We investigate conditions sufficient for identification of average treatment effects using instrumental variables. First we show that the existence of valid instruments is not sufficient to identify any meaningful average treatment effect. We then establish that the combination of an instrument and a condition on the relation between the instrument and the participation status is sufficient for identification of a local average treatment effect for those who can be induced to change their participation status by changing the value of the instrument. Finally we derive the probability limit of the standard IV estimator under these conditions. It is seen to be a weighted average of local average treatment effects.

Evolution and Rationality Some Recent Game-Theoretic Results. Identification and Estimation of Local Average Treatment Effects

The past twenty years have seen great theoretical and empirical advances in the field of corporate finance Whereas once the subject addressed mainly the financing of corporations--equity, debt, and valuation--today it also embraces crucial issues of governance, liquidity, risk management, relationships between banks and corporations, and the macroeconomic impact of corporations However, this progress has left in its wake a jumbled array of concepts and models that students are often hard put to make sense of Here, one of the world's leading economists offers a lucid, unified, and comprehensive introduction to modern corporate finance theory Jean Tirole builds his landmark book around a single model, using an incentive or contract theory approach Filling a major gap in the field, The Theory of Corporate Finance is an indispensable resource for graduate and advanced undergraduate students as well as researchers of corporate finance, industrial organization, political economy, development, and macroeconomics Tirole conveys the organizing principles that structure the analysis of today's key management and public policy issues, such as the reform of corporate governance and auditing; the role of private equity, financial markets, and takeovers; the efficient determination of leverage, dividends, liquidity, and risk management; and the design of managerial incentive packages He weaves empirical studies into the book's theoretical analysis And he places the corporation in its broader environment, both microeconomic and macroeconomic, and examines the two-way interaction between the corporate environment and institutions Setting a new milestone in the field, The Theory of Corporate Finance will be the authoritative text for years to come

The Theory of Corporate Finance

A central issue in school choice is the design of a student assignment mechanism. Education literature provides guidance for the design of such mechanisms but does not offer specific mechanisms. The flaws in the existing school choice plans result in appeals by unsatisfied parents. We formulate the school choice problem as a mechanism design problem and analyze some of the existing school choice plans including those in Boston, Columbus, Minneapolis, and Seattle. We show that these existing plans have serious shortcomings, and offer two alternative mechanisms each of which may provide a practical solution to some critical school choice issues.

/pdf/school-choice-a-mechanism-design-approach-11t5vq18ed.pdf

School Choice: A Mechanism Design Approach

The emergence of software-based platforms is shifting competition toward platform-centric ecosystems, although this phenomenon has not received much attention in information systems research. Our premise is that the coevolution of the design, governance, and environmental dynamics of such ecosystems influences how they evolve. We present a framework for understanding platform-based ecosystems and discuss five broad research questions that present significant research opportunities for contributing homegrown theory about their evolutionary dynamics to the information systems discipline and distinctive information technology-artifact-centric contributions to the strategy, economics, and software engineering reference disciplines.

Research Commentary---Platform Evolution: Coevolution of Platform Architecture, Governance, and Environmental Dynamics

I survey the literature post Ledyard (Handbook of Experimental Economics, ed. by J. Kagel, A. Roth, Chap. 2, Princeton, Princeton University Press, 1995) on three related issues in linear public goods experiments: (1) conditional cooperation; (2) the role of costly monetary punishments in sustaining cooperation and (3) the sustenance of cooperation via means other than such punishments. Many participants in laboratory public goods experiments are “conditional cooperators” whose contributions to the public good are positively correlated with their beliefs about the average group contribution. Conditional cooperators are often able to sustain high contributions to the public good through costly monetary punishment of free-riders but also by other mechanisms such as expressions of disapproval, advice giving and assortative matching.

https://www.cepr.org/sites/default/files/events/papers/796_CHAUDHURI.pdf

Sustaining cooperation in laboratory public goods experiments: a selective survey of the literature

This paper uses data on house transactions in the state of Massachusetts over the last 20 years to show that houses sold after foreclosure, or close in time to the death or bankruptcy of at least one seller, are sold at lower prices than other houses. Foreclosure discounts are particularly large on average at 28% of the value of a house. The pattern of death-related discounts suggests that they may result from poor home maintenance by older sellers, while foreclosure discounts appear to be related to the threat of vandalism in low-priced neighborhoods. After aggregating to the zipcode level and controlling for regional price trends, the prices of forced sales are mean-reverting, while the prices of unforced sales are close to a random walk. At the zipcode level, this suggests that unforced sales take place at approximately efficient prices, while forced-sales prices reflect time-varying illiquidity in neighborhood housing markets. At a more local level, however, we find that foreclosures that take place within a quarter of a mile, and particularly within a tenth of a mile, of a house lower the price at which it is sold. Our preferred estimate of this effect is that a foreclosure at a distance of 0.05 miles lowers the price of a house by about 1%.

Forced Sales and House Prices

Stocks are short sale constrained when there is a strong demand to sell short and a limited supply of shares to borrow. Using data on both short interest, a proxy for demand, and institutional ownership, a proxy for supply, we find that constrained stocks underperform during 1988-2002 by a significant 215 basis points per month on an EW basis, although by only an insignificant 39 basis points per month on a VW basis. For the overwhelming majority of stocks, short interest and institutional ownership levels make short selling constraints unlikely.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID624821_code371452.pdf?abstractid=525623&mirid=1&type=2

Short Interest, Institutional Ownership, and Stock Returns

We assisted the New York City Department of Education (NYCDOE) in designing a mechanism to match over 90,000 entering students to public high schools each year. This paper makes a very preliminary report on the design process and the first year of operation, in academic year 2003–2004, for students entering high school in fall 2004. In the first year, only about 3,000 students had to be assigned to a school for which they had not indicated a preference, which is only 10 percent of the number of such assignments the previous year. New York City has the largest public school system in the country, with over a million students. In 1969 the system was decentralized into over 30 community school districts. In the 1990s, the city began to take more centralized control (Mark Schneider et al., 2000), and in 2002, a newly reorganized NYCDOE began to reform many aspects of the school system. In May 2003, Jeremy Lack, then the NYCDOE Director of Strategic Planning, contacted one of us for advice on designing a new high-school matching process. The NYCDOE was aware of the matching process for American physicians, the National Resident Matching Program (Roth, 1984; Roth and E. Peranson, 1999). They wanted to know if it could be appropriately adapted to the city’s schools. The three authors of the present paper (and, at several crucial junctures, also Tayfun Sonmez) advised (and often convinced) Lack, his colleagues (particularly Elizabeth Sciabarra and Neil Dorosin), and the DOE’s software vendor, about the design of the match. I. The Prior (2002–2003) New York City Matching Procedure

https://dash.harvard.edu/bitstream/handle/1/2562765/Roth_NYC.pdf?sequence=2

The New York City High School Match

Short interest, institutional ownership, and stock returns

After the publication of “School Choice: A Mechanism Design Approach” by Abdulkadiroglu and Sonmez (2003), a Boston Globe reporter contacted us about the Boston Public Schools (BPS) system for assigning students to schools. The Globe article highlighted the difficulties that Boston’s system may give parents in strategizing about applying to schools. Briefly, Boston tries to give students their firstchoice school. But a student who fails to get her first choice may find her later choices filled by students who chose them first. So there is a risk in ranking a school first if there is a chance of not being admitted; other schools that would have been possible had they been listed first may also be filled. Valerie Edwards, then Strategic Planning Manager at BPS, and her colleague Carleton Jones invited us to a meeting in October 2003. BPS agreed to a study of their assignment system and provided us with micro-level data sets on choices and characteristics of students in the grades at which school choices are made (K, 1, 6, and 9), and school characteristics. Based on the pending results of this study, the Superintendent has asked for our advice on the design of a new assignment mechanism. This paper describes some of the difficulties with the current mechanism and some elements of the design and evaluation of possible replacement mechanisms. School choice in Boston has been partly shaped by desegregation. In 1974, Judge W. Arthur Garrity ordered busing for racial balance. In 1987, the U.S. Court of Appeals freed BPS to adopt a new, choice-based assignment plan. In 1999 BPS eliminated racial preferences in assignment and adopted the current mechanism.

/pdf/the-boston-public-school-match-1rk6i3ygry.pdf

Parag A. Pathak

Papers

Forced Sales and House Prices

Short Interest, Institutional Ownership, and Stock Returns

The New York City High School Match

Short interest, institutional ownership, and stock returns

The Boston Public School Match