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Articles 1531 - 1560 of 2930
Full-Text Articles in Social and Behavioral Sciences
Partially Linear Models With Unit Roots, Ted Juhl, Zhijie Xiao
Partially Linear Models With Unit Roots, Ted Juhl, Zhijie Xiao
Cowles Foundation Discussion Papers
This paper studies the asymptotic properties of a nonstationary partially linear regression model. In particular, we allow for covariates to enter the unit root (or near unit root) model in a nonparametric fashion, so that our model is an extension of the semiparametric model analyzed in Robinson (1988). It is proven that the autoregressive parameter can be estimated at rate N even though part of the model is estimated nonparametrically. Unit root tests based on the semiparametric estimate of the autoregressive parameter have a limiting distribution which is a mixture of a standard normal and the Dickey-Fuller distribution. A Monte …
Valid Edgeworth Expansions For The Whittle Maximum Likelihood Estimator For Stationary Long-Memory Gaussian Time Series, Donald W.K. Andrews, Offer Lieberman
Valid Edgeworth Expansions For The Whittle Maximum Likelihood Estimator For Stationary Long-Memory Gaussian Time Series, Donald W.K. Andrews, Offer Lieberman
Cowles Foundation Discussion Papers
In this paper, we prove the validity of an Edgeworth expansion to the distribution of the Whittle maximum likelihood estimator for stationary long-memory Gaussian models with unknown parameter donpap26_black.jpg (3566 bytes) . The error of the (s-2)-order expansion is shown to be o ( n ( s -2)/2 ) – the usual iid rate — for a wide range of models, including the popular ARFIMA(p,d,q) models. The expansion is valid under mild assumptions on the behavior of spectral density and its derivatives in the neighborhood of the origin. As a by-product, we generalize a Theorem by Fox and Taqqu (1987) …
Macroeconomic Strategy In Wartime, James Tobin
Macroeconomic Strategy In Wartime, James Tobin
Cowles Foundation Discussion Papers
In 2001-02 the United States has been hit by two quite different shocks, terrorism and recession. As usual in time of war, national defense is the highest priority for use of the country’s resources. Although the opportunities for international warfare are limited, the challenges to the homeland are virtually unlimited. The president’s fiscal year 2003 budget includes $48 billion additional for the military and $38 billion additional for homeland defense. Given the gravity of the threat, it is hard to understand why new expenditures are not undertaken as soon as and as large as possible. This would also be timely …
How To Auction An Essential Facility When Underhand Integration Is Possible, Eduardo Engel, Ronald Fischer, Alexander Galetovic
How To Auction An Essential Facility When Underhand Integration Is Possible, Eduardo Engel, Ronald Fischer, Alexander Galetovic
Cowles Foundation Discussion Papers
Regulating seaports is difficult in general, even more so for the weak regulatory institutions common in developing countries. For this reason some countries have awarded these facilities via Demsetz auctions, to the port operator that bids the lowest cargo-handling fee. A major concern with Demsetz auctions in this context, is that the winning operator may integrate with a shipper and monopolize the shipping market, by worsening the service quality for competing shippers. The standard policy recommendation against service quality discrimination is to ban the seaport from operating in the shipping market. The effectiveness of such prohibitions is suspect, however, because …
The Health Of Nations: The Contribution Of Improved Health To Living Standards, William D. Nordhaus
The Health Of Nations: The Contribution Of Improved Health To Living Standards, William D. Nordhaus
Cowles Foundation Discussion Papers
Nations generally measure their economic performance using the yardstick of national output and income. It is not widely recognized, however, that conventional measures of national income and output exclude the value of improvements in the health status of the population. The present study develops a methodology and presents preliminary estimates of how standard economic measures would change if they adequately reflected improvements in health status. The study first discusses the theory of the measurement of national income, examines some of the shortcomings of traditional concepts, and proposes a new concept called ‘health income’ that can be used to incorporate improvements …
I'Ll See It When I Believe It — A Simple Model Of Cognitive Consistency, Leeat Yariv
I'Ll See It When I Believe It — A Simple Model Of Cognitive Consistency, Leeat Yariv
Cowles Foundation Discussion Papers
Psychological experiments demonstrate that people exhibit a taste for consistency. Individuals are inclined to interpret new evidence in ways that confirm their pre-existing beliefs. They also tend to change their beliefs to enhance the desirability of their past actions. I present a model that incorporates these effects into an agent’s utility function and allows me to characterize when: (i) agents become under- and over-confident, (ii) agents exhibit excess stickiness in action choices, (iii) agents prefer less accurate signals, and (iv) agents are willing to pay in order to forgo signals altogether. Applications to political campaigns and investment decisions are explored.
Highway Franchising And Real Estate Values, Eduardo Engel, Ronald Fischer, Alexander Galetovic
Highway Franchising And Real Estate Values, Eduardo Engel, Ronald Fischer, Alexander Galetovic
Cowles Foundation Discussion Papers
It has become increasingly common to allocate highway franchises to the bidder that offers to charge the lowest toll. Often, building a highway increases the value of land held by a small group of developers, an effect that is more pronounced with lower tolls. We study the welfare implications of highway franchises that benefit large developers, focusing on the incentives developers have to internalize the effect of the toll they bid on the value of their land. We study how participation by developers in the auction affects equilibrium tolls and welfare. We find that large developers bid more aggressively than …
Consistent Testing For Stochastic Dominance: A Subsampling Approach, Oliver B. Linton, Esfandiar Maasoumi, Yoon-Jae Whang
Consistent Testing For Stochastic Dominance: A Subsampling Approach, Oliver B. Linton, Esfandiar Maasoumi, Yoon-Jae Whang
Cowles Foundation Discussion Papers
We propose a procedure for estimating the critical values of the Klecan, McFadden, and McFadden (1990) test for first and second order stochastic dominance in the general k -prospect case. Our method is based on subsampling bootstrap. We show that the resulting test is consistent. We allow for correlation amongst the prospects and for the observations to be autocorrelated over time. Importantly, the prospects may be the residuals from certain conditional models.
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, …
Valid Asymptotic Expansions For The Maximum Likelihood Estimator Of The Parameter Of A Stationary, Gaussian, Strongly Dependent Process, Offer Lieberman, Judith Rousseau, David M. Zucker
Valid Asymptotic Expansions For The Maximum Likelihood Estimator Of The Parameter Of A Stationary, Gaussian, Strongly Dependent Process, Offer Lieberman, Judith Rousseau, David M. Zucker
Cowles Foundation Discussion Papers
We establish the validity of an Edgeworth expansion to the distribution of the maximum likelihood estimator of the parameter of a stationary, Gaussian, strongly dependent process. The result covers ARFIMA type models, including fractional Gaussian noise. The method of proof consists of three main ingredients: (i) verification of a suitably modified version of Durbin’s (1980) general conditions for the validity of the Edgeworth expansion to the joint density of the log-likelihood derivatives; (ii) appeal to a simple result of Skovgaard (1986) to obtain from this an Edgeworth expansion for the joint distribution of the log-likelihood derivatives; (iii) appeal to and …
Inductive Inference: An Axiomatic Approach, Itzhak Gilboa, David Schmeidler
Inductive Inference: An Axiomatic Approach, Itzhak Gilboa, David Schmeidler
Cowles Foundation Discussion Papers
A predictor is asked to rank eventualities according to their plausibility, based on past cases. We assume that she can form a ranking given any memory that consists of finitely many past cases. Mild consistency requirements on these rankings imply that they have a numerical representation via a matrix assigning numbers to eventuality-case pairs, as follows. Given a memory, each eventuality is ranked according to the sum of the numbers in its row, over cases in memory. The number attached to an eventuality-case pair can be interpreted as the degree of support that the past case lends to the plausibility …
Bootstrapping Macroeconometric Models, Ray C. Fair
Bootstrapping Macroeconometric Models, Ray C. Fair
Cowles Foundation Discussion Papers
This paper outlines a bootstrapping approach to the estimation and analysis of macroeconometric models. It integrates for dynamic, nonlinear, simultaneous equation models the bootstrapping approach to evaluating estimators initiated by Efron (1979) and the stochastic simulation approach to evaluating models’ properties initiated by Adelman and Adelman (1959). It also estimates for a particular model the gain in coverage accuracy from using bootstrap confidence intervals over asymptotic confidence intervals.
Competitive Pooling: Rothschild-Stiglitz Reconsidered, Pradeep Dubey, John Geanakoplos
Competitive Pooling: Rothschild-Stiglitz Reconsidered, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We build a model of competitive pooling, which incorporates adverse selection and signalling into general equilibrium. Pools are characterized by their quantity limits on contributions. Households signal their reliability by choosing which pool to join. In equilibrium, pools with lower quantity limits sell for a higher price, even though each household’s deliveries are the same at all pools. The Rothschild-Stiglitz model of insurance is included as a special case. We show that by recasting their hybrid oligopolistic-competitive story into our perfectly competitive framework, their separating equilibrium always exists (even when they say it doesn’t) and is unique.
Penalised Maximum Likelihood Estimation For Fractional Gaussian Processes, Offer Lieberman
Penalised Maximum Likelihood Estimation For Fractional Gaussian Processes, Offer Lieberman
Cowles Foundation Discussion Papers
We apply and extend Firth’s (1993) modified score estimator to deal with a class of stationary Gaussian long-memory processes. Our estimator removes the first order bias of the maximum likelihood estimator. A small simulation study reveals the reduction in the bias is considerable, while it does not inflate the corresponding mean squared error.
Subjective Distributions, Itzhak Gilboa, David Schmeidler
Subjective Distributions, Itzhak Gilboa, David Schmeidler
Cowles Foundation Discussion Papers
A decision maker has to choose one of several random variables, with uncertainty known distributions. As a Bayesian she behaves as if she knew the distributions. In his paper we suggest an axiomatic derivation of these (subjective) distributions, which is much more economical than the derivations by de Finetti or Savage. They derive the whole joint distribution of all the available random variables.
Asymptotic Theory For Multivariate Garch Processes, F. Comte, Offer Lieberman
Asymptotic Theory For Multivariate Garch Processes, F. Comte, Offer Lieberman
Cowles Foundation Discussion Papers
We provide in this paper asymptotic theory for the multivariate GARCH (p,q) process. Strong consistency of the quasi-maximum likelihood estimator (MLE) is established by appealing to conditions given in Jeantheau [19] in conjunction with a result given by Boussama [9] concerning the existence of a stationary and ergodic solution to the multivariate GARCH (p,q) process. We prove asymptotic normality of the quasi-MLE when the initial state is either stationary or fixed.
A Derivation Of Expected Utility Maximization In The Context Of A Game, Itzhak Gilboa, David Schmeidler
A Derivation Of Expected Utility Maximization In The Context Of A Game, Itzhak Gilboa, David Schmeidler
Cowles Foundation Discussion Papers
A decision maker faces a decision problem, or a game against nature. For each probability distribution over the state of the world (nature’s strategies), she has a weak order over her acts (pure strategies). We formulate conditions on these weak orders guaranteeing that they can be jointly represented by expected utility maximization with respect to an almost-unique state-dependent utility, that is, a matrix assigning real numbers to act-state pairs. As opposed to a utility function that is derived in another context, the utility matrix derived in the game will incorporate all psychological or sociological determinants of well-being that result from …
Money And The Monetization Of Credit, Martin Shubik
Money And The Monetization Of Credit, Martin Shubik
Cowles Foundation Discussion Papers
The relationship between money and credit is discussed in terms of network linkage. Fiat money is the only instrument with the universal recognition of its issuer. Near monies such as bank money and money substitutes such as gasoline credit cards can be classified in terms of their network links. This leads to a way of considering the velocity of money.
Competitive Pooling: Rothschild-Stiglitz Reconsidered, Pradeep Dubey, John Geanakoplos
Competitive Pooling: Rothschild-Stiglitz Reconsidered, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We build a model of competitive pooling, which incorporates adverse selection and signalling into general equilibrium. Pools are characterized by their quantity limits on contributions. Households signal their reliability by choosing which pool to join. In equilibrium, pools with lower quantity limits sell for a higher price, even though each household’s deliveries are the same at all pools. The Rothschild-Stiglitz model of insurance is included as a special case. We show that by recasting their hybrid oligopolistic-competitive story in our perfectly competitive framework, their separating equilibrium always exists (even when they say it doesn’t) and is unique.
Believe And Let Believe: Axiomatic Foundations For Belief Dependent Utility Functionals, Leeat Yariv
Believe And Let Believe: Axiomatic Foundations For Belief Dependent Utility Functionals, Leeat Yariv
Cowles Foundation Discussion Papers
A large body of experimental data demonstrates that people’s beliefs influence their well-being beyond the indirect effect through the actions taken. I present a model that incorporates beliefs into an agent’s utility function. The paper provides axiomatic foundations for a special class of non-additive utility indices defined over infinite streams of beliefs and actions. I assume that: 1) there exists a (null) belief that does not have any effect on future preferences; 2) the agent has finite memory – only finite histories have an effect on current preferences; and 3) if the agent knows she will not be getting any …
On Fair Allocations And Indivisibilities, Ning Sun, Zaifu Yang
On Fair Allocations And Indivisibilities, Ning Sun, Zaifu Yang
Cowles Foundation Discussion Papers
This paper studies the problem of how to distribute a set of indivisible objects with an amount M of money among a number of agents in a fair way. We allow any number of agents and objects. Objects can be desirable or undesirable and the amount of money can be negative as well. In case M is negative, it can be regarded as costs to be shared by the agents. The objects with the money will be completely distributed among the agents in a way that each agent gets a bundle with at most one object if there are more …
Competitive Pooling: Rothschild-Stiglitz Reconsidered, Pradeep Dubey, John Geanakoplos
Competitive Pooling: Rothschild-Stiglitz Reconsidered, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We build a model of competitive pooling, which incorporates adverse selection and signalling into general equilibrium. Pools are characterized by their quantity limits on contributions. Households signal their reliability by choosing which pool to join. In equilibrium, pools with lower quantity limits sell for a higher price, even though each household’s deliveries are the same at all pools. The Rothschild-Stiglitz model of insurance is included as a special case. We show that by recasting their hybrid oligopolistic-competitive story into our perfectly competitive framework, their separating equilibrium always exists (even when they say it doesn’t) and is unique.
Equilibrium Selection In Global Games With Strategic Complementarities, David M. Frankel, Stephen Morris, Ady Pauzner
Equilibrium Selection In Global Games With Strategic Complementarities, David M. Frankel, Stephen Morris, Ady Pauzner
Cowles Foundation Discussion Papers
We study games with strategic complementarities, arbitrary numbers of players and actions, and slightly noisy payoff signals. We prove limit uniqueness: as the signal noise vanishes, the game has a unique strategy profile that survives iterative dominance. This generalizes a result of Carlsson and van Damme (1993) for two player, two action games. The surviving profile, however, may depend on fine details of the structure of the noise. We provide sufficient conditions on payoffs for there to be noise-independent selection.
The Optimal Concentration Of Creditors, Ivo Welch, Arturo Bris
The Optimal Concentration Of Creditors, Ivo Welch, Arturo Bris
Cowles Foundation Discussion Papers
There are situations in which dispersed creditors (e.g., public creditors) have more difficulties and higher costs when collecting their claims in financial distress than concentrated creditors (e.g., banks). Under this assumption, our model predicts that measures of debt concentration relate [a] positively to creditors’ chosen aggregate debt collection expenditures; [b] positively to management’s chosen expenditures to avoid paying; [c] positively to total net litigation costs/waste in financial distress; and [d] positively to accomplished claim recovery by creditors (to which we present some preliminary favorable empirical evidence). Under additional assumptions, measures of debt concentration relate [e] positively to intrinsic firm quality; …
Differentiated Products Demand Systems From A Combination Of Micro And Macro Data: The New Car Market, Steven T. Berry, James Levinsohn, Ariel Pakes
Differentiated Products Demand Systems From A Combination Of Micro And Macro Data: The New Car Market, Steven T. Berry, James Levinsohn, Ariel Pakes
Cowles Foundation Discussion Papers
In this paper we provide an algorithm for estimating characteristic based demand models from alternative data sources, and apply it to new data on the market for passenger vehicles. We find that, provided care is taken in constructing the demand system and rich enough data are available, the characteristic based model can both rationalize existing results and provide realistic out of sample predictions.
Higher-Order Improvements Of The Parametric Bootstrap For Markov Processes, Donald W.K. Andrews
Higher-Order Improvements Of The Parametric Bootstrap For Markov Processes, Donald W.K. Andrews
Cowles Foundation Discussion Papers
This paper provides bounds on the errors in coverage probabilities of maximum likelihood-based, percentile- t , parametric bootstrap confidence intervals for Markov time series processes. These bounds show that the parametric bootstrap for Markov time series provides higher-order improvements (over confidence intervals based on first order asymptotics) that are comparable to those obtained by the parametric and nonparametric bootstrap for iid data and are better than those obtained by the block bootstrap for time series. Additional results are given for Wald-based confidence regions. The paper also shows that k -step parametric bootstrap confidence intervals achieve the same higher-order improvements as …
Inflationary Bias In A Simple Stochastic Economy, Ioannis Karatzas, Martin Shubik, William D. Sudderth, John Geanakoplos
Inflationary Bias In A Simple Stochastic Economy, Ioannis Karatzas, Martin Shubik, William D. Sudderth, John Geanakoplos
Cowles Foundation Discussion Papers
We construct explicit equilibria for strategic market games used to model an economy with fiat money, one nondurable commodity, countably many time- periods, and a continuum of agents. The total production of the commodity is a random variable that fluctuates from period to period. In each period, the agents receive equal endowments of the commodity, and sell them for cash in a market; their spending determines, endogenously, the price of the commodity. All agents have a common utility function, and seek to maximize their expected total discounted utility from consumption. Suppose an outside bank sets an interest rate rho for …
Comparing Wealth Effects: The Stock Market Versus The Housing Market, Karl E. Case, John M. Quigley, Robert J. Shiller
Comparing Wealth Effects: The Stock Market Versus The Housing Market, Karl E. Case, John M. Quigley, Robert J. Shiller
Cowles Foundation Discussion Papers
We examine the link between increases in housing wealth, financial wealth, and consumer spending. We rely upon a panel of 14 countries observed annually for various periods during the past 25 years and a panel of U.S. states observed quarterly during the 1980s and 1990s. We impute the aggregate value of owner-occupied housing, the value of financial assets, and measures of aggregate consumption for each of the geographic units over time. We estimate regressions relating consumption to income and wealth measures, finding a statistically significant and rather large effect of housing wealth upon household consumption.
Information Structures In Optimal Auctions, Dirk Bergemann, Martin Pesendorfer
Information Structures In Optimal Auctions, Dirk Bergemann, Martin Pesendorfer
Cowles Foundation Discussion Papers
A seller wishes to sell an object to one of multiple bidders. The valuations of the bidders are privately known. We consider the joint design problem in which the seller can decide the accuracy by which bidders learn their valuation and to whom to sell at what price. We establish that optimal information structures in an optimal auction exhibit a number of properties: (i) information structures can be represented by monotone partitions, (ii) the cardinality of each partition is finite, (iii) the partitions are asymmetric across agents. These properties imply that the optimal selling strategy of a seller can be …
A Cusum Test For Cointegration Using Regression Residuals, Zhijie Xiao, Peter C.B. Phillips
A Cusum Test For Cointegration Using Regression Residuals, Zhijie Xiao, Peter C.B. Phillips
Cowles Foundation Discussion Papers
We show that the conventional CUSUM test for structural change can be applied to cointegrating regression residuals leading to a consistent residual based test for the null hypothesis of cointegration. The proposed tests are semiparametric and utilize fully modified residuals to correct for endogeneity and serial correlation and to scale out nuisance parameters. The limit distribution of the test is derived under both the null and the alternative hypothesis. The tests are easy to use and are found to perform quite well in a Monte Carlo experiment.