1,720,991 research outputs found
Correlated Choice
Full text linkWe study random joint choice rules, allowing for interdependence of choice
across agents. These capture random choice by multiple agents, or a single
agent across goods or time periods. Our interest is in separable choice rules,
where each agent can be thought of as acting independently of the other. A
random joint choice rule satisfies marginality if for every individual choice
set, we can determine the individual's choice probabilities over alternatives
independently of the other individual's choice set. We offer two
characterizations of random joint choice rules satisfying marginality in terms
of separable choice rules. While marginality is a necessary condition for
separability, we show that it fails to be sufficient. We provide an additional
condition on the marginal choice rules which, along with marginality, is
sufficient for separability
Random Utilities and How to Find Them
No full textPh.D.In this dissertation, I study the random utility model. The random utility model is an extension of the classic paradigm of economics which assumes that decision makers choose according to some underlying preference. The random utility model extends this paradigm by allowing for heterogeneity across either a population of decision makers or across time for the same decision maker. This heterogeneity is modeled as there being a distribution over preferences inducing a distribution over choices. In Chapter 1, I study when an analyst is able to recover the underlying distribution over preferences from choice data. I provide fully characteristic conditions under which we are able to recover the underlying distribution over preferences. In Chapter 2, I readdress the problem of testing the random utility model. While axiomatic tests of the random utility model have been known, only recently has a hypothesis test for the random utility model been developed which can be applied to real data. However, this hypothesis test is not computationally feasible in many reasonable applications. I provide an alternative hypothesis test, applicable to real data, that offers large computational improvements over the current standard methodology. In Chapter 3, I study the random utility model in a dynamic setting where a decision maker's past choices can impact their preference today. First, I broach the problem of aggregation. In general, if a decision maker's preference depends on their history of choices, the time average of their choices does not coincide with the random utility model. I provide characteristic conditions for when the random utility model is an accurate model of time aggregated choice. Second, I develop a test for this type of dynamic random utility when we have time disaggregated but population level data. I provide a fully characteristic axiomatic test as well as a hypothesis test for history dependent random utility for this type of data
Choice with endogenous categorization
No full textWe propose and axiomatize the categorical thinking model (CTM) in which the framing of the decision problem affects how agents categorize alternatives, that in turn affects their evaluation of it. Prominent models of salience, status quo bias, loss-aversion, inequality aversion, and present bias all fit under the umbrella of CTM. This suggests categorization is an underlying mechanism of key departures from the neoclassical model of choice. We specialize CTM to provide a behavioural foundation for the salient thinking model of Bordalo et al. (2013, Journal of Political Economy, 121, 803–843) that highlights its strong predictions and distinctions from other models
Informality Traps
No full textDespite large deregulation efforts, informal economic activity still represents a large share of GDP in many developing countries. In this paper we look at incentives to reduce informal activity when capitalists in the formal sector regulate entry. We consider a dual economy with a formal sector employing educated workers and an informal sector with unskilled workers. We show that high costs of education make labor migration and profits in the formal sector an increasing function of its size. Therefore, incentives to allow capital to be reallocated to the formal sector increase with the size of the formal economy, and unless the formal sector has reached a "critical mass" countries remain in a highly informal equilibrium. We conclude by reviewing policies that can push countries with large informal economies towards formalization.
Managing Markets for Toxic Assets
Full text linkWe present a model in which banks trade toxic assets to fund investments. Adverse selection in toxic assets reduces liquidity and investment. Investment is inefficiently low because banks must sell high-quality assets below their "fair" value. We consider whether equity injections and asset purchases improve market outcomes. By allowing banks to fund investments without selling high-quality assets, equity injections reduce the number of high-quality assets traded and further contaminate the interbank market. If equity is directed to firms with the greatest liquidity needs, the contamination effect causes investment to fall. Asset purchase programs often improve liquidity, investment and welfare.Adverse selection; investment; TARP; financial crisis
Choice by iterative search
Full text linkPeer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/109653/1/TE1014.pd
B.E. Journal of Economic Analysis and Policy: Contributions to Economic Analysis and Policy
No full textDespite large deregulation efforts, informal economic activity still represents a large share of GDP in many developing countries. In this paper we look at incentives to reduce informal activity when capitalists in the formal sector regulate entry. We consider a dual economy with a formal sector employing educated workers and an informal sector with unskilled workers. We show that high costs of education make labor migration and profits in the formal sector an increasing function of its size. Therefore, incentives to allow capital to be reallocated to the formal sector increase with the size of the formal economy, and unless the formal sector has reached a "critical mass" countries remain in a highly informal equilibrium. We conclude by reviewing policies that can push countries with large informal economies towards formalization
Choice by lexicographic semiorders
Full text linkIn Tversky's (1969) model of a lexicographic semiorder, preference is generated by the sequential application of numerical criteria, by declaring an alternative x better than an alternative y if the first criterion that distinguishes between x and y ranks x higher than y by an amount exceeding a fixed threshold. We generalize this idea to a fully-fledged model of boundedly rational choice. We explore the connection with sequential rationalizability of choice (Apesteguia and Ballester 2009, Manzini and Mariotti 2007), and we provide axiomatic characterizations of both models in terms of observable choice data.Lexicographic semiorders, bounded rationality, revealed preference, choice
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