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Articles 31 - 41 of 41
Full-Text Articles in Economics
Gerrymandering And The Limits Of Representative Democracy, Kai Hao Yang, Alexander K. Zentefis
Gerrymandering And The Limits Of Representative Democracy, Kai Hao Yang, Alexander K. Zentefis
Cowles Foundation Discussion Papers
We assess the capacity of gerrymandering to undermine the will of the people in a representative democracy. Citizens have political positions represented on a spectrum, and electoral maps separate people into districts. We show that unrestrained gerrymandering can severely distort the composition of a legislature, potentially leading half the population to lose all representation of their views. This means that, under majority rule in the congress, gerrymandering enables politicians to enact any legislation of their choice as long as it falls within the interquartile range of the political spectrum. Just as worrisome, gerrymandering can rig any legislation to pass instead …
Consumer Bankruptcy, Mortgage Default And Labor Supply, Wenli Li, Costas Meghir, Florian Oswald
Consumer Bankruptcy, Mortgage Default And Labor Supply, Wenli Li, Costas Meghir, Florian Oswald
Cowles Foundation Discussion Papers
We specify and estimate a lifecycle model of consumption, housing demand and labor supply in an environment where individuals may file for bankruptcy or default on their mortgage. Uncertainty in the model is driven by house price shocks, education specific productivity shocks, and catastrophic consumption events, while bankruptcy is governed by the basic institutional framework in the US as implied by Chapter 7 and Chapter 13. The model is estimated using micro data on credit reports and mortgages combined with data from the American Community Survey. We use the model to understand the relative importance of the two chapters (7 …
Framing Human Action In Physics: Valid Reconstruction, Invalid Reduction, Shabnam Mousavi, Shyam Sunder
Framing Human Action In Physics: Valid Reconstruction, Invalid Reduction, Shabnam Mousavi, Shyam Sunder
Cowles Foundation Discussion Papers
We propose framing human action in physics before reaching to biology and social sciences, rearranging the order of their usual deployment. As an example, consider efforts to model altruism that start in a frame of psychological or social attributes such as reciprocity, empathy, and identity. Evolutionary roots might also be used by appeal to survival of the species from biology. Only then the modeler abstracts to work on notations, and to establish relationships using mathematical apparatus from physics. This top-down deployment of principles from various scientific disciplines has generated a body of coherent models, partially generalizable theories, and disagreements. In …
Distributions Of Posterior Quantiles And Economic Applications, Kai Hao Yang, Alexander K. Zentefis
Distributions Of Posterior Quantiles And Economic Applications, Kai Hao Yang, Alexander K. Zentefis
Cowles Foundation Discussion Papers
We characterize the distributions of posterior quantiles under a given prior. Unlike the distributions of posterior means, which are known to be mean-preserving contractions of the prior, the distributions of posterior quantiles coincide with a first-order stochastic dominance interval bounded by an upper and a lower truncation of the prior. We apply this characterization to several environments, ranging across political economy, Bayesian persuasion, industrial organization, econometrics, finance, and accounting.
Is Selling Complete Information (Approximately) Optimal?, Dirk Bergemann, Yang Cai, Grigoris Velegkas, Mingfei Zhao
Is Selling Complete Information (Approximately) Optimal?, Dirk Bergemann, Yang Cai, Grigoris Velegkas, Mingfei Zhao
Cowles Foundation Discussion Papers
We study the problem of selling information to a data-buyer who faces a decision problem under uncertainty. We consider the classic Bayesian decision-theoretic model pioneered by Blackwell [Bla51, Bla53]. Initially, the data buyer has only partial information about the payoff-relevant state of the world. A data seller offers additional information about the state of the world. The information is revealed through signaling schemes, also referred to as experiments. In the single-agent setting, any mechanism can be represented as a menu of experiments. A recent paper by Bergemann et al. [BBS18] present a complete characterization of the revenue-optimal mechanism in a …
A Panel Clustering Approach To Analyzing Bubble Behavior, Yanbo Liu, Peter C. B. Phillips, Jun Yu
A Panel Clustering Approach To Analyzing Bubble Behavior, Yanbo Liu, Peter C. B. Phillips, Jun Yu
Cowles Foundation Discussion Papers
This study provides new mechanisms for identifying and estimating explosive bubbles in mixed-root panel autoregressions with a latent group structure. A post-clustering approach is employed that combines a recursive k-means clustering algorithm with panel-data test statistics for testing the presence of explosive roots in time series trajectories. Uniform consistency of the k-means clustering algorithm is established, showing that the post-clustering estimate is asymptotically equivalent to the oracle counterpart that uses the true group identities. Based on the estimated group membership, right-tailed self-normalized t-tests and coefficient-based J-tests, each with pivotal limit distributions, are introduced to detect the explosive roots. The usual …
The Value Of Arbitrage, Eduardo Dávila, Daniel Graves, Cecilia Parlatore
The Value Of Arbitrage, Eduardo Dávila, Daniel Graves, Cecilia Parlatore
Cowles Foundation Discussion Papers
This paper studies the social value of closing price differentials in financial markets. We show that arbitrage gaps (price differentials between markets) exactly correspond to the marginal social value of executing an arbitrage trade. We further show that arbitrage gaps and measures of price impact are sufficient to compute the total social value from closing an arbitrage gap. Theoretically, we show that, for a given arbitrage gap, the total social value of arbitrage is higher in more liquid markets. We apply our framework to compute the welfare gains from closing arbitrage gaps in the context of covered interest parity violations …
Optimal Inter-Release Time Between Sequentially Released Products, Jackie Luan, K. Sudhir
Optimal Inter-Release Time Between Sequentially Released Products, Jackie Luan, K. Sudhir
Cowles Foundation Discussion Papers
Marketers routinely use timing as a segmentation device through sequential product releases. While there has been much theoretical research on the optimal introduction strategy of sequential releases, there is little empirical research on this problem. This paper develops an econometric model to empirically solve the inter-release timing problem: it involves (1) developing and estimating a structural model of consumers’ choice for sequentially released products and (2) using the estimates of the structural model to solve for the optimal inter-release time. The empirical application focuses on the movie industry, where we specifically address the issue of the inter-release time between a …
Consumer Guilt And Sustainable Choice: Environmental Impact Of Durable Goods Innovation, K. Sudhir, Ramesh Shankar, Yuan Jin
Consumer Guilt And Sustainable Choice: Environmental Impact Of Durable Goods Innovation, K. Sudhir, Ramesh Shankar, Yuan Jin
Cowles Foundation Discussion Papers
The paper develops a modeling framework to study how sustainability interventions impact consumer adoption of durable goods innovation, firm profit and environmental outcomes in equilibrium. Our two period model with forward looking consumers and a monopoly firm introducing an innovation in the second period accommodates three key features: (1) it builds on the psychology literature linking reactive and anticipatory guilt to consumers’ environmental sensitivity on initial purchase and upgrade decisions; (2) it disentangles environmental harm over the product life into that arising from product use and dumping at replacement; and (3) it clarifies how a taxonomy of innovations (function, fashion …
Market-Minded Informational Intermediary And Unintended Welfare Loss, Wenji Xu, Kai Hao Yang
Market-Minded Informational Intermediary And Unintended Welfare Loss, Wenji Xu, Kai Hao Yang
Cowles Foundation Discussion Papers
This paper examines the welfare effects of informational intermediation. A (short-lived) seller sets the price of a product that is sold through a (long-lived) informational intermediary. The intermediary can disclose information about the product to consumers, earns a fixed percentage of the sales revenue in each period, and has concerns about its prominence---the market size it faces in the future, which in turn is increasing in past consumer surplus. We characterize the Markov perfect equilibria and the set of subgame perfect equilibrium payoffs of this game and show that when the market feedback (i.e., how much past consumer surplus affects …
Informational Intermediation, Market Feedback, And Welfare Losses, Wenji Xu, Kai Hao Yang
Informational Intermediation, Market Feedback, And Welfare Losses, Wenji Xu, Kai Hao Yang
Cowles Foundation Discussion Papers
This paper examines the welfare implications of third-party informational intermediation. A seller sets the price of a product that is sold through an informational intermediary. The intermediary can disclose information about the product to consumers and earns a fied percentage of sales revenue in each period. The intermediary's market base grows at a rate that increases with past consumer surplus. We characterize the stationary equilibria and the set of subgame perfect equilibrium payoffs. When market feedback (i.e., the extent to which past consumer surplus affects future market bases) increases, welfare may decrease in the Pareto sense.