We develop a stochastic frontier model with unknown locations and number of structural breaks for both efficiency and technology. The structural changes in technology and efficiency are different. It is possible to identify these two types of changes even under a short panel context. The algorithm to estimate the model is designed to avoid the potential pitfalls with panel data. Parallel comput...

This paper is aimed at investigating the effects of government intervention through unemployment benefits on macroeconomic dynamics in an agent based decentralized matching framework. The major result is that the presence of such a public intervention in the economy stabilizes the aggregate demand and the financial conditions of the system at the cost of a modest increase of both the inflation ...

We propose a model with heterogeneous interacting traders which can explain some of the stylized facts of stock market returns. In the model, synchronization effects, which generate large fluctuations in returns, can arise purely from communication and imitation among traders. The key element in the model is the introduction of a trade friction which, by responding to price movements, creates a...

We apply the idea of evolution to a spatial model. Prisoners’ dilemmas or coordination games are played repeatedly within neighbourhoods where players do not optimise but instead copy successful strategies. Discriminative behaviour of players is introduced representing strategies as small automata, which can be in different states against different neighbours. Extensive simulations show that co...

In this paper we argue that in realistically calibrated two period general equilibrium models with incomplete markets CAPM-pricing provides a good benchmark for equilibrium prices even when agents are not mean-variance optimizers and returns are not normally distributed. We numerically approximate equilibria for a variety of di erent speci cations for preferences, endowments and dividends and c...

Justified communication equilibrium (JCE) is an refinement for signaling games with cheap-talk communication. A strategy profile must be a JCE to stable outcome of nonequilibrium learning when receivers are initially trusting and senders play many more times than receivers. In the model, counterfactual “speeches” that have been informally used motivate past refinements messages actually sent. S...

Sixteen subjects’ brain activity were scanned using fMRI as they made choices, expressed beliefs, and expressed iterated 2nd-order beliefs (what they think others believe they will do) in eight games. Cingulate cortex and prefrontal areas (active in “theory of mind” and social reasoning) are differentially activated in making choices versus expressing beliefs. Forming self-referential 2nd-order...

Most quantitative studies of international real business cycle (IRBC) models require the use of approximate solution methods. We solve an IRBC model with incomplete asset markets using King, Plosser and Rebelo’s (1988) linear approximation method. We quantify the additional approximation error brought about by the existence of a unit root in the linear dynamic system and demonstrate that the sy...

We present a decomposition approach for integrated assessment modeling of climate policy based on a linear approximation of the climate system. Our objective is to demonstrate the usefulness of decomposition for integrated assessment models posed in a complementarity format. First, the complementarity formulation cum decomposition permits a precise representation of post-terminal damages thereb...