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Optimal Rule (optimal + rule)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	80%

Selected Abstracts

On Optimal Rules of Persuasion

ECONOMETRICA, Issue 6 2004
Jacob Glazer
A speaker wishes to persuade a listener to accept a certain request. The conditions under which the request is justified, from the listener's point of view, depend on the values of two aspects. The values of the aspects are known only to the speaker and the listener can check the value of at most one. A mechanism specifies a set of messages that the speaker can send and a rule that determines the listener's response, namely, which aspect he checks and whether he accepts or rejects the speaker's request. We study mechanisms that maximize the probability that the listener accepts the request when it is justified and rejects the request when it is unjustified, given that the speaker maximizes the probability that his request is accepted. We show that a simple optimal mechanism exists and can be found by solving a linear programming problem in which the set of constraints is derived from what we call the L -principle. [source]

Optimal Monetary Policy with Price and Wage Rigidities

ECONOMIC NOTES, Issue 1 2006
Massimiliano Marzo
In this paper, I search for an optimal configuration of parameters for variants of the Taylor rule by using an accurate second-order welfare-based method within a fully microfounded dynamic stochastic model, with price and wage rigidities, without capital accumulation. A version of the model with distortionary taxation is also explicitly tested. The model is solved up to second-order solution. Optimal rules are obtained by maximizing a conditional welfare measure, differently from what has been done in the current literature. Optimal monetary policy functions turn out to be characterized by inflation targeting parameter lower than in empirical studies. In general, the optimal values for monetary policy parameters depend on the degree of nominal rigidities and on the role of fiscal policy. When nominal rigidities are higher, optimal monetary policy becomes more aggressive to inflation. With a tighter fiscal policy, optimal monetary policy turns out to be less aggressive to inflation. Impulse-response functions based on second-order model solution show a non-affine pattern when the economy is hit by shocks of different magnitude. [source]

Searching for certainty in an uncertain world: the difficulty of giving up the experiential for the rational mode of thinking

JOURNAL OF BEHAVIORAL DECISION MAKING, Issue 2 2003
Yaacov Schul
Abstract Our research explores predictions that people make in a simple environment consisting of sequences of a binary signal followed by two possible outcomes. In order to optimize their prediction success, respondents should use a very simple decision rule, called maximization, whereby they consistently predict according to the signal. In line with past research, our findings show that even respondents who realized after the experiment that maximization is optimal failed to use it during the experiment itself. We discuss conditions that weaken or reinforce behaving according to the optimal rule in a repeated choice situation. Experiment 1 shows that individuals who are forced to plan their strategy and justify their actions are more likely to discover and use the optimal rule than those not forced to do so. Thinking about the appropriateness of one's performance can be done in two different orientations: focusing on the past (justifying past actions) or on the future (planning future action). Experiment 2 shows that planning induces rule-base thinking, while justifying fails to do so. These findings are discussed within a theoretical framework which suggest an interplay between the experiential and the rational modes of processing. Copyright © 2003 John Wiley & Sons, Ltd. [source]

OPTIMAL CONTRACTS FOR CENTRAL BANKERS AND PUBLIC DEBT POLICY*

THE JAPANESE ECONOMIC REVIEW, Issue 4 2004
HIROSHI FUJIKI
We consider how the second-best allocation corresponding to an optimal rule under the policy commitment of a central bank and a fiscal authority with a consolidated government budget constraint can be achieved, even though these authorities are unable to commit themselves to their optimal policies and ignore the strategic interaction between their policies. Our results show that the best practical institutional arrangement is to have an instrument-independent central bank that controls the money supply to determine the rate of inflation and commits itself to an inflation target that depends on fiscal variables. [source]

Optimal dynamic treatment regimes

JOURNAL OF THE ROYAL STATISTICAL SOCIETY: SERIES B (STATISTICAL METHODOLOGY), Issue 2 2003
S. A. Murphy
Summary. A dynamic treatment regime is a list of decision rules, one per time interval, for how the level of treatment will be tailored through time to an individual's changing status. The goal of this paper is to use experimental or observational data to estimate decision regimes that result in a maximal mean response. To explicate our objective and to state the assumptions, we use the potential outcomes model. The method proposed makes smooth parametric assumptions only on quantities that are directly relevant to the goal of estimating the optimal rules. We illustrate the methodology proposed via a small simulation. [source]