[We apply the third-order efficient method of estimation to the estimation problem of a system of structural equations in econometrics. The maximum likelihood estimator (hereafter m.l.e.) of structural equations is proved to give uniformly higher probability of concentration about true values than any regular best asymptotically normal estimator, if its asymptotic bias is properly adjusted. For instance, the full-information or limited-information m.l.e give asymptotically uniformly higher probability of concentration than the three-stage or two-stage least-squares estimators, given that these estimators are adjusted to have the same biases. The same result holds for he subsystem m.l.e. We prove the asymptotic completeness of Fuller's modified estimator. Asymptotic expansions of the distributions of the full-information m.l., subsystem m.l., and limited-information m.l. estimators are derived to terms of order O(T extasciicircum-1). Our general theorem is also applied to the multi-equation seemingly unrelated regression (SUR) model.]
[The first part of this paper considers the interaction between productive and nonproductive savings in a growing economy. It employs an overlapping generations model with capital accumulation and various types of rents, and gives necessary and efficient conditions for the existence of an aggregate bubble. The second part is a series of thoughts on the definition, nature, and consequences of asset bubbles. First, it derives some implications of bubbles for tests of asset pricing. Second, it demonstrates the specificity of money as an asset and shows that there is a fundamental dichtotomy in its formalization. Third, it discusses inefficiencies of price bubbles. Fourth, it shows that the financial definition of a bubble is not satisfactory for some assets.]
Abstract : The NTU (Non-Transferable Utility) Value is a solution concept for multiperson cooperative games in which utility is not transferable (games without side payments). Introduced by Shapley in (1969), it generalizes his (1953) value for TU (Transferable Utility) games. Many economic contexts are more naturally modelled by NTU than by TU games; and indeed, the NTU value has been applied with some success to a variety of economic and economic-political models. Two well-known applications are Nash's solutions (1950, 1953) for the bargaining problem and for two-person cooperative games, both of which are instances of the NTU value. In this paper, the author offers an axiomatization of the NTU value. Like any axiomatization, it should enable us to understand the concept better, and hence to focus discussion. One can now view the NTU value as defined by the axioms, with the treatment in Shapley (1969) serving as a formula or method of calculation. Thus the NTU value joins the ranks of the TU value and Nash's solution to the bargaining problem, each of which is defined by axioms, but usually calculated by a formula -- a formula whose intuitive significance is not, on the face of it, entirely clear.
Examines the sequences of economies constructed by successive sampling from any characteristics of agents. In this paper author considers closeness of commodity bundles to demand sets, dependency of the agents bundles on convexity, relationship between core allocations and demand sets.
In a repeated principal-agent game (supergame) in which each player's criterion is his long-run average expected utility, efficient behavior can be sustained by a Nash equilibrium if it is Pareto-superior to a one-period Nash equilibrium.Furthermore, if the players discount future expected utilities, then for every positive epsilon, and every pair of discount factors sufficiently close to unity (given epsilon), there exists a supergame equilibrium that is within epsilon (in normalized discounted expected utility) of the target efficient behavior.These supergame equilibria are explicitly constructed with simple "review strategies." 1. INTRODUCTION 1.1.Some Background IN A PRINCIPAL-AGENT SITUATION, the agent chooses an action "on behalf of" the principal.The resulting consequence depends on a random state of the environment as well as on the agent's action.After observing the consequence, the principal makes a payment to the agent according to a pre-announced reward function, which depends directly only on the observed consequence.This last restriction expresses the fact that the principal cannot directly observe the agent's action, nor can the principal observe the information on which the agent bases his action.This situation is one of the simplest examples of decentralized decisionmaking in which the interests of the decision-makers do not coincide.2If this action-reward situation occurs only once, I shall call it a short-run principal-agent relationship.The situation can be naturally modeled as a two-move game, in which the principal first announces a reward function to the agent, and then the agent chooses an action (or decision function if he has prior information about the environment).The Nash (or perfect Nash) equilibria of such a game are typically inefficient (unless the agent is neutral towards risk), in the sense that there will typically be another (but nonequilibrium) reward-decision pair that yields higher expected utilities to both players.In order to increase the efficiency of short-run equilibria, the principal could monitor (at least ex post) the information and decision of the agent.However such monitoring would tyically be costly, so that net efficiency need not be increased by monitoring.Another approach to increasing efficiency is suggested by the theory of repeated games.If a game with two or more players is repeated, the resulting situation can be modeled naturally as a game ("supergame") in which the players' actions in any one repetition are allowed to depend on the history of the previous repetitions.In the principal-agent situation, the repetition of the game would l I am grateful to R. A. Aumann, R. W. Rosenthal, and A.
The first-order approach to principal-agent problems involves relaxing the constraint that the agent choose an action which is utility maximizing to require instead only that the agent choose an action at which his utility is at a stationary point. Although more mathematically tractable, this approach is generally invalid. This paper identifies sufficient conditions-the monotone likelihood ratio condition and convexity of the distribution function condition-for the first-order approach to be valid. The Pareto-optimal wage contract is shown to be nondecreasing in output under these same conditions. MIRRLEES [5] WAS THE FIRST to point out that the standard method for analyzing the principal-agent problem is not generally correct. This method, the so-called first-order approach, involves weakening the constraint that the agent choose a utility-maximizing action to require instead only that the agent choose an action at which his utility is at a stationary point. The resulting problem is more mathematically tractable. However, as Mirrlees [5] has shown, necessary conditions for a contract to solve the first-order program are not generally even necessary conditions for the valid program. Therefore qualitative propositions about the nature of the Pareto-optimal contract derived from the first-order approach are not in general valid. This has motivated researchers to try to identify classes of cases where the first-order approach is valid.
Let S denote a set of consumers who have identical, nondecreasing, ordinal, quasiconcave utility functions u: XS(t) -* u[X (t)], where XX(t) is the vector of n goods consumed by individual s at time t. Consumers shop at different stores and hence may pay different prices for commodities.4 Let PS(t) and yS(t) denote exogenous vectors of commodity prices and income, respectively, faced by individual s at time t. This does not preclude the existence of a subset, 5, of consumers who all face the same prices, i.e., P5(t) = pS (t) for all s, s'c S. At each instant in time consumers attempt to
[This paper examines the detection of misspecification in the context of maximum likelihood models. The power properties of specification tests based on moment conditions are explicitly considered. Tests of conditional moment restrictions are also discussed and are shown to be particularly useful when exogenous variables are present. The form of optimal conditional moment tests is presented. The general results are then applied to specification tests for probit.]