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Articles 361 - 390 of 2930
Full-Text Articles in Social and Behavioral Sciences
From Imitation To Innovation: Where Is All That Chinese R&D Going?, König D. König, Kjetil Storesletten, Zheng Song, Fabrizio Zilibotti
From Imitation To Innovation: Where Is All That Chinese R&D Going?, König D. König, Kjetil Storesletten, Zheng Song, Fabrizio Zilibotti
Cowles Foundation Discussion Papers
We construct a model of rm dynamics with heterogenous productivity and distortions. The productivity distribution evolves endogenously as the result of the decisions of firms seeking to upgrade their productivity over time. Firms can adopt two strategies toward that end: imitation and innovation. The theory bears predictions about the evolution of the productivity distribution. We structurally estimate the stationary state of the dynamic model targeting moments of the empirical distribution of R&D and TFP growth in China during the period 2007-2012. The estimated model ts the Chinese data well. We compare the estimates with those obtained using data for Taiwan …
Multiproduct Intermediaries, Andrew Rhodes, Makoto Watanabe, Jidong Zhou
Multiproduct Intermediaries, Andrew Rhodes, Makoto Watanabe, Jidong Zhou
Cowles Foundation Discussion Papers
This paper develops a new framework for studying multiproduct intermediaries when consumers demand multiple products and face search frictions. We show that a multiproduct intermediary is profitable even when it does not improve consumer search efficiency. In its optimal product selection, it stocks high-value products exclusively to attract consumers to visit, then profits by selling non-exclusive products which are relatively cheap to buy from upstream suppliers. However, relative to the social optimum, the intermediary tends to be too big and stock too many products exclusively. As applications we use the framework to study the optimal design of a shopping mall, …
Robust Identification Of Investor Beliefs, Xiaohong Chen, Lars P. Hansen, Peter G. Hansen
Robust Identification Of Investor Beliefs, Xiaohong Chen, Lars P. Hansen, Peter G. Hansen
Cowles Foundation Discussion Papers
This paper develops a new method informed by data and models to recover information about investor beliefs. Our approach uses information embedded in forward-looking asset prices in conjunction with asset pricing models. We step back from presuming rational expectations and entertain potential belief distortions bounded by a statistical measure of discrepancy. Additionally, our method allows for the direct use of sparse survey evidence to make these bounds more informative. Within our framework, market-implied beliefs may differ from those implied by rational expectations due to behavioral/psychological biases of investors, ambiguity aversion, or omitted permanent components to valuation. Formally, we represent evidence …
Financing Firms In Hibernation During The Covid-19 Pandemic, Tatiana Didier, Federico Huneeus, Mauricio Larrain, Sergio L. Schmukler
Financing Firms In Hibernation During The Covid-19 Pandemic, Tatiana Didier, Federico Huneeus, Mauricio Larrain, Sergio L. Schmukler
Cowles Foundation Discussion Papers
The coronavirus (COVID-19) pandemic has halted economic activity worldwide, hurting firms and pushing them toward bankruptcy. This paper provides a unified framework to organize the policy debate related to firm financing during the downturn, centered along four main points. First, the economic crisis triggered by the spread of the virus is radically different from past crises, with important consequences for optimal policy responses. Second, to avoid inefficient bankruptcies and long-term detrimental effects, it is important to preserve firms’ relationships with key stakeholders, like workers, suppliers, customers, and creditors. Third, firms can benefit from “hibernating,” using the minimum bare cash necessary …
Stability And Robustness In Misspecified Learning Models, Mira Frick, Ryota Iijima, Yuhta Ishii
Stability And Robustness In Misspecified Learning Models, Mira Frick, Ryota Iijima, Yuhta Ishii
Cowles Foundation Discussion Papers
We present an approach to analyze learning outcomes in a broad class of misspecified environments, spanning both single-agent and social learning. Our main results provide general criteria to determine—without the need to explicitly analyze learning dynamics—when beliefs in a given environment converge to some long-run belief either locally or globally (i.e., from some or all initial beliefs). The key ingredient underlying these criteria is a novel “prediction accuracy” ordering over subjective models that refines existing comparisons based on Kullback-Leibler divergence. We show that these criteria can be applied, first, to unify and generalize various convergence results in previously studied settings. …
Belief Convergence Under Misspecified Learning: A Martingale Approach, Mira Frick, Ryota Iijima, Yuhta Ishii
Belief Convergence Under Misspecified Learning: A Martingale Approach, Mira Frick, Ryota Iijima, Yuhta Ishii
Cowles Foundation Discussion Papers
We present an approach to analyze learning outcomes in a broad class of misspecified environments, spanning both single-agent and social learning. We introduce a novel “prediction accuracy” order over subjective models, and observe that this makes it possible to partially restore standard martingale convergence arguments that apply under correctly specified learning. Based on this, we derive general conditions to determine when beliefs in a given environment converge to some long-run belief either locally or globally (i.e., from some or all initial beliefs). We show that these conditions can be applied, first, to unify and generalize various convergence results in previously …
Recursive Preferences, The Value Of Life, And Household Finance, Antoine Bommier, Daniel Harenberg, François Le Grand, Cormac O'Dea
Recursive Preferences, The Value Of Life, And Household Finance, Antoine Bommier, Daniel Harenberg, François Le Grand, Cormac O'Dea
Cowles Foundation Discussion Papers
We analyze lifecycle saving strategies using a recursive utility model calibrated to match empirical estimates for the value of a statistical life. We show that, with a positive value of life, risk aversion reduces savings and annuity purchase. Risk averse agents are willing to make an early death a not-so-adverse outcome by enjoying greater consumption when young and bequeathing wealth in case of death. We also find that greater risk aversion lowers stock market participation. We show that this model can rationalize low annuity demand while also matching empirically documented levels of wealth and private investments in stocks. Our findings …
Recursive Preferences, The Value Of Life, And Household Finance, Antoine Bommier, Daniel Harenberg, François Le Grand, Cormac O'Dea
Recursive Preferences, The Value Of Life, And Household Finance, Antoine Bommier, Daniel Harenberg, François Le Grand, Cormac O'Dea
Cowles Foundation Discussion Papers
We analyze lifecycle saving strategies using a recursive utility model calibrated to match empirical estimates of the value of a statistical life. The novelty of our approach is that we require preferences to be monotone with respect to first order stochastic dominance. The framework we use can disentangle risk aversion and the intertemporal elasticity and can feature a positive value of life without placing constraints on the value of the risk aversion parameter or the intertemporal elasticity of substitution. We show that, with a positive value of life, risk aversion reduces savings, decreases stock market participation and decreases annuity purchase. …
Belief Convergence Under Misspecified Learning: A Martingale Approach, Mira Frick, Ryota Iijima, Yuhta Ishii
Belief Convergence Under Misspecified Learning: A Martingale Approach, Mira Frick, Ryota Iijima, Yuhta Ishii
Cowles Foundation Discussion Papers
We present an approach to analyze learning outcomes in a broad class of misspecified environments, spanning both single-agent and social learning. We introduce a novel “prediction accuracy” order over subjective models, and observe that this makes it possible to partially restore standard martingale convergence arguments that apply under correctly specified learning. Based on this, we derive general conditions to determine when beliefs in a given environment converge to some long-run belief either locally or globally (i.e., from some or all initial beliefs). We show that these conditions can be applied, first, to unify and generalize various convergence results in previously …
Competition And Public Information: A Note, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Competition And Public Information: A Note, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We study price discrimination in a market in which two firms engage in Bertrand competition. Some consumers are contested by both firms, and other consumers are “captive” to one of the firms. The market can be divided into segments, which have different relative shares of captive and contested consumers. It is shown that the revenue-maximizing segmentation involves dividing the market into “nested” markets, where exactly one firm may have captive consumers.
Adaptive Rationality In Strategic Interaction: Do Emotions Regulate Thinking About Others?, Timo Ehrig, Jaison Manjaly, Aditya Singh, Shyam Sunder
Adaptive Rationality In Strategic Interaction: Do Emotions Regulate Thinking About Others?, Timo Ehrig, Jaison Manjaly, Aditya Singh, Shyam Sunder
Cowles Foundation Discussion Papers
Forming beliefs or expectations about others’ behavior is fundamental to strategy, as it co-determines the outcomes of interactions in and across organizations. In the game theoretic conception of rationality, agents reason iteratively about each other to form expectations about behavior. According to prior scholarship, actual strategists fall short of this ideal, and attempts to understand the underlying cognitive processes of forming expectations about others are in their infancy. We propose that emotions help regulate iterative reasoning, that is, their tendency to not only reflect on what others think, but also on what others think about their thinking. Drawing on a …
Optimal Control Of An Epidemic Through Social Distancing, Thomas Kruse, Philipp Strack
Optimal Control Of An Epidemic Through Social Distancing, Thomas Kruse, Philipp Strack
Cowles Foundation Discussion Papers
We analyze how to optimally engage in social distancing in order to minimize the spread of an infectious disease. We identify conditions under which any optimal policy is single-peaked, i.e., first engages in increasingly more social distancing and subsequently decreases its intensity. We show that an optimal policy might delay measures that decrease the transmission rate substantially to create herd-immunity and that engaging in social distancing sub-optimally early can increase the number of fatalities. Finally, we find that optimal social distancing can be an effective measure and can substantially reduce the death rate of a disease.
The Evolving Impacts Of Covid-19 On Small Businesses Since The Cares Act, John Eric Humphries, Christopher Neilson, Gabriel Ulyssea
The Evolving Impacts Of Covid-19 On Small Businesses Since The Cares Act, John Eric Humphries, Christopher Neilson, Gabriel Ulyssea
Cowles Foundation Discussion Papers
This note provides new evidence on how small business owners have been impacted by COVID-19, and how these effects have evolved since the passage of the CARES Act. As part of a broader and ongoing project, we collected survey data from more than 8,000 small business owners in the U.S. from March 28th, one day after the CARES Act was passed, through April 20th. The data include information on firm size, layoffs, beliefs about the future prospects of their businesses, as well as awareness of existing government relief programs. We provide three main findings. First, by the time the CARES …
It Takes A Village: The Economics Of Parenting With Neighborhood And Peer Effects, Francesco Agostinelli, Matthias Doepke, Giuseppe Sorrenti, Fabrizio Zilibotti
It Takes A Village: The Economics Of Parenting With Neighborhood And Peer Effects, Francesco Agostinelli, Matthias Doepke, Giuseppe Sorrenti, Fabrizio Zilibotti
Cowles Foundation Discussion Papers
As children reach adolescence, peer interactions become increasingly central to their development, whereas the direct influence of parents wanes. Nevertheless, parents may continue to exert leverage by shaping their children’s peer groups. We study interactions of parenting style and peer effects in a model where children’s skill accumulation depends on both parental inputs and peers, and where parents can affect the peer group by restricting who their children can interact with. We estimate the model and show that it can capture empirical patterns regarding the interaction of peer characteristics, parental behavior, and skill accumulation among US high school students. We …
Adaptive Rationality In Strategic Interaction: Do Emotions Regulate Thinking About Others?, Timo Ehrig, Jaison Manjaly, Aditya Singh, Shyam Sunder
Adaptive Rationality In Strategic Interaction: Do Emotions Regulate Thinking About Others?, Timo Ehrig, Jaison Manjaly, Aditya Singh, Shyam Sunder
Cowles Foundation Discussion Papers
Forming beliefs or expectations about others’ behavior is fundamental to strategy, as it co-determines the outcomes of interactions in and across organizations. In the game theoretic conception of rationality, agents reason iteratively about each other to form expectations about behavior. According to prior scholarship, actual strategists fall short of this ideal, and attempts to understand the underlying cognitive processes of forming expectations about others are in their infancy. We propose that emotions help regulate iterative reasoning, that is, their tendency to not only reflect on what others think, but also on what others think about their thinking. Drawing on a …
Optimal Control Of An Epidemic Through Social Distancing, Thomas Kruse, Philipp Strack
Optimal Control Of An Epidemic Through Social Distancing, Thomas Kruse, Philipp Strack
Cowles Foundation Discussion Papers
We analyze how to optimally engage in social distancing (SD) in order to minimize the spread of an infectious disease. We identify conditions under which the optimal policy is single-peaked, i.e., first engages in increasingly more social distancing and subsequently decreases its intensity. We show that the optimal policy might delay measures that decrease the transmission rate substantially to create “herd-immunity” and that engaging in social distancing sub-optimally early can increase the number of fatalities. Finally, we find that optimal social distancing can be an effective measure in substantially reducing the death rate of a disease.
Search, Information, And Prices, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Search, Information, And Prices, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
Consider a market with identical firms offering a homogeneous good. A consumer obtains price quotes from a subset of firms and buys from the firm offering the lowest price. The “price count” is the number of firms from which the consumer obtains a quote. For any given ex ante distribution of the price count, we derive a tight upper bound (under first-order stochastic dominance) on the equilibrium distribution of sales prices. The bound holds across all models of firms’ common-prior higher-order beliefs about the price count, including the extreme cases of full information (firms know the price count) and no …
Search, Information, And Prices, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Search, Information, And Prices, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
Consider a market with many identical firms offering a homogeneous good. A consumer obtains price quotes from a subset of firms and buys from the firm offering the lowest price. The “price count” is the number of firms from which the consumer obtains a quote. For any given ex ante distribution of the price count, we obtain a tight upper bound (under first-order stochastic dominance) on the equilibrium distribution of sale prices. The bound holds across all models of firms’ common-prior higher-order beliefs about the price count, including the extreme cases of complete information ( firms know the price count …
Changes In Assortative Matching: Theory And Evidence For The Us, Pierre-André Chiappori, Monica Costa-Dias, Costas Meghir
Changes In Assortative Matching: Theory And Evidence For The Us, Pierre-André Chiappori, Monica Costa-Dias, Costas Meghir
Cowles Foundation Discussion Papers
The extent to which like-with like marry is particularly important for inequality as well as for the outcomes of children that result from the union. In this paper we discuss approaches to the measurement of changes in assortative mating. We derive two key conditions that a well-defined measure should satisfy. We argue that changes in assortativeness should be interpreted through a structural model of the marriage market; in particular, a crucial issue is how they relate to variations in the economic surplus generated by marriage. We propose a very general criterion of increase in assortativeness, and show that almost all …
Search, Information, And Prices, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Search, Information, And Prices, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
Consider a market with identical firms offering a homogeneous good. A consumer obtains price quotes from a subset of firms and buys from the firm offering the lowest price. The “price count” is the number of firms from which the consumer obtains a quote. For any given ex ante distribution of the price count, we obtain a tight upper bound (under first-order stochastic dominance) on the equilibrium distribution of sale prices. The bound holds across all models of firms’ common-prior higher-order beliefs about the price count, including the extreme cases of full information ( firms know the price count) and …
Popular Economic Narratives Advancing The Longest U.S. Economic Expansion 2009-2019, Robert J. Shiller
Popular Economic Narratives Advancing The Longest U.S. Economic Expansion 2009-2019, Robert J. Shiller
Cowles Foundation Discussion Papers
The U.S. economic expansion since 2009 is the longest on record since 1854, according to the National Bureau of Economic Research Business Cycle Dating Committee. This paper seeks to understand this phenomenon better by looking at the time paths of popular narratives over this interval, of stories that people have been telling that offer clues into their economic behavior. Six constellations of narratives are studied, identified by keywords “Great Depression,” “secular stagnation,” “sustainability,” “housing bubble,” “strong economy,” and “save more.”
Changes In Assortative Matching And Inequality In Income: Evidence For The Uk, Pierre-André Chiappori, Monica Costa-Dias, Sam Crossman, Costas Meghir
Changes In Assortative Matching And Inequality In Income: Evidence For The Uk, Pierre-André Chiappori, Monica Costa-Dias, Sam Crossman, Costas Meghir
Cowles Foundation Discussion Papers
The extent to which like-with like marry is important for inequality as well as for the outcomes of children that result from the union. In this paper we present evidence on changes in assortative mating and its implications for household inequality in the UK. Our approach contrasts with others in the literature in that it is consistent with an underlying model of the marriage market. We argue that a key advantage of this approach is that it creates a direct connection between changes in assortativeness in marriage and changes in the value of marriage for the various possible matches by …
Partial Identification And Inference For Dynamic Models And Counterfactuals, Myrto Kalouptsidi, Yuichi Kitamura, Lucas Lima, Eduardo Souza-Rodrigues
Partial Identification And Inference For Dynamic Models And Counterfactuals, Myrto Kalouptsidi, Yuichi Kitamura, Lucas Lima, Eduardo Souza-Rodrigues
Cowles Foundation Discussion Papers
We provide a general framework for investigating partial identification of structural dynamic discrete choice models and their counterfactuals, along with uniformly valid inference procedures. In doing so, we derive sharp bounds for the model parameters, counterfactual behavior, and low-dimensional outcomes of interest, such as the average welfare effects of hypothetical policy interventions. We characterize the properties of the sets analytically and show that when the target outcome of interest is a scalar, its identified set is an interval whose endpoints can be calculated by solving well-behaved constrained optimization problems via standard algorithms. We obtain a uniformly valid inference procedure by …
Spatial Distribution Of Supply And The Role Of Market Thickness: Theory And Evidence From Ride Sharing, Soheil Ghili, Vineet Kumar
Spatial Distribution Of Supply And The Role Of Market Thickness: Theory And Evidence From Ride Sharing, Soheil Ghili, Vineet Kumar
Cowles Foundation Discussion Papers
This paper studies the e ects of economies of density in transportation markets, focusing on ridesharing. Our theoretical model predicts that (i) economies of density skew the supply of drivers away from less dense regions, (ii) the skew will be more pronounced for smaller platforms, and (iii) rideshare platforms do not nd this skew ecient and thus use prices and wages to mitigate (but not eliminate) it. We then develop a general empirical strategy with simple implementation and limited data requirements to test for spatial skew of supply from demand. Applying our method to ride-level, multi-platform data from New York …
Optimal Long-Term Health Insurance Contracts: Characterization, Computation, And Welfare Effects, Soheil Ghili, Ben Handel, Igal Hendel, Michael D. Whinston
Optimal Long-Term Health Insurance Contracts: Characterization, Computation, And Welfare Effects, Soheil Ghili, Ben Handel, Igal Hendel, Michael D. Whinston
Cowles Foundation Discussion Papers
Reclassification risk is a major concern in health insurance where contracts are typically one year in length but health shocks often persist for much longer. While most health systems with private insurers emphasize short-run contracts paired with substantial pricing regulations to reduce reclassification risk, long-term contracts with one-sided insurer commitment have significant potential to reduce reclassification risk without the negative side effects of price regulation, such as adverse selection. In this paper, we theoretically characterize optimal long-term insurance contracts with one-sided commitment, extending prior models of this form in several key directions that are important for studying health insurance markets. …
Optimal Long-Term Health Insurance Contracts: Characterization, Computation, And Welfare Effects, Soheil Ghili, Ben Handel, Igal Hendel, Michael D. Whinston
Optimal Long-Term Health Insurance Contracts: Characterization, Computation, And Welfare Effects, Soheil Ghili, Ben Handel, Igal Hendel, Michael D. Whinston
Cowles Foundation Discussion Papers
Reclassification risk is a major concern in health insurance where contracts are typically one year in length but health shocks often persist for much longer. We theoretically characterize optimal long-term insurance contracts with one-sided commitment, and use our characterization to provide a simple computation algorithm for computing optimal contracts from primitives. We apply this method to derive empirically-based optimal long-term health insurance contracts using all-payers claims data from Utah, and then evaluate the potential welfare performance of these contracts. We find that optimal long-term health insurance contracts that start at age 25 can eliminate over 94% of the welfare loss …
Quick Or Cheap? Breaking Points In Dynamic Markets, Panayotis Mertikopoulos, Heinrich H. Nax, Bary S.R. Pradelski
Quick Or Cheap? Breaking Points In Dynamic Markets, Panayotis Mertikopoulos, Heinrich H. Nax, Bary S.R. Pradelski
Cowles Foundation Discussion Papers
We examine two-sided markets where players arrive stochastically over time and are drawn from a continuum of types. The cost of matching a client and provider varies, so a social planner is faced with two contending objectives: a) to reduce players’ waiting time before getting matched; and b) to form efficient pairs in order to reduce matching costs. We show that such markets are characterized by a quick or cheap dilemma: Under a large class of distributional assumptions, there is no `free lunch’, i.e., there exists no clearing schedule that is simultaneously optimal along both objectives. We further identify a …
Spatial Distribution Of Supply And The Role Of Market Thickness: Theory And Evidence From Ride Sharing, Soheil Ghili, Vineet Kumar
Spatial Distribution Of Supply And The Role Of Market Thickness: Theory And Evidence From Ride Sharing, Soheil Ghili, Vineet Kumar
Cowles Foundation Discussion Papers
This paper develops a strategy with simple implementation and limited data requirements to identify spatial distortion of supply from demand -or, equivalently, unequal access to supply among regions- in transportation markets. We apply our method to ride-level, multi-platform data from New York City (NYC) and show that for smaller rideshare platforms, supply tends to be disproportionately concentrated in more densely populated areas. We also develop a theoretical model to argue that a smaller platform size, all else being equal, distorts the supply of drivers toward more densely populated areas due to network effects. Motivated by this, we estimate a minimum …
What Is Socialism Today? Conceptions Of A Cooperative Economy, John E. Roemer
What Is Socialism Today? Conceptions Of A Cooperative Economy, John E. Roemer
Cowles Foundation Discussion Papers
Socialism is back on the political agenda in the United States. Politicians and some economists who identify as socialists, however, do not discuss property relations, a topic that was central in the intellectual history of socialism, but rather limit themselves to advocacy of economic reforms, funded through taxation, that would tilt the income distribution in favor of the disadvantaged in society. In the absence of a more precise discussion of property relations, the presumption must be that ownership of firms would remain private or corporate with privately owned shares. This formula is identified with the Nordic and other western European …
The Welfare Effects Of Long-Term Health Insurance Contracts, Soheil Ghili, Ben Handel, Igal Hendel, Michael D. Whinston
The Welfare Effects Of Long-Term Health Insurance Contracts, Soheil Ghili, Ben Handel, Igal Hendel, Michael D. Whinston
Cowles Foundation Discussion Papers
Reclassification risk is a major concern in health insurance where contracts are typically one year in length but health shocks often persist for much longer. We use rich individual-level medical information from the Utah all-payer claims database to empirically study one possible solution: long-term insurance contracts. We characterize optimal long-term contracts with one-sided commitment theoretically, derive the contracts that are optimal for consumers in Utah, and assess the welfare level that a full implementation of these contracts could achieve relative to several key benchmarks. We find that dynamic contracts perform very well for the majority of the population, for example, …