Open Access. Powered by Scholars. Published by Universities.®
Social and Behavioral Sciences Commons™
Open Access. Powered by Scholars. Published by Universities.®
- Keyword
-
- Mechanism design (36)
- Asymptotic size (27)
- Bayes correlated equilibrium (25)
- Climate change (25)
- Incomplete information (25)
-
- Unit root (25)
- Adverse selection (24)
- Cointegration (24)
- Information structure (24)
- Test (24)
- N/A (23)
- Identification (22)
- Asymptotics (21)
- Default (21)
- Moment inequalities (21)
- Nonstationarity (21)
- Productivity (21)
- Confidence set (20)
- Robustness (20)
- Asymptotic theory (19)
- Autoregression (19)
- Common knowledge (18)
- Game theory (18)
- Innovation (18)
- Moral hazard (18)
- Weak instruments (18)
- Brownian motion (17)
- Correlated equilibrium (17)
- General equilibrium (17)
- Long memory (17)
- Publication Year
Articles 1141 - 1170 of 2930
Full-Text Articles in Social and Behavioral Sciences
The Ethics Of Distribution In A Warming Planet, John E. Roemer
The Ethics Of Distribution In A Warming Planet, John E. Roemer
Cowles Foundation Discussion Papers
The discounted-utilitarian social welfare function (DU) is used by the great majority of researchers studying intergenerational resource allocation in the presence of climate change (e.g., W. Nordhaus, M. Weitzman, N. Stern, and P. Dasgupta). I present three justifications for using DU: (1) the view that the first generation’s preferences should be hegemonic, (2) the viewpoint of a utilitarian Ethical Observer who maximizes expected utility when the existence of future generations is uncertain, and (3) axiomatic justifications (as in classical social-choice theory). I argue that only justification (2) provides an ethically convincing justification, and that, only if one endorses utilitarianism as …
Collaborating, Alessandro Bonatti, Johannes Hörner
Collaborating, Alessandro Bonatti, Johannes Hörner
Cowles Foundation Discussion Papers
This paper examines moral hazard in teams over time. Agents are collectively engaged in an uncertain project, and their individual efforts are unobserved. Free-riding leads not only to a reduction in effort, but also to procrastination. The collaboration dwindles over time, but never ceases as long as the project has not succeeded. In fact, the delay until the project succeeds, if it ever does, increases with the number of agents. We show why deadlines, but not necessarily better monitoring, help to mitigate moral hazard.
Principal Components And Long Run Implications Of Multivariate Diffusions, Xiaohong Chen, Lars P. Hansen, José Scheinkman
Principal Components And Long Run Implications Of Multivariate Diffusions, Xiaohong Chen, Lars P. Hansen, José Scheinkman
Cowles Foundation Discussion Papers
We investigate a method for extracting nonlinear principal components. These principal components maximize variation subject to smoothness and orthogonality constraints; but we allow for a general class of constraints and multivariate densities, including densities without compact support and even densities with algebraic tails. We provide primitive sufficient conditions for the existence of these principal components. We characterize the limiting behavior of the associated eigenvalues, the objects used to quantify the incremental importance of the principal components. By exploiting the theory of continuous-time, reversible Markov processes, we give a different interpretation of the principal components and the smoothness constraints. When the …
Understanding Inflation-Indexed Bond Markets, John Y. Campbell, Robert J. Shiller, Luis M. Viceira
Understanding Inflation-Indexed Bond Markets, John Y. Campbell, Robert J. Shiller, Luis M. Viceira
Cowles Foundation Discussion Papers
This paper explores the history of inflation-indexed bond markets in the US and the UK. It documents a massive decline in long-term real interest rates from the 1990’s until 2008, followed by a sudden spike in these rates during the financial crisis of 2008. Breakeven inflation rates, calculated from inflation-indexed and nominal government bond yields, stabilized until the fall of 2008, when they showed dramatic declines. The paper asks to what extent short-term real interest rates, bond risks, and liquidity explain the trends before 2008 and the unusual developments in the fall of 2008. Low inflation-indexed yields and high short-term …
The Perils Of The Learning Model For Modeling Endogenous Technological Change, William D. Nordhaus
The Perils Of The Learning Model For Modeling Endogenous Technological Change, William D. Nordhaus
Cowles Foundation Discussion Papers
Learning or experience curves are widely used to estimate cost functions in manufacturing modeling. They have recently been introduced in policy models of energy and global warming economics to make the process of technological change endogenous. It is not widely appreciated that this is a dangerous modeling strategy. The present note has three points. First, it shows that there is a fundamental statistical identification problem in trying to separate learning from exogenous technological change and that the estimated learning coefficient will generally be biased upwards. Second, we present two empirical tests that illustrate the potential bias in practice and show …
Bootstrapping I(1) Data, Peter C.B. Phillips
Bootstrapping I(1) Data, Peter C.B. Phillips
Cowles Foundation Discussion Papers
A functional law for an I(1) sample data version of the continuous-path block bootstrap of Paparoditis and Politis (2001) is given. The results provide an alternative demonstration that continuous-path block bootstrap unit root tests are consistent under the null.
Mean And Autocovariance Function Estimation Near The Boundary Of Stationarity, Liudas Giraitis, Peter C.B. Phillips
Mean And Autocovariance Function Estimation Near The Boundary Of Stationarity, Liudas Giraitis, Peter C.B. Phillips
Cowles Foundation Discussion Papers
We analyze the applicability of standard normal asymptotic theory for linear process models near the boundary of stationarity. The concept of stationarity is refined, allowing for sample size dependence in the array and paying special attention to the rate at which the boundary unit root case is approached using a localizing coefficient around unity. The primary focus of the present paper is on estimation of the mean, autocovariance and autocorrelation functions within the broad region of stationarity that includes near boundary cases which vary with the sample size. The rate of consistency and the validity of the normal asymptotic approximation …
An Analysis Of The Dismal Theorem, William D. Nordhaus
An Analysis Of The Dismal Theorem, William D. Nordhaus
Cowles Foundation Discussion Papers
In a series of papers, Martin Weitzman has proposed a Dismal Theorem. The general idea is that, under limited conditions concerning the structure of uncertainty and preferences, society has an indefinitely large expected loss from high-consequence, low-probability events. Under such conditions, standard economic analysis cannot be applied. The present study is intended to put the Dismal Theorem in context and examine the range of its applicability, with an application to catastrophic climate change. I conclude that Weitzman makes an important point about selection of distributions in the analysis of decision-making under uncertainty. However, the conditions necessary for the Dismal Theorem …
Asymptotic Theory For Zero Energy Density Estimation With Nonparametric Regression Applications, Qiying Wang, Peter C.B. Phillips
Asymptotic Theory For Zero Energy Density Estimation With Nonparametric Regression Applications, Qiying Wang, Peter C.B. Phillips
Cowles Foundation Discussion Papers
A local limit theorem is given for the sample mean of a zero energy function of a nonstationary time series involving twin numerical sequences that pass to infinity. The result is applicable in certain nonparametric kernel density estimation and regression problems where the relevant quantities are functions of both sample size and bandwidth. An interesting outcome of the theory in nonparametric regression is that the linear term is eliminated from the asymptotic bias. In consequence and in contrast to the stationary case, the Nadaraya-Watson estimator has the same limit distribution (to the second order including bias) as the local linear …
Cointegrating Rank Selection In Models With Time-Varying Variance, Xu Cheng, Peter C.B. Phillips
Cointegrating Rank Selection In Models With Time-Varying Variance, Xu Cheng, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Reduced rank regression (RRR) models with time varying heterogeneity are considered. Standard information criteria for selecting cointegrating rank are shown to be weakly consistent in semiparametric RRR models in which the errors have general nonparametric short memory components and shifting volatility provided the penalty coefficient C n → infinity and C n /n → 0 as n → ∞. The AIC criterion is inconsistent and its limit distribution is given. The results extend those in Cheng and Phillips (2008) and are useful in empirical work where structural breaks or time evolution in the error variances is present. An empirical application …
Efficient Estimation Of Copula-Based Semiparametric Markov Models, Xiaohong Chen, Wei Biao Wu, Yanping Yi
Efficient Estimation Of Copula-Based Semiparametric Markov Models, Xiaohong Chen, Wei Biao Wu, Yanping Yi
Cowles Foundation Discussion Papers
This paper considers efficient estimation of copula-based semiparametric strictly stationary Markov models. These models are characterized by nonparametric invariant (one-dimensional marginal) distributions and parametric bivariate copula functions; where the copulas capture temporal dependence and tail dependence of the processes. The Markov processes generated via tail dependent copulas may look highly persistent and are useful for financial and economic applications. We first show that Markov processes generated via Clayton, Gumbel and Student’s t $ copulas and their survival copulas are all geometrically ergodic. We then propose a sieve maximum likelihood estimation (MLE) for the copula parameter, the invariant distribution and the …
Venture Capital And Sequential Investments, Dirk Bergemann, Ulrich Hege, Liang Peng
Venture Capital And Sequential Investments, Dirk Bergemann, Ulrich Hege, Liang Peng
Cowles Foundation Discussion Papers
We present a dynamic model of venture capital financing, described as a sequential investment problem with uncertain outcome. Each venture has a critical, but unknown threshold beyond which it cannot progress. If the threshold is reached before the completion of the project, then the project fails, otherwise it succeeds. The investors decide sequentially about the speed of the investment and the optimal path of staged investments. We derive the dynamically optimal funding policy in response to the arrival of information during the development of the venture. We develop three types of predictions from our theoretical model and test these predictions …
Estimation And Model Selection Of Semiparametric Multivariate Survival Functions Under General Censorship, Xiaohong Chen, Yanqin Fan, Demian Pouzo, Zhiliang Ying
Estimation And Model Selection Of Semiparametric Multivariate Survival Functions Under General Censorship, Xiaohong Chen, Yanqin Fan, Demian Pouzo, Zhiliang Ying
Cowles Foundation Discussion Papers
Many models of semiparametric multivariate survival functions are characterized by nonparametric marginal survival functions and parametric copula functions, where different copulas imply different dependence structures. This paper considers estimation and model selection for these semiparametric multivariate survival functions, allowing for misspecified parametric copulas and data subject to general censoring. We first establish convergence of the two-step estimator of the copula parameter to the pseudo-true value defined as the value of the parameter that minimizes the KLIC between the parametric copula induced multivariate density and the unknown true density. We then derive its root–n asymptotically normal distribution and provide a simple …
Venture Capital And Sequential Investments, Dirk Bergemann, Ulrich Hege, Liang Peng
Venture Capital And Sequential Investments, Dirk Bergemann, Ulrich Hege, Liang Peng
Cowles Foundation Discussion Papers
We analyze sequential investment decisions in an innovative project that depend on the investor’s information about the project failure risk and its potential final value. We consider the feedback effects between learning about the project parameters and the continuous adjustment of the investment strategy. Investors decide sequentially about the speed of investment and the optimal degree of involvement. We develop three types of predictions from our theoretical model and test these predictions in a large sample of venture capital investment in the U.S. for the period of 1987-2002. First, the investment flow starts cautiously if the failure risk is high …
Venture Capital And Sequential Investments, Dirk Bergemann, Ulrich Hege, Liang Peng
Venture Capital And Sequential Investments, Dirk Bergemann, Ulrich Hege, Liang Peng
Cowles Foundation Discussion Papers
We present a dynamic model of venture capital financing, described as a sequential investment problem with uncertain outcome. Each venture has a critical, but unknown threshold beyond which it cannot progress. If the threshold is reached before the completion of the project, then the project fails, otherwise it succeeds. The investors decide sequentially about the speed of the investment and the optimal path of staged investments. We derive the dynamically optimal funding policy in response to the arrival of information during the development of the venture. We develop three types of predictions from our theoretical model and test these predictions …
Managing Strategic Buyers, Johannes Hörner, Larry Samuelson
Managing Strategic Buyers, Johannes Hörner, Larry Samuelson
Cowles Foundation Discussion Papers
We consider the problem of a monopolist who must sell her inventory before some deadline, facing n buyers with independent private values. The monopolist posts prices but has no commitment power. The seller faces a basic trade-off between imperfect price discrimination and maintaining an effective reserve price. When there is only one unit and only a few buyers, the seller essentially posts unacceptable prices up to the very end, at which point prices collapse in a series of jumps to a “reserve price” that exceeds marginal cost. When there are many buyers, the seller abandons this reserve price in order …
Managing Strategic Buyers, Johannes Hörner, Larry Samuelson
Managing Strategic Buyers, Johannes Hörner, Larry Samuelson
Cowles Foundation Discussion Papers
We consider the problem of a monopolist with an object to sell before some deadline, facing n buyers with independent private values. The monopolist posts prices but has no commitment power. We show that the monopolist can always secure at least the larger of the static monopoly profit and the revenue from a Dutch auction with a zero reserve price. When there are only a few buyers, her profits are higher than this bound, and she essentially posts unacceptable prices up to the very end, at which point prices collapse to a “reservation price” that exceeds marginal cost. When there …
A Principal-Agent Model Of Sequential Testing, Dino Gerardi, Lucas Maestri
A Principal-Agent Model Of Sequential Testing, Dino Gerardi, Lucas Maestri
Cowles Foundation Discussion Papers
This paper analyzes the optimal provision of incentives in a sequential testing context. In every period the agent can acquire costly information that is relevant to the principal’s decision. Neither the agent’s effort nor the realizations of his signals are observable. First, we assume that the principal and the agent are symmetrically informed at the time of contracting. We construct the optimal mechanism and show that the agent is indifferent in every period between performing the test and sending an uninformative message which continues the relationship. Furthermore, in the first period the agent is indifferent between carrying out his task …
Copula-Based Nonlinear Quantile Autoregression, Xiaohong Chen, Roger Koenker, Zhijie Xiao
Copula-Based Nonlinear Quantile Autoregression, Xiaohong Chen, Roger Koenker, Zhijie Xiao
Cowles Foundation Discussion Papers
Parametric copulas are shown to be attractive devices for specifying quantile autoregressive models for nonlinear time-series. Estimation of local, quantile-specific copula-based time series models offers some salient advantages over classical global parametric approaches. Consistency and asymptotic normality of the proposed quantile estimators are established under mild conditions, allowing for global misspecification of parametric copulas and marginals, and without assuming any mixing rate condition. These results lead to a general framework for inference and model specification testing of extreme conditional value-at-risk for financial time series data.
The Evolution Of Decision And Experienced Utilities, Arthur Robson, Larry Samuelson
The Evolution Of Decision And Experienced Utilities, Arthur Robson, Larry Samuelson
Cowles Foundation Discussion Papers
Psychologists report that people make choices on the basis of “decision utilities” that routinely overestimate the “experienced utility” consequences of these choices. This paper argues that this dichotomy between decision and experienced utilities may be the solution to an evolutionary design problem. We examine a setting in which evolution designs agents with utility functions that must mediate intertemporal choices, and in which there is an incentive to condition current utilities on the agent’s previous experience. Anticipating future utility adjustments can distort intertemporal incentives, a conflict that is attenuated by separating decision and experienced utilities.
Asymptotic Equivalence Of Probabilistic Serial And Random Priority Mechanisms, Yeon-Koo Che, Fuhito Kojima
Asymptotic Equivalence Of Probabilistic Serial And Random Priority Mechanisms, Yeon-Koo Che, Fuhito Kojima
Cowles Foundation Discussion Papers
The random priority (random serial dictatorship) mechanism is a common method for assigning objects to individuals. The mechanism is easy to implement and strategy-proof. However this mechanism is inefficient, as the agents may be made all better off by another mechanism that increases their chances of obtaining more preferred objects. Such an inefficiency is eliminated by the recent mechanism called probabilistic serial, but this mechanism is not strategy-proof. Thus, which mechanism to employ in practical applications has been an open question. This paper shows that these mechanisms become equivalent when the market becomes large. More specifically, given a set of …
Inference For Parameters Defined By Moment Inequalities: A Recommended Moment Selection Procedure, Donald W.K. Andrews, Panle Jai Barwick
Inference For Parameters Defined By Moment Inequalities: A Recommended Moment Selection Procedure, Donald W.K. Andrews, Panle Jai Barwick
Cowles Foundation Discussion Papers
This paper is concerned with tests and confidence intervals for partially-identified parameters that are defined by moment inequalities and equalities. In the literature, different test statistics, critical value methods, and implementation methods (i.e., asymptotic distribution versus the bootstrap) have been proposed. In this paper, we compare a wide variety of these methods. We provide a recommended test statistic, moment selection critical value method, and implementation method. In addition, we provide a data-dependent procedure for choosing the key moment selection tuning parameter and a data-dependent size-correction factor.
Financial Control Of A Competitive Economy Without Randomness, Ioannis Karatzas, Martin Shubik, William D. Sudderth
Financial Control Of A Competitive Economy Without Randomness, Ioannis Karatzas, Martin Shubik, William D. Sudderth
Cowles Foundation Discussion Papers
The monetary and fiscal control of a simple economy without outside randomness is studied here from the micro-economic basis of a strategic market game. The government’s bureaucracy is treated as a public good that provides services at a cost. A conventional public good is also considered.
The Value Of Fiat Money With An Outside Bank: An Experimental Game, Juergen Huber, Martin Shubik, Shyam Sunder
The Value Of Fiat Money With An Outside Bank: An Experimental Game, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
Why people accept intrinsically worthless fiat money in exchange for real goods and services has been a longstanding question. There are many competing sufficient explanations that may confound each other in practice but can be individually tested in isolation experimentally. In this paper we examine a sufficient explanation of the value of fiat money through the existence of a debt instrument which allows consumption to be moved earlier in time. We present experimental evidence that the theoretical predictions about the behavior of such economies work reasonably well in a laboratory setting. The import of this finding for the theory of …
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
We present a model in which an outside bank and a default penalty support the value of fiat money, and experimental evidence that the theoretical predictions about the behavior of such economies, based on the Fisher-condition, work reasonably well in a laboratory setting. The import of this finding for the theory of money is to show that the presence of a societal bank and default laws provide sufficient structure to support the use of fiat money and use of the bank rate to influence inflation or deflation, although other institutions could provide alternatives.
Innovation And Equilibrium?, Martin Shubik
Innovation And Equilibrium?, Martin Shubik
Cowles Foundation Discussion Papers
A discussion is given of the problems involved in the formal modeling of the innovation process. The link between innovation and finance is stressed. The nature of how the circular flow of funds is broken and the role of finance in evaluation and control is discussed.
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Sufficiency Of An Outside Bank And A Default Penalty To Support The Value Of Fiat Money: Experimental Evidence, Juergen Huber, Martin Shubik, Shyam Sunder
Cowles Foundation Discussion Papers
We present a model in which an outside bank and a default penalty support the value of fiat money, and experimental evidence that the theoretical predictions about the behavior of such economies, based on the Fisher-condition, work reasonably well in a laboratory setting. The import of this finding for the theory of money is to show that the presence of a societal bank and default laws provide sufficient structure to support the use of fiat money and use of the bank rate to influence inflation or deflation, although other institutions could provide alternatives.
Inference For Parameters Defined By Moment Inequalities: A Recommended Moment Selection Procedure, Donald W.K. Andrews, Panle Jai Barwick
Inference For Parameters Defined By Moment Inequalities: A Recommended Moment Selection Procedure, Donald W.K. Andrews, Panle Jai Barwick
Cowles Foundation Discussion Papers
This paper is concerned with tests and confidence intervals for parameters that are not necessarily identified and are defined by moment inequalities. In the literature, different test statistics, critical value methods, and implementation methods (i.e., the asymptotic distribution versus the bootstrap) have been proposed. In this paper, we compare these methods. We provide a recommended test statistic, moment selection critical value method, and implementation method. We provide data-dependent procedures for choosing the key moment selection tuning parameter kappa and a size-correction factor eta.
The Dynamic Pivot Mechanism, Dirk Bergemann, Juuso Välimäki
The Dynamic Pivot Mechanism, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
We consider truthful implementation of the socially efficient allocation in an independent private-value environment in which agents receive private information over time. We propose a suitable generalization of the pivot mechanism, based on the marginal contribution of each agent. In the dynamic pivot mechanism, the ex-post incentive and ex-post participation constraints are satisfied for all agents after all histories. In an environment with diverse preferences it is the unique mechanism satisfying ex-post incentive, ex-post participation and efficient exit conditions. We develop the dynamic pivot mechanism in detail for a repeated auction of a single object in which each bidder learns …
The Dynamic Pivot Mechanism, Dirk Bergemann, Juuso Välimäki
The Dynamic Pivot Mechanism, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
We consider truthful implementation of the socially efficient allocation in an independent private-value environment in which agents receive private information over time. We propose a suitable generalization of the pivot mechanism, based on the marginal contribution of each agent. In the dynamic pivot mechanism, the ex-post incentive and ex-post participation constraints are satisfied for all agents after all histories. In an environment with diverse preferences it is the unique mechanism satisfying ex-post incentive, ex-post participation and efficient exit conditions. We develop the dynamic pivot mechanism in detail for a repeated auction of a single object in which each bidder learns …