Exogenous expectations on endogenous uncertainty: recursive equilibrium and survival

This paper analyses general equilibrium models with finite heterogeneous agents having exogenous expectations on endogenous uncertainty. It is shown that there exists a recursive equilibrium with the state space consisting of the past aggregate portfolio distribution and the current state of the nature and that it implements the sequential equilibrium. We establish conditions under which the recursive equilibrium is continuous. Moreover, we use the continuous recursive relation of the aggregate variables to prove that if the economy has two types of agents, the one who commits persistent mistakes on the expectation rules of the future endogenous variables is driven out of the market by the others with correct anticipations of the variables, that is, the rational expectations agents.

Endogenous capacity utilization and the asymmetric effects of monetary policy

This paper investigates the role of variable capacity utilization as a source of asymmetries in the relationship between monetary policy and economic activity within a dynamic stochastic general equilibrium framework. The source of the asymmetry is directly linked to the bottlenecks and stock-outs that emerge from the existence of capacity constraints in the real side of the economy. Money has real effects due to the presence of rigidities in households' portfolio decisions in the form of a Luces-Fuerst 'limited participation' constraint. The model features variable capacity utilization rates across firms due to demand uncertainty. A monopolistic competitive structure provides additional effects through optimal mark-up changes. The overall message of this paper for monetary policy is that the same actions may have different effects depending on the capacity utilization rate of the economy.

Electoral Uncertainty and the Deficit Bias in a New Keynesian Economy

Recent attempts to incorporate optimal fiscal policy into New Keynesian models subject to nominal inertia, have tended to assume that policy makers are benevolent and have access to a commitment technology. A separate literature, on the New Political Economy, has focused on real economies where there is strategic use of policy instruments in a world of political conflict. In this paper we combine these literatures and assume that policy is set in a New Keynesian economy by one of two policy makers facing electoral uncertainty (in terms of infrequent elections and an endogenous voting mechanism). The policy makers generally share the social welfare function, but differ in their preferences over fiscal expenditure (in its size and/or composition). Given the environment, policy shall be realistically constrained to be time-consistent. In a sticky-price economy, such heterogeneity gives rise to the possibility of one policy maker utilising (nominal) debt strategically to tie the hands of the other party, and influence the outcome of any future elections. This can give rise to a deficit bias, implying a sub-optimally high level of steady-state debt, and can also imply a sub-optimal response to shocks. The steady-state distortions and inflation bias this generates, combined with the volatility induced by the electoral cycle in a sticky-price environment, can significantly

Legal Uncertainty, Competition Law Enforcement Procedures and Optimal Penalties

In this paper we make three contributions to the literature on optimal Competition Law enforcement procedures. The first (which is of general interest beyond competition policy) is to clarify the concept of “legal uncertainty”, relating it to ideas in the literature on Law and Economics, but formalising the concept through various information structures which specify the probability that each firm attaches – at the time it takes an action – to the possibility of its being deemed anti-competitive were it to be investigated by a Competition Authority. We show that the existence of Type I and Type II decision errors by competition authorities is neither necessary nor sufficient for the existence of legal uncertainty, and that information structures with legal uncertainty can generate higher welfare than information structures with legal certainty – a result echoing a similar finding obtained in a completely different context and under different assumptions in earlier Law and Economics literature (Kaplow and Shavell, 1992). Our second contribution is to revisit and significantly generalise the analysis in our previous paper, Katsoulacos and Ulph (2009), involving a welfare comparison of Per Se and Effects- Based legal standards. In that analysis we considered just a single information structure under an Effects-Based standard and also penalties were exogenously fixed. Here we allow for (a) different information structures under an Effects-Based standard and (b) endogenous penalties. We obtain two main results: (i) considering all information structures a Per Se standard is never better than an Effects-Based standard; (ii) optimal penalties may be higher when there is legal uncertainty than when there is no legal uncertainty.

Endogenous steroid profiling in the athlete biological passport.

The Athlete Biological Passport (ABP) is an individual electronic document that collects data regarding a specific athlete that is useful in differentiating between natural physiologic variations of selected biomarkers and deviations caused by artificial manipulations. A subsidiary of the endocrine module of the ABP, that which here is called Athlete Steroidal Passport (ASP), collects data on markers of an altered metabolism of endogenous steroidal hormones measured in urine samples. The ASP aims to identify not only doping with anabolic-androgenic steroids, but also most indirect steroid doping strategies such as doping with estrogen receptor antagonists and aromatase inhibitors. Development of specific markers of steroid doping, use of the athlete's previous measurements to define individual limits, with the athlete becoming his or her own reference, the inclusion of heterogeneous factors such as the UDPglucuronosyltransferase B17 genotype of the athlete, the knowledge of potentially confounding effects such as heavy alcohol consumption, the development of an external quality control system to control analytical uncertainty, and finally the use of Bayesian inferential methods to evaluate the value of indirect evidence have made the ASP a valuable alternative to deter steroid doping in elite sports. The ASP can be used to target athletes for gas chromatography/combustion/ isotope ratio mass spectrometry (GC/C/IRMS) testing, to withdraw temporarily the athlete from competing when an abnormality has been detected, and ultimately to lead to an antidoping infraction if that abnormality cannot be explained by a medical condition. Although the ASP has been developed primarily to ensure fairness in elite sports, its application in endocrinology for clinical purposes is straightforward in an evidence-based medicine paradigm.

Reassessing the interaction between investment and tenure uncertainty

A diverse body of empirical literature recognizes that investment can influence tenure security, yet this phenomenon has rarely been examined analytically. This paper develops a theoretical model that demonstrates explicitly conditions under which the probability of eviction is endogenous to investment undertaken on illegally encroached land. By accommodating explicitly the government's objective function and its ability to commit credibly to an eviction policy, the model reveals why both those farmers who under-invest, and those who raise their investment levels to improve tenure security, may be behaving rationally. Indeed, both types of behaviour are accommodated within a single model.

On endogenous cost of altruism

The paper extends the cost of altruism model, analyzed in Lisboa (1999). There are three types of agents: households, providers of a service and insurance companies. Households have uncertainty about future leveIs of income. Providers, if hired by a household, have to choose a non-observable leveI of effort, perform a diagnoses and privately learn a signal. For each signal there is a procedure that maximizes the likelihood of the household obtaining the good state of nature. Finally, insurance companies offer contracts to both providers and households. The paper provides suflicient conditions for the existence of equilibrium and shows the optimal contract induces providers to care about their income and also about the likelihood households will obtain the good state of nature, which in Lisboa (1999) was stated as altruism assumption. Equilibrium is inefficient in comparison with the standard moral hazard outcome whenever high leveIs of effort is chosen precisely due to the need to incentive providers to choose the least expensive treatment for some signals. We show, however that an equilibrium is always constrained optimal.

Explaining Endogenous Control Change in Outsourced Software Projects

Given the centrality of control for achieving success in outsourced software projects, past research has identified key exogenous factors that determine the choice of controls. This view of exogenously driven control choice is based on a number of assumptions; particularly, clients and vendors are seen as separate cognitive entities that combat opportunistic threats under environmental uncertainty by one-off choices or infrequent revisions of controls. In this paper we complement this perspective by acknowledging that an outsourced software project may be characterized as a collective, evolving process faced with the challenge of coping with cognitive limitations of both client and vendor through a continuous process of learning. We argue that if viewed in this way, controls are less subject of a deliberate choice but rather are subject of endogenously driven change, i.e. controls evolve in close interaction with the evolving software project. Accordingly, we suggest a complementary model of endogenous control, where controls mediate individual and collective learning processes. Our research contributes to a better understanding of the dynamics in outsourced software projects. It also spells out methodological implications that may help improve cross-section control research.

A Tort for Risk and Endogenous Bankruptcy

Conventional tort law bars victims of exposure to a toxic substance from filing suit until they actually develop symptoms of illness. Practically speaking, this rule often bars recovery due to bankruptcy and causal uncertainty. One solution is to allow victims to file at exposure for expected damages (a tort for risk). The trade-off is that such a rule may trigger a race to file among exposure victims, thereby itself inducing bankruptcy. This paper characterizes the conditions under which such a race will occur in equilibrium and examines the implications for social welfare.

Islet Neogenesis-associated Protein (ingap): The Role Of Its Endogenous Production As A Positive Modulator Of Insulin Secretion.

Islet neogenesis-associated protein (INGAP) is a peptide found in pancreatic exocrine-, duct- and islet- non-β-cells from normal hamsters. Its increase induced by either its exogenous administration or by the overexpression of its gene enhances β-cell secretory function and increases β-cell mass by a combination of stimulation of cell replication and islet neogenesis and reduction of β-cell apoptosis. We studied the potential modulatory role of endogenous INGAP in insulin secretion using two different experimental approaches. Hamster islets transfected with INGAP-small interfering RNA (INGAP-siRNA) were used to study glucose-stimulated insulin secretion (GSIS). In parallel, freshly isolated islets were incubated with high glucose and the same concentration of either a specific anti-INGAP rabbit serum or normal rabbit serum. INGAP-siRNA transfected islets reduced their INGAP mRNA and protein content by 35.1% and 47.2%, respectively whereas GSIS decreased by 25.8%. GSIS by transfected islets attained levels comparable to those recorded in control islets when INGAP pentadecapeptide (INGAP-PP) was added to the culture medium. INGAP antibody in the medium decreased significantly GSIS in a dose-dependent manner. These results indicate that endogenous INGAP plays a physiological positive modulatory role in insulin secretion, supporting its possible use in the treatment of prediabetes and Type 2 diabetes.

Hypobromous Acid, A Powerful Endogenous Electrophile: Experimental And Theoretical Studies.

Hypobromous acid (HOBr) is an inorganic acid produced by the oxidation of the bromide anion (Br(-)). The blood plasma level of Br(-) is more than 1,000-fold lower than that of chloride anion (Cl(-)). Consequently, the endogenous production of HOBr is also lower compared to hypochlorous acid (HOCl). Nevertheless, there is much evidence of the deleterious effects of HOBr. From these data, we hypothesized that the reactivity of HOBr could be better associated with its electrophilic strength. Our hypothesis was confirmed, since HOBr was significantly more reactive than HOCl when the oxidability of the studied compounds was not relevant. For instance: anisole (HOBr, k2=2.3×10(2)M(-1)s(-1), HOCl non-reactive); dansylglycine (HOBr, k2=7.3×10(6)M(-1)s(-1), HOCl, 5.2×10(2)M(-1)s(-1)); salicylic acid (HOBr, k2=4.0×10(4)M(-1)s(-1), non-reactive); 3-hydroxybenzoic acid (HOBr, k2=5.9×10(4)M(-1)s(-1), HOCl, k2=1.1×10(1)M(-1)s(-1)); uridine (HOBr, k2=1.3×10(3)M(-1)s(-1), HOCl non-reactive). The compounds 4-bromoanisole and 5-bromouridine were identified as the products of the reactions between HOBr and anisole or uridine, respectively, i.e. typical products of electrophilic substitutions. Together, these results show that, rather than an oxidant, HOBr is a powerful electrophilic reactant. This chemical property was theoretically confirmed by measuring the positive Mulliken and ChelpG charges upon bromine and chlorine. In conclusion, the high electrophilicity of HOBr could be behind its well-established deleterious effects. We propose that HOBr is the most powerful endogenous electrophile.

Effect Of Pain Chronification And Chronic Pain On An Endogenous Pain Modulation Circuit In Rats.

We tested the hypothesis that chronic pain development (pain chronification) and ongoing chronic pain (chronic pain) reduce the activity and induce plastic changes in an endogenous analgesia circuit, the ascending nociceptive control. An important mechanism mediating this form of endogenous analgesia, referred to as capsaicin-induced analgesia, is its dependence on nucleus accumbens μ-opioid receptor mechanisms. Therefore, we also investigated whether pain chronification and chronic pain alter the requirement for nucleus accumbens μ-opioid receptor mechanisms in capsaicin-induced analgesia. We used an animal model of pain chronification in which daily subcutaneous prostaglandin E2 (PGE2) injections into the rat's hind paw for 14 days, referred to as the induction period of persistent hyperalgesia, induce a long-lasting state of nociceptor sensitization referred to as the maintenance period of persistent hyperalgesia, that lasts for at least 30 days following the cessation of the PGE2 treatment. The nociceptor hypersensitivity was measured by the shortening of the time interval for the animal to respond to a mechanical stimulation of the hind paw. We found a significant reduction in the duration of capsaicin-induced analgesia during the induction and maintenance period of persistent mechanical hyperalgesia. Intra-accumbens injection of the μ-opioid receptor selective antagonist Cys(2),Tyr(3),Orn(5),Pen(7)amide (CTOP) 10 min before the subcutaneous injection of capsaicin into the rat's fore paw blocked capsaicin-induced analgesia. Taken together, these findings indicate that pain chronification and chronic pain reduce the duration of capsaicin-induced analgesia, without affecting its dependence on nucleus accumbens μ-opioid receptor mechanisms. The attenuation of endogenous analgesia during pain chronification and chronic pain suggests that endogenous pain circuits play an important role in the development and maintenance of chronic pain.

Activation of endogenous p53 by combined p19Arf gene transfer and nutlin-3 drug treatment modalities in the murine cell lines B16 and C6

Background: Reactivation of p53 by either gene transfer or pharmacologic approaches may compensate for loss of p19Arf or excess mdm2 expression, common events in melanoma and glioma. In our previous work, we constructed the pCLPG retroviral vector where transgene expression is controlled by p53 through a p53-responsive promoter. The use of this vector to introduce p19Arf into tumor cells that harbor p53wt should yield viral expression of p19Arf which, in turn, would activate the endogenous p53 and result in enhanced vector expression and tumor suppression. Since nutlin-3 can activate p53 by blocking its interaction with mdm2, we explored the possibility that the combination of p19Arf gene transfer and nutlin-3 drug treatment may provide an additive benefit in stimulating p53 function. Methods: B16 (mouse melanoma) and C6 (rat glioma) cell lines, which harbor p53wt, were transduced with pCLPGp19 and these were additionally treated with nutlin-3 or the DNA damaging agent, doxorubicin. Viral expression was confirmed by Western, Northern and immunofluorescence assays. p53 function was assessed by reporter gene activity provided by a p53-responsive construct. Alterations in proliferation and viability were measured by colony formation, growth curve, cell cycle and MTT assays. In an animal model, B16 cells were treated with the pCLPGp19 virus and/or drugs before subcutaneous injection in C57BL/6 mice, observation of tumor progression and histopathologic analyses. Results: Here we show that the functional activation of endogenous p53wt in B16 was particularly challenging, but accomplished when combined gene transfer and drug treatments were applied, resulting in increased transactivation by p53, marked cell cycle alteration and reduced viability in culture. In an animal model, B16 cells treated with both p19Arf and nutlin-3 yielded increased necrosis and decreased BrdU marking. In comparison, C6 cells were quite susceptible to either treatment, yet p53 was further activated by the combination of p19Arf and nutlin-3. Conclusions: To the best of our knowledge, this is the first study to apply both p19Arf and nutlin-3 for the stimulation of p53 activity. These results support the notion that a p53 responsive vector may prove to be an interesting gene transfer tool, especially when combined with p53- activating agents, for the treatment of tumors that retain wild-type p53.

Improving sample representativeness in environmental studies: a major component for the uncertainty budget

For environmental quality assessment, INAA has been applied for determining chemical elements in small (200 mg) and large (200 g) samples of leaves from 200 trees. By applying the Ingamells` constant, the expected percent standard deviation was estimated in 0.9-2.2% for 200 mg samples. Otherwise, for composite samples (200 g), expected standard deviation varied from 0.5 to 10% in spite of analytical uncertainties ranging from 2 to 30%. Results thereby suggested the expression of the degree of representativeness as a source of uncertainty, contributing for increasing of the reliability of environmental studies mainly in the case of composite samples.

Multicriteria analysis in decision making under information uncertainty

This paper presents results of research related to multicriteria decision making under information uncertainty. The Bell-man-Zadeh approach to decision making in a fuzzy environment is utilized for analyzing multicriteria optimization models (< X, M > models) under deterministic information. Its application conforms to the principle of guaranteed result and provides constructive lines in obtaining harmonious solutions on the basis of analyzing associated maxmin problems. This circumstance permits one to generalize the classic approach to considering the uncertainty of quantitative information (based on constructing and analyzing payoff matrices reflecting effects which can be obtained for different combinations of solution alternatives and the so-called states of nature) in monocriteria decision making to multicriteria problems. Considering that the uncertainty of information can produce considerable decision uncertainty regions, the resolving capacity of this generalization does not always permit one to obtain unique solutions. Taking this into account, a proposed general scheme of multicriteria decision making under information uncertainty also includes the construction and analysis of the so-called < X, R > models (which contain fuzzy preference relations as criteria of optimality) as a means for the subsequent contraction of the decision uncertainty regions. The paper results are of a universal character and are illustrated by a simple example. (c) 2007 Elsevier Inc. All rights reserved.