I have recently finished working on a new working paper titled “Attitudes to Price Risk and Uncertainty: The Earnest Search for Identification and Policy Relevance,” coauthored with my PhD student Yu Na Lee.*
In that paper, we first review the relatively small literature studying the effects of price risk and uncertainty on consumers, producers, and households. Then, we discuss the potential of experimental economics in identifying price risk preferences and of behavioral economics in developing theoretical models that are closer to how people actually behave. In doing so, we wanted to lay out a future research agenda on price risk.
Here is the abstract: Continue reading
I have been pondering a post on heteroskedasticity in this series for a good long while, but I just wasn’t convinced I had much to add. But reading the Wiki entry for heteroskedasticity this past weekend, I realized I might have something to tell those people who have more book knowledge of econometrics than they have practical knowledge of econometrics–a situation which probably describes most graduate students.
First off, what is heteroskedasticity? It is an issue that arises when the variance of the error term e in
Y = a + bX + e
is nonspherical. Seeing as to how this isn’t exactly helpful, a more intuitive explanation is the following: Continue reading
Since I had a post discussing contract farming and agricultural value chains yesterday, I thought I should also mention this new article (gated; click here for an older, ungated version) by Rocco Macchiavello and Ameet Morjaria published in the latest issue of the American Economic Review, titled “The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports.”
Here is the abstract:
This paper provides evidence on the importance of reputation in the context of the Kenyan rose export sector. A model of reputation and relational contracting is developed and tested. A seller’s reputation is defined by buyer’s beliefs about seller’s reliability. We show that (i) due to lack of enforcement, the volume of trade is constrained by the value of the relationship; (ii) the value of the relationship increases with the age of the relationship; and (iii) during an exogenous negative supply shock deliveries are an inverted-U shaped function of relationship’s age. Models exclusively focusing on enforcement or insurance considerations cannot account for the evidence.