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Full-Text Articles in Economics
Expected Worth For 2 × 2 Matrix Games With Variable Grid Sizes, Michael R. Powers, Martin Shubik, Wen Wang
Expected Worth For 2 × 2 Matrix Games With Variable Grid Sizes, Michael R. Powers, Martin Shubik, Wen Wang
Cowles Foundation Discussion Papers
We offer a detailed examination of a broad class of 2 x 2 matrix games as a first step toward considering measures of resource distribution and efficiency of outcomes. In the present essay, only noncooperative equilibria and entropic outcomes are considered, and a crude measure of efficiency employed. Other solution concepts and the formal construction of an efficiency index will be addressed in a companion paper.
Expected Worth For 2 × 2 Matrix Games With Variable Grid Sizes, Michael R. Powers, Martin Shubik, Wen Wang
Expected Worth For 2 × 2 Matrix Games With Variable Grid Sizes, Michael R. Powers, Martin Shubik, Wen Wang
Cowles Foundation Discussion Papers
We offer a detailed examination of a broad class of 2 × 2 matrix games as a first step toward considering measures of resource distribution and efficiency of outcomes. In the present essay, only noncooperative equilibria and entropic outcomes are considered, and a crude measure of efficiency employed. Other solution concepts and the formal construction of an efficiency index will be addressed in a companion paper.
Threshold Regression With Endogeneity, Ping Yu, Peter C.B. Phillips
Threshold Regression With Endogeneity, Ping Yu, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper studies estimation and specification testing in threshold regression with endogeneity. Three key results differ from those in regular models. First, both the threshold point and the threshold effect parameters are shown to be identified without the need for instrumentation. Second, in partially linear threshold models, both parametric and nonparametric components rely on the same data, which prima facie suggests identification failure. But, as shown here, the discontinuity structure of the threshold itself supplies identifying information for the parametric coefficients without the need for extra randomness in the regressors. Third, instrumentation plays different roles in the estimation of the …
Investment And Competitive Matching, Georg Nöldeke, Larry Samuelson
Investment And Competitive Matching, Georg Nöldeke, Larry Samuelson
Cowles Foundation Discussion Papers
We study markets in which agents first make investments and are then matched into potentially productive partnerships. Equilibrium investments and the equilibrium matching will be efficient if agents can simultaneously negotiate investments and matches, but we focus on markets in which agents must first sink their investments before matching. Additional equilibria may arise in this sunk-investment setting, even though our matching market is competitive. These equilibria exhibit inefficiencies that we can interpret as coordination failures. All allocations satisfying a constrained efficiency property are equilibria, and the converse holds if preferences satisfy a separability condition. We identify sufficient conditions (most notably, …
First Difference Mle And Dynamic Panel Estimation, Chirok Han, Peter C.B. Phillips
First Difference Mle And Dynamic Panel Estimation, Chirok Han, Peter C.B. Phillips
Cowles Foundation Discussion Papers
First difference maximum likelihood (FDML) seems an attractive estimation methodology in dynamic panel data modeling because differencing eliminates fixed effects and, in the case of a unit root, differencing transforms the data to stationarity, thereby addressing both incidental parameter problems and the possible effects of nonstationarity. This paper draws attention to certain pathologies that arise in the use of FDML that have gone unnoticed in the literature and that affect both finite sample peformance and asymptotics. FDML uses the Gaussian likelihood function for first differenced data and parameter estimation is based on the whole domain over which the log-likelihood is …
Uniform Asymptotic Normality In Stationary And Unit Root Autoregression, Chirok Han, Peter C.B. Phillips, Donggyu Sul
Uniform Asymptotic Normality In Stationary And Unit Root Autoregression, Chirok Han, Peter C.B. Phillips, Donggyu Sul
Cowles Foundation Discussion Papers
While differencing transformations can eliminate nonstationarity, they typically reduce signal strength and correspondingly reduce rates of convergence in unit root autoregressions. The present paper shows that aggregating moment conditions that are formulated in differences provides an orderly mechanism for preserving information and signal strength in autoregressions with some very desirable properties. In first order autoregression, a partially aggregated estimator based on moment conditions in differences is shown to have a limiting normal distribution which holds uniformly in the autoregressive coefficient rho including stationary and unit root cases. The rate of convergence is root of n when |τ| < 1 and the limit distribution is the same as the Gaussian maximum likelihood estimator (MLE), but when τ = 1 the rate of convergence to the normal distribution is within a slowly varying factor of n . A fully aggregated estimator is shown to have the same limit behavior in the stationary case and to have nonstandard limit distributions in unit root and near integrated cases which reduce both the bias and the variance of the MLE. This result shows that it is possible to improve on the asymptotic behavior of the MLE without using an artificial shrinkage technique or otherwise accelerating convergence at unity at the cost of performance in the neighborhood of unity.
The Virtues And Vices Of Equilibrium And The Future Of Financial Economics, J. Doyne Farmer, John Geanakoplos
The Virtues And Vices Of Equilibrium And The Future Of Financial Economics, J. Doyne Farmer, John Geanakoplos
Cowles Foundation Discussion Papers
The use of equilibrium models in economics springs from the desire for parsimonious models of economic phenomena that take human reasoning into account. This approach has been the cornerstone of modern economic theory. We explain why this is so, extolling the virtues of equilibrium theory; then we present a critique and describe why this approach is inherently limited, and why economics needs to move in new directions if it is to continue to make progress. We stress that this shouldn’t be a question of dogma, but should be resolved empirically. There are situations where equilibrium models provide useful predictions and …
An Economy With Personal Currency: Theory And Experimental Evidence, Martin Angerer, Juergen Huber, Martin Shubik, Shyam Sunder
An Economy With Personal Currency: Theory And Experimental Evidence, Martin Angerer, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
Is personal currency issued by participants sufficient to operate an economy efficiently, with no outside or government money? Sahi and Yao (1989) and Sorin (1996) constructed a strategic market game to prove that this is possible. We conduct an experimental game in which each agent issues her personal IOUs, and a costless efficient clearinghouse adjusts the exchange rates among them so the markets always clear. The results suggest that if the information system and clearing are so good as to preclude moral hazard, any form of information asymmetry, and need for trust, the economy operates efficiently at any price level …
The Ideal Inflation Indexed Bond And Irving Fisher's Impatience Theory Of Interest In An Overlapping Generations World, John Geanakoplos
The Ideal Inflation Indexed Bond And Irving Fisher's Impatience Theory Of Interest In An Overlapping Generations World, John Geanakoplos
Cowles Foundation Discussion Papers
Irving Fisher long advocated inflation indexed bonds. I prove in the context of a multicommodity CAPM world that the best welfare improving bond pays the minimum money needed to achieve the same utility, and not the minimum needed to buy an ideal commodity bundle. Irving Fisher also developed and advocated the impatience theory of interest. But in OLG economies, the rate of interest is determined by population growth, not impatience. I reconcile this contradiction by proving that in stationary OLG economies with land, the interest rate at the unique steady state does depend on impatience. Indeed, the proposition that greater …
More Efficient Kernel Estimation In Nonparametric Regression With Autocorrelated Errors, Zhijie Xiao, Oliver B. Linton, Raymond J. Carroll, E. Mammen
More Efficient Kernel Estimation In Nonparametric Regression With Autocorrelated Errors, Zhijie Xiao, Oliver B. Linton, Raymond J. Carroll, E. Mammen
Cowles Foundation Discussion Papers
We propose a modification of kernel time series regression estimators that improves efficiency when the innovation process is autocorrelated. The procedure is based on a pre-whitening transformation of the dependent variable that has to be estimated from the data. We establish the asymptotic distribution of our estimator under weak dependence conditions. It is shown that the proposed estimation procedure is more efficient than the conventional kernel method. We also provide simulation evidence to suggest that gains can be achieved in moderate sized samples.
An Optimal Fair Job Assignment Problem, Zaifu Yang
An Optimal Fair Job Assignment Problem, Zaifu Yang
Cowles Foundation Discussion Papers
We study the problem of how to allocate a set of indivisible objects like jobs or houses and an amount of money among a group of people as fairly and as efficiently as possible. A particular constraint for such an allocation is that every person should be assigned with the same number of objects in his or her bundle. The preferences of people depend on the bundle of objects and the quantity of money they take. We propose a solution to this problem, called a perfectly fair allocation. It is shown that every perfectly fair allocation is efficient and envy-free, …