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Articles 1411 - 1440 of 2930
Full-Text Articles in Social and Behavioral Sciences
Optimal Invariant Similar Tests For Instrumental Variables Regression, Donald W.K. Andrews, Marcelo J. Moreira, James H. Stock
Optimal Invariant Similar Tests For Instrumental Variables Regression, Donald W.K. Andrews, Marcelo J. Moreira, James H. Stock
Cowles Foundation Discussion Papers
This paper considers tests of the parameter on endogenous variables in an instrumental variables regression model. The focus is on determining tests that have some optimal power properties. We start by considering a model with normally distributed errors and known error covariance matrix. We consider tests that are similar and satisfy a natural rotational invariance condition. We determine tests that maximize weighted average power (WAP) for arbitrary weight functions among invariant similar tests. Such tests include point optimal (PO) invariant similar tests. The results yield the power envelope for invariant similar tests. This allows one to assess and compare the …
Monopoly Pricing Of Experience Goods, Dirk Bergemann, Juuso Välimäki
Monopoly Pricing Of Experience Goods, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
We develop a dynamic model of experience goods pricing with independent private valuations. We show that the optimal paths of sales and prices can be described in terms of a simple dichotomy. In a mass market, prices are declining over time. In a niche market, the optimal prices are initially low followed by higher prices that extract surplus from the buyers with a high willingness to pay. We consider extensions of the model to integrate elements of social rather than private learning and turnover among buyers.
Monopoly Pricing Of Experience Goods, Dirk Bergemann, Juuso Välimäki
Monopoly Pricing Of Experience Goods, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
We develop a dynamic model of experience goods pricing with independent private valuations. We show that the optimal paths of sales and prices can be described in terms of a simple dichotomy. In a mass market, prices are declining over time. In a niche market, the optimal prices are initially low followed by higher prices that extract surplus from the buyers with a high willingness to pay. We consider extensions of the model to integrate elements of social rather than private learning and turnover among buyers.
Time-Inconsistency And Welfare Program Participation: Evidence From The Nlsy, Hanming Fang, Dan Silverman
Time-Inconsistency And Welfare Program Participation: Evidence From The Nlsy, Hanming Fang, Dan Silverman
Cowles Foundation Discussion Papers
We empirically implement a dynamic structural model of labor supply and welfare program participation for agents with potentially time-inconsistent preferences. Using panel data on the choices of single women with children from the NLSY 1979, we provide estimates of the degree of time-inconsistency, and of its influence on the welfare take-up decision. With these estimates, we conduct counterfactual experiments to quantify the utility loss stemming from the inability to commit to future decisions, and the potential utility gains from commitment mechanisms such as welfare time limits and work requirements.
Racism And Redistribution In The United States: A Solution To The Problem Of American Exceptionalism, Woojin Lee, John E. Roemer
Racism And Redistribution In The United States: A Solution To The Problem Of American Exceptionalism, Woojin Lee, John E. Roemer
Cowles Foundation Discussion Papers
The two main political parties in the United States put forth policies on redistribution and on issues pertaining directly to race. We argue that redistributive politics in America can be fully understood only by taking account of the interconnection between these issues, and the effects of political competition upon the multi-dimensional party platforms. We identify two mechanisms through which racism among American voters decreases the degree of redistribution that would otherwise obtain. Many authors have suggested that voter racism decreases the degree of redistribution due to an anti-solidarity effect: that (some) voters oppose government transfer payments to minorities whom they …
The Social Cost Of Monopoly Power, Donald J. Brown, G. A. Wood
The Social Cost Of Monopoly Power, Donald J. Brown, G. A. Wood
Cowles Foundation Discussion Papers
A general equilibrium analysis of monopoly power is proposed as an alternative to the partial equilibrium analyses of monopolization common to most antitrust texts. This analysis introduces the notion of a cost minimizing market equilibrium. The empirical implications of this equilibrium concept for antitrust policy is derived in terms of a family of equilibrium inequalities over market data from observations on a market economy with competitive factor markets. The social cost of monopoly power is measured using Debreu’s coefficient of resource utilization. That is, we propose Pareto optimality as the ultimate objective of antitrust policy.
Gold, Fiat And Credit: An Elementary Discussion Of Commodity Money, Fiat Money And Credit. Part Ii, Thomas Quint, Martin Shubik
Gold, Fiat And Credit: An Elementary Discussion Of Commodity Money, Fiat Money And Credit. Part Ii, Thomas Quint, Martin Shubik
Cowles Foundation Discussion Papers
In this paper we present a series of models, all within the context of a simple two-good economy, which bring out the distinctions between the different types of money and financial institutions. The models emphasize the physical properties of the economic goods, moneys, and trading systems. In Part 1 of the paper, we covered models in which the money is a consumable storable; here in Part 2 we consider economies using durable money, fiat money, or credit. Under this framework we are able to successfully contrast the role of private money lenders, banks, bilateral credit systems, and credit clearinghouses. We …
Neighborhood Complexes And Generating Functions, Herbert E. Scarf, Kevin M. Woods
Neighborhood Complexes And Generating Functions, Herbert E. Scarf, Kevin M. Woods
Cowles Foundation Discussion Papers
Given a 1 , a 2 ,…, a n in Z d , we examine the set, G , of all nonnegative integer combinations of these a i . In particular, we examine the generating function f ( z ) = Sum {b in G} z b . We prove that one can write this generating function as a rational function using the neighborhood complex (sometimes called the complex of maximal lattice-free bodies or the Scarf complex) on a particular lattice in Z n . In the generic case, this follows from algebraic results of D . Bayer and B. …
Schumpeterian Profits In The American Economy: Theory And Measurement, William D. Nordhaus
Schumpeterian Profits In The American Economy: Theory And Measurement, William D. Nordhaus
Cowles Foundation Discussion Papers
The present study examines the importance of Schumpeterian profits in the United States economy. Schumpeterian profits are defined as those profits that arise when firms are able to appropriate the returns from innovative activity. We first show the underlying equations for Schumpeterian profits. We then estimate the value of these profits for the non-farm business economy. We conclude that only a miniscule fraction of the social returns from technological advances over the 1948-2001 period was captured by producers, indicating that most of the benefits of technological change are passed on to consumers rather than captured by producers.
Household Reaction To Changes In Housing Wealth, Robert J. Shiller
Household Reaction To Changes In Housing Wealth, Robert J. Shiller
Cowles Foundation Discussion Papers
It is widely claimed that housing wealth, as well as stock prices, have an impact on consumption and hence on aggregate economic activity. This paper presents a broad overview of the issues that arise in evaluating this claim in the context of recent research in behavioral economics. Particular attention is paid to a model of the response of consumption to wealth components produced by Christopher Carroll [2004].
Radical Financial Innovation, Robert J. Shiller
Radical Financial Innovation, Robert J. Shiller
Cowles Foundation Discussion Papers
Radical financial innovation is the development of new institutions and methods that permit risk management to be extended far beyond its former realm, covering important new classes of risks. This paper compares past such innovation with potential future innovation, looking at the process that produced past success and the possibilities for future financial innovation.
Smoothed Empirical Likelihood Methods For Quantile Regression Models, Yoon-Jae Whang
Smoothed Empirical Likelihood Methods For Quantile Regression Models, Yoon-Jae Whang
Cowles Foundation Discussion Papers
This paper considers an empirical likelihood method to estimate the parameters of the quantile regression (QR) models and to construct confidence regions that are accurate in finite samples. To achieve the higher-order refinements, we smooth the estimating equations for the empirical likelihood. We show that the smoothed empirical likelihood (SEL) estimator is first-order asymptotically equivalent to the standard QR estimator and establish that confidence regions based on the smoothed empirical likelihood ratio have coverage errors of order n –1 and may be Bartlett-corrected to produce regions with an error of order n –2 , where n denotes the sample size. …
A Quantilogram Approach To Evaluating Directional Predictability, Oliver B. Linton, Yoon-Jae Whang
A Quantilogram Approach To Evaluating Directional Predictability, Oliver B. Linton, Yoon-Jae Whang
Cowles Foundation Discussion Papers
In this note we propose a simple method of measuring directional predictability and testing for the hypothesis that a given time series has no directional predictability. The test is based on the correlogram of quantile hits. We provide the distribution theory needed to conduct inference, propose some model free upper bound critical values, and apply our methods to stock index return data. The empirical results suggests some directional predictability in returns especially in mid range quantiles like 5%-10%.
An Elementary Discussion Of Commodity Money, Fiat Money And Credit: Part 1, Thomas Quint, Martin Shubik
An Elementary Discussion Of Commodity Money, Fiat Money And Credit: Part 1, Thomas Quint, Martin Shubik
Cowles Foundation Discussion Papers
In this paper we present a series of models, all within the context of a simple two-good economy, which bring out the distinctions among the different types of money and financial institutions. The models emphasize the physical properties of the economic goods, moneys, and trading systems. Part 1 covers models in which the money is a consumable storable; the economies in Part 2 use durable money, fiat money, or credit. Under this framework we are able to successfully contrast the role of private money lenders, banks, bilateral credit systems, and credit clearinghouses. We are also able to model the importance …
Three Strikes And You’Re Out: Reply To Cooper And Willis, Ricardo J. Caballero, Eduardo Engel
Three Strikes And You’Re Out: Reply To Cooper And Willis, Ricardo J. Caballero, Eduardo Engel
Cowles Foundation Discussion Papers
Cooper and Willis (2003) is the latest in a sequence of criticisms of our methodology for estimating aggregate nonlinearities when microeconomic adjustment is lumpy. Their case is based on “reproducing” our main findings using artificial data generated by a model where microeconomic agents face quadratic adjustment costs. That is, they supposedly find our results where they should not be found. The three claims on which they base their case are incorrect. Their mistakes range from misinterpreting their own simulation results to failing to understand the context in which our procedures should be applied. They also claim that our approach assumes …
Purification In The Infinitely-Repeated Prisoners’ Dilemma, V. Bhaskar, George J. Mailath, Stephen Morris
Purification In The Infinitely-Repeated Prisoners’ Dilemma, V. Bhaskar, George J. Mailath, Stephen Morris
Cowles Foundation Discussion Papers
This paper investigates the Harsanyi-purifiability of mixed strategies in the repeated prisoners’ dilemma with perfect monitoring. We perturb the game so that in each period, a player receives a private payoff shock which is independently and identically distributed across players and periods. We focus on the purifiability of a class of one-period memory mixed strategy equilibria used by Ely and Välimäki in their study of the repeated prisoners’ dilemma with private monitoring. We find that the strategy profile is purifiable by perturbed-game finite-memory strategies if and only if it is strongly symmetric, in the sense that after every history, both …
Using Subspace Methods For Estimating Arma Models For Multivariate Time Series With Conditionally Heteroskedastic Innovations, Dietmar Bauer
Using Subspace Methods For Estimating Arma Models For Multivariate Time Series With Conditionally Heteroskedastic Innovations, Dietmar Bauer
Cowles Foundation Discussion Papers
This paper deals with the estimation of linear dynamic models of the ARMA type for the conditional mean for time series with conditionally heteroskedastic innovation process widely used in modelling financial time series. Estimation is performed using subspace methods which are known to have computational advantages as compared to prediction error methods based on criterion minimization. These advantages are especially strong for high dimensional time series. The subspace methods are shown to provide consistent estimators. Moreover asymptotic equivalence to prediction error estimators in terms of the asymptotic variance is proved. Also order estimation techniques are proposed and analyzed. The estimators …
Does Prison Harden Inmates? A Discontinuity-Based Approach, Keith M. Chen, Jesse M. Shapiro
Does Prison Harden Inmates? A Discontinuity-Based Approach, Keith M. Chen, Jesse M. Shapiro
Cowles Foundation Discussion Papers
Some two million Americans are currently incarcerated, with roughly six hundred thousand to be released this year. Despite this, little is known about the effects of confinement conditions on the post-release lives of inmates. Focusing on post-release criminal activity, we identify the causal effect of prison conditions on recidivism rates by exploiting a discontinuity in the assignment of federal prisoners to security levels. We find that harsher prison conditions are associated with significantly more post-release crime.
Absenteeism, Substitutes, Complements, And The Banzhaf Index, Thomas Quint
Absenteeism, Substitutes, Complements, And The Banzhaf Index, Thomas Quint
Cowles Foundation Discussion Papers
We consider the voting-with-absenteeism game of Quint-Shubik (2003). In that paper we defined a power index for such games, called the absentee index. Our analysis was based on the theory of the Shapley-Shubik power index (SSPI) for simple games. In this paper we do an analogous analysis, based on the Banzhaf index instead of the SSPI. The result is a new index, called the absentee Banzhaf index. We provide an axiomatization and multilinear extension formula for this index. Finally, we re-explore Myerson’s (1977, 1980) “balanced contributions” property, and the concept of substitutes and complements for simple games (Quint-Shubik 2003), again …
Dollar Denominated Debt And Optimal Security Design, John Geanakoplos, Felix Kubler
Dollar Denominated Debt And Optimal Security Design, John Geanakoplos, Felix Kubler
Cowles Foundation Discussion Papers
During a crisis, developing countries regret having issued dollar denominated debt because they have to pay more when they have less. Ex ante, however, they may be worse off issuing local currency debt because the equilibrium interest rate might rise, making it more expensive for them to borrow. Many authors have assumed that lenders and borrowers have contrary goals, and that local currency (peso) debt is better for the borrower (Bolivia), and dollar debt is better for the lender (America). We show that if each country is represented by a single consumer with quadratic utilities, in perfect competition, then both …
Absenteeism, Substitutes, And Complements In Simple Games, Thomas Quint, Martin Shubik
Absenteeism, Substitutes, And Complements In Simple Games, Thomas Quint, Martin Shubik
Cowles Foundation Discussion Papers
A voting with absenteeism game is defined as a pair (G;r) where G is an n-player (monotonic) simple game and r is an n-vector for which r i is the probability that player i attends a vote. We define a power index for such games, called the absentee index. We axiomatize the absentee index and provide a multilinear extension formula for it. Using this analysis we re-derive Myerson’s (1977, 1980) “balanced contributions” property for the Shapley-Shubik power index. In fact, we derive a formula which quantitatively gives the amount of the ‘balanced contributions” in terms of the coefficients of the …
Can One Estimate The Conditional Distribution Of Post-Model-Selection Estimators?, Hannes Leeb, Benedikt M. Pötscher
Can One Estimate The Conditional Distribution Of Post-Model-Selection Estimators?, Hannes Leeb, Benedikt M. Pötscher
Cowles Foundation Discussion Papers
We consider the problem of estimating the conditional distribution of a post-model-selection estimator where the conditioning is on the selected model. The notion of a post-model-selection estimator here refers to the combined procedure resulting from first selecting a model (e.g., by a model selection criterion like AIC or by a hypothesis testing procedure) and second estimating the parameters in the selected model (e.g., by least-squares or maximum likelihood), all based on the same data set. We show that it is impossible to estimate this distribution with reasonable accuracy even asymptotically. In particular, we show that no estimator for this distribution …
Nonparametric Tests For Common Values In First-Price Sealed-Bid Auctions, Philip A. Haile, Han Hong, Matthew Shum
Nonparametric Tests For Common Values In First-Price Sealed-Bid Auctions, Philip A. Haile, Han Hong, Matthew Shum
Cowles Foundation Discussion Papers
We develop tests for common values at first-price sealed-bid auctions. Our tests are nonparametric, require observations only of the bids submitted at each auction, and are based on the fact that the “winner’s curse” arises only in common values auctions. The tests build on recently developed methods for using observed bids to estimate each bidder’s conditional expectation of the value of winning the auction. Equilibrium behavior implies that in a private values auction these expectations are invariant to the number of opponents each bidder faces, while with common values they are decreasing in the number of opponents. This distinction forms …
A Behavioral Model Of Bargaining With Endogenous Types, Dilip Abreu, David G. Pearce
A Behavioral Model Of Bargaining With Endogenous Types, Dilip Abreu, David G. Pearce
Cowles Foundation Discussion Papers
We enrich a simple two-person bargaining model by introducing “behavioral types” who concede more slowly than does the average person in the economy. The presence of behavioral types profoundly influences the choices of optimizing types. In equilibrium, concessions are calculated to induce “reciprocity”: a substantial concession by player i is followed by a period in which j is much more likely to make a concession than usual. This favors concessions by i that are neither very small nor large enough to end the bargaining immediately. A key difference from the traditional method of perturbing a game is that the actions …
To Bundle Or Not To Bundle, Hanming Fang, Peter Norman
To Bundle Or Not To Bundle, Hanming Fang, Peter Norman
Cowles Foundation Discussion Papers
Commodity bundling is studied in an environment where the dispersion of valuations unambiguously decreases when two or more goods are sold as a bundle only. Bundling is more likely to dominate separately selling the goods if marginal costs are low relative to the average valuation, or if the distribution of valuations is very peaked around the mean.
The Edgeworth, Cournot And Walrasian Cores Of An Economy, Martin Shubik
The Edgeworth, Cournot And Walrasian Cores Of An Economy, Martin Shubik
Cowles Foundation Discussion Papers
Three variations of the core of a market game representing an exchange economy are considered and compared. The possibility for utilizing the Walrasian core to reflect certain monetary phenomena is noted.
An Efficiency Rationale For Bundling Of Public Goods, Hanming Fang, Peter Norman
An Efficiency Rationale For Bundling Of Public Goods, Hanming Fang, Peter Norman
Cowles Foundation Discussion Papers
This paper studies the role of bundling in the efficient provision of excludable public goods. We show that bundling in the provision of unrelated public goods can enhance social welfare. With a large number of goods and agents, first best can be approximated with pure bundling. For a parametric class of problems with binary valuations, we characterize the optimal mechanism, and show that bundling alleviates the free riding problem in large economies and decreases the extent of use exclusions. Both results are related to the idea that bundling makes it possible to reduce the incidence of exclusions because the variance …
The Invention Of Inflation-Indexed Bonds In Early America, Robert J. Shiller
The Invention Of Inflation-Indexed Bonds In Early America, Robert J. Shiller
Cowles Foundation Discussion Papers
The world’s first known inflation-indexed bonds were issued by the Commonwealth of Massachusetts in 1780 during the Revolutionary War. These bonds were invented to deal with severe wartime inflation and with angry discontent among soldiers in the U.S. Army with the decline in purchasing power of their pay. Although the bonds were successful, the concept of indexed bonds was abandoned after the immediate extreme inflationary environment passed, and largely forgotten until the twentieth century. In 1780, the bonds were viewed as at best only an irregular expedient, since there was no formulated economic theory to justify indexation.
Optimal Provision Of Multiple Excludable Public Goods, Hanming Fang, Peter Norman
Optimal Provision Of Multiple Excludable Public Goods, Hanming Fang, Peter Norman
Cowles Foundation Discussion Papers
This paper studies the optimal provision mechanism for multiple excludable public goods when agents’ valuations are private information. For a parametric class of problems with binary valuations, we characterize the optimal mechanism, and show that it involves bundling. Bundling alleviates the free riding problem in large economies in two ways: first, it can increase the asymptotic provision probability of socially efficient public goods from zero to one; second, it decreases the extent of use exclusions.
A Double Auction Market: Teaching, Experiment And Theory, Martin Shubik
A Double Auction Market: Teaching, Experiment And Theory, Martin Shubik
Cowles Foundation Discussion Papers
A simultaneous double auction market with bid and offer cards was utilized in classes on the theory and history of money and financial institutions and occasionally in classes on the theory of games. The prime purpose in using this game was to teach the students how to construct process models of economic phenomena. The second purpose was to consider the properties of the double auction market. The third purpose was to interpret the experimental results an link them to theory.