SSRN Author: Rajeev R. BhattacharyaRajeev R. Bhattacharya SSRN Content
https://www.ssrn.com/author=1820790
https://www.ssrn.com/rss/en-usThu, 21 Oct 2021 01:01:05 GMTeditor@ssrn.com (Editor)Thu, 21 Oct 2021 01:01:05 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0REVISION: Due Diligence and Strategic BehaviorWe provide a general model of due diligence and strategic behavior under asymmetric information and apply this model to an analyst's forecasts about a studied firm. Due diligence requires that the analyst acquire and analyze studied firm-specific information, even possibly information that is not available to the studied firm itself -- we measure Due-Diligence as an increasing function of the empirical likelihood of the alternate hypothesis of due diligence versus the null hypothesis of non-due diligence, using an innovative application of the Hausman Specification Test (of Two Stage Least Squares versus Ordinary Least Squares). We measure Strategic-Behavior using a similar innovative application of the Wald Test. We find that over 1994-2018, Due-Diligence is significantly increasing in first analyst forecast after management guidance, log of difference in days between management guidance and analyst forecast, and log of analyst's experience, and that Strategic-Behavior is ...
https://www.ssrn.com/abstract=3883602
https://www.ssrn.com/2069834.htmlWed, 20 Oct 2021 13:30:09 GMTREVISION: Due Diligence and Strategic BehaviorWe provide a general model of due diligence and strategic behavior that can be applied to a wide array of situations with asymmetric information and apply this model to an Analyst's Forecasts about a Studied Firm as a function of Publicly available information and the Studied Firm's unobserved (to the Empiricist) information, when the Studied Firm provides Management Guidance to the market as well. Due diligence requires that the Analyst acquire and analyze Studied Firm-specific information, even potentially information that is not available to the Studied Firm itself, we measure Due-Diligence using the Hausman Specification Test. Under non-strategic behavior, the Analyst provides as Forecast its best estimate of the Studied Firm's earnings, we measure Strategic-Behavior using the Wald Test. We calculate the Z-Score of Due-Diligence and Strategic-Behavior, and each regressand and regressor, which follows standard normal distribution, and report, for ease of empirical interpretation, ...
https://www.ssrn.com/abstract=3883602
https://www.ssrn.com/2061392.htmlMon, 20 Sep 2021 13:54:12 GMTREVISION: Strong Non-Monotonicity of Equilibrium Price - Static and Dynamic ModelsThis paper examines the implications for equilibrium price of a shift in demand. Counterfactual predictions are serious negatives of a model which then is clearly inferior to a general and parsimonious model that predicts, within the model, all empirical observations. <br><br>First, I consider two static Cournot oligopoly models with linear demand, linear costs, and a finite number of firms, and I prove strong non-monotonicity of any equilibrium price within each model.<br><br>Second, in a stochastically indefinite horizon simultaneous moves Cournot oligopoly model with a countable number of firms, with the discount factors and the demand parameters following general stochastic processes, I prove that for a path which follows a stationary function of the demand parameter and which is sustainable in a strategy profile that is efficient among the set of perfect equilibrium strategy profiles, any equilibrium price is strongly non-monotonic within each model.<br><br>The fact that ...
https://www.ssrn.com/abstract=2980215
https://www.ssrn.com/2059284.htmlMon, 13 Sep 2021 11:35:30 GMTREVISION: Short-Run Constraints and Price WarsPrice wars have been explained as occurring because of breakdown of cartels, or as necessary deterrent measures to sustain collusion, or due to imperfect information about demand conditions and/or moves of other firms; and combinations of the above. The above literature, however, fails to explain the repeated episodes of price wars in an industry with instantaneous transmission of information, for example, the U.S. domestic airlines industry. This paper studies different market models with linear and twice differentiable market demand and identical linear costs without capacity constraints, and with almost perfect homogeneity of competitors' products, to demonstrate that, in the presence of short-run constraints (such as insolvency) of firms and of intertemporal substitution of demand (such as with vacation travel or durables), a price war occurs if one or more firm(s) have sufficiently low net asset level(s) --- such price wars occur in equilibrium and as part of cooperation. ...
https://www.ssrn.com/abstract=2980230
https://www.ssrn.com/2059282.htmlMon, 13 Sep 2021 11:34:13 GMTREVISION: Intrinsic Uncertainty - An Explanation of the St. Petersburg ParadoxConsider any situation involving uncertainty, where the random variable of interest (e.g., payoff) is X. Let there exist a random variable, say Y, which represents the uncertainty intrinsic to the situation, and let there exist a function g such that X=g(Y). Our contention is that, once the intrinsic uncertainty has been identified, the relevant summary value is g(E(Y)), even though this may not be equal to the expectation E(g(Y)) of the variable of interest. We discuss two examples in which we can identify the random variable representing the intrinsic uncertainty. One of these examples is the St. Petersburg Paradox, where we argue that the intrinsic uncertainty is represented by the length of the game, and therefore, the variable of interest is the (finite) payoff received at the expected length of the game, as opposed to the infinite expected payoff of the game. As a result, we are able to resolve the St. Petersburg Paradox even under risk neutrality, i.e., without recourse to the ...
https://www.ssrn.com/abstract=2980237
https://www.ssrn.com/2059281.htmlMon, 13 Sep 2021 11:33:49 GMTREVISION: The Scientific Method Versus Faith"If you toss a coin seven times, and all tosses come up heads, what is the probability of the eighth toss also turning up head?" I show that the answer depends on the level of surety about the prior probability that the coin is fair. I extend the analysis to the probability of gender-neutrality of birth on the basis of the observed number of female and male births. I prove that updating the probability on the basis of new information is scientific, and since the criterion of falsifiability is essential to a scientific theory, that faith consists of a degenerate prior whereas the scientific method requires a non-degenerate prior.
https://www.ssrn.com/abstract=3650610
https://www.ssrn.com/2059280.htmlMon, 13 Sep 2021 11:33:24 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/2059279.htmlMon, 13 Sep 2021 11:32:53 GMTREVISION: Due Diligence and Strategic BehaviorWe provide a general model of due diligence and strategic behavior that can be applied to a wide array of situations with asymmetric information and apply this model to an Analyst's Forecasts about a Studied Firm as a function of Publicly available information and the Studied Firm's unobserved (to the Empiricist) information, when the Studied Firm provides Management Guidance to the market as well. Due diligence requires that the Analyst acquire and analyze Studied Firm-specific information, even potentially information that is not available to the Studied Firm itself, we measure Due-Diligence using the Hausman Specification Test. Under non-strategic behavior, the Analyst provides as Forecast its best estimate of the Studied Firm's earnings, we measure Strategic-Behavior using the Wald Test. We calculate the Z-Score of Due-Diligence and Strategic-Behavior, and each regressand and regressor, which follows standard normal distribution, and report, for ease of empirical interpretation, ...
https://www.ssrn.com/abstract=3883602
https://www.ssrn.com/2059278.htmlMon, 13 Sep 2021 11:32:25 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/2055113.htmlMon, 30 Aug 2021 11:17:48 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/2053379.htmlTue, 24 Aug 2021 11:01:03 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/2048952.htmlMon, 09 Aug 2021 14:49:12 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/2048614.htmlFri, 06 Aug 2021 21:43:33 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/2048289.htmlThu, 05 Aug 2021 19:42:14 GMTREVISION: Due Diligence and Strategic BehaviorWe provide a general model of due diligence and strategic behavior that can be applied to a wide array of situations with asymmetric information and apply this model to an Analyst's Forecasts about a Studied Firm as a function of Publicly available information and the Studied Firm's unobserved (to the Empiricist) information, when the Studied Firm provides Management Guidance to the market as well. Due diligence requires that the Analyst acquire and analyze Studied Firm-specific information, even potentially information that is not available to the Studied Firm itself, we measure Due-Diligence using the Hausman Specification Test. Under non-strategic behavior, the Analyst provides as Forecast its best estimate of the Studied Firm's earnings, we measure Strategic-Behavior using the Wald Test. We calculate the Z-Score of Due-Diligence and Strategic-Behavior, and each regressand and regressor, which follows standard normal distribution, and report, for ease of empirical interpretation, ...
https://www.ssrn.com/abstract=3883602
https://www.ssrn.com/2048047.htmlThu, 05 Aug 2021 11:14:48 GMTREVISION: Due Diligence and Strategic BehaviorWe provide a general model of due diligence and strategic behavior that can be applied to a wide array of situations with asymmetric information and apply this model to an Analyst's Forecasts about a Studied Firm as a function of Publicly available information and the Studied Firm's unobserved (to the Empiricist) information, when the Studied Firm provides Management Guidance to the market as well. Due diligence requires that the Analyst acquire and analyze Studied Firm-specific information, even potentially information that is not available to the Studied Firm itself, we measure Due-Diligence using the Hausman Specification Test. Under non-strategic behavior, the Analyst provides as Forecast its best estimate of the Studied Firm's earnings, we measure Strategic-Behavior using the Wald Test. We calculate the Z-Score of Due-Diligence and Strategic-Behavior, and each regressand and regressor, which follows standard normal distribution, and report, for ease of empirical interpretation, ...
https://www.ssrn.com/abstract=3883602
https://www.ssrn.com/2047777.htmlWed, 04 Aug 2021 13:07:30 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/2046123.htmlWed, 28 Jul 2021 22:39:28 GMTREVISION: Market Efficiency - A Structural StudyI use 8 different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a 7-equation (6- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical question. I ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/2041754.htmlMon, 12 Jul 2021 14:06:52 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/2040549.htmlWed, 07 Jul 2021 10:51:04 GMTREVISION: The Scientific Method Versus Faith"If you toss a coin seven times, and all tosses come up heads, what is the probability of the eighth toss also turning up head?" I show that the answer depends on the level of surety about the prior probability that the coin is fair. I extend the analysis to the probability of gender-neutrality of birth on the basis of the observed number of female and male births. I prove that updating the probability on the basis of new information is scientific, and since the criterion of falsifiability is essential to a scientific theory, that faith consists of a degenerate prior whereas the scientific method requires a non-degenerate prior.
https://www.ssrn.com/abstract=3650610
https://www.ssrn.com/2033919.htmlTue, 15 Jun 2021 09:11:39 GMTREVISION: Strong Non-Monotonicity of Equilibrium Price - Static and Dynamic ModelsThis paper examines the implications for equilibrium price of a shift in demand. Counterfactual predictions are serious negatives of a model which then is clearly inferior to a general and parsimonious model that predicts, within the model, all empirical observations. <br><br>First, I consider two static Cournot oligopoly models with linear demand, linear costs, and a finite number of firms, and I prove strong non-monotonicity of any equilibrium price within each model.<br><br>Second, in a stochastically indefinite horizon simultaneous moves Cournot oligopoly model with a countable number of firms, with the discount factors and the demand parameters following general stochastic processes, I prove that for a path which follows a stationary function of the demand parameter and which is sustainable in a strategy profile that is efficient among the set of perfect equilibrium strategy profiles, any equilibrium price is strongly non-monotonic within each model.<br><br>The fact that ...
https://www.ssrn.com/abstract=2980215
https://www.ssrn.com/2031151.htmlMon, 07 Jun 2021 09:10:46 GMTREVISION: Intrinsic Uncertainty - An Explanation of the St. Petersburg ParadoxConsider any situation involving uncertainty, where the random variable of interest (e.g., payoff) is X. Let there exist a random variable, say Y, which represents the uncertainty intrinsic to the situation, and let there exist a function g such that X=g(Y). Our contention is that, once the intrinsic uncertainty has been identified, the relevant summary value is g(E(Y)), even though this may not be equal to the expectation E(g(Y)) of the variable of interest. We discuss two examples in which we can identify the random variable representing the intrinsic uncertainty. One of these examples is the St. Petersburg Paradox, where we argue that the intrinsic uncertainty is represented by the length of the game, and therefore, the variable of interest is the (finite) payoff received at the expected length of the game, as opposed to the infinite expected payoff of the game. As a result, we are able to resolve the St. Petersburg Paradox even under risk neutrality, i.e., without recourse to the ...
https://www.ssrn.com/abstract=2980237
https://www.ssrn.com/2031150.htmlMon, 07 Jun 2021 09:10:13 GMTREVISION: Short-Run Constraints and Price WarsPrice wars have been explained as occurring because of breakdown of cartels, or as necessary deterrent measures to sustain collusion, or due to imperfect information about demand conditions and/or moves of other firms; and combinations of the above. The above literature, however, fails to explain the repeated episodes of price wars in an industry with instantaneous transmission of information, for example, the U.S. domestic airlines industry. This paper studies different market models with linear and twice differentiable market demand and identical linear costs without capacity constraints, and with almost perfect homogeneity of competitors' products, to demonstrate that, in the presence of short-run constraints (such as insolvency) of firms and of intertemporal substitution of demand (such as with vacation travel or durables), a price war occurs if one or more firm(s) have sufficiently low net asset level(s) --- such price wars occur in equilibrium and as part of cooperation. ...
https://www.ssrn.com/abstract=2980230
https://www.ssrn.com/2031148.htmlMon, 07 Jun 2021 09:09:32 GMTREVISION: The Scientific Method Versus Faith"If you toss a coin seven times, and all tosses come up heads, what is the probability of the eighth toss also turning up head?" I show that the answer depends on how sure one is about the prior valuation of the probability that the coin is fair. I extend the analysis to valuation of the probability of gender-neutrality of birth on the basis of the observed number of female and male births, using Bayes Theorem. I prove that updating one's valuations on the basis of new information is scientific, and since the criterion of falsifiability is essential to a scientific theory, that faith or dogma consists of a degenerate prior whereas the scientific method requires a non-degenerate prior.
https://www.ssrn.com/abstract=3650610
https://www.ssrn.com/2031147.htmlMon, 07 Jun 2021 09:09:20 GMTREVISION: Strong Non-Monotonicity of Equilibrium Price - Static and Dynamic ModelsThis paper examines the implications for equilibrium price of a shift in demand. Counterfactual predictions are serious negatives of a model which then is clearly inferior to a general and parsimonious model that predicts, within the model, all empirical observations. <br><br>First, I consider two static Cournot oligopoly models with linear demand, linear costs, and a finite number of firms, and I prove strong non-monotonicity of any equilibrium price within each model.<br><br>Second, in a stochastically indefinite horizon simultaneous moves Cournot oligopoly model with a countable number of firms, with the discount factors and the demand parameters following general stochastic processes, I prove that for a path which follows a stationary function of the demand parameter and which is sustainable in a strategy profile that is efficient among the set of perfect equilibrium strategy profiles, any equilibrium price is strongly non-monotonic within each model.<br><br>The fact that ...
https://www.ssrn.com/abstract=2980215
https://www.ssrn.com/2027698.htmlTue, 25 May 2021 11:17:50 GMTREVISION: Short-Run Constraints and Price WarsPrice wars have been explained as occurring because of breakdown of cartels, or as necessary deterrent measures to sustain collusion, or due to imperfect information about demand conditions and/or moves of other firms; and combinations of the above. The above literature, however, fails to explain the repeated episodes of price wars in an industry with instantaneous transmission of information, for example, the U.S. domestic airlines industry. This paper studies different market models with linear and twice differentiable market demand and identical linear costs without capacity constraints, and with almost perfect homogeneity of competitors' products, to demonstrate that, in the presence of short-run constraints (such as insolvency) of firms and of intertemporal substitution of demand (such as with vacation travel or durables), a price war occurs if one or more firm(s) have sufficiently low net asset level(s) --- such price wars occur in equilibrium and as part of cooperation. ...
https://www.ssrn.com/abstract=2980230
https://www.ssrn.com/2027697.htmlTue, 25 May 2021 11:17:29 GMTREVISION: The Scientific Method Versus Faith"If you toss a coin seven times, and all tosses come up heads, what is the probability of the eighth toss also turning up head?" I show that the answer depends on how sure one is about the prior valuation of the probability that the coin is fair. I extend the analysis to valuation of the probability of gender-neutrality of birth on the basis of the observed number of female and male births, using Bayes Theorem. I prove that updating one's valuations on the basis of new information is scientific, and since the criterion of falsifiability is essential to a scientific theory, that faith or dogma consists of a degenerate prior whereas the scientific method requires a non-degenerate prior.
https://www.ssrn.com/abstract=3650610
https://www.ssrn.com/2027696.htmlTue, 25 May 2021 11:17:09 GMTREVISION: Strong Non-Monotonicity of Equilibrium Price - Static and Dynamic ModelsThis paper examines the implications for equilibrium price of a shift in demand. Counterfactual predictions are serious negatives of a model which then is clearly inferior to a general and parsimonious model that predicts, within the model, all empirical observations. <br><br>First, I consider two static Cournot oligopoly models with linear demand, linear costs, and a finite number of firms, and I prove strong non-monotonicity of any equilibrium price within each model.<br><br>Second, in a stochastically indefinite horizon simultaneous moves Cournot oligopoly model with a countable number of firms, with the discount factors and the demand parameters following general stochastic processes, I prove that for a path which follows a stationary function of the demand parameter and which is sustainable in a strategy profile that is efficient among the set of perfect equilibrium strategy profiles, any equilibrium price is strongly non-monotonic within each model.<br><br>The fact that ...
https://www.ssrn.com/abstract=2980215
https://www.ssrn.com/2010549.htmlThu, 01 Apr 2021 12:35:23 GMTREVISION: Strong Non-Monotonicity of Equilibrium Price - Static and Dynamic ModelsThis paper examines the implications for equilibrium price of a shift in demand.<br><br>First, I consider two static Cournot oligopoly models with linear demand, linear costs, and a finite number of firms, and I prove strong non-monotonicity of any equilibrium price within each model.<br><br>Second, in a stochastically indefinite horizon simultaneous moves Cournot oligopoly model with a countable number of firms, with the discount factors and the demand parameters following general stochastic processes, I prove that for a path which follows a stationary function of the demand parameter and which is sustainable in a strategy profile that is efficient among the set of perfect equilibrium strategy profiles, any equilibrium price is strongly non-monotonic within each model.<br><br>The fact that equilibrium price is strongly non-monotonic even in a parsimonious simple linear structure makes an even stronger statement that these strong non-monotonicities are not artifacts of the complexity ...
https://www.ssrn.com/abstract=2980215
https://www.ssrn.com/2005214.htmlSun, 21 Mar 2021 19:31:29 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/1991582.htmlTue, 16 Feb 2021 09:28:11 GMTREVISION: Strong Non-Monotonicity of Equilibrium Price - Static and Dynamic ModelsThis paper examines the implications for equilibrium price of a shift in demand.<br><br>First, I consider two static Cournot oligopoly models with linear demand, linear costs, and a finite number of firms, and I prove strong non-monotonicity of any equilibrium price within each model.<br><br>Second, in a stochastically indefinite horizon simultaneous moves Cournot oligopoly model with a countable number of firms, with the discount factors and the demand parameters following general stochastic processes, I prove that for a path which follows a stationary function of the demand parameter and which is sustainable in a strategy profile that is efficient among the set of perfect equilibrium strategy profiles, any equilibrium price is strongly non-monotonic within each model.<br><br>The fact that equilibrium price is strongly non-monotonic even in a parsimonious simple linear structure makes an even stronger statement that these strong non-monotonicities are not artifacts of the complexity ...
https://www.ssrn.com/abstract=2980215
https://www.ssrn.com/1991277.htmlSat, 13 Feb 2021 09:51:15 GMTREVISION: Strong Non-Monotonicity of Equilibrium Price Static and Dynamic ModelsThis paper examines the implications for equilibrium price of a shift in demand.<br>First, I consider two static Cournot oligopoly models with linear demand, linear costs, and a finite number of firms, and I prove strong non-monotonicity of any equilibrium price within each model.<br>Second, in a stochastically indefinite horizon simultaneous moves Cournot oligopoly model with a countable number of firms, with the discount factors and the demand parameters following general stochastic processes, I prove that for a path which follows a stationary function of the demand parameter and which is sustainable in a strategy profile that is efficient among the set of perfect equilibrium strategy profiles, any equilibrium price is strongly non-monotonic within each model.<br>The fact that equilibrium price is strongly non-monotonic even in a parsimonious simple linear structure makes an even stronger statement that these strong non-monotonicities are not artifacts of the complexity of the ...
https://www.ssrn.com/abstract=2980215
https://www.ssrn.com/1991146.htmlFri, 12 Feb 2021 16:29:58 GMTREVISION: Intrinsic Uncertainty - An Explanation of the St. Petersburg ParadoxConsider any situation involving uncertainty, where the random variable of interest (e.g., payoff) is X. Let there exist a random variable, say Y, which represents the uncertainty intrinsic to the situation, and let there exist a function g such that X=g(Y). Our contention is that, once the intrinsic uncertainty has been identified, the relevant summary value is g(E(Y)), even though this may not be equal to the expectation E(g(Y)) of the variable of interest. We discuss two examples in which we can identify the random variable representing the intrinsic uncertainty. One of these examples is the St. Petersburg Paradox, where we argue that the intrinsic uncertainty is represented by the length of the game, and therefore, the variable of interest is the (finite) payoff received at the expected length of the game, as opposed to the infinite expected payoff of the game. As a result, we are able to resolve the St. Petersburg Paradox even under risk neutrality, i.e., without recourse to the ...
https://www.ssrn.com/abstract=2980237
https://www.ssrn.com/1990942.htmlFri, 12 Feb 2021 09:25:08 GMTREVISION: Short-Run Constraints and Price WarsPrice wars have been explained as occurring because of breakdown of cartels, or as necessary deterrent measures to sustain collusion, or due to imperfect information about demand conditions and/or moves of other firms; and combinations of the above. The above literature, however, fails to explain the repeated episodes of price wars in an industry with instantaneous transmission of information, for example, the U.S. domestic airlines industry. This paper studies different market models with linear and twice differentiable market demand and identical linear costs without capacity constraints, and with almost perfect homogeneity of competitors' products, to demonstrate that, in the presence of short-run constraints (such as insolvency) of firms and of intertemporal substitution of demand (such as with vacation travel or durables), a price war occurs if one or more firm(s) have sufficiently low net asset level(s) --- such price wars occur in equilibrium and as part of cooperation. ...
https://www.ssrn.com/abstract=2980230
https://www.ssrn.com/1990941.htmlFri, 12 Feb 2021 09:24:51 GMTREVISION: The Scientific Method Versus Faith"If you toss a coin seven times, and all tosses come up heads, what is the probability of the eighth toss also turning up head?" I show that the answer depends on how sure one is about the prior valuation of the probability that the coin is fair. I extend the analysis to valuation of the probability of gender-neutrality of birth on the basis of the observed number of female and male births, using Bayes Theorem. I prove that updating one's valuations on the basis of new information is scientific, and since the criterion of falsifiability is essential to a scientific theory, that faith or dogma consists of a degenerate prior whereas the scientific method requires a non-degenerate prior.
https://www.ssrn.com/abstract=3650610
https://www.ssrn.com/1990939.htmlFri, 12 Feb 2021 09:24:26 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/1990938.htmlFri, 12 Feb 2021 09:24:13 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/1986170.htmlSat, 30 Jan 2021 12:16:01 GMTREVISION: Intrinsic Uncertainty - An Explanation of the St. Petersburg ParadoxConsider any situation involving uncertainty, where the random variable of interest (e.g., payoff) is X. Let there exist a random variable, say Y, which represents the uncertainty intrinsic to the situation, and let there exist a function g such that X=g(Y). Our contention is that, once the intrinsic uncertainty has been identified, the relevant summary value is g(E(Y)), even though this may not be equal to the expectation E(g(Y)) of the variable of interest. We discuss two examples in which we can identify the random variable representing the intrinsic uncertainty. One of these examples is the St. Petersburg Paradox, where we argue that the intrinsic uncertainty is represented by the length of the game, and therefore, the variable of interest is the (finite) payoff received at the expected length of the game, as opposed to the infinite expected payoff of the game. As a result, we are able to resolve the St. Petersburg Paradox even under risk neutrality, i.e., without recourse to the ...
https://www.ssrn.com/abstract=2980237
https://www.ssrn.com/1986050.htmlFri, 29 Jan 2021 16:52:42 GMTREVISION: Non-Monotonicity of Equilibrium PriceThis paper examines the implications for equilibrium price of a shift in demand. First, I consider two static Cournot oligopoly models with linear demand, linear costs, and a finite number of firms, and I prove strong non-monotonicity of any equilibrium price. In a stochastically indefinite horizon simultaneous moves Cournot oligopoly model with a countable number of firms, with the discount factors and the demand parameters following general stochastic processes, I prove that for a path which follows a stationary function of the demand parameter and which is sustainable in a strategy profile that is efficient among the set of perfect equilibrium strategy profiles, any equilibrium price is strongly non-monotonic.
https://www.ssrn.com/abstract=2980215
https://www.ssrn.com/1986049.htmlFri, 29 Jan 2021 16:52:24 GMTREVISION: Short-Run Constraints and Price WarsPrice wars have been explained as occurring because of breakdown of cartels, or as necessary deterrent measures to sustain collusion, or due to imperfect information about demand conditions and/or moves of other firms; and combinations of the above. The above literature, however, fails to explain the repeated episodes of price wars in an industry with instantaneous transmission of information, for example, the U.S. domestic airlines industry. This paper studies different market models with linear and twice differentiable market demand and identical linear costs without capacity constraints, and with almost perfect homogeneity of competitors' products, to demonstrate that, in the presence of short-run constraints (such as insolvency) of firms and of intertemporal substitution of demand (such as with vacation travel or durables), a price war occurs if one or more firm(s) have sufficiently low net asset level(s) --- such price wars occur in equilibrium and as part of cooperation. ...
https://www.ssrn.com/abstract=2980230
https://www.ssrn.com/1986048.htmlFri, 29 Jan 2021 16:52:07 GMTREVISION: The Scientific Method Versus Faith"If you toss a coin seven times, and all tosses come up heads, what is the probability of the eighth toss also turning up head?" I show that the answer depends on how sure one is about the prior valuation of the probability that the coin is fair. I extend the analysis to valuation of the probability of gender-neutrality of birth on the basis of the observed number of female and male births, using Bayes Theorem. I prove that updating one's valuations on the basis of new information is scientific, and since the criterion of falsifiability is essential to a scientific theory, that faith or dogma consists of a degenerate prior whereas the scientific method requires a non-degenerate prior.
https://www.ssrn.com/abstract=3650610
https://www.ssrn.com/1986047.htmlFri, 29 Jan 2021 16:51:52 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/1986046.htmlFri, 29 Jan 2021 16:51:32 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/1985481.htmlThu, 28 Jan 2021 12:45:00 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/1985367.htmlThu, 28 Jan 2021 09:50:34 GMTREVISION: The Scientific Method Versus Faith"If you toss a coin seven times, and all tosses come up heads, what is the probability of the eighth toss also turning up head?" I show that the answer depends on how sure one is about the prior valuation of the probability that the coin is fair. I extend the analysis to valuation of the probability of gender-neutrality of birth on the basis of the observed number of female and male births, using Bayes Theorem. I prove that updating one's valuations on the basis of new information is scientific, and since the criterion of falsifiability is essential to a scientific theory, that faith or dogma consists of a degenerate prior whereas the scientific method requires a non-degenerate prior.
https://www.ssrn.com/abstract=3650610
https://www.ssrn.com/1984771.htmlWed, 27 Jan 2021 10:12:06 GMTREVISION: Non-Monotonicity of Equilibrium PriceThis paper examines the implications for equilibrium price of a shift in demand. First, I consider two static Cournot oligopoly models with linear demand, linear costs, and a finite number of firms, and I prove strong non-monotonicity of any equilibrium price. In a stochastically indefinite horizon simultaneous moves Cournot oligopoly model with a countable number of firms, with the discount factors and the demand parameters following general stochastic processes, I prove that for a path which follows a stationary function of the demand parameter and which is sustainable in a strategy profile that is efficient among the set of perfect equilibrium strategy profiles, any equilibrium price is strongly non-monotonic.
https://www.ssrn.com/abstract=2980215
https://www.ssrn.com/1982884.htmlThu, 21 Jan 2021 10:34:43 GMTREVISION: Intrinsic Uncertainty - An Explanation of the St. Petersburg ParadoxConsider any situation involving uncertainty, where the random variable of interest (e.g., payoff) is X. Let there exist a random variable, say Y, which represents the uncertainty intrinsic to the situation, and let there exist a function g such that X=g(Y). Our contention is that, once the intrinsic uncertainty has been identified, the relevant summary value is g(E(Y)), even though this may not be equal to the expectation E(g(Y)) of the variable of interest. We discuss two examples in which we can identify the random variable representing the intrinsic uncertainty. One of these examples is the St. Petersburg Paradox, where we argue that the intrinsic uncertainty is represented by the length of the game, and therefore, the variable of interest is the (finite) payoff received at the expected length of the game, as opposed to the infinite expected payoff of the game. As a result, we are able to resolve the St. Petersburg Paradox even under risk neutrality, i.e., without recourse to the ...
https://www.ssrn.com/abstract=2980237
https://www.ssrn.com/1980629.htmlThu, 14 Jan 2021 10:10:36 GMTREVISION: Non-Monotonicity of Equilibrium PriceThis paper examines the implications for equilibrium price of a shift in demand. First, I consider two static Cournot oligopoly models with linear demand, linear costs, and a finite number of firms, and I prove strong non-monotonicity of any equilibrium price. In a stochastically indefinite horizon simultaneous moves Cournot oligopoly model with a countable number of firms, with the discount factors and the demand parameters following general stochastic processes, I prove that for a path which follows a stationary function of the demand parameter and which is sustainable in a strategy profile that is efficient among the set of perfect equilibrium strategy profiles, any equilibrium price is strongly non-monotonic.
https://www.ssrn.com/abstract=2980215
https://www.ssrn.com/1980170.htmlWed, 13 Jan 2021 09:18:35 GMTREVISION: The Scientific Method Versus Faith"If you toss a coin seven times, and all tosses come up heads, what is the probability of the eighth toss also turning up head?" I show that the answer depends on how sure one is about the prior valuation of the probability that the coin is fair. I extend the analysis to valuation of the probability of gender-neutrality of birth on the basis of the observed number of female and male births, using Bayes Theorem. I prove that updating one's valuations on the basis of new information is scientific, and since the criterion of falsifiability is essential to a scientific theory, that faith or dogma consists of a degenerate prior whereas the scientific method requires a non-degenerate prior.
https://www.ssrn.com/abstract=3650610
https://www.ssrn.com/1976880.htmlMon, 04 Jan 2021 15:16:24 GMTREVISION: Market Efficiency - A Structural StudyI use eight different metrics as separate objective and systematic measures of the efficiency of the market for a stock. I develop a seven-equation (six- for non-Nasdaq stocks) structural model with market efficiency as a function of exogenous factors (transaction costs & constraints, short sales costs & constraints, and dispersion in investor valuations) and endogenous market activities (trading volume, short interest, number of analysts, institutional holdings, shares outstanding, and number of market makers (for Nasdaq stocks)), and each endogenous market activity as a function of the exogenous factors and all other endogenous market activities. I propose a theoretical model that shows that higher trading volume (or another similar market activity) is caused by lower transaction costs, lower short sales costs, and/or higher dispersion of investor valuations, and therefore, that the impact on market efficiency of transaction costs or short sales costs is an empirical ...
https://www.ssrn.com/abstract=3742378
https://www.ssrn.com/1976794.htmlMon, 04 Jan 2021 12:49:41 GMTREVISION: The Scientific Method Versus Faith"If you toss a coin seven times, and all tosses come up heads, what is the probability of the eighth toss also turning up head?" I show that the answer depends on how sure one is about the prior valuation of the probability that the coin is fair. I extend the analysis to valuation of the probability of gender-neutrality of birth on the basis of the observed number of female and male births, using Bayes Theorem. I prove that updating one's valuations on the basis of new information is scientific, that the criterion of falsifiability lies at the heart of any scientific discussion, and that faith or dogma consists of a degenerate prior whereas the scientific method requires a non-degenerate prior.
https://www.ssrn.com/abstract=3650610
https://www.ssrn.com/1976489.htmlSat, 02 Jan 2021 10:36:11 GMTREVISION: The Scientific Method Versus Faith"If you toss a coin seven times, and all tosses come up heads, what is the probability of the eighth toss also turning up head?" I show that the answer depends on how sure one is about the prior valuation of the probability that the coin is fair. I extend the analysis to valuation of the probability of gender-neutrality of birth on the basis of the observed number of female and male births, using Bayes Theorem. I prove that updating one's valuations on the basis of new information is scientific, that the criterion of falsifiability lies at the heart of any scientific discussion, and that faith or dogma consists of a degenerate prior whereas the scientific method requires a non-degenerate prior.
https://www.ssrn.com/abstract=3650610
https://www.ssrn.com/1976088.htmlThu, 31 Dec 2020 11:28:52 GMTREVISION: The Scientific Method Versus Faith"If you toss a coin seven times, and all tosses come up heads, what is the probability of the eighth toss also turning up head?" I show that the answer depends on how sure one is about the prior valuation of the probability that the coin is fair. I extend the analysis to valuation of the probability of gender-neutrality of birth on the basis of the observed number of female and male births, using Bayes Theorem. I prove that updating one's valuations on the basis of new information is scientific, that the criterion of falsifiability lies at the heart of any scientific discussion, and that faith or dogma consists of a degenerate prior whereas the scientific method requires a non-degenerate prior.
https://www.ssrn.com/abstract=3650610
https://www.ssrn.com/1975817.htmlWed, 30 Dec 2020 11:30:51 GMTREVISION: On The Scientific Method"If you toss a coin seven times, and all tosses come up heads, what is the probability of the eighth toss also turning up head?" I show that the answer depends on how sure one is about the prior valuation of the probability that the coin is fair. I extend the analysis to valuation of the probability of gender-neutrality of birth on the basis of the observed number of female and male births, using Bayesian updating. I prove that updating one's valuations on the basis of new information is scientific, that the criterion of falsifiability lies at the heart of any scientific discussion, and that faith or dogma consists of a degenerate prior whereas the scientific method requires a non-degenerate prior.
https://www.ssrn.com/abstract=3650610
https://www.ssrn.com/1968513.htmlFri, 04 Dec 2020 09:14:36 GMTREVISION: On The Scientific Method"If you toss a coin seven times, and all tosses come up heads, what is the probability of the eighth toss also turning up head?" I show that the answer depends on how sure one is about the prior valuation of the probability that the coin is fair. I extend the analysis to valuation of the probability of gender-neutrality of birth on the basis of the observed number of female and male births, using Bayesian updating. I prove that updating one's valuations on the basis of new information is scientific, that the criterion of falsifiability lies at the heart of any scientific discussion, and that faith or dogma consists of a degenerate prior whereas the scientific method requires a non-degenerate prior.
https://www.ssrn.com/abstract=3650610
https://www.ssrn.com/1961328.htmlThu, 12 Nov 2020 18:44:57 GMT