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- Bertrand Competition (4)
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- Crisis Management (2)
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Articles 1 - 30 of 68
Full-Text Articles in Economics
When The Great Equalizer Shuts Down: Schools, Peers, And Parents In Pandemic Time, Francesco Agostinelli, Matthias Doepke, Giuseppe Sorrenti, Fabrizio Zilibotti
When The Great Equalizer Shuts Down: Schools, Peers, And Parents In Pandemic Time, Francesco Agostinelli, Matthias Doepke, Giuseppe Sorrenti, Fabrizio Zilibotti
Cowles Foundation Discussion Papers
What are the effects of school closures during the Covid-19 pandemic on children’s education? Online education is an imperfect substitute for in-person learning, particularly for children from low-income families. Peer effects also change: schools allow children from different socio-economic backgrounds to mix together, and this effect is lost when schools are closed. Another factor is the response of parents, some of whom compensate for the changed environment through their own efforts, while others are unable to do so. We examine the interaction of these factors with the aid of a structural model of skill formation. We find that school closures …
A Model Of Crisis Management, Fei Li, Jidong Zhou
A Model Of Crisis Management, Fei Li, Jidong Zhou
Cowles Foundation Discussion Papers
We propose a model of how multiple societies respond to a common crisis. A government faces a “damned-either-way” policy-making dilemma: aggressive intervention contains the crisis, but the resulting good outcome makes people skeptical of the costly response; light intervention worsens the crisis and causes the government to be faulted for not doing enough. This dilemma can be mitigated for the society that encounters the crisis first if another society faces the same crisis afterward. Our model predicts that the later society does not necessarily perform better despite having more information, while the earlier society might benefit from a dynamic counterfactual …
A Model Of Sequential Crisis Management, Fei Li, Jidong Zhou
A Model Of Sequential Crisis Management, Fei Li, Jidong Zhou
Cowles Foundation Discussion Papers
We propose a model of how multiple societies respond to a common crisis. A government faces a "damned-either-way" policymaking dilemma: aggressive intervention contains the crisis, but the resulting good outcome makes people skeptical about the costly response; light intervention worsens the crisis and causes the government to be faulted for not doing enough. When multiple societies encounter the crisis sequentially, due to this policymaking dilemma, late societies may underperform despite having more information, while early societies can benefit from a dynamic counterfactual effect.
Open Banking: Credit Market Competition When Borrowers Own The Data, Zhiguo He, Jing Huang, Jidong Zhou
Open Banking: Credit Market Competition When Borrowers Own The Data, Zhiguo He, Jing Huang, Jidong Zhou
Cowles Foundation Discussion Papers
Open banking facilitates data sharing consented by customers who generate the data, with a regulatory goal of promoting competition between traditional banks and challenger fintech entrants. We study lending market competition when sharing banks’ customer data enables better borrower screening or targeting by fintech lenders. Open banking could make the entire financial industry better off yet leave all borrowers worse off, even if borrowers could choose whether to share their data. We highlight the importance of equilibrium credit quality inference from borrowers’ endogenous sign-up decisions. When data sharing triggers privacy concerns by facilitating exploitative targeted loans, the equilibrium sign-up population …
Aggregate Implications Of Firm Heterogeneity: A Nonparametric Analysis Of Monopolistic Competition Trade Models, Rodrigo Adão, Costas Arkolakis, Sharat Ganapati
Aggregate Implications Of Firm Heterogeneity: A Nonparametric Analysis Of Monopolistic Competition Trade Models, Rodrigo Adão, Costas Arkolakis, Sharat Ganapati
Cowles Foundation Discussion Papers
We measure the role of firm heterogeneity in counterfactual predictions of monopolistic competition trade models without parametric restrictions on the distribution of firm fundamentals. We show that two bilateral elasticity functions are sufficient to nonparametrically compute the counterfactual aggregate impact of trade shocks, and recover changes in economic fundamentals from observed data. These functions are identified from two semiparametric gravity equations governing the impact of bilateral trade costs on the extensive and intensive margins of firm-level exports. Applying our methodology, we estimate elasticity functions that imply an impact of trade costs on trade flows that falls when more firms serve …
Mothers’ Social Networks And Socioeconomic Gradients Of Isolation, Alison Andrew, Orazio P. Attanasio, Britta Augsburg, Jere Behrman, Monimalika Day, Pamela Jervis, Costas Meghir, Angus Phimister
Mothers’ Social Networks And Socioeconomic Gradients Of Isolation, Alison Andrew, Orazio P. Attanasio, Britta Augsburg, Jere Behrman, Monimalika Day, Pamela Jervis, Costas Meghir, Angus Phimister
Cowles Foundation Discussion Papers
Social connections are fundamental to human wellbeing. This paper examines the social networks of young married women in rural Odisha, India.. This is a group, for whom highly-gendered norms around marriage, mobility, and work are likely to shape opportunities to form and maintain meaningful ties with other women. We track the social networks of 2,170 mothers over four years, and find a high degree of isolation. Wealthier women and women more-advantaged castes have smaller social networks than their less-advantaged peers. These gradients are primarily driven by the fact that more-advantaged women are less likely to know other women within their …
Improved Information In Search Markets, Jidong Zhou
Improved Information In Search Markets, Jidong Zhou
Cowles Foundation Discussion Papers
How will an improved information environment affects competition and market performance when consumers face search frictions? This paper provides a unified way to model information improvement that makes the search pool more ``selective" (e.g., due to personalized recommendations), or more ``informative" (e.g., due to the availability of more detailed product information). Information improvement tends to induce consumers to search less, intensify price competition and benefit consumers, if the search friction is small, or if information improvement truncates the match utility distribution from below. More generally, however, it is also possible for information improvement to raise the market price and harm …
Open Banking: Credit Market Competition When Borrowers Own The Data, Zhiguo He, Jing Huang, Jidong Zhou
Open Banking: Credit Market Competition When Borrowers Own The Data, Zhiguo He, Jing Huang, Jidong Zhou
Cowles Foundation Discussion Papers
Open banking facilitates data sharing consented to by customers who generate the data, with the regulatory goal of promoting competition between traditional banks and challenger fintech entrants. We study lending market competition when sharing banks’ customer transaction data enables better borrower screening. Open banking can make the entire financial industry better off yet leave all borrowers worse off, even if borrowers have the control of whether to share their banking data. We highlight the importance of the equilibrium credit quality inference from borrowers’ endogenous sign-up decisions. We also study extensions with fintech affinities and data sharing on borrower preferences.
Analysis Of Nine U.S. Recessions And Three Expansions, Ray C. Fair
Analysis Of Nine U.S. Recessions And Three Expansions, Ray C. Fair
Cowles Foundation Discussion Papers
Nine U.S. recessions and three expansions are analyzed in this paper using a structural macroeconometric model. With two exceptions and one partial exception, the episodes are predicted well by the model, including the 2008-2009 recession, conditional on the actual values of the exogenous variables. The main exogenous variables are stock prices, housing prices, import prices, exports, and exogenous government policy variables. Monetary policy is endogenous. Fluctuations in stock and housing prices (housing prices after 1995) are important drivers of output fluctuations—large wealth effects on household expenditures.
Analysis Of Nine U.S. Recessions And Three Expansions, Ray C. Fair
Analysis Of Nine U.S. Recessions And Three Expansions, Ray C. Fair
Cowles Foundation Discussion Papers
Nine U.S. recessions and three expansions are analyzed in this paper using a structural macroeconometric model. With two exceptions and one partial exception, the episodes are predicted well by the model, including the 2008-2009 recession, conditional on the actual values of the exogenous variables. The main exogenous variables are stock prices, housing prices, import prices, exports, and exogenous government policy variables. Monetary policy is endogenous. Fluctuations in stock and housing prices (housing prices after 1995) are important drivers of output fluctuations—large wealth effects on household expenditures. In explaining the 2008-2009 recession detailed financial variables such as credit-constraint variables are not …
Improved Information In Search Markets, Jidong Zhou
Improved Information In Search Markets, Jidong Zhou
Cowles Foundation Discussion Papers
This paper studies how an improved information environment affects consumer search and firm competition. We find conditions for information improvement to have unambiguous impacts on search duration, price and consumer welfare. In many cases consumers benefit from information improvement regardless of how it affects the market price, but there are also cases where information improvement raises price significantly so that consumers suffer from it. Our model provides a unified way to consider the market implications of various types of information improvement such as search advertising, personalized recommendations, filtering, and VR shopping technology.
Forecasting Economic Activity Using The Yield Curve: Quasi-Real-Time Applications For New Zealand, Australia And The Us, Todd Henry, Peter C.B. Phillips
Forecasting Economic Activity Using The Yield Curve: Quasi-Real-Time Applications For New Zealand, Australia And The Us, Todd Henry, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Inversion of the yield curve has come to be viewed as a leading recession indicator. Unsurprisingly, some recent instances of inversion have attracted attention from economic commentators and policymakers about possible impending recessions. Using a variety of time series models and recent innovations in econometric method, this paper conducts quasi-real-time forecasting exercises to investigate whether the predictive capability of the yield curve extends to forecasting economic activity in general and whether removing the term premium component from yields affects forecast accuracy. The empirical findings for the US, Australia, and New Zealand show that forecast performance is not improved either by …
Selling Consumer Data For Profit: Optimal Market-Segmentation Design And Its Consequences, Kai Hao Yang
Selling Consumer Data For Profit: Optimal Market-Segmentation Design And Its Consequences, Kai Hao Yang
Cowles Foundation Discussion Papers
A data broker sells market segmentations created by consumer data to a producer with private production cost who sells a product to a unit mass of consumers with heterogeneous values. In this setting, I completely characterize the revenue-maximizing mechanisms for the data broker. In particular, every optimal mechanism induces quasi-perfect price discrimination. That is, the data broker sells the producer a market segmentation described by a cost-dependent cutoff, such that all the consumers with values above the cutoff end up buying and paying their values while the rest of consumers do not buy. The characterization of optimal mechanisms leads to …
Identification And Inference In First-Price Auctions With Risk Averse Bidders And Selective Entry, Xiaohong Chen, Matthew Gentry, Tong Li, Jingfeng Lu
Identification And Inference In First-Price Auctions With Risk Averse Bidders And Selective Entry, Xiaohong Chen, Matthew Gentry, Tong Li, Jingfeng Lu
Cowles Foundation Discussion Papers
We study identification and inference in first-price auctions with risk averse bidders and selective entry, building on a flexible entry and bidding framework we call the Affiliated Signal with Risk Aversion (AS-RA) model. Assuming that the econometrician observes either exogenous variation in the number of potential bidders (N) or a continuous instrument (z) shifting opportunity costs of entry, we provide a sharp characterization of the nonparametric restrictions implied by equilibrium bidding. Given variation in either competition or costs, this characterization implies that risk neutrality is nonparametrically testable in the sense that if bidders are strictly risk averse, then no risk …
Consistent Misspecification Testing In Spatial Autoregressive Models, Jungyoon Lee, Peter C. B. Phillips, Francesca Rossi
Consistent Misspecification Testing In Spatial Autoregressive Models, Jungyoon Lee, Peter C. B. Phillips, Francesca Rossi
Cowles Foundation Discussion Papers
Spatial autoregressive (SAR) and related models offer flexible yet parsimonious ways to model spatial or network interaction. SAR specifications typically rely on a particular parametric functional form and an exogenous choice of the so-called spatial weight matrix with only limited guidance from theory in making these specifications. The choice of a SAR model over other alternatives, such as spatial Durbin (SD) or spatial lagged X (SLX) models, is often arbitrary, raising issues of potential specification error. To address such issues, this paper develops an omnibus specification test within the SAR framework that can detect general forms of misspecification including that …
Optimally Stubborn, Anna Sanktjohanser
Optimally Stubborn, Anna Sanktjohanser
Cowles Foundation Discussion Papers
I consider a bargaining game with two types of players – rational and stubborn. Rational players choose demands at each point in time. Stubborn players are restricted to choose from the set of “insistent” strategies that always make the same demand and never accept anything less. However, their initial choice of demand is unrestricted. I characterize the equilibria of this game. I show that while pooling equilibria exist, fully separating equilibria do not. Relative to the case with exogenous behavioral types, strong behavioral predictions emerge: in the limit, players randomize over at most two demands. However, unlike in a world …
When Do Consumers Talk?, Ishita Chakraborty, Joyee Deb, Aniko Öry (Oery)
When Do Consumers Talk?, Ishita Chakraborty, Joyee Deb, Aniko Öry (Oery)
Cowles Foundation Discussion Papers
The propensity of consumers to engage in word-of-mouth (WOM) differs after good versus bad experiences, which can result in positive or negative selection of user-generated reviews. We show how the dispersion of consumer beliefs about quality (brand strength), informativeness of good and bad experiences, and price can affect selection of WOM in equilibrium. WOM is costly: Early adopters talk only if they can affect the receiver’s purchase. Under homogeneous beliefs, only negative WOM can arise. Under heterogeneous beliefs, the type of WOM depends on the informativeness of the experiences. We use data from Yelp.com to validate our predictions.
When Do Consumers Talk?, Ishita Chakraborty, Joyee Deb, Aniko Öry (Oery)
When Do Consumers Talk?, Ishita Chakraborty, Joyee Deb, Aniko Öry (Oery)
Cowles Foundation Discussion Papers
The propensity of consumers to engage in word-of-mouth (WOM) can differ after good versus bad experiences. This can result in positive or negative selection of user-generated reviews. We show how the strength of brand image - determined by the dispersion of consumer beliefs about quality - and the informativeness of good and bad experiences impact the selection of WOM in equilibrium. Our premise is that WOM is costly: Early adopters talk only if their information is instrumental for the receiver’s purchase decision. If the brand image is strong, i.e., consumers have close to homogeneous beliefs about quality, then only negative …
Heterogeneous Paths Of Industrialization, Federico Huneeus, Richard Rogerson
Heterogeneous Paths Of Industrialization, Federico Huneeus, Richard Rogerson
Cowles Foundation Discussion Papers
Industrialization experiences differ significantly across countries. We use a benchmark model of structural change to shed light on the sources of this heterogeneity and, in particular, the phenomenon of premature deindustrialization. Our analysis leads to three key findings. First, benchmark models of structural change robustly generate hump-shaped patterns for the evolution of the manufacturing sector. Second, heterogeneous patterns of catch-up in sectoral productivities across countries can generate variation in industrialization experiences similar to those found in the data, including premature deindustrialization. Third, differences in the rate of agricultural productivity growth across economies can account for a large share of the …
Diagnosing Housing Fever With An Econometric Thermometer, Shuping Shi, Peter C. B. Phillips
Diagnosing Housing Fever With An Econometric Thermometer, Shuping Shi, Peter C. B. Phillips
Cowles Foundation Discussion Papers
Housing fever is a popular term to describe an overheated housing market or housing price bubble. Like other financial asset bubbles, housing fever can inflict harm on the real economy, as indeed the US housing bubble did in the period following 2006 leading up to the general financial crisis and great recession. One contribution that econometricians can make to minimize the harm created by a housing bubble is to provide a quantitative `thermometer’ for diagnosing ongoing housing fever. Early diagnosis can enable prompt and effective policy action that reduces long term damage to the real economy. This paper provides a …
When Bias Contributes To Variance: True Limit Theory In Functional Coefficient Cointegrating Regression, Peter C. B. Phillips, Ying Wang
When Bias Contributes To Variance: True Limit Theory In Functional Coefficient Cointegrating Regression, Peter C. B. Phillips, Ying Wang
Cowles Foundation Discussion Papers
Limit distribution theory in the econometric literature for functional coefficient cointegrating (FCC) regression is shown to be incorrect in important ways, influencing rates of convergence, distributional properties, and practical work. In FCC regression the cointegrating coefficient vector \beta(.) is a function of a covariate z_t. The true limit distribution of the local level kernel estimator of \beta(.) is shown to have multiple forms, each form depending on the bandwidth rate in relation to the sample size n and with an optimal convergence rate of n^{3/4} which is achieved by letting the bandwidth have order 1/n^{1/2}.when z_t is scalar. Unlike stationary …
Bootstrap Inference For Quantile Treatment Effects In Randomized Experiments With Matched Pairs, Liang Jiang, Xiaobin Liu, Peter C. B. Phillips, Yichong Zhang
Bootstrap Inference For Quantile Treatment Effects In Randomized Experiments With Matched Pairs, Liang Jiang, Xiaobin Liu, Peter C. B. Phillips, Yichong Zhang
Cowles Foundation Discussion Papers
This paper examines methods of inference concerning quantile treatment effects (QTEs) in randomized experiments with matched-pairs designs (MPDs). We derive the limit distribution of the QTE estimator under MPDs, highlighting the difficulties that arise in analytical inference due to parameter tuning. We show that the naïve weighted bootstrap fails to approximate the limit distribution of the QTE estimator under MPDs because it ignores the dependence structure within the matched pairs.To address this difficulty we propose two bootstrap methods that can consistently approximate the limit distribution: the gradient bootstrap and the weighted bootstrap of the inverse propensity score weighted (IPW) estimator. …
Common Bubble Detection In Large Dimensional Financial Systems, Ye Chen, Peter C. B. Phillips, Shuping Shi
Common Bubble Detection In Large Dimensional Financial Systems, Ye Chen, Peter C. B. Phillips, Shuping Shi
Cowles Foundation Discussion Papers
Price bubbles in multiple assets are sometimes nearly coincident in occurrence. Such near-coincidence is strongly suggestive of co-movement in the associated asset prices and likely driven by certain factors that are latent in the financial or economic system with common effects across several markets. Can we detect the presence of such common factors at the early stages of their emergence? To answer this question, we build a factor model that includes I(1), mildly explosive, and stationary factors to capture normal, exuberant, and collapsing phases in such phenomena. The I(1) factor models the primary driving force of market fundamentals. The explosive …
High-Dimensional Vars With Common Factors, Ke Miao, Peter C.B. Phillips, Liangjun Su
High-Dimensional Vars With Common Factors, Ke Miao, Peter C.B. Phillips, Liangjun Su
Cowles Foundation Discussion Papers
This paper studies high-dimensional vector autoregressions (VARs) augmented with common factors that allow for strong cross section dependence. Models of this type provide a convenient mechanism for accommodating the interconnectedness and temporal co-variability that are often present in large dimensional systems. We propose an `1-nuclear-norm regularized estimator and derive non-asymptotic upper bounds for the estimation errors as well as large sample asymptotics for the estimates. A singular value thresholding procedure is used to determine the correct number of factors with probability approaching one. Both the LASSO estimator and the conservative LASSO estimator are employed to improve estimation precision. The conservative …
Information Frictions And Access To The Paycheck Protection Program, John Eric Humphries, Christopher Neilson, Gabriel Ulyssea
Information Frictions And Access To The Paycheck Protection Program, John Eric Humphries, Christopher Neilson, Gabriel Ulyssea
Cowles Foundation Discussion Papers
The Paycheck Protection Program (PPP) extended 669 billion dollars of forgivable loans in an unprecedented effort to support small businesses affected by the COVID-19 crisis. This paper provides evidence that information frictions and the “first-come, first-served” design of the PPP program skewed its resources towards larger firms and may have permanently reduced its effectiveness. Using new daily survey data on small businesses in the U.S., we show that the smallest businesses were less aware of the PPP and less likely to apply. If they did apply, the smallest businesses applied later, faced longer processing times, and were less likely to …
You Can Lead A Horse To Water: Spatial Learning And Path Dependence In Consumer Search, Charles Hodgson, Gregory Lewis
You Can Lead A Horse To Water: Spatial Learning And Path Dependence In Consumer Search, Charles Hodgson, Gregory Lewis
Cowles Foundation Discussion Papers
We develop a model of consumer search with spatial learning in which sampling the payoff of one product causes consumers to update their beliefs about the payoffs of other products that are nearby in attribute space. Spatial learning gives rise to path dependence, as each new search decision depends on past experiences through the updating process. We present evidence of spatial learning in data that records online search for digital cameras. Consumers’ search paths tend to converge to the chosen product in attribute space, and consumers take larger steps away from rarely purchased products. We estimate the structural parameters of …
Copula-Based Time Series With Filtered Nonstationarity, Xiaohong Chen, Zhijie Xiao, Bo Wang
Copula-Based Time Series With Filtered Nonstationarity, Xiaohong Chen, Zhijie Xiao, Bo Wang
Cowles Foundation Discussion Papers
Economic and financial time series data can exhibit nonstationary and nonlinear patterns simultaneously. This paper studies copula-based time series models that capture both patterns. We introduce a procedure where nonstationarity is removed via a filtration, and then the nonlinear temporal dependence in the filtered data is captured via a flexible Markov copula. We propose two estimators of the copula dependence parameters: the parametric (two-step) copula estimator where the marginal distribution of the filtered series is estimated parametrically; and the semiparametric (two-step) copula estimator where the marginal distribution is estimated via a rescaled empirical distribution of the filtered series. We show …
A Public Option For The Core, Yotam Harchol, Dirk Bergemann, Nick Feamster, Eric Friedman, Arvind Krishnamurthy, Aurojit Panda, Sylvia Ratnasamy, Michael Schapira, Scott Shenker
A Public Option For The Core, Yotam Harchol, Dirk Bergemann, Nick Feamster, Eric Friedman, Arvind Krishnamurthy, Aurojit Panda, Sylvia Ratnasamy, Michael Schapira, Scott Shenker
Cowles Foundation Discussion Papers
This paper is focused not on the Internet architecture – as defined by layering, the narrow waist of IP, and other core design principles – but on the Internet infrastructure, as embodied in the technologies and organizations that provide Internet service. In this paper we discuss both the challenges and the opportunities that make this an auspicious time to revisit how we might best structure the Internet’s infrastructure. Currently, the tasks of transit-between-domains and last-mile-delivery are jointly handled by a set of ISPs who interconnect through BGP. In this paper we propose cleanly separating these two tasks. For transit, we …
Objective Rationality Foundations For (Dynamic) Α-Meu, Mira Frick, Ryota Iijima, Yves Le Yaouanq
Objective Rationality Foundations For (Dynamic) Α-Meu, Mira Frick, Ryota Iijima, Yves Le Yaouanq
Cowles Foundation Discussion Papers
We show how incorporating Gilboa, Maccheroni, Marinacci, and Schmeidler’s (2010) notion of objective rationality into the alpha-MEU model of choice under ambiguity (Hurwicz, 1951) can overcome several challenges faced by the baseline model without objective rationality. The decision-maker (DM) has a subjectively rational preference $\succsim^\wedge$, which captures the complete ranking over acts the DM expresses when forced to make a choice; in addition, we endow the DM with a (possibly incomplete) objectively rational preference $\succsim^*$, which captures the rankings the DM deems uncontroversial. Under the objectively founded alpha-MEU model, $\succsim^\wedge$ has an alpha-MEU representation and $\succsim^*$ has a unanimity representation …
The Us Employment Situation Using The Yale Labor Survey, Christopher Foote, William D. Nordhaus, Douglas Rivers
The Us Employment Situation Using The Yale Labor Survey, Christopher Foote, William D. Nordhaus, Douglas Rivers
Cowles Foundation Discussion Papers
This study presents the design and results of a rapid-fire survey that collects labor market data for households in the United States. The Yale Labor Survey, or YLS, uses an online panel from YouGov to replicate the Current Population Survey (CPS), which is the source of the government’s monthly household statistics. Questions in the YLS concern current and retrospective employment, hours, and income. Because the YLS draws upon an existing pool of potential respondents, it can generate responses inexpensively and quickly (within 24 hours). Moreover, the YLS can develop new questions in real time to study unusual patterns of work …