Relevant parameter changes in structural break models

Dufays, Arnaud, and Jeroen VK Rombouts. “Relevant parameter changes in structural break models." Journal of Econometrics (2019). [PDF]


Structural break time series models, which are commonly used in macroeconomics and finance, capture unknown structural changes by allowing for abrupt changes to model parameters. However, most specifications suffer from an over-parametrization issue, since all parameters have to change when a break occurs. We introduce a sparse change-point model to detect which parameters change over time. We propose a shrinkage prior distribution, which controls model parsimony by limiting the number of parameters that change from one structural break to another. We develop a Bayesian sampler for inference on the sparse change-point model. An extensive simulation study based on AR, ARMA and GARCH processes highlights the excellent performance of the sampler. We then propose three empirical applications. First, we revisit the US three-month Treasury bill modelling proposed in Pesaran, Pettenuzzo, and Timmermann (2006) to emphasize that many of the detected breaks are due to a change in only a subset of the model parameters. A second application consists of studying the 22 most-used macroeconomic time series for breaks in parameters. As a final exercise, we summarize GARCH parameter breaks detected in 384 financial returns for companies in the S&P 500 index.







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Roth, Alvin E. “Laboratory experimentation in economics: A methodological overview." The Economic Journal 98.393 (1988): 974-1031. [PDF] [PDF2]


Laboratory experimentation in economics

Roth, Alvin E. “Laboratory experimentation in economics." Economics & Philosophy 2.2 (1986): 245-273. [PDF]

==original abstract==





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Article: 5G 競標第 5 天,第 42 回合暫總標金 346.86 億元

5G 競標第 5 天,第 42 回合暫總標金 346.86 億元; 2020年拍賣最終結果:5G競標終拍板!一圖搞清楚總標金1380.81億元這樣分配

5G 第一波釋照 10 日開始競標,底價訂為新台幣 300 億元,由於 28GHz 和 1800MHz 仍有區塊無業者出價,靠著最熱門的頻段 3.5GHz 競爭,暫時總得標金在第 23 回合超越底價 300 億元,業界認為這次的競標偏向冷靜、理性。

今天競標進入第 5 天,第 42 回合總標金為 346.86 億元,最熱門的頻段 3.5GH z暫得標金 336.56 億元,28GHz 的熱度提升,暫時得標 10 個區塊,暫得標金 10.3 億元,1800MHz 尚無人出手。

The economist as engineer: Game theory, experimentation, and computation as tools for design economics

Roth, Alvin E. “The economist as engineer: Game theory, experimentation, and computation as tools for design economics." Econometrica 70.4 (2002): 1341-1378. [PDF] [**]


Economists have lately been called upon not only to analyze markets, but to design them. Market design involves a responsibility for detail, a need to deal with all of a market’s complications, not just its principle features. Designers therefore cannot work only with the simple conceptual models used for theoretical insights into the general working of markets. Instead, market design calls for an engineering approach. Drawing primarily on the design of the entry level labor market for American doctors (the National Resident Matching Program), and of the auctions of radio spectrum conducted by the Federal Communications Commission, this paper makes the case that experimental and computational economics are natural complements to game theory in the work of design. The paper also argues that some of the challenges facing both markets involve dealing with related kinds of complementarities, and that this suggests an agenda for future theoretical research.

KEYWORDS:Market design, game theory, experimental economics, computational economics

Mindful economics: The production, consumption, and value of beliefs

Bénabou, Roland, and Jean Tirole. “Mindful economics: The production, consumption, and value of beliefs." Journal of Economic Perspectives 30.3 (2016): 141-64. [PDF]


人類的 heuristics and biases (Tversky and Kahneman 1974)

  • over-confidence,
    (as discussed in a “Symposium on Overconfidence” in the Fall 2015 issue of this journal)
    YNY: moderate overconfidence can be helpful to enhance people’s ability to do things and interact with others successfully. Overoptimistic individuals often work more, save more, expect to retire later, and much healthier.
  • confirmation bias,
  • distorted probability weighting

本文回顧 growing literature on motivated beliefs and reasoning


==cited by Bruno S. Frey==

[This article] provides a most useful survey of recent insights of psychology but also makes a successful effort to integrate them into economics. They deal with heuristics and biases inconsistent with the standard homo oeconomicus such as over-confidence, confirmation bias, distorted probability weighting, and other cognitive mistakes.

The economics of two-sided markets

Rysman, Marc. “The economics of two-sided markets." Journal of economic perspectives 23.3 (2009): 125-43. [aeaweb];[PDF][**]

==first para.==

At a local Best Buy, a child places a new Sony PlayStation 3 on the cashier’ scounter while the parents dig out their Visa card. The gaming system and the payment card may appear to have little connection other than this purchase. However, these two items share an important characteristic that is generating a series of economic insights and has important implications for strategic decision making and economic policy making. Both video game systems and payment cards are examples of two-sided markets.