Solving non-linear stochastic models by parameterizing expectations: An application to asset pricing with production

A new algorithm called the parameterized expectations approach(PEA) for solving dynamic stochastic models under rational expectationsis developed and its advantages and disadvantages are discussed. Thisalgorithm can, in principle, approximate the true equilibrium arbitrarilywell. Also, this algorithm works from the Euler equations, so that theequilibrium does not have to be cast in the form of a planner's problem.Monte--Carlo integration and the absence of grids on the state variables,cause the computation costs not to go up exponentially when the numberof state variables or the exogenous shocks in the economy increase. \\As an application we analyze an asset pricing model with endogenousproduction. We analyze its implications for time dependence of volatilityof stock returns and the term structure of interest rates. We argue thatthis model can generate hump--shaped term structures.

Seeking theta's desperately: Estimating the distribution of consumers under increasing block rates

This paper shows that the distribution of observed consumption is not a good proxy for the distribution of heterogeneous consumers when the current tariff is an increasing block tariff. We use a two step method to recover the "true" distribution of consumers. First, we estimate the demand function induced by the current tariff. Second, using the demand system, we specify the distribution of consumers as a function of observed consumption to recover the true distribution. Finally, we design a new two-part tariff which allows us to evaluate the equity of the existence of an increasing block tariff.

Selling to consumers with endogenous types

For many goods (such as experience goods or addictive goods), consumers preferences may change over time. In this paper, we examine a monopolist s optimal pricing schedule when current consumption can affect a consumer s valuation in the future and valuations are unobservable. We assume that consumers are anonymous, i.e. the monopolist can t observe a consumer s past consumption history. For myopic consumers, the optimal consumption schedule is distorted upwards, involving substantial discounts for low valuation types. This pushes low types into higher valuations, from which rents can be extracted.For forward looking consumers, there may be a further upward distortion of consumption due to a reversal of the adverse selection effect; low valuation consumers now have a strong interest in consumption in order to increase their valuations. Firms will find it profitable to educate consumers and encourage forward looking behavior.

Supermarket key attributes and location decisions: A comparative study between British and Spanish consumers

The Maximum Capture problem (MAXCAP) is a decision model that addresses the issue of location in a competitive environment. This paper presents a new approach to determine which store s attributes (other than distance) should be included in the newMarket Capture Models and how they ought to be reflected using the Multiplicative Competitive Interaction model. The methodology involves the design and development of a survey; and the application of factor analysis and ordinary least squares. Themethodology has been applied to the supermarket sector in two different scenarios: Milton Keynes (Great Britain) and Barcelona (Spain).

Dynamic higher order expectations

In models where privately informed agents interact, agents may need to formhigher order expectations, i.e. expectations of other agents' expectations. This paper develops a tractable framework for solving and analyzing linear dynamic rational expectationsmodels in which privately informed agents form higher order expectations. The frameworkis used to demonstrate that the well-known problem of the infinite regress of expectationsidentified by Townsend (1983) can be approximated to an arbitrary accuracy with a finitedimensional representation under quite general conditions. The paper is constructive andpresents a fixed point algorithm for finding an accurate solution and provides weak conditions that ensure that a fixed point exists. To help intuition, Singleton's (1987) asset pricingmodel with disparately informed traders is used as a vehicle for the paper.

Inflationary expectations during Germany's great slump

Was the German slump inevitable? This paper argues that -despite thespeed and depth of Germany's deflation in the early 1930s - fear ofinflation is evident in the bond, foreign exchange, and commodity marketsat certain critical junctures of the Great Depression. Therefore, policyoptions were more limited than many subsequent critics of Brüning'spolicies have been prepared to admit. Using a rational expectationsframework, we find strong evidence from the bondmarket to suggest fearof inflation. Futures prices also reveal that market participants werebetting on price increases. These findings are discussed in the contextof reparations and related to the need for a regime shift to overcomethe crisis.

Do expectations matter? The Great Moderation revisited

We examine the role of expectations in the Great Moderation episode. We derive theoretical restrictions in a New-Keynesian model and test them using measures of expectations obtained from survey data, the Greenbook and bond markets. Expectations explain the dynamics of inflation and of interest rates but their importance is roughly unchanged over time. Systems with and without expectations display similar reduced form characteristics. Including or excluding expectations hardly changes the economic explanation of the Great Moderation. Results are robust to changes in the structure of the empirical model.

Constraints and non-existence of rational expectations equilibria

In this article we show that in the presence of trading constraints, such as short sale constraints, the standard definition of a Rational Expectations Equilibrium allows for equilibrium prices that reveal information unknown to any active trader in the market. We propose a new definition of the Rational Expectations Equilibrium that incorporates a stronger measurability condition than measurability with respect to the join of the information sets of the agents and give an example of non-existence of equilibrium. The example is robust to perturbations on the data of the economy and the introduction of new assets.

Eliciting consumers preferences using stated preference discrete choice models: Contingent ranking versus choice experiment

The aim of this paper is twofold: firstly, to carry out a theoreticalreview of the most recent stated preference techniques used foreliciting consumers preferences and, secondly, to compare the empiricalresults of two dierent stated preference discrete choice approaches.They dier in the measurement scale for the dependent variable and,therefore, in the estimation method, despite both using a multinomiallogit. One of the approaches uses a complete ranking of full-profiles(contingent ranking), that is, individuals must rank a set ofalternatives from the most to the least preferred, and the other usesa first-choice rule in which individuals must select the most preferredoption from a choice set (choice experiment). From the results werealize how important the measurement scale for the dependent variablebecomes and, to what extent, procedure invariance is satisfied.

Influence of label information on dark chocolate acceptability

The aim of the present work was to study how the information on product labels influences consumer expectations and their acceptance and purchase intention of dark chocolate. Six samples of dark choco- late, varying in brand (premium and store brand) and in type of product (regular dark chocolate, single cocoa origin dark chocolate and high percentage of cocoa dark chocolate), were evaluated by 109 con- sumers who scored their liking and purchase intention under three conditions: blind (only tasting the products), expected (observing product label information) and informed (tasting the products together with provision of the label information). In the expected condition, consumer liking was mainly affected by the brand. In the blind condition, differences in liking were due to the type of product; the samples with a high percentage of cocoa were those less preferred by consumers. Under the informed condition, liking of dark chocolates varied depending on both brand and type of product. Premium brand chocolates generated high consumer expectations of chocolate acceptability, which were fulfilled by the sensory characteristics of the products. Store brand chocolates created lower expectations, but when they were tasted they were as acceptable as premium chocolates. Claims of a high percentage of cocoa and single cocoa origin on labels did not generate higher expectations than regular dark chocolates.

The ambiguous disruption of gender-role expectations in the law and the lady name

The main purpose of this research project is to analyse the major female figures in Wilkie Collins' work of fiction The Law and the Lady, in relation to the times in which the novel was produced and the situation of women in the Victorian era. After taking into account the major events of the life of the author, as well as the sociohistorical conditions of the Victorian period, I try to reach conclusions about whether the author challenges gender-role expectations, presenting the readers with a new form of femininity, of if, on the contrary, he preserves and maintains a conservative, traditional perspective of femininity and female conventions proper to the established parameters of the times in which he lived. Keywords:

The Internet as an enhancer of the consumers' empowerment - A power to be managed by online firms?

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