industry has witnessed high price premiums in the past which, according to economic theory, would in a perfectly competitive market attract entry until those price premiums decreased to the point where economic profits were zero. However, the USDA’s National Organic Certification Cost Share Program, or NOCCP, was introduced in its current form in 2009 and offers reimbursement for farmers who are already certified with certification or recertification costs for their organic farming operation. …

The Effects Of Charities On Rural Economic Development, Joshua Drouin

Posters-at-the-Capitol

The Effects of Charities on Rural Economic Development: An Analysis of the Outcomes of Charity Involvement and the Reduction of Local Economic Growth

Joshua Drouin Dr. David Eaton

This research examines the impact of charities and NGOs on economic development in areas served by the charitable groups. We will look at both long term NGO and charitable involvement, as well as disaster related efforts. By drawing on the comparisons we can empirically test the Samaritan’s Dilemma put forth by James Buchannan. This hypothesis suggests that while charity actions can help in the short term, they can lead to long term …

Economic Analysis With Systematically Biased Agents, Mark Schneider

ESI Working Papers

A tenet of behavioral economics is that biases are systematic and should have visible effects in economic applications. Expected utility maximization has been widely applied in economic analysis, but progress has been slower incorporating 'systematically biased' agents into applications involving risk. This contrasts with the widespread application of present-biased preferences in intertemporal settings. To address this gap, we advocate a model of quasi-rank dependent probability weighting as a natural analog to quasi-hyperbolic discounting for decisions under risk. The model satisfies stochastic dominance and transitivity and transforms individual rather than cumulative probabilities. We illustrate the model’s tractability in several economic applications.

Rhode Island Current Conditions Index -- November 2016, Leonard Lardaro

The Rhode Island Current Conditions Index

No abstract provided.

The Identification And Estimation Of A Large Factor Model With Structural Instability, Badi H. Baltagi, Chihwa Kao, Fa Wang

Center for Policy Research

This paper tackles the identification and estimation of a high dimensional factor model with unknown number of latent factors and a single break in the number of factors and/or factor loadings occurring at unknown common date. First, we propose a least squares estimator of the change point based on the second moments of estimated pseudo factors and show that the estimation error of the proposed estimator is Op(1). We also show that the proposed estimator has some degree of robustness to misspecification of the number of pseudo factors. With the estimated change point plugged in, consistency of the estimated number …

The Academic Effects Of Chronic Exposure To Neighborhood Violence, Amy Ellen Schwartz, Agustina Laurito, Johanna Lacoe, Patrick Sharkey, Ingrid Gould Ellen

Center for Policy Research

We estimate the causal effect of repeated exposure to violent crime on test scores in New York City. We use two distinct empirical strategies; value-added models linking student performance on standardized exams to violent crimes on a student’s residential block, and a regression discontinuity approach that identifies the acute effect of an additional crime exposure within a one-week window. Exposure to violent crime reduces academic performance. Value added models suggest the average effect is very small; approximately -0.01 standard deviations in English Language Arts (ELA) and mathematics. RD models suggest a larger effect, particularly among children previously exposed. The marginal …

Stationary Points For Parametric Stochastic Frontier Models, William C. Horrace, Ian A. Wright

Center for Policy Research

The results of Waldman (1982) on the Normal-Half Normal stochastic frontier model are generalized using the theory of the Dirac delta (Dirac, 1930), and distribution-free conditions are established to ensure a stationary point in the likelihood as the variance of the inefficiency distribution goes to zero. Stability of the stationary point and "wrong skew" results are derived or simulated for common parametric assumptions on the model. Identification is discussed.

Bias Correction And Refined Inferences For Fixed Effects Spatial Panel Data Models, Zhenlin Yang, Jihai Yu, Shew Fan Liu

Research Collection School Of Economics

This paper first presents simple methods for conducting up to third-order bias and variance corrections for the quasi maximum likelihood (QML) estimators of the spatial parameter(s) in the fixed effects spatial panel data (FE-SPD) models. Then, it shows how the bias and variance corrections lead to refined t-ratios for spatial effects and for covariate effects. The implementation of these corrections depends on the proposed bootstrap methods of which validity is established. Monte Carlo results reveal that (i) the QML estimators of the spatial parameters can be quite biased, (ii) a second-order bias correction effectively removes the bias, and (iii) the …

Shrinkage Estimation Of Covariance Matrix For Portfolio Choice With High Frequency Data, Cheng Liu, Ningning Xia, Jun Yu

Research Collection School Of Economics

This paper examines the usefulness of high frequency data in estimating the covariancematrix for portfolio choice when the portfolio size is large. A computationally convenientnonlinear shrinkage estimator for the integrated covariance (ICV) matrix of financial as-sets is developed in two steps. The eigenvectors of the ICV are first constructed from adesigned time variation adjusted realized covariance matrix of noise-free log-returns of rel-atively low frequency data. Then the regularized eigenvalues of the ICV are estimated byquasi-maximum likelihood based on high frequency data. The estimator is always positivedefinite and its inverse is the estimator of the inverse of ICV. It minimizes the …

Identifying Latent Structures In Panel Data, Liangjun Su, Zhentao Shi, Peter C. B. Phillips

Research Collection School Of Economics

This paper provides a novel mechanism for identifying and estimating latent group structures in panel data using penalized techniques. We consider both linear and nonlinear models where the regression coefficients are heterogeneous across groups but homogeneous within a group and the group membership is unknown. Two approaches are consideredpenalized profile likelihood (PPL) estimation for the general nonlinear models without endogenous regressors, and penalized GMM (PGMM) estimation for linear models with endogeneity. In both cases, we develop a new variant of Lasso called classifier-Lasso (C-Lasso) that serves to shrink individual coefficients to the unknown group-specific coefficients. C-Lasso achieves simultaneous classification and …

Homogeneity Pursuit In Panel Data Models: Theory And Applications, Wuyi Wang, Peter C. B. Phillips, Liangjun Su

Research Collection School Of Economics

This paper studies estimation of a panel data model with latent structures where individuals can be classified into different groups where slope parameters are homogeneous within the same group but heterogeneous across groups. To identify the unknown group structure of vector parameters, we design an algorithm called Panel-CARDS which is a systematic extension of the CARDS procedure proposed by Ke, Fan, and Wu (2015) in a cross section framework. The extension addresses the problem of comparing vector coefficients in a panel model for homogeneity and introduces a new concept of controlled classification of multidimensional quantities called the segmentation net. We …

The Pros And Cons Of Workplace Tournaments, Roman M. Sheremeta

ESI Working Papers

Tournaments are commonly used in the workplace to determine promotion, assign bonuses, and motivate personal development. Tournament-based contracts can be very effective in eliciting high effort, often outperforming other compensation contracts, but they can also have negative consequences for both managers and workers. The benefits and disadvantages of workplace tournaments have been identified in theoretical, empirical, and experimental research over the past several decades. Based on these findings, I provide suggestions and guidelines for when it might be beneficial to use tournaments in the workplace.

Asymptotically Refined Score And Gof Tests For Inverse Gaussian Models, Anthony F. Desmond, Zhenlin Yang

Research Collection School Of Economics

The score test and the GOF test for the inverse Gaussian distribution, in particular the latter, are known to have large size distortion and hence unreliable power when referring to the asymptotic critical values. We show in this paper that with the appropriately bootstrapped critical values, these tests become second-order accurate, with size distortion being essentially eliminated and power more reliable. Two major generalizations of the score test are made: one is to allow the data to be right-censored, and the other is to allow the existence of covariate effects. A data mapping method is introduced for the bootstrap to …

Semiparametric Single Index Panel Data Models With Interactive Fixed Effects: Theory And Practice, Guohua Feng, Bin Peng, Liangjun Su, Thomas Tao Yang

Research Collection School Of Economics

In this paper, we propose a single-index panel data model with unobserved multiple interactive fixed effects. This model has the advantages of being flexible and of being able to allow for common shocks and their heterogeneous impacts on cross sections, thus making it suitable for the investigation of many economic issues. We derive asymptotic theories for both the case where the link function is integrable and the case where the link function is non-integrable. Our Monte Carlo simulations show that our methodology works well for large N and T cases. In our empirical application, we illustrate our model by analyzing …

The Effects Of Borrowing Rates On Intra-Firm Disequilibria Between Equity Prices And Cds Premiums – Evidence From Dynamic Panel Analysis., Robert J. Brown

Undergraduate Economic Review

Cointegration techniques are used to estimate the long run equilibrium relationship between a firm’s CDS premium and its equity price, for a panel of large-cap US firms. From these results, the estimated disequilibrium in daily CDS premiums, with respect to equity prices, is constructed. Dynamic panel methods are employed to show the importance of lagged changes in libor rates as determinants of the estimated disequilibrium. Evidence is found that the extent to which the markets deviate from equilibrium will increase as one-month libor rates rise, but, counter-intuitively, will decrease (return towards equilibrium) as longer term libor rates rise.