We propose a new test for the stability of parameters in a Markov switching model where regime changes are driven by an unobservable Markov chain. Testing in this context is more challenging than testing in structural change and threshold models because, besides the presence of nuisance...

In this paper, we develop an analytical approach to modeling consumer response to banner ad exposures at a sponsored content Web site that reveals significant heterogeneity in (unobservable) click proneness across consumers. The effect of repeated exposures to banner ads is negative and...

In this note we look at sufficient conditions for stationarity of a simple random coefficient model and find that this model is guaranteed to be stationary under strict conditions.<br> <br> J.E.L. classification codes.

This paper states four realities of econometric model building and shows that an econometric model can be causal only if the interpretations given to its coefficients are consistent with these realities. A numerically stable algorithm for estimating such a model subject to equality and...

Generally, profit predictions are made conditional upon a particular functional form. The typical caveat offered is that this is not the “true” demand model, but is instead some reasonable approximation. We show how the notion of an approximation can be explicitly represented using a random...

The local asymptotic normality for a class of generalized random coefficient autoregressive processes is established. This property implies the asymptotic optimality of the maximum likelihood estimator and the related test statistics. The model includes standard random coefficient autoregressive...