Stefanie Brilon, S. Grassi, Manuel Grieder, Jonathan F. Schulz
{"title":"Strategic Competition and Self-Confidence","authors":"Stefanie Brilon, S. Grassi, Manuel Grieder, Jonathan F. Schulz","doi":"10.2139/ssrn.3481057","DOIUrl":"https://doi.org/10.2139/ssrn.3481057","url":null,"abstract":"This study tests the hypothesis that competitive strategic interactions foster overconfidence. We experimentally compare a strategic environment in which players have an incentive to overstate their own ability to deter competitors and avoid competition with a nonstrategic environment in which these incentives are removed. Subsequently, we measure the participants’ confidence. Overconfidence persists in the former environment but vanishes in the latter. We provide evidence for three mechanisms that contribute to the persistence of overconfidence. First, participants who win uncontested update their confidence as if they had won in an actual competition. Second, by contrast, participants who do not compete do not update their confidence, thus creating an asymmetry in updating. Third, inflated ability messages are “contagious” because they affect positively how their receivers update their confidence. We provide empirical evidence on the role of these mechanisms to explain the Dunning–Kruger effect and gender differences in confidence. This paper was accepted by Yan Chen, behavioral economics and decision analysis. Supplemental Material: The data files and online appendices are available at https://doi.org/10.1287/mnsc.2023.4688 .","PeriodicalId":11465,"journal":{"name":"Econometrics: Econometric & Statistical Methods - General eJournal","volume":"s3-45 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-10-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90837713","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Persuasion with Coarse Communication","authors":"Yunus C. Aybas, E. Turkel","doi":"10.2139/ssrn.3540677","DOIUrl":"https://doi.org/10.2139/ssrn.3540677","url":null,"abstract":"Persuasion is an exceedingly difficult task. A leading cause of this difficulty is the misalignment of preferences, which is studied extensively by the literature on persuasion games. However, the difficulty of communication also has a first order effect on the outcomes and welfare of agents. Motivated by this observation, we study a model of Bayesian Persuasion in which the communication between the sender and the receiver is constrained. This is done by allowing the cardinality of the signal space to be less than the cardinality of the action space and the state space, which limits the number of action recommendations that the sender can make. Existence of a maximum to the sender's problem is proven and its properties are characterized. This generalizes the standard Bayesian Persuasion framework, in which existence results rely on the assumption of rich signal spaces. We analyze the sender's willingness to pay for an additional signal as a function of the prior belief, which can be interpreted as the value of precise communication. We provide an upper bound for this value which applies to all finite persuasion games. While increased precision is always better for the sender, we show that the receiver might prefer coarse communication. We show this by analyzing a game of advice seeking, where the receiver has the ability to choose the size of the signal space.","PeriodicalId":11465,"journal":{"name":"Econometrics: Econometric & Statistical Methods - General eJournal","volume":"93 5 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-10-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87662710","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Quasilinear Quadratic Utility Model: An Overview","authors":"Philippe Choné, Laurent Linnemer","doi":"10.2139/ssrn.3422221","DOIUrl":"https://doi.org/10.2139/ssrn.3422221","url":null,"abstract":"The quasi-linear quadratic utility model is widely used in economics. The knowledge of its exact origin is less widespread. A first contribution of the paper is to explain the genesis of this model. Next, we review the main properties of the general model, mainly following the previous literature. Finally, it is shown that all the tractable versions of the model used in practice are (almost) identical and have a mean variance structure. We provide ready-to-use formulae for this symmetric model.","PeriodicalId":11465,"journal":{"name":"Econometrics: Econometric & Statistical Methods - General eJournal","volume":"20 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76842769","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Ambiguous State Dynamics, Learning, and Endogenous Long-Run Risk","authors":"Hongseok Choi","doi":"10.2139/ssrn.3399366","DOIUrl":"https://doi.org/10.2139/ssrn.3399366","url":null,"abstract":"This paper considers learning about unobservable state variables when their dynamics are ambiguous. Ambiguity in dynamics, differently from that in a parameter, is never fully resolved; and, since data are to be filtered through the state equation, learning about the state becomes more difficult, permanently. This endogenously amplifies the long-run risk in estimation. An application to the long-run risks model shows that some of the large long-run risk (and high risk aversion) required by returns data can be attributed to this lack of confidence.","PeriodicalId":11465,"journal":{"name":"Econometrics: Econometric & Statistical Methods - General eJournal","volume":"18 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74948284","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Simultaneous Two-Dimensional Continuous-Time Markov Chain Approximation of Two-Dimensional Fully Coupled Markov Diffusion Processes","authors":"Yuejuan Xi, Kailin Ding, Ning Ning","doi":"10.2139/ssrn.3461115","DOIUrl":"https://doi.org/10.2139/ssrn.3461115","url":null,"abstract":"In this paper, we propose a novel simultaneous two-dimensional continuous-time Markov chain (CTMC) approximation method, in contrast to the existing double-layer approach, to approximate the general fully coupled Markov diffusion processes which cover all the classical models. Extensive simulation studies on different kinds of financial option pricing problems in the European, American, and barrier settings, confirm that the proposed methodology has superior accuracy and outperforms the widely applicable Monte Carlo (MC) simulation approach consistently.","PeriodicalId":11465,"journal":{"name":"Econometrics: Econometric & Statistical Methods - General eJournal","volume":"98 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-09-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85216730","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Copulas and the Quantity Theory of Money","authors":"E. Weber","doi":"10.2139/ssrn.3456812","DOIUrl":"https://doi.org/10.2139/ssrn.3456812","url":null,"abstract":"The quantity theory of money remains a cornerstone of modern macroeconomics that provides a benchmark for the long-run behaviour of macroeconomic models. The direct empirical evidence for it is, however, less conclusive than suggested by scatterplots and the exaggerated correlations between money growth and inflation that can be found in the macroeconomic literature. Copulas with upper tail dependence show a considerably weaker relationship between money growth and inflation than Pearson’s r. Even so, the quantity theory will continue to be part of macroeconomics because economics as a science is driven both by observation and by the inherent structure of the accumulated body of economic theory.","PeriodicalId":11465,"journal":{"name":"Econometrics: Econometric & Statistical Methods - General eJournal","volume":"17 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-09-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90244865","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Measuring Linear Correlation Between Random Vectors","authors":"Giovanni Puccetti","doi":"10.2139/ssrn.3116066","DOIUrl":"https://doi.org/10.2139/ssrn.3116066","url":null,"abstract":"We introduce a new scalar coefficient to measure linear correlation between random vectors which preserves all the relevant properties of Pearson’s correlation in arbitrary dimensions. The new measure and its bounds are derived from a mass transportation approach in which the expected inner product of two random vectors is taken as a measure of their covariance and then standardized by the maximal attainable value given their marginal covariance matrices. In several simulative studies we show the limiting distribution of the empirical estimator of the newly defined index and of the corresponding rank correlation. A comparative study shows that our proposed correlation, though derived from a novel approach, behaves similarly to some of the multivariate dependence notions recently introduced in the literature. Throughout the paper, we also give some auxiliary results of independent interest in matrix analysis and mass transportation theory, including an improvement to the Cauchy-Schwarz inequality for positive definite covariance matrices.","PeriodicalId":11465,"journal":{"name":"Econometrics: Econometric & Statistical Methods - General eJournal","volume":"67 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-09-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84040809","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Models Where the Least Trimmed Squares and Least Median of Squares Estimators Are Maximum Likelihood","authors":"Vanessa Berenguer-Rico, S. Johansen, B. Nielsen","doi":"10.2139/ssrn.3455870","DOIUrl":"https://doi.org/10.2139/ssrn.3455870","url":null,"abstract":"The Least Trimmed Squares (LTS) and Least Median of Squares (LMS) estimators are popular robust regression estimators. The idea behind the estimators is to fi?nd, for a given h; a sub-sample of h '?good' ?observations among n observations and estimate the regression on that sub-sample. We fi?nd models, based on the normal or the uniform distribution respectively, in which these estimators are maximum likelihood. We provide an asymptotic theory for the location-scale case in those models. The LTS estimator is found to be h1/2 consistent and asymptotically standard normal. The LMS estimator is found to be h consistent and asymptotically Laplace.","PeriodicalId":11465,"journal":{"name":"Econometrics: Econometric & Statistical Methods - General eJournal","volume":"113 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-09-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79035842","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"A Competing Risks Model with Time-varying Heterogeneity and Simultaneous Failure","authors":"Ruixuan Liu","doi":"10.2139/ssrn.3456382","DOIUrl":"https://doi.org/10.2139/ssrn.3456382","url":null,"abstract":"This paper proposes a new bivariate competing risks model in which both durations are the first passage times of dependent Lévy subordinators with exponential thresholds and multiplicative covariates effects. Our specification extends the mixed proportional hazards model, as it allows for the time‐varying heterogeneity represented by the unobservable Lévy processes and it generates the simultaneous termination of both durations with positive probability. We obtain nonparametric identification of all model primitives given competing risks data. A flexible semiparametric estimation procedure is provided and illustrated through the analysis of a real dataset.","PeriodicalId":11465,"journal":{"name":"Econometrics: Econometric & Statistical Methods - General eJournal","volume":"22 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-09-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75230326","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"A Practical Method for Testing Many Moment Inequalities","authors":"Yuehao Bai, Andrés Santos, A. Shaikh","doi":"10.2139/ssrn.3454610","DOIUrl":"https://doi.org/10.2139/ssrn.3454610","url":null,"abstract":"This paper considers the problem of testing a finite number of moment inequalities. For this problem, Romano et al. (2014) propose a two-step testing procedure. In the first step, the procedure incorporates information about the location of moments using a confidence region. In the second step, the procedure accounts for the use of the confidence region in the first step by adjusting the significance level of the test appropriately. An important feature of the proposed method is that it is “practical” in the sense that it remains computationally feasible even if the number of moments is large. Its justification, however, has so far been limited to settings in which the number of moments is fixed with the sample size. In this paper, we provide weak assumptions under which the same procedure remains valid even in settings in which there are “many” moments in the sense that the number of moments grows rapidly with the sample size. We confirm the practical relevance of our theoretical guarantees in a simulation study. We additionally provide both numerical and theoretical evidence that the procedure compares favorably with the method proposed by Chernozhukov et al. (2019), which has also been shown to be valid in such settings.","PeriodicalId":11465,"journal":{"name":"Econometrics: Econometric & Statistical Methods - General eJournal","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2019-09-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89741878","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}