This paper examines the contribution of unobserved contemporaneous preference structures over
different products on consumer spending. Previous studies that dealt with idiosyncratic preference
shocks only focus on time preference of individual consumers. But for variety-loving consumers, the
differences in preferences structure over various products between consumers and its change over
times might affect consumer spending through different income and price elasticity. We use micro
panel data on barcode-level purchase records to recover unobserved preference parameters of
consumers belonging to different clusters by estimating a structural model of consumer demand. Then
a fixed effects model estimation is conducted on the micro panel data. The results show that using the
price index adjusted by contemporaneous preference structure improve the explanatory power of the
model significantly compared to other reference price indices such as Stone price index with true price,
Stone price index with product-group CPI, and all item CPI.
We analyze how political candidates can signal their competence and show that polarization might be a way of doing this. For this purpose, we study a unidimensional Hotelling-Downs model of electoral competition in which a fraction of candidates have the ability to correctly observe a policy-relevant state of the world. We show that candidates tend to polarize, even in the absence of policy bias. This is because proposing an extreme platform has a competence signaling effect and has a strictly higher probability of winning than proposing a median platform. The degree of polarization depends on how uncertain is the state of the world.
This study develops a model of dynamic persuasion. A sender has a fixed number of arguments that contain information about the quality of his proposal, each of which is either favorable or unfavorable. The sender may try to persuade a decision maker (DM) that she has enough favorable arguments by sequentially revealing at most one argument at a time. Presenting argument is costly for the sender and delaying decisions is costly for the DM. In this dynamic game of persuasion, the sender effectively chooses when to give up persuasion and the DM decides when to make a decision. Resolving the strategic tension requires probabilistic behavior from both parties. Typically, the DM will accept the sender’s proposal even when she knows that the sender’s proposal may be overall unfavorable. Also, the sender’s net gain from engaging in persuasion can be negative on the equilibrium path, even when persuasion is successful. We characterize the equilibrium that maximizes the DM.s payoff, and perform comparative statics in the costs of persuasion on the equilibrium. We further characterize the DM.s optimal stochastic commitment rule as well as the optimal non-stochastic commitment rule.
This paper constructs a tractable model of endogenous growth with financial frictions and firm heterogeneity. We introduce factor income tax, consumption tax as well as the government consumption into the base model and explore the growth effect of fiscal policy. We show that from the qualitative perspective, the long-run effects of fiscal actions in our model are similar to those obtained in the representative-agent models. However, the quantitative impacts of fiscal policy on long-run growth in our setting can be substantially different from those established in the model where agents are homogeneous and there is no financial friction.
This paper explores the role of consumption externalities in a neoclassical growth model in which households have heterogeneous preferences. We find that a higher degree of average conformism accelerates the convergence speed of the economy towards the steady state as in the case of homogeneous conformism. Furthermore, we reveal that the wealth inequality expands or shrinks in the case of heterogeneous conformism, while it does not expand but shrinks in the case of homogeneous conformism.
The objective of this study is to design a laboratory experiment to explore the effect of ambiguity on a subject’s search behavior in a finite-horizon sequential search model. In so doing, we employ a strategy to observe the potential trend of reservation points that is usually unobserved. We observe that subjects behaving consistently across treatments reduce their reservation points in the face of ambiguity over point distribution. Our result is consistent with the theoretical implication obtained by Nishimura and Ozaki (Journal of Economic Theory 2004).
This paper constructs a simple model of endogenous growth with financial frictions and firm heterogeneity. In the presence of financial constraints and heterogeneity in production efficiency of firms, the firms whose efficiency exceeds the cutoff level produce and the entrepreneurs who own those firms become borrowers. We show that even if production technology of each firm has an Ak property, the aggregate economy has transition dynamics and that the balanced growth rate depends on the aggregate distribution of wealth between rentiers and entrepreneurs.
Credit market imperfections typically characterize a low quality financial market, where the quality of information about borrowers is low and/or enforcement rules or institutions are not well developed. We consider an economy with credit market imperfections and analyze how changes in the degree of credit constraints affect economic fluctuations. The analysis demonstrates that if the degree of credit market imperfection is either severe or too soft, the economy converges to an asymptotically stable steady state, whereas if the degree of imperfection is moderate, the equilibrium involves deterministic cycles or chaos.
Using a simple framework of Cooper and John (1988) and Cooper (1999), this paper derives the conditions under which overconfidence and underconfidence of agents lead to Pareto improvement. We show that an agent’s overconfidence in a game exhibiting strategic complementarity and positive spillovers and an agent’s underconfidence in a game exhibiting strategic complementarity and negative spillovers can lead to Pareto improvement.
This paper explores the role of consumption externalities in a neoclassical growth model in which households have heterogeneous preferences. We find that the degree of conformism in consumption held by each household significantly affects the speed of convergence of the aggregate economy as well as the patterns of wealth distribution in the steady state equilibrium. In particular, a higher degree of consumption conformism accelerates the convergence speed of the economy towards the steady state. We also reveal that in an economy with a high degree of conformism, the pattern of initial distribution of wealth tends not to be sustained in the long run.
