Knowledge that Transforms

[In the classical linear regression model the conflict between the W, LR, and LM tests is due to the tests not having the correct significance level. This paper shows that the probability of conflict can be substantial when the three tests are based on the asymptotic chi-square critical value. For this model some computable correction factors for the chi-square critical values are examined, including those derived from a second-order Edgeworth approximation to the exact distributions. It is shown that the probability of conflict between the Edgeworth size-corrected tests is of no practical importance over a wide range of conditions.]

[There are many infinite horizon optimal problems in economic models. In such problems, the transversality condition may not be verified, as shown by Halkin'sexample. But we prove another property: the maximum of the Hamiltonian converges to zero when time goes to infinity. And, if along the optimal trajectory, after some time, changes of speed (by controls) in all directions at a given level are possible, then the transversality condition is verified. Examples show that the additional property proved here (i) allows exclusion of nonoptimal trajectories which verify the usual necessary conditions in an infinite horizon; (ii) is a result directly useful in some economic studies.]

This paper considers the possibility of static and dynamic speculation when traders have rational expectations. Its central theme is that, unless traders have different priors or are able to obtain insurance in the market, speculation relies on inconsistent plans, and thus is ruled out by rational expectations. Its main contribution lies in the integration of the rational expectations equilibrium concept into a model of dynamic asset trading and in the study of the speculation created by potential capital gains. Price bubbles and their martingale properties are examined. It is argued that price bubbles rely on the myopia of traders and that they disappear if traders adopt a truly dynamic maximizing behavior.

THIS PAPER PRESENTS a numerical algorithm for computing full information maximum likelihood (FIML) and nonlinear three-stage least squares (3SLS) coefficient estimates for large nonlinear models. (The proposed algorithm will be denoted algorithm A.) Although the theory of FIML estimation has been available for thirty years [20], FIML estimation has long been regarded as impossible on large nonlinear models.2 The more recently proposed nonlinear 3SLS estimator [191 also poses difficulties for large models.3 Using the algorithm presented in this paper, FIML and 3SLS are now feasible alternatives for estimation of large nonlinear models. The principles behind algorithm A's efficiency can be summarized as follows. First, most of the algorithm's steps explicitly control the mean of each equation's residuals. Large changes in those means are avoided because the FIML and 3SLS estimation problems are extremely sensitive to the residuals' means. Second, the coefficients are grouped by equations and the groups are treated separately during most of each iteration. This focus on individual equations is effective because coefficients within the same equation are generally more

Abstract : In Section 2, we review some important results of the received auction theory, introduce a new general auction model, and summarize the results of our analysis. Section 3 contains a formal statement of our model, and develops the properties of affiliated random variables. The various theorems are presented in Sections 4-8. In Section 9, we offer our views on the current state of auction theory. Following Section 9 is a technical appendix dealing with affiliated random variables.

Focuses on a study which examined perfect equilibrium in a bargaining model. Overview of the strategic approach adopted for the study; Details of the bargaining situation used; Discussion on perfect equilibrium. (From Ebsco)

We give necessary conditions for a neutral social choice function to be partially implementable by means of a strong equilibrium (i.e., implementable by cooperative agents): the veto power of the various coalitions should be maximally distributed. If moreover the social choice function is veto-anonymous, then the veto power of a coalition must be (roughly) proportional to its size: x per cent of the agents have the power to veto x per cent of the candidates. The procedure of "voting by successive veto" is an example of a neutral and (nearly) veto-anonymous social choice function which is implementable.