Monod-Wyman-Changeux Analysis of Ligand-Gated Ion Channel Mutants

We present a framework for computing the gating properties of ligand-gated ion channel mutants using the Monod-Wyman-Changeux (MWC) model of allostery. We derive simple analytic formulas for key functional properties such as the leakiness, dynamic range, half-maximal effective concentration, and effective Hill coefficient, and explore the full spectrum of phenotypes that are accessible through mutations. Specifically, we consider mutations in the channel pore of nicotinic acetylcholine receptor (nAChR) and the ligand binding domain of a cyclic nucleotide-gated (CNG) ion channel, demonstrating how each mutation can be characterized as only affecting a subset of the biophysical parameters. In addition, we show how the unifying perspective offered by the MWC model allows us, perhaps surprisingly, to collapse the plethora of dose-response data from different classes of ion channels into a universal family of curves

Estimating Risk Preferences from Deductible Choice

We use a large data set of deductible choices in auto insurance contracts to estimate the distribution of risk preferences in our sample. To do so, we develop a structural econometric model, which accounts for adverse selection by allowing for unobserved heterogeneity in both risk (probability of an accident) and risk aversion. Ex-post claim information separately identifies the marginal distribution of risk, while the joint distribution of risk and risk aversion is identified by the deductible choice. We find that individuals in our sample have on average an estimated absolute risk aversion which is higher than other estimates found in the literature. Using annual income as a measure of wealth, we find an average two-digit coefficient of relative risk aversion. We also find that women tend to be more risk averse than men, that proxies for income and wealth are positively related to absolute risk aversion, that unobserved heterogeneity in risk preferences is higher relative to that of risk, and that unobserved risk is positively correlated with unobserved risk aversion. Finally, we use our results for counterfactual exercises that assess the profitability of insurance contracts under various assumptions.

Production Targets

We present a dynamic quantity setting game, where players may continuously adjust their quantity targets, but incur convex adjustment costs when they do so. These costs allow players to use quantity targets as a partial commitment device. We show that the equilibrium path of such a game is hump-shaped and that the final equilibrium outcome is more competitive than its static analog. We then test the theory using monthly production targets of the Big Three U.S. auto manufacturers during 1965-1995 and show that the hump-shaped dynamic pattern is present in the data. Initially, production targets steadily increase until they peak about 2-3 months before production. Then, they gradually decline to eventual production levels. This qualitative pattern is fairly robust across a range of similar exercises. We conclude that strategic considerations play a role in the planning phase in the auto industry, and that static models may therefore under-estimate the industry's competitiveness.

The Welfare Cost of Asymmetric Information: Evidence from the U.K. Annuity Market

Much of the extensive empirical literature on insurance markets has focused on whether adverse selection can be detected. Once detected, however, there has been little attempt to quantify its importance. We start by showing theoretically that the efficiency cost of adverse selection cannot be inferred from reduced form evidence of how "adversely selected" an insurance market appears to be. Instead, an explicit model of insurance contract choice is required. We develop and estimate such a model in the context of the U.K. annuity market. The model allows for private information about risk type (mortality) as well as heterogeneity in preferences over different contract options. We focus on the choice of length of guarantee among individuals who are required to buy annuities. The results suggest that asymmetric information along the guarantee margin reduces welfare relative to a first-best, symmetric information benchmark by about £127 million per year, or about 2 percent of annual premiums. We also find that government mandates, the canonical solution to adverse selection problems, do not necessarily improve on the asymmetric information equilibrium. Depending on the contract mandated, mandates could reduce welfare by as much as £107 million annually, or increase it by as much as £127 million. Since determining which mandates would be welfare improving is empirically difficult, our findings suggest that achieving welfare gains through mandatory social insurance may be harder in practice than simple theory may suggest.

Not-So-Classical Measurement Errors: A Validation Study of Homescan

We report results from a validation study of Nielsen Homescan data. We use data from a large grocery chain to match thousands of individual transactions that were recorded by both the retailer (at the store) and the Nielsen Homescan panelist (athome). First, we report how often shopping trips are not reported, and how often trip information, product information, price, and quantity are reported with error. We focus on recording errors in prices, which are more prevalent, and show that they can be classified to two categories, one due to standard recording errors, the other due to how Nielsen constructs the price data. We then show how the validation data can be used to correct the impact of recording errors on estimates obtained from Nielsen Homescan data. We use a simple application to illustrate the impact of recording errors as well as the ability to correct for these errors. The application suggests that while recording errors are present, and potentially impact results, corrections, like the one we employ, can be adopted by users of Homescan data to investigate the robustness of their results.Measurement Error, Validation Study, Self-Reported Data

Liquidity Constraints and Imperfect Information in Subprime Lending

We present new evidence on consumer liquidity constraints and the credit market conditions that might give rise to them. Our analysis is based on unique data from a large auto sales company that serves the subprime market. We first document the role of short-term liquidity in driving purchasing behavior, including sharp increases in demand during tax rebate season and a high sensitivity to minimum down payment requirements. We then explore the informational problems facing subprime lenders. We find that default rates rise significantly with loan size, providing a rationale for lenders to impose loan caps because of moral hazard. We also find that borrowers at the highest risk of default demand the largest loans, but the degree of adverse selection is mitigated substantially by effective risk-based pricing.

Is Hanukkah responsive to Christmas?

We study the extent to which religious activity responds to the presence and activity of other religions. Specifcally, we employ individual-level survey data and county-level expenditure data to examine the extent to which Hanukkah celebration among U.S. Jews is driven by the presence of Christmas. We find that: (1) Jews with children at home are more likely to celebrate Hanukkah than Jews without children. (2) The effect of having children on Hanukkah celebrations is higher for reform Jews than for orthodox Jews; and, it is higher for Jews who feel a stronger sense of belonging to Judaism. (3) Jewish-related expenditures in Hanukkah are higher in counties with lower share of Jews. These findings are consistent with the hypothesis that Jews increase religious activity during Hanukkah because of the presence of Christmas, and this response is primarily driven by the presence of children at home. One underlying motivator might be that Jewish parents in the U.S. celebrate Hanukkah more intensively so heir children do not feel left out, and/or because they are concerned that their children will convert or intermarry.Religions, Hanukkah, Identity