This paper assumes that output depends on a large number of variables, but that economic theory has only revealed a subset of these variables. The variables that determine output include exogenous shocks, as well as endogenous variables that depend on both the exogenous variables and agents’ expectations. This paper examines a policy maker’s attempts to forecast output under two different types...

Scotchmer and Wooders (1987) show that efficient clubs are homogeneous when consumers are divisible in Berglas’s (1976) anonymous crowding model. However, if consumers are not divisible or if clubs have multiple facilities with economies of scope, mixed clubs are efficient. In such a model, we consider clubs with multiple membership policies for different types of consumers, and show the existe...

In this paper, a class of bimatrix games having the same Nash equilibria of a given game, either in pure or in mixed policies, is characterized. Such a goal is reached by computing the set of all the polynomials that are monotone strictly increasing in a given interval and by borrowing techniques from algebraic geometry to find solutions to a set of polynomial equalities.

I propose a generalization of the probabilistic voting model in two-candidate elections. Unlike in all previous works, I assume that the candidates have general von Neumann-Morgenstern utility functions defined over the voting outcomes. For a finite number of voters, I derive necessary and sufficient conditions for the existence of a local Nash equilibrium in which the policy platforms of the c...

We present a simple model of the macroeconomy that includes a role for an assetprice bubble, and derive optimal monetary policy settings for two policy-makers. The first policy-maker, a sceptic, does not attempt to forecast the future possible paths for the asset-price bubble when setting policy. The second policy-maker, an activist, takes into account the complete stochastic implications of th...

We extend the Monacelli [Monacelli, T. (2005). Monetary policy in a low pass-through environment. Journal of Money, Credit and Banking, 37(6), 1047–1066]model to allow for a central bank that penalizes nominal interest rate paths that are too close to the zero lower bound. We analytically derive the optimal interest-rate policy rule in each equilibrium under four policy regimes: (i) benchmark c...

The problem of detecting an odd arm from a set of K arms of a multi-armed bandit, with fixed confidence, is studied in a sequential decision-making scenario. Each arm’s signal follows a distribution from a vector exponential family. All arms have the same parameters except the odd arm. The actual parameters of the odd and non-odd arms are unknown to the decision maker. Further, the decision mak...

We extend the “policy rollout” sampling technique for Markov decision processes to Markov games, and provide an approximation result guaranteeing that the resulting sampling-based policy is closer to the Nash equilibrium than the underlying base policy. This improvement is achieved with an amount of sampling that is independent of the state-space size. We base our approximation result on a more...

We present a simple model of a debate between two interested parties which takes into account the complexity of their policy positions. The two debaters engage in all-pay-auctions to win slots of time/attention to present their positions to a decision maker. Complexity of a policy is modelled through the number of slots of attention needed to get the policy across. We show that when the number ...

Giannoni and Woodford (2003a, 2003b) and Hansen and Sargent (2003, 2004) have recently developed different notions of robust policy, and both approaches have been applied in the context of optimal monetary policy. In this note, I demonstrate that both approaches lead to exactly the same implicit instrument rule for the policy maker in a standard, forward-looking, new Keynesian model. Despite th...