Minimum Distance Estimation of Search Costs Using Price Distribution

ABSTRACT

It has been shown that equilibrium restrictions in a search model can be used to identify quantiles of the search cost distribution from observedprices alone. These quantiles can be difficult to estimate in practice. This article uses a minimum distance approach to estimate them that is easy to compute. A version of our estimator is a solution to a nonlinear least-square problem that can be straightforwardly programmed on softwares such as STATA. We show our estimator is consistent and has an asymptotic normal distribution. Its distribution can be consistently estimated by a bootstrap. Our estimator can be used to estimate the cost distribution nonparametrically on a larger support when prices from heterogenous markets are available. We propose a two-step sieve estimator for that case. The first step estimates quantiles from each market. They are used in the second step as generated variables to perform nonparametric sieve estimation. We derive the uniform rate of convergence of the sieve estimator that can be used to quantify the errors incurred from interpolating data across markets. To illustrate we use online bookmaking odds for English football leagues’ matches (as prices) and find evidence that suggests search costs for consumers have fallen following a change in the British law that allows gambling operators to advertise more widely. Supplementary materials for this article are available online.     

Swinger economics

Swinging is a sexual behaviour of increasing relevance but substantially ignored in theoretical economic investigation. This paper has two major goals. The first is to describe what swinging is, discuss its economic relevance and single out the main characteristics of swinger behaviour. To this end, the Italian situation has been considered as a type of case study. The second goal is to use standard and less-standard tools from economic theory to propose some preliminary assessments of the causes and consequences of swinger couples’ behaviour. In this respect, some contributions on two-sided markets, hedonic adaptation approaches and equilibrium matching models have proved particularly useful.     

How to cut a pizza fairly: Fair division with decreasing marginal evaluations

Existential and constructive solutions to the classic problems of fair division are known for individuals with constant marginal evaluations. By considering nonatomic concave capacities instead of nonatomic probability measures, we extend some of these results to the case of individuals with decreasing marginal evaluations. Received: 12 June 2001/Accepted: 23 May 2002 An earlier version of this paper, Caltech Social Science Working Paper # 1126, was titled “How to cut a cake healthily”. We wish to thank Maristella Botticini, Erio Castagnoli, Marco Dall'Aglio, Paolo Ghirardato, Luigi Montrucchio, Marco Scarsini, Marciano Siniscalchi, as well as Maurice Salles (the Editor), an Associate Editor, and four anonymous Referees for helpful suggestions. The financial support of MIUR, CNR, and Università Bocconi is gratefully acknowledged. Part of this research was done while the first author was visiting Boston University and the California Institute of Technology, which he thanks for their hospitality.     

ATTITUDES,POLICIES, AND WORK

We study whether cultural attitudes towards gender, the young, and leisure are significant determinants of the employment rates of women and of the young, and of hours worked. We do this controlling for policies, institutions and other structural characteristics of the economy which may influence labor market outcomes. We identify the effect of culture exploiting the evolution over time within country, as well as across countries, of cultural attitudes. We also address the endogeneity of attitudes, policies, and institutions, and allow for the persistent nature of labor market outcomes. We find that culture matters for women's employment rates and for hours worked. However, policies, in particular employment protection legislation and taxes, are also important and their quantitative impact substantial.     

Providing social security in a context of change: Experience and challenges in Latin America

Over the past two decades Latin America has experienced major demographic, economic and social changes. The trend towards accelerated ageing of the population in most countries, together with the financial restrictions faced by social protection systems, has brought sweeping changes in pension programmes. The new demographic and labour context presents challenges for these new programmes which, unless they make the necessary adaptations, will definitely be unable to attain their stated objective of providing universal coverage and eliminating poverty in old age. This article offers a general discussion of the processes that the region is undergoing, as well as the limitations and challenges imposed by existing welfare systems. Finally, it examines the options available to retain the objective of universal coverage and thus ensure the economic needs of the elderly population.     

Between Transition and Enlargement: The Composition of Consumption in European Households

The article aims to specifically consider the effect of the enlargement of markets, resulting from the process of transition in Central and Eastern European countries, on the structure of household consumption. On the basis of a discriminatory analysis performed on recent data published by OECD and Eurostat, this study proposes to address three main questions: if during transition the household consumption patterns, measured by budget shares, have changed; if from this point of view, Central and Eastern European countries are similar between them and diverge from Western ones; if today there are any signs of convergence between the two groups of countries. The dissimilarity in budget share in Eastern and Western countries is proven and persistent, appearing greater in real terms than in nominal ones. On the one hand, Engel’s law is confirmed, given that at lower income levels the percentage of food consumption is greater, even though in real terms the absolute level of consumption of food has, in most cases, been reduced. On the other hand, the historical experience of Eastern countries is evident in the prolonged productive-distributive role of the State, especially in the field of essential services: home, schooling, and health.     

Boundaries of the business model within business groups

Scholars have sought various ways to find out how financial performance of the firm can be affected by its business model (BM). However, to date academic literature has focused attention on the “firm” as a unit of analysis without clearly defining the boundaries of the reporting entity to which the BMs refer. The aim of this paper is to investigate what are the boundaries of the BM of the affiliated-group companies and how the degree of independence of BMs is measured within the business group. The contribution of the paper is in using the BM concept to expound and criticise the assumptions in economic analysis and accounting standards that groups of companies are economic units that optimise economic income of the group as a whole and that the financial statements of individual subsidiaries, sub-groups and the group as a whole report the value generated by the group.     

An exact semidefinite programming approach for the max-mean dispersion problem

This paper proposes an exact algorithm for the Max-Mean dispersion problem (\(Max-Mean DP\)), an NP-Hard combinatorial optimization problem whose aim is to select the subset of a set such that the average distance between elements is maximized. The problem admits a natural non-convex quadratic fractional formulation from which a semidefinite programming (SDP) relaxation can be derived. This relaxation can be tightened by means of a cutting plane algorithm which iteratively adds the most violated triangular inequalities. The proposed approach embeds the SDP relaxation and the cutting plane algorithm into a branch and bound framework to solve \(Max-Mean DP\) instances to optimality. Computational experiments show that the proposed method is able to solve to optimality in reasonable time instances with up to 100 elements, outperforming other alternative approaches.