Nonlinear models with panel data

Panel data play an important role in empirical economics. With panel data one can answer questions about microeconomic dynamic behavior that could not be answered with cross sectional data. Panel data techniques are also useful for analyzing cross sectional data with grouping. This paper discusses some issues related to specification and estimation of nonlinear models using panel data.JEL Classification: C230The research behind this paper was supported by the National Science Foundation, the Gregory C. Chow Econometric Research Program at Princeton University, and Danish National Research Foundation (through CAM at the University of Copenhagen). The author thanks Ekaterini Kyriazidou, Hong Li, Marina Sallustro, and the editors for helpful suggestions.     

Theory of negative consumption externalities with applications to the economics of happiness

This paper investigates the problem of obtaining Pareto efficient allocations in the presence of negative consumption externalities. In contrast to the conventional wisdom, we show that even if consumers’ preferences are monotonically increasing in their own consumption, one may have to dispose of resources to achieve Pareto efficiency when negative consumption externalities exist. We provide characterization results on destruction both for pure exchange economies and for production economies. As an application, our results provide an explanation to Easterlin’s paradox: average happiness levels do not increase as countries grow wealthier. We thank an anonymous referee, Xiaoyong Cao, Li Gan, and Tapan Mitra for helpful comments and suggestions that improved the exposition of the paper. The first author thanks the National Natural Science Foundation of China and Private Enterprise Research Center at Texas A&M University for financial support.     

Unemployment dynamics in an OLG economy with public pensions

Pension benefits in old age establish a disincentive to save in youth, thereby yielding lower levels of capital stock and the wage rate. As a result, the trade union has an incentive to change the composition of its two targets: employment and the wage rate. This paper develops a model that includes employment effects of public pensions via capital accumulation and union wage setting. Within this framework, we consider how contribution rates to the pension system influence the level and time path of the unemployment rate. It is demonstrated that (1) a higher contribution rate results in a lower unemployment rate, and (2) the economy with a high (low) contribution rate experiences monotone convergence towards (oscillatory convergence towards or a period-2 cycle around) the steady state. The author would like to thank an anonymous referee, Kazutoshi Miyazawa, and seminar participants at Osaka University for their useful comments and suggestions, and Masako Ikefuji and Hiroaki Yamagami for their research assistance. Financial support from the Japan Society for the Promotion of Science (JSPS) through a Grant-in-Aid for Young Scientists (B) (No.17730131), the Asahi Glass Foundation, the Japan Economic Research Foundation and the 21st Century COE Program (Osaka University) is gratefully acknowledged. All remaining errors are mine.     

Bertrand-Edgeworth duopoly with unit cost asymmetry

Summary This paper characterizes the set of Nash equilibria in a price setting duopoly in which firms have limited capacity, and in which unit costs of production up to capacity may differ. Assuming concave revenue and efficient rationing, we show that the case of different unit costs involves a tractable generalization of the methods used to analyze the case of identical costs. However, the supports of the two firms' equilibrium price distributions need no longer be connected and need not coincide. In addition, the supports of the equilibrium price distributions need no longer be continuous in the underlying parameters of the model.As an application of our characterization, we examine the Kreps-Scheinkman model of capacity choice followed by Bertrand-Edgeworth price competition and show that, unlike in the case of identical costs, Cournot equilibrium capacity levels need not arise as subgame-perfect equilibria. The low-cost firm has greater incentive to price its rival out of the market than exists under Cournot behavior.We are grateful to Joseph Harrington, Marie Thursby, Casper de Vries and, especially, William Novshek for helpful discussions and comments. Thomas Faith and Ioannis Tournas provided valuable research assistance. This paper was presented at the Winter Meetings of the Econometric Society in December 1988, the Midwest Mathematical Economics Conference in April 1989, the Sixteenth Annual Congress of the European Association for Research in Industrial Economics in August 1989, the European Meetings of the Econometric Society in September 1989, and in seminars at the Ecole Nationale des Ponts et Chaussées, Erasmus University Rotterdam, Indiana University, INSEAD, Texas A&M University, Tilburg University, the University of Bonn and the University of Florida. Deneckere acknowledges financial support through National Science Foundation Grant SES-8619012 and the Kellogg Graduate School of Management's Beatrice/Esmark Research Chair. Kovenock acknowledges financial support through Erasmus University Rotterdam, the Purdue Research Foundation, the Ford Motor Company Fund, and an Ameritech Foundation Summer Faculty Research Grant.     

A generalized theorem of the maximum

Summary This paper generalizes the Theorem of the Maximum (Berge [2]) to allow for discontinuous changes in the domain and the objective function. It also provides a geometrical version of the (generalized) theorem.This research was supported in part by National Science Foundation Grant SES-86-19012. Financial assistance was also provided, for Lawrence Ausubel, by the Lynde and Harry Bradley Foundation, and for Raymond Deneckere, by the Kellogg School of Management's Beatrice/Esmark Research Chair. We thank Alejandro Manelli and Israel Zang for many helpful conversations.     

Survival auctions

Dynamic clock auctions with drop-out information typically yield outcomes closer to equilibrium predictions than do comparable sealed-bid auctions. However, clock auctions require congregating bidders for a fixed time interval, which has limited field applicability and introduces inefficiencies of its own given the time cost of congregating bidders. In this experiment we explore the effects of removing these inefficiencies through survival auctions—a multi-round sealed-bid auction which is theoretically isomorphic to the dynamic clock auction with drop-out information. Kagel’s research was partially supported by National Science Foundation Grants No. 0136925 and 0136928. Any opinions, findings, and conclusions or recommendations in this material are those of the authors and do not necessarily reflect the views of the National Science Foundation. We thank the associate editor, an anonymous referee, seminar participants at Purdue University, especially Tim Cason, participants at International Industrial Organization April 2004 Conference, the ESA June 2003 meetings, and our discussant, Tim Salmon, for valuable comments. Kirill Chernomaz provided valuable research assistance. The usual caveat applies.     

Impostors in the Temple,by Martin Anderson

The Teaching Innovations Program (TIP) was a six-year project funded by the National Science Foundation that gave economics instructors the opportunity to learn interactive teaching strategies for use in undergraduate economics courses. TIP participants first attended a teaching workshop that presented various teaching strategies. They then could enroll in a follow-up program of online instruction and mentoring to learn more about one or two teaching strategies. TIP participants also had the opportunity to engage in the scholarship of teaching and learning economics to share their work. A retrospective survey was administered to the participants after attending the program to obtain a longitudinal assessment of TIP. This article presents the overall survey findings and discusses the results from each TIP phase (workshop, online instruction, and scholarship).     

Bounded rationality in laboratory bargaining with asymmetric information

Summary. This paper reports an experiment on two-player sequential bargaining with asymmetric information that features some forces present in multi-round monopoly pricing environments. Buyer-seller pairs play a series of bargaining games that last for either one or two rounds of offers. The treatment variable is the probability of continuing into a second round. Equilibrium predictions do a poor job of explaining levels of prices and treatment effects. As an alternative to the conventional equilibrium model, we consider models that allow for bounded rationality of subjects. The quantal response equilibrium model captures some of the important features of the results.Received: 30 April 2003, Revised: 10 December 2003, JEL Classification Numbers: C78, D82, D42, C91. Correspondence to: Timothy N. CasonThis research was funded in part by the National Science Foundation (SBR-9809110). The experiments were run at the Economic Science Laboratory of the University of Arizona and the Krannert Laboratory for Experimental Economic Research at Purdue University, using the z-Tree software developed at the Institute for Empirical Research at the University of Zurich (Fischbacher [8]). David Cooper, Rachel Croson, Charles Noussair, an anonymous referee, and conference participants at the Economic Science Association and the Society for the Advancement of Economic Theory meetings provided helpful comments. Timothy ONeill Dang, Thomas Wilkening and Marikah Mancini provided expert research assistance.     

Incentives,information, and organizational design

NÖG Lecture delivered to the annual meeting of the Austrian Economic Society, Vienna, September 29, 1988. Financial support from the Olin Foundation, the National Science Foundation, and the Hoover Institution is gratefully acknowledged. This paper is partly based on joint work undertaken with Raaj K. Sah, to whom I am most indebted. I have also benefitted greatly from conversations with Joseph Farrell. Research assistance of Serge Marquié and Rohit Rahi is gratefully acknowledged.