Learning by Owning in a Lemons Market

Most of this code was written by, or in collaboration with, Brian Waters.

Empirical work

Written in R. Requires data.table, mgcv, lfe and zoo. For figures, run

source("main.r") # loads estimator function
# housing: 
#    figure 1(a) "housing_resrets.pdf"
#    figure 1(b) "housing_hist.pdf"
#    figure 7(a) "housing_rawrets.pdf"
#    figure 7(b) "housing_rotrets.pdf"
# make sure that "housing.RData" is saved in the working directory
source("housing_build.r") # loads data.table X
duration_breaks=seq(1/365,15+1/365,.25)
estimator(c("t.buy.yq","T.buy.yq"),duration_breaks,"housing",X)
# venture capital: 
#    figure 2(a) "venture_capital_rawrets.pdf"
#    figure 2(b) "venture_capital_hist.pdf"
# make sure that "venture_capital.RData" is saved in the working directory
source("venture_capital_build.r") # loads data.table X
duration_breaks=seq(.25,2.5,.125)
estimator(c(),duration_breaks,"venture_capital",X,smpar=1.)
# equipment: 
#    figure 3(a) "equipment_resrets.pdf"
#    figure 3(b) "equipment_hist.pdf"
#    figure 8(a) "equipment_rawrets.pdf"
#    figure 8(b) "equipment_rotrets.pdf"
# make sure that "equipment.RData" is saved in the working directory
source("equipment_build.r") # loads data.table X
duration_breaks=seq(1/365,10+1/365,.25)
estimator(c("lag_age","age"),duration_breaks,"equipment",X)

Figures are saved in the working directory.

Numerical work

Written in Python. Requires numpy, scipy, and matplotlib. The module is perfect_good_news.py. The Equilibrium object has two methods, plot_val, which plots values and prices, and plot_pdf, which plots probability densities. For figures, run

from perfect_good_news import Equilibrium
# high liquidity
L_liq = Equilibrium(b=.1,c=.1,l=.5,r=.5,Q=.7,Y=1.) 
L_liq.plot_val(full=True) # figure 4(a): price, L-value, H-value
L_liq.plot_pdf(leg=False) # figure 4(b): strategic
L_liq.plot_val(leg=False) # figure 5(a): price
L_liq.plot_pdf(full=True) # figure 5(b): strategic, liquidity, total
# low liquidity
H_liq = Equilibrium(b=.9,c=.2,l=.5,r=.5,Q=.7,Y=1.) 
H_liq.plot_val(full=True) # figure 6(a): price, L-value, H-value
H_liq.plot_pdf(full=True) # figure 6(b): strategic, liquidity, total

Figures are displayed on the screen one-by-one.