Department of Mathematics
Title : Inference with Ambiguous Priors and an Economic Application
| Speaker: Matthew Ryan Affiliation: Department of Economics Time: 4:00 pm Tuesday, 13 September, 2011 Location: Room 6115, Owen Glenn Building |
Abstract
| This paper considers statistical inference when the prior takes the form of a belief function (Dempster, 1967; Shafer, 1976) rather than a probability. We review some approaches to this non-standard inference problem and discuss their properties. The paper also develops an economic application, in which entrepreneurs learn about a new market or technology over time. We demonstrate that these learning dynamics, when embedded in an equilibrium model of price determination, can produce an "investment bubble": a boom in investment despite unfavourable market data - a frequentist evaluation would lead one to reject the new technology - followed by the inevitable crash. The investment boom and bust in tech stocks of the late 1990's is a recent example of the phenomenon. Curiously, the initial boom is driven not by the increasing exuberance of over-optimistic entrepreneurs, but by the diminishing resistance of their more conservative employees and financiers. This is a Joint work with Luca Rigotti (Pittsburgh) and Rhema Vaithianathan. |
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Programmes and Centres
- New Zealand Institute of Mathematics and its Applications (NZIMA)
- Community for Understanding and Learning in the Mathematical Sciences (CULMS)
- Centre for Mathematical Social Science (CMSS)
- Department of Computer Science
- Department of Engineering Science
- Department of Physics
- Department of Statistics
- Auckland Bioengineering Institute
