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A priori knowledge usually enables us to decide that some coefficients must be zero in the particular equation, while they assume non-zero values in other equations of the system. We said that identification of an equation is based on variables not included (not appearing) in it. To be identifiable an equation must be independent of one or more important variables, which are included in other equations of the system. Such excluded variables, if operative during the sample period, will generate shifts in the other equations of the model, which will in turn identify the particular equation from which they are absent (i.e. in which they appear with zero coefficient).
Based on the a priori information a list can be prepared, which should be as complete as possible, of the factors which are relevant to the phenomenon being studied. The list can help us decide which of these factors would normally appear in each relationship. For example, assume that we want to study the demand for an agricultural product. The demand equation belongs to a system of equations describing the market mechanism.
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The most basic version of a LIV allows the executive office holder (Governor or President) to accept part of a bill passed by the legislature (so that part becomes law) and to veto
A game is one among complete data if all factors of the sport are common information. Specifically, every player is awake to all different players, the timing of the sport, and als
This chapter introduces mixed strategies and the methods used to solve for mixed strategy equilibria. Students are likely to accept the idea of randomization more readily if they t
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A heuristic is an aid to learning, casually brought up as a rule of thumb. Formally, a heuristic may be a mechanism capable of altering its internal model of the surroundings in re
Rollback shows that Boeing chooses peace over war if Airbus enters, so Airbus will enter. Rollback equilibrium entails Airbus playing “Enter” and Boeing playing “Peace if entry”; e
A practice analogous to price fixing in which auction members form a ring whose associates agree not to bid against each other, either by discarding the auction or by placing phony
Assuming that there are only 2 airline companies in the world, Delta and US Airways, what is the ((Nash) Equilibrium) or price that each company in the following matrix will charge
Ship, Captain and Crew (sometimes called Ship, Captain and Mate) was a popular bar game played for drinks with five dice and throwing cup. Each player gets three throws. He has to
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