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Articles 1 - 30 of 57
Full-Text Articles in Economics
Games With Perceptive Commanders But Less Perceptive Subordinates, Martin Shubik
Games With Perceptive Commanders But Less Perceptive Subordinates, Martin Shubik
Cowles Foundation Discussion Papers
We introduce a model of the 2 x 2 games played by agents or subordinates of the players. We assume that each agent or subordinates of the players. We assume that each agent is not as perceptive as his commander in that he can make only two distinctions among the four outcomes whose value can be distinguished by the commanders.
A Note On The Unbiasedness Of Feasible Gls, Quasi-Maximum Likelihood, Robust Adaptive, And Spectral Estimators Of The Linear Model, Donald W.K. Andrews
A Note On The Unbiasedness Of Feasible Gls, Quasi-Maximum Likelihood, Robust Adaptive, And Spectral Estimators Of The Linear Model, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This note presents a set of conditions on the defining functions of regression parameter estimators of the linear model. These conditions guarantee that the estimators are symmetrically distributed about the true parameter value, and hence are median unbiased, provided the conditional distribution of the vector of errors is symmetric given the matrix of regressors. The symmetry result holds even if the regression parameters are subject to linear restrictions. If the estimators posses one or more moments, then the symmetry result also implies mean unbiasedness. Similar conditions are provided that establish the property of origin (or shift) equivariance for the estimators. …
On A General Existence Theorem For Marginal Cost Pricing Equilibria, Donald J. Brown, Geoffrey M. Heal, M. Ali Khan, Rajiv Vohra
On A General Existence Theorem For Marginal Cost Pricing Equilibria, Donald J. Brown, Geoffrey M. Heal, M. Ali Khan, Rajiv Vohra
Cowles Foundation Discussion Papers
We report a generalization of recent results on the existence of marginal cost pricing equilibria (MCPE) in economies with an increasing returns to scale industry. Our result makes no ad hoc assumptions which force the equilibrium to be on the efficiency frontier of the aggregate production possibility set. We also present an additional condition under which our MCPE are productivity efficient in the aggregate.
Testing The Random Walk Hypothesis: Power Versus Frequency Of Observation, Robert J. Shiller, Pierre Perron
Testing The Random Walk Hypothesis: Power Versus Frequency Of Observation, Robert J. Shiller, Pierre Perron
Cowles Foundation Discussion Papers
Power functions of tests of the random walk hypothesis versus stationary first order autoregressive alternatives are tabulated for samples of fixed span but various frequencies of observation. For a t -test and normalized test, power is found to depend, for a substantial range of parameter values, more on the span of the data in time than on the number of observations. For a runs test, power rapidly declines as the number of observations is increased beyond a certain point.
A Note On The Unbiasedness Of Feasible Gls, Quasi-Maximum Likelihood, Robust Adaptive, And Spectral Estimators Of The Linear Model, Donald W.K. Andrews
A Note On The Unbiasedness Of Feasible Gls, Quasi-Maximum Likelihood, Robust Adaptive, And Spectral Estimators Of The Linear Model, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This note presents a set of conditions on the defining functions of regression parameter estimators of the linear model. These conditions guarantee that the estimators are symmetrically distributed about the true parameter value, and hence are median unbiased, provided the conditional distribution of the vector of errors is symmetric given the matrix of regressors. The symmetry result holds even if the regression parameters are subject to linear restrictions. If the estimators posses one or more moments, then the symmetry result also implies mean unbiasedness. Similar conditions are provided that establish the property of origin (or shift) equivariance for the estimators. …
The Exact Distribution Of The Wald Statistic: The Non-Central Case, Peter C.B. Phillips, Sam Ouliaris
The Exact Distribution Of The Wald Statistic: The Non-Central Case, Peter C.B. Phillips, Sam Ouliaris
Cowles Foundation Discussion Papers
This paper extends earlier results, which were reported in [7], to include non null distributions. As in [7], attention is concentrated on the Wald statistic for testing general linear restrictions on the coefficients in the multivariate linear model. The results of the present paper encompass the null distributions derived in [7] and generalize all previously known results for such statistics as the standard regression test and Hotelling’s T 2 test.
Managerial Incentives And Capital Management, Bengt Holmstrom, Joan E. Ricart-Costa
Managerial Incentives And Capital Management, Bengt Holmstrom, Joan E. Ricart-Costa
Cowles Foundation Discussion Papers
In Holmstrom (1982) an example is given, which shows that a manager’s concern for the value of his human capital will lead to a natural incongruity in risk-preferences between himself and the owners, even when no effort considerations are involved. In this paper we present a formal model of this channel of incongruity based on learning about managerial talent. We also explore the nature of an optimal incentive contract in the case where the manager may withhold but not misrepresent information about investment returns. The optimal contract is an option on the manager’s human capital value with a possible bonus …
A Note On Enough Money In A Strategic Market Game With Complete Or Fewer Markets, Martin Shubik
A Note On Enough Money In A Strategic Market Game With Complete Or Fewer Markets, Martin Shubik
Cowles Foundation Discussion Papers
This paper discusses the notion of “enough money” in strategic market games. In an economy with one money, m-1 markets and no credit, in order to be able to achieve efficient trade there must be “enough money” held by all traders. In essence “enough money” means that the noncooperative equilibrium solutions to a strategic market game is interior, in other words it is not considered by lack of liquidity. For simplicity two specific market mechanisms are described to illustrate the relationship between market structure and liquidity.
The Dynamic Demand For Capital And Labor, Matthew D. Shapiro
The Dynamic Demand For Capital And Labor, Matthew D. Shapiro
Cowles Foundation Discussion Papers
A model of the dynamically interrelated demand for capital and labor is specified and estimated. The estimates are of the first-order conditions of the firm’s problem rather than of the closed-form decision rules. This use of the first-order conditions allows a random rate of return and a flexible specification of the technology. The estimates do not imply the very slow rates of adjustment displayed in other, related estimates of the demand for capital. Because adjustment is estimated to be rapid, there is, contrary to the standard view, scope for factor-prices to affect investment at relatively high frequencies.
Strategic Market Games: A Dynamic Programming Application To Money, Banking And Insurance, Martin Shubik
Strategic Market Games: A Dynamic Programming Application To Money, Banking And Insurance, Martin Shubik
Cowles Foundation Discussion Papers
A series of models (kept simple in order to stress the structure of the models and the nature of the questions) are described and problems are posed pertaining to a dynamic economy with various possibilities for the issuance of fiat money, credit and insurance.
Optimal Cartel Equilibria With Imperfect Monitoring, Dilip Abreu, David G. Pearce, Ennio Stacchetti
Optimal Cartel Equilibria With Imperfect Monitoring, Dilip Abreu, David G. Pearce, Ennio Stacchetti
Cowles Foundation Discussion Papers
There exist optimal symmetric equilibria in the Green-Porter model [5, 8] having an elementary intertemporal structure. Such an equilibrium is described entirely by two subsets of price space and two quantities, the only production levels used by firms in any contingency. The central technique employed in the analysis is the reduction of the repeated game to a family of static games.
Expansionary Government Policy In An Economy With Commodity And Labor, Russell Cooper
Expansionary Government Policy In An Economy With Commodity And Labor, Russell Cooper
Cowles Foundation Discussion Papers
This paper considers a model in which all exchange is mediated by contracts. The analysis explores the indexation of labor and commodities contracts to observable variations in government spending financed by money creation. In one of the many equilibria, prices and nominal wages are shown to be independent of current money shocks. Except in the extreme equilibrium exhibiting full indexation, policy shocks will generate correlated movements in output and employment over time. The analysis thus suggests an inverse relationship between indexation of contracts and persistence of policy effects.
Neighborhood Systems For Production Sets With Indivisibilities, Herbert E. Scarf
Neighborhood Systems For Production Sets With Indivisibilities, Herbert E. Scarf
Cowles Foundation Discussion Papers
No abstract provided.
A Mean-Variance Approach To Fundamental Valuations, James Tobin
A Mean-Variance Approach To Fundamental Valuations, James Tobin
Cowles Foundation Discussion Papers
No abstract provided.
Testing For Serial Correlation And Unit Roots Using A Computer Function Routine Based On Era's, Peter C.B. Phillips, Peter C. Reiss
Testing For Serial Correlation And Unit Roots Using A Computer Function Routine Based On Era's, Peter C.B. Phillips, Peter C. Reiss
Cowles Foundation Discussion Papers
This paper initiates a research program to provide computer function routines that can be used to deliver critical values or significance levels for statistical tests. These routines are easily integrated into existing econometric software and can be made available on a user call basis. The mathematical formulae underlying these approximants belong to the family of extended rational approximants (ERA’s) introduced in [15]. The first part of this paper extends the algebraic theory of ERA’s to distribution function approximation. Composite functional approximants are also developed to treat the parameter multidimensionally that is common in practical application. The second part of the …
The Exact Distribution Of The Wald Statistic, Peter C.B. Phillips
The Exact Distribution Of The Wald Statistic, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper derives the exact distribution of the Wald statistic for testing general linear restrictions on the coefficients in the multivariate linear model. This generalizes all previously known results including those for the standard F statistic in linear regression, for Hotelling’s T 2 test and for Hotelling’s generalized T 0 2 test. Conventional classical assumptions of normally distributed errors and nonrandom exogenous variables are employed.
An Everywhere Convergent Series Representation Of The Distribution Of Hotellings Generalized T 2^0, Peter C.B. Phillips
An Everywhere Convergent Series Representation Of The Distribution Of Hotellings Generalized T 2^0, Peter C.B. Phillips
Cowles Foundation Discussion Papers
A new series representation of the exact distribution of Hotelling’s generalized T 0 2 statistic is found which is everywhere convergent. Earlier results by Constantine which are convergent on the interval [0,1) are also derived from the formulae given here. The new results are made possible by the use of a matrix operator calculus developed by the author.
An Everywhere Convergent Series Representation Of The Distribution Of Hotelling's Generalized T 2^0, Peter C.B. Phillips
An Everywhere Convergent Series Representation Of The Distribution Of Hotelling's Generalized T 2^0, Peter C.B. Phillips
Cowles Foundation Discussion Papers
A new series representation of the exact distribution of Hotelling’s generalized T 0 2 statistic is obtained. Unlike earlier work, the series representation given here is everywhere convergent. Explicit formulae are given for both the null and the noncentral distributions. Earlier results by Constantine [1], which are convergent on the interval [0,1), are also derived quite simply from our formulae.
Trends, Random Walks, And Tests Of The Permanent Income Hypothesis, N. Gregory Mankiw, Matthew D. Shapiro
Trends, Random Walks, And Tests Of The Permanent Income Hypothesis, N. Gregory Mankiw, Matthew D. Shapiro
Cowles Foundation Discussion Papers
Recent studies find that consumption is excessively sensitive to income. These studies assume that income is stationary around a deterministic trend. The data, however, do not reject the hypothesis that disposable income is a random walk with drift. If income is indeed a random walk, then the standard testing procedure is greatly biased toward finding excess sensitivity. Moreover, if income is borderline stationary, this procedure is also seriously biased.
Product Warranties And Double Moral Hazard, Russell Cooper, Thomas W. Ross
Product Warranties And Double Moral Hazard, Russell Cooper, Thomas W. Ross
Cowles Foundation Discussion Papers
This paper explores a model of warranties in which moral hazard problems play a key role. The goal is to understand the important characteristics of warranties including their provision of incomplete insurance and the relationship between product quality and coverage. We analyze a model in which buyers and sellers take actions which affect a product’s performance. Since these actions are not cooperatively determined, an incentives problem arises. We characterize the optimal warranty contract and undertake comparative statics to determine the predicted correlation of warranty coverage and product quality.
Empirical Tests Of The Rationality Of Economic Forecasters: A Fixed Horizons Approach, William D. Nordhaus, Steven N. Durlauf
Empirical Tests Of The Rationality Of Economic Forecasters: A Fixed Horizons Approach, William D. Nordhaus, Steven N. Durlauf
Cowles Foundation Discussion Papers
No abstract provided.
Empirical Tests Of The Rationality Of Economic Forecasters: A Fixed Horizons Approach, William D. Nordhaus, Steven N. Durlauf
Empirical Tests Of The Rationality Of Economic Forecasters: A Fixed Horizons Approach, William D. Nordhaus, Steven N. Durlauf
Cowles Foundation Discussion Papers
This paper examines the behavior of 4 major forecasters and the forecast consensus. We employ a new technique of “Fixed Horizon” models. This technique analyzes the sequence of adjustments of a series of forecasts of the same event. We first demonstrate that these forecast adjustment sequences should fluctuate randomly under rationality. We then examine approximately 1200 forecast adjustments over the 1978-1982 period to examine the statistical properties of forecast adjustments. The evidence clearly demonstrates that there are marked and significant elements of statistical rationality for these major forecasters. Information shocks are processed slowly. The pattern of adjustments is consistent with …
Stock Prices And Social Dynamics, Robert J. Shiller
Stock Prices And Social Dynamics, Robert J. Shiller
Cowles Foundation Discussion Papers
No abstract provided.
I And First And Second Scenarios (A Sensitivity Analysis), Paul Bracken, Moshe Haviv, Martin Shubik, Ulrich Tulowitzki
I And First And Second Scenarios (A Sensitivity Analysis), Paul Bracken, Moshe Haviv, Martin Shubik, Ulrich Tulowitzki
Cowles Foundation Discussion Papers
No abstract provided.
The Many Approaches To The Study Of Monopolistic Competition, Martin Shubik
The Many Approaches To The Study Of Monopolistic Competition, Martin Shubik
Cowles Foundation Discussion Papers
It is suggested here that there are many highly different purposes for the study and application of theories of oligopolistic competition, monopolistic competition, and allied topics. This paper sets the different purposes and questions in context, then makes criticisms and suggestions as to where to go from here.
Plausible Outcomes For Games In Strategic Form, Martin Shubik
Plausible Outcomes For Games In Strategic Form, Martin Shubik
Cowles Foundation Discussion Papers
This is the first projected series of papers on solutions to games in matrix and extensive form.
The Use Of Expected Future Variables In Macroeconometric Models, Ray C. Fair
The Use Of Expected Future Variables In Macroeconometric Models, Ray C. Fair
Cowles Foundation Discussion Papers
A more sophisticated expectational hypothesis than is traditionally used in the specification of macroeconometric models is tested in this paper. Economic agents are assumed to use a vector of variables Z t in forming their expectations for periods t + 1 and beyond. These expectations may or may not be rational in the Muth sense. The results provide some evidence in favor of the more sophisticated hypothesis, but they are not strong enough to allow much weight to be put on the hypothesis as yet. The evidence in favor of the hypothesis is strongest for households’ response to future wages …
Stock Prices And Social Dynamics, Robert J. Shiller
Stock Prices And Social Dynamics, Robert J. Shiller
Cowles Foundation Discussion Papers
The empirical evidence that is widely interpreted as supporting the efficient markets theory in finance actually does not rule out the possibility that changing fashions or fads among investors have an important influence on prices in financial markets. A model of the impact of such fashions on prices is proposed and used in an exploratory data analysis of the aggregate United States Stock Market in the 20th century.
General Equilibrium With Wage Rigidities: An Application To Belgium, Victor Ginsburgh, Ludo Van Der Heyden
General Equilibrium With Wage Rigidities: An Application To Belgium, Victor Ginsburgh, Ludo Van Der Heyden
Cowles Foundation Discussion Papers
This paper concerns an application to the Belgian economy of general equilibrium analysis in the presence of downward real wage rigidities. The model aims at explaining the short-run impact of recent income and exchange policies upon employment in Belgium. Mathematical programming techniques are used to compute equilibria.
Stability Comparisons Of Estimators, Donald W.K. Andrews
Stability Comparisons Of Estimators, Donald W.K. Andrews
Cowles Foundation Discussion Papers
A property of estimators called stability is investigated in this paper. The stability of an estimator is a measure of the magnitude of the affect of any single observation in the sample on the realized value of the estimator. High stability often is desirable for robustness against misspecification and against highly variable observations. Stabilities are determined and compared for a wide variety of estimators and econometric models. Estimators considered include: least squares, maximum likelihood (including both LIML and FIML), instrumental variables, M-, and multi-stage estimators such as tow and three stage least squares, Zellner’s feasible Aikten estimator of the multivariate …