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[5:42 PM, 10/22/2021] Flo: Here is the table again showing the long-term returns and risks of the major asset classes from 1926 - 2018. Asset Geometric Mean (%) Standard Deviation % Cumulative Wealth of $100 Large-Cap Stocks 10.0% 19.8% $707,163 Small-Cap Stocks 11.8% 31.6% $3,199,541 Long-term Corporate Bonds 5.9% 8.4% $20,669 Long-term Government Bonds 5.5% 9.8% $14,537 Intermediate-term Government Bonds 5.1% 5.6% $10,211 U.S. Treasury Bills 3.3% 3.1% $2,048 Inflation 2.9% 4.0% $1,428 Source: Duff and Phelp, 2019 SBBI Yearbook Stocks, Bonds, Bills, and Inflation, Roger G. Ibbotson. Based on the table above, please share some of your thoughts and insights on how you would allocate a portfolio: 1. Over a long-term time horizon (20+ years)? 2. Would you use this same allocation if your time horizon was only 5 years? Why or why not [5:44 PM, 10/22/2021] Flo: This assignment reinforces the importance of effective summarizing and analyzing skills, appropriate tone, clarity, layout and persuasiveness as well as considerations of audience and format, all of which are essential business communication components in the competitive workplace. You will compile a communications package that includes an appropriately formatted email on the topic provided. The correspondence will be submitted together with PAIBOC documents to Blackboard by week 5, in class

Section B Question 3 (a) Discuss the logit demand model. In particular, discuss the assumptions underlying the model and the data needed to estimate the model (b) The next few questions deal with Berry, Levinsohn and Pakes (Econometrica 1995) which estimates a model partially based on the logit demand model. Discuss the empirical setting of the model and the data. (c) Discuss the major differences between BLP and a "standard" logit demand model as well as any issues/weaknesses with the standard model that BLP seek to address. (d) Give a brief overview of BLP's estimation strategy. Given the nature of their data are there additional hurdles that the authors must overcome? Discuss their results. (e) Compare and contrast BLP with Goldberg (Econometrica 1995). What are the similarities between the two papers? What the key differences in the data and estimation strategies? In doing so discuss Glodberg's empirical model and how it relates to the logit demand model. Question 4 This question relates to "New Empirical Industrial Organization" studies that seek to estimate market power levels without marginal costs data. (a) Discuss the identification strategy of NEIO models. That is, what equation NEIO papers are estimating as well as the theoretical underpinnings of this key equation? (b) The NEIO model has been challenged on at least two fronts. Discuss two challenges to the validity of the NEIO model. Be as specific as you can. (c) Discuss Genesove and Mullin (Rand 1998). What is the empirical setting, what is the key feature of their data, what is the main research question and what are the key results?Question 3 (a) Discuss the logit demand model. In particular, discuss the assumptions underlying the model and the data needed to estimate the model. (b) The next few questions deal with Berry, Levinsohn and Pakes (Econometrica 1995) which estimates a model partially based on the logit demand model. Discuss the empirical setting of the model and the data. (c) In which direction would you want to extend the demand model? What other data would you need? Can you "sign" the bias present in the simpler BLP model? (c) Discuss the major differences between BLP and a "standard" logit demand model as well as any issues/weaknesses with the standard model that BLP seek to address. In doing so, discuss Knittel and Metaxoglou. (d) Give a brief overview of BLP's estimation strategy. That is, outline the steps you would take to estimate a BLP model. Given the nature of their data are there additional hurdles that the authors must overcome? Discuss their results. (e) Suppose you wanted to use the results from a BLP demand model to simulate the outcome of a merger. How would this be done? Question 4 A recent paper seeks to understand how "suggested" prices affect competitive behavior. The background is as follows: In the Dutch gasoline market refiners (wholesalers) post "suggested" prices for gasoline retailers. These prices vary by location and time. The paper argues that these suggested prices facilitate tacit collusion. The paper has daily data on retail prices and suggested prices over a two-year period. (a) Discuss the theoretical argument of why suggested prices may influence competition. (b) What empirical information would you provide as initial evidence that is consistent with the theoretical argument? Obviously, I am not asking what they provide, but rather what your first step would be to support this argument. (c) What other data sources would you want to include in the analysis? Explain why. (d) Suppose you regressed the change in the retail price on the change in the suggested price and found a positive and statistically significant effect. Is this enough to conclude that suggested prices facilitate collusion? Why or why not.Question 3 (a) Discuss the logit demand model. In particular, discuss the assumptions underlying the model and the data needed to estimate the model. (b) The next few questions deal with Berry, Levinsohn and Pakes (Econometrica 1995) which estimates a model partially based on the logit demand model. Discuss the empirical setting of the model and the data. (c) In which direction would you want to extend the demand model? What other data would you need? Can you "sign" the bias present in the simpler BLP model? (c) Discuss the major differences between BLP and a "standard" logit demand model as well as any issues/weaknesses with the standard model that BLP seek to address. In doing so, discuss Knittel and Metaxoglou. (d) Give a brief overview of BLP's estimation strategy. That is, outline the steps you would take to estimate a BLP model. Given the nature of their data are there additional hurdles that the authors must overcome? Discuss their results. (e) Suppose you wanted to use the results from a BLP demand model to simulate the outcome of a merger. How would this be done? Question 4 A recent paper seeks to understand how "suggested" prices affect competitive behavior. The background is as follows: In the Dutch gasoline market refiners (wholesalers) post "suggested" prices for gasoline retailers. These prices vary by location and time. The paper argues that these suggested prices facilitate tacit collusion. The paper has daily data on retail prices and suggested prices over a two-year period. (a) Discuss the theoretical argument of why suggested prices may influence competition. (b) What empirical information would you provide as initial evidence that is consistent with the theoretical argument? Obviously, I am not asking what they provide, but rather what your first step would be to support this argument. (c) What other data sources would you want to include in the analysis? Explain why. (d) Suppose you regressed the change in the retail price on the change in the suggested price and found a positive and statistically significant effect. Is this enough to conclude that suggested prices facilitate collusion? Why or why not