Matching Items (18)

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The Methodology of Economics: How Economists Choose Between Theories

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I began this thesis because I was confused about economics. I wondered why there were so many different models. I didn't understand how they fit together. I was also confused by the assumptions being made. For instance, the assumption that

I began this thesis because I was confused about economics. I wondered why there were so many different models. I didn't understand how they fit together. I was also confused by the assumptions being made. For instance, the assumption that humans are rational utility-maximizers did not seem to agree with my own experiences. With my director Dr. Edward Schlee's help, my thesis has become an inquiry into the state of economic methodology, both in theory and in practice. The questions that drive this paper are: How do economists choose between theories? What is the purpose of economic theory? What is the role of empirical data in assessing models? What role do assumptions play in theory evaluation, and should assumptions make sense? Part I: Methodology is the theoretical portion of the paper. I summarize the essential arguments of the two main schools of thought in economic methodology, and argue for an updated methodology. In Part II: A case study: The expected utility hypothesis, I examine methodology in practice by assessing a handful of studies that seek to test the expected utility hypothesis. Interestingly, I find that there is a different between what economists say they are doing, and what they actually seem to be doing. Throughout this paper, I restrict my analysis to microeconomic theory, simply because this is the area with which I am more familiar. I intend this paper to be a guide for my fellow students and rising economists, as well as for already practicing economists. I hope it helps the reader better understand methodology and improve her own practice.

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2013-05

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Share auctions with linear demands

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Buyers have private information on auctioning divisible goods. Linearity could be a useful property on measuring their marginal utility on those goods or on their bidding strategies under such a share auction environment. This paper establishes an auction model with

Buyers have private information on auctioning divisible goods. Linearity could be a useful property on measuring their marginal utility on those goods or on their bidding strategies under such a share auction environment. This paper establishes an auction model with independent private-values paradigm (IPVP) where bidders have linear demand. A mechanism design approach is applied to explore the optimal share auction in this model. I discuss the most popular auction formats in practice, including Vickrey auction (VA), uniform-price auction (UPA) and discriminatory price auction (DPA). The ex-post equilibriums on explicit solutions are achieved. I found VA does not generally constitute an optimal mechanism as expected even in a symmetric scenario. Furthermore, I rank the different auction formats in terms of revenue and social efficiency. The more private information bidders keep, the lower revenue VA generates to seller, and it could be even inferior to UPA or DPA. My study aggregates dispersed private information with linearity and is robust to distributional assumption.

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2014

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Three essays in economics

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This dissertation presents three essays in economics. Firstly, I study the problem of allocating an indivisible good between two agents under incomplete information. I provide a characterization of mechanisms that maximize the sum of the expected utilities of the agents

This dissertation presents three essays in economics. Firstly, I study the problem of allocating an indivisible good between two agents under incomplete information. I provide a characterization of mechanisms that maximize the sum of the expected utilities of the agents among all feasible strategy-proof mechanisms: Any optimal mechanism must be a convex combination of two fixed price mechanisms and two option mechanisms. Secondly, I study the problem of allocating a non-excludable public good between two agents under incomplete information. An equal-cost sharing mechanism which maximizes the sum of the expected utilities of the agents among all feasible strategy-proof mechanisms is proved to be optimal. Under the equal-cost sharing mechanism, when the built cost is low, the public good is provided whenever one of the agents is willing to fund it at half cost; when the cost is high, the public good is provided only if both agents are willing to fund it. Thirdly, I analyze the problem of matching two heterogeneous populations. If the payoff from a match exhibits complementarities, it is well known that absent any friction positive assortative matching is optimal. Coarse matching refers to a situation in which the populations into a finite number of classes, then randomly matched within these classes. The focus of this essay is the performance of coarse matching schemes with a finite number of classes. The main results of this essay are the following ones. First, assuming a multiplicative match payoff function, I derive a lower bound on the performance of n-class coarse matching under mild conditions on the distributions of agents' characteristics. Second, I prove that this result generalizes to a large class of match payoff functions. Third, I show that these results are applicable to a broad class of applications, including a monopoly pricing problem with incomplete information, as well as to a cost-sharing problem with incomplete information. In these problems, standard models predict that optimal contracts sort types completely. The third result implies that a monopolist can capture a large fraction of the second-best profits by offering pooling contracts with a small number of qualities.

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Date Created
2011

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Essays in organizational economics: information sharing and organizational behavior

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One theoretical research topic in organizational economics is the information issues raised in different organizations. This has been extensively studied in last three decades. One common feature of these research is focusing on the asymmetric information among different agents within

One theoretical research topic in organizational economics is the information issues raised in different organizations. This has been extensively studied in last three decades. One common feature of these research is focusing on the asymmetric information among different agents within one organization. However, in reality, we usually face the following situation. A group of people within an organization are completely transparent to each other; however, their characters are not known by other organization members who are outside this group. In my dissertation, I try to study how this information sharing would affect the outcome of different organizations. I focus on two organizations: corporate board and political parties. I find that this information sharing may be detrimental for (some of) the members who shared information. This conclusion stands in contrast to the conventional wisdom in both corporate finance and political party literature.

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Created

Date Created
2014

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An: examination of the self-esteem of street children, as measured by the CFSEI-3

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It is estimated there are tens of millions of street children throughout the world. Existing literature has identified the conditions street children live in; and additional research has shown how these conditions typically affect the self-esteem of children. There is

It is estimated there are tens of millions of street children throughout the world. Existing literature has identified the conditions street children live in; and additional research has shown how these conditions typically affect the self-esteem of children. There is also ample research to support self-esteem as a critical component to a healthy childhood development. Existing research suggests that street children should have a low self-esteem, however data has not yet been collected to examine if this is true. Existing literature has also not yet explored how the self-esteem of street children is a necessary component to economic development. Based on Amartaya Sen's development theory of capabilities, damaged self-esteem in street children could be considered a hindrance to development.

This paper will examine how the self-esteem of street children is important to overall economic development. To understand if the self-esteem of street children are affected how existing literature suggests, this research examines the self-esteem of street children (n=22) in the Philippines using the Culture Free Self-Esteem Inventories 3 tool, which quantifies self-esteem levels with the Global Self-Esteem Quotient (GSEQ). In comparison to the GSEQ standardized scale, almost all street children surveyed scored below average or lower. The mean GSEQ score for the street children in Manila was below average.

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Date Created
2015

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Standardized strategic assessment framework for small and medium enterprises in high-tech manufacturing industry

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A fundamental question in the field of strategic management is how companies achieve sustainable competitive advantage. The Market-Oriented Theory (MOT), the Resource-Based Model and their complementary perspective try to answer this fundamental question. The primary goal of this study is

A fundamental question in the field of strategic management is how companies achieve sustainable competitive advantage. The Market-Oriented Theory (MOT), the Resource-Based Model and their complementary perspective try to answer this fundamental question. The primary goal of this study is to lay the groundwork for Standardized Strategic Assessment Framework (SSAF). The SSAF, which consists of a set of six models, aids in the evaluation and assessment of current and future strategic positioning of Small and Medium Enterprises (SMEs). The SSAF was visualized by IDEF0, a systems engineering tool. In addition, a secondary goal is the development of models to explain relationships between a company's resources, capabilities, and competitive strategy within the SSAF. Six models are considered within the SSAF, including R&D; activities model, product innovation model, process innovation model, operational excellence model, and export performance model. Only one of them, R&D; activities model was explained in-debt and developed a model by transformational system. In the R&D; activities model, the following question drives the investigation. Do company R&D; inputs (tangible, intangible and human resources) affect R&D; activities (basic research, applied research, and experimental development)? Based on this research question, eight hypotheses were extrapolated regarding R&D; activities model. In order to analyze these hypotheses, survey questions were developed for the R&D; model. A survey was sent to academic staff and industry experts for a survey instrument validation. Based on the survey instrument validation, content validity has been established and questions, format, and scales have been improved for future research application.

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Date Created
2012

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Political economic barriers to global change adaptations: a study of agrarian rural development in northwest Costa Rica

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This is a study of the plight of smallholder agriculture in Northwest Costa Rica. More specifically, this is the story of 689 rice farms, of an average size of 7.2 hectares and totaling just less than 5,300 hectares within the

This is a study of the plight of smallholder agriculture in Northwest Costa Rica. More specifically, this is the story of 689 rice farms, of an average size of 7.2 hectares and totaling just less than 5,300 hectares within the largest agricultural irrigation system in Central America. I was able to define the physical bounds of this study quite clearly, but one would be mistaken to think that this simplicity transfers to a search for rural development solutions in this case. Those solutions lie in the national and international politics that appear to have allowed a select few to pick winners and losers in Costa Rican agriculture in the face of global changes. In this research, I found that water scarcity among smallholder farms between 2006 and 2013 was the product of the adaptations of other, more powerful actors in 2002 to threats of Costa Rica's ratification of the Central American Free Trade Agreement. I demonstrate how the adaptations of these more powerful actors produced new risks for others, and how this ultimately prevented the rural development program from meeting its development goals. I reflect on my case study to draw conclusions about the different ways risks may emerge in rural development programs of this type. Then, I focus on the household level and show that determinants of successful adaptation to one type of global change risk may make farmers more vulnerable to other types, creating a "catch-22" among vulnerable farmers adapting to multiple global change risks. Finally, I define adaptation limits in smallholder rice farming in Northwest Costa Rica. I show that the abandonment of livelihood security and well-being, and of the unique "parcelaro" identities of rice farmers in this region define adaptation limits in this context.

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Date Created
2014

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Potential games and competition in the supply of natural resources

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This dissertation discusses the Cournot competition and competitions in the exploitation of common pool resources and its extension to the tragedy of the commons. I address these models by using potential games and inquire how these models reflect the real

This dissertation discusses the Cournot competition and competitions in the exploitation of common pool resources and its extension to the tragedy of the commons. I address these models by using potential games and inquire how these models reflect the real competitions for provisions of environmental resources. The Cournot models are dependent upon how many firms there are so that the resultant Cournot-Nash equilibrium is dependent upon the number of firms in oligopoly. But many studies do not take into account how the resultant Cournot-Nash equilibrium is sensitive to the change of the number of firms. Potential games can find out the outcome when the number of firms changes in addition to providing the "traditional" Cournot-Nash equilibrium when the number of firms is fixed. Hence, I use potential games to fill the gaps that exist in the studies of competitions in oligopoly and common pool resources and extend our knowledge in these topics. In specific, one of the rational conclusions from the Cournot model is that a firm's best policy is to split into separate firms. In real life, we usually witness the other way around; i.e., several firms attempt to merge and enjoy the monopoly profit by restricting the amount of output and raising the price. I aim to solve this conundrum by using potential games. I also clarify, within the Cournot competition model, how regulatory intervention in the management of environmental pollution externalities affects the equilibrium number of polluters. In addition, the tragedy of the commons is the term widely used to describe the overexploitation of open-access common-pool resources. Open-access encourages potential resource users to continue to enter the resource up to the point where rents are exhausted. The resulting level of resource use is higher than is socially optimal, and in extreme cases can lead to the collapse of the resource and the communities that may depend on it. In this paper I use the concept of potential games to evaluate the relation between the cost of resource use and the equilibrium number of resource users in open access regimes. I find that costs of access and costs of production are sufficient to determine the equilibrium number of resource users, and that there is in fact a continuum between Cournot competition and the tragedy of the commons. I note that the various common pool resource management regimes identified in the empirical literature are associated with particular cost structures, and hence that this may be the mechanism that determines the number of resource users accessing the resource.

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Date Created
2017

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Essay on dynamic matching

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In the first chapter, I study the two-sided, dynamic matching problem that occurs in the United States (US) foster care system. In this market, foster parents and foster children can form reversible foster matches, which may disrupt, continue in a

In the first chapter, I study the two-sided, dynamic matching problem that occurs in the United States (US) foster care system. In this market, foster parents and foster children can form reversible foster matches, which may disrupt, continue in a reversible state, or transition into permanency via adoption. I first present an empirical analysis that yields four new stylized facts related to match transitions of children in foster care and their exit through adoption. Thereafter, I develop a two-sided dynamic matching model with five key features: (a) children are heterogeneous (with and without a disability), (b) children must be foster matched before being adopted, (c) children search for parents while foster matched to another parent, (d) parents receive a smaller per-period payoff when adopting than fostering (capturing the presence of a financial penalty on adoption), and (e) matches differ in their quality. I use the model to derive conditions for the stylized facts to arise in equilibrium and carry out predictions regarding match quality. The main insight is that the intrinsic disadvantage (being less preferred by foster parents) faced by children with a disability exacerbates due to the penalty. Moreover, I show that foster parents in high-quality matches (relative to foster parents in low-quality matches) might have fewer incentives to adopt.

In the second chapter, I study the Minnesota's 2015 Northstar Care Program which eliminated the adoption penalty (i.e., the decrease in fostering-based financial transfers associated with adoption) for children aged six and older, while maintaining it for children under age six. Using a differences-in-differences estimation strategy that controls for a rich set of covariates, I find that parents were responsive to the change in direct financial payments; the annual adoption rate of older foster children (aged six to eleven) increased by approximately 8 percentage points (24% at the mean) as a result of the program. I additionally find evidence of strategic adoption behavior as the adoption rate of younger children temporarily increased by 9 percentage points (23% at the mean) while the adoption rate of the oldest children (aged fifteen) temporarily decreased by 9 percentage points (65% at the mean) in the year prior to the program's implementation.

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Date Created
2019

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Application of transaction cost economics within the facilities and construction industry to improve project outcomes: a case study approach

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This thesis draws on industry experience and academic literature to highlight several problems facing the construction and facility management industries. These problems include issues with product delivery performance and financial failures that often lead firms to spend much more than

This thesis draws on industry experience and academic literature to highlight several problems facing the construction and facility management industries. These problems include issues with product delivery performance and financial failures that often lead firms to spend much more than anticipated, while obtaining much less of a product. Transaction-cost economics theory and literature are presented as a model for understanding, predicting, and preventing these problems. Transaction-cost economics suggests that specificity and uncertainty, two key characteristics of industry transactions, are improperly aligned with governance structures, leading to preventable failures. This thesis highlights several case studies in which these failures occur and argues that the correct application of this theory can mitigate many of these problems. A final case study illustrates how this alignment can make a difference in outcome without a compromise of quality.

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Date Created
2019