The views expressed herein are those of the author(s) and not necessarily those of the National Bureau of Economic Research. ©2004 by Dennis W. Carlton. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.

Experimental economists are leaving the reservation. They are recruiting subjects in the field rather than in the classroom, using field goods rather than induced valuations, and using field context rather than abstract terminology in instructions. We argue that there is something methodologically fundamental behind this trend. Field experiments differ from laboratory experiments in many ways. Although it is tempting to view field experiments as simply less controlled variants of laboratory experiments, we argue that to do so would be to seriously mischaracterize them. What passes for “control” in laboratory experiments might in fact be precisely the opposite if it is artificial to the subject or context of the task. We propose six factors that can be used to determine the field context of an experiment: the nature of the subject pool, the nature of the information that the subjects bring to the task, the nature of the commodity, the nature of the task or trading rules applied, the nature of the stakes, and the environment that subjects operate in.

We model the conditional mean and volatility of stock returns as a latent VAR process to study their contemporaneous and intertemporal relationships in a flexible statistical framework and without relying on exogenous predictors. We find a strong and robust negative correlation between the innovations to the conditional moments leading to pronounced countercyclical variation in the Sharpe ratio. We document significant lead-lag correlations between the moments that also appear related to business cycles. Finally, we show that although the conditional correlation between the mean and volatility is negative, the unconditional correlation is positive due to these lead-lag correlations.

Given adverse selection, durable goods that trade less frequently depreciate more quickly. Consistent with this prediction, I find an inverse relationship between depreciation and trading volume for less reliable brands of used business aircraft. Additionally, recent theoretical analyses suggest that leasing, by increasing the average quality of used goods offered for sale, may reduce adverse selection in durable goods markets. Indeed, I find an increase in the direct relationship between depreciation and trading volume for aircraft models with relatively high lease rates. Together these findings suggest that adverse selection is a prominent feature of the market for contemporary used business aircraft and that leasing mitigates the consequences of asymmetric information about the quality of used durable goods.

Author(s): Granger, Clive W.J. | Abstract: This is the speech that Professor Granger gave at Nobel Prize Awards 2004

Over fifty years ago, Abram Bergson, Janet Chapman, and others sought to assess the large gap in Soviet statistics between the published wage bill and the full wage bill; and Frank Lorimer drew attention to the related gap between the employment data in the 1939 population census and in the annual employment returns. Soviet archives which have recently been declassified reveal the considerable extent to which the findings of the Western authors were accurate.

Recently there has been a surge in econometric work focusing on estimating average treatment effects under various sets of assumptions. One strand of this literature has developed methods for estimating average treatment effects for a binary treatment under assumptions variously described as exogeneity, unconfoundedness, or selection on observables. The implication of these assumptions is that systematic (for example, average or distributional) differences in outcomes between treated and control units with the same values for the covariates are attributable to the treatment. Recent analysis has considered estimation and inference for average treatment effects under weaker assumptions than typical of the earlier literature by avoiding distributional and functional-form assumptions. Various methods of semiparametric estimation have been proposed, including estimating the unknown regression functions, matching, methods using the propensity score such as weighting and blocking, and combinations of these approaches. In this paper I review the state of this literature and discuss some of its unanswered questions, focusing in particular on the practical implementation of these methods, the plausibility of this exogeneity assumption in economic applications, the relative performance of the various semiparametric estimators when the key assumptions (unconfoundedness and overlap) are satisfied, alternative estimands such as quantile treatment effects, and alternate methods such as Bayesian inference.

We examine an oligopoly model where some consumers engage in costly non-sequential search to discover prices. There are three distinct price-dispersed equilibria characterized by low, moderate and high search intensity. The effects of an increase in the number of firms on search behaviour, expected prices, price dispersion and welfare are sensitive (i) to the equilibrium consumers' search intensity, and (ii) to the status quo number of firms. For instance, when consumers search with low intensity, an increase in the number of firms reduces search, does not affect expected price, leads to greater price dispersion and reduces welfare. In contrast, when consumers search with high intensity, increased competition results in more search and lower prices when the number of competitors in the market is low to begin with, but in less search and higher prices when the number of competitors is large. Duopoly yields identical expected price and price dispersion but higher welfare than an infinite number of firms.

We examine an oligopoly model where some consumers engage in costly non-sequential search to discover prices. There are three distinct price-dispersed equilibria characterized by low, moderate and high search intensity. The effects of an increase in the number of firms on search behaviour, expected prices, price dispersion and welfare are sensitive (i) to the equilibrium consumers' search intensity, and (ii) to the status quo number of firms. For instance, when consumers search with low intensity, an increase in the number of firms reduces search, does not affect expected price, leads to greater price dispersion and reduces welfare. In contrast, when consumers search with high intensity, increased competition results in more search and lower prices when the number of competitors in the market is low to begin with, but in less search and higher prices when the number of competitors is large. Duopoly yields identical expected price and price dispersion but higher welfare than an infinite number of firms.