80 research outputs found
On ordinal utility, cardinal utility, and random utility
Though the Random Utility Model (RUM) was conceived
entirely in terms of ordinal utility, the apparatus throughwhich it is widely practised exhibits properties of
cardinal utility. The adoption of cardinal utility as a
working operation of ordinal is perfectly valid, provided
interpretations drawn from that operation remain faithful
to ordinal utility. The paper considers whether the latterrequirement holds true for several measurements commonly
derived from RUM. In particular it is found that
measurements of consumer surplus change may depart from
ordinal utility, and exploit the cardinality inherent in
the practical apparatus.
The Social Climbing Game
The structure of a society depends, to some extent, on the incentives of the
individuals they are composed of. We study a stylized model of this interplay,
that suggests that the more individuals aim at climbing the social hierarchy,
the more society's hierarchy gets strong. Such a dependence is sharp, in the
sense that a persistent hierarchical order emerges abruptly when the preference
for social status gets larger than a threshold. This phase transition has its
origin in the fact that the presence of a well defined hierarchy allows agents
to climb it, thus reinforcing it, whereas in a "disordered" society it is
harder for agents to find out whom they should connect to in order to become
more central. Interestingly, a social order emerges when agents strive harder
to climb society and it results in a state of reduced social mobility, as a
consequence of ergodicity breaking, where climbing is more difficult.Comment: 14 pages, 9 figure
Entanglement between Demand and Supply in Markets with Bandwagon Goods
Whenever customers' choices (e.g. to buy or not a given good) depend on
others choices (cases coined 'positive externalities' or 'bandwagon effect' in
the economic literature), the demand may be multiply valued: for a same posted
price, there is either a small number of buyers, or a large one -- in which
case one says that the customers coordinate. This leads to a dilemma for the
seller: should he sell at a high price, targeting a small number of buyers, or
at low price targeting a large number of buyers? In this paper we show that the
interaction between demand and supply is even more complex than expected,
leading to what we call the curse of coordination: the pricing strategy for the
seller which aimed at maximizing his profit corresponds to posting a price
which, not only assumes that the customers will coordinate, but also lies very
near the critical price value at which such high demand no more exists. This is
obtained by the detailed mathematical analysis of a particular model formally
related to the Random Field Ising Model and to a model introduced in social
sciences by T C Schelling in the 70's.Comment: Updated version, accepted for publication, Journal of Statistical
Physics, online Dec 201
Semiparametric theory and empirical processes in causal inference
In this paper we review important aspects of semiparametric theory and
empirical processes that arise in causal inference problems. We begin with a
brief introduction to the general problem of causal inference, and go on to
discuss estimation and inference for causal effects under semiparametric
models, which allow parts of the data-generating process to be unrestricted if
they are not of particular interest (i.e., nuisance functions). These models
are very useful in causal problems because the outcome process is often complex
and difficult to model, and there may only be information available about the
treatment process (at best). Semiparametric theory gives a framework for
benchmarking efficiency and constructing estimators in such settings. In the
second part of the paper we discuss empirical process theory, which provides
powerful tools for understanding the asymptotic behavior of semiparametric
estimators that depend on flexible nonparametric estimators of nuisance
functions. These tools are crucial for incorporating machine learning and other
modern methods into causal inference analyses. We conclude by examining related
extensions and future directions for work in semiparametric causal inference
Crises and collective socio-economic phenomena: simple models and challenges
Financial and economic history is strewn with bubbles and crashes, booms and
busts, crises and upheavals of all sorts. Understanding the origin of these
events is arguably one of the most important problems in economic theory. In
this paper, we review recent efforts to include heterogeneities and
interactions in models of decision. We argue that the Random Field Ising model
(RFIM) indeed provides a unifying framework to account for many collective
socio-economic phenomena that lead to sudden ruptures and crises. We discuss
different models that can capture potentially destabilising self-referential
feedback loops, induced either by herding, i.e. reference to peers, or
trending, i.e. reference to the past, and account for some of the phenomenology
missing in the standard models. We discuss some empirically testable
predictions of these models, for example robust signatures of RFIM-like herding
effects, or the logarithmic decay of spatial correlations of voting patterns.
One of the most striking result, inspired by statistical physics methods, is
that Adam Smith's invisible hand can badly fail at solving simple coordination
problems. We also insist on the issue of time-scales, that can be extremely
long in some cases, and prevent socially optimal equilibria to be reached. As a
theoretical challenge, the study of so-called "detailed-balance" violating
decision rules is needed to decide whether conclusions based on current models
(that all assume detailed-balance) are indeed robust and generic.Comment: Review paper accepted for a special issue of J Stat Phys; several
minor improvements along reviewers' comment
Case-Control Studies, Inference in
Classic (or ‘‘cumulative’’) case-control sampling designs do not admit inferences about quantities of interest other than risk ratios and then only by making the rare events assumption. Probabilities, risk differences, number neede
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