The Majoritarian Compromise in large societies

First, we dwell on the definition of the Majoritarian Compromise in the case of an odd number of alternatives. Then, assuming the Impartial Culture hypothesis we calculate the average maximum welfare achievable by the Majoritarian Compromise procedure and show that this social choice rule is asymptotically stable with the proportion of the number of unstable profiles to the total number of profiles being in the order of ,(¹We write in case there is a positive constant C such that for all sufficiently large values of ) where n is the total number of agents. I am grateful to Prof. Semih Koray for his invitation to visit the Center for Economic Design and the Department of Economics of Boğazi?i University in Turkey during the spring semester of 1999. I appreciate the stimulating discussions with Prof. Murat Sertel about the properties of the Majoritarian Compromise which I had during my stay there. I am also grateful to an anonymous referee whose remarks helped to significantly improve the exposition. A partial support from TüBİTAK NATO PC-B Programme is gratefully acknowledged.     

Shortlisting procedure with a limited capacity

A decision maker, who is overwhelmed by the number of available alternatives, limits her consideration. We investigate a model where a decision maker’s capacity determines whether she is overwhelmed: She considers all the available alternatives if their number does not exceed her capacity; otherwise, she applies a shortlisting procedure to reduce the number of alternatives to within her capacity. We show how to deduce the decision maker’s capacity, her preference and the alternatives that she considers from the observed behavior. Furthermore, we provide the necessary and sufficient conditions for a consideration function to be derived by the shortlisting procedure with a limited capacity.     

EVALUATING ALTERNATIVE REPRESENTATIONS OF THE CHOICE SETS IN MODELS OF LABOR SUPPLY

Abstract.  During the last two decades, the discrete choice modeling of labor supply decisions has become increasingly popular. Within the literature adopting this approach, however, there are two potentially important issues that so far have not been given the attention they might deserve. A first issue concerns the procedure by which the discrete alternatives are selected to enter the choice set. Most authors choose (not probabilistically) a set of fixed points identical for every individual. Some authors adopt instead a sampling procedure and also assume that the choice set may differ across households. A second issue concerns the availability of the alternatives. Most authors assume all the values of hours of work within some range are equally available. At the other extreme, some authors assume only two or three alternatives (for example, nonparticipation, part-time and full-time) are available for everyone. Some studies account instead for the fact that not all the hour opportunities are equally available to everyone specifying a probability density function of opportunities for each individual. In this paper we explore by simulation the implications of (i) the procedure used to build the choice set (fixed alternatives versus sampled alternatives); (ii) accounting or not accounting for a different availability of alternatives. The results of the evaluation performed in this paper show that the way the choice set is represented has little impact on the fitting of observed values, but a more significant and important impact on the out-of-sample prediction performance. Thus, the treatment of the choice sets might have a crucial effect on the result of policy evaluations.     

Similarity-based mistakes in choice

We characterize the following choice procedure. The decision maker is endowed with two binary relations over alternatives, a preference and a similarity. In every choice problem she includes in her choice set all alternatives which are similar to the best feasible alternative. Hence she can, by mistake, choose an inferior option because it is similar to the best. We characterize this boundedly rational behavior by suitably weakening the rationalizability axiom of Arrow (1959). We also characterize a variation where the decision maker chooses alternatives on the basis of their similarities to attractive yet infeasible options. We show that similarity-based mistakes of either kind lead to cyclical behavior. Finally, we reinterpret our procedure as a method for choosing a bundle given a set of individual items, in which the decision maker combines the best feasible item with those that complement it.     

Using Complex Surveys to Estimate the L1‐Median of a Functional Variable: Application to Electricity Load Curves

Mean profiles are widely used as indicators of the electricity consumption habits of customers. Currently, in Électricité De France (EDF), class load profiles are estimated using point‐wise mean profiles. Unfortunately, it is well known that the mean is highly sensitive to the presence of outliers, such as one or more consumers with unusually high‐levels of consumption. In this paper, we propose an alternative to the mean profile: the L ₁ ‐ median profile which is more robust. When dealing with large data sets of functional data (load curves for example), survey sampling approaches are useful for estimating the median profile avoiding storing the whole data. We propose here several sampling strategies and estimators to estimate the median trajectory. A comparison between them is illustrated by means of a test population. We develop a stratification based on the linearized variable which substantially improves the accuracy of the estimator compared to simple random sampling without replacement. We suggest also an improved estimator that takes into account auxiliary information. Some potential areas for future research are also highlighted.     

Psychological profiles for predicting leader performance

This study deals with the search for psychological profile(s) that can differentiate levels of leader performance. Although many have rejected the traditional trait theory approach to leadership, others continue to search for meaningful relationships between leader characteristics and leader behavior/effectiveness. Recent promising research focuses on profiles as opposed to individual traits as indicators of leader effectiveness. It is clearly the interaction of certain individual characteristics and situational variables that ultimately predict leader behavior. This requires continued search for person variables that may be relevant to this equation. Work with the 16 Personality Factor scale suggests some promising results. Research in this article focuses on the generation of specification equations that differentiate between high and low performers. The assumption is that there exist unique combinations (profiles) of characteristics that can aid in the prediction of leader performance. This research is an attempt to explore such profiles. Results show that a multitrait profile with weighted scale scores can predict performance. Significant correlations were obtained between 16PF profile scores and overall performance.     

Time Schedule and Program Profile: TV News in Norway and Denmark

Two TV channels compete on programming with respect to both time schedule (continuous choice) and program profile (discrete choice), with a directional constraint concerning time schedule (viewers cannot watch TV before they get home). We show how the relative importance of program profile and time schedule, as perceived by the viewers, determines the equilibrium outcome. Furthermore, we find that there is a first-mover disadvantage in a sequential game where one channel sets its two choice variables before its rival does, and a first-mover advantage in a semise-quential game where the channels set time schedules sequentially and thereafter set program profiles simultaneously. The results are applied to the Norwegian and Danish markets for TV news, where number-two channels have challenged the incumbents.     

Nowcasting German GDP: Foreign factors,financial markets,and model averaging

This paper develops a nowcasting model for the German economy. The model outperforms a number of alternatives and produces forecasts not only for GDP but also for other key variables. We show that the inclusion of a foreign factor improves the model’s performance, while financial variables do not. Additionally, a comprehensive model averaging exercise reveals that factor extraction in a single model delivers slightly better results than averaging across models. Finally, we estimate a “news” index for the German economy in order to assess the overall performance of the model beyond forecast errors in GDP. The index is constructed as a weighted average of the nowcast errors related to each variable included in the model.     

“Trilemmas”: Characterising the Japanese Concept of “amae” with a Three-Way Forced-Ranking Technique

A ‘trilemma’ procedure is introduced for collecting ‘dominance data’ (i.e. rankings of a set of items along a scale of relevance, preference, etc.). Trilemmas are three-way forced choices where the three items comprising each trilemma are selected on the basis of a multidimensional scaling solution (MDS) for the item set, ensuring that each choice is as stark and informative as possible. A questionnaire designed on this principle is easily understood and rapidly administered. The data are convenient to record and show less fluctuation among informants than existing techniques. We demonstrate the procedure with a set of 45 short generalisations about behaviour, designed for assessing child attachment. A three-dimensional ‘map’ of these items was obtained by applying MDS to multiple sets of similarity data. The same structure emerged from English-language and Japanese translations of the items. Thirty trilemmas based on this map were used to rank the items by degree of association with the Japanese concept of amae, characterising the concept in terms of its behavioural correlates.     

The asymptotic strategyproofness of scoring and Condorcet consistent rules

We calculate the proportion of preference profiles where “small” coalitions of agents may successfully manipulate any given scoring rule and show that it decreases to zero at a rate proportional to with the number of agents. If agents have to incur a small cost in order to decide how to manipulate the voting rule, our results imply that scoring rules are robust to such manipulation in large groups of agents. We present examples of asymptotically strategyproof and non strategyproof Condorcet consistent rules. We thank Eric Maskin and Shmuel Nitzan for useful discussions. We also thank seminar participants at Harvard, Haifa, and Technion universities for their comments. Neeman is grateful for the generous financial support of the NSF under grant SBR-9806832.     

GMM redundancy results for general missing data problems

We consider questions of efficiency and redundancy in the GMM estimation problem in which we have two sets of moment conditions, where two sets of parameters enter into one set of moment conditions, while only one set of parameters enters into the other. We then apply these results to a selectivity problem in which the first set of moment conditions is for the model of interest, and the second set of moment conditions is for the selection process. We use these results to explain the counterintuitive result in the literature that, under an ignorability assumption that justifies GMM with weighted moment conditions, weighting using estimated probabilities of selection is better than weighting using the true probabilities. We also consider estimation under an exogeneity of selection assumption such that both the unweighted and the weighted moment conditions are valid, and we show that when weighting is not needed for consistency, it is also not useful for efficiency.     

Distribution-free tests for time series models specification

We consider a class of time series specification tests based on quadratic forms of weighted sums of residuals autocorrelations. Asymptotically distribution-free tests in the presence of estimated parameters are obtained by suitably transforming the weights, which can be optimally chosen to maximize the power function when testing in the direction of local alternatives. We discuss in detail an asymptotically optimal distribution-free alternative to the popular Box–Pierce when testing in the direction of AR or MA alternatives. The performance of the test with small samples is studied by means of a Monte Carlo experiment.     

Non-anonymous ballot aggregation: An axiomatic generalization of Approval Voting

We study axiomatically situations in which the society agrees to treat voters with different characteristics distinctly. In this setting, we propose a set of intuitive axioms and show that they jointly characterize a new class of voting procedures, called Type-weighted Approval Voting. According to this family, each voter has a strictly positive and finite weight (the weight is necessarily the same for all voters with the same characteristics) and the alternative with the highest number of weighted votes is elected. The implemented voting procedure reduces to Approval Voting in case all voters are identical or the procedure assigns the same weight to all types. Using this idea, we also obtain a new characterization of Approval Voting.     

Strategy-proof fuzzy aggregation rules

We investigate the structure of fuzzy aggregation rules which, for every permissible profile of fuzzy individual preferences, specify a fuzzy social preference. We show that all fuzzy aggregation rules which are strategy-proof and satisfy a minimal range condition are dictatorial. In other words, there is an individual whose fuzzy preferences determine the entire fuzzy social ranking at every profile in the domain of the aggregation rule. To prove this theorem, we show that all fuzzy aggregation rules which are strategy-proof and satisfy the minimal range condition must also satisfy counterparts of independence of irrelevant alternatives and the Pareto criterion. There has been hardly any treatment of the manipulability problem in the literature on social choice with fuzzy preferences.     

A noncooperative foundation of the asymmetric Nash bargaining solution

We consider a noncooperative multilateral bargaining model with heterogeneous time preferences in which the first rejector of a proposal in the current round becomes the proposer in the next round. We show the existence of a stationary subgame perfect equilibrium (SSPE), characterize SSPEs and show the efficiency of SSPEs. We show that any sequence of SSPE payoff profiles converges to the asymmetric Nash bargaining solution weighted by the inverses of discount rates as the bargaining friction vanishes.     

Durbin’s random substitution and conditional Monte Carlo

Durbin (Biometrika 48:41–55, 1961) proposed a method called random substitution, by which a composite problem of goodness-of-fit can be reduced to a simple one. In this paper we provide a method of finding the p-value of any test statistic, for a composite goodness-of-fit problem, based on the simulation of a large number of conditional samples, using an analog of Durbin’s proposal in a reverse-type application. We analyze a Bayesian chi-square test proposed in Johnson (Ann Stat 32:2361–2384, 2004) which relies on a single randomization and relate it with Durbin’s original method. We also review a related proposal for conditional Monte-Carlo simulation in Lindqvist and Taraldsen (Biometrika 92:451–464, 2005) and compare it with our procedure. We show our method in a non-group example introduced in Lindqvist and Taraldsen (Biometrika 90:489–490, 2003).     

Sequential point estimation of the powers of a normal scale parameter

We consider the sequential point estimation problem of the powers of a normal scale parameter σ^r with r≠ 0 when the loss function is squared error plus linear cost. It is shown that the regret due to using our fully sequential procedure in ignorance of σ is asymptotically minimized for estimating σ⁻². We also propose a bias-corrected procedure to reduce the risk and show that the larger the distance between r and −2 is, the more effective our bias-corrected procedure is. Received August 2000     

Opportunity analysis of newborn screening programs

There exist congenital diseases that reduce newborns’ potential opportunities. This reduction is sometimes alleviated if the congenital disease is detected early by a newborn screening program. We propose a new outcome measurement procedure for newborn screening programs, based on the opportunity gains they offer. We show that, under plausible assumptions, the ranking of the available screening programs for a particular disease, according to this new outcome measurement procedure, does not depend on the metric of opportunity. We also apply our model to the current debate about choosing between a selective or a universal newborn hearing screening program to detect congenital hearing impairments.     

Nash implementing social choice rules with restricted ranges

We consider Nash implementation of social choice rules with restricted ranges, i.e., where some of the available alternatives are chosen at no preference profile. We show that the appropriate adaptation of Maskin monotonicity to this context depends on the range of the mechanisms: the wider is this range, the weaker is the monotonicity condition to be used. As a result, mechanisms employing outcome functions which allow for out-of-range alternatives at off-equilibrium messages can Nash implement social choice rules which fail to be Nash implementable by mechanisms whose ranges are restricted to the range of the social choice rule to be implemented. The Walrasian social choice correspondence is a particular instance of this. Moreover, social choice rules which are not Maskin monotonic can be “monotonized” by the addition of artificial out-of-range alternatives—a point we illustrate through Solomon’s Dilemma.     

An equilibrium model of insider trading in continuous time

We study a Bayesian–Nash equilibrium model of insider trading in continuous time. The supply of the risky asset is assumed to be stochastic. This supply can be interpreted as noise from nonrational traders (noise traders). A rational informed investor (the insider) has private information on the growth rate of the dividend flow rewarded by the risky asset. She is risk averse and maximizes her inter-temporal utility rate over an infinite time-horizon. The market is cleared by a risk neutral market maker who sets the price of the risky asset competitively as the conditional present value of future dividends, given the information supplied by the dividend history and the cumulative order flow. Due to the presence of noise traders, the market demand does not fully reveal the insider’s private information, which slowly becomes incorporated in prices. An interesting result of the paper is that a nonstandard linear filtering procedure gives an a priori form for the equilibrium strategy to be postulated. We show the existence of a stationary linear equilibrium where the insider acts strategically by taking advantage of the camouflage provided by the noise which affects the market maker’s estimates on private information. In this equilibrium, we find that the insider’s returns on the stock are uncorrelated over long periods of time. Finally, we show that the instantaneous variance of the price under asymmetric information lies between the instantaneous variance of the price under complete and incomplete information. The converse inequalities hold true for the unconditional variance of the price.