close the gaps a learning while doing algorithm for single product revenue management problems we consider a retailer selling a single product with limited on hand inventory over a finite selling season customer demand arrives according to a poisson process the rate of which is influenced by a single action taken by the retailer such as price adjustment sales commission advertisement intensity etc the relationship between the action and the demand rate is not known in advance however the retailer is able to learn the optimal action on the fly as she maximizes her total expected revenue based on the observed demand reactions using the pricing problem as an example we propose a dynamic learning while doing algorithm that only involves function value estimation to achieve a near optimal performance our algorithm employs a series of shrinking price intervals and iteratively tests prices within that interval using a set of carefully chosen parameters we prove that the performance of our algorithm is among the best of all possible algorithms in terms of the asymptotic regret the relative loss compared to the full information optimal solution our result closes the performance gaps between parametric and nonparametric learning and between the post price mechanism and the customer bidding mechanism important managerial insight from this research is that the values of information on both the parametric form of the demand function as well as each customer s exact reservation price are less important than prior literature suggests our results also suggest that firms would be better off to perform dynamic learning and action concurrently rather than sequentially

simultaneously learning and optimizing using controlled variance pricing price experimentation is an important tool for firms to find the optimal selling price of their products it should be conducted properly since experimenting with selling prices can be costly a firm therefore needs to find a pricing policy that optimally balances between learning the optimal price and gaining revenue in this paper we propose such a pricing policy called controlled variance pricing cvp the key idea of the policy is to enhance the certainty equivalent pricing policy with a taboo interval around the average of previously chosen prices the width of the taboo interval shrinks at an appropriate rate as the amount of data gathered gets large this guarantees sufficient price dispersion for a large class of demand models we show that this procedure is strongly consistent which means that eventually the value of the optimal price will be learned and derive upper bounds on the regret which is the expected amount of money lost due to not using the optimal price numerical tests indicate that cvp performs well on different demand models and time scales this paper was accepted by assaf zeevi stochastic models and simulation

price dispersion and incomplete learning in the long run abstract in each period a seller chooses a price and the customer for that period buys either one unit or nothing the relationship between price and purchase probability is one of two linear functions it is shown that the seller behaving optimally does not necessarily learn which function is the actual relationship since there can be a positive probability of sequences of prices converging to the price at which the two functions give the same purchase probability

on the surprising sufficiency of linear models for dynamic pricing with demand learning we consider a multiperiod single product pricing problem with an unknown demand curve the seller s objective is to adjust prices in each period so as to maximize cumulative expected revenues over a given finite time horizon in doing so the seller needs to resolve the tension between learning the unknown demand curve and maximizing earned revenues the main question that we investigate is the following how large of a revenue loss is incurred if the seller uses a simple parametric model that differs significantly i e is misspecified relative to the underlying demand curve we measure performance by analyzing the price trajectory induced by this misspecified model and quantifying the magnitude of revenue losses as a function of the time horizon relative to an oracle that knows the true underlying demand curve the price of misspecification is expected to be significant if the parametric model is overly restrictive somewhat surprisingly we show under reasonably general conditions that this need not be the case this paper was accepted by gerard cachon stochastic models and simulation

paradoxical effects of increasing the normal retirement age a prospective evaluation abstract a life cycle model that incorporates both disability insurance di and old age insurance oai is developed to study social security reforms and is compared to an alternative model without di the model with di predicts that increasing the normal retirement age nra causes a decrease in employment and an increase in di receipt and that the decrease of payroll tax revenue and the increase of di expenses combined offset about 40 of the decrease of oai expenses these paradoxical effects of increasing the nra are absent from the model without di i employ both models to search for reforms that will balance the government budget in an economy with an aging population which has the demographics for the year 2100 and find that the required change in tax and benefit rules differ substantially across the two models

social security disability insurance applications awards and lifetime income flows this article provides new evidence about the impact of social security disability insurance on male labor force participation decisions based on estimates from a structural model of applications awards and state contingent lifetime income flows the lifetime framework makes it possible to consider long term opportunity costs associated with early labor force withdrawal and the disincentive to applications resulting from the statutory waiting period before benefits may be received estimation techniques account for the self selected nature of the pool of applicants when predicting the individual specific probability of acceptance and the opportunity costs of applying

the rise in the disability rolls and the decline in unemployment between 1984 and 2001 the share of nonelderly adults receiving social security disability insurance income di rose by 60 percent to 5 3 million beneficiaries rapid program growth despite improving aggregate health appears to be explained by reduced screening stringency declining demand for less skilled workers and an unforeseen increase in the earnings replacement rate we estimate that the sum of these forces doubled the labor force exit propensity of displaced high school dropouts after 1984 lowering measured u s unemployment by one half a percentage point steady state calculations augur a further 40 percent increase in the rate of di receipt

technical note dynamic pricing and demand learning with limited price experimentation in a dynamic pricing problem where the demand function is not known a priori price experimentation can be used as a demand learning tool existing literature usually assumes no constraint on price changes but in practice sellers often face business constraints that prevent them from conducting extensive experimentation we consider a dynamic pricing model where the demand function is unknown but belongs to a known finite set the seller is allowed to make at most m price changes during t periods the objective is to minimize the worst case regret i e the expected total revenue loss compared with a clairvoyant who knows the demand distribution in advance we demonstrate a pricing policy that incurs a regret of ologmt or m iterations of the logarithm furthermore we describe an implementation of this pricing policy at groupon a large e commerce marketplace for daily deals the field study shows significant impact on revenue and bookings the e companion is available at https doi org 10 1287 opre 2017 1629

disability insurance benefits and labor supply a critical input for assessing the optimal size of disability insurance programs is the elasticity of labor force participation with respect to the generosity of benefits unfortunately this parameter has been difficult to estimate in the context of the u s disability insurance program since all workers face an identical benefits schedule i surmount this problem by studying the experience of canada which operates two distinct disability insurance programs for quebec and for the rest of canada the latter program raised its benefits by 36 percent in january 1987 whereas benefits in quebec were constant i find a sizable labor supply response to the policy change my central estimates imply an elasticity of labor force nonparticipation with respect to disability insurance benefits of 0 28 0 36

the impact of age pension eligibility age on retirement and program dependence evidence from an australian experiment abstract governments around the world are reforming their social security systems in light of the challenges posed by population aging we study the 1993 australian age pension reform which progressively increased the eligibility age for women from 60 to 65 years we find economically significant responses to the reform an increase in the eligibility age of one year induced a decline in the probability of retirement by 12 to 19 percentage points in addition the reform induced significant program substitution with increases in enrollment in other social insurance programs particularly the disability support pension which effectively functioned as an alternative source of retirement income

early retirement policy in the presence of competing exit pathways evidence from pension reforms in finland i study the effects of changes in the eligibility age thresholds for unemployment and part time pensions and the effect of tightening medical criteria for disability pension eligibility in finland particular attention is paid to the spillover effects of the pension reforms these pension reforms jointly raised the average age at which workers leave employment by 3 9 months mainly due to a sharp drop in disability pension enrolment from age 58 upwards and a lower incidence of unemployment at younger ages these effects are heterogeneous much of which is attributable to the spillover effects that vary across individuals

the social security early entitlement age in a structural model of retirement and wealth abstract a structural life cycle model of retirement and wealth attributes retirement peaks at both ages 62 and 65 to social security rules and wide heterogeneity in time preferences those with high discount rates often retire at 62 they have few assets and heavily value lost benefits from working after 62 largely ignoring potential increases in later benefits declining actuarial adjustments beginning at 65 induce those with low discount rates to retire at 65 raising the social security early entitlement age to 64 induces 5 of the population to delay retiring shifting the retirement spike from 62 to 64

the growth in the social security disability rolls a fiscal crisis unfolding the u s social security disability insurance di program has grown dramatically over the last 20 years in size and expense this growth poses significant risks to the finances of the di program and the broader social security system and raises troubling questions as to whether the program is being misused by claimants this article first provides an overview of the disability insurance program describing who qualifies for the program how an individual applies for benefits and how the level of benefits is determined next we summarize the factors responsible for the growth in the di rolls and discuss how the characteristics of di recipients have changed as a result we then explore the extent of moral hazard in the di program and the effectiveness of the screening process in distinguishing meritorious from nonmeritorious claims finally we identify the challenges that the di program creates for social security finances and social security reform and discuss potential reforms to the di program

the health and earnings of rejected disability insurance applicants applicants for social security disability benefits who fail to pass the medical screening form a natural control group for beneficiaries data drawn from the 1972 and 1978 surveys of the disabled done for the social security administration show that fewer than 50 percent of rejected male applicants work typical earnings of those that do are less than 59 percent of median earnings for other men their age these data cast doubt on recent econometric work that suggests that the disincentive effects of the social security disability program have been substantial copyright 1989 by american economic association

learning and pricing with models that do not explicitly incorporate competition in revenue management research and practice demand models are used that describe how demand for a seller s products depends on the decisions such as prices of that seller even in settings where the demand for a seller s products also depends on decisions of other sellers the models often do not explicitly account for such decisions it has been conjectured in the revenue management literature that such monopoly models may incorporate the effects of competition because the parameter estimates of the monopoly models are based on data collected in the presence of competition in this paper we take a closer look at such a setting to investigate the behavior of parameter estimates and decisions if monopoly models are used in the presence of competition we consider repeated pricing games in which two competing sellers use mathematical models to choose the prices of their products over the sequence of games each seller attempts to estimate the values of the parameters of a demand model that expresses demand as a function only of its own price using data comprised only of its own past prices and demand realizations we analyze the behavior of the sellers parameter estimates and prices under various assumptions regarding the sellers knowledge and estimation procedures and we identify situations in which a the sellers prices converge to the nash equilibrium associated with knowledge of the correct demand model b the sellers prices converge to the cooperative solution and c the sellers prices have many potential limit points that are neither the nash equilibrium nor the cooperative solution and that depend on the initial conditions we compare the sellers revenues at potential limit prices with their revenues at the nash equilibrium and the cooperative solution and we show that it is possible for sellers to be better off when using a monopoly model than at the nash equilibrium

did vietnam veterans get sicker in the 1990s the complicated effects of military service on self reported health abstract the veterans disability compensation vdc program which provides a monthly stipend to disabled veterans is the third largest american disability insurance program since the late 1990s vdc growth has been driven primarily by an increase in claims from vietnam veterans raising concerns about costs as well as health we use the draft lottery to study the long term effects of vietnam era military service on health and work in the 2000 census we find no evidence that military service affected overall employment rates or overall work limiting disability rates that is health conditions that make work difficult at the same time military service sharply increased federal transfer income especially for lower skilled white men among whom there was also a large negative impact on employment and a marked increase in disability rates the differential impact of vietnam era service on low skilled men cannot be explained by more combat or war theatre exposure for the least educated because high school graduates were at least as likely to be exposed to combat or war theatre as the less educated this leaves the relative attractiveness of vdc for less skilled men and the work disincentives embedded in the vdc system as a likely explanation for our findings

can social security explain trends in labor force participation of older men in the united states after a long decline the labor force participation rate lfpr of older men in the united states leveled off in the 1980s and began to increase in the late 1990s we examine how changes in social security rules affected these trends we attribute only a small portion of the decline from the 1960s 80s to the increasing generosity of social security over this period increases in the full retirement age and the delayed retirement credit explain one quarter to one half of the recent increase in the lfpr increasing educational attainment and increasing lfpr of married women also contributed to the recent rise

medicaid expansions for the working age disabled revisiting the crowd out of private health insurance disabled individuals under 65 years old account for 15 of medicaid recipients but half of all medicaid spending despite their large cost few studies have investigated the effects of medicaid expansions for disabled individuals on insurance coverage and crowd out of private insurance using an eligibility expansion that allowed states to provide medicaid to disabled individuals with incomes less than 100 of the federal poverty level i address these issues crowd out estimates range from 49 using an ordinary least squares procedure to 100 using two stage least squares analysis this potentially large degree of crowd out could have fiscal implications for the affordable care act which has greatly expanded medicaid eligibility in 2014

bayesian dynamic pricing policies learning and earning under a binary prior distribution motivated by applications in financial services we consider a seller who offers prices sequentially to a stream of potential customers observing either success or failure in each sales attempt the parameters of the underlying demand model are initially unknown so each price decision involves a trade off between learning and earning attention is restricted to the simplest kind of model uncertainty where one of two demand models is known to apply and we focus initially on performance of the myopic bayesian policy mbp variants of which are commonly used in practice because learning is passive under the mbp that is learning only takes place as a by product of actions that have a different purpose it can lead to incomplete learning and poor profit performance however under one additional assumption a constrained variant of the myopic policy is shown to have the following strong theoretical virtue the expected performance gap relative to a clairvoyant who knows the underlying demand model is bounded by a constant as the number of sales attempts becomes large this paper was accepted by gerard p cachon stochastic models and simulation

disability insurance rejection rates and the labor supply of older workers abstract we investigate the effects of trying to mitigate moral hazard in the disability insurance di program by raising the stringency of the screening process for applicants we do so by studying a dramatic increase in rejection rates for the di program in the late 1970s which varied substantially across the us states we find that each 10 rise in denial rates led to a statistically significant 2 8 fall in labor force non participation among 45 64 year old males we also find that the denial rate increases effectively targeted their incentive effects to more able individuals according to an anthropometric measure of disability

how do unemployment insurance benefits affect the decision to apply for social security disability insurance this paper examines whether unemployment insurance ui benefits affect the decision to apply for social security disability insurance di using data from the survey of income and benefits matched to administrative records on di applications i find that higher ui benefits reduce applications for di this substitution effect is imprecisely estimated but economically significant implying that a 1 00 increase in ui benefits reduces di expenditures by 15 cents recognizing this cost saving effect would increase the optimal ui benefit level by more than 20 percent for coefficients of relative risk aversion ranging from two to five

dynamic pricing under a general parametric choice model we consider a stylized dynamic pricing model in which a monopolist prices a product to a sequence of t customers who independently make purchasing decisions based on the price offered according to a general parametric choice model the parameters of the model are unknown to the seller whose objective is to determine a pricing policy that minimizes the regret which is the expected difference between the seller s revenue and the revenue of a clairvoyant seller who knows the values of the parameters in advance and always offers the revenue maximizing price we show that the regret of the optimal pricing policy in this model is theta sqrt t by establishing an omega sqrt t lower bound on the worst case regret under an arbitrary policy and presenting a pricing policy based on maximum likelihood estimation whose regret is cal o sqrt t across all problem instances furthermore we show that when the demand curves satisfy a well separated condition the t period regret of the optimal policy is log t numerical experiments show that our policies perform well

aching to retire the rise in the full retirement age and its impact on the social security disability rolls abstract the social security amendments of 1983 reduced the generosity of social security retired worker benefits in the u s by increasing the program s full retirement age from 65 to 67 and increasing the penalty for claiming benefits at the early retirement age of 62 these changes were phased in gradually so that individuals born in or before 1937 were unaffected and those born in 1960 or later were fully affected no corresponding changes were made to the program s disabled worker benefits and thus the relative generosity of social security disability insurance ssdi benefits increased in this paper we investigate the effect of the amendments on ssdi enrollment by exploiting variation across birth cohorts in the policy induced reduction in the present value of retired worker benefits our findings indicate that the amendments significantly increased ssdi enrollment since 1983 with an additional 0 6 of men and 0 9 of women between the ages of 45 and 64 receiving ssdi benefits in 2005 as a result of the changes our results further indicate that these effects will continue to increase during the next two decades as those fully exposed to the reduction in retirement benefit generosity reach their fifties and early sixties

labor supply effects of the recent social security benefit cuts empirical estimates using cohort discontinuities abstract in response to a crisis in social security financing two decades ago congress implemented an increase in the normal retirement age nra of 2 months per year for cohorts born in 1938 and after these cohorts began reaching retirement age in 2000 this paper studies the effects of these benefit cuts on recent retirement behavior the evidence suggests that the mean retirement age of the affected cohorts has increased by about half as much as the increase in the nra if older workers continue to increase their labor supply in the same way there might be important implications for the estimates of social security trust fund exhaustion that have played such a major role in recent discussions of social security reform

monetary policy regimes implications for the yield curve and bond pricing abstract we develop a multivariate dynamic term structure model which takes into account the nonlinear time varying relation between interest rates and the state of the economy in contrast to the classical term structure literature in which nonlinearities are captured by increasing the number of latent state variables or by latent regime shifts in our no arbitrage framework the regimes are governed by thresholds and are directly linked to economic fundamentals specifically starting from a simple monetary policy model for the short rate we introduce a parsimonious and tractable model for the yield curve which takes into account the possibility of regime shifts in the behavior of the federal reserve in our empirical analysis we show the merit of our approach three dimensions interpretable bond dynamics accurate short end yield curve pricing and yield curve implications

dynamic pricing with an unknown demand model asymptotically optimal semi myopic policies we consider a monopolist who sells a set of products over a time horizon of t periods the seller initially does not know the parameters of the products linear demand curve but can estimate them based on demand observations we first assume that the seller knows nothing about the parameters of the demand curve and then consider the case where the seller knows the expected demand under an incumbent price it is shown that the smallest achievable revenue loss in t periods relative to a clairvoyant who knows the underlying demand model is of order t in the former case and of order log t in the latter case to derive pricing policies that are practically implementable we take as our point of departure the widely used policy called greedy iterated least squares ils which combines sequential estimation and myopic price optimization it is known that the greedy ils policy itself suffers from incomplete learning but we show that certain variants of greedy ils achieve the minimum asymptotic loss rate to highlight the essential features of well performing pricing policies we derive sufficient conditions for asymptotic optimality

nonparametric advertising budget allocation with inventory constraint abstract in this paper we study the optimization problem of the advertising budget allocation for revenue management faced by a marketer besides the advertising budget the marketer is subject to an inventory constraint during the promotion season the marketer can affect sales by spending on advertising but does not initially know the relationship between the advertising expense and consequent sales we propose a nonparametric learning while doing budget allocation policy for the problem specifically we first conduct a sequence of advertising experiments to learn predict the market sales response through observing realized sales exploration then based on the learned sales function determine the following budget allocation planning exploitation in particular during the exploration and exploitation phases we need to balance the advertising and inventory budgets simultaneously we show that our policy is asymptotically optimal as the size of the market increases by constructing a worst case example we show that our policy achieves near best asymptotic performance we also provide numerical illustrations to show how our policy works and discuss how its performance changes as the system parameters vary we also glen some managerial implications of our model and policy from the numerical results

social security and households saving this paper provides new evidence on the substitutability between private and pension wealth by exploiting the italian pension reform of 1992 we use a difference in difference estimator that exploits the differential effects of the reform on individuals belonging to several yea of birth cohorts and different occupational groups we find convincing evidence that saving rates increase as a result of a reduction in pension wealth by allowing for the possibility that substitutability changes with age we find that substitutability is particularly high and precisely estimated for workers between 35 and 45

afdc ssi and welfare reform aggressiveness caseload reductions versus caseload shifting welfare reform has made receipt of cash benefits more difficult and less attractive for single mothers we examine whether reforms of afdc affected caseloads of another program supplemental security income ssi we exploit state variation in welfare reform over time and find that female headed households in states aggressively pursuing welfare reform were 21 6 percent more likely to receive ssi this implies that a decrease in caseloads in one program cannot be interpreted as an equal sized decrease in the number of families receiving public assistance in addition our results have policy implications for the well being of families affected by welfare reform time limits

the impact of economic conditions on participation in disability programs evidence from the coal boom and bust abstract we examine the impact of the coal boom of the 1970 s and the coal bust of the 1980 s on disability program participation these shocks provide clear evidence that as the value of labor market participation increases disability program participation falls for the disability insurance program the elasticity of payments with respect to local earnings is between 0 3 and 0 4 and for supplemental security income the elasticity is between 0 4 and 0 7 consistent with a model where qualifying for disability programs is costly the relationship between economic conditions and program participation is much stronger for permanent than for transitory economic shocks

who feels the calorie crunch and when the impact of school meals on cyclical food insecurity abstract monthly welfare programs such as the supplemental nutrition assistance program snap produce consistent cycles of expenditure and consumption among recipients food insecurity health status crime poor behavior and test scores track these cycles this paper leverages new data from the usda the foodaps survey to better understand these cycles in three ways first i find that expenditure and consumption cycles are correlated within households a fact not previously established second i study diet quality over the benefit month and find that it worsens potentially compounding the harmful consequences of cyclical food insecurity third i find that kids bear less of the burden of the consumption cycle than adults and that much of this difference may be driven by school meal programs this finding suggests large potential gains in child welfare from expanding summer meal programs

pension reform and labor supply abstract we exploit a comprehensive restructuring of the early retirement system in norway in 2011 to examine labor supply responses to increases in work incentives and actuarially neutral reductions in the age of first access to pension benefits we find that increasing the returns to work is a powerful policy the removal of an earnings test implying a doubling of the average net take home wage led to an increase in average labor supply by 7 h per week 30 at age 63 and by 8 h 46 at age 64 the responses primarily came at the extensive margin in contrast reducing the access age has almost no effect on labor supply in our setting with actuarially fair work incentives

the impact of stricter criteria for disability insurance on labor force participation this paper studies the effect of a large scale policy change in the austrian disability insurance program which tightened eligibility criteria for men above a certain age using administrative data on the universe of austrian private sector employees the results of difference in difference regressions suggest a substantial and statistically significant decline in disability enrollment of 6 to 7 4 percentage points and an increase in employment of 1 6 to 3 4 percentage points the policy change had important spillover effects into the unemployment and sickness insurance program specifically the share of individuals receiving unemployment benefits increased by 3 5 to 3 9 percentage points and the share receiving sickness insurance benefits by roughly 0 7 percentage points

asset accumulation and labor force participation of disability insurance applicants abstract this paper provides empirical evidence of the existence of forward looking asset accumulation behavior among disability insurance applicants previously examined only in the theoretical literature using panel data from the rand health and retirement study i show that rejected applicants for social security disability insurance ssdi possess significantly more assets than accepted applicants immediately prior to application and exhibit lower attachment to the labor force these empirical results are consistent with the theoretical prediction in diamond and mirrlees 1978 and golosov and tsyvinski 2006 that certain individuals with high unwillingness to work maximize utility by planning in advance for their future disability insurance application because the existing empirical literature on disability insurance does not account for this intertemporal channel it may underestimate the total work disincentive effect of ssdi

does raising the early retirement age increase employment of older workers two pension reforms in austria increased the early retirement age era from 60 to 62 for men and from 55 to 58 25 for women we find that raising the era increased employment by 9 75 percentage points among affected men and by 11 percentage points among affected women the reforms had large spillover effects on the unemployment insurance program but negligible effects on disability insurance claims specifically unemployment increased by 12 5 percentage points among men and by 11 8 percentage points among women the employment response was largest among high wage and healthy workers while low wage and less healthy workers either continued to retire early via disability benefits or bridged the gap to the era via unemployment benefits taking spillover effects and additional tax revenues into account we find that for a typical birth year cohort a one year increase in the era resulted in a reduction of net government expenditures of 107 million euros for men and of 122 million euros for women

cash on hand and competing models of intertemporal behavior new evidence from the labor market this paper presents new tests of the permanent income hypothesis and other widely used models of household behavior using data from the labor market we estimate the excess sensitivity of job search behavior to cash on hand using sharp discontinuities in eligibility for severance pay and extended unemployment insurance ui benefits in austria analyzing data for over one half million job losers we obtain three empirical results 1 a lump sum severance payment equal to two months of earnings reduces the job finding rate by 8 12 on average 2 an extension of the potential duration of ui benefits from 20 weeks to 30 weeks similarly lowers job finding rates in the first 20 weeks of search by 5 9 and 3 increases in the duration of search induced by the two programs have little or no effect on subsequent job match quality using a search theoretic model we show that estimates of the relative effect of severance pay and extended benefits can be used to calibrate and test a wide set of intertemporal models our estimates of this ratio are inconsistent with the predictions of a simple permanent income model as well as naive rule of thumb behavior the representative job searcher in our data is 70 of the way between the permanent income benchmark and credit constrained behavior in terms of sensitivity to cash on hand

should pensions be progressive abstract the present paper quantitatively characterizes the consequences of rising pension progressivity in an overlapping generations model with idiosyncratic income disability and longevity risk as well as endogenous labor supply at the intensive and extensive margin focusing on the german pension system which is purely earnings related we increase the degree of progressivity and compute the optimal mix between flat and earnings related pensions we find that a flat rate pension share of roughly 30 maximizes aggregate economic efficiency since improved insurance provision dominates higher labor supply distortions disability risk significantly increases the optimal progressivity level while endogenous retirement has important macroeconomic implications since our results are robust for a wide range of parameter specifications they indicate that at least in germany a move towards more redistribution within the pension system is efficient