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Articles 871 - 900 of 2930
Full-Text Articles in Social and Behavioral Sciences
Adverse Selection And An Individual Mandate: When Theory Meets Practice, Martin B. Hackmann, Jonathan T. Kolstad, Amanda E. Kowalski
Adverse Selection And An Individual Mandate: When Theory Meets Practice, Martin B. Hackmann, Jonathan T. Kolstad, Amanda E. Kowalski
Cowles Foundation Discussion Papers
We develop a model of selection that incorporates a key element of recent health reforms: an individual mandate. We identify a set of key parameters for welfare analysis, allowing us to model the welfare impact of the actual policy as well as to estimate the socially optimal penalty level. Using data from Massachusetts, we estimate the key parameters of the model. We compare health insurance coverage, premiums, and insurer average health claim expenditures between Massachusetts and other states in the periods before and after the passage of Massachusetts health reform. In the individual market for health insurance, we find that …
Affective Utilities: A Rational Theory Of Optimistic Bias In Asset Markets, Anat Bracha, Donald J. Brown
Affective Utilities: A Rational Theory Of Optimistic Bias In Asset Markets, Anat Bracha, Donald J. Brown
Cowles Foundation Discussion Papers
The equilibrium prices in asset markets, as stated by Keynes (1930): “…will be fixed at the point at which the sales of the bears and the purchases of the bulls are balanced.” We propose a descriptive theory of finance explicating Keynes’ claim that the prices of assets today equilibrate the optimism and pessimism of bulls and bears regarding the payoffs of assets tomorrow. This equilibration of optimistic and pessimistic beliefs of investors is a consequence of investors maximizing affective utilities subject to budget constraints defined by market prices and investor’s income. The set of affective utilities is a new class …
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We analyze the welfare consequences of a monopolist having additional information about consumers’ tastes, beyond the prior distribution; the additional information can be used to charge different prices to different segments of the market, i.e., carry out “third degree price discrimination.” We show that the segmentation and pricing induced by the additional information can achieve every combination of consumer and producer surplus such that: (i) consumer surplus is non-negative, (ii) producer surplus is at least as high as profits under the uniform monopoly price, and (iii) total surplus does not exceed the surplus generated by efficient trade.
Sieve Wald And Qlr Inferences On Semi/Nonparametric Conditional Moment Models, Xiaohong Chen, Demian Pouzo
Sieve Wald And Qlr Inferences On Semi/Nonparametric Conditional Moment Models, Xiaohong Chen, Demian Pouzo
Cowles Foundation Discussion Papers
This paper considers inference on functionals of semi/nonparametric conditional moment restrictions with possibly nonsmooth generalized residuals, which include all of the (nonlinear) nonparametric instrumental variables (IV) as special cases. For these models it is often difficult to verify whether a functional is regular (i.e., root-n estimable) or irregular (i.e., slower than root-n estimable). We provide computationally simple, unified inference procedures that are asymptotically valid regardless of whether a functional is regular or not. We establish the following new useful results: (1) the asymptotic normality of a plug-in penalized sieve minimum distance (PSMD) estimator of a (possibly irregular) functional; (2) the …
Sieve Wald And Qlr Inferences On Semi/Nonparametric Conditional Moment Models, Xiaohong Chen, Demian Pouzo
Sieve Wald And Qlr Inferences On Semi/Nonparametric Conditional Moment Models, Xiaohong Chen, Demian Pouzo
Cowles Foundation Discussion Papers
This paper considers inference on functionals of semi/nonparametric conditional moment restrictions with possibly nonsmooth generalized residuals, which include all of the (nonlinear) nonparametric instrumental variables (IV) as special cases. These models are often ill-posed and hence it is difficult to verify whether a (possibly nonlinear) functional is root- n estimable or not. We provide computationally simple, unified inference procedures that are asymptotically valid regardless of whether a functional is root- n estimable or not. We establish the following new useful results: (1) the asymptotic normality of a plug-in penalized sieve minimum distance (PSMD) estimator of a (possibly nonlinear) functional; (2) …
Sieve Quasi Likelihood Ratio Inference On Semi/Nonparametric Conditional Moment Models, Xiaohong Chen, Demian Pouzo
Sieve Quasi Likelihood Ratio Inference On Semi/Nonparametric Conditional Moment Models, Xiaohong Chen, Demian Pouzo
Cowles Foundation Discussion Papers
This paper considers inference on functionals of semi/nonparametric conditional moment restrictions with possibly nonsmooth generalized residuals. These models belong to the difficult (nonlinear) ill-posed inverse problems with unknown operators, and include all of the (nonlinear) nonparametric instrumental variables (IV) as special cases. For these models it is generally difficult to verify whether a functional is regular (i.e., root-n estimable) or irregular (i.e., slower than root-n estimable). In this paper we provide computationally simple, unified inference procedures that are asymptotically valid regardless of whether a functional is regular or irregular. We establish the following new results: (1) the asymptotic normality of …
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We analyze the welfare consequences of a monopolist having additional information about consumers’ tastes, beyond the prior distribution; the additional information can be used to charge different prices to different segments of the market, i.e., carry out “third degree price discrimination.” We show that the segmentation and pricing induced by the additional information can achieve every combination of consumer and producer surplus such that: (i) consumer surplus is non-negative, (ii) producer surplus is at least as high as profits under the uniform monopoly price, and (iii) total surplus does not exceed the surplus generated by efficient trade.
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We analyze the welfare consequences of a monopolist having additional information about consumers’ tastes, beyond the prior distribution; the additional information can be used to charge different prices to different segments of the market, i.e., carry out “third degree price discrimination.” We show that the segmentation and pricing induced by the additional information can achieve every combination of consumer and producer surplus such that: (i) consumer surplus is non-negative, (ii) producer surplus is at least as high as profits under the uniform monopoly price, and (iii) total surplus does not exceed the efficient gains from trade. As well as characterizing …
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
The Limits Of Price Discrimination, Dirk Bergemann, Benjamin Brooks, Stephen Morris
Cowles Foundation Discussion Papers
We analyze the welfare consequences of a monopolist having additional information about consumers’ tastes, beyond the prior distribution; the additional information can be used to charge different prices to different segments of the market, i.e., carry out “third degree price discrimination.” We show that the segmentation and pricing induced by the additional information can achieve every combination of consumer and producer surplus such that: (i) consumer surplus is non-negative, (ii) producer surplus is at least as high as profits under the uniform monopoly price, and (iii) total surplus does not exceed the efficient gains from trade. As well as characterizing …
Likelihood Inference In Some Finite Mixture Models, Xiaohong Chen, Maria Ponomareva, Elie Tamer
Likelihood Inference In Some Finite Mixture Models, Xiaohong Chen, Maria Ponomareva, Elie Tamer
Cowles Foundation Discussion Papers
Parametric mixture models are commonly used in applied work, especially empirical economics, where these models are often employed to learn for example about the proportions of various types in a given population. This paper examines the inference question on the proportions (mixing probability) in a simple mixture model in the presence of nuisance parameters when sample size is large. It is well known that likelihood inference in mixture models is complicated due to 1) lack of point identification, and 2) parameters (for example, mixing probabilities) whose true value may lie on the boundary of the parameter space. These issues cause …
Reflections On Finance And The Good Society, Robert J. Shiller
Reflections On Finance And The Good Society, Robert J. Shiller
Cowles Foundation Discussion Papers
After the financial crisis that began in 2007 many have expressed renewed doubts about the basic goodness of the financial sectors, doubts related to deeply-held moral principles and traditions of larger society. We need to reconcile these doubts with financial practice. We must acknowledge the important principle of reciprocity. We must understand that there are natural human tendencies towards aggression and hoarding, which no financial institutions and codes of ethics can completely eliminate. We must appreciate the important role of professional organizations in moderating these tendencies. When these principles are made part of financial education we can expect better public …
Female Labour Supply, Human Capital And Welfare Reform, Richard Blundell, Monica Costa Dias, Costas Meghir, Jonathan Shaw
Female Labour Supply, Human Capital And Welfare Reform, Richard Blundell, Monica Costa Dias, Costas Meghir, Jonathan Shaw
Cowles Foundation Discussion Papers
We consider the impact of Tax credits and income support programs on female education choice, employment, hours and human capital accumulation over the life-cycle. We thus analyze both the short run incentive effects and the longer run implications of such programs. By allowing for risk aversion and savings we are also able to quantify the insurance value of alternative programs. We find important incentive effects on education choice, and labor supply, with single mothers having the most elastic labor supply. Returns to labour market experience are found to be substantial but only for full-time employment, and especially for women with …
Female Labour Supply, Human Capital And Welfare Reform, Richard Blundell, Monica Costa Dias, Costas Meghir, Jonathan Shaw
Female Labour Supply, Human Capital And Welfare Reform, Richard Blundell, Monica Costa Dias, Costas Meghir, Jonathan Shaw
Cowles Foundation Discussion Papers
We estimate a dynamic model of employment, human capital accumulation - including education, and savings for women in the UK, exploiting tax and benefit reforms, and use it to analyze the effects of welfare policy. We find substantial elasticities for labor supply and particularly for lone mothers. Returns to experience, which are important in determining the longer-term effects of policy, increase with education, but experience mainly accumulates when in full-time employment. Tax credits are welfare improving in the UK and increase lone-mother labor supply, but the employment effects do not extend beyond the period of eligibility. Marginal increases in tax …
Female Labour Supply, Human Capital And Welfare Reform, Richard Blundell, Monica Costa Dias, Costas Meghir, Jonathan Shaw
Female Labour Supply, Human Capital And Welfare Reform, Richard Blundell, Monica Costa Dias, Costas Meghir, Jonathan Shaw
Cowles Foundation Discussion Papers
We estimate a dynamic model of employment, human capital accumulation — including education, and savings for women in the UK, exploiting policy changes. We analyze both the incentive effects and the welfare implications of tax credits and income support programs and we account for their insurance value. We find important incentive effects on education choice and labor supply, with single mothers having the most elastic labor supply. Returns to experience increase with education, but experience only accumulates when in full-time employment. Finally, marginal increases in tax credits are preferred to equally costly income support or to tax cuts.
Biology And The Arguments Of Utility, Luis Rayo, Arthur Robson
Biology And The Arguments Of Utility, Luis Rayo, Arthur Robson
Cowles Foundation Discussion Papers
Why did evolution not give us a utility function that is offspring alone? Why do we care intrinsically about other outcomes, food, for example, and what determines the intensity of such preferences? A common view is that such other outcomes enhance fitness and the intensity of our preference for a given outcome is proportional to its contribution to fitness. We argue that this view is inaccurate. Specifically, we show that in the presence of informational imperfections, the evolved preference for a given outcome is determined by the individual’s degree of ignorance regarding its significance. Our model sheds light on imitation …
Keynesian Utilities: Bulls And Bears, Anat Bracha, Donald J. Brown
Keynesian Utilities: Bulls And Bears, Anat Bracha, Donald J. Brown
Cowles Foundation Discussion Papers
We propose Keynesian utilities as a new class of non-expected utility functions representing the preferences of investors for optimism, defined as the composition of the investor’s preferences for risk and her preferences for ambiguity. The optimism or pessimism of Keynesian utilities is determined by empirical proxies for risk and ambiguity. Bulls and bears are defined respectively as optimistic and pessimistic investors. The resulting family of Afriat inequalities are necessary and sufficient for rationalizing the asset demands of bulls and bears with Keynesian utilities.
Biology And The Arguments Of Utility, Luis Rayo, Arthur Robson
Biology And The Arguments Of Utility, Luis Rayo, Arthur Robson
Cowles Foundation Discussion Papers
Why did evolution not give us a utility function that is offspring alone? Why do we care intrinsically about other outcomes, such as food, and what determines the intensity of such preferences? A common view is that such other outcomes enhance fitness and the intensity of our preference for a given outcome is proportional to its contribution to fitness. We argue that this view is incomplete. Specifically, we show that in the presence of informational asymmetries, the evolutionarily most desirable preference for a given outcome is determined not only by the significance of the outcome, but by the Agent’s degree …
Fictive Learning In Choice Under Uncertainty: A Logistic Regression Model, Donald J. Brown, Oliver D. Bunn, Caterina Calsamiglia
Fictive Learning In Choice Under Uncertainty: A Logistic Regression Model, Donald J. Brown, Oliver D. Bunn, Caterina Calsamiglia
Cowles Foundation Discussion Papers
This paper is an exposition of an experiment on revealed preferences, where we posite a novel discrete binary choice model. To estimate this model, we use general estimating equations or GEE. This is a methodology originating in biostatistics for estimating regression models with correlated data. In this paper, we focus on the motivation for our approach, the logic and intuition underlying our analysis and a summary of our findings. The missing technical details are in the working paper by Bunn, et al. (2013). The experimental data is available from the corresponding author: [email protected] . The recruiting poster and informed consent …
Testing For Fictive Learning In Decision-Making Under Uncertainty, Oliver D. Bunn, Caterina Calsamiglia, Donald J. Brown
Testing For Fictive Learning In Decision-Making Under Uncertainty, Oliver D. Bunn, Caterina Calsamiglia, Donald J. Brown
Cowles Foundation Discussion Papers
We conduct two experiments where subjects make a sequence of binary choices between risky and ambiguous binary lotteries. Risky lotteries are defined as lotteries where the relative frequencies of outcomes are known. Ambiguous lotteries are lotteries where the relative frequencies of outcomes are not known or may not exist. The trials in each experiment are divided into three phases: pre-treatment, treatment and post-treatment. The trials in the pre-treatment and post-treatment phases are the same. As such, the trials before and after the treatment phase are dependent, clustered matched-pairs, that we analyze with the alternating logistic regression (ALR) package in SAS. …
Education Policy And Intergenerational Transfers In Equilibrium, Brant Abbott, Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante
Education Policy And Intergenerational Transfers In Equilibrium, Brant Abbott, Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante
Cowles Foundation Discussion Papers
This paper examines the equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life cycle model with education, labor supply, and consumption/saving decisions. Cognitive and non-cognitive skills of children depend on the cognitive skills and education of parents, and affect education choice and labor market outcomes. Driven by both altruism and paternalism, parents make transfers to their children which can be used to fund education, supplementing grants, loans and the labor supply of the children themselves during college. The crowding out of parental transfers by government programs is sizable and thus cannot …
Career Progression, Economic Downturns, And Skills, Jerome Adda, Christian Dustmann, Costas Meghir, Jean-Marc Robin
Career Progression, Economic Downturns, And Skills, Jerome Adda, Christian Dustmann, Costas Meghir, Jean-Marc Robin
Cowles Foundation Discussion Papers
This paper analyzes the career progression of skilled and unskilled workers, with a focus on how careers are affected by economic downturns and whether formal skills, acquired early on, can shield workers from the effect of recessions. Using detailed administrative data for Germany for numerous birth cohorts across different regions, we follow workers from labor market entry onwards and estimate a dynamic life-cycle model of vocational training choice, labor supply, and wage progression. Most particularly, our model allows for labor market frictions that vary by skill group and over the business cycle. We find that sources of wage growth differ: …
Education Policy And Intergenerational Transfers In Equilibrium, Brant Abbott, Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante
Education Policy And Intergenerational Transfers In Equilibrium, Brant Abbott, Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante
Cowles Foundation Discussion Papers
This paper compares partial and general equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life-cycle, heterogeneous-agent, incomplete-markets model with education, labor supply, and consumption/saving decisions. Altruistic parents make inter vivos transfers to their children. Labor supply during college, government grants and loans, as well as private loans, complement parental transfers as sources of funding for college education. We find that the current financial aid system in the U.S. improves welfare, and removing it would reduce GDP by two percentage points in the long-run. Any further relaxation of government-sponsored loan limits would …
Education Policy And Intergenerational Transfers In Equilibrium, Brant Abbott, Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante
Education Policy And Intergenerational Transfers In Equilibrium, Brant Abbott, Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante
Cowles Foundation Discussion Papers
This paper examines the equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life-cycle, heterogeneous-agent, incomplete-markets model with education, labor supply, and consumption/saving decisions. Driven by both altruism and paternalism, parents make inter vivos transfers to their children. Both cognitive and non-cognitive skills determine the non-pecuniary cost of schooling. Labor supply during college, government grants and loans, as well as private loans, complement parental resources as means of funding college education. We find that the current financial aid system in the U.S. improves welfare, and removing it would reduce GDP by 4-5 …
Relational Contracting, Repeated Negotiations, And Hold-Up, Sebastian Kranz
Relational Contracting, Repeated Negotiations, And Hold-Up, Sebastian Kranz
Cowles Foundation Discussion Papers
We propose a unified framework to study relational contracting and hold-up problems in infinite horizon stochastic games. We first illustrate that with respect to long run decisions, the common formulation of relational contracts as Pareto-optimal public perfect equilibria is in stark contrast to fundamental assumptions of hold-up models. We develop a model in which relational contracts are repeatedly newly negotiated during relationships. Negotiations take place with positive probability and cause bygones to be bygones. Traditional relational contracting and hold-up formulations are nested as opposite corner cases. Allowing for intermediate cases yields very intuitive results and sheds light on many plausible …
Multiscale Adaptive Inference On Conditional Moment Inequalities, Timothy B. Armstrong, Hock Peng Chan
Multiscale Adaptive Inference On Conditional Moment Inequalities, Timothy B. Armstrong, Hock Peng Chan
Cowles Foundation Discussion Papers
This paper considers inference for conditional moment inequality models using a multiscale statistic. We derive the asymptotic distribution of this test statistic and use the result to propose feasible critical values that have a simple analytic formula. We also propose critical values based on a modified bootstrap procedure and prove their asymptotic validity. The asymptotic distribution is extreme value, and the proof uses new techniques to overcome several technical obstacles. We provide power results that show that our test detects local alternatives that approach the identified set at the best possible rate under a set of conditions that hold generically …
Multiscale Adaptive Inference On Conditional Moment Inequalities, Timothy B. Armstrong, Hock Peng Chan
Multiscale Adaptive Inference On Conditional Moment Inequalities, Timothy B. Armstrong, Hock Peng Chan
Cowles Foundation Discussion Papers
This paper considers inference for conditional moment inequality models using a multiscale statistic. We derive the asymptotic distribution of this test statistic and use the result to propose feasible critical values that have a simple analytic formula, and to prove the asymptotic validity of a modified bootstrap procedure. The asymptotic distribution is extreme value, and the proof uses new techniques to overcome several technical obstacles. The test detects local alternatives that approach the identified set at the best rate in a broad class of models, and is adaptive to the smoothness properties of the data generating process. Our results also …
Multiscale Adaptive Inference On Conditional Moment Inequalities, Timothy B. Armstrong, Hock Peng Chan
Multiscale Adaptive Inference On Conditional Moment Inequalities, Timothy B. Armstrong, Hock Peng Chan
Cowles Foundation Discussion Papers
This paper considers inference for conditional moment inequality models using a multiscale statistic. We derive the asymptotic distribution of this test statistic and use the result to propose feasible critical values that have a simple analytic formula, and to prove the asymptotic validity of a modified bootstrap procedure. The asymptotic distribution is extreme value, and the proof uses new techniques to overcome several technical obstacles. The test detects local alternatives that approach the identified set at the best rate among available tests in a broad class of models, and is adaptive to the smoothness properties of the data generating process. …
Mismatch, Sorting And Wage Dynamics, Jeremy Lise, Costas Meghir, Jean-Marc Robin
Mismatch, Sorting And Wage Dynamics, Jeremy Lise, Costas Meghir, Jean-Marc Robin
Cowles Foundation Discussion Papers
We develop an empirical search-matching model which is suitable for analyzing the wage, employment and welfare impact of regulation in a labor market with heterogeneous workers and jobs. To achieve this we develop an equilibrium model of wage determination and employment which extends the current literature on equilibrium wage determination with matching and provides a bridge between some of the most prominent macro models and microeconometric research. The model incorporates productivity shocks, long-term contracts, on-the-job search and counter-offers. Importantly, the model allows for the possibility of assortative matching between workers and jobs due to complementarities between worker and job characteristics. …
An Estimation Of Economic Models With Recursive Preferences, Xiaohong Chen, Jack Favilukis, Sydney C. Ludvigson
An Estimation Of Economic Models With Recursive Preferences, Xiaohong Chen, Jack Favilukis, Sydney C. Ludvigson
Cowles Foundation Discussion Papers
This paper presents estimates of key preference parameters of the Epstein and Zin (1989, 1991) and Weil (1989) (EZW) recursive utility model, evaluates the model’s ability to fit asset return data relative to other asset pricing models, and investigates the implications of such estimates for the unobservable aggregate wealth return. Our empirical results indicate that the estimated relative risk aversion parameter ranges from 17-60, with higher values for aggregate consumption than for stockholder consumption, while the estimated elasticity of intertemporal substitution is above one. In addition, the estimated model-implied aggregate wealth return is found to be weakly correlated with the …
Mathematical Institutional Economics, Martin Shubik
Mathematical Institutional Economics, Martin Shubik
Cowles Foundation Discussion Papers
An overview is given of the utilization of strategic market games in the development of a game theory based theory of money and financial institutions.