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.     

On the existence of optimal processes in non-stationary environments

We consider an aggregative model of intertemporal allocation under uncertainty, in which the utility and production functions are allowed to be time dependent, the random shocks occurring in each period are entirely arbitrary, and the production functions are permitted to be non-concave. In this framework, we provide a theorem on the existence of infinite-horizon optimal processes. In the course of establishing this result, we obtain the existence of optimal policy functions and we show that they are monotone in the stock levels.This paper has benefitted from the comments of two referees of the journal. Research of the first author was supported by a National Science Foundation Grant.     

Intangible capital,corporate valuation and asset pricing

Recent studies have found unmeasured intangible capital to be large and important. In this paper we observe that by nature intangible capital is also very different from physical capital. We find it plausible to argue that the accumulation process for intangible capital differs significantly from the process by which physical capital accumulates. We study the implications of this hypothesis for rational firm valuation and asset pricing using a two-sector general equilibrium model. Our main finding is that the properties of firm valuation and stock prices are very dependent on the assumed accumulation process for intangible capital. If one entertains the possibility that intangible investments translates into capital stochastically, we find that plausible levels of macroeconomic volatility are compatible with highly variable corporate valuations, P/E ratios and stock returns. We thank Ellen McGrattan, Edward Prescott, Rene Stulz and an anonymous referee for their helpful comments as well as workshop participants at FAME, the 5th Conference of the Swiss Society for Financial Market Research, the European Central Bank, Columbia Business School Finance Free Lunch and the University of Zürich. This research has benefited from financial support from the National Center for Competence in Research “Financial Valuation and Risk Management”. The National Centers of Competence in Research are managed by the Swiss National Science Foundation on behalf of the Federal Authorities.     

Selection dynamics and adaptive behavior without much information

This paper uses the experimental method to investigate behavior in a coordination game when the information available to subjects is limited to their feasible choices and their experienced payoffs. In the experiment subjects converge to an absorbing state at rates that are orders of magnitude faster than reinforcement learning algorithms, but slower than under complete information. This state is very close to a mutual best response outcome. All cohorts converged to the market statistic predicted by the interior equilibrium regardless of the information conditions or the stability conditions. Eric Battalio programmed the graphical user interface. The National Science Foundation and Texas Advanced Research Program provided financial support. Any opinions, findings, and conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of the National Science Foundation or the Texas Advanced Research Program.     

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.     

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.     

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.     

Transport development and the evolution of economic geography

In this paper, based on the recent advances in the new economic geography (e.g., Fujita et al. [12]), we analyze impacts of transport costs on the spatial patterns of economic agglomeration. We first identify prototypes from the existing models, and explain the mechanism of how transport costs influence the balance between economic forces of agglomeration and dispersion. We then investigate the transformation of the agglomeration/dispersion patterns given gradually decreasing transport costs for different goods.Received: Received: July 2004 / Accepted: January 2005, Accepted: Received: July 2004 / Accepted: January 2005, JEL Classification: R12Tomoya Mori: Correspondence toThe authors are grateful to David Bernstein, Tatsuo Hatta, Komei Sasaki, Tony E. Smith, and two anonymous referees for their valuable comments. This research is partly supported by The Grant in Aid for Research 08403001 of Ministry of Education, Science and Culture in Japan, the Murata Science Foundation, and WESCO Civil Engineering Technology Foundation.     

Mortality,Human Capital and Persistent Inequality

Available evidence suggests high intergenerational correlation of economic status and persistent disparities in health status between the rich and the poor. This paper proposes a mechanism linking the two. We introduce health capital into a two-period overlapping generations model. Private health investment improves the probability of surviving from the first period of life to the next and, along with education, enhances an individual’s labor productivity. Poorer parents are of poor health, unable to invest much in reducing mortality risk and improving their human capital. Consequently, they leave less for their progeny. Despite convex preferences and technologies, initial differences in economic and health status may perpetuate across generations when annuities markets are imperfect.Additional support was provided by the National Science Foundation. Additional support was provided by the National Science Foundation.     

Hours and employment variation in business cycle theory

Summary Previous business cycle models have made the assumption that all the variation in the labor input is either due to changes in hours per worker or changes in number of workers, but not both. In this paper, both vary. We think this is a better model for estimating the contribution of Solow technology shocks to aggregate fluctuations. We find that about 70% of the variance of U.S. postwar cyclical fluctuations is induced by variations in the Solow technology parameter.This material is based on work supported by the National Science Foundation under Grant Numbers SES-8722451 and SES-8909361. The Government has certain rights to this material.Any opinions, findings, conclusions, or recommendations expressed herein are those of the authors and not necessarily those of the National Science Foundation, the University of Minnesota, the Federal Reserve Bank of Minneapolis, or the Federal Reserve System.     

A competitive model of economic geography

Summary. Most of the literature argues that competitive analysis has nothing interesting to say about location. This paper argues, to the contrary, that a competitive model can have something interesting to say about location, provided that locations are not identical and transportation costs are not zero. To do this, it constructs a competitive intertemporal general equilibrium model and applies it to a suggestive example of migration.Received: 25 August 2003, Revised: 18 December 2003, JEL Classification Numbers: D5, R0.Our interest in this topic has been stimulated over the years by many conversations with Marcus Berliant. We thank an anonymous referee for exceptionally careful and useful comments. Financial support from the UCLA Academic Committee on Research (Ellickson, Zame) and the National Science Foundation (Zame) is gratefully acknowledged. Views expressed here are those of the authors and do not necessary reflect the views of any funding agency.     

Closed-loop equilibrium in a multi-stage innovation race

Summary. We examine a multistage model of an R&D race where players have multiple projects. We also develop perturbation methods for general dynamic games that can be expressed as analytic operators in a Banach space. We apply these perturbation methods to solve races with a small prize. We compute second-order asymptotically valid solutions for equilibrium and socially optimal decisions to determine qualitative properties of equilibrium. We find that innovators invest relatively too much on risky projects. Strategic reactions are ambiguous in general; in particular, a player may increase expenditures as his opponent moves ahead of him. Received: January 3, 2002; revised version: June 14, 2002 RID="*" ID="*" This is the final version of Judd (1985). The author gratefully acknowledges the comments of anonymous referees, Paul Milgrom, seminar participants at Northwestern University, the University of Chicago, the 1984 Summer Meetings of the Econometric Society, University of California at Berkeley, Stanford University, and Yale University, and the financial support of the National Science Foundation (SES-8409786, SES-8606581)     

The Laboratory-Based Economics Curriculum

The liberal arts, computer laboratory-based economics program at Denison University is described. This National Science Foundation–supported curriculum development project is one of those highlighted in the article on the economics major in this issue.     

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.     

大学技术转移服务机构的发展策略研究——基于国家技术转移促进行动的分析

国家技术转移促进行动的实施为大学技术转移服务机构迎来了良好的发展机遇。对大学技术转移中心、大学科技园、生产力促进中心、工程（技术）研究中心等现阶段大学技术转移服务机构主要类型的功能定位进行了分析,指出几类大学技术转移服务机构的功能定位虽然不同,但都在促进大学技术转移方面发挥了重要作用。对国家技术转移促进行动关于大学技术转移及其服务机构的相关政策进行了解读。在国家新型技术转移体系中,大学作为国家技术转移体系建设的重要环节,充分发挥技术转移服务机构的作用,大力促进技术转移意义重大。以国家技术转移促进行动为契机,应从技术转移服务机构运行机制的完善、技术转移服务机构的扶持、科学的知识产权管理办法、合理的科技人员评价机制以及技术转移机构专业人员的培训等多方面入手加强大学技术转移服务机构的发展。     

国家工程技术研究中心运行模式及路径选择研究

各国家工程技术研究中心的运作与经营模式具有不同的特点。本文从利益博弈机制和产权分析的角度,对国家工程技术研究中心的不同运行模式进行了理论阐述,并对其与依托单位、下游企业、科技部等相关利益主体的关系及路径选择基础进行了充分论证,指出当前研究中心的运行机制和模式是各利益相关主体利益博弈取得均衡后的结果,最后在此基础上从产权改革和外部支撑环境两方面提出政策建议。     

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.     

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.     

Evolutionary choice of markets

We consider an economy where a finite set of agents can trade on one of two asset markets. Due to endogenous participation the markets may differ in the liquidity they provide. Traders have idiosyncratic preferences for the markets, e.g.due to differential time preferences for maturity dates of futures contracts. For a broad range of parameters we find that no trade, trade on both markets (individualization) as well as trade on one market only (standardization) is supported by a Nash equilibrium. By contrast, whenever the number of traders becomes large, the evolutionary process selects a unique stochastically stable state which corresponds to the equilibrium with two active markets and coincides with the welfare maximizing market structure. We are grateful to Thorsten Hens, Fernando Vega-Redondo and a referee for valuable comments. We also thank seminar participants at the University of Zurich, the CES research seminar at the University of Munich, the Koc University in Istanbul as well as conference participants at the SAET conference in Ischia, the ESEM in Lausanne and the ESF workshop on Behavioural Models in Economics and Finance in Vienna. A first version of the paper was written while Marc Oliver Bettzüge was visiting the Institute for Empirical Research in Economics at the University of Zurich. Financial Support by the Swiss Banking Institute and by the National Centre of Competence in Research “Financial Valuation and Risk Management” (NCCR FINRISK) is gratefully acknowledged. The NCCR FINRISK is a research program supported by the Swiss National Science Foundation.