Learning Economic Parameters from Revealed Preferences

A recent line of work, starting with Beigman and Vohra (2006) and Zadimoghaddam and Roth (2012), has addressed the problem of {\em learning} a utility function from revealed preference data. The goal here is to make use of past data describing the purchases of a utility maximizing agent when faced with certain prices and budget constraints in order to produce a hypothesis function that can accurately forecast the {\em future} behavior of the agent. In this work we advance this line of work by providing sample complexity guarantees and efficient algorithms for a number of important classes. By drawing a connection to recent advances in multi-class learning, we provide a computationally efficient algorithm with tight sample complexity guarantees ($\Theta(d/\epsilon)$ for the case of $d$ goods) for learning linear utility functions under a linear price model. This solves an open question in Zadimoghaddam and Roth (2012). Our technique yields numerous generalizations including the ability to learn other well-studied classes of utility functions, to deal with a misspecified model, and with non-linear prices

GSP with General Independent Click-Through-Rates

The popular generalized second price (GSP) auction for sponsored search is built upon a separable model of click-through-rates that decomposes the likelihood of a click into the product of a "slot effect" and an "advertiser effect" --- if the first slot is twice as good as the second for some bidder, then it is twice as good for everyone. Though appealing in its simplicity, this model is quite suspect in practice. A wide variety of factors including externalities and budgets have been studied that can and do cause it to be violated. In this paper we adopt a view of GSP as an iterated second price auction (see, e.g., Milgrom 2010) and study how the most basic violation of separability --- position dependent, arbitrary public click-through-rates that do not decompose --- affects results from the foundational analysis of GSP (Varian 2007, Edelman et al. 2007). For the two-slot setting we prove that for arbitrary click-through-rates, for arbitrary bidder values, an efficient pure-strategy equilibrium always exists; however, without separability there always exist values such that the VCG outcome and payments cannot be realized by any bids, in equilibrium or otherwise. The separability assumption is therefore necessary in the two-slot case to match the payments of VCG but not for efficiency. We moreover show that without separability, generic existence of efficient equilibria is sensitive to the choice of tie-breaking rule, and when there are more than two slots, no (bid-independent) tie-breaking rule yields the positive result. In light of this we suggest alternative mechanisms that trade the simplicity of GSP for better equilibrium properties when there are three or more slots

More light and less heat Mirowski on economics and the energy metaphor

I initially approached More Heat than Light with some apprehension. This is not because I suspected that I would disagree with its main thesis but because I feared that I would find the book anticlimactic. Over the past few years, Phil Mirowski has served us a number of delightful appetizers’-so many in fact that I suspected I might tire of the taste before the main entrée appeared. These concerns were wholly unfounded. The main entrée has finally arrived and is of such depth and complexity that it makes the appetizers, well, just appetizers. Mirowski’s central thesis is that neoclassical economics-initially developed during the 1870s and currently the dominant paradigm in economic theory-amounts to little more than a &dquo;brazen daylight robbery&dquo; (p. 4)2 of nineteenth-century energy physics. Motivated by the desire to achieve the status and prestige of the physical sciences, early neoclassical economists created their &dquo;revolution&dquo; by simply substituting &dquo;utility&dquo; for &dquo;energy&dquo; in the physics of their day. In a limited respect, this project was successful-the mathematical formalism of energy physics did (and does) contribute to the scientific respectability of the neoclassical research program-but this status was achieved at substantial cost. Mirowski argues that there were (and are) deep problems associated with the economic appropriation of the energy metaphor; physical systems have properties that make the mathematics appropriate, but these properties are not shared by economic systems. For example, the physical requirement that potential energy and kinetic energy sum to a constant translates into the economic requirement that utility and income sum to a constant. This is a problem because utility and income are measured in entirely different units. Mirowski argues that such difficulties were exacerbated by the scientific naivete of the early neoclassical economists who were trained in science and engineering-they had been exposed to the basic ideas of energy physics-but their knowledge was relatively rudimentary (p. 250). The result was energy physics appropriated in a &dquo;shoddy and slipshod manner&dquo; (p. 108). Mirowski provides a detailed discussion of how this misappropriation of the energy metaphor has surreptitiously influenced the development of modern economic thought. He reconstructs and explains certain generally accepted facts of theoretical life in economics (such as the problems of neoclassical production theory) and exposes some of the fundamental weaknesses of neoclassical theory (such as its inability to explain preference changes). Mirowski also argues that the dominance of the energy metaphor from nineteenth-century physics has prevented economists from taking advantage of more recent developments in physical theory, such as quantum mechanics and the theory of relativity. The result, according to Mirowski, is a tale reminiscent of Dorian Gray .... Neoclassicals, by imbibing some mystical elixir of modern mathematical techniques, have maintained the figure of vibrant youth, while hidden away somewhere in the attic is the real portrait, the original metaphor of a conserved preference field in an independently constituted commodity space, growing progressively desiccated and decrepit. (p. 374) My overall evaluation of Mirowski’s thesis is quite positive. I believe that he is entirely correct about the role of the energy metaphor in early neoclassical economics (probably reaching an apogee in Irving Fisher), and he is also correct that the metaphor has been lurking ever since in the background of neoclassical economics. The energy metaphor and its mathematics have been actively influential in the development of modem neoclassical theory, although I would probably weaken its impact from Mirowski’s story by saying &dquo;influenced&dquo; whereas Mirowski would say &dquo;dominated.&dquo; Where I mainly differ from Mirowski is on the implications of his thesis. For Mirowski, uncovering this hidden influence amounts to a scathing critique of modern neoclassical economics (and given the neoclassical dominance of the profession, this means most of modem economics). For him, the metaphor and its mathematics have been both dominant and pernicious. I disagree. While I am convinced that Mirowski has uncovered something important that can be used to further our understanding of the development of modem economic theory, I am not convinced that his thesis entails the kind of critical bite that he would like it to have. Given this overall evaluation of More Heat than Light, I will divide my comments into two sections. The first-more light-lends additional support to Mirowski’s general historical thesis by using it to illuminate two areas of modem neoclassical economics that Mirowski does not emphasize. The second-less heat-offers some arguments against Mirowski’s critical interpretation of his general thesis

A test of whether millet acreage in Niger is determined by official or private market prices

Niger has two separate marketing channels for grain: one is the official system operated by the government; the other is a parallel channel of private traders. Researchers or policy-makers wanting to study effects of price policies on producers are faced with two sets of prices. This paper seeks to answer the question, which prices matter? Non-nested hypothesis tests are conducted for millet-acreage response equations. The results show that prices from the larger private market are the prices that matter

Turkish information retrieval: Past changes future

One of the most exciting accomplishments of computer science in the lifetime of this generation is the World Wide Web. The Web is a global electronic publishing medium. Its size has been growing with an enormous speed for over a decade. Most of its content is objectionable, but it also contains a huge amount of valuable information. The Web adds a new dimension to the concept of information explosion and tries to solve the very same problem by information retrieval systems known as Web search engines. We briefly review the information explosion problem and information retrieval systems, convey the past and state of the art in Turkish information retrieval research, illustrate some recent developments, and propose some future actions in this research area in Turkey. © Springer-Verlag Berlin Heidelberg 2006

Diverse Beliefs and Time Variability of Risk Premia

Why do risk premia vary over time? We examine this problem theoretically and empirically by studying the effect of market belief on risk premia. Individual belief is taken as a fundamental primitive state variable. Market belief is observable; it is central to the empirical evaluation and we show how to measure it. Our asset pricing model is familiar from the noisy REE literature but we adapt it to an economy with diverse beliefs. We derive equilibrium asset prices and implied risk premium. Our approach permits a closed form solution of prices; hence we trace the exact effect of market belief on the time variability of asset prices and risk premia. We test empirically the theoretical conclusions. Our main result is that, above the effect of business cycles on risk premia, fluctuations in market belief have significant independent effect on the time variability of risk premia. We study the premia on long positions in Federal Funds Futures, 3- and 6-month Treasury Bills (T-Bills). The annual mean risk premium on holding such assets for 1-12 months is about 40-60 basis points and we find that, on average, the component of market belief in the risk premium exceeds 50% of the mean. Since time variability of market belief is large, this component frequently exceeds 50% of the mean premium. This component is larger the shorter is the holding period of an asset and it dominates the premium for very short holding returns of less than 2 months. As to the structure of the premium we show that when the market holds abnormally favorable belief about the future payoff of an asset the market views the long position as less risky hence the risk premium on that asset declines. More generally, periods of market optimism (i.e. "bull" markets) are shown to be periods when the market risk premium is low while in periods of pessimism (i.e. "bear" markets) the market's risk premium is high. Fluctuations in risk premia are thus inversely related to the degree of market optimism about future prospects of asset payoffs. This effect is strong and economically very significant

Marketing as a means to transformative social conflict resolution: lessons from transitioning war economies and the Colombian coffee marketing system

Social conflicts are ubiquitous to the human condition and occur throughout markets, marketing processes, and marketing systems.When unchecked or unmitigated, social conflict can have devastating consequences for consumers, marketers, and societies, especially when conflict escalates to war. In this article, the authors offer a systemic analysis of the Colombian war economy, with its conflicted shadow and coping markets, to show how a growing network of fair-trade coffee actors has played a key role in transitioning the country’s war economy into a peace economy. They particularly draw attention to the sources of conflict in this market and highlight four transition mechanisms — i.e., empowerment, communication, community building and regulation — through which marketers can contribute to peacemaking and thus produce mutually beneficial outcomes for consumers and society. The article concludes with a discussion of implications for marketing theory, practice, and public policy