Estimation of the Spatial Weights Matrix under Structural Constraints

While estimates of models with spatial interaction are very sensitive to the choice of spatial weights, considerable uncertainty surrounds de nition of spatial weights in most studies with cross-section dependence. We show that, in the spatial error model the spatial weights matrix is only partially identi ed, and is fully identifi ed under the structural constraint of symmetry. For the spatial error model, we propose a new methodology for estimation of spatial weights under the assumption of symmetric spatial weights, with extensions to other important spatial models. The methodology is applied to regional housing markets in the UK, providing an estimated spatial weights matrix that generates several new hypotheses about the economic and socio-cultural drivers of spatial di¤usion in housing demand.

Atomic Cournotian Traders May Be Walrasian.

In a bilateral oligopoly, with large traders, represented as atoms, and small traders, represented by an atomless part, when is there a non-empty intersection between the sets of Walras and Cournot-Nash allocations? Using a two commodity version of the Shapley window model, we show that a necessary and sufficient condition for a Cournot- Nash allocation to be a Walras allocation is that all atoms demand a null amount of one of the two commodities. We provide two examples which show that this characterization holds non-vacuously. When our condition fails to hold, we also confirm, through some examples, the result obtained by Okuno, Postlewaite, and Roberts (1980): small traders always have a negligible influence on prices, while the large traders keep their strategic power even when their behavior turns out to be Walrasian in the cooperative framework considered by Gabszewicz and Mertens (1971) and Shitovitz (1973).