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A priori knowledge usually enables us to decide that some coefficients must be zero in the particular equation, while they assume non-zero values in other equations of the system. We said that identification of an equation is based on variables not included (not appearing) in it. To be identifiable an equation must be independent of one or more important variables, which are included in other equations of the system. Such excluded variables, if operative during the sample period, will generate shifts in the other equations of the model, which will in turn identify the particular equation from which they are absent (i.e. in which they appear with zero coefficient).
Based on the a priori information a list can be prepared, which should be as complete as possible, of the factors which are relevant to the phenomenon being studied. The list can help us decide which of these factors would normally appear in each relationship. For example, assume that we want to study the demand for an agricultural product. The demand equation belongs to a system of equations describing the market mechanism.
Consider the electoral competition game presented in Lecture 6. In this game there are two candidates who simultaneously choose policies from the real line. There is a distribution
Consider the following three games (Chicken, Matching Pennies, Stag Hunt): Chicken Player 2 Player 1 D V D -100;-100 10;-10 V -10; 10 -1;-1 Matching Pennies Pla
A strategy is dominated if, no matter what the other players do, the strategy earns a player a smaller payoff than another strategy. Hence, a method is dominated if it's invariably
A reserve worth is that the minimum acceptable bid in an auction. If no bidder submits a bid higher than the reserve worth, the auctioneer keeps the item offered for sale. Alternat
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A type of trigger strategy sometimes applied to the repeated Prisoner's Dilemma during which a player responds in one amount with identical action her opponent utilized in the last
A bidding increment is defined by the auctioneer as the least amount above the previous bid that a new bid must be in order to be adequate to the auctioneer. For example, if the in
A participant in a very game who selects from among her methods randomly, primarily based on some predetermined chance distribution, instead of strategically, primarily based on pa
The most basic version of a LIV allows the executive office holder (Governor or President) to accept part of a bill passed by the legislature (so that part becomes law) and to veto
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