Econometrics

A Variational Model for Urban Planning with Traffic CongestionA Variational Model for Urban Planning with Traffic Congestion

Author: 
Guillaume Carlier
Filippo Santambrogio
Date: 
Tue, Jul 11, 2006
Location: 
UBC, Vancouver, Canada
Conference: 
Summer School Frontiers in Mathematics and Economics
Abstract: 
A Variational Model for Urban Planning with Traffic Congestion

Equilibrium structure of a bidimensional asymmetric city

Author: 
Guillaume Carlier
Ivar Ekeland
Date: 
Tue, Jul 11, 2006
Location: 
UBC, Vancouver, Canada
Conference: 
Summer School Frontiers in Mathematics and Economics
Abstract: 
Equilibrium structure of a bidimensional asymmetric city

Dynamic Security Design

Author: 
Bruno Biais
Thomas Mariotti
Guillaume Plantin
Jean-Charles Rochet
Date: 
Sat, Jul 1, 2006
Location: 
UBC, Vancouver, Canada
Conference: 
Summer School Frontiers in Mathematics and Economics
Abstract: 
An entrepreneur with limited liability needs to finance an infinite horizon investment project. An agency problem arises because she can divert operating cash-flows before reporting them to the financiers. We first study the optimal contract in discrete time. This contract can be implemented by cash reserves, debt and equity. The latter is split between the financiers and the entrepreneur, and pays dividends when retained earnings reach a threshold. To provide appropriate incentives to the entrepreneur, the firm is downsized when it runs short of cash. We then study the continuous-time limit of the model. We prove the convergence of the discrete-time value functions and optimal contracts. Our analysis yields rich implications for the dynamics of security prices. Stock prices follow a diffusion reflected at the dividend barrier and absorbed at zero. Their volatility, as well as the leverage ratio of the firm, increase after bad performance. Stock prices and book-to-market ratios are in a non-monotonic relationship. A more severe agency problem entails lower price earning ratios and firm liquidity, and higher default risk.

On the Pricing of Corporate Debt: the Risk Structure of Interest Rates

Author: 
Robert Merton
Date: 
Sat, Jul 1, 2006
Location: 
University of British Columbia, Vancouver, Canada
Conference: 
Summer School Frontiers in Mathematics and Economics
Abstract: 
On the Pricing of Corporate Debt: the Risk Structure of Interest Rates.

On Long-Run Covariance Matrix Estimation with the Truncated Flat Kernel

Author: 
Shinichi Sakata
Date: 
Tue, Jun 3, 2008
Location: 
Simon Fraser University, Burnaby, Canada
Conference: 
PIMS Vancouver Econometrics Workshop
Abstract: 
Despite its large sample efficiency, the truncated flat (TF) kernel estimator of long-run covariance matrices is seldom used, because it lacks the guaranteed positive semidefiniteness and sometimes performs poorly in small samples, compared to other familiar kernel estimators. This paper proposes simple modifications to the TF estimator to enforce the positive definiteness without sacrificing the large sample efficiency and make the estimator more reliable in small samples through better utilization of the bias-variance tradeoff. We study the large sample properties of the modified TF estimators and verify their improved small-sample performances by Monte Carlo simulations.
Notes: 

Endogeneity and Discrete Outcomes

Author: 
Andrew Chesher
Date: 
Tue, Jun 3, 2008
Location: 
Simon Fraser University, Burnaby, Canada
Conference: 
PIMS Vancouver Econometrics Workshop
Abstract: 
This paper studies models for discrete outcomes which permit explanatory variables to be endogenous. In these models there is a single nonadditive latent variate which is restricted to be locally independent of instruments. The models are incomplete; they are silent about the nature of dependence between the latent variate and the endogenous variable and the role of the instrument in this relationship. These single equation IV models which, when an outcome is continuous, can have point identifying power, have only set identifying power when the outcome is discrete. Identification regions vary with the strength and support of instruments and shrink as the support of a discrete outcome grows. The paper extends the analysis of structural quantile functions with endogenous arguments to cases in which there are discrete outcomes.
Notes: 

`Oil'igopoly Exploration: Why Smaller Producers Explore More

Author: 
John R. Boyce,
Lucia Vojtassak
Date: 
Fri, Oct 7, 2005
Location: 
University of Calgary, Calgary, Canada
Conference: 
Alberta Conference on Industrial Organization
Abstract: 
The ‘oil’igopoly theory of oil production with fixed reserves predicts that firms with larger reserves will extract a larger quantity but a smaller proportion of their reserves. While this theory is supported when looking at production data, it is not supported when looking at changes in proven reserves data. This paper develops a theory of ‘oil’igopolistic oil exploration to explain trends observed in the world oil industry over the past fifty years. The ‘oil’igopoly theory of oil exploration predicts that firms with smaller proven reserves will do more exploration than firms with larger proven reserves, as well as reproducing the predictions of the ‘oil’igopoly oil production model. These predictions are consistent with international production and reserve data in the post-World War II era.

Coordination Cascades: Sequential Choice in the Presence of a Network Externality

Author: 
B. Curtis Eaton,
David Krause
Date: 
Fri, Oct 7, 2005
Location: 
University of Calgary, Calgary, Canada
Conference: 
Alberta Conference on Industrial Organization
Abstract: 
In the network externality literature, little, if any attention has been paid to the process through which consumers coordinate their adoption decisions. The primary objective of this paper is to discover how effectively rational individuals manage to coordinate their choices in a sequential choice framework. Since individuals make their choices with minimal information in this setting, perfect coordination will rarely be achieved, and it is therefore of some interest to discern both the extent to which coordination may be achieved, and the expected cost of the failure to achieve perfect coordination. We discover that when it counts, that is when the network externality is large, a substantial amount of coordination is achieved, and although perfect coordination is never guaranteed, expected relative efficiency is large.

Vertical Control of Inventory and Pricing Decisions

Author: 
Harish Krishnan,
Ralph A. Winter
Date: 
Fri, Oct 7, 2005
Location: 
University of Calgary, Calgary, Canada
Conference: 
Alberta Conference on Industrial Organization
Abstract: 

This paper offers a simple approach to the theory of decentralizing inventory and pricing decisions within a distribution system. We consider an upstream manufacturer selling to two outlets, which compete as differentiated duopolists and face uncertain demand. Demand spillovers between the outlets arise in the event of stock-outs. The price mechanism, in which each outlet simply pays a wholesale price and chooses price and inventory, never coordinates incentives efficiently. Contracts that can elicit first-best decisions include resale price floors or buy-back policies (retailer-held options to sell inventory back to the manufacturers) with fixed fees. The combination of a buy-back option plus a resale price ceiling elicits the first-best without the need for a fixed fee and is robust to asymmetry in information about demand at the time of contracting.

Estimating Disaggregate Production Functions: An Application to Northern Mexico

Author: 
Richard E. Howitt,
Siwa Msangi
Date: 
Sat, Mar 25, 2006
Location: 
University of British Columbia, Vancouver, Canada
Conference: 
PIMS 10th Anniversary Lectures
Abstract: 
This paper develops a method to estimate disaggregated production function models from minimal data sets.
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