We develop numerically stable and accurate stochastic simulation approaches for solving dynamic economic models. First, instead of standard least-squares methods, we examine a variety of alternatives, including least-squares methods using singular value decomposition and Tikhonov regularization,...

First, we propose a more efficient implementation of the Smolyak method for interpolation, namely, we show how to avoid costly evaluations of repeated basis functions in the conventional Smolyak formula. Second, we extend the Smolyak method to include anisotropic constructions; this allows us to...

We introduce an envelope condition method (ECM) for solving dynamic programming problems. The ECM method is simple to implement, dominates conventional value function iteration and is comparable in accuracy and cost to Carroll’s (2005) endogenous grid method. Codes are available.

We use the stochastic simulation algorithm, described in Judd, Maliar and Maliar (2009), and the cluster-grid algorithm, developed in Judd, Maliar and Maliar (2010a), to solve a collection of multi-country real business cycle models. The following ingredients help us reduce the cost in...

We introduce an algorithm for solving dynamic economic models that merges stochastic simulation and projection approaches: we use simulation to approximate the ergodic measure of the solution, we construct a fixed grid covering the support of the constructed ergodic measure, and we use...

We consider two (symmetric) upstream firms producing independent goods that sell to consumers through symmetric retailers. The distinguishing feature of retailers is that they have a selling capacity, in the sense, that there is an upper limit in the total units of the two goods they can sell....

The paper studies managerial incentives in a model where managers choose product market strategies and make takeover decisions. The equilibrium contract includes an incentive to increase the firm's sales, under either quantity or price competition. This result contrasts with previous findings in...

The US Merger Guidelines consider that the anticompetitive effect of a horizontal merger is increasing in the initial market concentration and decreasing in the elasticity of demand. These ideas are studied in a setting where identical firms compete à la Cournot and marginal cost is constant....

The aim of this study consists of proposing a sequential and hierarchical decision-making process of tourists divided into four stages: 1) going on holiday (or not); 2) choosing a national of international trip; 3) choosing a specific geographical area; and 4) choosing a type of trip...

The objective of this study is to examine the rivalry within and between strategic groups in a given industry. Current literature on the topic suggests that the empirical evidence presented, so far, might well be biased by systematic errors in the measuring of rivalry. As a novelty, the method...