minimum effort coordination games stochastic potential and logit equilibrium abstract this paper revisits the minimum effort coordination game with a continuum of pareto ranked nash equilibria noise is introduced via a logit probabilistic choice function the resulting logit equilibrium distribution of decisions is unique and maximizes a stochastic potential function in the limit as the noise vanishes the distribution converges to an outcome that is analogous to the risk dominant outcome for 2 2 games in accordance with experimental evidence logit equilibrium efforts decrease with increases in effort costs and the number of players even though these parameters do not affect the nash equilibria journal of economic literature classification numbers c72 c92

menu dependent stochastic feasibility we examine the role of stochastic feasibility in consumer choice using a random conditional choice set rule rccsr and uniquely characterize the model from conditions on stochastic choice data feasibility is modeled to permit correlation in availability of alternatives this provides a natural way to examine substitutability complementarity we show that an rccsr generalizes the random consideration set rule of manzini and mariotti 2014 we then relate this model to existing literature in particular an rccsr is not a random utility model

electoral outcomes with probabilistic voting and nash social welfare maxima abstract this paper provides unexpected support to nash s view of how bargaining determines the social choice we first present a spatial model of electoral competition with probabilistic voting and a very close relation between voters preferences and their choice probabilities the outcome of the electoral competition game is then shown to be precisely the social alternative that maximizes a nash type social welfare function theorem 1 this electoral outcome is also interpreted as a unanimity likelihood maximum corollary 1 within our framework existence and uniqueness of such an outcome are guaranteed corollaries 2 and 3

boundedly rational nash equilibrium a probabilistic choice approach we propose an equilibrium for n person finite games based on bounded rationality using the legit model of discrete choice theory at equilibrium each player uses appropriate choice probabilities given those used by the others rationality is parameterized on a continuum from complete rationality to uniform random choice results on the existence of equilibrium and on convergence to nash as rationality becomes perfect are similar to results due to mckelvey and palfrey we identify conditions such that for a given rationality parameter range the path of choices over time when the players use fictitious play converges to equilibrium c 1997 academic press

rational inattention dynamics inertia and delay in decision making we solve a general class of dynamic rational inattention problems in which an agent repeatedly acquires costly information about an evolving state and selects actions the solution resembles the choice rule in a dynamic logit model but it is biased towards an optimal default rule that does not depend on the realized state we apply the general solution to the study of i the sunk cost fallacy ii inertia in actions leading to lagged adjustments to shocks and iii the tradeoff between accuracy and delay in decision making

assessing the quality of household panel data the case of the panel study of income dynamics evidence from a number of methodological studies are used to assess the overall quality of data from the panel study of income dynamics psid despite substantial cumulative non response over the nearly two decades spanned by the study the sample is found to maintain its representation of the nonimmigrant population of the united states the most important reasons for this result are that the study s following rules insure that the sample replaces itself in the same manner as the population through the formation of new families by the offspring of old and that nonresponse is largely unsystematic nonresponse also appears to be largely random with respect to parameters in a number of behavioral models the accuracy of measures is assessed by comparing survey measures with national aggregates and with highly accurate individual validating data psid reports of transfer income appear to compare more favorably with program aggregates than do reports from other large scale surveys such as the current popul

decisions error and heterogeneity probabilistic choices or choice errors may play an important supporting role in shaping observed risky choices and a variety of restrictions on such choice probabilities play the role of identifying restrictions in empirical decision research we test six restrictions in the context of common ratio effect data for a general class of theories of risky choice two restrictions one for aggregate and one for individual data are supported but none of the heterogeneity restrictions that make the aggregate data model powerful survive scrutiny nor do estimable parametric versions of the individual data model there is room for new stochastic identifying restrictions in empirical decision research

rational inattention optimal consideration sets and stochastic choice we unite two basic approaches to modelling limited attention in choice by showing that the rational inattention model implies the formation of consideration sets only a subset of the available alternatives will be considered for choice we provide necessary and sufficient conditions for rationally inattentive behaviour which allow the identification of consideration sets in simple settings chosen options are those that are best on a stand alone basis in richer settings the consideration set can only be identified holistically in addition to payoffs prior beliefs impact consideration sets linear inequalities identify all priors consistent with each possible consideration set

foreclosure vacancy and crime abstract this paper examines the impact of residential foreclosures and vacancies on violent and property crime to overcome confounding factors a difference in difference research design is applied to a unique data set containing geocoded foreclosure and crime data from pittsburgh pennsylvania results indicate that while foreclosure alone has no effect on crime violent crime rates increase by roughly 19 once the foreclosed home becomes vacant an effect that increases with length of vacancy we find weak evidence suggesting a potential vacancy effect for property crime that is much lower in magnitude

traffic and crime abstract we study the link between crime and extreme traffic congestion to estimate the psychological costs of traffic our empirical analysis combines police incident reports with observations of local traffic data in los angeles from 2011 to 2015 this rich dataset allows us to link traffic with criminal activity at a fine spatial and temporal dimension our identification relies on deviations from normal traffic to isolate the impact of abnormally high traffic on crime we find that extreme traffic increases the incidence of domestic violence a crime shown to be affected by emotional cues but not other crimes the result is robust to a variety of specifications and falsification tests the results represent a lower bound of the psychological costs of traffic congestion since most drivers stuck in traffic do not commit domestic violence but still bear some emotional costs

homogeneity bias in models of discrete choice with bounded rationality abstract quantal response equilibrium captures bounded rationality in a strategic game by adopting a stochastic model of discrete choice along with the traditional rational expectation framework we examine the use of a single agent homogeneous parametric quantal response model e g logit response to describe the aggregate behavior of heterogeneous agents sharing the same parametric form for their quantal response functions but having individual rationality parameters in a symmetric population game for any parametric quantal response function arising from a unimodal distribution of exchangeable payoff disturbances we find that a mis specified homogeneous rationality parameter will have downward bias logit response is one such specification this result implies that empirical work that disregards heterogeneity underestimates subjects rationality

stimulating housing markets we study temporary fiscal stimulus designed to support distressed housing markets by inducing demand from buyers in the private market using difference in differences and regression kink research designs we find that the first time homebuyer credit increased home sales by 490 000 9 8 median home prices by 2 400 1 1 per standard deviation increase in program exposure and the transition rate into homeownership by 53 the policy response did not reverse immediately instead demand comes from several years in the future induced buyers were three years younger in 2009 than typical first time buyers the program s market stabilizing benefits likely exceeded its direct stimulus effects

precautionary price stickiness abstract this paper proposes a model in which retail prices are sticky even though firms can always change their prices at zero cost instead of imposing a menu cost we assume that more precise decisions are more costly in equilibrium firms optimally make some errors in price setting thus economizing on managerial time both the time cost of choice and the resulting risk of errors give firms an incentive to leave their prices unchanged until they perceive a sufficiently costly deviation from the optimal price we show that this error prone control cost framework helps explain many puzzling observations from microdata however on the macroeconomic side pricing errors do little to explain the real effects of monetary shocks

equilibrium without independence abstract because players whose preferences violate the von neumann morgenstern independence axiom may be unwilling to randomize as mixed strategy nash equilibrium would require a nash equilibrium may not exist without independence this paper generalizes nash s definition of equilibrium retaining its rational expectations spirit but relaxing its requirement that a player must bear as much uncertainty about his own strategy choice as other players do the resulting notion equilibrium in beliefs is equivalent to nash equilibrium when independence is satisfied but exists without independence this makes it possible to study the robustness of equilibrium comparative statics results to violations of independence

dynamic logit with choice aversion we characterize a generalization of discounted logistic choice that incorporates a parameter to capture different views the agent might have about the costs and benefits of larger choice sets the discounted logit model used in the empirical literature is the special case that displays a preference for flexibility in the sense that the agent always prefers to add additional items to a menu other cases display varying levels of choice aversion where the agent prefers to remove items from a menu if their ex ante value is below a threshold we show that higher choice aversion as measured by dislike of bigger menus also corresponds to an increased preference for putting off decisions as late as possible

foreclosure contagion and the neighborhood spillover effects of mortgage defaults in this paper i identify shocks to interest rates resulting from two administrative details in adjustable rate mortgage contract terms the choice of financial index and the choice of lookback period i find that a 1 percentage point increase in interest rate at the time of adjustable rate mortgage arm reset results in a 2 5 percentage increase in the probability of foreclosure in the following year and that each foreclosure filing leads to an additional 0 3 to 0 6 completed foreclosures within a 0 10 mile radius in explaining this result i emphasize price effects bank supply responses and borrower responses arising from peer effects

the panel study of income dynamics after fourteen years an evaluation this article considers the representativeness of the panel study of income dynamics psid over its 14 year history from 1968 to 1981 given the dynamics of entry and exit from the panel by 1981 40 of the original members had left the sample and were replaced by new entrants who joined either existing households or new households being formed by members of the original sample we consider the distribution of demographic characteristics and earnings equations over time and we compare the psid with the current population survey cps by either approach we find little evidence that the psid has become unrepresentative

an analysis of sample attrition in panel data the michigan panel study of income dynamics by 1989 the michigan panel study on income dynamics psid had experienced approximately 50 percent sample loss from cumulative attrition from its initial 1968 membership we study the effect of this attrition on the unconditional distributions of several socioeconomic variables and on the estimates of several sets of regression coefficients we provide a statistical framework for conducting tests for attrition bias that draws a sharp distinction between selection on unobservables and on observables and that shows that weighted least squares can generate consistent parameter estimates when selection is based on observables even when they are endogenous our empirical analysis shows that attrition is highly selective and is concentrated among lower socioeconomic status individuals we also show that attrition is concentrated among those with more unstable earnings marriage and migration histories nevertheless we find that these variables explain very little of the attrition in the sample and that the selection that occurs is moderated by regression to the mean effects from selection on transitory components that fade over time consequently despite the large amount of attrition we find no strong evidence that attrition has seriously distorted the representativeness of the psid through 1989 and considerable evidence that its cross sectional representativeness has remained roughly intact

statistical testing of bounded rationality with applications to the newsvendor model abstract in this paper we define bounded rationality in terms of probabilistic cost efficiency this establishes a framework where bounded rationality can be examined rigorously by statistical methods we apply this theory to data from laboratory experiments on the newsvendor model we enter into a theoretical discussion of the classical pull to center effect and explain why underorders are typically larger than overorders

probabilistic choice and procedurally bounded rationality abstract we derive a family of probabilistic choice models including the multinomial logit model from a microeconomic model in which the decision maker has to make some effort in order to implement any desired outcome the disutility of this effort enters the decision maker s goal function in an additively separable way a particular disutility function yielding the multinomial logit as a special case is characterized axiomatically the present approach naturally leads to a normalization of the achieved utility with respect to the number of alternatives the approach also applies to continuum choice sets in euclidean spaces and provides a microeconomic foundation for logit type quantal response models in game theory

animals choices over uncertain outcomes further experimental results the betweenness axiom of expected utility theory which is not required under several nonexpected utility formulations is examined choices are checked for independence axiom violations in the allais direction and for fanning out in little explored areas of the unit probability triangle as predicted by machina s hypothesis ii the data show allais type violations of the independence axiom systematic failure of the fanning out hypothesis in the northwest portion of the unit probability triangle and consistent violations of the betweenness axiom in favor of folded orderings results are related to findings from human choice experiments exploring similar phenomena copyright 1991 by royal economic society