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- Ex-post participation constraints (5)
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Articles 31 - 60 of 71
Full-Text Articles in Economics
The Best And Worst Of All Possible Worlds: Some Crude Evaluations, Martin Shubik, Michael R. Powers
The Best And Worst Of All Possible Worlds: Some Crude Evaluations, Martin Shubik, Michael R. Powers
Cowles Foundation Discussion Papers
The 2 x 2 matrix game plays a central role in the teaching and exposition of game theory. It is also the source of much experimentation and research in political science, social psychology, biology and other disciplines. This brief paper is addressed to answering one intuitively simple question without going into the many subtle qualifications that are there. How efficient is the non-cooperative equilibrium? This is part of a series of several papers that address many of the qualifications concerning the uses of the 2 x 2 matrix games.
Dynamic Random Utility, Mira Frick, Ryota Iijima, Tomasz Strzalecki
Dynamic Random Utility, Mira Frick, Ryota Iijima, Tomasz Strzalecki
Cowles Foundation Discussion Papers
We provide an axiomatic analysis of dynamic random utility, characterizing the stochastic choice behavior of agents who solve dynamic decision problems by maximizing some stochastic process (U_t) of utilities. We show first that even when (U_t) is arbitrary, dynamic random utility imposes new testable restrictions on how behavior across periods is related, over and above period-by-period analogs of the static random utility axioms: An important feature of dynamic random utility is that behavior may appear history dependent, because past choices reveal information about agents’ past utilities and (U_t) may be serially correlated; however, our key new axioms highlight that the …
A Design For Market Socialism, John E. Roemer
A Design For Market Socialism, John E. Roemer
Cowles Foundation Discussion Papers
Socialism is conceptualized as a society in which individuals cooperate, distinguished from capitalism, characterized as involving ubiquitous economic competition. Here, I embed a formal model of cooperation in an Arrow-Debreu model, using the Kantian optimization protocol, and define a Walras-Kant equilibrium, in which firms maximize profits, consumers choose demands for commodities in the usual utilitymaximizing fashion, and the state rents capital to firms. The labor-supply decision of workers, however, is arrived at using the cooperative protocol. Incomes are redistributed through a flat income tax. Walras-Kant equilibria, with any desired degree of income equality exist, are decentralizable, and are Pareto efficient.
Socialism Revised, John E. Roemer
Socialism Revised, John E. Roemer
Cowles Foundation Discussion Papers
Marxists have viewed the task of socialism as the elimination of exploitation, defined in the Marxian manner in terms the excess of labor expended over of labor commanded. I argue that the concept of Marxian exploitation commits both type-one (false positives) and type-two (false negatives) errors as a diagnosis of distributive injustice: it misses instances of distributive injustice because they do not involve exploitation, and it calls some economic relations characterized by exploitation unjust when they are not. The most important reformulators of Marx’s concept of socialism, which implicitly or explicitly attempt to correct the Marxian errors, are Oscar Lange, …
Dynamic Random Utility, Mira Frick, Ryota Iijima, Tomasz Strzalecki
Dynamic Random Utility, Mira Frick, Ryota Iijima, Tomasz Strzalecki
Cowles Foundation Discussion Papers
Under dynamic random utility, an agent (or population of agents) solves a dynamic decision problem subject to evolving private information. We analyze the fully general and non-parametric model, axiomatically characterizing the implied dynamic stochastic choice behavior. A key new feature relative to static or i.i.d. versions of the model is that when private information displays serial correlation, choices appear history dependent: different sequences of past choices reflect different private information of the agent, and hence typically lead to different distributions of current choices. Our axiomatization imposes discipline on the form of history dependence that can arise under arbitrary serial correlation. …
In Life Choose What Is Beautiful, But Choose Wisely: Quinnipiac Graduation Speech, May 20, 2017, John Geanakoplos
In Life Choose What Is Beautiful, But Choose Wisely: Quinnipiac Graduation Speech, May 20, 2017, John Geanakoplos
Cowles Foundation Discussion Papers
No abstract provided.
Revealed Price Preference: Theory And Stochastic Testing, Rahul Deb, Yuichi Kitamura, John K.-H. Quah, Jörg Stoye
Revealed Price Preference: Theory And Stochastic Testing, Rahul Deb, Yuichi Kitamura, John K.-H. Quah, Jörg Stoye
Cowles Foundation Discussion Papers
We develop a model of demand where consumers trade-off the utility of consumption against the disutility of expenditure. This model is appropriate whenever a consumer’s demand over a strict subset of all available goods is being analyzed. Data sets consistent with this model are characterized by the absence of revealed preference cycles over prices. The model is readily generalized to the random utility setting, for which we develop nonparametric statistical tests. Our application on national household consumption data provides support for the model.
Information And Interaction, Dirk Bergemann, Tibor Heumann, Stephen Morris
Information And Interaction, Dirk Bergemann, Tibor Heumann, Stephen Morris
Cowles Foundation Discussion Papers
We study a linear interaction model with asymmetric information. We first characterize the linear Bayes Nash equilibrium for a class of one dimensional signals. It is then shown that this class of one dimensional signals provide a comprehensive description of the first and second moments of the distribution of outcomes for any Bayes Nash equilibrium and any information structure. We use our results in a variety of applications: (i) we study the connections between incomplete information and strategic interaction, (ii) we explain to what extent payoff environment and information structure of a economy are distinguishable through the equilibrium outcomes of …
Defensive Investments And The Demand For Air Quality: Evidence From The Nox Budget Program, Olivier Deschenes, Michael Greenstone, Joseph S. Shapiro
Defensive Investments And The Demand For Air Quality: Evidence From The Nox Budget Program, Olivier Deschenes, Michael Greenstone, Joseph S. Shapiro
Cowles Foundation Discussion Papers
The demand for air quality depends on health impacts and defensive investments, but little research assesses the empirical importance of defenses. A rich quasi-experiment suggests that the Nitrogen Oxides (NOx) Budget Program (NBP), a cap-and-trade market, decreased NOx emissions, ambient ozone concentrations, pharmaceutical expenditures, and mortality rates. The annual reductions in pharmaceutical purchases, a key defensive investment, and mortality are valued at about $800 million and $1.1 billion, respectively, suggesting that defenses are over one-third of willingness-to-pay for reductions in NOx emissions. Further, estimates indicate that the NBP’s benefits easily exceed its costs and that NOx reductions have substantial benefits.
Multidimensional Sales Incentives In Crm Settings: Customer Adverse Selection And Moral Hazard, Minkyung Kim, K. Sudhir, Kosuke Uetake, Rodrigo Canales
Multidimensional Sales Incentives In Crm Settings: Customer Adverse Selection And Moral Hazard, Minkyung Kim, K. Sudhir, Kosuke Uetake, Rodrigo Canales
Cowles Foundation Discussion Papers
In many firms, incentivized salespeople with private information about their customers are responsible for customer relationship management (CRM). Private information can help the firm by increasing sales efficiency, but it can also hurt the firm if salespeople use it to maximize own compensation at the expense of the firm. Specifically, we consider two negative outcomes due to private information — ex-ante customer adverse selection at the time of acquisition and ex-post customer moral hazard after acquisition. This paper investigates potential positive and negative responses of a salesforce to managerial levers — multidimensional incentives for acquisition and retention performance and job …
Evolution Of Modeling Of The Economics Of Global Warming: Changes In The Dice Model, 1992-2017, William D. Nordhaus
Evolution Of Modeling Of The Economics Of Global Warming: Changes In The Dice Model, 1992-2017, William D. Nordhaus
Cowles Foundation Discussion Papers
Many areas of the natural and social sciences involve complex systems that link together multiple sectors. Integrated assessment models (IAMs) are approaches that integrate knowledge from two or more domains into a single framework, and these are particularly important for climate change. One of the earliest IAMs for climate change was the DICE/RICE family of models, first published in Nordhaus (1992), with the latest version in Nordhaus (2017, 2017a). A difficulty in assessing IAMs is the inability to use standard statistical tests because of the lack of a probabilistic structure. In the absence of statistical tests, the present study examines …
Econometric Measurement Of Earth's Transient Climate Sensitivity, Peter C.B. Phillips, Thomas Leirvik, Trude Storelvmo
Econometric Measurement Of Earth's Transient Climate Sensitivity, Peter C.B. Phillips, Thomas Leirvik, Trude Storelvmo
Cowles Foundation Discussion Papers
How sensitive is Earth’s climate to a given increase in atmospheric greenhouse gas (GHG) concentrations? This long-standing and fundamental question in climate science was recently analyzed by dynamic panel data methods using extensive spatiotemporal data of global surface temperatures, solar radiation, and GHG concentrations over the last half century to 2010 (Storelvmo et al, 2016). These methods revealed that atmospheric aerosol effects masked approximately one-third of the continental warming due to increasing GHG concentrations over this period, thereby implying greater climate sensitivity to GHGs than previously thought. The present study provides asymptotic theory justifying the use of these methods when …
Tribute To T. W. Anderson, Peter C.B. Phillips
Tribute To T. W. Anderson, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Professor T.W. Anderson passed away on September 17, 2016 at the age of 98 years after an astonishing career that spanned more than seven decades. Standing at the nexus of the statistics and economics professions, Ted Anderson made enormous contributions to both disciplines, playing a significant role in the birth of modern econometrics with his work on structural estimation and testing in the Cowles Commission during the 1940s, and educating successive generations through his brilliant textbook expositions of time series and multivariate analysis. This article is a tribute to his many accomplishments.
John Denis Sargan At The London School Of Economics, David F. Hendry, Peter C.B. Phillips
John Denis Sargan At The London School Of Economics, David F. Hendry, Peter C.B. Phillips
Cowles Foundation Discussion Papers
During his period at the LSE from the early 1960s to the mid 1980s, John Denis Sargan rose to international prominence and the LSE emerged as the world’s leading centre for econometrics. Within this context, we examine the life of Denis Sargan, describe his major research accomplishments, recount the work of his many doctoral students, and track this remarkable period that constitutes the Sargan era of econometrics at the LSE.
Research Design Meets Market Design: Using Centralized Assignment For Impact Evaluation, Atila Abdulkadiroğlu, Joshua D. Angrist, Yusuke Narita, Parag A. Pathak
Research Design Meets Market Design: Using Centralized Assignment For Impact Evaluation, Atila Abdulkadiroğlu, Joshua D. Angrist, Yusuke Narita, Parag A. Pathak
Cowles Foundation Discussion Papers
A growing number of school districts use centralized assignment mechanisms to allocate school seats in a manner that reflects student preferences and school priorities. Many of these assignment schemes use lotteries to ration seats when schools are oversubscribed. The resulting random assignment opens the door to credible quasi-experimental research designs for the evaluation of school effectiveness. Yet the question of how best to separate the lottery-generated variation integral to such designs from non-random preferences and priorities remains open. This paper develops easily-implemented empirical strategies that fully exploit the random assignment embedded in a wide class of mechanisms, while also revealing …
Misspecified Moment Inequality Models: Inference And Diagnostics, Donald W.K. Andrews, Soonwoo Kwon
Misspecified Moment Inequality Models: Inference And Diagnostics, Donald W.K. Andrews, Soonwoo Kwon
Cowles Foundation Discussion Papers
This paper is concerned with possible model misspecification in moment inequality models. Two issues are addressed. First, standard tests and confidence sets for the true parameter in the moment inequality literature are not robust to model misspecification in the sense that they exhibit spurious precision when the identified set is empty. This paper introduces tests and confidence sets that provide correct asymptotic inference for a pseudo-true parameter in such scenarios, and hence, do not suffer from spurious precision. Second, specification tests have relatively low power against a range of misspecified models. Thus, failure to reject the null of correct specification …
Information Design: A Unified Perspective, Dirk Bergemann, Stephen Morris
Information Design: A Unified Perspective, Dirk Bergemann, Stephen Morris
Cowles Foundation Discussion Papers
Fixing a game with uncertain payoffs, information design identifies the information structure and equilibrium that maximizes the payoff of an information designer. We show how this perspective unifies existing work, including that on communication in games (Myerson (1991)), Bayesian persuasion (Kamenica and Gentzkow (2011)) and some of our own recent work. Information design has a literal interpretation, under which there is a real information designer who can commit to the choice of the best information structure (from her perspective) for a set of participants in a game. We emphasize a metaphorical interpretation, under which the information design problem is used …
Global Collateral: How Financial Innovation Drives Capital Flows And Increases Financial Instability, Ana Fostel, John Geanakoplos, Gregory Phelan
Global Collateral: How Financial Innovation Drives Capital Flows And Increases Financial Instability, Ana Fostel, John Geanakoplos, Gregory Phelan
Cowles Foundation Discussion Papers
We show that cross-border financial flows arise when countries differ in their abilities to use assets as collateral. Financial integration is a way of sharing scarce collateral. The ability of one country to leverage and tranche assets provides attractive financial contracts to investors in the other country, and general equilibrium effects on prices create opportunities for investors in the financially advanced country to invest abroad. Foreign demand for collateral and for collateral-backed financial promises increases the collateral value of domestic assets, and cheap foreign assets provide attractive returns to investors who do not demand collateral to issue promises. Gross global …
Inefficient Liquidity Provision, John Geanakoplos, Kieran James Walsh
Inefficient Liquidity Provision, John Geanakoplos, Kieran James Walsh
Cowles Foundation Discussion Papers
We prove that in competitive market economies with no insurance for idiosyncratic risks, agents will always overinvest in illiquid long term assets and underinvest in short term liquid assets. We take as our setting the seminal model of Diamond and Dybvig (1983), who first posed the question in a tractable model. We reach such a simple conclusion under mild conditions because we stick to the basic competitive market framework, avoiding the banks and intermediaries that Diamond and Dybvig and others introduced.
The Scope Of Sequential Screening With Ex-Post Participation Constraints, Dirk Bergemann, Francisco Castro, Gabriel Weintraub
The Scope Of Sequential Screening With Ex-Post Participation Constraints, Dirk Bergemann, Francisco Castro, Gabriel Weintraub
Cowles Foundation Discussion Papers
We study the classic sequential screening problem under ex-post participation constraints. Thus the seller is required to satisfy buyers’ ex-post participation constraints. A leading example is the online display advertising market, in which publishers frequently cannot use up-front fees and instead use transaction-contingent fees. We establish when the optimal selling mechanism is static (buyers are not screened) or dynamic (buyers are screened), and obtain a full characterization of such contracts. We begin by analyzing our model within the leading case of exponential distributions with two types. We provide a necessary and sufficient condition for the optimality of the static contract. …
The Scope Of Sequential Screening With Ex-Post Participation Constraints, Dirk Bergemann, Francisco Castro, Gabriel Weintraub
The Scope Of Sequential Screening With Ex-Post Participation Constraints, Dirk Bergemann, Francisco Castro, Gabriel Weintraub
Cowles Foundation Discussion Papers
We study the classic sequential screening problem under ex-post participation constraints. Thus the seller is required to satisfy buyers’ ex-post participation constraints. A leading example is the online display advertising market, in which publishers frequently cannot use up-front fees and instead use transaction-contingent fees. We establish when the optimal selling mechanism is static (buyers are not screened) or dynamic (buyers are screened), and obtain a full characterization of such contracts. We begin by analyzing our model within the leading case of exponential distributions with two types. We provide a necessary and sufficient condition for the optimality of the static contract. …
The Scope Of Sequential Screening With Ex-Post Participation Constraints, Dirk Bergemann, Francisco Castro, Gabriel Weintraub
The Scope Of Sequential Screening With Ex-Post Participation Constraints, Dirk Bergemann, Francisco Castro, Gabriel Weintraub
Cowles Foundation Discussion Papers
We study the classic sequential screening problem in the presence of buyers’ ex-post participation constraints. A leading example is the online display advertising market, in which publishers frequently do not use up-front fees and instead use transaction-contingent fees. We establish conditions under which the optimal selling mechanism is static and buyers are not screened with respect to their interim type, or sequential and the buyers are screened with respect to their interim type. In particular, we provide an intuitive necessary and sufficient condition under which the static contract is optimal for general distributions of ex-post values. Further, we completely characterize …
The Scope Of Sequential Screening With Ex-Post Participation Constraints, Dirk Bergemann, Francisco Castro, Gabriel Weintraub
The Scope Of Sequential Screening With Ex-Post Participation Constraints, Dirk Bergemann, Francisco Castro, Gabriel Weintraub
Cowles Foundation Discussion Papers
We study the classic sequential screening problem in the presence of ex-post participation constraints. We establish necessary and sufficient conditions that determine when the optimal selling mechanism is either static or sequential. In the static contract, the buyers are not screened with respect to their interim type and the object is sold at a posted price. In the sequential contract, the buyers are screened with respect to their interim type and a menu of quantities is offered. We completely characterize the optimal sequential contract with binary interim types and a continuum of ex-post values. Importantly, the optimal sequential contract randomizes …
Zone Pricing In Retail Oligopoly, Brian Adams, Kevin R. Williams
Zone Pricing In Retail Oligopoly, Brian Adams, Kevin R. Williams
Cowles Foundation Discussion Papers
We quantify the welfare effects of zone pricing, or setting common prices across distinct markets, in retail oligopoly. Although monopolists can only increase profits by price discriminating, this need not be true when firms face competition. With novel data covering the retail home improvement industry, we find that Home Depot would benefit from finer pricing but that Lowe’s would prefer coarser pricing. The use of zone pricing softens competition in markets where firms compete, but it shields consumers from higher prices in markets where firms might otherwise exercise market power. Overall, zone pricing produces higher consumer surplus than finer pricing …
Zone Pricing In Retail Oligopoly, Brian Adams, Kevin R. Williams
Zone Pricing In Retail Oligopoly, Brian Adams, Kevin R. Williams
Cowles Foundation Discussion Papers
We quantify the welfare effects of zone pricing, or setting common prices across distinct markets, in retail oligopoly. Although monopolists can only increase profits by price discriminating, this need not be true when firms face competition. With novel data covering the retail home improvement industry, we find that Home Depot would benefit from finer pricing but that Lowe’s would prefer coarser pricing. Zone pricing softens competition in markets where firms compete, but it shields consumers from higher prices in markets where firms might otherwise exercise market power. Overall, zone pricing produces higher consumer surplus than finer pricing discrimination does.
Zone Pricing In Retail Oligopoly, Brian Adams, Kevin R. Williams
Zone Pricing In Retail Oligopoly, Brian Adams, Kevin R. Williams
Cowles Foundation Discussion Papers
We quantify the welfare effects of zone pricing, or setting common prices across distinct markets, in retail oligopoly. Although monopolists can only increase profits by price discriminating, this need not be true when firms face competition. With novel data covering the retail home improvement industry, we find that Home Depot would benefit from finer pricing but that Lowe’s would prefer coarser pricing. Zone pricing softens competition in markets where firms compete, but it shields consumers from higher prices in rural markets, where firms might otherwise exercise market power. Overall, zone pricing produces higher consumer surplus than finer price discrimination does.
Behavioral Characterizations Of Naiveté For Time-Inconsistent Preferences, David S. Ahn, Ryota Iijima, Yves Le Yaouanq, Todd Sarver
Behavioral Characterizations Of Naiveté For Time-Inconsistent Preferences, David S. Ahn, Ryota Iijima, Yves Le Yaouanq, Todd Sarver
Cowles Foundation Discussion Papers
We propose nonparametric definitions of absolute and comparative naivete. These definitions leverage ex-ante choice of menu to identify predictions of future behavior and ex-post (random) choices from menus to identify actual behavior. The main advantage of our definitions is their independence from any assumed functional form for the utility function representing behavior. An individual is sophisticated if she is indifferent between choosing from a menu ex-post or committing to the actual distribution of choices from that menu ex-ante. She is naive if she prefers the flexibility in the menu, reflecting a mistaken belief that she will act more virtuously than …
Information Design: A Unified Perspective, Dirk Bergemann, Stephen Morris
Information Design: A Unified Perspective, Dirk Bergemann, Stephen Morris
Cowles Foundation Discussion Papers
Fixing a game with uncertain payoffs, information design identi.es the information structure and equilibrium that maximizes the payoff of an information designer. We show how this perspective unifies existing work, including that on communication in games (Myerson (1991)), Bayesian persuasion (Kamenica and Gentzkow (2011)) and some of our own recent work. Information design has a literal interpretation, under which there is a real information designer who can commit to the choice of the best information structure (from her perspective) for a set of participants in a game. We emphasize a metaphorical interpretation, under which the information design problem is used …
Information Design: A Unified Perspective, Dirk Bergemann, Stephen Morris
Information Design: A Unified Perspective, Dirk Bergemann, Stephen Morris
Cowles Foundation Discussion Papers
Given a game with uncertain payoffs, information design analyzes the extent to which the provision of information alone can influence the behavior of the players. Information design has a literal interpretation, under which there is a real information designer who can commit to the choice of the best information structure (from her perspective) for a set of participants in a game. We emphasize a metaphorical interpretation, under which the information design problem is used by the analyst to characterize play in the game under many different information structures. We provide an introduction into the basic issues and insights of a …
Information Design: A Unified Perspective, Dirk Bergemann, Stephen Morris
Information Design: A Unified Perspective, Dirk Bergemann, Stephen Morris
Cowles Foundation Discussion Papers
Given a game with uncertain payoffs, information design analyzes the extent to which the provision of information alone can influence the behavior of the players. Information design has a literal interpretation, under which there is a real information designer who can commit to the choice of the best information structure (from her perspective) for a set of participants in a game. We emphasize a metaphorical interpretation, under which the information design problem is used by the analyst to characterize play in the game under many different information structures. We provide an introduction into the basic issues and insights of a …