Market and Information Economics

Transcription

1 Marke and Informaion Economics Preliminary Examinaion Deparmen of Agriculural Economics Texas A&M Universiy May 2015 Insrucions: This examinaion consiss of six quesions. You mus answer he firs quesion and you mus answer four of he remaining five quesions (i.e. answer four of he quesions numbered 2-6). Each quesion answered (five in oal) has a weigh of 20% in he final examinaion score. Please read hrough he enire examinaion before making a decision on he paricular se of five quesions you acually answer. The examinaion procor will review he conen of he exam a he beginning of he ime period (9:00 am). He will answer general quesions for he enire se of sudens wriing his prelim. You have unil 1:15 pm o complee he exam. Good Luck!

2 You Mus Answer his Quesion 1. The sugar refining indusry was highly concenraed in he lae1800s as he resul of acquisiions by he Sugar Trus, which was laer incorporaed as he American Sugar Refining Company and conrolled more han 80% of he indusry s capaciy. Refined sugar was a homogeneous produc (100% sucrose), purified and crysallized from raw sugar. The grocers packaged he refined sugar for consumers wihou any idenificaion of he manufacurer. Deailed marke daa for his indusry for are available as a resul of anirus liigaion. Genesove and Mullin (1998) used hese daa o infer marke conduc of he sugar refining indusry under he hypohesis of saic oligopoly behavior. Suppose ha he demand curve of he refined sugar has he paricular linear form, where p is he price of refined sugar in he marke, Q is oupu, Z is anoher variable ha affecs demands, such as income or he price of a subsiue, and is he error erm. Suppose ha he firm s marginal cos curve is linear in Q and raw sugar price W, wih error erm, Define he effecive marginal revenue as where is a parameer o be esimaed and. (a) Provide he inerpreaion of. (b) Derive Lerner s index as a funcion of and marke elasiciy of demand. Show your work. (c) Suppose you have he daa of p, Q, Z, W, bu no MC. Explain in deails how o obain an esimae of. (d) If here is no ZQ erm (ha is, if =0) in he demand curve, discuss he esimaion of based on he informaion abou MC.

3 Answer four of he following five quesions 2. Roll Global, a privae company and big supporer of scienific research on healh benefis of fruis and vegeables, is ineresed in research on consumer demand for frui and vegeable juices in he Unied Saes. Specifically, Roll Global expressed ineres in paricular producs, namely super premium juices, 100% frui juices, 100% vegeable juices, frozen juices, juice drinks, and oher beverage caegories. In order o obain research funds, Roll Global required a formal research proposal. In such a proposal, you are specifically o do he following: In a quaniaive and qualiaive manner: a. Develop and jusify a heoreical model o analyze he consumer demand of he various beverages in he Unied Saes. b. Describe in some deail he source of daa and he saisical procedure(s) o carry ou he empirical work. c. Describe he ypes of informaion provided by he research model. d. Describe he usefulness of he informaion in (c). e. Discuss empirical and heoreical problems wih respec o such research. f. Show how o possibly resolve he problems in (e).

4 3. For he following vecor auoregression (VAR): X1 X 2 X X1 1 X 2 1 X X1 2 X 2 2 X 3 2 e1 e2 e3 a. Discuss assumpions made on he correlaion beween conemporaneous innovaions in deriving he moving average represenaion. Wha mehods have been used in he lieraure o solve his problem? In marix form, wihou individual elemens (jus use argumen in compac marix form: AX = BX -1 + Ce ) sugges how one migh ransform he model given above o accoun for conemporaneous correlaion among innovaions. Wha informaion do we require for such a ransformaion o be meaningful? Sugges how one obains he needed informaion. b. Consider he Moving Average Represenaion of his sysem. Discuss hree ways i can be sudied and presened o help inform economic analyss (and policy makers) on he dynamic relaionship beween X 1, X 2 and X 3 and pas or fuure values of each.

5 4. Consider he following graph and definiion. Definiion: A pah p defined on he se of variables, X i, i=1,..., 5 and Y is said o be d-separaed (blocked) by a se of nodes Z if and only if: X 4 X 3 X 5 X 1 Y X 2 i. p conains a chain X i X m Y or a fork X i X m Y, such ha he middle node, X m, is in Z. ii. p conains an invered fork (collider) X i X m Y such ha he middle node, X m, is no in Z and no descenden of X m is in Z. Discuss his definiion of -separaion using he graph in order o esimae he effec of X 1 on Y. a. Are X 3 and X 5 uncondiionally d-separaed? Are X 3 and X 5 given knowledge of X 4 d-separaed? b. Need we accoun for X 4 (include i) in an OLS regression of Y on X 1 if we are ineresed in obaining an unbiased esimae of Y/X 1? Why or why no? c. Need we accoun for X 2 (include in he regression) in an OLS regression of Y on X 1 if we are ineresed in obaining an unbiased esimae Y/X 1? Why or why no? d. Specify one or more equaions o consisenly esimae he above parial derivaive (Y/X 1 ) wih observaional daa. Does your answer change depending on wheher X 4 and X 2 are observable or unobservable? e. Suppose X 2 and X 4 are no observable, wha can we do o ge a an unbiased and consisen esimae of Y/X 1?

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