Robust Classification for Imprecise Environments

In real-world environments it usually is difficult to specify target operating conditions precisely, for example, target misclassification costs. This uncertainty makes building robust classification systems problematic. We show that it is possible to build a hybrid classifier that will perform at least as well as the best available classifier for any target conditions. In some cases, the performance of the hybrid actually can surpass that of the best known classifier. This robust performance extends across a wide variety of comparison frameworks, including the optimization of metrics such as accuracy, expected cost, lift, precision, recall, and workforce utilization. The hybrid also is efficient to build, to store, and to update. The hybrid is based on a method for the comparison of classifier performance that is robust to imprecise class distributions and misclassification costs. The ROC convex hull (ROCCH) method combines techniques from ROC analysis, decision analysis and computational geometry, and adapts them to the particulars of analyzing learned classifiers. The method is efficient and incremental, minimizes the management of classifier performance data, and allows for clear visual comparisons and sensitivity analyses. Finally, we point to empirical evidence that a robust hybrid classifier indeed is needed for many real-world problems.Comment: 24 pages, 12 figures. To be published in Machine Learning Journal. For related papers, see http://www.hpl.hp.com/personal/Tom_Fawcett/ROCCH

Collusion via signaling in open ascending auctions with multiple objects and complementarities

Collusive equilibria exist in open ascending auctions with multiple objects, if the number of bidders is sufficiently small relative to the number of objects, even with large complementarities in the buyers' utility functions. The bidders collude by dividing the objects among themselves, while keeping the prices low. Hence the complementarities are not realized

Privatization Matters: Bank Efficiency in Transition Countries

To investigate the impact of bank privatization in transition countries, we take the largest banks in six relatively advanced countries, namely, Bulgaria, the Czech Republic, Croatia, Hungary, Poland and Romania. Income and balance sheet characteristics are compared across four bank ownership types. Efficiency measures are computed from stochastic frontiers and used in ownership and privatization regressions having dummy variables for bank type. Our empirical results support the hypotheses that foreign-owned banks are most efficient and governmentowned banks are least efficient. In addition, the importance of attracting a strategic foreign owner in the privatization process is confirmed. However, counter to the conjecture that foreign banks cream skim, we find that domestic banks have a local advantage in pursuing fee-forservice business. Finally, we show that both the method and the timing of privatization matter to efficiency; specifically, voucher privatization does not lead to increased efficiency and earlyprivatized banks are more efficient than later-privatized banks even though we find no evidence of a selection effect.http://deepblue.lib.umich.edu/bitstream/2027.42/40065/3/wp679.pd

Price competition with consumer confusion

Copyright © 2013, INFORMS. Article posted with permission.This paper proposes a model in which identical sellers of a homogeneous product compete in both prices and price frames (i.e., ways to present price information). Frame choices affect the comparability of price offers and may cause consumer confusion and lower price sensitivity. In equilibrium, firms randomize their frame choices to obfuscate price comparisons and sustain positive profits. The nature of the equilibrium depends on whether frame differentiation or frame complexity is more confusing. Moreover, an increase in the number of competitors induces firms to rely more on frame complexity, and this may boost industry profits and lower consumer surplus

The Role of Outside Options in Auction Design

This paper studies revenue maximizing auctions when buyersíoutside options depend on their private information. The set-up is very general and encompasses a large number of potential applications. The main novel message of our analysis is that with type-dependent non-participation payo§s, the revenue maximizing assignment of objects can crucially depend on the outside options that buyers face. Outside options can therefore a§ect the degree of e¢ ciency of revenue maximizing auctions. We show that depending on the shape of outside options, sometimes an optimal mechanism will allocate the objects in an ex-post e¢ cient way, and other times, buyers will obtain objects more often than it is e¢ cient. Our characterization rings a bell of caution. Modeling buyersíoutside options as being independent of their private information, is with loss of generality and can lead to quite misleading intuitions. Our solution procedure can be useful also in other models where type-dependent outside options arise endogenously, because, for instance, buyers can collude or because there are competing sellers

DESIGNING INTERACTIVE USER INTERFACES: DIALOG CHARTS AND AN ASSESSMENT OF THEIR USE IN SPECIFYING CONCEPTUAL MODELS OF DIALOGS

The conceptual design of user interfaces focuses on arriving at a specification of the structure of the dialog, independent of any particular implementation approach. There is common agreement as to the importance of this activity to both IS professionals and end-users, but few -- if any -- modeling methods were developed to specifically support the process of conceptual design, and the usefulness of such methods has not been adequately addressed. This paper introduces the Dialog Charts (DCs), and documents a preliminary examination of their perceived usefulness by designers of user/system interaction who actually used them. The DCs yield high level dialog schemas that are abstract enough to support the conceptual design of dialog control structures. In a uniform diagramming framework they combine the concept of dialog independence, distinguish between the dialog parties, provide for hierarchical decomposition and enforce a structured control flow. The usefulness of the DCs has been studied empirically in a qualitative inquiry. Recalled experiences of designers were captured and analyzed to ascertain the concept of usability, as well as assess the usability of the DCs. Usability has emerged from this study as a set of 38 concerns that operationalizes the broader aspects of purpose of use, design stage, impact on product structure, impact on design process, and attitudinal patterns. In general, the Dialog Charts were found by these dialog designers to be a useful, exhibiting the essential attributes of tools for conceptual modeling.Information Systems Working Papers Serie

IMPACT OF INFORMATION TECHNOLOGY ON WORK ORGANIZATION: A POSITIVE VIEW

Information Systems Working Papers Serie

The Valuation and Hedging of Deferred Commission Asset Backed Securities

Due to a timing mismatch between fee receipts and commission payments, there is a new and growing market for securities backed by fees from back-end load and level load mutual funds. This paper develops a contingent claims methodology for the valuation of these securities. The resulting security value depends primarily on the current value of fund assets and the fee schedule. The valuation formula also provides an analytical expression for the appropriate strategy for hedging fluctuations in asset value. As a case study, we investigate the hedging performance of an institution that holds a portfolio of these securities

Measuring Network Effects in a Dynamic Environment

This paper proposes methods for identifying indirect network effects with dynamically optimizing consumers purchasing a durable hardware good and associated software. We apply this model to a data drawn from the DVD player and titles markets. We observe model-level prices, sales and characteristics of DVD players and sales and availability of DVDs at the level of the month for 10 years. We augment these aggregate data with household survey data on player holdings. In our model, forward looking consumers buy possibly multiple DVD players over time and benefit from the evolution of the titles market. We address issues of clustering, spurious correlation and endogeneity

A New Law for the Bond Rating Industry-- For Better or For Worse

With little fanfare last September, President Bush signed the Credit Rating Agency Reform Act of 2006. This new legislation has the potential to change the way that the credit rating industry is regulated by the Securities and Exchange Commission. So as to provide a better understanding of the significance of the new law, this paper first provides a brief recounting of the bond rating industry's history and the SEC's haphazard regulation of this industry over the past 31 years. The paper then outlines the important provisions of the new act and comments on the possible routes that the SEC could follow in implementing it