Interdependent Preferences, Potential Games and Household Consumption

This paper presents a nonparametric model of interdependent preferences, where an individual’s consumption may be an externality on the preferences of other consumers. We assume that individual price consumption data is observed for all consumers and prove that the general model imposes few restrictions on the observed data, where the consistency requirement is Nash rationalizability. We motivate potential games as an important sub class of games where the family of concave potential games is refutable and imposes stronger restrictions on observed data. As an application of this model, we discuss inter-household consumption data. Finally, we use this framework to extend the analysis of Brown and Matzkin (1996) on refutable pure exchange economies to pure exchange economies with externalities.Potential games, Externalities, Nonparametric restrictions, Revealed Preference, Household consumption, Nash-Walras equilibrium

A Nonparametric Test of Strategic Behavior in the Cournot Model

We devise a nonparametric test of strategic behavior in a multiproduct Cournot oligopoly. It is assumed that firms have cost functions that do not change over the period of observation but that market demand can change in each period. Market prices and firm-specific production quantities are observed and it is assumed that neither the inverse demand functions nor the cost functions are known. The driving assumptions of the test are that market inverse demand functions are decreasing and differentiable at each period and that cost functions are increasing and convex for each firm. Under these very general conditions, we show that this test imposes strong restrictions on observed data. We apply the test to the crude oil market and find that strategic behavior is strongly rejected.Competitive behavior, Multiproduct Cournot oligopoly, Nonparametric test, Crude oil market, OPEC.

Tests of Independence in Separable Econometric Models: Theory and Application

A common stochastic restriction in econometric models separable in the latent variables is the assumption of stochastic independence between the unobserved and observed exogenous variables. Both simple and composite tests of this assumption are derived from properties of independence empirical processes and the consistency of these tests is established. As an application, we simulate estimation of a random quasilinear utility function, where we apply our tests of independence.Cramer-von Mises distance, Empirical independence processes, Random utility models, Semiparametric econometric models, Specification test of independence

Tests of Independence in Separable Econometric Models: Theory and Application

A common stochastic restriction in econometric models separable in the latent variables is the assumption of stochastic independence between the unobserved and observed exogenous variables. Both simple and composite tests of this assumption are derived from properties of independence empirical processes and the consistency of these tests is established. As an application, we simulate estimation of a random quasilinear utility function, where we apply our tests of independence.Cramer–von Mises distance, Empirical independence processes, Random utility models, Semiparametric econometric models, Specification test of independence

A context-sensitive conceptual framework for activity modeling

Human motion trajectories, however captured, provide a rich spatiotemporal data source for human activity recognition, and the rich literature in motion trajectory analysis provides the tools to bridge the gap between this data and its semantic interpretation. But activity is an ambiguous term across research communities. For example, in urban transport research activities are generally characterized around certain locations assuming the opportunities and resources are present in that location, and traveling happens between these locations for activity participation, i.e., travel is not an activity, rather a mean to overcome spatial constraints. In contrast, in human-computer interaction (HCI) research and in computer vision research activities taking place along the way, such as reading on the bus, are significant for contextualized service provision. Similarly activities at coarser spatial and temporal granularity, e.g., holidaying in a country, could be recognized in some context or domain. Thus the context prevalent in the literature does not provide a precise and consistent definition of activity, in particular in differentiation to travel when it comes to motion trajectory analysis. Hence in this paper, a thorough literature review studies activity from different perspectives, and develop a common framework to model and reason human behavior flexibly across contexts. This spatio-temporal framework is conceptualized with a focus on modeling activities hierarchically. Three case studies will illustrate how the semantics of the term activity changes based on scale and context. They provide evidence that the framework holds over different domains. In turn, the framework will help developing various applications and services that are aware of the broad spectrum of the term activity across contexts

Optimal Contracting Of New Experience Goods

We model new experience goods in the context of dynamic mechanism design. These are goods for which an agent is unsure of her valuation but can learn it through consumption experience. We consider a dynamic environment with a single buyer and seller in which contracting occurs over T periods, where each time the agent consumes the object, she receives a signal which allows her to revise her valuation. In this setting, experimentation with the product is strategic both for the buyer and seller. We derive the efficient and seller optimal contracts and compare them. We present a simple two period example which highlights some of the key features of the model. Finally, the methodology developed in the paper can be used to design efficient and optimal contracts in a multi-buyer setting with learning, where each buyer has single unit demand and there is a single object for sale in each period

Interdependent Preferences, Potential Games and Household Consumption

This paper presents a nonparametric model of interdependent preferences, where an individual’s consumption may be an externality on the preferences of other consumers. We assume that individual price consumption data is observed for all consumers and prove that the general model imposes few restrictions on the observed data, where the consistency requirement is Nash rationalizability. We motivate potential games as an important sub class of games where the family of concave potential games is refutable and imposes stronger restrictions on observed data. As an application of this model, we discuss inter-household consumption data. Finally, we use this framework to extend the analysis of Brown and Matzkin (1996) on refutable pure exchange economies to pure exchange economies with externalities

Optimal Contracting Of New Experience Goods

We model new experience goods in the context of dynamic mechanism design. These are goods for which an agent is unsure of her valuation but can learn it through consumption experience. We consider a dynamic environment with a single buyer and seller in which contracting occurs over T periods, where each time the agent consumes the object, she receives a signal which allows her to revise her valuation. In this setting, experimentation with the product is strategic both for the buyer and seller. We derive the efficient and seller optimal contracts and compare them. We present a simple two period example which highlights some of the key features of the model. Finally, the methodology developed in the paper can be used to design efficient and optimal contracts in a multi-buyer setting with learning, where each buyer has single unit demand and there is a single object for sale in each period

Computational Inefficiency Of Nonparametric Tests For Consistency Of Data With Household Consumption

Recently Cherchye et al. (2007a) provided a nonparametric characterization of a general collective model for household consumption which includes externalities and public consumption. This characterization involved different necessary and sufficient conditions. We identify a special case of the household model for which their sufficiency conditions are also necessary. We show that verification of this sufficiency condition is NP Complete which provides justification for the parametric techniques used in the empirical literature