Some Recent Related Conferences

• Conference on Dynamic Aspects in Economic Decision Making Copenhagen, June, 2010
• STRUCTURAL MICROECONOMICS SUMMER CONFERENCE at the Cowles Foundation Yale, June 2010
• 10th Doctoral Seminar in Economic Theory and Econometrics Firenze, July 2010
• Royal Economic Society 5th PhD Presentation Meeting January, 2010

Lecture 1: The "Information Revolution" will it promote good decision making or bad decision making?

Sites:

• The Singularity is Near: When Humans Transcend Biology By Ray Kurzweil, Viking Press.
• Postgres^® The world's most advanced open source database
• Mysql^® The world's most popular open source database
• PERL: Practice Extraction and Report Language
• CGI-BIN: Common Gateway Interface
• EconJobMarket.org^®
• Conference Maker^®
• Editorial Express^®
• Freakonomics Blog

Readings:

• Special Issue of the Journal of Econometrics on Structural Models of Optimization Behavior in Labor, Aging, and Health edited by Donna Gilleskie and Ahmed Khwaja
• Michael Keane's keynote paper from the above special issue,
• John Rust's comment on Keane's keynote paper
• John Rust (2006) Bad Decisions (slides from presentations at the European Meetings of the Econometric Society, Vienna, 2006
• John Rust (2006) Dynamic Programming
• John Rust (1996) Numerical Dynamic Programming in Economics in Handbook of Computational Economics (volume 1) edited by H. Ammman, D. Kendrick and J. Rust (Elsevier).
• John Rust (1994) Structural Estimation of Markov Decision Processes in Handbook of Econometrics (volume 4) edited by R.F. Engel and D.L. McFadden
• John Rust Dealing with the Complexity of Economic Calculations unpublishable manuscript.
• John Rust (1987) Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher Econometrica 55-5 999-1033. New Palgrave Dictionary of Economics
• John Rust (1997) Using Randomization to Break the Curse of Dimensionality Econometrica 65-3 487-516.
• Rust, J, Traub, J.F. and H. Wozniakowski (2002) Is There a Curse of Dimensionality for Contraction Fixed Points in the Worst Case? Econometrica 70-1 285-329.
• Susumu Imai, Neelam Jain and Andrew Ching (2009) Bayesian Estimation of Dynamic Discrete Choice Models Econometrica 77-6 1865-1899.
• Andriy Norets (2009) Inference in Dynamic Discrete Choice Models With Serially orrelated Unobserved State Variables Econometrica 77-5 1665-1682.
• Geoffrey Rothwell and John Rust (1995) Optimal Response to Shift in Regulatory Regime: The Case of the U.S. Nuclear Power Industry Journal of Applied Econometrics 10-S 75--118.
• Geoffrey Rothwell and John Rust (1997) On the Optimal Lifetime of Nuclear Power Plants Journal of Business and Economic Statistics 15-2 195-208.
• John Rust and Christopher Phelan (1997) How Social Security and Medicare Affect Retirement Behavior In a World of Incomplete Markets Econometrica 65-4 781-832.
• John Rust (2005) Impact of Retiree Health Plans on Faculty Retirement Decisions in Robert Clark and Jennifer Ma (editors) Recruitment, Retention and Retirement: The Three R's of Higher Education in the 21st Century Edward Elgar, Northhampton, Massachusetts, pp. 135--169.
• Hugo Benitez-Silva, Moshe Buchinsky and John Rust (2010) Induced Entry Effects of a $1 for $2 Offset in SSDI Benefits manuscript, resubmitted to Journal of Policy Analysis and Management
• Scholz, J.K. A. Seshshadri and S. Kitatrakun (2006) Are Americans Saving "Optimally" for Retirement? Journal of Political Economy 114-4 607-643.
• John Rust and George Hall (2003) Middle Men versus Market Makers: A Theory of Competitive Exchange Journal of Political Economy 111-2 353-403.
• John Rust and George Hall (2007) The (S,s) Rule is an Optimal Trading Strategy in a Class of Commodity Price Speculation Problems Economic Theory 30 515--538.
• Harry Paarsch and John Rust (2008) Valuing Programs with Deterministic and Stochastic Cycles Journal of Economic Dynamics and Control 33 614-623.
• Sungjin Cho and John Rust (2008) Is Econometrics Useful for Private Policy Making? A Case Study of Replacement Policy at an Auto Rental Company Journal of Econometrics 145 243--257.
• Sungjin Cho and John Rust (2010) The Flat Rental Puzzle Review of Economics Studies 77-2 534-559.

Lecture 2: Dynamic Games

I provide a brief survey and discussion of a set of papers on solving and estimating dynamic games, particularly for a class of equilibria known as Markov perfect equilibria. Solving dynamic games is more complex than solving single agent dynamic programming problems due to the problem of multiple equilibria. I discuss several examples where multiple equilibria is a problem that challenges the empirical relevance of these models, since when there are many equilibria, the theory ordinarily is silent on which of these equilibria is most likely to occur in an actual situation (if one believes that real agents are "in equilibrium" in the first place). If there are so many equilibria that "almost anything can happen" then game theory may not be a useful tool for predicting the outcome of multi-agent strategic interactions. We consider whether "learning theories" might serve as a useful way of thinking about whether/how real agents come to a particular equilibrium solution if they interact repeatedly. The conclusions of learning theory do not provide a lot of hope that this can resolve the issue of convergence to equilibria and selection of particular equilibria when the game has many possible equilibria. However apart from its possible empirical irrelevance, numerical solution of dynamic games can be quite interesting and lead to important insights on how hypothetical rational agents would behave. The tension is how "seriously" we ought to take theory, and particularly game theory, when we are doing empirical work. There are many unsolved challenges in this expanding frontier of research, including the numerical difficulties of solving games and trying to estimate and test them empirically.

Readings: