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Articles 1621 - 1650 of 2930
Full-Text Articles in Social and Behavioral Sciences
Forecasting New Zealand's Real Gdp, Aaron F. Schiff, Peter C.B. Phillips
Forecasting New Zealand's Real Gdp, Aaron F. Schiff, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Recent time series methods are applied to the problem of forecasting New Zealand’s real GDP. Model selection is conducted within autoregressive (AR) and vector autoregressive (VAR) classes, allowing for evolution in the form of the models over time. The selections are performed using the Schwarz (1978) BIC and the Phillips-Ploberger (1996) PIC criteria. The forecasts generated by the data-determined AR models and an international VAR model are found to be competitive with forecasts from fixed format models and forecasts produced by the NZIER. Two illustrations of the methodology in conditional forecasting settings are performed with the VAR models. The first …
The Effect Of Bidders’ Asymmetries On Expected Revenue In Auctions, Estelle Cantillon
The Effect Of Bidders’ Asymmetries On Expected Revenue In Auctions, Estelle Cantillon
Cowles Foundation Discussion Papers
Bidders’ asymmetries are widespread in auction markets. Yet, their impact on behavior and, ultimately, revenue and profits is still not well understood. In this paper, I define a natural benchmark auction environment to which to compare any private value auction with asymmetrically distributed valuations. I show that the expected revenue from the benchmark auction always dominates that from the asymmetric auction, both in the first price auction and the second price auction. These results formalize and make transparent the idea that competition is reduced by bidders’ asymmetries. The paper also contributes to a better understanding of competition and the nature …
Entry And Vertical Differentiation, Dirk Bergemann, Juuso Välimäki
Entry And Vertical Differentiation, Dirk Bergemann, Juuso Välimäki
Cowles Foundation Discussion Papers
This paper analyzes the entry of new products into vertically differentiated markets where an entrant and an incumbent compete in quantities. The value of the new product is initially uncertain and new information is generated through purchases in the market. We derive the (unique) Markov perfect equilibrium of the infinite horizon game under the strong long run average payoff criterion. The qualitative features of the optimal entry strategy are shown to depend exclusively on the relative ranking of established and new products based on current beliefs. Superior products are launched relatively slowly and at high initial prices whereas substitutes for …
Global Games: Theory And Applications, Stephen Morris, Hyun Song Shin
Global Games: Theory And Applications, Stephen Morris, Hyun Song Shin
Cowles Foundation Discussion Papers
Global games are games of incomplete information whose type space is determined by the players each observing a noisy signal of the underlying state. With strategic complementarities, global games often have a unique, dominance solvable equilibrium, allowing analysis of a number of economic models of coordination failure. For symmetric binary action global games, equilibrium strategies in the limit (as noise becomes negligible) are simple to characterize in terms of ‘diffuse’ beliefs over the actions of others. We describe a number of economic applications that fall in this category. We also explore the distinctive roles of public and private information in …
Global Games: Theory And Applications, Stephen Morris, Hyun Song Shin
Global Games: Theory And Applications, Stephen Morris, Hyun Song Shin
Cowles Foundation Discussion Papers
Global games are games of incomplete information whose type space is determined by the players each observing a noisy signal of the underlying state. With strategic complementarities, global games often have a unique, dominance solvable equilibrium, allowing analysis of a number of economic models of coordination failure. For symmetric binary action global games, equilibrium strategies in the limit (as noise becomes negligible) are simple to characterize in terms of ‘diffuse’ beliefs over the actions of others. We describe a number of economic applications that fall in this category. We also explore the distinctive roles of public and private information in …
Investment Incentives In Procurement Auctions, Leandro Arozamena, Estelle Cantillon
Investment Incentives In Procurement Auctions, Leandro Arozamena, Estelle Cantillon
Cowles Foundation Discussion Papers
We investigate firms’ incentives for cost reduction in the first price sealed bid auction, a format largely used for procurement. A central feature of the model is that we allow firms to be heterogeneous. Though private value first price auctions are not games with monotonic best responses, we find that for comparative statics purposes they behave like these games. In particular, firms will tend to underinvest in cost reduction because they anticipate fiercer head-on competition. Using the second price auction as a benchmark, we also find that the first price auction will elicit less investment from market participants. Moreover, both …
Faulty Communication, Stephen Morris
Faulty Communication, Stephen Morris
Cowles Foundation Discussion Papers
The electronic mail game of Rubinstein (1989) showed that a lack of common knowledge generated by faulty communication can make coordinated action impossible. This paper shows how this conclusion is robust to having a more realistic timing structure of messages, more than two players who meet publicly but not as a plenary group, and strategic decisions about whether to communicate.
Faulty Communication, Stephen Morris
Faulty Communication, Stephen Morris
Cowles Foundation Discussion Papers
The electronic mail game of Rubinstein (1989) showed that a lack of common knowledge generated by faulty communication can make coordinated action impossible. This paper shows how this conclusion is robust to having a more realistic timing structure of messages, more than two players who meet publicly but not as a plenary group, and strategic decisions about whether to communicate.
Does One Soros Make A Difference? A Theory Of Currency Crises With Large And Small Traders, Giancarlo Corsetti, Partha Dasgupta, Stephen Morris, Hyun Song Shin
Does One Soros Make A Difference? A Theory Of Currency Crises With Large And Small Traders, Giancarlo Corsetti, Partha Dasgupta, Stephen Morris, Hyun Song Shin
Cowles Foundation Discussion Papers
Do large investors increase the vulnerability of a country to speculative attacks in the foreign exchange markets? To address this issue, we build a model of currency crises where a single large investor and a continuum of small investors independently decide whether to attack a currency based on their private information about fundamentals. Even abstracting from signalling, the presence of the large investor does make all other traders more aggressive in their selling. Relative to the case in which there is no large investors, small investors attack the currency when fundamentals are stronger. Yet, the difference can be small, or …
Gmm Estimation Of Autoregressive Roots Near Unity With Panel Data, Hyungsik Roger Moon, Peter C.B. Phillips
Gmm Estimation Of Autoregressive Roots Near Unity With Panel Data, Hyungsik Roger Moon, Peter C.B. Phillips
Cowles Foundation Discussion Papers
This paper investigates a generalized method of moments (GMM) approach to the estimation of autoregressive roots near unity with panel data. The two moment conditions studied are obtained by constructing bias corrections to the score functions under OLS and GLS detrending, respectively. It is shown that the moment condition under GLS detrending corresponds to taking the projected score on the Bhattacharya basis, linking the approach to recent work on projected score methods for models with infinite numbers of nuisance parameters (Waterman and Lindsay, 1998). Assuming that the localizing parameter makes a nonpositive value, we establish consistency of the GMM estimator …
How To Compute Equilibrium Prices In 1891, William C. Brainard, Herbert E. Scarf
How To Compute Equilibrium Prices In 1891, William C. Brainard, Herbert E. Scarf
Cowles Foundation Discussion Papers
Irving Fisher’s Ph.D. thesis, submitted to Yale University in 1891, contains a fully articulated general equilibrium model presented with the broad scope and formal mathematical clarity associated with Walras and his successors. In addition, Fisher presents a remarkable hydraulic apparatus for calculating equilibrium prices and the resulting distribution of society’s endowments among the agents in the economy. In this paper we provide an analytical description of Fisher’s apparatus, and report the results of simulating the mechanical/hydraulic “machine,” illustrating the ability of the apparatus to “compute” equilibrium prices and also to find multiple equilibria.
Optimal Inventory Policies When Sales Are Discretionary, Herbert E. Scarf
Optimal Inventory Policies When Sales Are Discretionary, Herbert E. Scarf
Cowles Foundation Discussion Papers
Inventory models customarily assume that demand is fully satisfied if sufficient stock is available. We analyze the form of the optimal inventory policy if the inventory manager can choose to meet a fraction of the demand. Under classical conditions we show that the optimal policy is again of the ( S,s ) form. The analysis makes use of a novel property of K-concave functions.
Modified Local Whittle Estimation Of The Memory Parameter In The Nonstationary Case, Katsumi Shimotsu, Peter C.B. Phillips
Modified Local Whittle Estimation Of The Memory Parameter In The Nonstationary Case, Katsumi Shimotsu, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Semiparametric estimation of the memory parameter is studied in models of fractional integration in the nonstationary case, and some new representation theory for the discrete Fourier transform of a fractional process is used to assist in the analysis. A limit theory is developed for an estimator of the memory parameter that covers a range of values of d commonly encountered in applied work with economic data. The new estimator is called the modified local Whittle estimator and employs a version of the Whittle likelihood based on frequencies adjacent to the origin and modified to take into account the form of …
Pooled Log Periodogram Regression, Katsumi Shimotsu, Peter C.B. Phillips
Pooled Log Periodogram Regression, Katsumi Shimotsu, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Estimation of the memory parameter in time series with long range dependence is considered. A pooled log periodogram regression estimator is proposed that utilizes a set of mL periodogram ordinates with L approaching infinity rather than m ordinates used in the conventional log periodogram estimator. Consistency and asymptotic normality of the pooled regression estimator are established. The pooled estimator is shown to have smaller variance but larger bias than the conventional log periodogram estimator. Finite sample performance is assessed in simulations, and the methods are illustrated in an empirical application with inflation and stock returns.
Trending Time Series And Macroeconomic Activity: Some Present And Future Challenges, Peter C.B. Phillips
Trending Time Series And Macroeconomic Activity: Some Present And Future Challenges, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Some challenges for econometric research on trending time series are discussed in relation to some perceived needs of macroeconomics and macroeconomic policy making.
Local Whittle Estimation In Nonstationary And Unit Root Cases, Katsumi Shimotsu, Peter C.B. Phillips
Local Whittle Estimation In Nonstationary And Unit Root Cases, Katsumi Shimotsu, Peter C.B. Phillips
Cowles Foundation Discussion Papers
Asymptotic properties of the local Whittle estimator in the nonstationary case (d > 1/2) are explored. For 1/2 < d < 1, the estimator is shown to be consistent, and its limit distribution and the rate of convergence depend on the value of d . For d = 1, the limit distribution is mixed normal. For d > 1 and when the process has a linear trend, the estimator is shown to be inconsistent and to converge in probability to unity.
Equivalence Of The Higher-Order Asymptotic Efficiency Of K-Step And Extremum Statistics, Donald W.K. Andrews
Equivalence Of The Higher-Order Asymptotic Efficiency Of K-Step And Extremum Statistics, Donald W.K. Andrews
Cowles Foundation Discussion Papers
It is well known that a one-step scoring estimator that starts from any N 1 /2 -consistent estimator has the same first-order asymptotic efficiency as the maximum likelihood estimator. This paper extends this result to k -step estimators and test statistics for k > 1, higher-order asymptotic efficiency, and general extremum estimators and test statistics. The paper shows that a k -step estimator has the same higher-order asymptotic efficiency, to any given order, as the extremum estimator towards which it is stepping, provided (i) k is sufficiently large, (ii) some smoothness and moment conditions hold, and (iii) a condition on the …
Savings And Portfolio Choice In A Two-Period Two-Asset Model, Saku Aura, Peter A. Diamond, John Geanakoplos
Savings And Portfolio Choice In A Two-Period Two-Asset Model, Saku Aura, Peter A. Diamond, John Geanakoplos
Cowles Foundation Discussion Papers
We extend Arrow’s analysis of portfolio choice in a one-period model to savings and portfolio choice in a two-period model.
Social Security Investment In Equities In An Economy With Short-Term Production And Land, Peter A. Diamond, John Geanakoplos
Social Security Investment In Equities In An Economy With Short-Term Production And Land, Peter A. Diamond, John Geanakoplos
Cowles Foundation Discussion Papers
This paper explores the general equilibrium impact of social security portfolio diversification into private securities, either through the trust fund or via private accounts. The analysis depends critically on heterogeneity in saving, in production, in assets, and in taxes. Under fairly general assumptions we show that limited diversification increases a neutral social welfare function, increases interest rates, reduces the expected return on short-term equity (and thus the equity premium), decreases safe investment and increases risky investment. However, the effect on aggregate investment, long-term capital values, and the utility of young savers hinges on delicate assumptions about technology. Aggregate investment and …
Information And The Existence Of Stationary Markovian Equilibrium, Ioannis Karatzas, Martin Shubik, William D. Sudderth
Information And The Existence Of Stationary Markovian Equilibrium, Ioannis Karatzas, Martin Shubik, William D. Sudderth
Cowles Foundation Discussion Papers
We describe conditions for the existence of a stationary Markovian equilibrium when total production or total endowment is a random variable. Apart from regularity assumptions, there are two crucial conditions: (i) low information — agents are ignorant of both total endowment and their own endowments when they make decisions in a given period, and (ii) proportional endowments — the endowment of each agent is in proportion, possibly a random proportion, to the total endowment. When these conditions hold, there is a stationary equilibrium. When they do not hold, such equilibrium need not exist.
A Bias-Reduced Log-Periodogram Regression Estimator For The Long-Memory Parameter, Donald W.K. Andrews, Patrik Guggenberger
A Bias-Reduced Log-Periodogram Regression Estimator For The Long-Memory Parameter, Donald W.K. Andrews, Patrik Guggenberger
Cowles Foundation Discussion Papers
The widely used log-periodogram regression estimator of the long-memory parameter d proposed by Geweke and Porter-Hudak (1983) (GPH) has been criticized because of its finite-sample bias, see Agiakloglou, Newbold, and Wohar (1993). In this paper, we propose a simple bias-reduced log-periodogram regression estimator, ^d r , that eliminates the first- and higher-order biases of the GPH estimator. The bias-reduced estimator is the same as the GPH estimator except that one includes frequencies to the power 2 k for k = 1,…, r , for some positive integer r, as additional regressors in the pseudo-regression model that yields the GPH estimator. …
Rethinking Multiple Equilibria In Macroeconomic Modelling, Stephen Morris, Hyun Song Shin
Rethinking Multiple Equilibria In Macroeconomic Modelling, Stephen Morris, Hyun Song Shin
Cowles Foundation Discussion Papers
Are beliefs as indeterminate as auggested by models with multiple equilibria? Multiplicity of equilibria arise largely as the unintended consequence of two modelling assumptions — the fundamentals are assumed to be common knowledge, and economic agents know others’ actions in equilibrium. Both are questionable. When others’ actions are not known with certainty, such as when actions rely on noisy signals, self-fulfilling beliefs lead to a unique outcome determined by the fundamentals and the knowledges that others are rational. This paper illustrates this approach in the context of a model of bank runs and other similar applications. Such an approach places …
A Stochastic Overlapping Generations Economy With Inheritance, Ioannis Karatzas, Martin Shubik, William D. Sudderth
A Stochastic Overlapping Generations Economy With Inheritance, Ioannis Karatzas, Martin Shubik, William D. Sudderth
Cowles Foundation Discussion Papers
An overlapping generations model of an exchange economy is considered, with individuals having a finite expected life-span. Conditions concerning birth, death, inheritance and bequests are fully specified. Under such conditions, the existence of stationary Markov equilibrium is established in some generality, and several explicitly solvable examples are treated in detail.
Optimal Scrutiny In Multi-Period Promotion Tournaments, Pradeep Dubey, Ori Haimanko
Optimal Scrutiny In Multi-Period Promotion Tournaments, Pradeep Dubey, Ori Haimanko
Cowles Foundation Discussion Papers
Consider a principal who hires heterogeneous agents to work for him over T periods, without prior knowledge of their respective skills, and intends to promote one of them at the end. In each period the agents choose effort levels and produce random outputs, independently of each other, and are fully informed of the past history of outputs The principal’s major objective is to maximize the total expected output, but he may also put some weight on detecting the higher-skilled agent for promotion. To this end, he randomly samples n out of the T periods and awards the promotion to the …
Cartoons Of The Variation Of Financial Prices And Of Brownian Motions In Multifractal Time, Benoit Mandelbrot
Cartoons Of The Variation Of Financial Prices And Of Brownian Motions In Multifractal Time, Benoit Mandelbrot
Cowles Foundation Discussion Papers
This article describes a versatile family of functions increasingly roughened by successive interpolations. They provide models of the variation of financial prices. More importantly, they are helpful “cartoons” of Brownian motions in multifractal time, BMMT, which are better models described in the next article. Ordinary Brownian motion and two models the author proposed in the 1960s correspond to special cartoons. More general cartoons are richer in structure but (by choice) remain parsimonious and easily computed. Their outputs reproduce the main features of financial prices: continually varying volatility, discontinuity or concentration, and other events far outside the mildly behaving Brownian “norm.”
Estimated, Calibrated, And Optimal Interest Rate Rules, Ray C. Fair
Estimated, Calibrated, And Optimal Interest Rate Rules, Ray C. Fair
Cowles Foundation Discussion Papers
Estimated, calibrated, and optimal interest rate rules are examined for their ability to dampen economic fluctuations caused by random shocks. A tax rate rule is also considered. The results show that the estimated interest rate rule used in the paper is stable for the period beginning in 1954 except for the early Volcker period, although more observations, especially high inflation ones, are needed before much confidence can be placed on the results. The models used for the stabilization results are large scale structural macroeconometric models, and some of the results differ from those based on small models. For example, rules …
Competitive Prizes: When Less Scrutiny Induces More Effort, Pradeep Dubey, Chien-Wei Wu
Competitive Prizes: When Less Scrutiny Induces More Effort, Pradeep Dubey, Chien-Wei Wu
Cowles Foundation Discussion Papers
We consider a principal who is keen to induce his agents to work at their maximal effort levels. To this end, he samples n days at random out of the T days on which they work, and awards a prize of B dollars to the most productive agent. The principal’s policy ( B,n ) induces a strategic game Γ( B,n ) between the agents. We show that to implement maximal effort levels weakly (or, strongly) as a strategic equilibrium (or, as dominant strategies) in Γ( B,n ), at the least cost B to himself, the principal must choose a small …
Inside And Outside Money, Gains To Trade, And Is-Lm, Pradeep Dubey, John Geanakoplos
Inside And Outside Money, Gains To Trade, And Is-Lm, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We build a one-period general equilibrium model with money. Equilibrium exists, and fiat money has positive value, as long as the ratio of outside money to inside money is less than the gains to trade available at autarky. We show that the nominal effects of government fiscal and monetary policy can be completely described by a diagram identical in form to the IS-LM curves introduced by Hicks to describe Keynes’ general theory. IS-LM analysis is thus not incompatible with full market clearing, multiple commodities, and heterogeneous households. We show that as the government deficit approaches a finite threshold, hyperinflation sets …
Inside And Outside Money, Gains To Trade, And Is-Lm, Pradeep Dubey, John Geanakoplos
Inside And Outside Money, Gains To Trade, And Is-Lm, Pradeep Dubey, John Geanakoplos
Cowles Foundation Discussion Papers
We build a one-period general equilibrium model with money. Equilibrium exists, and fiat money has positive value, as long as the ratio of outside money to inside money is less than the gains to trade available at autarky. We show that the nominal effects of government fiscal and monetary policy can be completely described by a diagram identical in form to the IS-LM curves introduced by Hicks to describe Keynes’ general theory. IS-LM analysis is thus not incompatible with full market clearing, multiple commodities, and heterogeneous households. We show that as the government deficit approaches a finite threshold, hyperinflation sets …
Asymptotics In Minimum Distance From Independence Estimation, Donald J. Brown, Marten H. Wegkamp
Asymptotics In Minimum Distance From Independence Estimation, Donald J. Brown, Marten H. Wegkamp
Cowles Foundation Discussion Papers
In this paper we introduce a family of minimum distance from independence estimators, suggested by Manski’s minimum mean square from independence estimator. We establish strong consistency, asymptotic normality and consistency of resampling estimates of the distribution and variance of these estimators. For Manski’s estimator we derive both strong consistency and asymptotic normality.