Fiscal foresight --the phenomenon that legislative and implementation lags ensure that private agents receive clear signals about the tax rates they face in the future --is intrinsic to the tax policy process.This paper develops an analytical framework to study the econometric implications of fiscal foresight.Simple theoretical examples show that foresight produces equilibrium time series with nonfundamental representations, which misalign the agents' and the econometrician's information sets.Economically meaningful shocks to taxes, therefore, cannot generally be extracted from statistical innovations in conventional ways.Econometric analyses that fail to align agents' and the econometrician's information sets can produce distorted inferences about the effects of tax policies.The paper documents the sensitivity of econometric inferences of tax effects to details about how tax information flows into the economy.We show that alternative assumptions about the information flows that give rise to fiscal foresight can reconcile the diverse empirical findings in the literature on anticipated tax changes.

We propose a new Walrasian tâtonnement process called a double-track procedure for efficiently allocating multiple heterogeneous indivisible items in two distinct sets to many buyers who view items in the same set as substitutes but items across the two sets as complements. In each round of the process, a Walrasian auctioneer first announces the current prices for all items, buyers respond by reporting their demands at these prices, and then the auctioneer adjusts simultaneously the prices of items in one set upward but those of items in the other set downward. It is shown that this procedure converges globally to a Walrasian equilibrium in finitely many rounds.

This paper examines an exchange economy with heterogeneous indivisible objects that can be substitutable or complementary. We show that a competitive equilibrium exists in such economies, provided that all the objects can be partitioned into two groups, and from the viewpoint of each agent, objects in the same group are substitutes and objects across the two groups are complements. This condition generalizes the well-known Kelso–Crawford gross substitutes condition and is called gross substitutes and complements. We also provide practical and typical examples from which substitutes and complements are both jointly observed.

A signal is privacy‐preserving with respect to a collection of privacy sets if the posterior probability assigned to every privacy set remains unchanged conditional on any signal realization. We characterize the privacy‐preserving signals for arbitrary state space and arbitrary privacy sets. A signal is privacy‐preserving if and only if it is a garbling of a reordered quantile signal . Furthermore, distributions of posterior means induced by privacy‐preserving signals are exactly mean‐preserving contractions of that induced by the quantile signal . We discuss the economic implications of our characterization for statistical discrimination, the revelation of sensitive information in auctions and price discrimination.

We develop a new nonparametric approach for discrete choice and use it to analyze the demand for health insurance in the California Affordable Care Act marketplace. The model allows for endogenous prices and instrumental variables, while avoiding parametric functional form assumptions about the unobserved components of utility. We use the approach to estimate bounds on the effects of changing premiums or subsidies on coverage choices, consumer surplus, and government spending on subsidies. We find that a $10 decrease in monthly premium subsidies would cause a decline of between 1.8% and 6.7% in the proportion of subsidized adults with coverage. The reduction in total annual consumer surplus would be between $62 and $74 million, while the savings in yearly subsidy outlays would be between $207 and $602 million. We estimate the demand impacts of linking subsidies to age, finding that shifting subsidies from older to younger buyers would increase average consumer surplus, with potentially large impacts on enrollment. We also estimate the consumer surplus impact of removing the highly‐subsidized plans in the Silver metal tier, where we find that a nonparametric model is consistent with a wide range of possibilities. We find that comparable mixed logit models tend to yield price sensitivity estimates toward the lower end of the nonparametric bounds, while producing consumer surplus impacts that can be both higher and lower than the nonparametric bounds depending on the specification of random coefficients.

Emissions abatement alone cannot address the consequences of global warming for weather disasters. We model how society adapts to manage disaster risks to capital stock. Optimal adaptation—a mix of firm‐level efforts and public spending—varies as society learns about the adverse consequences of global warming for disaster arrivals. Taxes on capital are needed alongside those on carbon to achieve the first best. We apply our model to country‐level control of flooding from tropical cyclones. Learning rationalizes empirical findings, including the responses of Tobin's q , equity risk premium, and risk‐free rate to disaster arrivals. Adaptation is more valuable under learning than a counterfactual no‐learning environment. Learning alters social‐cost‐of‐carbon projections due to the interaction of uncertainty resolution and endogenous adaptive response.

Gul and Pesendorfer (2015) propose a promising theory of decision under uncertainty, they dub Hurwicz expected utility (HEU). HEU is a special case of α ‐maxmin EU that allows for preferences over sources of uncertainty. It is consistent with most of the available empirical evidence on decision under risk and uncertainty. We show that HEU is also tractable and can readily be measured and tested. We do this by deriving a new two‐parameter functional form for the probability weighting function, which fits our data well and which offers a clean separation between ambiguity perception and ambiguity aversion. In two experiments, we find support for HEU's predictions that ambiguity aversion is constant across sources of uncertainty and that ambiguity aversion and first order risk aversion are positively correlated.

This paper develops a simple model of firm entry, competition, and exit in oligopolistic markets. It features toughness of competition, sunk entry costs, and market-level demand and cost shocks, but assumes that firms' expected payoffs are identical when entry and survival decisions are made. We prove that this model has an essentially unique symmetric Markov-perfect equilibrium, and we provide an algorithm for its computation. Because this algorithm only requires finding the fixed points of a finite sequence of contraction mappings, it is guaranteed to converge quickly.