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Articles 481 - 510 of 2930
Full-Text Articles in Social and Behavioral Sciences
The Wisdom Of A Confused Crowd: Model-Based Inference, George J. Mailath, Larry Samuelson
The Wisdom Of A Confused Crowd: Model-Based Inference, George J. Mailath, Larry Samuelson
Cowles Foundation Discussion Papers
“Crowds” are often regarded as “wiser” than individuals, and prediction markets are often regarded as effective methods for harnessing this wisdom. If the agents in prediction markets are Bayesians who share a common model and prior belief, then the no-trade theorem implies that we should see no trade in the market. But if the agents in the market are not Bayesians who share a common model and prior belief, then it is no longer obvious that the market outcome aggregates or conveys information. In this paper, we examine a stylized prediction market comprised of Bayesian agents whose inferences are based …
Misinterpreting Others And The Fragility Of Social Learning, Mira Frick, Ryota Iijima, Yuhta Ishii
Misinterpreting Others And The Fragility Of Social Learning, Mira Frick, Ryota Iijima, Yuhta Ishii
Cowles Foundation Discussion Papers
We study to what extent information aggregation in social learning environments is robust to slight misperceptions of others’ characteristics (e.g., tastes or risk attitudes). We consider a population of agents who obtain information about the state of the world both from initial private signals and by observing a random sample of other agents’ actions over time, where agents’ actions depend not only on their beliefs about the state but also on their idiosyncratic types. When agents are correct about the type distribution in the population, they learn the true state in the long run. By contrast, our first main result …
Eliminating Latent Discrimination: Train Then Mask, Soheil Ghili, Ehsan Kazemi, Amin Karbasi
Eliminating Latent Discrimination: Train Then Mask, Soheil Ghili, Ehsan Kazemi, Amin Karbasi
Cowles Foundation Discussion Papers
How can we control for latent discrimination in predictive models? How can we provably remove it? Such questions are at the heart of algorithmic fairness and its impacts on society. In this paper, we define a new operational fairness criteria, inspired by the well-understood notion of omitted variable-bias in statistics and econometrics. Our notion of fairness effectively controls for sensitive features and provides diagnostics for deviations from fair decision making. We then establish analytical and algorithmic results about the existence of a fair classifier in the context of supervised learning. Our results readily imply a simple, but rather counter-intuitive, strategy …
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We describe a methodology for making counterfactual predictions in settings where the information held by strategic agents and the distribution of payoff-relevant states of the world are unknown. The analyst observes behavior assumed to be rationalized by a Bayesian model, in which agents maximize expected utility, given partial and differential information about the state. A counterfactual prediction is desired about behavior in another strategic setting, under the hypothesis that the distribution of the state and agents’ information about the state are held fixed. When the data and the desired counterfactual prediction pertain to environments with finitely many states, players, and …
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We describe a methodology for making counterfactual predictions when the information held by strategic agents is a latent parameter. The analyst observes behavior which is rationalized by a Bayesian model in which agents maximize expected utility given partial and differential information about payoff-relevant states of the world. A counterfactual prediction is desired about behavior in another strategic setting, under the hypothesis that the distribution of and agents’ information about the state are held fixed. When the data and the desired counterfactual prediction pertain to environments with finitely many states, players, and actions, there is a finite dimensional description of the …
Endogenous Beliefs And Institutional Structure In Competitive Equilibrium With Adverse Selection, Gerald David Jaynes
Endogenous Beliefs And Institutional Structure In Competitive Equilibrium With Adverse Selection, Gerald David Jaynes
Cowles Foundation Discussion Papers
I model financial markets that structure decision-making into discrete points separating contract offers, applications, and acceptance/denial decisions. Endogenous beliefs about applicants’ risk types emerge as the institutional process extracts private information allowing uninformed firms to infer risk qualities by comparing applications of many consumers. Endogenous beliefs and low-risk consumer behavior render truthful disclosure of transactions incentive compatible supporting a unique equilibrium robust to cream-skimming and cross-subsidizing deviations, even under Hellwig’s “secret” policy assumption. In equilibrium each type demands low-risk’s optimal pooling policy and high-risk supplement to full coverage at fair-price. Nonpassive consumers’ belief firms are sequentially rational necessary for equilibrium; …
Misinterpreting Others And The Fragility Of Social Learning, Mira Frick, Ryota Iijima, Yuhta Ishii
Misinterpreting Others And The Fragility Of Social Learning, Mira Frick, Ryota Iijima, Yuhta Ishii
Cowles Foundation Discussion Papers
We exhibit a natural environment, social learning among heterogeneous agents, where even slight misperceptions can have a large negative impact on long-run learning outcomes. We consider a population of agents who obtain information about the state of the world both from initial private signals and by observing a random sample of other agents’ actions over time, where agents’ actions depend not only on their beliefs about the state but also on their idiosyncratic types (e.g., tastes or risk attitudes). When agents are correct about the type distribution in the population, they learn the true state in the long run. By …
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Counterfactuals With Latent Information, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We describe a methodology for making counterfactual predictions when the information held by strategic agents is a latent parameter. The analyst observes behavior which is rationalized by a Bayesian model in which agents maximize expected utility, given partial and differential information about payoff-relevant states of the world. A counterfactual prediction is desired about behavior in another strategic setting, under the hypothesis that the distribution of and agents’ information about the state are held fixed. When the data and the desired counterfactual prediction pertain to environments with finitely many states, players, and actions, there is a finite dimensional description of the …
Har Testing For Spurious Regression In Trend, Peter C.B. Phillips, Yonghui Zhang, Xiaohu Wang
Har Testing For Spurious Regression In Trend, Peter C.B. Phillips, Yonghui Zhang, Xiaohu Wang
Cowles Foundation Discussion Papers
The usual t test, the t test based on heteroskedasticity and autocorrelation consistent (HAC) covariance matrix estimators, and the heteroskedasticity and autocorrelation robust (HAR) test are three statistics that are widely used in applied econometric work. The use of these significance tests in trend regression is of particular interest given the potential for spurious relationships in trend formulations. Following a longstanding tradition in the spurious regression literature, this paper investigates the asymptotic and finite sample properties of these test statistics in several spurious regression contexts, including regression of stochastic trends on time polynomials and regressions among independent random walks. Concordant …
Aiming For The Goal: Contribution Dynamics Of Crowdfunding, Joyee Deb, Aniko Öry (Oery), Kevin R. Williams
Aiming For The Goal: Contribution Dynamics Of Crowdfunding, Joyee Deb, Aniko Öry (Oery), Kevin R. Williams
Cowles Foundation Discussion Papers
Fundraising campaigns draw support from a wide pool of contributors. Some contributors are interested in private rewards offered in exchange for contributions (buyers), whereas others are publicly-minded and value success (donors). Buyers face a coordination problem because of the positive externalities of campaign success. A leadership donor who strategically times contributions can promote coordination by dynamically signaling his valuation. The ability to signal increases the probability of success and benefits all participants relative to the donor valuation being known. We validate our modeling assumptions and theoretical predictions using Kickstarter data.
Aiming For The Goal: Contribution Dynamics Of Crowdfunding, Joyee Deb, Aniko Öry (Oery), Kevin R. Williams
Aiming For The Goal: Contribution Dynamics Of Crowdfunding, Joyee Deb, Aniko Öry (Oery), Kevin R. Williams
Cowles Foundation Discussion Papers
We study reward-based crowdfunding, a new class of dynamic contribution games where a private good is produced only if the funding goal is reached by a deadline. Buyers face a problem of coordination rather than free-riding. A long-lived donor may alleviate this coordination risk, signaling his wealth through dynamic contributions. We characterize platform-, donor-, and buyer-optimal equilibrium outcomes, attained by Markov equilibria with simple donation strategies. We test the model’s predictions using high-frequency data collected from the largest crowdfunding platform, Kickstarter. The model fits the data well, especially for predictions concerning comparative statistics, donation dynamics, and properties of successful campaigns.
Quantitative Easing, Collateral Constraints, And Financial Spillovers, John Geanakoplos, Haobin Wang
Quantitative Easing, Collateral Constraints, And Financial Spillovers, John Geanakoplos, Haobin Wang
Cowles Foundation Discussion Papers
The steady application of Quantitative Easing (QE) has been followed by big and non-monotonic effects on international asset prices and international capital flows. These are difficult to explain in conventional models, but arise naturally in a model with collateral. This paper develops a general-equilibrium framework to explore QE’s international transmission involving an advanced economy (AE) and an emerging market economy (EM) whose assets have less collateral capacity. Capital flows arise as a result of international sharing of scarce collateral. The crucial insight is that private AE agents adjust their portfolios in different ways in response to QE, conditional on whether …
Efficient Counterfactual Learning From Bandit Feedback, Yusuke Narita, Shota Yasui, Kohei Yata
Efficient Counterfactual Learning From Bandit Feedback, Yusuke Narita, Shota Yasui, Kohei Yata
Cowles Foundation Discussion Papers
What is the most statistically efficient way to do off-policy optimization with batch data from bandit feedback? For log data generated by contextual bandit algorithms, we consider offline estimators for the expected reward from a counterfactual policy. Our estimators are shown to have lowest variance in a wide class of estimators, achieving variance reduction relative to standard estimators. We then apply our estimators to improve advertisement design by a major advertisement company. Consistent with the theoretical result, our estimators allow us to improve on the existing bandit algorithm with more statistical confidence compared to a state-of-theart benchmark.
Aiming For The Goal: Contribution Dynamics Of Crowdfunding, Joyee Deb, Aniko Öry, Kevin R. Williams
Aiming For The Goal: Contribution Dynamics Of Crowdfunding, Joyee Deb, Aniko Öry, Kevin R. Williams
Cowles Foundation Discussion Papers
We study reward-based crowdfunding campaigns, a new class of dynamic contribution games where consumption is exclusive. Two types of backers participate: buyers want to consume the product while donors just want the campaign to succeed. The key tension is one of coordination between buyers, instead of free-riding. Donors can alleviate this coordination risk. We analyze a dynamic model of crowdfunding and demonstrate that its predictions are consistent with high-frequency data collected from Kickstarter. We compare the Kickstarter mechanism to alternative platform designs and evaluate the value of dynamically arriving information. We extend the model to incorporate social learning about quality.
Strategically Simple Mechanisms, Tilman Börgers, Jiangtao Li
Strategically Simple Mechanisms, Tilman Börgers, Jiangtao Li
Cowles Foundation Discussion Papers
We define and investigate a property of mechanisms that we call “strategic simplicity,” and that is meant to capture the idea that, in strategically simple mechanisms, strategic choices require limited strategic sophistication. We define a mechanism to be strategically simple if choices can be based on first-order beliefs about the other agents’ preferences and first-order certainty about the other agents’ rationality alone, and there is no need for agents to form higher-order beliefs, because such beliefs are irrelevant to the optimal strategies. All dominant strategy mechanisms are strategically simple. But many more mechanisms are strategically simple. In particular, strategically simple …
Dynamic Panel Modeling Of Climate Change, Peter C.B. Phillips
Dynamic Panel Modeling Of Climate Change, Peter C.B. Phillips
Cowles Foundation Discussion Papers
We discuss some conceptual and practical issues that arise from the presence of global energy balance effects on station level adjustment mechanisms in dynamic panel regressions with climate data. The paper provides asymptotic analyses, observational data computations, and Monte Carlo simulations to assess the use of various estimation methodologies, including standard dynamic panel regression and cointegration techniques that have been used in earlier research. The findings reveal massive bias in system GMM estimation of the dynamic panel regression parameters, which arise from fixed effect heterogeneity across individual station level observations. Difference GMM and Within Group (WG) estimation have little bias …
Sensitivity Analysis Using Approximate Moment Condition Models, Timothy B. Armstrong, Michal Kolesár
Sensitivity Analysis Using Approximate Moment Condition Models, Timothy B. Armstrong, Michal Kolesár
Cowles Foundation Discussion Papers
We consider inference in models defined by approximate moment conditions. We show that near-optimal confidence intervals (CIs) can be formed by taking a generalized method of moments (GMM) estimator, and adding and subtracting the standard error times a critical value that takes into account the potential bias from misspecification of the moment conditions. In order to optimize performance under potential misspecification, the weighting matrix for this GMM estimator takes into account this potential bias, and therefore differs from the one that is optimal under correct specification. To formally show the near-optimality of these CIs, we develop asymptotic efficiency bounds for …
A Behavioral Interpretation Of The Origins Of African American Family Structure, Gerald David Jaynes
A Behavioral Interpretation Of The Origins Of African American Family Structure, Gerald David Jaynes
Cowles Foundation Discussion Papers
1960 to 1980 doubling (21% to 41%) of black children in one-parent families emerged from 1940-to-1970 urbanization converging population toward urbanized blacks’ historically stable high rate, not post-1960 welfare liberalization or deindustrialization. Urban and rural child socializations structured different Jim Crow Era black family formations. Agrarian economic enclaves socialized conformity to Jim Crow and two-parent families; urban enclaves rebellion, male joblessness, and destabilized families. Proxying urban/rural residence at age 16 for socialization location, logistic regressions on sixties census data confirm the hypothesis. Racialized urban socialization negatively affected two-parent family formation and poverty status of blacks but not whites.
Real Time Monitoring Of Asset Markets: Bubbles And Crises, Peter C.B. Phillips, Shuping Shi
Real Time Monitoring Of Asset Markets: Bubbles And Crises, Peter C.B. Phillips, Shuping Shi
Cowles Foundation Discussion Papers
While each financial crisis has its own characteristics, there is now widespread recognition that crises arising from sources such as financial speculation and excessive credit creation do inflict harm on the real economy. Detecting speculative market conditions and ballooning credit risk in real time is therefore of prime importance in the complex exercises of market surveillance, risk management, and policy action. This chapter provides an R implementation of the popular real-time monitoring strategy proposed by Phillips, Shi and Yu in the International Economic Review (2015), along with a new bootstrap procedure designed to mitigate the potential impact of heteroskedasticity and …
Countering The Winner’S Curse: Optimal Auction Design In A Common Value Model, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Countering The Winner’S Curse: Optimal Auction Design In A Common Value Model, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We characterize revenue maximizing mechanisms in a common value environment where the value of the object is equal to the highest of bidders’ independent signals. The optimal mechanism exhibits either neutral selection, wherein the object is randomly allocated at a price that all bidders are willing to pay, or advantageous selection, wherein the object is allocated with higher probability to bidders with lower signals. If neutral selection is optimal, then the object is sold with probability one by a deterministic posted price. If advantageous selection is optimal, the object is sold with probability less than one at a random price. …
Sensitivity Analysis Using Approximate Moment Condition Models, Timothy B. Armstrong, Michal Kolesár
Sensitivity Analysis Using Approximate Moment Condition Models, Timothy B. Armstrong, Michal Kolesár
Cowles Foundation Discussion Papers
We consider inference in models defined by approximate moment conditions. We show that near-optimal confidence intervals (CIs) can be formed by taking a generalized method of moments (GMM) estimator, and adding and subtracting the standard error times a critical value that takes into account the potential bias from misspecification of the moment conditions. In order to optimize performance under potential misspecification, the weighting matrix for this GMM estimator takes into account this potential bias, and therefore differs from the one that is optimal under correct specification. To formally show the near-optimality of these CIs, we develop asymptotic efficiency bounds for …
Countering The Winner’S Curse: Optimal Auction Design In A Common Value Model, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Countering The Winner’S Curse: Optimal Auction Design In A Common Value Model, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We characterize revenue maximizing mechanisms in a common value environment where the value of the object is equal to the highest of bidders’ independent signals. If the object is optimally sold with probability one, then the optimal mechanism is simply a posted price, with the highest price such that every type of every bidder is willing to buy the object. A sufficient condition for the posted price to be optimal among all mechanisms is that there is at least one potential bidder who is omitted from the auction. If the object is optimally sold with probability less than one, then …
Adaptation Bounds For Confidence Bands Under Self-Similarity, Timothy B. Armstrong
Adaptation Bounds For Confidence Bands Under Self-Similarity, Timothy B. Armstrong
Cowles Foundation Discussion Papers
We derive bounds on the scope for a confidence band to adapt to the unknown regularity of a nonparametric function that is observed with noise, such as a regression function or density, under the self-similarity condition proposed by Gine and Nickl (2010). We find that adaptation can only be achieved up to a term that depends on the choice of the constant used to define self-similarity, and that this term becomes arbitrarily large for conservative choices of the self-similarity constant. We construct a confidence band that achieves this bound, up to a constant term that does not depend on the …
Adaptation Bounds For Confidence Bands Under Self-Similarity, Timothy B. Armstrong
Adaptation Bounds For Confidence Bands Under Self-Similarity, Timothy B. Armstrong
Cowles Foundation Discussion Papers
We derive bounds on the scope for a confidence band to adapt to the unknown regularity of a nonparametric function that is observed with noise, such as a regression function or density, under the self-similarity condition proposed by Gine and Nickl (2010). We find that adaptation can only be achieved up to a term that depends on the choice of the constant used to define self-similarity, and that this term becomes arbitrarily large for conservative choices of the self-similarity constant. We construct a confidence band that achieves this bound, up to a constant term that does not depend on the …
Slippery Fish: Enforcing Regulation When Agents Learn And Adapt, Andres Gonzalez Lira, Ahmed Musfiq Mobarak
Slippery Fish: Enforcing Regulation When Agents Learn And Adapt, Andres Gonzalez Lira, Ahmed Musfiq Mobarak
Cowles Foundation Discussion Papers
Attempts to curb undesired behavior through regulation gets complicated when agents can adapt to circumvent enforcement. We test a model of enforcement with learning and adaptation, by auditing vendors selling illegal fish in Chile in a randomized controlled trial, and tracking them daily using mystery shoppers. Conducting audits on a predictable schedule and (counter-intuitively) at high frequency is less effective, as agents learn to take advantage of loopholes. A consumer information campaign proves to be almost as cost-effective and curbing illegal sales, and obviates the need for complex monitoring and policing. The Chilean government subsequently chooses to scale up this …
Risk Aversion And Double Marginalization, Soheil Ghili, Matthew Schmitt
Risk Aversion And Double Marginalization, Soheil Ghili, Matthew Schmitt
Cowles Foundation Discussion Papers
In vertical markets, eliminating double marginalization with a two-part tariff may not be possible due to downstream firms' risk aversion. When demand is uncertain, contracts with large fixed fees expose the downstream rm to more risk than contracts that are more reliant on variable fees. In equilibrium, contracts may thus rely on variable fees, giving rise to double marginalization. Counterintuitively, we show that increased demand risk or risk aversion can actually mitigate double marginalization. We also characterize several sufficient conditions under which increased risk or risk aversion does exacerbate double marginalization. We conclude with an application to merger analysis.
Early Stimulation And Nutrition: The Impacts Of A Scalable Intervention, Orazio P. Attanasio, Helen Baker-Henningham, Raquel Bernal, Costas Meghir, Diana Pineda, Marta Rubio-Codina
Early Stimulation And Nutrition: The Impacts Of A Scalable Intervention, Orazio P. Attanasio, Helen Baker-Henningham, Raquel Bernal, Costas Meghir, Diana Pineda, Marta Rubio-Codina
Cowles Foundation Discussion Papers
This paper evaluates the effects of the implementation of a structured early stimulation curriculum combined with a nutritional intervention through public large-scale parenting support services for vulnerable families in rural Colombia, known as FAMI, using a clustered randomized controlled trial. We randomly assigned 87 towns in rural areas to treatment and control and 1,460 children younger than 1 year of age were assessed at baseline. The interventions were also complemented with training, supervision and coaching of FAMI program facilitators. We assessed program effects on children’s nutritional status, and on cognitive and socio-emotional development; as well as on parental practices. The …
Enforcing Regulation Under Illicit Adaptation, Andrés González Lira, Ahmed Mushfiq Mobarak
Enforcing Regulation Under Illicit Adaptation, Andrés González Lira, Ahmed Mushfiq Mobarak
Cowles Foundation Discussion Papers
Attempts to curb illegal activity by enforcing regulations gets complicated when agents react to the new regulatory regime in unanticipated ways to circumvent enforcement. We present a research strategy that uncovers such reactions, and permits program evaluation net of such adaptive behaviors. Our interventions were designed to reduce over-fishing of the critically endangered Pacific hake by either (a) monitoring and penalizing vendors that sell illegal fish or (b) discouraging consumers from purchasing using an information campaign. Vendors attempt to circumvent the ban through hidden sales and other means, which we track using mystery shoppers. Instituting random monitoring visits are much …
Markets For Information: An Introduction, Dirk Bergemann, Alessandro Bonatti
Markets For Information: An Introduction, Dirk Bergemann, Alessandro Bonatti
Cowles Foundation Discussion Papers
We survey a recent and growing literature on markets for information. We offer a comprehensive view of information markets through an integrated model of consumers, information intermediaries, and firms. The model embeds a large set of applications ranging from sponsored search advertising to credit scores to information sharing among competitors. We then review a mechanism design approach to selling information in greater detail. We distinguish between ex ante sales of information (the buyer acquires an information structure) and ex post sales (the buyer pays for specific realizations). We relate this distinction to the different products that brokers, advertisers, and publishers …
Unobserved Heterogeneity In Auctions, Philip A. Haile, Yuichi Kitamura
Unobserved Heterogeneity In Auctions, Philip A. Haile, Yuichi Kitamura
Cowles Foundation Discussion Papers
A common concern in the empirical study of auctions is the likely presence of auction-specific factors that are common knowledge among bidders but unobserved to the econometrician. Such unobserved heterogeneity confounds attempts to uncover the underlying structure of demand and information, typically a primary feature of interest in an auction market. Unobserved heterogeneity presents a particular challenge in first-price auctions, where identification arguments rely on the econometrician’s ability to reconstruct from observables the conditional probabilities that entered each bidder’s equilibrium optimization problem; when bidders condition on unobservables, it is not obvious that this is possible. Here we discuss several approaches …