In this note we derive the general form of a utility based system of demand equations that are quadratic in income with coefficients that are functions of prices.Our result turns out to be slightly more general than known till now.
This paper proposes a simple modification of a conventional method of moments estimator for a discrete response model, replacing response probabilities that require numerical integration with estimators obtained by Monte Carlo simulation.This method of simulated moments (MSM) does not require precise estimates of these probabilities for consistency and asymptotic normality, relying instead on the law of large numbers operating across observations to control simulation error, and hence can use simulations of practical size.The method is useful for models such as high-dimensional multinomial probit (MNP), where computation has restricted applications.
T. J. Rothenberg's (1984) Edgeworth test size correction for the linear model with a nonscalar covariance matrix is applied to the special case of AR(1) errors. Simulations show that the correction reduces the overrejection that is commonly encountered in this model, although substantial overrejection remains when the original amount is large. When the regressors are autocorrelated and collinear (for example, two trended regressors) there is not nearly as much overrejection when testing a single restriction as there is when the model contains only one autocorrelated regressor. Copyright 1989 by The Econometric Society.
Properties of t ratios associated with the LIML, TSLS, and OLS estimators in a structural form estimation are studied. The existence of moments of these t ratios including the LIML form is proved first. Second, Monte Carlo simulations are performed to find out real sizes of the t test and the likelihood ratio test. Third, asymptotic expansions of the distributions of t ratios are derived under the null hypothesis to find out deviations of real sizes from nominal sizes theoretically. The asymptotic power functions are also derived
A transferable utility economy in which each agent holds a resource which can be used in combination with the resources of other agents to generate value (according to the characteristic function V) is studied using a dynamic model of bargaining. The main theorem establishes that the payoffs associated with efficient equilibria converge to the agents' Shapley values as the time between periods of the dynamic game goes to zero. In addition it is demonstrated that an efficient equilibrium exists and is unique when an additivity condition is satisfied. To demonstrate the sensitivity of the solution to the institutional detail we modify the model to allow for partnerships and show that the Shapley value is no longer achieved.
This paper gives a solution to the problem of estimating coefficients of index models, through the estimation of the density-weighted average derivative of a general regression function. A normalized version of the density-weighted average derivative can be estimated by certain linear instrumental variables coefficients. The estimators, based on sample analogies of the product moment representation of the average derivative, are constructed using nonparametric kernel estimators of the density of the regressors. Consistent estimators of the asymptotic variance-covariance matrices of the estimators are given, and a limited Monte Carlo simulation is used to study the practical performance of the procedures. Copyright 1989 by The Econometric Society.
The college admissions problem is perhaps the simplest model of many-to-one matching in two-sided markets, such as labor markets. The authors show that the set of stable outcomes (which is equal to the core defined by weak domination) has some surprising properties not found in models of one-to-one matching. These properties may help to explain the success that this kind of model has had in explaining empirical observations. Copyright 1989 by The Econometric Society.
In this paper, the authors examine the consequences of adopting the random utility hypothesis as an approach for randomizing a system of demand equations. Random utility models are appealing since they allow the usual assumption of deterministic utility-maximizing behavior by each consumer to coexist with the apparent randomness across individuals that is exhibited by data. Their results show that the use of random utility models implies that the disturbances of the demand equations may not be homoskedastic, but must be functions of prices and/or income. Copyright 1989 by The Econometric Society.
The article develops a bargaining model of spatial competition. Sellers compete by choosing locations in a market region. Consumers face a cost to moving from one place to another. The price of the good is determined as the perfect equilibrium of a bargaining game between seller and buyer. In this game, the buyer has the outside option to move to another seller and so the prices at all stores are interdependent. Existence of a location-price equilibrium is established. The outcome approaches the perfectly-competitive one if the consumer's cost of traveling becomes negligible or if the number of sellers tends to infinity. Copyright 1989 by The Econometric Society.
This paper examines conditions for the uniqueness of an equilibrium price distribution in stochastic macroeconomic models with rational expectations.A model is developed in which many price distributions, each with a finite variance, satisfy the equilibrium requirements of rationality.Hence, the condition that the variance of the equilibrium price distribution be finite, or equivalently, that the conditionally expected price path be stable, does not guarantee uniqueness.In such cases it is shown that an arbitrary random quantity which is widely publicized can become a leading indicator of prices and, consequently, influence the behavior of actual prices.However, by extending the finite variance (stability) condition to a minimum variance condition, these nonuniqueness problems can be avoided.Such stability or minimum variance conditions suggest a kind of collective rationality which, although not unreasonable, has not yet been fully analyzed in rational expectations models.