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Articles 271 - 300 of 2930
Full-Text Articles in Social and Behavioral Sciences
Optimal Unilateral Carbon Policy, Samuel Kortum, David A. Weisbach
Optimal Unilateral Carbon Policy, Samuel Kortum, David A. Weisbach
Cowles Foundation Discussion Papers
We derive the optimal unilateral policy in a general equilibrium model of trade and climate change where one region of the world imposes a climate policy and the rest of the world does not. A climate policy in one region shifts activities—extraction, production, and consumption—in the other region. The optimal policy trades off the costs of these distortions. The optimal policy can be implemented through: (i) a nominal tax on extraction at a rate equal to the global marginal harm from emissions, (ii) a tax on imports of energy and goods, and a rebate of taxes on exports of energy …
Organizational Structure And Pricing: Evidence From A Large U.S. Airline, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Organizational Structure And Pricing: Evidence From A Large U.S. Airline, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Cowles Foundation Discussion Papers
Firms often involve multiple departments for critical decisions that may result in coordination failures. Using data from a large U.S. airline, we document the presence of important pricing biases that differ significantly from dynamically optimal profit maximization. However, these biases can be rationalized as a “second-best” after accounting for department decision rights. We show that assuming prices are generated through profit maximization biases demand estimates and that second-best prices can persist, even under improvements to pricing algorithm inputs. Our results suggest caution in abstracting from organizational structure and drawing inferences from firms’ pricing decisions alone.
Coresets For Regressions With Panel Data, Lingxiao Huang, K. Sudhir, Nisheeth Vishnoi
Coresets For Regressions With Panel Data, Lingxiao Huang, K. Sudhir, Nisheeth Vishnoi
Cowles Foundation Discussion Papers
This paper introduces the problem of coresets for regression problems to panel data settings. We first define coresets for several variants of regression problems with panel data and then present efficient algorithms to construct coresets of size that depend polynomially on 1/ε (where ε is the error parameter) and the number of regression parameters – independent of the number of individuals in the panel data or the time units each individual is observed for. Our approach is based on the Feldman-Langberg framework in which a key step is to upper bound the “total sensitivity” that is roughly the sum of …
Organizational Structure And Pricing: Evidence From A Large U.S. Airline, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Organizational Structure And Pricing: Evidence From A Large U.S. Airline, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Cowles Foundation Discussion Papers
Although typically modeled as a centralized firm decision, pricing often involves multiple organizational teams that have decision rights over specific pricing inputs. We study team input decisions using comprehensive data from a large U.S. airline. We document that pricing at a sophisticated firm is subject to miscoordination across teams, uses persistently biased forecasts, and does not account for cross-price elasticities. With structural demand estimates derived from sales and search data, we find that addressing one team’s biases in isolation has little impact on market outcomes. We show that teams do not optimally account for biases introduced by other teams. We …
Herding With Heterogeneous Ability: An Application To Organ Transplantation, Stephanie De Mel, Kaivan Munshi, Soenje Reiche, Hamid Sabourian
Herding With Heterogeneous Ability: An Application To Organ Transplantation, Stephanie De Mel, Kaivan Munshi, Soenje Reiche, Hamid Sabourian
Cowles Foundation Discussion Papers
There are many economic environments in which an object is offered sequentially to prospective buyers. It is often observed that once the object for sale is turned down by one or more agents, those that follow do the same. One explanation that has been proposed for this phenomenon is that agents making choices further down the line rationally ignore their own assessment of the object’s quality and herd behind their predecessors. Our research adds a new dimension to the canonical herding model by allowing agents to di er in their ability to assess the quality of the offered object. We …
Estimation And Inference With Near Unit Roots, Peter C. B. Phillips
Estimation And Inference With Near Unit Roots, Peter C. B. Phillips
Cowles Foundation Discussion Papers
New methods are developed for identifying, estimating and performing inference with nonstationary time series that have autoregressive roots near unity. The approach subsumes unit root (UR), local unit root (LUR), mildly integrated (MI) and mildly explosive (ME) specifications in the new model formulation. It is shown how a new parameterization involving a localizing rate sequence that characterizes departures from unity can be consistently estimated in all cases. Simple pivotal limit distributions that enable valid inference about the form and degree of nonstationarity apply for MI and ME specifications and new limit theory holds in UR and LUR cases. Normalizing and …
Robust Inference With Stochastic Local Unit Root Regressors In Predictive Regressions, Yanbo Liu, Peter C. B. Phillips
Robust Inference With Stochastic Local Unit Root Regressors In Predictive Regressions, Yanbo Liu, Peter C. B. Phillips
Cowles Foundation Discussion Papers
This paper explores predictive regression models with stochastic unit root (STUR) components and robust inference procedures that encompass a wide class of persistent and time-varying stochastically nonstationary regressors. The paper extends the mechanism of endogenously generated instrumentation known as IVX, showing that these methods remain valid for short and long-horizon predictive regressions in which the predictors have STUR and local STUR (LSTUR) generating mechanisms. Both mean regression and quantile regression methods are considered. The asymptotic distributions of the IVX estimators are new and require some new methods in their derivation. The distributions are compared to previous results and, as in …
Limit Theory For Locally Flat Functional Coefficient Regression, Peter C. B. Phillips, Ying Wang
Limit Theory For Locally Flat Functional Coefficient Regression, Peter C. B. Phillips, Ying Wang
Cowles Foundation Discussion Papers
Functional coefficient (FC) regressions allow for systematic flexibility in the responsiveness of a dependent variable to movements in the regressors, making them attractive in applications where marginal effects may depend on covariates. Such models are commonly estimated by local kernel regression methods. This paper explores situations where responsiveness to covariates is locally flat or fixed. In such cases, the limit theory of FC kernel regression is shown to depend intimately on functional shape in ways that affect rates of convergence, optimal bandwidth selection, estimation, and inference. The paper develops new asymptotics that take account of shape characteristics of the function …
On Multicointegration, Peter C. B. Phillips, Igor Kheifets
On Multicointegration, Peter C. B. Phillips, Igor Kheifets
Cowles Foundation Discussion Papers
A semiparametric triangular systems approach shows how multicointegration can occur naturally in an I(1) cointegrated regression model. The framework reveals the source of multicointegration as singularity of the long run error covariance matrix in an I(1) system, a feature noted but little explored in earlier work. Under such singularity, cointegrated I(1) systems embody a multicointegrated structure and may be analyzed and estimated without appealing to the associated I(2) system but with consequential asymptotic properties that can introduce asymptotic bias into conventional methods of cointegrating regression. The present paper shows how estimation of such systems may be accomplished under multicointegration without …
Discrete Fourier Transforms Of Fractional Processes With Econometric Applications, Peter C. B. Phillips
Discrete Fourier Transforms Of Fractional Processes With Econometric Applications, Peter C. B. Phillips
Cowles Foundation Discussion Papers
The discrete Fourier transform (dft) of a fractional process is studied. An exact representation of the dft is given in terms of the component data, leading to the frequency domain form of the model for a fractional process. This representation is particularly useful in analyzing the asymptotic behavior of the dft and periodogram in the nonstationary case when the memory parameter d ≥ 1 2: Various asymptotic approximations are established including some new hypergeometric function representations that are of independent interest. It is shown that smoothed periodogram spectral estimates remain consistent for frequencies away from the origin in the nonstationary …
Lookalike Targeting On Others' Journeys: Brand Versus Performance Marketing, K. Sudhir, Seung Yoon Lee, Subroto Roy
Lookalike Targeting On Others' Journeys: Brand Versus Performance Marketing, K. Sudhir, Seung Yoon Lee, Subroto Roy
Cowles Foundation Discussion Papers
Lookalike Targeting is a widely used model-based ad targeting approach that uses a seed database of individuals to identify matching “lookalikes” for targeted customer acquisition. An advertiser has to make two key choices: (1) who to seed on and (2) seed-match rank range. First, we assess if and how seeding by others’ journey stages impact clickthrough (upstream behavior desirable for brand marketing) and donation (downstream behavior desirable in performance marketing). Overall, we find that lookalike targeting using other’s journeys can be effective-third parties can indeed identify factors unobserved to the advertiser merely from others’ journey stage to improve targeting. Further, …
Foundations Of Demand Estimation, Steven T. Berry, Philip A. Haile
Foundations Of Demand Estimation, Steven T. Berry, Philip A. Haile
Cowles Foundation Discussion Papers
Demand elasticities and other features of demand are critical determinants of the answers to most positive and normative questions about market power or the functioning of markets in practice. As a result, reliable demand estimation is an essential input to many types of research in Industrial Organization and other fields of economics. This chapter presents a discussion of some foundational issues in demand estimation. We focus on the distinctive challenges of demand estimation and strategies one can use to overcome them. We cover core models, alternative data settings, common estimation approaches, the role and choice of instruments, and nonparametric identification.
Selling Impressions: Efficiency Vs. Competition, Dirk Bergemann, Tibor Heumann, Stephen Morris, Constantine Sorokin, Eyal Winter
Selling Impressions: Efficiency Vs. Competition, Dirk Bergemann, Tibor Heumann, Stephen Morris, Constantine Sorokin, Eyal Winter
Cowles Foundation Discussion Papers
In digital advertising, a publisher selling impressions faces a trade-o¤ in deciding how precisely to match advertisers with viewers. A more precise match generates efficiency gains that the publisher can hope to exploit. A coarser match will generate a thicker market and thus more competition. The publisher can control the precision of the match by controlling the amount of information that advertisers have about viewers. We characterize the optimal trade-off when impressions are sold by auction. The publisher pools premium matches for advertisers (when there will be less competition on average) but gives advertisers full information about lower quality matches.
Learning Efficiency Of Multi-Agent Information Structures, Mira Frick, Ryota Iijima, Yuhta Ishii
Learning Efficiency Of Multi-Agent Information Structures, Mira Frick, Ryota Iijima, Yuhta Ishii
Cowles Foundation Discussion Papers
We study settings in which, prior to playing an incomplete information game, players observe many draws of private signals about the state from some information structure. Signals are i.i.d. across draws, but may display arbitrary correlation across players. For each information structure, we define a simple learning efficiency index, which only considers the statistical distance between the worst-informed player’s marginal signal distributions in different states. We show, first, that this index characterizes the speed of common learning (Cripps, Ely, Mailath, and Samuelson, 2008): In particular, the speed at which players achieve approximate common knowledge of the state coincides with the …
Learning Efficiency Of Multi-Agent Information Structures, Mira Frick, Ryota Iijima, Yuhta Ishii
Learning Efficiency Of Multi-Agent Information Structures, Mira Frick, Ryota Iijima, Yuhta Ishii
Cowles Foundation Discussion Papers
We study settings in which, prior to playing an incomplete information game, players observe many draws of private signals about the state from some information structure. Signals are i.i.d. across draws, but may display arbitrary correlation across players. For each information structure, we define a simple learning efficiency index, which only considers the statistical distance between the worst-informed player’s marginal signal distributions in different states. We show, first, that this index characterizes the speed of common learning (Cripps, Ely, Mailath, and Samuelson, 2008): In particular, the speed at which players achieve approximate common knowledge of the state coincides with the …
Information Markets And Nonmarkets, Dirk Bergemann, Marco Ottaviani
Information Markets And Nonmarkets, Dirk Bergemann, Marco Ottaviani
Cowles Foundation Discussion Papers
As large amounts of data become available and can be communicated more easily and processed more e¤ectively, information has come to play a central role for economic activity and welfare in our age. This essay overviews contributions to the industrial organization of information markets and nonmarkets, while attempting to maintain a balance between foundational frameworks and more recent developments. We start by reviewing mechanism-design approaches to modeling the trade of information. We then cover ratings, predictions, and recommender systems. We turn to forecasting contests, prediction markets, and other institutions designed for collecting and aggregating information from decentralized participants. Finally, we …
Experimental Persuasion, Ian Ball, José-Antonio Espín-Sánchez
Experimental Persuasion, Ian Ball, José-Antonio Espín-Sánchez
Cowles Foundation Discussion Papers
We introduce experimental persuasion between Sender and Receiver. Sender chooses an experiment to perform from a feasible set of experiments. Receiver observes the realization of this experiment and chooses an action. We characterize optimal persuasion in this baseline regime and in an alternative regime in which Sender can commit to garble the outcome of the experiment. Our model includes Bayesian persuasion as the special case in which every experiment is feasible; however, our analysis does not require concavification. Since we focus on experiments rather than beliefs, we can accommodate general preferences including costly experiments and non-Bayesian inference.
Corrective Regulation With Imperfect Instruments, Eduardo Dávila, Ansgar Walther
Corrective Regulation With Imperfect Instruments, Eduardo Dávila, Ansgar Walther
Cowles Foundation Discussion Papers
This paper studies the optimal design of second-best corrective regulation, when some agents or activities cannot be perfectly regulated. We show that policy elasticities and Pigouvian wedges are sufficient statistics to characterize the marginal welfare impact of regulatory policies in a large class of environments. We show that the optimal second-best policy is determined by a subset of policy elasticities: leakage elasticities, and characterize the marginal value of relaxing regulatory constraints. We apply our results to scenarios with unregulated agents/activities and with uniform regulation across agents/activities. We illustrate our results in applications to shadow banking, scale-invariant regulation, asset substitution, and …
Holding Up Green Energy, Nicholas Ryan
Holding Up Green Energy, Nicholas Ryan
Cowles Foundation Discussion Papers
Green energy is produced by relationship-specific assets that are vulnerable to hold-up if contracts are not strictly enforced. I study the role of counterparty risk in the procurement of green energy using data on the universe of solar procurement auctions in India. The Indian context allows clean estimates of how risk affects procurement, because solar power plants set up in the same states, by the same firms, are procured in auctions variously intermediated by either risky states themselves or the central government. I find that: (i) the counterparty risk of an average state increases solar energy prices by 10%; (ii) …
Nonlinear Pricing With Finite Information, Dirk Bergemann, Edmund M. Yeh, Jinkun Zhang
Nonlinear Pricing With Finite Information, Dirk Bergemann, Edmund M. Yeh, Jinkun Zhang
Cowles Foundation Discussion Papers
We analyze nonlinear pricing with finite information. We consider a multi-product environment where each buyer has preferences over a d-dimensional variety of goods. The seller is limited to offering a finite number n of d-dimensional choices. The limited menu reflects a finite communication capacity between the buyer and seller. We identify necessary conditions that the optimal finite menu must satisfy, for either the socially efficient or the revenue-maximizing mechanism. These conditions require that information be bundled, or "quantized," optimally. We introduce vector quantization and establish that the losses due to finite menus converge to zero at a rate …
Curse Of Democracy: Evidence From The 21st Century, Yusuke Narita, Ayumi Sudo
Curse Of Democracy: Evidence From The 21st Century, Yusuke Narita, Ayumi Sudo
Cowles Foundation Discussion Papers
Democracy is widely believed to contribute to economic growth and public health. However, we find that this conventional wisdom is no longer true and even reversed; democracy has persistent negative impacts on GDP growth since the beginning of this century. This finding emerges from five different instrumental variable strategies. Our analysis suggests that democracies cause slower growth through less investment, less trade, and slower value-added growth in manufacturing and services. For 2020, democracy is also found to cause more deaths from Covid-19.
Learning Efficiency Of Multi-Agent Information Structures, Mira Frick, Ryota Iijima, Yuhta Ishii
Learning Efficiency Of Multi-Agent Information Structures, Mira Frick, Ryota Iijima, Yuhta Ishii
Cowles Foundation Discussion Papers
We study which multi-agent information structures are more effective at eliminating both first-order and higher-order uncertainty, and hence at facilitating efficient play in incomplete-information coordination games. We consider a learning setting à la Cripps, Ely, Mailath, and Samuelson (2008) where players have access to many private signal draws from an information structure. First, we characterize the rate at which players achieve approximate common knowledge of the state, based on a simple learning efficiency index. Notably, this coincides with the rate at which players’ first-order uncertainty vanishes, as higher-order uncertainty becomes negligible relative to first-order uncertainty after enough signal draws. Based …
Selling Impressions: Efficiency Vs. Competition, Dirk Bergemann, Tibor Heumann, Stephen Morris
Selling Impressions: Efficiency Vs. Competition, Dirk Bergemann, Tibor Heumann, Stephen Morris
Cowles Foundation Discussion Papers
In digital advertising, a publisher selling impressions faces a trade-off in deciding how precisely to match advertisers with viewers. A more precise match generates efficiency gains that the publisher can hope to exploit. A coarser match will generate a thicker market and thus more competition. The publisher can control the precision of the match by controlling the amount of information that advertisers have about viewers. We characterize the optimal trade-off when impressions are sold by auction. The publisher pools premium matches for advertisers (when there will be less competition on average) but gives advertisers full information about lower quality matches.
Long Term Effects Of Cash Transfer Programs In Colombia, Orazio Attanasio, Lina Cardona-Sosa, Carlos Medina, Costas Meghir, Christian Posso
Long Term Effects Of Cash Transfer Programs In Colombia, Orazio Attanasio, Lina Cardona-Sosa, Carlos Medina, Costas Meghir, Christian Posso
Cowles Foundation Discussion Papers
Conditional Cash transfer (CCT) programs have been shown to have positive effects on a variety of outcomes including education, consumption and health visits, amongst others. We estimate the long-run impacts of the urban version of Familias en Acción, the Colombian CCT program on crime, teenage pregnancy, high school dropout and college enrollment using a Regression Discontinuity design on administrative data. ITT estimates show a reduction on arrest rates of 2.7pp for men and a reduction on teenage pregnancy of 2.3pp for women. High school dropout rates were reduced by 5.8pp and college enrollment was increased by 1.7pp for men.
The Optimality Of Upgrade Pricing, Dirk Bergemann, Alessandro Bonatti, Andreas Haupt, Alex Smolin
The Optimality Of Upgrade Pricing, Dirk Bergemann, Alessandro Bonatti, Andreas Haupt, Alex Smolin
Cowles Foundation Discussion Papers
We consider a multiproduct monopoly pricing model. We provide sufficient conditions under which the optimal mechanism can be implemented via upgrade pricing—a menu of product bundles that are nested in the strong set order. Our approach exploits duality methods to identify conditions on the distribution of consumer types under which (a) each product is purchased by the same set of buyers as under separate monopoly pricing (though the transfers can be different), and (b) these sets are nested. We exhibit two distinct sets of sufficient conditions. The first set of conditions is given by a weak version of monotonicity of …
The Optimality Of Upgrade Pricing, Dirk Bergemann, Alessandro Bonatti, Andreas Haupt, Alex Smolin
The Optimality Of Upgrade Pricing, Dirk Bergemann, Alessandro Bonatti, Andreas Haupt, Alex Smolin
Cowles Foundation Discussion Papers
We consider a multiproduct monopoly pricing model. We provide sufficient conditions under which the optimal mechanism can be implemented via upgrade pricing—a menu of product bundles that are nested in the strong set order. Our approach exploits duality methods to identify conditions on the distribution of consumer types under which (a) each product is purchased by the same set of buyers as under separate monopoly pricing (though the transfers can be different), and (b) these sets are nested. We exhibit two distinct sets of sufficient conditions. The first set of conditions weakens the monotonicity requirement of types and virtual values …
Regression-Adjusted Estimation Of Quantile Treatment Effects Under Covariate-Adaptive Randomizations, Liang Jiang, Peter C. B. Phillips, Yubo Tao, Yichong Zhang
Regression-Adjusted Estimation Of Quantile Treatment Effects Under Covariate-Adaptive Randomizations, Liang Jiang, Peter C. B. Phillips, Yubo Tao, Yichong Zhang
Cowles Foundation Discussion Papers
This paper examines regression-adjusted estimation and inference of unconditional quantile treatment effects (QTEs) under covariate-adaptive randomizations (CARs). Datasets from field experiments usually contain extra baseline covariates in addition to the strata indicators. We propose to incorporate these extra covariates via auxiliary regressions in the estimation and inference of unconditional QTEs. We establish the consistency, limit distribution, and validity of the multiplier bootstrap of the QTE estimator under CARs. The auxiliary regression may be estimated parametrically, nonparametrically, or via regularization when the data are high-dimensional. Even when the auxiliary regression is misspecified, the proposed bootstrap inferential procedure still achieves the nominal …
What Do Price Equations Say About Future Inflation?, Ray C. Fair
What Do Price Equations Say About Future Inflation?, Ray C. Fair
Cowles Foundation Discussion Papers
This paper uses an econometric approach to examine the inflation consequences of the American Rescue Plan Act of 2021. Price equations are estimated and used to forecast future inflation. The main results are: 1) The data suggest that price equations should be specified in level form rather than in first or second difference form. 2) There is some slight evidence of nonlinear demand effects on prices. 3) There is no evidence that demand effects have gotten smaller over time. 4) The stimulus from the act combined with large wealth effects from past household savings, rising stock prices, and rising housing …
Climate Club Futures: On The Effectiveness Of Future Climate Clubs, William D. Nordhaus
Climate Club Futures: On The Effectiveness Of Future Climate Clubs, William D. Nordhaus
Cowles Foundation Discussion Papers
A proposal to combat free-riding in international climate agreements is the notion of a “climate club” or coalition of countries to encourage high levels of participation. Empirical models of climate clubs in the early stages relied on the analysis of single-period coalition formation. The results suggested that there were limits on the potential strength of clubs and that it would be difficult to have deep abatement strategies in the club framework. The current work extends the single-period approach to many periods and develops an approach analyzing “supportable policies” to analyze multi-period clubs. The major surprise of the study is the …
Heterogeneity And Aggregate Fluctuations, Minsu Chang, Xiaohong Chen, Frank Schorfheide
Heterogeneity And Aggregate Fluctuations, Minsu Chang, Xiaohong Chen, Frank Schorfheide
Cowles Foundation Discussion Papers
We develop a state-space model with a state-transition equation that takes the form of a functional vector autoregression and stacks macroeconomic aggregates and a cross-sectional density. The measurement equation captures the error in estimating log densities from repeated cross-sectional samples. The log densities and the transition kernels in the law of motion of the states are approximated by sieves, which leads to a nite-dimensional representation in terms of macroeconomic aggregates and sieve coefficients. We use this model to study the joint dynamics of technology shocks, per capita GDP, employment rates, and the earnings distribution. We nd that the estimated spillovers …