Explanatory Value in Context the Curious Case of Hotelling's
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April 2, 2015 Probabilistic Voting in Models of Electoral Competition By
April 2, 2015 Probabilistic Voting in Models of Electoral Competition by Peter Coughlin Department of Economics University of Maryland College Park, MD 20742 Abstract The pioneering model of electoral competition was developed by Harold Hotelling and Anthony Downs. The model developed by Hotelling and Downs and many subsequent models in the literature about electoral competition have assumed that candidates embody policies and, if a voter is not indifferent between the policies embodied by two candidates, then the voter’s choices are fully determined by his preferences on possible polices. More specifically, those models have assumed that if a voter prefers the policies embodied by one candidate then the voter will definitely vote for that candidate. Various authors have argued that i) factors other than policy can affect a voter’s decision and ii) those other factors cause candidates to be uncertain about who a voter will vote for. These authors have modeled the candidates’ uncertainty by using a probabilistic description of the voters’ choice behavior. This paper provides a framework that is useful for discussing the model developed by Hotelling and Downs and for discussing other models of electoral competition. Using that framework, the paper discusses work that has been done on the implications of candidates being uncertain about whom the individual voters in the electorate will vote for. 1. An overview The initial step toward the development of the first model of electoral competition was taken by Hotelling (1929), who developed a model of duopolists in which each firm chooses a location for its store. Near the end of his paper, he briefly described how his duopoly model could be reinterpreted as a model of competition between two political parties. -
Harold Hotelling 1895–1973
NATIONAL ACADEMY OF SCIENCES HAROLD HOTELLING 1895–1973 A Biographical Memoir by K. J. ARROW AND E. L. LEHMANN Any opinions expressed in this memoir are those of the authors and do not necessarily reflect the views of the National Academy of Sciences. Biographical Memoirs, VOLUME 87 PUBLISHED 2005 BY THE NATIONAL ACADEMIES PRESS WASHINGTON, D.C. HAROLD HOTELLING September 29, 1895–December 26, 1973 BY K. J. ARROW AND E. L. LEHMANN AROLD HOTELLING WAS A man of many interests and talents. HAfter majoring in journalism at the University of Washington and obtaining his B.A in that field in 1919, he did his graduate work in mathematics at Princeton, where he received his Ph.D. in 1924 with a thesis on topology. Upon leaving Princeton, he took a position as research associate at the Food Research Institute of Stanford Univer- sity, from where he moved to the Stanford Mathematics Department as an associate professor in 1927. It was during his Stanford period that he began to focus on the two fields— statistics and economics—in which he would do his life’s work. He was one of the few Americans who in the 1920s realized the revolution that R. A. Fisher had brought about in statistics and he spent six months in 1929 at the Rothamstead (United Kingdom) agricultural research station to work with Fisher. In 1931 Hotelling accepted a professorship in the Eco- nomics Department of Columbia University. He taught a course in mathematical economics, but most of his energy during his 15 years there was spent developing the first program in the modern (Fisherian) theory of statistics. -
Endogenous Market Power"
Endogenous Market Power Marek Weretkay August 5, 2010 Abstract In this paper we develop a framework to study thin markets, in which all traders, buyers, and sellers are large, in the sense that they all have market power (also known as bilateral oligopoly). Unlike many IO models, our framework does not assume a priori that some traders have or do not have market power because “they are large or small.” Here, market power arises endogenously for each trader from market clearing and optimization by all agents. This framework allows for multiple goods and heterogeneous traders. We de…ne an equilibrium and show that such equilibrium exists in economies with smooth utility and cost functions and is determinate. The model suggests that price impact depends positively on the convexity of preferences or cost functions of the trading partners. In addition, the market power of di¤erent traders reinforces that of others. We also characterize an equilibrium outcome: Compared to the competitive model, the volume of trade is reduced and hence is Pareto ine¢ cient. JEL classification: D43, D52, L13, L14 Keywords: Thin Markets, Bilateral Oligopoly, Walrasian Auction The problem of the exchange of goods among rational traders is at the heart of economics. The study of this problem, originating with the work of Walras and re…ned by Fisher, Hicks, Samuelson, Arrow, and Debreu, provides a well-established methodology for analyzing market interactions in an exchange economy. The central concept of this approach is competitive equilibrium, wherein it is assumed that individual traders cannot a¤ect prices. Price taking behavior is justi…ed by the informal argument that the economy is so large that each individual trader is negligible and hence has no impact on price. -
Restoring the Principle of Minimum Differentiation in Product Positioning
RESTORING THE PRINCIPLE OF MINIMUM DIFFERENTIATION IN PRODUCT POSITIONING BYONG-DUKRHEE john M. Olin School of Business Washington University St. Louis. MO 63130 ANDREDE PALMA D&partement COMIN Universitt de Genhe Genhe, CH-1211, Switzerland CLAESFORNELL Graduate School of Business Administration The University of Michigan Ann Arbor, MI 48109 JACQUES-FRAN~OISTHISSE Universitt de Paris I and CERAS, Ecole Nationale des Ponfs et Chaussies Paris, F-75343, France Most research on product positioning supports the idea of differentiation. Product standardization (i.e., minimum differentiation) occurs only under very limiting as- sumptions. Yet, similar products are often observed in the marketplace. We attempt to restore the case for standardization by using more realistic assumptions than in previous work. We assume that consumers consider not only observable attributes in brand choice, but also attributes that are unobservable by the firms. We find that standardization is an equilibrium when consumers exhibit sufficient heterogeneity along the unobservable attributes under both positioning with exogenously given prices and price competition, We also show that, under insufficient heterogeneity along the unobservable attribute, our results coincide with past research that argues in fauor of differentiation. The authors wish to thank the anonymous reviewers for their valuable comments and suggestions to improve the quality of this paper. Special thanks should be ex- tended to the editor, Daniel F. Spulber, for encouraging this research. The second author would like to thank Robin Lindsey at the University of Alberta for helpful discussion and his comments, and thanks Centre Interuniversitaire de Management, Belgium, for funding. 0 1993 The Massachusetts Institute of Technology. -
Markets and Hierarchies: Analysis and Antitrust Implications
Markets and Hierarchies: Analysis and Antitrust Implications A Study in the Economics of Internal Organization Oliver E. Williamson University of Pennsylvania THE FREE PRESS A Division of Macmillan Publishing Co., Inc. ~ NEW YORK Collier Macmillan Publishers LONDON ...... 1. Toward a New Institutional Economics A broadly based interest among economists in what might be referred to as the "new institutional economics" has developed in recent years. Aspects of mainline microtheory, economic history, the economics of property rights, comparative systems, labor economics, and industrial organization• have each had a bearing on this renaissance. The common threads that tie these various studies together are: (1) an evolving consensus that received microtheory, as useful and powerful as it is for many purposes, operates at too high a level of abstraction to permit many important microeconomic phenomena to be addressed in an uncontrived way; and (2) a sense that the study of "transactions," which concerned the institutionalists in the profes sion some forty years ago, is really a core matter and deserves renewed attention. Unlike the earlier institutionalists, however, the current group is inclined to be eclectic. The new institutional economists both draw on microtheory and, for the most part, regard what they are doing as comple mentary to, rather than a substitute for, conventional analysis. The spirit in which this present book is written very much follows the ~hinking of these new institutionalists. I hope, by exploring microeconomic Issues of markets and hierarchies in greater detail than conventional analysis commonly employs, to achieve a better understanding of the origins and functions of various firm and market structures- stretching from ele ~entary work groups to complex modern corporations. -
The Theory of Monopolistic Competition, Marketing's Intellectual History, and the Product Differentiation Versus Market Segmen
Journal of Macromarketing 31(1) 73-84 ª The Author(s) 2011 The Theory of Monopolistic Competition, Reprints and permission: sagepub.com/journalsPermissions.nav Marketing’s Intellectual History, and the DOI: 10.1177/0276146710382119 Product Differentiation Versus Market http://jmk.sagepub.com Segmentation Controversy Shelby D. Hunt1 Abstract Edward Chamberlin’s theory of monopolistic competition influenced greatly the development of marketing theory and thought in the 1930s to the 1960s. Indeed, marketers held the theory in such high regard that the American Marketing Association awarded Chamberlin the Paul D. Converse Award in 1953, which at the time was the AMA’s highest honor. However, the contemporary marketing literature virtually ignores Chamberlin’s theory. The author argues that the theory of monopolistic competition deserves reexamining on two grounds. First, marketing scholars should know their discipline’s intellectual history, to which Chamberlin’s theory played a significant role in developing. Second, understanding the theory of monopolistic competition can inform contemporary marketing thought. Although our analysis will point out several contributions of the theory, one in partic- ular is argued in detail: the theory of monopolistic competition can contribute to a better understanding of the ‘‘product differ- entiation versus market segmentation’’ controversy in marketing strategy. Keywords Chamberlin, marketing strategy, product differentiation, market segmentation As research specialization has increased, ... knowledge outside Despite the theory’s defeat in economics, the theory of of a person’s specialty may first be viewed as noninstrumental, monopolistic competition (hereafter, TMC) influenced greatly then as nonessential, then as nonimportant, and finally as the development of marketing theory and thought in the 1930s nonexistent. -
Dynamic Duopoly with Output Adjustment Costs in International Markets: Taking the Conjecture out of Conjectural Variations
View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Research Papers in Economics This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Trade Policies for International Competitiveness Volume Author/Editor: Robert C. Feenstra, editor Volume Publisher: University of Chicago Press Volume ISBN: 0-226-23949-7 Volume URL: http://www.nber.org/books/feen89-1 Conference Date: April 29-30, 1988 Publication Date: 1989 Chapter Title: Dynamic Duopoly with Output Adjustment Costs in International Markets: Taking the Conjecture out of Conjectural Variations Chapter Author: Robert Driskill, Stephen McCafferty Chapter URL: http://www.nber.org/chapters/c6178 Chapter pages in book: (p. 125 - 144) 4 Dynamic Duopoly with Output Adjustment Costs in International Markets: Taking the Conjecture out of Conjectural Variations Robert Driskill and Stephen McCafferty Microeconomics in general and trade economists in particular have made wide use of the conjectural variations approach to modeling oligopolistic behavior. Most users of this approach acknowledge its well-known shortcomings but defend its use as a “poor man’s’’ dynamics, capable of capturing dynamic considerations in a static framework. As one example, Eaton and Grossman ( 1986) organize discussion about optimal trade policy in international oligopolistic markets around the question of whether conjectural variations are Nash-Coumot, Bertrand, or consistent in the sense of Bresnahan (1981). Their primary finding is that the optimal policy might be a tax, a subsidy, or free trade, depending on whether the exogenous conjectural variation is Nash-Coumot, Bertrand, or consistent. -
Conjectural Variation’ in Cournot Duopoly, Evaluate Its Impacts and Discuss the Policy Implication
View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Munich Personal RePEc Archive MPRA Munich Personal RePEc Archive Explain `conjectural variation' in Cournot duopoly, evaluate its impacts and discuss the policy implication Niall Edward Douglas University of St. Andrews December 2006 Online at http://mpra.ub.uni-muenchen.de/13652/ MPRA Paper No. 13652, posted 27. February 2009 18:59 UTC Explain ‘conjectural variation’ in Cournot duopoly, evaluate its impacts and discuss the policy implication To fully understand the impacts and policy implications of conjectural variation, one must first understand the part it played in the great indeterminacy debate within marginal economics during the first half of the 20th century. Therefore, this paper shall begin with a short description and history of conjectural variation, followed by how the debates surrounding it led to the final resolution of the indeterminacy issue. The policy implications of that resolution for imperfect markets are then briefly discussed. Definition & History At the beginning of the 20th century, political economics, as it was still known then, was wrestling with the indeterminacy issue i.e.; whether an economy tended towards an equilibrium or not1. The prevailing mood of the time felt a strong need that an economy should be determinate as it was not understood then how otherwise an economy should not fall apart2. The problem was that empirical evidence strongly suggested indeterminacy, as did some of the most notable Economists of the time. F. Y. Edgeworth (1897) was considered to have given the authoritative judgement on the indeterminacy of Cournot duopoly by showing that the imposition of a quantity constraint caused the market price to oscillate inside an interval3. -
Multi-Purchasing in the Linear City
View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by NORA - Norwegian Open Research Archives NORGES HANDELSHØYSKOLE Bergen, Spring 2012 Multi-purchasing in the linear city Håkon Sæberg Advisor: Hans Jarle Kind Master Thesis in Economic Analysis NORGES HANDELSHØYSKOLE This thesis was written as a part of the Master of Science in Economics and Business Administration at NHH. Neither the institution, the advisor, nor the sensors are - through the approval of this thesis - responsible for neither the theories and methods used, nor results and conclusions drawn in this work. 2 3 Abstract This paper allows for the purchase of both goods in the Hotelling model with linear transport costs. Price competition disappears as a result, and we have a stable linear model with the Principle of Minimum Differentiation intact. Stability is dependent on equal marginal costs for the two producers. The new model lends itself well to bundling. Treating the multi-purchase Hotelling framework under a monopoly, we find that mixed bundling leads to an intermediate level of differentiation with at least half the line between the two goods. Variety is thus greater under a monopoly than under the ordinary duopoly. Media markets, popularly modelled using two-sided markets, are an example of when purchases of multiple brands are common. This paper fills a gap in the literature on multi- homing in two-sided markets. 4 Acknowledgements I am grateful for the support of my advisor, Professor Hans Jarle Kind. Although industrial organization has fascinated me for long, I chose the topic for my thesis based explicitly on whom I could get as an advisor. -
United and American Airlines
UC Berkeley Working Paper Series Title Estimating a Mixed Strategy: United and American Airlines Permalink https://escholarship.org/uc/item/2f36z7n1 Authors Golan, Amos Karp, Larry S. Perloff, Jeffrey M. Publication Date 1998-06-01 eScholarship.org Powered by the California Digital Library University of California Estimating a Mixed Strategy: United and American Airlines Amos Golan Larry S. Karp Jeffrey M. Perloff June 1998 Abstract We develop a generalized maximum entropy estimator that can estimate pure and mixed strategies subject to restrictions from game theory. This method avoids distributional assumptions and is consistent and efficient. We demonstrate this method by estimating the mixed strategies of duopolistic airlines. KEYWORDS: Mixed strategies, noncooperative games, oligopoly, maximum entropy, airlines JEL: C13, C35, C72, L13, L93 George Judge was involved in every stage of this paper and was a major contributor, but is too modest to agree to be a coauthor. He should be. We are very grateful to Jim Brander and Anming Zhang for generously providing us with the data used in this study. Contact: Jeffrey M. Perloff (510/642-9574; 510/643-8911 fax) Department of Agricultural and Resource Economics 207 Giannini Hall University of California Berkeley, California 94720 [email protected] Revised: June 25, 1998 Printed: July 23, 1999 Table of Contents 1. INTRODUCTION 1 2. OLIGOPOLY GAME 3 2.1 Strategies 4 2.2 Econometric Implications 5 3. GENERALIZED-MAXIMUM-ENTROPY ESTIMATION APPROACH 8 3.1 Background: Classical Maximum Entropy Formulation 8 3.2 The Basic Generalized Maximum Entropy Formulation 10 3.3 Generalized Maximum Entropy Formulation of the Nash Model 12 3.4 Properties of the Estimators and Normalized Entropy 13 4. -
An Experimental Investigation of the Hotelling Rule
Price Formation Of Exhaustible Resources: An Experimental Investigation of the Hotelling Rule Christoph Neumann1, Energy Economics, Energy Research Center of Lower Saxony, 38640 Goslar, Germany, +49 (5321) 3816 8067, [email protected] Mathias Erlei, Institute of Management and Economics, Clausthal University of Technology, 38678 Clausthal-Zellerfeld, Germany +49 (5323) 72 7625, [email protected] Keywords Non-renewable resource, Hotelling rule, Experiment, Continuous Double Auction Overview Although Germany has an ambitious energy strategy with the aim of a low carbon economy, around 87% of the primary energy consumption was based on the fossil energies oil, coal, gas and uranium in 2012, which all belong to the category of exhaustible resources (BMWi 2013). Harold Hotelling described in 1931 the economic theory of exhaustible resources (Hotelling 1931). The Hotelling rule states that the prices of exhaustible resources - more specifically the scarcity rent - will rise at the rate of interest, and consumption will decline over time. The equilibrium implies social optimality. However, empirical analysis shows that market prices of exhaustible resources rarely follow theoretical price paths. Nevertheless, Hotelling´s rule “continues to be a central feature of models of non-renewable resource markets” (Livernois 2009). We believe that there are difficulties in the (traditional) empirical verification but this should not lead to the invalidity of the theory in general. Our research, by using experimental methods, shows that the Hotelling rule has its justification. Furthermore, we think that the logic according to the Hotelling rule is one influencing factor among others in the price formation of exhaustible resources, therefore deviations are possible in real markets. -
IMS Presidential Address Teaching Statistics in the Age of Data Science
IMS Presidential Address Teaching Statistics in the Age of Data Science Jon A. Wellner University of Washington, Seattle IMS Annual Meeting, & JSM, Baltimore, July 31, 2017 IMS Annual Meeting and JSM Baltimore STATISTICS and DATA SCIENCE • What has happened and is happening? B Changes in degree structures: many new MS degree programs in Data Science. B Changes in Program and Department Names; 2+ programs with the name \Statistics and Data Science" Yale and Univ Texas at Austin. B New pathways in Data Science and Machine Learning at the PhD level: UW, CMU, and ::: • Changes (needed?) in curricula / teaching? IMS Presidential Address, Baltimore, 31 July 2017 1.2 ? Full Disclosure: 1. Task from my department chair: a. Review the theory course offerings in the Ph.D. program in Statistics at the UW. b. Recommend changes in the curriculum, if needed. 2. I will be teaching Statistics 581 and 582, Advanced Statistical Theory during Fall and Winter quarters 2017-2018. What should I be teaching? ? IMS Presidential Address, Baltimore, 31 July 2017 1.3 Exciting times for Statistics and Data Science: • Increasing demand! • Challenges of \big data": B challenges for computation B challenges for theory • Changes needed in statistical education? IMS Presidential Address, Baltimore, 31 July 2017 1.4 Exciting times for Statistics and Data Science: • Increasing demand! Projections, Bureau of Labor Statistics, 2014-24: Job Description Increase % • Statisticians 34% • Mathematicians 21% • Software Developer 17% • Computer and Information Research Scientists