Working Papers 2020
Working Paper 1-2020
What are axiomatizations good for?
Itzhak Gilboa, Andrew Postlewaite, Larry Samuelson and David Schmeidler
ABSTRACT
Do axiomatic derivations advance positive economics? If economists are interested in predicting how people behave, without a pretense to change individual decision making, how can they benefit from representation theorems, which are no more than equivalence results? We address these questions. We propose several ways in which representation results can be useful and discuss their implications for axiomatic decision theory.
click here for 1-2020 paper in PDF
Published: Theory and Decision, 86 (2019), 339-359.
Working Paper 2-2020
States and Contingencies: How to Understand Savage without Anyone Being Hanged
Itzhak Gilboa, Stefania Minardi, Larry Samuelson and David Schmeidler
ABSTRACT
Models of decision making under uncertainty gain much of their power from the speci cation of states so as to resolve all uncertainty. However, this speci cation can undermine the presumed observabil- ity of preferences on which axiomatic theories of decision making are based. We introduce the notion of a contingency. Contingencies need not resolve all uncertainty, but preferences over functions from contin- gencies to outcomes are (at least in principle) observable. In sufficiently simple situations, states and contingencies coincide. In more challenging situations, the analyst must choose between sacri cing observability in order to harness the power of states that resolve all uncertainty, or preserving observability by working with contingencies.
Click here for 2-2020 paper in PDF
Published in: Revue économique 2020/2 (Vol. 71), pages 365 - 385
Working Paper 3-2020
No-Betting Pareto under Ambiguity
Itzhak Gilboa and Larry Samuelson
ABSTRACT
It has been argued that Pareto-improving trade is not as compelling under uncertainty as it is under certainty. The former may involve agents with different beliefs, who might wish to execute trades that are no more than betting. In response, the concept of No-Betting Pareto dominance was de ned to capture Pareto improvements that can also be rationalized by common prob- abilities. In this paper we argue that this de nition might be too narrow for use when agents are not Bayesian. Agents who face ambiguity might wish to trade in ways that can be justi ed by common ambiguity, though not necessarily by common probabilities. We accordingly extend the notion of No-Betting Pareto dominance to characterize trades than are "No-Betting Pareto" ranked according to the maxmin expected utility model.
Click here for 3-2020 paper in PDF
Published in: Theory and Decision, Published: 24 June 2021
Working Paper 4-2020
What Were You Thinking? Revealed Preference Theory as Coherence Test
Itzhak Gilboa and Larry Samuelson
ABSTRACT
Theory can be used to test the logic of intuitive decision making|one may ask whether a given set of decisions can be justi ed by a decision theoretic model in a given class. Indeed, in principal-agent settings, such justifications may be required|a manager of an investment fund may be asked what beliefs she had in mind when making nancial decisions for her clients, or when evaluating assets and liabilities. While such a question is formally equivalent to a revealed preference question, our motivation
suggests di erent assumptions about observable data. In this paper we assume that states and utilities are observable, and ask which collections of uncertain-act evaluations can be simultaneously justi ed by a single probability (for a Bayesian agent) and by a single set of probabilities (for a maxmin expected utility agent). We use a linear-programming-based argument to develop characterization results for each case.
Click here for 4-2020 paper in PDF
Published in: Theoretical Economics, 17 (2022): 507-519.
Working Paper 5-2020
What Should a Firm Know? Protecting Consumers' Privacy Rents
Daniel Bird and Zvika Neeman
ABSTRACT
A monopolistic rm observes a signal about the state of the world and then makes a take-it-or-leave-it o er to an uninformed consumer who has recourse to some outside option. We provide a geometric characterization of the rm's information structure that maximizes the consumer's surplus: the optimal regime partitions the space of payo states into polyhedral cones with disjoint interiors. We interpret our results in terms of the maximization of the consumer's "privacy rents." We illustrate and motivate our approach through an example of the regulation of the privacy of genetic information.
Click here for 5-2020 paper in PDF
Published in: American Economic Journal: Microeconomic, VOL. 14, NO. 4, NOVEMBER 2022, (pp. 257-95)
Working Paper 6-2020
Theories and Cases in Decisions under Uncertainty
Itzhak Gilboa, Stefania Minardi Larry Samuelson
ABSTRACT
We present and axiomatize a model that combines and generalizes theory-based and analogy-based reasoning in the context of decision under uncertainty. An agent considers a set of theories describing the data generating process that she observes, and her beliefs over theories are given by decision weights. She also remembers and puts weight on similarity to past cases. When a case is added to her memory and a new problem is encountered, two types of learning take place. First, the decision weight assigned to each theory is multiplied by its conditional probability (given the realized case). Second, subsequent problems are assessed for their similarity to past cases, including the newly-added case. If no weight is put on past cases, the model is equivalent to Bayesian reasoning over the theories. However, when this weight is positive, the learning process continually adjusts the balance between case-based and theory-based reasoning. In particular, a "black swan" which is considered a surprise by all theories would shift the weight to case-based reasoning.
Click here for 6-2020 paper in PDF
Published in: Games and Economic Behavior, Volume 123, September 2020, Pages 22-40
Working Paper 7-2020
Supply-Side Variation in the Use of Emergency Departments
Dan Zeltzer, Liran Einav, Avichai Chasid, Ran D. Balicer
ABSTRACT
We investigate the role of person-specific and place-specific factors in explaining geographic variation in emergency department (ED) utilization using detailed data on 150,000 patients who moved regions within Israel. We observe a sharp change in the probability of an ED visit following a move that is equal to half of the destination- origin difference in the average ED utilization rate. In contrast, we find no change in the probability of having an unplanned hospital admission (that is, via the ED), implying that the entire change is driven by ED visits that do not lead to hospital admission. Similar results are obtained in our complementary event-study analysis, which uses hospital entry as a source of variation. The results from both approaches suggest that supply-side variation in ED access affects only the less severe cases - for which close substitutes likely exist- and that variation across ED physicians in their propensity to admit patients is not explained by place-specific factors, such as differences in incentives, capacity, or diagnostic quality.
Click here for 7-2020 paper in PDF
Published in: Journal of Health Economic Volume 78, July 2021, 102453
Working Paper 8-2020
Cheating with (Recursive) Models
Kfir Eliaz, Ran Spiegler and Yair Weiss
ABSTRACT
To what extent can misspeci ed subjective models distort correlations? We study an \analyst" who utilizes models that take the form of a recursive system of linear regression equations. The analyst ts each equation to an objective empirical distribution. We characterize the maximal pairwise correlation that the analyst's model can predict given a generic objective covariance matrix, subject to the constraint that the estimated model does not distort the mean and variance of individual variables. We show that as the number of variables in the model grows, the estimated pairwise correlation can become arbitrarily large, regardless of the objective correlation.
Click here for 8-2020 paper in PDF
Published in: AMERICAN ECONOMIC REVIEW: INSIGHTS, VOL. 3, NO. 4, DECEMBER 2021, (pp. 417-34)
Working Paper 9-2020
A Simple Model of a Money-Management Market with Rational and Extrapolative Investors
Ran Spiegler
ABSTRACT
I analyze a simple model of competition in fees among mutual funds. The funds are vertically differentiated in terms of the expected return they can generate for investors. Following Berk and Green (2004), I assume that a fund’s net return is decreasing in the amount of capital it manages, and that there is an infinite supply of capital by rational investors. Unlike the Berk-Green model, I assume there is also a finite supply of capital by non-rational investors who naively chase recent net returns. Investor behavior and the funds’ fee profile induce a long-run average amount of managed capital for each fund. I analyze Nash equilibrium in the game played by the funds, focusing on the implications of fund skill on fees, capital flows and net performance.
Click here for 9-2020 paper in PDF
Published in: European Economic Review Volume 127, August 2020, 103488
Working Paper 10-2020
Strategic Interpretations
Kfir Eliaz, Ran Spiegler and Heidi C. Thysen
ABSTRACT
We study strategic communication when the sender can inuence the receiver's understanding of messages' quilibrium meaning. We focus on a “pure persuasion" setting, in which the informed sender wants the informed receiver to always choose “accept". The sender's strategy maps each state of Nature to a distribution over pairs consisting of: (i) a multi-dimensional message, and (ii) a “dictionary" that credibly discloses the state-dependent distribution of some of the messsage's components. The receiver does not know the sender's strategy by default; he can only interpret message components that are covered by the dictionary he is provided with. We characterize the sender's optimal persuasion strategy and show that full persuasion is possible when the prior on the acceptance state exceeds a threshold that quickly decreases with message dimensionality. We extend our analysis to situations where interpretation of messages is done by a third party with uncertain preferences, and explore alternative notions of “dictionaries".
Click here for 10-2020 paper in PDF
Published in: Journal of Economic Theory, Volume 192, March 2021, 105192
Working Paper 11-2020
Politics and Gender in the Executive Suite
Alma Cohen, Moshe Hazan and David Weiss
ABSTRACT
We investigate whether CEOs’ political preferences are associated with the prevalence and compensation of women among non-CEO top executives at U.S. public companies. We find that “Democratic” CEOs are associated with more women in the executive suite. To explore causality, we use an event study approach to showthat replacing a Republican with a Democratic CEO increases female representation. Additionally, we discuss how the lack of an association between CEO political preferences and gender diversity in the boardroom influences our interpretation of these results. Finally, gender gaps in the level and performance-sensitivity of compensation diminish, or disappear, under Democratic CEOs.
Click here for 11-2020 paper in PDF
Working Paper 12-2020
"Using Employment Subsidies to incentivize Job Search and Employment of Job Seekers in Remote Areas"
Naomi Gershoni, Itay Saporta-Eksten, Analia Schlosser
(Paper in Hebrew)
נייר דיון 12-2020
"כלים לעידוד תעסוקה של תושבי הפריפריה: הערכת ההשפעה של "מענק עבודה מרוחקת"
נעמי גרשוני, איתי ספורטא אקשטין, אנליה שלוסר
תקציר:
מאמר זה בוחן את ההשפעה של תוכנית "מענק עבודה מרוחקת" אשר יושמה על ידי שירות התעסוקה בישראל החל מסוף 2015 ועד סוף 2019. מטרת התוכנית הייתה לעודד את דורשי העבודה המתגוררים ביישובים פריפריאליים בעלי מדד סוציו כלכלי נמוך למצוא עבודה מחוץ ליישוב מגוריהם. במסגרת התוכנית, זכאי דורש עבודה לקבל מענק של כ-600 ש"ח בחודש למשך 5 חודשים אם השתלב בעבודה מחוץ ליישוב מגוריו בתקופת הזכאות, העומדת על 3 חודשים מיום קבלת ההודעה על התוכנית. התוכנית יושמה במתכונת של ניסוי מבוקר: כאחת לחודש התבצעה הקצאה של דורשי עבודה לקבוצת טיפול, אשר קיבלו הסבר על התוכנית ועל האפשרות לקבל מענק, ולקבוצת ביקורת, אשר המשיכה לקבל שירותים בלשכת התעסוקה ללא כל שינוי. הניתוח במאמר זה מתבסס על מדגם של 20,910 דורשי עבודה (8,621 בקבוצת טיפול), אשר ניתן לבחון את מצבם התעסוקתי 18 חודשים לאחר תאריך ההקצאה לתוכנית ו-39,697 דורשי עבודה (18,162 בקבוצת טיפול), אשר ניתן לבחון את מצבם לאחר 12 חודשים מתאריך ההקצאה לתוכנית. הממצאים מלמדים כי כ-9% מהפרטים שהוקצו לקבוצת הטיפול ניצלו לפחות חודש אחד של מענק. הממצא המרכזי הינו כי לתוכנית השפעה חיובית מובהקת על תעסוקה. הגידול הממוצע בשיעור התעסוקה על פני הקבוצות באופק של 18 חודשים (לאחר מיצוי מוחלט של תקופת הזכאות למענק) עומד על 1.2 נקודות אחוז לעומת שיעור תעסוקה של 38.3% בקבוצת הביקורת (גידול של 3.1%). ההשפעה המשמעותית ביותר נאמדה בקבוצה של תובעי ה"ה ותיקים – גידול של 2.5 נקודות אחוז לעומת שיעור תעסוקה של 17.9% בקבוצת הביקורת (גידול של כמעט 14%). עבור קבוצה זו, העלייה בשיעור התעסוקה מלווה גם בגידול מובהק בהכנסה החודשית מעבודה, ובירידה בהסתברות לקבלת קצבה.
Click here for paper 12-2020 in PDF (Hebrew)
Working Paper 13-2020
"Israel's Balance of Payments: From Deficits to Surpluses"
Leonardo Leiderman and Victor Bahar
ABSTRACT:
Israel's balance of payments changed dramatically between 1995 and 2015. These years mark a period of transition from deficits to surpluses in the current account. Among the factors behind this reversal were a sound macroeconomic policy, the global boom in high-tech industries, and the discovery of natural gas on Israel’s coast in the Mediterranean Sea. The transition reflects an increase in the national saving rate and a decline in the rate of national investment. While these important changes were taking place, the financial account of the balance of payments also shifted due to various structural changes, such as the completion of foreign exchange market liberalization and a shift to a floating exchange rate regime. Due to the foregoing developments, Israel has become a net lender to the rest of the world. In this paper we analyze and quantify these major changes and assess the extent to which the existence of current account surpluses be considered as a sustainable phenomenon.
Click here for paper 13-2020 in PDF
נייר דיון 14-2020
"הדינמיקה של מגפתCOVID 19 בישראל והשלכותיה הכלכליות"
טניה ברון, ערן ישיב ועופר קורנפלד
תקציר:
החל מסוף פברואר 2020 חווה ישראל את מגפת COVID 19. במאמר זה אנו אומדים את הדינמיקה של המגפה ומנתחים את השלכותיה הבריאותיות והכלכליות למשק הישראלי. כבסיס לניתוח אנו משתמשים במודל אפידמיולוגי עדכני, המבוסס על תכונות הוירוס, ובנתוני ישראל. במסגרת מודל זה אנו בוחנים בסימולציה צעדי מדיניות חלופיים ומשווים אותם למה שנעשה בפובעל. ההשוואה נעשית בפריזמה של אופטימיזציה של צעדי המדיניות. זאת על ידי הצגת בעיית תכנון של מתכנן חברתי מרכזי המנסה להביא למינימום פונקציית הפסד, הלוקחת בחשבון הן את התוצאות הבריאותיות (חולים, מתים, מגבלות מערכת הבריאות) והן את התוצאות הכלכליות (אובדן תוצר ותעסוקה).
ניתוח המודל מביא למסקנה כי בפני קובעי המדיניות עומדות בעיקרון שתי אסטרטגיות של מדיניות בריאות הציבור לטיפול במגפה. האסטרטגיה האחת מכוונת להשגת חיסון-עדר. זו נשענת על תפיסה לפיה העלות הכלכלית של אמצעי הסגר השונים (עד שיימצא חיסון) הינה יקרה מדי, ועל כן מתיר המתכנן המרכזי למגפה להתפשט, תוך שהוא מתזמן את אמצעי הסגר כך שהתמותה תהיה מינימלית, בהינתן שאין ביכולתו להמתין לחיסון. האסטרטגיה השנייה הינה המתנה לחיסון. כלומר, המתכנן מעריך את חיי האדם במידה כזו שהוא מוכן לשלם מחירים גבוהים יותר כדי לצמצם את התחלואה.
מכיול המודל לישראל נראה שהמתנה לחיסון מהווה אסטרטגיה אופטימלית אך ורק כאשר ערך החיים מבחינת המתכנן הוא גבוה מספיק וכולל שיקולים רחבים יותר משיקולים כלכליים בלבד. הדינמיקה בפועל של המגפה בישראל מהווה מקרה ביניים של מסלולי שתי האסטרטגיות לעיל. המדיניות המוצהרת היא של המתנה לחיסון, תוך ניסיון לשלוט בהיקף המגפה על ידי פעולות ריסון הנושאות מחיר כלכלי. אך היעדר מדיניות יציאה סדורה מהסגר בגל הראשון הביאה לגל שני עם היקפי תחלואה ותמותה הגבוהים מאלו של הגל הראשון ומאלו המשתמעים מהאסטרטגיה השנייה שנידונה לעיל. בעת סגירת מאמר זה הוטל גם סגר שני.
Working Paper 15-2020
"Modelling COVID19: EpidemiologicalEvidence and Model Misspecifications"
Yinon Bar-On, Tatiana Baron, Ofer Cornfeld, Ron Milo and Eran Yashiv
ABSTRACT:
Research in Economics on COVID19 typically posits an economy subject to a model of epidemiological dynamics which is at the core of the analysis. We place this model on the foundations of an epidemiological analysis of the SARS-CoV-2 transmission timescales. We formulate a full model with both epidemiologically-based and clinicallybased parameterization. We show that there is often serious misspecification of the model, erroneously characterizing a relatively slowmoving disease, thereby distorting the policymaker decisions towards less severe, delayed intervention. Moreover, the scale of the disease is under-estimated. We also discuss misguided modelling of lockdown policies.
Click here for paper 15-2020 in PDF
Submitted to Journal of Population Economics
