# Questions tagged [probability]

A branch of statistics that studies the likelihood of uncertain events occurring.

29 questions with no upvoted or accepted answers
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### How to interpret the proof that information cascades will form?

I am reading the 1992 paper of Bikchandani, Hirshleifer and Welch on information cascades. They claim and prove that, given an environment of sequential decision making, an information cascade will ...
44 views

### Model the uncertain impact of a proposed policy by expected utility or other probabilistic approach

The impact of a proposed policy is often uncertain and subjected to randomness. As such, it seems natural to use probabilistic models. How to model the policy impact using the expected utility ...
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### Estimating probability of Central Bank's interest rate changes

Recently, I came across this article, which offers a simple model for estimating the probabilities of interest rate cut/hike from a central bank. This is done by using market data, especially normal ...
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### Mean Field/Differential Game and Measurability

Consider the following scenario. There is a continuum of players in a population, with population measure normalized to $1$. Each player has a type $\theta \in [0,1]$ and we suppose that $\theta$ is ...
167 views

### Job-finding rate in an urn-ball model with types

Setup Say you have two types of workers, high and low. The share of low-types among the unemployed population is $P$. I want to find the job-finding rate for these types. Matching Matching is ...
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### Applying the Martingale central limit theorem to the score process of an autoregressive model

This question is a natural continuation of the following question: How do I construct the score process of a Markov model and verify that it is a Martingale? In this problem, we set up as follows: ...
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### Probability for Economics

I need to learn ASAP on the list of topics: Multivariate Distribution, discrete and continuous random variables; integration and expectation; law of large numbers and central limit theorem, confidence ...
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### Estimating excess probability

I have three players A,B,C, where C ideally functions as a baseline. They play different games (not against each other) and I can observe their win probability, for example P(A wins in game I) = 90%, ...
44 views

### In economics, what variables do we usually assume to follow an exponential distribution?

In economics, what variables do we usually assume to follow an exponential distribution? I would like as many examples as possible, and it would be great if you have a rationale(economic reason or ...
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### Best-responding to a stochastically higher distribution of bids

In Auction Theory, Krishna writes that: a bidder who faces a stochastically higher distribution of bids–in the sense of reverse hazard rate dominance–will bid higher (This follows the proof of ...
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1 vote
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### Finding the risk attitude parameter in a CPT Risk Elicitation Model

I'm working with this article by Bauermeister et al. that compares the risk attitude parameters found using two different risk elicitation models. The models each use a series of gambling options to ...
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1 vote
51 views

### Bayesian update in the beliefs about the signals

Suppose that we have tow states of the world $\omega_1$ and $\omega_2$, where $p(\omega_1)=p(\omega_1)=1/2$ and there are three different signals, $s_H,s_M,s_L$ that are equally likely to occur in ...
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1 vote
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### The most used probability distributions in moral hazard models?

I'm engaged in making a variation of the canonical moral hazard model, but I need some examples of probability distributions to make some simulations and graphs. What are the probability distributions ...
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1 vote
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### Question on the choice of boundary in the CUSUM test when we make some resampling

Question on the choice of boundary in the CUSUM test when we make some resampling We are considering to make a CUSUM test for some economical time series $𝑋=(𝑥_1,..,x_n)$. Suppose 𝑋 contains many ...
1 vote
62 views

### Assessing risk in a decision problem with repeated toss

The problem starts at time t0. At each time step, the participant can choose to opt out and claim a loser's reward Rl. At each time step, the participant has a probability p to win a winner's reward ...
1 vote
107 views

### Global games: How to derive posterior with uniform prior and signal

I have access to some lecture notes on Global games (following the model of Carlsson and van Damme (1993)) showing how to derive the players posterior beliefs. But I don't really grasp how players ...
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1 vote