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Articles 331 - 360 of 3476
Full-Text Articles in Economics
Privacy Preserving Signals, Philipp Strack, Kai Hao Yang
Privacy Preserving Signals, Philipp Strack, Kai Hao Yang
Cowles Foundation Discussion Papers
A signal is privacy-preserving with respect to a collection of privacy sets, if the posterior probability assigned to every privacy set remains unchanged conditional on any signal realization. We characterize the privacy-preserving signals for arbitrary state space and arbitrary privacy sets. A signal is privacy-preserving if and only if it is a garbling of a reordered quantile signal. These signals are equivalent to couplings, which in turn lead to a characterization of optimal privacy-preserving signals for a decisionmaker. We demonstrate the applications of this characterization in the contexts of algorithmic fairness, price discrimination, and information design.
Panel Data Models With Time-Varying Latent Group Structures, Peter C. B. Phillips, Liangjun Su, Yiren Wang
Panel Data Models With Time-Varying Latent Group Structures, Peter C. B. Phillips, Liangjun Su, Yiren Wang
Cowles Foundation Discussion Papers
This paper considers a linear panel model with interactive fixed effects and unobserved individual and time heterogeneities that are captured by some latent group structures and an unknown structural break, respectively. To enhance realism the model may have different numbers of groups and/or different group memberships before and after the break. With the preliminary nuclear-norm-regularized estimation followed by row- and column-wise linear regressions, we estimate the break point based on the idea of binary segmentation and the latent group structures together with the number of groups before and after the break by sequential testing K-means algorithm simultaneously. It is shown …
Formalizing Dispute Resolution: Effects Of Village Courts In Bangladesh, Martin Mattsson, Ahmed Mushfiq Mobarak
Formalizing Dispute Resolution: Effects Of Village Courts In Bangladesh, Martin Mattsson, Ahmed Mushfiq Mobarak
Discussion Papers
Disagreements over business deals, land boundaries, or loan non-repayment are very common sources of disputes, and courts are congested in developing countries. We evaluate the effects of the government introducing formal “village courts” (VCs) in rural Bangladesh using a randomized controlled trial with a pre-analysis plan. VCs were designed to improve dispute resolution and relieve the pressure on congested district courts. We find that VCs are more of a substitute for the ubiquitous informal dispute resolution mechanism (DRM) called shalish. VCs become functional and active in treated areas, but shalish remains the primary preferred DRM in both treatment and …
New Asymptotics Applied To Functional Coefficient Regression And Climate Sensitivity Analysis, Qiying Wang, Peter C. B. Phillips, Ying Wang
New Asymptotics Applied To Functional Coefficient Regression And Climate Sensitivity Analysis, Qiying Wang, Peter C. B. Phillips, Ying Wang
Cowles Foundation Discussion Papers
A general asymptotic theory is established for sample cross moments of nonstationary time series, allowing for long range dependence and local unit roots. The theory provides a substantial extension of earlier results on nonparametric regression that include near-cointegrated nonparametric regression as well as spurious nonparametric regression. Many new models are covered by the limit theory, among which are functional coefficient regressions in which both regressors and the functional covariate are nonstationary. Simulations show finite sample performance matching well with the asymptotic theory and having broad relevance to applications, while revealing how dual nonstationarity in regressors and covariates raises sensitivity to …
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 facing complex objectives often decompose the problems they face, delegating different parts of the decision to distinct sub-units. Using comprehen-sive data and internal models from a large U.S. airline, we establish that airline pricing is not well approximated by a model of the firm as a unitary decision-maker. We show that observed prices, however, can be rationalized by account-ing for organizational structure and the decisions by departments that are tasked with supplying inputs to the observed pricing heuristic. Simulating the prices the firm would charge if it were a rational unitary decision-maker results in lower welfare than we estimate …
Demand Estimation With Infrequent Purchases And Small Market Sizes, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Demand Estimation With Infrequent Purchases And Small Market Sizes, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Cowles Foundation Discussion Papers
We propose a demand estimation method that allows for a large number of zero sale observations, rich unobserved heterogeneity, and endogenous prices. We do so by modeling small market sizes through Poisson arrivals. Each of these arriving consumers solves a standard discrete choice problem. We present a Bayesian IV estimation approach that addresses sampling error in product shares and scales well to rich data environments. The data requirements are traditional market-level data as well as a measure of market sizes or consumer arrivals. After presenting simulation studies, we demonstrate the method in an empirical application of air travel demand.
Rational Dialogues, John Geanakoplos, Heracles M. Polemarchakis
Rational Dialogues, John Geanakoplos, Heracles M. Polemarchakis
Cowles Foundation Discussion Papers
Any finite conversation can be rationalized.
The People And The Experts: Alternative Views On Economic Affairs, William D. Nordhaus, Douglas Rivers
The People And The Experts: Alternative Views On Economic Affairs, William D. Nordhaus, Douglas Rivers
Cowles Foundation Discussion Papers
Are speculators driving up oil prices? Should we raise energy prices to slow global warming? The present study takes a small number of such questions and compares the views of economic experts with those of the public. This comparison uses a panel of 2000+ respondents from YouGov with the views of the panel of experts from the IGM at the Chicago Booth School. We found that most of the US population is at best modestly informed about major economic questions and policies. The low level of knowledge is generally associated with the intrusion of ideological, political, and religious views that …
Affective Interdependence And Welfare, Aviad Heifetz, Enrico Minelli, Heracles M. Polemarchakis
Affective Interdependence And Welfare, Aviad Heifetz, Enrico Minelli, Heracles M. Polemarchakis
Cowles Foundation Discussion Papers
Purely affective interaction allows the welfare of an individual to depend on her own actions and on the profile of welfare levels of others. Under an assumption on the structure of mutual affection that we interpret as “non-explosive mutual affection,” we show that equilibria of simultaneous-move affective interaction are Pareto optimal independently of whether or not an induced standard game exists. Moreover, if purely affective interaction in-duces a standard game, then an equilibrium profile of actions is a Nash equilibrium of the game, and this Nash equilibrium and Pareto optimal profile of strategies is locally dominant.
Managed Campaigns And Data-Augmented Auctions For Digital Advertising, Dirk Bergemann, Alessandro Bonatti, Nicholas Wu
Managed Campaigns And Data-Augmented Auctions For Digital Advertising, Dirk Bergemann, Alessandro Bonatti, Nicholas Wu
Cowles Foundation Discussion Papers
We develop an auction model for digital advertising. A monopoly platform has access to data on the value of the match between advertisers and consumers. The platform support bidding with additional information and increase the feasible surplus for on-platform matches. Advertisers jointly determine their pricing strategy both on and off the platform, as well as their bidding for digital advertising on the platform. We compare a data-augmented second-price auction and a managed campaign mechanism. In the data-augmented auction, the bids by the advertisers are informed by the data of the platform regarding the value of the match. This results in …
Data, Competition, And Digital Platforms, Dirk Bergemann, Alessandro Bonatti
Data, Competition, And Digital Platforms, Dirk Bergemann, Alessandro Bonatti
Cowles Foundation Discussion Papers
We analyze digital markets where a monopolist platform uses data to match multiproduct sellers with heterogeneous consumers who can purchase both on and o§ the platform. The platform sells targeted ads to sellers that recommend their products to consumers and reveals information to consumers about their values. The revenueoptimal mechanism is a managed advertising campaign that matches products and preferences e¢ ciently. In equilibrium, sellers o§er higher qualities at lower unit prices on than o§ the platform. Privacy-respecting data-governance rules such as organic search results or federated learning can lead to welfare gains for consumers.
Dynamic Price Competition: Theory And Evidence From Airline Markets, Jose M. Betancourt, Ali Hortaçsu, Aniko Öry (Oery), Kevin R. Williams
Dynamic Price Competition: Theory And Evidence From Airline Markets, Jose M. Betancourt, Ali Hortaçsu, Aniko Öry (Oery), Kevin R. Williams
Cowles Foundation Discussion Papers
We introduce a model of dynamic pricing in perishable goods markets with competition and provide conditions for equilibrium uniqueness. Pricing dynamics are rich because both own and competitor scarcity affect future profits. We identify new competitive forces that can lead to misallocation due to selling units too quickly: the Bertrand scarcity trap. We empirically estimate our model using daily prices and bookings for competing U.S. airlines. We compare competitive equilibrium outcomes to those where firms use pricing heuristics based on observed internal pricing rules at a large airline. We find that pricing heuristics increase revenues (4-5%) and consumer surplus (3%).
Growing Like India. The Unequal Effects Of Service Lead Growth., Tianyu Fan, Michael Peters, Fabrizio Zilibotti
Growing Like India. The Unequal Effects Of Service Lead Growth., Tianyu Fan, Michael Peters, Fabrizio Zilibotti
Discussion Papers
Structural transformation in most currently developing countries takes the form of a rapid rise in services but limited industrialization. In this paper, we propose a new methodology to structurally estimate productivity growth in service industries that circumvents the notorious difficulties in measuring quality improvements. In our theory, the expansion of the service sector is both a consequence—due to income effects—and a cause— due to productivity growth— of the development process. We estimate the model using Indian household data. We find that productivity growth in non-tradable consumer services such as retail, restaurants, or residential real estate, was an important driver of …
Incorporating Sales And Arrivals Information In Demand Estimation, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Incorporating Sales And Arrivals Information In Demand Estimation, Ali Hortaçsu, Olivia R. Natan, Hayden Parsley, Timothy Schwieg, Kevin R. Williams
Cowles Foundation Discussion Papers
We propose a demand estimation method that allows for a large number of zero sale observations, rich unobserved heterogeneity, and endogenous prices. We do so by modeling small market sizes through Poisson arrivals. Each of these arriving con-sumers solves a standard discrete choice problem. We present a Bayesian IV estima-tion approach that addresses sampling error in product shares and scales well to rich data environments. The data requirements are traditional market-level data as well as a measure of market sizes or consumer arrivals. After presenting simulation studies, we demonstrate the method in an empirical application of air travel demand.
Policies, Projections, And The Social Cost Of Carbon: Results From The Dice-2023 Model, Lint Barrage, William D. Nordhaus
Policies, Projections, And The Social Cost Of Carbon: Results From The Dice-2023 Model, Lint Barrage, William D. Nordhaus
Cowles Foundation Discussion Papers
The present study examines the assumptions, modeling structure, and preliminary results of DICE-2023, the revised Dynamic Integrated Model of Climate and the Economy (DICE), updated to 2023. The revision contains major changes in the carbon and climate modules, the treatment of non-industrial greenhouse gases, discount rates, as well as updates on all the major components. The major changes are a significant reduction in the target for the optimal (cost-beneficial) temperature path, a lower cost of reaching the 2 °C target, an analysis of the impact of the Paris Accord, and a major increase in the estimated social cost of carbon.
The Effect Of Education Policy On Crime: An Intergenerational Perspective, Costas Meghir, Marten Palme, Marieke Schnabel
The Effect Of Education Policy On Crime: An Intergenerational Perspective, Costas Meghir, Marten Palme, Marieke Schnabel
Cowles Foundation Discussion Papers
We study the intergenerational effect of education policy on crime. We use Swedish administrative data that links outcomes across generations with crime records and we show that the comprehensive school reform, gradually implemented between 1949 and 1962, reduced conviction rates both for the generation directly affected by the reform and for their sons. The reduction in conviction rates occurred across many types of crime. Key mediators for this reduction in the child generation are an increase in education and a decline in crime amongst their fathers.
When Do Consumers Talk?, Ishita Chakraborty, Joyee Deb, Aniko Öry (Oery)
When Do Consumers Talk?, Ishita Chakraborty, Joyee Deb, Aniko Öry (Oery)
Cowles Foundation Discussion Papers
The propensity of consumers to talk after a good versus bad experience with a product can differ based on information available from other marketing channels, for example the brand image or advertising. This can result in selection of positive/negative word-of-mouth for reasons outside of product quality. We develop a unifying framework of WOM, brand image, product advertising, and pricing with a focus on the instrumentality motive of word-of-mouth: early adopters talk to inform new buyers’ purchasing decisions. The different marketing channels shape the information sharing behavior of the early adopter as well as the target consumer’s purchase decision. We show …
The Optimality Of Constant Mark-Up Pricing, Dirk Bergemann, Tibor Heumann, Stephen Morris
The Optimality Of Constant Mark-Up Pricing, Dirk Bergemann, Tibor Heumann, Stephen Morris
Cowles Foundation Discussion Papers
We consider a nonlinear pricing environment with private information. We provide profit guarantees (and associated mechanisms) that the seller can achieve across all possible distributions of willingness to pay of the buyers. With a constant elasticity cost function, constant markup pricing provides the optimal revenue guarantee across all possible distributions of willingness to pay and the lower bound is attained under a Pareto distribution. We characterize how profits and consumer surplus vary with the distribution of values and show that Pareto distributions are extremal. We also provide a revenue guarantee for general cost functions.We establish equivalent results for optimal procurement …
Social And Financial Incentives For Overcoming A Collective Action Problem, M. Mehrab Bakhtiar, Raymond Guiteras, James Levinsohn, Ahmed Mushfiq Mobarak
Social And Financial Incentives For Overcoming A Collective Action Problem, M. Mehrab Bakhtiar, Raymond Guiteras, James Levinsohn, Ahmed Mushfiq Mobarak
Discussion Papers
Addressing public health externalities often requires community-level collective action. Each person’s sanitation behavior can affect the health of neighbors. We report on a cluster randomized controlled trial conducted with 19,000 households in rural Bangladesh where we randomized (1) either group financial incentives or a non-financial “social recognition” reward, and (2) asking each household to make either a private pledge or a public pledge to maintain hygienic latrines. The group financial reward has the strongest impact in the short term (3 months), inducing a 7.5-12.5 percentage point increase in hygienic latrine ownership. Getting people to publicly commit to maintaining and using …
Extreme Points Of First-Order Stochastic Dominance Intervals: Theory And Applications, Kai Hao Yang, Alexander K. Zentefis
Extreme Points Of First-Order Stochastic Dominance Intervals: Theory And Applications, Kai Hao Yang, Alexander K. Zentefis
Cowles Foundation Discussion Papers
We characterize the extreme points of first-order stochastic dominance (FOSD) intervals and show how these intervals are at the heart of many topics in economics. Using knowledge of these extreme points, we characterize the distributions of posterior quantiles under a given prior, leading to an analogue of a classical result regarding the distribution of posterior means. We apply this analogue to various economic subjects, including the psychology of judgement, political economy, and Bayesian persuasion. In addition, FOSD intervals provide a common structure to security design. We use the extreme points to unify and generalize seminal results in that literature when …
Influence Or Advertise: The Role Of Social Learning In Influencer Marketing, Ron Berman, Aniko Öry (Oery), Xudong Zheng
Influence Or Advertise: The Role Of Social Learning In Influencer Marketing, Ron Berman, Aniko Öry (Oery), Xudong Zheng
Cowles Foundation Discussion Papers
We compare influencer marketing to targeted advertising from information aggregation and product awareness perspectives. Influencer marketing leverages network effects by allowing consumers to socially learn from each other about their experienced content utility, but consumers may not know whether to attribute promotional post popularity to high content or high product quality. If the quality of a product is uncertain (e.g., it belongs to an unknown brand), then a mega influencer with consistent content quality fosters more information aggregation than a targeted ad and thereby yields higher profits. When we compare influencer marketing to untargeted ad campaigns or if the product …
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 facing complex objectives often decompose the problems they face, delegating different parts of the decision to distinct subordinates. Using comprehensive data and internal models from a large U.S. airline, we establish that airline pricing is inconsistent with canonical dynamic pricing models. However, we show that observed prices can be rationalized as an equilibrium of a game played by departments who each have decision rights for different inputs that are supplied to the observed pricing heuristic. Incorrectly assuming that the firm solves a standard profit maximization problem as a single entity understates overall welfare actually achieved but affects business and …
Nonparametric Identification Of Differentiated Products Demand Using Micro Data, Steven T. Berry, Philip A. Haile
Nonparametric Identification Of Differentiated Products Demand Using Micro Data, Steven T. Berry, Philip A. Haile
Cowles Foundation Discussion Papers
We examine identification of differentiated products demand when one has “micro data” linking the characteristics and choices of individual consumers. Our model nests standard specifications featuring rich observed and unobserved consumer heterogeneity as well as product/market-level unobservables that introduce the problem of econometric endogeneity. Previous work establishes identification of such models using marketlevel data and instruments for all prices and quantities. Micro data provides a panel structure that facilitates richer demand specifications and reduces requirements on both the number and types of instrumental variables. We address identification of demand in the standard case in which non-price product characteristics are assumed …
Misinterpreting Yourself, Paul Heidhues, Botond Koszegi, Philipp Strack
Misinterpreting Yourself, Paul Heidhues, Botond Koszegi, Philipp Strack
Cowles Foundation Discussion Papers
We model an agent who stubbornly underestimates how much his behavior is driven by undesirable motives, and, attributing his behavior to other considerations, updates his views about those considerations. We study general properties of the model, and then apply the framework to identify novel implications of partially naive present bias. In many stable situations, the agent appears realistic in that he eventually predicts his behavior well. His unrealistic self-view does, however, manifest itself in several other ways. First, in basic settings he always comes to act in a more present-biased manner than a sophisticated agent. Second, he systematically mispredicts how …
Affective Interdependence And Welfare, Aviad Heifetz, Enrico Minelli, Heracles M. Polemarchakis
Affective Interdependence And Welfare, Aviad Heifetz, Enrico Minelli, Heracles M. Polemarchakis
Cowles Foundation Discussion Papers
Purely affective interaction allows the welfare of an individual to depend only the individual’s own action and on the profile of welfare levels of others. Under an assumption on the structure of mutual affection that we interpret as non-reinforcing mutual affection, we show that equilibria of affective interaction are Pareto optimal. Moreover, if purely affective interaction induces a standard game, then an equilibrium profile of actions is a Nash equilibrium of the induced game, and this Nash equilibrium and Pareto optimal profile of strategies is locally dominant.
Lessons Learned: Gaurav Vasisht, Sandra Ward
Lessons Learned: Gaurav Vasisht, Sandra Ward
Journal of Financial Crises
Gaurav Vasisht served as assistant counsel, banking and financial services, to the governor of New York during the Global Financial Crisis of 2007–2009 (GFC). In his role, Vasisht set the governor’s agenda for banking and financial policy and oversaw the regulatory and legislative priorities of the state banking and insurance departments. Vasisht played a pivotal role in developing and drafting consumer protection legislation, particularly as it related to housing foreclosures at the time of the crisis. This Lessons Learned is based on an interview with Vasisht that occurred on September 27, 2019.
Lessons Learned: Kevin Stiroh, Mercedes Cardona
Lessons Learned: Kevin Stiroh, Mercedes Cardona
Journal of Financial Crises
Kevin Stiroh was head of the Financial Sector Analysis Supervision Group at the Federal Reserve Bank of New York (FRBNY) during the Global Financial Crisis of 2007–2009 (GFC). At the FRBNY, Stiroh was a leader in the design of the “stress test” for the banking system, the Supervisory Capital Assessment Program (SCAP). In the aftermath of the GFC, members of the FRBNY, including Stiroh, drafted a report on systemic risk and bank supervision, laying out lessons learned from the crisis and their recommendations. In February 2021, Stiroh transitioned from the FRBNY to a leadership position with the Federal Reserve Board …
Lessons Learned: Veerathai Santiprabhob, Maryann Haggerty
Lessons Learned: Veerathai Santiprabhob, Maryann Haggerty
Journal of Financial Crises
Veerathai Santiprabhob was the governor of the Bank of Thailand from 2015 to 2020, a period that included the onset of the COVID-19 pandemic. Earlier in his career, he was an economist at the International Monetary Fund. At the time of the 1997–1998 Asian Financial Crisis, he returned to his home country to take a position at the Ministry of Finance. There, he was involved with the government response to that financial crisis. From 2000 to 2015, he held private-sector finance jobs before going to lead the Bank of Thailand. This Lessons Learned is based on an interview with Santiprabhob …
Lessons Learned: Erik Sirri, Mercedes Cardona
Lessons Learned: Erik Sirri, Mercedes Cardona
Journal of Financial Crises
Erik Sirri served as director of the Division of Trading and Markets at the US Securities and Exchange Commission (SEC) from 2006 to 2009. In his post, he was responsible for matters relating to the regulation of stock and option exchanges, national securities associations, brokers-dealers, clearing agencies, transfer agents, and credit rating agencies. Before joining the SEC in 1996, he was an assistant professor of finance at the Harvard Business School from 1989 to 1995. Sirri served as the SEC’s chief economist until 1999, before returning to academia. He is currently a professor of finance at Babson College. His research …
Lessons Learned: Claudia Sahm, Mercedes Cardona
Lessons Learned: Claudia Sahm, Mercedes Cardona
Journal of Financial Crises
Claudia Sahm was a principal economist in the Division of Research and Statistics of the Board of Governors of the Federal Reserve System from 2007 to 2017 and section chief for the Consumer & Community Development section in the Division of Consumer and Community Affairs from 2017 to 2019. Her work focused on macro forecasting; she also researched household behavior and responses to fiscal stimulus. While at the Fed, she proposed the Sahm Rule, a gauge to call the start of a recession, based on an average of the unemployment rate. The rule is part of Sahm’s work on the …