Intertemporal choice with different short-term and long-term discount factors

This paper proposes a new axiomatic model of intertemporal choice that allows for dynamic inconsistency. We weaken the classical assumption of stationarity into two related axioms: stationarity in the short-term and stationarity in the long-term. We obtain a model with two independent discount factors, which is flexible enough to capture different time preferences, including a greater impatience for more immediate outcomes (when a long-term discount factor exceeds a compounded short-term discount factor). Our proposed model can accommodate some experimental results that cannot be rationalized by other existing models of dynamic inconsistency (such as quasi-hyperbolic discounting and generalized hyperbolic discounting).     

Inconsistency of the OLS estimator of the partial adjustment-adaptive expectations model

Following elimination of unobservable quantities it is assumed that the disturbance in the partial adjustment-adaptive expectations model follows a first-order moving average. The inconsistency of OLS is derived and calculated for different parameter values. The results indicate that the inconsistency in the estimate of the long-run elasticity is very small but that the short-run elasticity is likely to be seriously overestimated. Also, if OLS is used, it is quite probable that the model will be incorrectly rejected in favour of the partial adjustment (or the adaptive expectations) model by itself.     

Models for status inconsistency and mobility: A comparison of the approaches by Hope and Sobel with the mainstream square additive model

This paper is about the analysis of effects of status inconsistency and mobility on a dependent variable. We compare the mainstream square additive baseline model to alternative designs by Hope (1971, 1975) and Sobel (1981, 1985). Both writers claim that the square additive baseline model also contains some status inconsistency effects. An examination of the relationships between the square additive model, Hope's halfway/difference model, and Sobel's simple diagonal reference model shows that the effects uncovered by Sobel and Hope pertain to the inequality of the effects of the status variables on the dependent variable. These salience difference effects are therefore distinct from the non-additive status inconsistency effects which would be detected using the square additive approach. Less restricted versions of the diagonal reference model, the DM-1 and DM-2 models as well as a recent model by Weakliem (1992), are also examined with regard to additive/non-additive components and symmetry of effects.     

Trading in exhaustible resources in the presence of conversion costs a general equilibrium approach

We survey the literature on the general equilibrium approach to trade in exhaustible resources and present a model in which conversion costs are incorporated and in which the usual balance of payments condition is relaxed. It is found that in many cases the problem of dynamic inconsistency will arise.     

Generalised residuals and heterogeneous duration models: With applications to the Weilbull model

This paper deals with models for the duration of an event that are misspecified by the neglect of random multiplicative heterogeneity in the hazard function. This type of misspecification has been widely discussed in the literature [e.g., Heckman and Singer (1982), Lancaster and Nickell (1980)], but no study of its effect on maximum likelihood estimators has been given. This paper aims to provide such a study with particular reference to the Weibull regression model which is by far the most frequently used parametric model [e.g., Heckman and Borjas (1980), Lancaster (1979)]. In this paper we define generalised errors and residuals in the sense of Cox and Snell (1968, 1971) and show how their use materially simplifies the analysis of both true and misspecified duration models. We show that multiplicative heterogeneity in the hazard of the Weibull model has two errors in variables interpretations. We give the exact asymptotic inconsistency of M.L. estimation in the Weibull model and give a general expression for the inconsistency of M.L. estimators due to neglected heterogeneity for any duration model to O(σ²), where σ² is the variance of the error term. We also discuss the information matrix test for neglected heterogeneity in duration models and consider its behaviour when σ²>0.     

Discrete-time behavioral portfolio selection under cumulative prospect theory

We formulate and study three multi-period behavioral portfolio selection models under cumulative prospect theory: (i) S-shaped utility maximization without probability weighting in a market with one risky asset; (ii) S-shaped utility maximization without probability weighting in a market with multiple risky assets which follow a joint elliptical distribution; and (iii) S-shaped utility maximization with inverse-S-shaped probability weighting in a market with one risky asset. For the first two time consistent models, we identify the well-posedness conditions and derive the semi-analytical optimal policies. For the third time inconsistent model, we assume that the investor is aware of the time inconsistency but is unable to commit to his initial plan of action. Then, we reformulate the model into an intrapersonal game model and derive the semi-analytical subgame perfect Nash equilibrium (time consistent) policy under well-posedness condition. All the three policies take a piecewise linear feedback form. Our analysis of the three models not only partially explains the well documented phenomena of non-participation puzzle and horizon effect, but also extends the two fund separation theorem into multi-period S-shaped utility setting and pushes forward the study on time inconsistency issue incurred by probability weighting.     

基于时间偏好不一致的最优关系租金与银企估值

基于时间偏好不一致性的理论框架,构建了银企合作的关系贷款模型,模型中银行的最优停贷决策被视为一项实物期权。数值结果表明,时间偏好不一致性会导致代理人选择更低的违约门槛,但借款人的融资成本会更高。在项目估值方面,相比时间偏好一致情形,具有时间偏好不一致特征的银行和企业项目价值都大幅减少。此外,幼稚型和成熟型代理人对比结果显示,幼稚型代理人的错误信念能够抑制由于时间偏好不一致而导致的违约风险上升,并且能够降低最优关系租金,从而减轻具有财务约束的企业的融资成本。构建的贷款模型不仅丰富了银企关系型借贷的相关理论研究,而且指出在代理人具有时间偏好不一致的条件下最优关系租金(融资成本)更高,这从行为金融的认知偏差角度为中小企业融资难、融资贵的困境提供了新的解释。     

形成性评价实施的障碍及对策

指出了现有评价模式与《大学英语课程教学要求》的不符,从理论研究、教学改革以及教学管理模式等方面分析了形成性评价实施的障碍,从评价体系的构建,教学体系的改革和教师观念转变等方面提出发了形成性评价体系实施的对策。     

Money stock targeting and money supply: An intertemporal optimization approach (with an application to Canada)

We propose a model of the short-term behaviour of the monetary authorities of a small open economy that is willing to stabilize, to some extent, its bilateral exchange rate vis-à-vis a dominant partner. The optimal money supply strategy is derived using intertemporal optimization arguments, in a rational expectations environment, The model is formulated so as to avoid the time inconsistency problem stressed by Kydland and Prescott (1977). It allows econometric estimation of the optimal money supply rule as well as of the parameters of the intertemporal utility function, and of the function that defines the intermediate target money stock. The model is successfully estimated on Canadian quarterly data, using maximum-likelihood techniques.     

Stopping with anticipated regret

This paper analyzes a stopping problem where the decision maker is driven by anticipated ex-post regret. There are two sources of potential dynamic inconsistency, one is arrival of information and the other is changing choice opportunities over time—discarding the current stopping option may change how she stops the game in the future.First we consider a naive planner who prescribes a commitment solution, and illustrate the nature of the inconsistency problem. Then we consider a sophisticated planner who plays backward induction against her ‘successive selves’. The resolution of dynamic inconsistency does not in general allow the use of standard dynamic programming technique. We provide, however, a simple characterization of the backward induction strategy, which is given in a recursive formula.We also provide a behavioral implication, that larger indeterminacy of belief may lead to a more aggressive behavior, that is, continuing the gamble longer, which contrasts to the implication of ambiguity aversion.     

GMM Estimation with Non‐causal Instruments under Rational Expectations*

Lanne and Saikkonen [Oxford Bulletin of Economics and Statistics (2011a) Vol. 73, pp. 581–592], show that the generalized method of moments (GMM) estimator is inconsistent, when the instruments are lags of variables that admit a non‐causal autoregressive representation. This article argues that this inconsistency depends on distributional assumptions, that do not always hold. In particular under rational expectations, the GMM estimator is found to be consistent. This result is derived in a linear context and illustrated by simulation of a nonlinear asset pricing model.     

Effects of performance measurement system inconsistency on managers’ role clarity and well-being

In this paper we explore the impact of PMS inconsistency on managerial role clarity and well-being. In addition, we investigate if problems with PMS inconsistency can be dealt with by convincing superiors to loosen their control reactions to variances, giving managers job autonomy and providing managers with support from superiors, peers and staff functions. Based on survey responses from 799 managers in one public sector organization and 187 managers in one private sector organization we conclude that PMS inconsistency has negative effects on managers’ role clarity and well-being. This situation does not improve if superiors practice loose control; on the contrary, it seems to make managers’ work situation worse. Job autonomy and support appear to be better coping methods since they have direct positive impacts on managers’ role clarity and well-being that counteracts the negative effects of PMS inconsistency.     

Incorporating positions into asset pricing models with order-based strategies

The paper addresses the problem of agent-based asset pricing models with order-based strategies that the implied positions of the agents remain indeterminate. To overcome this inconsistency, two easily applicable risk aversion mechanisms are proposed which modify the original actions of a market maker and the speculative agents, respectively. Here the concepts are incorporated into the classical Beja–Goldman model. For the deterministic version of the thus enhanced model a four-dimensional mathematical stability analysis is provided. In a stochastic version it is demonstrated that jointly the mechanisms are indeed able to keep the agents’ positions within bounds, provided the corresponding risk aversion coefficients are neither too low nor too high. A similar result holds for the misalignment of the market price. We wish to thank two anonymous referees for their observations and detailed comments. Financial support from EU STREP ComplexMarkets, contract number 516446, is gratefully acknowledged.     

Optimal effort in the principal-agent problem with time-inconsistent preferences

This paper incorporates an agent’s time-inconsistent preferences into the Sannikov (2008) contract model to explore the effects of an agent’s preferences on his own behaviors: the incentive effort choice, the optimal retirement time and the consumption flow during his whole career life. We find the agent’s time inconsistency makes it difficult for him to be motivated and makes him need more compensation. An agent’s time-inconsistency erodes both the principal and his own income. The time-inconsistent agent will choose a lower incentive effort level, retire at an earlier time and have a lower consumption flow compared with his time-consistent peer. The time-inconsistent preference exactly influences the agents behavior and makes the agency problem more serious. Therefore, the firm has to cost more to stimulate such a time-inconsistent agent, which will damage the firms profits, as well as the efficiency.     

Prize Promotions as Costless Commitments

This study theoretically analyses the role of firms' prize promotions, using a simple and general microeconomic model. In a static environment, prize promotions are meaningless. However, in a dynamic environment, prize promotions work as firms' credible announcements on expansions in those firms' future production. The key lies in the firms' dynamic supply of lottery tickets in prize promotions. Because the prize promotions have been proved to be equivalent to credible announcements, we can say that prize promotions are costless and one of the best commitment tools in time‐inconsistency between the firm and consumers. Copyright © 2016 John Wiley & Sons, Ltd.     

Aggregation of Productivity Indices: The Allocative Efficiency Correction

Aggregation of productivity indices is known to be consistent under very restrictive conditions only. This paper quantifies the aggregation inconsistency.     

The effect of environmental regulation on environmental innovation

Environmental expenditure estimates resulting from US environmental policy are based on current technology which may overstate policy's true costs. Existing evidence shows that ex ante cost estimates are greater than realized costs due to unexpected technological progress. This research programme asks whether innovation is a response to environmental regulation or whether the true regulatory compliance costs are overestimated ex ante when technological advancement is ignored? The author conducts an empirical study of the US manufacturing industry's environmental patent activities and environmental regulation as measured by pollution abatement and control expenditure (PACE) data. She finds a statistically significant positive relationship between environmental regulation and innovation when estimated by ordinary least squares (OLS). However, the OLS coefficient of pollution abatement costs is inconsistent because of a correlation between the explanatory variable and unobservable variables. Two-staged least squares addresses the inconsistency problem, resulting in positive and significant PACE coefficients. Thus, there is evidence that innovation is a response to environmental regulation. © 1998 John Wiley & Sons, Ltd and ERP Environment.     

The problem of population and growth: a review of the literature from Malthus to contemporary models of endogenous population and endogenous growth.

This review traces the evolution of literature on population and economic growth through the main paradigms suggested to explain the observed covariation of per capita income and population levels (or their rates of growth) over time and space, and determine which public policies will improve the human condition. As the main paradigms evolved, key variables were progressively treated as endogenous (instead of exogenous) to the growth process. After the introduction, section 2 looks at the "classical model" of Malthusian population theory and its refinements. Section 3 identifies empirical data that bears on the secular and cross-sectional association between levels of rates of growth of population and per capita income. The inconsistency of these data with the classical model helps explain declining interest in this model over time and increased interest in a more systematic type of population and growth theory. The beginning of this new interest is traced in section 4 with a look at the "neo-classical growth model" and the reformulated theory of population, which was based on Becker's work on fertility behavior. The first line of inquiry branching from these theoretical works (section 5) treats population as an endogenous variable in static and dynamic settings. The second line of inquiry (section 6) analyzes population and growth within a unified model of growth and development. In section 7, recent studies of key policy issues (population control policies, mandatory social security schemes) are surveyed. The concluding section notes that contemporary research must face the challenge of providing additional insights into longevity as an aspect of economic growth and development and of developing a model of endogenous population and economic growth based on heterogeneous agents.     

A comparison of the Box-Cox maximum likelihood estimator and the non-linear two-stage least squares estimator

This paper investigates the limiting behaviour of the ‘maximum likelihood estimator’(MLE) based on normality, as well as the nonlinear two-stage least squares estimator (NL2S), for the i.i.d. and regression models in which the Box-Cox transformation is applied to the dependent variable. Since the transformed variable cannot in general be normally distributed, the untransformed variable is assumed to have a two-parameter gamma distribution. Tables of probability limits and asymptotic variance demonstrate that, in this case, the inconsistency of the ‘normal MLE’ is often quite pronounced, while the NL2S is consistent and typically well behaved.     

我国耕地保护形势与应对策略

研究的目的是探索当前我国耕地保护存在的问题和保护的对策。研究的方法是文献资料法和比较分析法。研究的结果是通过对近年来的数据分析,表明我国人地矛盾极为尖锐和突出,特别是耕地保护面临前所未有的压力。研究的结论是增强国土忧患意识,大力推进科学发展;完善农村土地制度,发挥农民主体作用;创新耕地保护机制,发挥市场基础作用;遏制地方政府冲动,发挥制度约束作用。