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Publications

Theoretical Economics
Abstract

A single seller faces a sequence of buyers with unit demand. The buyers are forward-looking and long-lived. Each buyer has private information about his arrival time and valuation where the latter evolves according to a geometric Brownian motion. Any incentive-compatible mechanism has to induce truth-telling about the arrival time and the evolution of the valuation. We establish that the optimal stationary allocation policy can be implemented by a simple posted price. The truth-telling constraint regarding the arrival time can be represented as an optimal stopping problem which determines the first time at which the buyer participates in the mechanism. The optimal mechanism thus induces progressive participation by each buyer: he either participates immediately or at a future random time.

Theoretical Economics
Abstract

Decision theory can be used to test the logic of decision making---one may ask whether a given set of decisions can be justified by a decision-theoretic model. Indeed, in principal-agent settings, such justifications may be required---a manager of an investment fund may be asked what beliefs she used when valuing assets and a government may be asked whether a portfolio of rules and regulations is coherent. In this paper we ask which collections of uncertain-act evaluations can be simultaneously justified under the maxmin expected utility criterion by a single set of probabilities. We draw connections to the the Fundamental Theorem of Finance (for the special case of a Bayesian agent) and revealed-preference results.

Review of Economic Studies
Abstract

This article considers a class of experimentation games with Lévy bandits encompassing those of Bolton and Harris (1999, Econometrica67, 349–374) and Keller, Rady, and Cripps (2005, Econometrica73, 39–68). Its main result is that efficient (perfect Bayesian) equilibria exist whenever players’ payoffs have a diffusion component. Hence, the trade-offs emphasized in the literature do not rely on the intrinsic nature of bandit models but on the commonly adopted solution concept (Markov perfect equilibrium). This is not an artefact of continuous time: we prove that efficient equilibria arise as limits of equilibria in the discrete-time game. Furthermore, it suffices to relax the solution concept to strongly symmetric equilibrium.

Econometrica
Abstract

We construct an endogenous growth model with random interactions where firms are subject to distortions. The TFP distribution evolves endogenously as firms seek to upgrade their technology over time either by innovating or by imitating other firms. We use the model to quantify the effects of misallocation on TFP growth in emerging economies. We structurally estimate the stationary state of the dynamic model targeting moments of the empirical distribution of R&D and TFP growth in China during the period 2007–2012. The estimated model fits the Chinese data well. We compare the estimates with those obtained using data for Taiwan and perform counterfactuals to study the effect of alternative policies. R&D misallocation has a large effect on TFP growth.

Econometric Theory
Abstract

New methods are developed for identifying, estimating, and performing inference with nonstationary time series that have autoregressive roots near unity. The approach subsumes unit-root (UR), local unit-root (LUR), mildly integrated (MI), and mildly explosive (ME) specifications in the new model formulation. It is shown how a new parameterization involving a localizing rate sequence that characterizes departures from unity can be consistently estimated in all cases. Simple pivotal limit distributions that enable valid inference about the form and degree of nonstationarity apply for MI and ME specifications and new limit theory holds in UR and LUR cases. Normalizing and variance stabilizing properties of the new parameterization are explored. Simulations are reported that reveal some of the advantages of this alternative formulation of nonstationary time series. A housing market application of the methods is conducted that distinguishes the differing forms of house price behavior in Australian state capital cities over the past decade.

American Economic Journal: Economic Policy
Abstract

We analyze the long-term workforce composition when the quality of mentoring available to majority and minority juniors depends on their representation in the workforce. A workforce with at least 50 percent majority workers invariably converges to one where the majority is overrepresented relative to the population. To maximize welfare, persistent interventions, such as group-specific fellowships, are often needed, and the optimal workforce may include minority workers of lower innate talent than the marginal majority worker. We discuss the role of mentorship determinants, talent dispersion, the scope of short-term interventions, various policy instruments and contrast our results to the classic fairness narrative.