Paul Schrimpf. November 25, UBC Economics 565. Price dispersion and search. Paul Schrimpf. Introduction. Models of price dispersion
|
|
- Dustin Weaver
- 5 years ago
- Views:
Transcription
1 Fixed Sequential UBC Economics 565 November 25, 2015
2 Fixed Sequential Theory and overview of reduced form : Baye, Morgan, and Scholten (2006) Structural papers:, Moraga-González and Wildenbeest (2008), De los Santos, Hortaçsu, and Wildenbeest (2012), Wildenbeest (2011)
3 1 Fixed Sequential 2 Fixed Sequential 3 4 5
4 Fixed Sequential Section 1
5 Fixed Sequential Homogenous product and competitive market: Theory one Reality Explanations: Unobserved product heterogeneity Likely part of explanation, but it is largely tautological Imperfect information and costs Stigler (1961)
6 Fixed Sequential
7 Fixed Sequential
8 Fixed Sequential Section 2
9 Fixed Sequential Key point: relationship between primitives ( cost, market size, number of firms, demand elasticity) depends on modeling assumptions Types: 1 Search 1 Fixed : gather n s, choose lowest 2 Sequential : sequentially gather s, stop when low enough 3 : some consumers loyal to one firm, others buy from lowest 2 Bounded rationality: small departure from Nash equilibrium in firms pricing game can give large Quantal response equilibrium, ε-equilibrium, mistaken beliefs about distribution
10 Fixed Fixed Sequential Stigler (1961) Assumptions: 1 Distribution of s on [p, p], non-degenerate CDF F(p), known by consumers 2 Each consumer wants to buy K units 3 Search process: optimally choose fixed number of quotes, n; buy from firm with lowest
11 Fixed Sequential Number of quotes: ( ) E[p (1:n 1) ] E[p (1:n ) ] K c n increasing in K Firm expected demand: Fixed - model implications Q(p) = µn K(1 F(p)) n 1 ( ) E[p (1:n ) ] E[p (1:n +1) ] K Transaction costs decrease with If G is a mean preserving spread of F, then E G [p (1:n) ] < E F [p (1:n) ] for n > 1 Expected total costs are lower with greater If G is a mean preserving spread of F, then E G [p (1:n G ) ]K cn G < E F[p (1:n F ) ]K cn F for n > 1
12 Fixed - critique I Fixed Sequential Rothschild (1973) critique: 1 distribution of s is not endogenous 2 fixed may not be optimal for consumers For (2) need to be more specific about environment Fixed optimal if e.g. waiting time to obtain each quote Diamond (1971) in sequential or fixed model with homogenous firms and consumers, there is an equilibrium where all firms charge the monopoly Can obtain non-degenerate equilibrium distribution of s by introducing firm heterogeneity or consumer cost heterogeneity
13 Fixed Sequential Fixed - endogenous I Burdett and Judd (1983) : equilibrium with ex-ante identical consumers and firms Assumptions: 1 Consumers: unit demand with reservation v 2 Fixed sample 3 Firms: constant marginal cost m, optimal monopoly p 4 Consumer utility given p and n = 1 is positive Equilibrium: distribution, F(p), and distribution, P(n = i) for i = 1, 2,...
14 Fixed Sequential Fixed - endogenous I Implications: If F(p) non-degenerate, then P(n = 1), P(n = 2) > 0 and P(n > 2) = 0, let θ = P(n = 1), 1 θ = P(n = 2) Firm profits: { (v m)θ if p = v π(p) = (p m)p(consumer purchases) if p < v { (v m)θ if p = v = (p m) [θ + (1 θ)(1 F(p))] if p < v Firms indifferent among s implies: F(p) = 1 v p θ p m 1 θ
15 Fixed - endogenous II Fixed Sequential Consumers indifferent between n = 1 and n = 2 pins down θ (generally two equilibria with θ (0, 1) (there s also an equilibrium where firms charge monopoly and n = 1 for all consumers))
16 Fixed Sequential Sequential I Sequential : consumer pays cost c to obtain p F; can either buy at p (or any previous ) or again Optimal strategy = reservation p = min{p, z } where c = z p (z p)f(p)dp = z p F(p)dp With homogeneous firms and consumers unique equilibrium is for firms to charge the monopoly Equilibrium with: Heterogeneous firm marginal cost and elastic demand (i.e. not unit demand); or Heterogeneous costs (and assumptions about distribution of costs)
17 Fixed Sequential Finite number n > 1 of homogeneous firms Constant marginal cost c Clearinghouse charges ϕ 0 to firms to list their s Consumers with unit demand and reservation v S > 0 shoppers consult, buy at lowest if < v, else visits one other firm buys if < v, else does not buy L > 0 loyal consumers visit firm i, buy if p i < v Equilibrium with if L > 0 or ϕ > 0 Non- s all = v Distribution of s v
18 Fixed Sequential Section 3
19 : Using distributions to estimate costs Fixed Sequential Goal: estimate consumer costs Environment: online booksellers Homogeneous product Homogeneous firm costs Data: distribution of s Method: use distribution of s + assumption about form of to estimate distribution of consumer costs
20 Fixed Sequential
21 Fixed I Fixed Sequential Firm marginal cost r, continuum of firms with equilibrium distribution F p Consumer cost c i F c Number of es ( ) ( ) E[p (1:n(ci) 1) ] E[p (1:n(ci)) ] K c i E[p (1:n(ci)) ] E[p (1:n(ci)+1) ] Define n = E[p (1:n 1) ] E[p (1:n) ]; F P observed, so n identified Let q n = F c ( n 1 ) F c ( n ) = portion of consumers who obtain n s q n not observed Assume F c such that q n = 0 for all n > K (could be relaxed, but complicates econometrics)
22 Fixed Sequential Fixed II Firms indifferent among s p [p, p], so [ K (p r) q 1 = (p r) q k k ( 1 F p (p) ) ] k 1 k=1 Observed s p j, j = 1,..., n f (p r) q 1 = (p r) identifies q 1,..., q K and r [ K k=1 q k k ( 1 ˆF p (p j ) ) ] k 1 Knowing q 1,..., q K can solve for F c ( 1 ),..., F c ( K ) Estimate using likelihood ( efficiently weighted GMM)
23 Fixed Sequential Estimates for Billingsley using 20 s, K = 3, and 5 moments q 1 = 0.633, q 2 = 0.309, q 3 = 0.058
24 Fixed Sequential Sequential I Consumer cost c i F c Reservation, p i = p(c i ) = min{z(c i ), p} where c i = z(ci ) Let G(p) = CDF of p i Firm indifference: p (z(c i ) p)f(p)dp = z(ci ) p F(p)dp (p r) (1 G(p)) = (p r) (1 G(p)) Data: n f s, but n f 1 indifference conditions, so need some restriction Parametric assumption about F c (in fixed model, assumption about K played a similar role) Or fix r and estimate F c nonparametrically Estimate by MLE
25 Fixed Sequential
26 Fixed Sequential
27 Fixed Sequential
28 Results Fixed Sequential For text books: Stokey-Lucas, Lazear, Billingsley, Duffie Fixed model: Median cost $2.50 (quantiles above median not identified) 25%tile $ $2.50 Selling cost r 65% of median Sequential model: Median cost $9.22-$29.40 Search cost such that z(c i ) = p, $4.56 $19.19 Selling cost r 40% of median Check whether parametric assumption driving sequential results: fix r and estimate nonparametrically
29 Fixed Sequential
30 Fixed Sequential Section 4
31 Fixed Sequential I Moraga-González and Wildenbeest (2008): Oligopoly version of fixed model MLE instead of nonparametric EL Chen, Hong, and Shum (2007): Model selection test to choose between fixed and sequential Test is inconclusive Moraga-González, Sándor, and Wildenbeest (2012) /Moraga-González and Wildenbeest (2008) fixed model with multiple markets Data: multiple markets with common cost distribution, but different reservation s, firm costs, and/or number of firms Semi-nonparametric estimator Application: memory chips
32 Fixed Sequential II De los Santos, Hortaçsu, and Wildenbeest (2012) Data on web browsing and purchases to test sequential vs fixed Key difference: behavior in sequential model depends on s observed so far; in fixed model it does not Context: online book stores Results: favor fixed model; also evidence of unobserved product heterogeneity (store loyalty) Hortaçsu and Syverson (2004) Context: mutual funds Model with frictions and product heterogeneity Results: Investors value observable nonportfolio product attributes Small costs can rationalize Wildenbeest (2011) Vertical product differentiation and frictions
33 Fixed Sequential III Fixed model ML estimation Context: grocery items Results: supermarket heterogeneity more important than frictions Honka (2014): & switching costs in auto insurance Fixed model Consumer knows of current insurer, and s of k others Pays switching cost if change insurer Finds costs more important than switching costs for customer retention & consumer welfare Search with learning: De los Santos, Hortacsu, and Wildenbeest (2012),
34 Fixed Sequential Section 5
35 Fixed Sequential Search model with unknown distribution Model based on Rothschild (1974) Applied to S&P 500 mutual funds Highlights differences with model with known distribution
36 Model I Fixed Sequential N products with utilities S N = {u 1,..., u N }, where u 1 > u 2 > > u N Consumer believes possible utilities S G = {ũ 1,..., ũ G } with S N S G Search technology: each independent and ũ g drawn with probability p g Consumer does not know p g, has Dirichlet prior with parameters α 1,..., α G, f( p 1,..., p g ) = Γ( α g ) α p g 1 g γ(αg ) which implies E[ p j ] = α j αg
37 Fixed Sequential Model II Bayesian updating: after seeing ũ g, n g times, so f(p n) f(n p)f(p) ( n g )! ng! n p g Γ( α g ) g γ(αg ) Γ( α g + n g ) α p g +n g 1 g γ(αg + n g ) E[ p j n 1,..., n g ] = α j + n j αg + n g p α g 1 g Sequential and at end buy best good found Search cost c, best good found so far u r
38 Model III Fixed Sequential Continue ing if E[max{ũ, u r } n] u r > c (ũ g u r )E[ p g n] > c ũ g >u r
39 Fixed Sequential Market shares I Observe: market shares, product characteristics Consumers have different costs c i F(c) Challenge: many histories can lead to the same choice; need to integrate over all histories to compute market shares Define k r = longest a consumer with best draw u r will continue ing kr = max 1, 1 g u r )α g c ũ g >u r (ũ α g g Show that market shares can be written as a function of just the k 1,..., k N k r is integer valued and decreasing in c
40 Example Fixed Sequential
41 Example Fixed Sequential
42 Fixed Sequential Paper has simulations comparing elasticity in with learning versus without learning models Simulations also show that ignoring learning can lead to bias
43 Fixed Sequential Application: S&P 500 mutual funds u g = (fixed fee per $10,000 invested) log c i N(µ 0 + µ 1 t, δ 0 + δ 1 t) Search probabilities depend on fund age: ρ jt = Aγ jt A γ kt Rational prior: α jt = ρ jt N 0 Consumers prior not identified from market share data alone
44 Application: S&P 500 mutual funds Fixed Sequential
45 Application: S&P 500 mutual funds Fixed Sequential
46 Application: S&P 500 mutual funds Fixed Sequential
47 Application: S&P 500 mutual funds Fixed Sequential
48 Fixed Sequential Baye, Michael R., John Morgan, and Patrick Scholten , Search, and Dispersion. Working Papers , Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. URL wpaper: Burdett, Kenneth and Kenneth L. Judd Equilibrium Dispersion. Econometrica 51 (4):pp URL Chen, Xiaohong, Han Hong, and Matthew Shum Nonparametric likelihood ratio model selection tests between parametric likelihood and moment condition models. Journal of Econometrics 141 (1): URL pii/s <ce:title>semiparametric methods in econometrics</ce:title>.
49 Fixed Sequential De los Santos, Babur, Ali Hortacsu, and Matthijs R Wildenbeest Search with Learning. Tech. rep. URL http: // bepp delossantos-hortacsu-wildenbeest. pdf. De los Santos, Babur, Ali Hortaçsu, and Matthijs R. Wildenbeest Testing models of consumer using data on web browsing and purchasing behavior. The American Economic Review 102 (6):pp URL /aer Diamond, Peter A A model of adjustment. Journal of Economic Theory 3 (2): URL pii/
50 Fixed Sequential Hong, Han and Matthew Shum Using Distributions to Estimate Search Costs. The RAND Journal of Economics 37 (2):pp URL Honka, Elisabeth Quantifying and switching costs in the US auto insurance industry. The RAND Journal of Economics 45 (4): URL Hortaçsu, Ali and Chad Syverson Product Differentiation, Search Costs, and Competition in the Mutual Fund Industry: A Case Study of S&P 500 Index Funds. The Quarterly Journal of Economics 119 (2): URL abstract.
51 Fixed Sequential, Sergei Search With Dirichlet Priors: Estimation and Implications for Consumer Demand. Journal of Business & Economic Statistics 31 (2): URL Moraga-González, José Luis and Matthijs R. Wildenbeest Maximum likelihood estimation of costs. European Economic Review 52 (5): URL pii/s x. Moraga-González, José Luis, Zsolt Sándor, and Matthijs R. Wildenbeest SEMI-NONPARAMETRIC ESTIMATION OF CONSUMER SEARCH COSTS. Journal of Applied Econometrics :n/a n/aurl
52 Fixed Sequential Rothschild, Michael Market Organization with Imperfect : A Survey. Journal of Political Economy 81 (6):pp URL Searching for the Lowest When the Distribution of s Is Unknown. Journal of Political Economy 82 (4): URL Stigler, George J The Economics of. Journal of Political Economy 69 (3):pp URL Wildenbeest, Matthijs R An model of with vertically differentiated products. The RAND Journal of Economics 42 (4): URL http: //dx.doi.org/ /j x.
Prices and Heterogeneous Search Costs
Supplementary Appendix to Prices and Heterogeneous Search Costs José Luis Moraga-González Zsolt Sándor Matthijs R. Wildenbeest June 216 Introduction In this supplementary appendix we present two extensions
More informationPrice Competition when Not All Customers Know of All Firms
Price Competition when Not All Customers Know of All Firms B. Curtis Eaton Department of Economics University of Calgary Ian MacDonald Commerce Division Lincoln University Laura Meriluoto Department of
More informationIndustrial Organization II (ECO 2901) Winter Victor Aguirregabiria. Problem Set #1 Due of Friday, March 22, 2013
Industrial Organization II (ECO 2901) Winter 2013. Victor Aguirregabiria Problem Set #1 Due of Friday, March 22, 2013 TOTAL NUMBER OF POINTS: 200 PROBLEM 1 [30 points]. Considertheestimationofamodelofdemandofdifferentiated
More informationAdvanced Microeconomics
Advanced Microeconomics Leonardo Felli EC441: Room D.106, Z.332, D.109 Lecture 8 bis: 24 November 2004 Monopoly Consider now the pricing behavior of a profit maximizing monopolist: a firm that is the only
More informationPhD Qualifier Examination
PhD Qualifier Examination Department of Agricultural Economics July 26, 2013 Instructions The exam consists of six questions. You must answer all questions. If you need an assumption to complete a question,
More informationMarket Structure and Productivity: A Concrete Example. Chad Syverson
Market Structure and Productivity: A Concrete Example. Chad Syverson 2004 Hotelling s Circular City Consumers are located uniformly with density D along a unit circumference circular city. Consumer buys
More informationWireless Network Pricing Chapter 6: Oligopoly Pricing
Wireless Network Pricing Chapter 6: Oligopoly Pricing Jianwei Huang & Lin Gao Network Communications and Economics Lab (NCEL) Information Engineering Department The Chinese University of Hong Kong Huang
More informationECO 2901 EMPIRICAL INDUSTRIAL ORGANIZATION
ECO 2901 EMPIRICAL INDUSTRIAL ORGANIZATION Lecture 7 & 8: Models of Competition in Prices & Quantities Victor Aguirregabiria (University of Toronto) Toronto. Winter 2018 Victor Aguirregabiria () Empirical
More informationPreliminary Results on Social Learning with Partial Observations
Preliminary Results on Social Learning with Partial Observations Ilan Lobel, Daron Acemoglu, Munther Dahleh and Asuman Ozdaglar ABSTRACT We study a model of social learning with partial observations from
More informationCournot and Bertrand Competition in a Differentiated Duopoly with Endogenous Technology Adoption *
ANNALS OF ECONOMICS AND FINANCE 16-1, 231 253 (2015) Cournot and Bertrand Competition in a Differentiated Duopoly with Endogenous Technology Adoption * Hongkun Ma School of Economics, Shandong University,
More informationVertical Product Differentiation and Credence Goods: Mandatory Labeling and Gains from International Integration
Vertical Product Differentiation and Credence Goods: Mandatory Labeling and Gains from International Integration Ian Sheldon and Brian Roe (The Ohio State University Quality Promotion through Eco-Labeling:
More informationPaul Schrimpf. March 22, UBC Vancouver School of Economics 565. Network structure and outcomes. Paul Schrimpf. Introduction. Describing Networks
s UBC Vancouver School of Economics 565 March 22, 2017 References s Overviews: Jackson, https://class.coursera.org/networksonline-001 Goyal (2012) industries: Economides (1996), Economides and Encaoua
More informationPrice Discrimination through Refund Contracts in Airlines
Introduction Price Discrimination through Refund Contracts in Airlines Paan Jindapon Department of Economics and Finance The University of Texas - Pan American Department of Economics, Finance and Legal
More informationCredence Goods and Vertical Product Differentiation: The Impact of Labeling Policies* Ian Sheldon (Ohio State University)
Credence Goods and Vertical Product Differentiation: The Impact of Labeling Policies* Ian Sheldon (Ohio State University) Seminar: North Dakota State University, Fargo, ND, May, 6 * Draws on Roe and Sheldon
More informationBresnahan, JIE 87: Competition and Collusion in the American Automobile Industry: 1955 Price War
Bresnahan, JIE 87: Competition and Collusion in the American Automobile Industry: 1955 Price War Spring 009 Main question: In 1955 quantities of autos sold were higher while prices were lower, relative
More informationOligopoly Theory 2 Bertrand Market Games
1/10 Oligopoly Theory 2 Bertrand Market Games May 4, 2014 2/10 Outline 1 Bertrand Market Game 2 Bertrand Paradox 3 Asymmetric Firms 3/10 Bertrand Duopoly Market Game Discontinuous Payoff Functions (1 p
More informationField Course Descriptions
Field Course Descriptions Ph.D. Field Requirements 12 credit hours with 6 credit hours in each of two fields selected from the following fields. Each class can count towards only one field. Course descriptions
More informationEC319 Economic Theory and Its Applications, Part II: Lecture 7
EC319 Economic Theory and Its Applications, Part II: Lecture 7 Leonardo Felli NAB.2.14 27 February 2014 Signalling Games Consider the following Bayesian game: Set of players: N = {N, S, }, Nature N strategy
More informationLecture 10 Demand for Autos (BLP) Bronwyn H. Hall Economics 220C, UC Berkeley Spring 2005
Lecture 10 Demand for Autos (BLP) Bronwyn H. Hall Economics 220C, UC Berkeley Spring 2005 Outline BLP Spring 2005 Economics 220C 2 Why autos? Important industry studies of price indices and new goods (Court,
More informationLecture Notes: Estimation of dynamic discrete choice models
Lecture Notes: Estimation of dynamic discrete choice models Jean-François Houde Cornell University November 7, 2016 These lectures notes incorporate material from Victor Agguirregabiria s graduate IO slides
More informationOligopoly Theory. This might be revision in parts, but (if so) it is good stu to be reminded of...
This might be revision in parts, but (if so) it is good stu to be reminded of... John Asker Econ 170 Industrial Organization January 23, 2017 1 / 1 We will cover the following topics: with Sequential Moves
More informationLecture 2F: Hotelling s Model
Econ 46 Urban Economics Lecture F: Hotelling s Model Instructor: Hiroki Watanabe Spring Hiroki Watanabe / 6 Hotelling s Model Monopoly (N = ) 3 (N = ) 4 Nash Equilibrium 5 Oligopoly (N ) N 4 6 Summary
More informationHotelling's Location Model with Quality Choice in Mixed Duopoly. Abstract
Hotelling's Location Model with Quality Choice in Mixed Duopoly Yasuo Sanjo Graduate School of Economics, Nagoya University Abstract We investigate a mixed duopoly market by introducing quality choice
More informationA theory of recommended price dispersion
A theory of recommended price dispersion Marco Haan Pim Heijnen Martin Obradovits January 3, 017 WORK IN PROGRESS DO NOT CITE Abstract This paper contributes to the theory of recommended retail prices
More informationDynamic Models with Serial Correlation: Particle Filter Based Estimation
Dynamic Models with Serial Correlation: Particle Filter Based Estimation April 6, 04 Guest Instructor: Nathan Yang nathan.yang@yale.edu Class Overview ( of ) Questions we will answer in today s class:
More informationOnline Appendix to A search model of costly product returns by Vaiva Petrikaitė
Online Appendix to A search model of costly product returns by Vaiva Petrikaitė 27 May A Early returns Suppose that a consumer must return one product before buying another one. This may happen due to
More informationTechnical Companion to: Sharing Aggregate Inventory Information with Customers: Strategic Cross-selling and Shortage Reduction
Technical Companion to: Sharing Aggregate Inventory Information with Customers: Strategic Cross-selling and Shortage Reduction Ruomeng Cui Kelley School of Business, Indiana University, Bloomington, IN
More informationAuctions. data better than the typical data set in industrial organization. auction game is relatively simple, well-specified rules.
Auctions Introduction of Hendricks and Porter. subject, they argue To sell interest in the auctions are prevalent data better than the typical data set in industrial organization auction game is relatively
More informationMKTG 555: Marketing Models
MKTG 555: Marketing Models Structural Models -- Overview Arvind Rangaswamy (Some Parts are adapted from a presentation by by Prof. Pranav Jindal) March 27, 2017 1 Overview Differences between structural
More informationGovernment 2005: Formal Political Theory I
Government 2005: Formal Political Theory I Lecture 11 Instructor: Tommaso Nannicini Teaching Fellow: Jeremy Bowles Harvard University November 9, 2017 Overview * Today s lecture Dynamic games of incomplete
More informationStrategic Complementarities and Search Market Equilibrium
Strategic Complementarities and Search Market Equilibrium Michael T. Rauh Kelley School of Business Department of Business Economics Indiana University 1309 East Tenth Street Bloomington, IN 47405-1701
More informationGame Theory and Algorithms Lecture 2: Nash Equilibria and Examples
Game Theory and Algorithms Lecture 2: Nash Equilibria and Examples February 24, 2011 Summary: We introduce the Nash Equilibrium: an outcome (action profile) which is stable in the sense that no player
More informationLabor Economics, Lecture 11: Partial Equilibrium Sequential Search
Labor Economics, 14.661. Lecture 11: Partial Equilibrium Sequential Search Daron Acemoglu MIT December 6, 2011. Daron Acemoglu (MIT) Sequential Search December 6, 2011. 1 / 43 Introduction Introduction
More informationDurable goods monopolist
Durable goods monopolist Coase conjecture: A monopolist selling durable good has no monopoly power. Reason: A P 1 P 2 B MC MC D MR Q 1 Q 2 C Q Although Q 1 is optimal output of the monopolist, it faces
More informationDeceptive Advertising with Rational Buyers
Deceptive Advertising with Rational Buyers September 6, 016 ONLINE APPENDIX In this Appendix we present in full additional results and extensions which are only mentioned in the paper. In the exposition
More informationSome forgotten equilibria of the Bertrand duopoly!?
Some forgotten equilibria of the Bertrand duopoly!? Mathias Erlei Clausthal University of Technology Julius-Albert-Str. 2, 38678 Clausthal-Zellerfeld, Germany email: m.erlei@tu-clausthal.de Abstract This
More informationOn revealed preferences in oligopoly games
University of Manchester, UK November 25, 2010 Introduction Suppose we make a finite set of observations T = {1,..., m}, m 1, of a perfectly homogeneous-good oligopoly market. There is a finite number
More informationDepartment of Agricultural & Resource Economics, UCB
Department of Agricultural & Resource Economics, UCB CUDARE Working Papers (University of California, Berkeley) Year 2004 Paper 993 Identification of Supply Models of Retailer and Manufacturer Oligopoly
More informationh Edition Money in Search Equilibrium
In the Name of God Sharif University of Technology Graduate School of Management and Economics Money in Search Equilibrium Diamond (1984) Navid Raeesi Spring 2014 Page 1 Introduction: Markets with Search
More informationBertrand Model of Price Competition. Advanced Microeconomic Theory 1
Bertrand Model of Price Competition Advanced Microeconomic Theory 1 ҧ Bertrand Model of Price Competition Consider: An industry with two firms, 1 and 2, selling a homogeneous product Firms face market
More informationEconometric Analysis of Games 1
Econometric Analysis of Games 1 HT 2017 Recap Aim: provide an introduction to incomplete models and partial identification in the context of discrete games 1. Coherence & Completeness 2. Basic Framework
More informationMinimum Distance Estimation of Search Costs using Price Distribution
Department of Economics- FEA/USP Minimum Distance Estimation of Search Costs using Price Distribution FÁBIO A. MIESSI SANCHES DANIEL SILVA JUNIOR SORAWOO SRISUMA WORKING PAPER SERIES Nº 2015-31 DEPARMEN
More informationConsideration Sets. Mark Dean. Behavioral Economics G6943 Fall 2015
Consideration Sets Mark Dean Behavioral Economics G6943 Fall 2015 What is Bounded Rationality? Start with a standard economic model e.g. utility maximization C (A) = max x A u(x) If the model is wrong
More informationRobust Predictions in Games with Incomplete Information
Robust Predictions in Games with Incomplete Information joint with Stephen Morris (Princeton University) November 2010 Payoff Environment in games with incomplete information, the agents are uncertain
More informationConsumer Search and Prices in the Automobile Market
Consumer Search and Prices in the Automobile Market José Luis Moraga-González Zsolt Sándor Matthijs R. Wildenbeest First version: December 2009 Current version: November 2010 PRELIMINARY AND INCOMPLETE,
More informationIntroduction to Game Theory
Introduction to Game Theory Part 2. Dynamic games of complete information Chapter 2. Two-stage games of complete but imperfect information Ciclo Profissional 2 o Semestre / 2011 Graduação em Ciências Econômicas
More informationOblivious Equilibrium: A Mean Field Approximation for Large-Scale Dynamic Games
Oblivious Equilibrium: A Mean Field Approximation for Large-Scale Dynamic Games Gabriel Y. Weintraub, Lanier Benkard, and Benjamin Van Roy Stanford University {gweintra,lanierb,bvr}@stanford.edu Abstract
More informationThe Economics of E-commerce and Technology
The Economics of E-commerce and Technology Industry Analysis 1 9/25/16 Industry Profits } In Econ 11, Economic Profits = 0 } In reality, many industries have much higher profits: 2 9/25/16 Industry Analysis
More informationSignal Extraction in Economics
Signal Extraction in Economics Tamura, Masaoki Institute of Innovation Research, Hitotsubashi University July 17, 2013 1 / 51 Introduction 2 / 51 I study four types of economic environments in which economic
More informationEC3224 Autumn Lecture #03 Applications of Nash Equilibrium
Reading EC3224 Autumn Lecture #03 Applications of Nash Equilibrium Osborne Chapter 3 By the end of this week you should be able to: apply Nash equilibrium to oligopoly games, voting games and other examples.
More informationMS&E 246: Lecture 12 Static games of incomplete information. Ramesh Johari
MS&E 246: Lecture 12 Static games of incomplete information Ramesh Johari Incomplete information Complete information means the entire structure of the game is common knowledge Incomplete information means
More informationAsymmetric Information and Search Frictions: A Neutrality Result
Asymmetric Information and Search Frictions: A Neutrality Result Neel Rao University at Buffalo, SUNY August 26, 2016 Abstract This paper integrates asymmetric information between firms into a canonical
More informationInformational Complementarity
Informational Complementarity Very Preliminary. Do Not Circulate. T. Tony Ke MIT kete@mit.edu Song Lin Hong Kong University of Science and Technology mksonglin@ust.hk January 2018 Informational Complementarity
More informationDesign Patent Damages under Sequential Innovation
Design Patent Damages under Sequential Innovation Yongmin Chen and David Sappington University of Colorado and University of Florida February 2016 1 / 32 1. Introduction Patent policy: patent protection
More informationMelitz, M. J. & G. I. P. Ottaviano. Peter Eppinger. July 22, 2011
Melitz, M. J. & G. I. P. Ottaviano University of Munich July 22, 2011 & 1 / 20 & & 2 / 20 My Bachelor Thesis: Ottaviano et al. (2009) apply the model to study gains from the euro & 3 / 20 Melitz and Ottaviano
More informationVolume 29, Issue 3. Strategic delegation and market competitiveness
Volume 29, Issue Strategic delegation and market competitiveness Caterina Colombo Università di Ferrara Alessandra Chirco Università del Salento Marcella Scrimitore Università del Salento Abstract Within
More informationPh.D. Preliminary Examination MICROECONOMIC THEORY Applied Economics Graduate Program June 2016
Ph.D. Preliminary Examination MICROECONOMIC THEORY Applied Economics Graduate Program June 2016 The time limit for this exam is four hours. The exam has four sections. Each section includes two questions.
More informationBayesian Games and Mechanism Design Definition of Bayes Equilibrium
Bayesian Games and Mechanism Design Definition of Bayes Equilibrium Harsanyi [1967] What happens when players do not know one another s payoffs? Games of incomplete information versus games of imperfect
More informationOptimal Insurance of Search Risk
Optimal Insurance of Search Risk Mikhail Golosov Yale University and NBER Pricila Maziero University of Pennsylvania Guido Menzio University of Pennsylvania and NBER November 2011 Introduction Search and
More informationMelitz, M. J. & G. I. P. Ottaviano. Peter Eppinger. July 22, 2011
Melitz, M. J. & G. I. P. Ottaviano University of Munich July 22, 2011 & 1 / 20 & & 2 / 20 My Bachelor Thesis: Ottaviano et al. (2009) apply the model to study gains from the euro & 3 / 20 Melitz and Ottaviano
More informationIndustrial Organization, Fall 2011: Midterm Exam Solutions and Comments Date: Wednesday October
Industrial Organization, Fall 2011: Midterm Exam Solutions and Comments Date: Wednesday October 23 2011 1 Scores The exam was long. I know this. Final grades will definitely be curved. Here is a rough
More informationPerfect Competition in Markets with Adverse Selection
Perfect Competition in Markets with Adverse Selection Eduardo Azevedo and Daniel Gottlieb (Wharton) Presented at Frontiers of Economic Theory & Computer Science at the Becker Friedman Institute August
More informationInternation1al Trade
4.58 International Trade Class notes on 4/8/203 The Armington Model. Equilibrium Labor endowments L i for i = ; :::n CES utility ) CES price index P = i= (w i ij ) P j n Bilateral trade ows follow gravity
More informationLecture #11: Introduction to the New Empirical Industrial Organization (NEIO) -
Lecture #11: Introduction to the New Empirical Industrial Organization (NEIO) - What is the old empirical IO? The old empirical IO refers to studies that tried to draw inferences about the relationship
More informationIdentification and Estimation of Bidders Risk Aversion in. First-Price Auctions
Identification and Estimation of Bidders Risk Aversion in First-Price Auctions Isabelle Perrigne Pennsylvania State University Department of Economics University Park, PA 16802 Phone: (814) 863-2157, Fax:
More informationPolitical Cycles and Stock Returns. Pietro Veronesi
Political Cycles and Stock Returns Ľuboš Pástor and Pietro Veronesi University of Chicago, National Bank of Slovakia, NBER, CEPR University of Chicago, NBER, CEPR Average Excess Stock Market Returns 30
More informationOn the Unique D1 Equilibrium in the Stackelberg Model with Asymmetric Information Janssen, M.C.W.; Maasland, E.
Tilburg University On the Unique D1 Equilibrium in the Stackelberg Model with Asymmetric Information Janssen, M.C.W.; Maasland, E. Publication date: 1997 Link to publication General rights Copyright and
More informationLecture 6. Xavier Gabaix. March 11, 2004
14.127 Lecture 6 Xavier Gabaix March 11, 2004 0.0.1 Shrouded attributes. A continuation Rational guys U i = q p + max (V p, V e) + σε i = q p + V min (p, e) + σε i = U i + σε i Rational demand for good
More informationFinite Brand Loyalty and Equilibrium Price Promotions
Finite Brand Loyalty and Equilibrium Price Promotions Bing Jing and Zhong Wen Stern School of Business, New York University June 26, 2005 Abstract The extant literature on price promotions typically assumes
More informationInternational Trade Lecture 16: Gravity Models (Theory)
14.581 International Trade Lecture 16: Gravity Models (Theory) 14.581 Week 9 Spring 2013 14.581 (Week 9) Gravity Models (Theory) Spring 2013 1 / 44 Today s Plan 1 The Simplest Gravity Model: Armington
More informationCoordinating Expectations: Global Games with Strategic Substitutes
: Global Games with Strategic Substitutes Stephen Morris Colin Clark lecture at the 2008 Australasian Meetings of the Econometric Society July 2008 Uniqueness versus Multiplicity in Economic Models I Economists
More informationTrade policy III: Export subsidies
The Vienna Institute for International Economic Studies - wiiw June 25, 2015 Overview Overview 1 1 Under perfect competition lead to welfare loss 2 Effects depending on market structures 1 Subsidies to
More informationPrice Competition and Endogenous Valuation in Search Advertising
Price Competition and Endogenous Valuation in Search Advertising Lizhen Xu Jianqing Chen Andrew Whinston Web Appendix A Heterogeneous Consumer Valuation In the baseline model, we assumed that consumers
More informationBasics of Game Theory
Basics of Game Theory Giacomo Bacci and Luca Sanguinetti Department of Information Engineering University of Pisa, Pisa, Italy {giacomo.bacci,luca.sanguinetti}@iet.unipi.it April - May, 2010 G. Bacci and
More informationBounded Rationality I: Consideration Sets
Bounded Rationality I: Consideration Sets Mark Dean Behavioral Economics G6943 Fall 2016 Outline 1 Introduction to Bounded Rationality 2 Consideration Sets 3 Satisficing, Sequential Search and Consideration
More informationOnline Appendix for Dynamic Ex Post Equilibrium, Welfare, and Optimal Trading Frequency in Double Auctions
Online Appendix for Dynamic Ex Post Equilibrium, Welfare, and Optimal Trading Frequency in Double Auctions Songzi Du Haoxiang Zhu September 2013 This document supplements Du and Zhu (2013. All results
More informationDISCUSSION PAPER SERIES
DISCUSSION PAPER SERIES IN ECONOMICS AND MANAGEMENT Strategic Incentives for Managers in Contests Matthias Kräkel Discussion Paper No. 01-08 GERMAN ECONOMIC ASSOCIATION OF BUSINESS ADMINISTRATION - GEABA
More informationGeneral Examination in Macroeconomic Theory SPRING 2013
HARVARD UNIVERSITY DEPARTMENT OF ECONOMICS General Examination in Macroeconomic Theory SPRING 203 You have FOUR hours. Answer all questions Part A (Prof. Laibson): 48 minutes Part B (Prof. Aghion): 48
More informationInformation Choice in Macroeconomics and Finance.
Information Choice in Macroeconomics and Finance. Laura Veldkamp New York University, Stern School of Business, CEPR and NBER Spring 2009 1 Veldkamp What information consumes is rather obvious: It consumes
More informationMIT PhD International Trade Lecture 15: Gravity Models (Theory)
14.581 MIT PhD International Trade Lecture 15: Gravity Models (Theory) Dave Donaldson Spring 2011 Introduction to Gravity Models Recall that in this course we have so far seen a wide range of trade models:
More informationProfitability of price and quantity strategies in a duopoly with vertical product differentiation
Economic Theory 7, 693 700 (200) Profitability of price quantity strategies in a duopoly with vertical product differentiation Yasuhito Tanaka Faculty of Law, Chuo University, 742-, Higashinakano, Hachioji,
More informationPerfect Bayesian Equilibrium. Definition. The single-crossing property. This is a draft; me with comments, typos, clarifications, etc.
Economics 0c: week This is a draft; email me with comments, typos, clarifications, etc. Perfect Bayesian Equilibrium We are by now familiar with the concept of Bayesian Nash equilibrium: agents are best
More informationBounded Rationality Lecture 2. Full (Substantive, Economic) Rationality
Bounded Rationality Lecture 2 Full (Substantive, Economic) Rationality Mikhail Anufriev EDG, Faculty of Business, University of Technology Sydney (UTS) European University at St.Petersburg Faculty of Economics
More information1 Differentiated Products: Motivation
1 Differentiated Products: Motivation Let us generalise the problem of differentiated products. Let there now be N firms producing one differentiated product each. If we start with the usual demand function
More informationSEQUENTIAL ESTIMATION OF DYNAMIC DISCRETE GAMES. Victor Aguirregabiria (Boston University) and. Pedro Mira (CEMFI) Applied Micro Workshop at Minnesota
SEQUENTIAL ESTIMATION OF DYNAMIC DISCRETE GAMES Victor Aguirregabiria (Boston University) and Pedro Mira (CEMFI) Applied Micro Workshop at Minnesota February 16, 2006 CONTEXT AND MOTIVATION Many interesting
More informationMarkets with Asymetric Information
Microeconomics 2 Presentation: Francis Bloch, Slides: Bernard Caillaud Master APE - Paris School of Economics March 6, 2017 (Lecture 9) I. Asymmetric information I.1. Introduction The economy is fundamentally
More informationUNIVERSITY OF NOTTINGHAM. Discussion Papers in Economics CONSISTENT FIRM CHOICE AND THE THEORY OF SUPPLY
UNIVERSITY OF NOTTINGHAM Discussion Papers in Economics Discussion Paper No. 0/06 CONSISTENT FIRM CHOICE AND THE THEORY OF SUPPLY by Indraneel Dasgupta July 00 DP 0/06 ISSN 1360-438 UNIVERSITY OF NOTTINGHAM
More informationTargeted Advertising and Social Status
Targeted Advertising and Social Status Nick Vikander University of Edinburgh nick.vikander@ed.ac.uk The Issue Firms often use targeted advertising (Esteban, Hernandez, Moraga-Gonzalez 2006) The Issue
More informationEndogenous Information Choice
Endogenous Information Choice Lecture 7 February 11, 2015 An optimizing trader will process those prices of most importance to his decision problem most frequently and carefully, those of less importance
More informationA Simple Example to Illustrate the Linkage Principle
A Simple Example to Illustrate the Linkage Principle Daniel Quint University of Wisconsin April 06 Abstract. I present a numerical example illustrating the revenue-superiority of an open over a closed
More informationA Note on Demand Estimation with Supply Information. in Non-Linear Models
A Note on Demand Estimation with Supply Information in Non-Linear Models Tongil TI Kim Emory University J. Miguel Villas-Boas University of California, Berkeley May, 2018 Keywords: demand estimation, limited
More informationInert Consumers in Markets with Switching Costs and Price Discrimination
Inert Consumers in Markets with Switching Costs Price Discrimination Marielle C. Non March 15, 2011 Abstract This paper analyzes an infinite-period oligopoly model where consumers incur costs when switching
More informationDeviant Behavior in Monetary Economics
Deviant Behavior in Monetary Economics Lawrence Christiano and Yuta Takahashi July 26, 2018 Multiple Equilibria Standard NK Model Standard, New Keynesian (NK) Monetary Model: Taylor rule satisfying Taylor
More informationSelection and Agglomeration Impact on Firm Productivity: A Study of Taiwan's Manufacturing Sector NARSC ANNUAL MEETING 2013
Selection and Agglomeration Impact on Firm Productivity: A Study of Taiwan's Manufacturing Sector SYED HASAN, ALLEN KLAIBER AND IAN SHELDON OHIO STATE UNIVERSITY NARSC ANNUAL MEETING 2013 Significance
More informationAn empirical model of firm entry with endogenous product-type choices
and An empirical model of firm entry with endogenous product-type choices, RAND Journal of Economics 31 Jan 2013 Introduction and Before : entry model, identical products In this paper : entry with simultaneous
More informationChapter 7 Duopoly. O. Afonso, P. B. Vasconcelos. Computational Economics: a concise introduction
Chapter 7 Duopoly O. Afonso, P. B. Vasconcelos Computational Economics: a concise introduction O. Afonso, P. B. Vasconcelos Computational Economics 1 / 21 Overview 1 Introduction 2 Economic model 3 Numerical
More informationKatz and Shapiro (1985)
Katz and Shapiro (1985) 1 The paper studies the compatibility choice of competing firms in industries with network externalities. Also investigated are the social vs. private incentives of compatibility
More informationOnline Appendix to Perfect Competition in Markets with Adverse Selection
Online Appendix to Perfect Competition in Markets with Adverse Selection Eduardo M. Azevedo and Daniel Gottlieb This version: August 31, 2016 First version: September 2, 2014 A Strategic Foundations when
More informationDepartment of Agricultural Economics. PhD Qualifier Examination. May 2009
Department of Agricultural Economics PhD Qualifier Examination May 009 Instructions: The exam consists of six questions. You must answer all questions. If you need an assumption to complete a question,
More informationEconS Sequential Competition
EconS 425 - Sequential Competition Eric Dunaway Washington State University eric.dunaway@wsu.edu Industrial Organization Eric Dunaway (WSU) EconS 425 Industrial Organization 1 / 47 A Warmup 1 x i x j (x
More information