In some Bayesian games, payoff-relevant states are influenced by unobserved heterogeneity that also directly affects strategic decisions. When ignored, such endogeneity leads to erroneous parameter inference and policy implications. We introduce a control-function approach for estimating such...

This paper develops a dynamic model of retail competition and uses it to study the impact of the expansion of a new national competitor on the structure of urban markets. In order to accommodate substantial heterogeneity (both observed and unobserved) across agents and markets, the paper first...

In this short note, we show investors one way to calculate ideal investment sizing by using two rules of thumb based on a simple outline of individual risk aversion. We illustrate these two heuristics, which are not widely appreciated, with thought experiments involving coin flips and ketchup &...

What would you do if you were invited to play a game where you were given $25 and allowed to place bets for 30 minutes on a coin that you were told was biased to come up heads 60% of the time? This is exactly what we did, gathering 61 young, quantitatively trained men and women to play this...

Since the initial input-output (i-o) models conceived by Leontief in the 1930's, the input-output theory has gone through a lot of development at the theoretical as well as applied point of view. However, despite all the progress, there are two points that need further consideration into the...

This article is a prologue to the article "Why Markets are Inefficient: A Gambling 'Theory' of Financial Markets for Practitioners an Theorists", available here: 'http://ssrn.com/abstract=2925532' http://ssrn.com/abstract=2925532. It presents important background for that article - why gambling...

We propose conduct parameter based market power measures within a model of price discrimination, extending work by Hazledine (2006) and Kutlu (2012) to certain forms of second degree price discrimination. We use our model to estimate the market power of U.S. airlines in a price discrimination...

Determining a premium for an insured person in an insurance company takes under consideration many factors, such as the size and profitability of the insurance company. By standard insurance theory, the total premium is given by p 3 σ/√n when n is the number of assured members, p is the net...

We consider n parties with n corresponding utility functions, denoted by u₁,…,u_n. Given a positive amount of money C, a fair split of C is a vector (c₁,…,c_n)∈Rⁿ such that c₁ ⋯ c_n=C and u₁(c₁) = u₂(c₂) = ⋯ = u_n(c_n). In this paper we show the existence and uniqueness of a fair split to...

In the process of merging insured groups, a profit arises due to the reduced risk for the larger group. We study the profit that emerge, and we investigate different ways of splitting this profit between the groups. We use techniques from Game Theory, in particular these of cooperative games