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Articles 1 - 30 of 45
Full-Text Articles in Economics
Auction Theory, Paul R. Milgrom
Auction Theory, Paul R. Milgrom
Cowles Foundation Discussion Papers
This paper discusses two central questions: Why do auction institutions continue to be so popular after thousands of years? and What accounts for particular details, like the popularity of sealed bid and ascending-bid auctions?
The Uses, Value And Limitation Of Game Theoretic Methods In Defense Analysis, Martin Shubik
The Uses, Value And Limitation Of Game Theoretic Methods In Defense Analysis, Martin Shubik
Cowles Foundation Discussion Papers
The central contribution of game theory to defense analysis has been a language for the understanding of how to formulate and study strategic or cross-purposes optimization in situations involving two or more actors. It is suggested here in this discussion that two fundamentally different classes of application of game theory to problems in defense have emerged. The first is the application of two-person zero sum game theory to military, primarily tactical situations which for the purposes at hand can be reasonably well modeled in this manner. The second is the application of two or more person nonconstant sum game theory …
On Finitely Repeated Games And Pseudo-Nash Equilibria, Chien-Fu Chou, John Geanakoplos
On Finitely Repeated Games And Pseudo-Nash Equilibria, Chien-Fu Chou, John Geanakoplos
Cowles Foundation Discussion Papers
In this paper we propose a pseudo-Nash equilibrium for N -person games in which very simply we allow play in the last period to be arbitrary, but otherwise it must conform to the (perfect) Nash optimality criterion.
Walrasian Indeterminacy And Keynesian Macroeconomics, John Geanakoplos, Heracles M. Polemarchakis
Walrasian Indeterminacy And Keynesian Macroeconomics, John Geanakoplos, Heracles M. Polemarchakis
Cowles Foundation Discussion Papers
Overlapping generations models with or without production or a portfolio demand for money display a fundamental indeterminacy. Expectations matter; and they are not, in the short run, constrained by the hypotheses of agent optimization, rational expectations, and market clearing. No short run policy analysis is possible without some explicit understanding of how agents expect the economy to respond to the policy. In this framework of perfect foresight and market clearing prices, it is possible to make Keynesian assumptions about the rigidity of money wages and the exogeneity of “animal spirits” of investors, to use the standard IS-LM apparatus, and to …
Comparative Statics And Local Indeterminacy In Olg Economies: An Application Of The Multiplicative Ergodic Theorem, John Geanakoplos, Donald J. Brown
Comparative Statics And Local Indeterminacy In Olg Economies: An Application Of The Multiplicative Ergodic Theorem, John Geanakoplos, Donald J. Brown
Cowles Foundation Discussion Papers
This study is an effort to give a simple measure of the local size of the equilibrium set of OLG economies in which there may be more than one good and more than one consumer per period, and in which the generations may differ across time.
Random Cell Chi-Square Diagnostic Tests For Econometric Models: Ii. Theory, Donald W.K. Andrews
Random Cell Chi-Square Diagnostic Tests For Econometric Models: Ii. Theory, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper extends the Pearson chi-square testing method to non-dynamic parametric econometric models, in particular, to models with covariates. The paper establishes the asymptotic distribution of the test statistic under the null and local alternatives, when the test statistic is based on data-dependent random cells of a general form, and on an arbitrary asymptotically normal estimator. These results are attained by extending recent probabilistic results for the weak convergence of empirical processes indexed by sets. The chi-square test that is introduced can be used to test goodness-of-fit of a parametric model, as well as to test particular aspects of the …
Fractional Matrix Calculus And The Distribution Of Multivariate Tests, Peter C.B. Phillips
Fractional Matrix Calculus And The Distribution Of Multivariate Tests, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Fractional matrix operator methods are introduced as a new tool of distribution theory for use in multivariate analysis and econometrics. Earlier work by the author on this operational calculus is reviewed and to illustrate the use of these methods we give an exact distribution theory for a general class of tests in the multivariate linear model. This distribution theory unifies and generalizes 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 -2 test. We also provide a simple and novel derivation of conventional asymptotic theory as …
Neoclassical Theory In America: J. B. Clark And Fisher, James Tobin
Neoclassical Theory In America: J. B. Clark And Fisher, James Tobin
Cowles Foundation Discussion Papers
The intellectual breakthroughs that mark the neoclassical revolution in economic analysis occurred in Europe around 1870. The next two decades witnessed lively debates in which the new theory more or less absorbed or was absorbed in the classical tradition that preceded and provoked it. In the 1890s, according to Joseph A. Schumpeter (1954, p. 754) there emerged “a large expanse of common ground and … a feeling of repose, both of which created, in the superficial observer, an impression of finality — the finality of a Greek temple that spreads its perfect lines against a cloudless sky.” Of course the …
The Many Properties Of Money: A Strategic Market Game Analysis, Martin Shubik
The Many Properties Of Money: A Strategic Market Game Analysis, Martin Shubik
Cowles Foundation Discussion Papers
Among the major properties of a money are that it can serve as (1) a numeraire, (2) a means of exchange, (3) a store of value, and (4) a source of liquidity. Among the lesser properties are that it should be easy to transport and identify, it should be durable, easily divisible, hard to counterfeit and easy to store. A possibly desirable property is that it is an anonymous “bearer instrument,” but the price of anonymity is that it is hard to recover if it is stolen. A personal check which is bank money can be stopped and is more …
Multiple Time Series Regression With Integrated Processes, Peter C.B. Phillips, Steven N. Durlauf
Multiple Time Series Regression With Integrated Processes, Peter C.B. Phillips, Steven N. Durlauf
Cowles Foundation Discussion Papers
This paper develops a general asymptotic theory of regression for processes which are integrated of order one. The theory includes vector autoregressions and multivariate regressions amongst integrated processes that are driven by innovation sequences which allow for a wide class of weak dependence and heterogeneity. The models studied cover cointegrated systems and quite general linear simultaneous equations systems with contemporaneous regressor-error correlation and serially correlated errors. Problems of statistical testing in vector autoregressions and multivariate regressions with integrated processes are also studied. It is shown that the asymptotic theory for conventional tests involves major departures from classical theory and raises …
Asymptotic Results For Generalized Wald Tests, Donald W.K. Andrews
Asymptotic Results For Generalized Wald Tests, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This note presents conditions under which a quadratic form based on a g-inverted weighting matrix converges to a chi-square distribution as the sample size goes to infinity. Subject to fairly weak underlying conditions, a necessary and sufficient condition is given for this result. The result is of interest, because it is needed to establish asymptotic significance levels and local power properties of generalized Wald tests (i.e., Wald tests with singular limiting covariance matrices). Included in this class of tests are Hausman specification tests and various goodness of fit tests, among others. The necessary and sufficient condition is relevant to procedures …
The Term Structure Of Euromarket Interest Rates: An Empirical Investigation, John Y. Campbell, Richard H. Clarida
The Term Structure Of Euromarket Interest Rates: An Empirical Investigation, John Y. Campbell, Richard H. Clarida
Cowles Foundation Discussion Papers
This paper is an empirical investigation of the predictability and comovement of risk premia in the term structure of Euromarket interest rates. We show that variables which have been used as proxies for risk premia on uncovered foreign asset positions also predict excess returns in Euromarket term structures, while variables which have been used as proxies for risk premia in the term structure also predict excess returns on taking uncovered foreign asset positions. These findings suggest that risk premia move together. We test formally the hypothesis that risk premia on uncovered 3-month EuroDM and Eurosterling deposits move in proportion to …
Random Cell Chi-Square Diagnostic Tests For Econometric Models: I. Introduction And Applications, Donald W.K. Andrews
Random Cell Chi-Square Diagnostic Tests For Econometric Models: I. Introduction And Applications, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper and its sequel, Andrews [4], extend the Pearson chi-square testing method to non-dynamic parametric econometric models, in particular, models with covariates. The present paper introduced the test and discusses a wide variety of applications. Andrews [4] establishes the asymptotic properties of the test, by extending recent probabilistic results for the weak convergence of empirical processes indexed by sets. The chi-square test that is introduced can be used to test goodness-of-fit of a parametric model, as well as to test particular aspects of the parametric model that are of interest. In the event of rejection of the null hypothesis …
Forecasting Efficiency: Concepts And Applications, William D. Nordhaus
Forecasting Efficiency: Concepts And Applications, William D. Nordhaus
Cowles Foundation Discussion Papers
The question of forecasting accuracy is, of course, one that has been the subject of numerous investigations over the last two decades. The present study contributes to this line of research in two ways. First, we introduce a new concept, called “forecast efficiency,” that measures the extent to which information is incorporated into forecasts. This concept is closely related to concepts of efficiency used in the analysis of stock and other financial markets. The paper proves two readily testable propositions about efficient forecasts. Second, the empirical part of the study examines forecast efficiency by looking at forecast revisions (“fixed-horizon forecasts”), …
A Theory Of Hierarchies Based On Limited Managerial Attention, John Geanakoplos, Paul R. Milgrom
A Theory Of Hierarchies Based On Limited Managerial Attention, John Geanakoplos, Paul R. Milgrom
Cowles Foundation Discussion Papers
Our purpose in this paper is to investigate the economics of managerial organizations by focusing on the decision problem of management. Ours is a “team theory” analysis, that is, it ignores the problem of conflicting objectives among managers and focuses instead on the problem of coordinating the decisions of several imperfectly informed actors. However, unlike classical team theory, we concentrate on the choice by managers of what to know, as well as what to do, and we allow the possibility that bounded rationality limits the managers’ ability to understand subtle messages.
Sections And Extensions Of Concave Functions, Roger Howe
Sections And Extensions Of Concave Functions, Roger Howe
Cowles Foundation Discussion Papers
No abstract provided.
Asymptotic Expansions In Nonstationary Vector Autoregressions, Peter C.B. Phillips
Asymptotic Expansions In Nonstationary Vector Autoregressions, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper studies the statistical properties of vector autoregressions (VAR’s) for quite general multiple time series which are integrated of order one. Functional central limit theorems are given for multivariate partial sums of weakly dependent innovations and these are applied to yield first order asymptotics in nonstationary VAR’s. Characteristic and cumulant functionals for generalized random processes are introduced as a means of developing a refinement of central limit theory on function spaces. The theory is used to find asymptotic expansions of the regression coefficients in nonstationary VAR’s under very general conditions. The results are specified to the scalar case and …
Existence, Regularity, And Constrained Suboptimality Of Competitive Allocations When The Asset Market Is Incomplete, John Geanakoplos, Heracles M. Polemarchakis
Existence, Regularity, And Constrained Suboptimality Of Competitive Allocations When The Asset Market Is Incomplete, John Geanakoplos, Heracles M. Polemarchakis
Cowles Foundation Discussion Papers
Let assets be denominated in an a priori specified numeraire. Whether or not the asset is complete, a competitive equilibrium exists as long as arbitrage is possible when assets are free. Generically, the set of competitive equilibria is finite, and the equilibrium prices and allocations in the commodity spot markets are uniquely determined by the asset allocation in a neighborhood of a competitive equilibrium. If the asset market is incomplete, a competitive equilibrium allocation is generically constrained suboptimal : there exists an arbitrarily small reallocation of the existing assets, which leads to a Pareto improvement in welfare when prices and …
On The Performance Of Least Squares In Linear Regression With Undefined Error Means, Donald W.K. Andrews
On The Performance Of Least Squares In Linear Regression With Undefined Error Means, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper considers the linear regression model with multiple stochastic regressors, intercept, and errors that have undefined means. This model is of interest from a robustness perspective as a polar case. Generally, least squares estimators are inconsistent in this context. It is shown, however, that this inconsistency is restricted to the estimation of the intercept, if the regressors are highly variable. Rates of convergence of the least squares slope estimators are determined, and are shown to exceed the standard rate, n -1/2 , in certain contexts. The results place no restrictions on the temporal dependence of the errors, and require …
Understanding Spurious Regressions In Econometrics, Peter C.B. Phillips
Understanding Spurious Regressions In Econometrics, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper provides an analytical study of spurious regressions involving the levels of economic time series. As asymptotic theory is developed for regressions that relate independent random walks. It is shown that the usual t ratio significance tests do not possess limiting distributions but actually diverge as the sample size T approaches infinity. The Durbin-Watson statistic, on the other hand, converges in probability to zero. An alternative asymptotic theory is also analyzed. An alternative asymptotic theory is developed based on the concept of continuous data recording. This theory together with the large sample asymptotics that we present go a long …
Enough Gold In A Society Without And With Money-Lenders, Martin Shubik
Enough Gold In A Society Without And With Money-Lenders, Martin Shubik
Cowles Foundation Discussion Papers
If an exchange economy is modeled as a strategic market game with one commodity serving as a money, then if there is no credit available and if all traders are insignificant in size, so that an individual does not influence prices, the noncooperative equilibria (NEs) of the game will coincide with the competitive equilibria of the exchange economy provided that there is enough money to facilitate trade. The meaning of ‘enough money’ is that the NEs are interior. In other words the constraint that an individual cannot spend more of the means of payment than he holds is not binding …
A Characterization Of Globally Optimal Paths In The Non-Classical Growth Model, Rabah Amir
A Characterization Of Globally Optimal Paths In The Non-Classical Growth Model, Rabah Amir
Cowles Foundation Discussion Papers
We show that the monotonicity property of optimal paths (or, equivalently, the uniform boundedness of the marginal propensity of consumption by unity) is a necessary condition for local (as well as for global) optimality, and is also sufficient for local optimality, but not for global optimality. We also show that the well-known properties of the value function — continuity and monotonicity — are sufficient (along with the above conditions) to guarantee global optimality. In other words, if at any stock level, a local non-global maximizer is selected, a discontinuity in the value function will be observed. We suggest that the …
Edgeworth Equilibria, Charalambos D. Aliprantis, Donald J. Brown, Owen Burkinshaw
Edgeworth Equilibria, Charalambos D. Aliprantis, Donald J. Brown, Owen Burkinshaw
Cowles Foundation Discussion Papers
The paper studies pure exchange economies with infinite dimensional commodity spaces in the setting of Riesz dual systems. Several new concepts of equilibrium are introduced. An allocation ( x 1 , …, x m ) is said to be a) an Edgeworth equilibrium whenever it belongs to the core of every n -fold replication of the economy; and b) an ε- Walrasian equilibrium whenever for each ε > 0 there exists some price p not equal to 0 with p ∙ω = 1 (where ω = Σω i is the total endowment) and with x ≥ i x i implying p …
Real Indeterminacy With Financial Assets, John Geanakoplos, Andreu Mas-Colell
Real Indeterminacy With Financial Assets, John Geanakoplos, Andreu Mas-Colell
Cowles Foundation Discussion Papers
The purpose of this paper, which takes up after D. Cass (1984a, 1984b) is to find the degree of real indeterminacy inherent in models with purely financial assets. We solve the problem for the case where there are enough traders (precisely, the number of traders is larger than the number of bonds) and the asset returns structure is in general position. We find that if the number of bonds is non-zero and fewer than the number of states then, generically, the number of dimensions of real indeterminacy is S-1, one less than the number of states. There is something of …
The Use Of Simple Games To Illustrate Concepts And To Provide Experimental Evidence, Martin Shubik
The Use Of Simple Games To Illustrate Concepts And To Provide Experimental Evidence, Martin Shubik
Cowles Foundation Discussion Papers
This paper is devoted to a discussion of several simple experimental games used in a series of lectures on game theory. The prime purpose of these games was to raise questions and illustrate problems in the construction of game theoretical models in the social sciences. The students were asked to make choices or to give opinions as to what imputation should be recommended as a solution in a cooperative game.
Some Three Person Games In Coalitional Form For Teaching And Experimentation, Martin Shubik
Some Three Person Games In Coalitional Form For Teaching And Experimentation, Martin Shubik
Cowles Foundation Discussion Papers
Since 1973 I have used several three person games in coalitional form for both teaching and experimental purposes. They have been run in primarily a normative mode. The individuals have been asked to act as judges called upon to recommend a division of assets among three players. The basic use of these games has been to help to raise questions about context and solution concepts in cooperative game theory. Since 1980 the three basic games noted below have been used with five more or less similar groups of students at Yale. The games, their didactic purpose and the results from …
A Model Of A Sudden-Death Field-Goal Football Game As A Sequential Duel, Siddhartha Sahi, Martin Shubik
A Model Of A Sudden-Death Field-Goal Football Game As A Sequential Duel, Siddhartha Sahi, Martin Shubik
Cowles Foundation Discussion Papers
This paper introduces a highly simplified version of ‘sudden-death’ scoring. The basic game is as follows. With equal probability the teams toss to see who gets the ball. The team with the ball can either run or try to kick a field goal. The first team to score wins the game.
Mass Economies With Vital Small Coalitions; The F-Core Approach, Peter J. Hammond, Mamoru Kaneko, Myrna Holtz Wooders
Mass Economies With Vital Small Coalitions; The F-Core Approach, Peter J. Hammond, Mamoru Kaneko, Myrna Holtz Wooders
Cowles Foundation Discussion Papers
A mass-economy is one with many, many agents where each agent is negligible and each trading group is also negligible with respect to the mass-economy. Feasible allocations are those which are virtually attainable by trades only among members of coalitions contained in feasible (“measure-consistent”) partitions of the agent set. A feasible allocation is in the core, called the f -core, if it cannot be improved upon by any finite coalition. We show that in a private goods economy with indivisibilities and without externalities, the f -core, the A -core (Aumann’s core concept) and the Walrasian allocations coincide. In the presence …
International Lending And Borrowing In A Stochastic Sequence Equilibrium, Richard H. Clarida
International Lending And Borrowing In A Stochastic Sequence Equilibrium, Richard H. Clarida
Cowles Foundation Discussion Papers
The objective of this paper is to study international lending and borrowing in general equilibrium framework in which countries are subject to stochastic productivity fluctuations. The role of time preference, borrowing limits, and lump sum taxation are rigorously analyzed, yielding results which enrich those obtained in the existing literature.
Relying On The Information Of Interested Parties, Paul R. Milgrom, John Roberts
Relying On The Information Of Interested Parties, Paul R. Milgrom, John Roberts
Cowles Foundation Discussion Papers
We investigate the conventional wisdom that competition among interested parties attempting to influence a decision maker by providing verifiable information brings out all the relevant information. We find that, if the decision maker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties, competition may be unnecessary; while if the decision maker is unsophisticated or not well informed, competition is not generally sufficient. However, if the interested parties’ interests are sufficiently opposed, or if the decision maker is seeking to advance the parties’ decision maker’s need for prior knowledge about …