The unequal effects of the health-economy trade-off during the COVID-19 pandemic.

Despite the global impact of the coronavirus disease 2019 pandemic, the question of whether mandated interventions have similar economic and public health effects as spontaneous behavioural change remains unresolved. Addressing this question, and understanding differential effects across socioeconomic groups, requires building quantitative and fine-grained mechanistic models. Here we introduce a data-driven, granular, agent-based model that simulates epidemic and economic outcomes across industries, occupations and income levels. We validate the model by reproducing key outcomes of the first wave of coronavirus disease 2019 in the New York metropolitan area. The key mechanism coupling the epidemic and economic modules is the reduction in consumption due to fear of infection. In counterfactual experiments, we show that a similar trade-off between epidemic and economic outcomes exists both when individuals change their behaviour due to fear of infection and when non-pharmaceutical interventions are imposed. Low-income workers, who perform in-person occupations in customer-facing industries, face the strongest trade-off.

Best-response dynamics, playing sequences, and convergence to equilibrium in random games.

We analyze the performance of the best-response dynamic across all normal-form games using a random games approach. The playing sequence-the order in which players update their actions-is essentially irrelevant in determining whether the dynamic converges to a Nash equilibrium in certain classes of games (e.g. in potential games) but, when evaluated across all possible games, convergence to equilibrium depends on the playing sequence in an extreme way. Our main asymptotic result shows that the best-response dynamic converges to a pure Nash equilibrium in a vanishingly small fraction of all (large) games when players take turns according to a fixed cyclic order. By contrast, when the playing sequence is random, the dynamic converges to a pure Nash equilibrium if one exists in almost all (large) games.

On learning agent-based models from data.

Agent-Based Models (ABMs) are used in several fields to study the evolution of complex systems from micro-level assumptions. However, a significant drawback of ABMs is their inability to estimate agent-specific (or "micro") variables, which hinders their ability to make accurate predictions using micro-level data. In this paper, we propose a protocol to learn the latent micro-variables of an ABM from data. We begin by translating an ABM into a probabilistic model characterized by a computationally tractable likelihood. Next, we use a gradient-based expectation maximization algorithm to maximize the likelihood of the latent variables. We showcase the efficacy of our protocol on an ABM of the housing market, where agents with different incomes bid higher prices to live in high-income neighborhoods. Our protocol produces accurate estimates of the latent variables while preserving the general behavior of the ABM. Moreover, our estimates substantially improve the out-of-sample forecasting capabilities of the ABM compared to simpler heuristics. Our protocol encourages modelers to articulate assumptions, consider the inferential process, and spot potential identification problems, thus making it a useful alternative to black-box data assimilation methods.

Forecasting the propagation of pandemic shocks with a dynamic input-output model.

We introduce a dynamic disequilibrium input-output model that was used to forecast the economics of the COVID-19 pandemic. This model was designed to understand the upstream and downstream propagation of the industry-specific demand and supply shocks caused by COVID-19, which were exceptional in their severity, suddenness and heterogeneity across industries. The model, which was inspired in part by previous work on the response to natural disasters, includes the introduction of a new functional form for production functions, which allowed us to create bespoke production functions for each industry based on a survey of industry analysts. We also introduced new elements for modeling inventories, consumption and labor. The resulting model made accurate real-time forecasts for the decline of sectoral and aggregate economic activity in the United Kingdom in the second quarter of 2020. We examine some of the theoretical implications of our model and find that the choice of production functions and inventory levels plays a key role in the propagation of pandemic shocks. Our work demonstrates that an out of equilibrium model calibrated against national accounting data can serve as a useful real time policy evaluation and forecasting tool.

Best reply structure and equilibrium convergence in generic games.

Game theory is widely used to model interacting biological and social systems. In some situations, players may converge to an equilibrium, e.g., a Nash equilibrium, but in other situations their strategic dynamics oscillate endogenously. If the system is not designed to encourage convergence, which of these two behaviors can we expect a priori? To address this question, we follow an approach that is popular in theoretical ecology to study the stability of ecosystems: We generate payoff matrices at random, subject to constraints that may represent properties of real-world games. We show that best reply cycles, basic topological structures in games, predict nonconvergence of six well-known learning algorithms that are used in biology or have support from experiments with human players. Best reply cycles are dominant in complicated and competitive games, indicating that in this case equilibrium is typically an unrealistic assumption, and one must explicitly model the dynamics of learning.

Home is where the ad is: online interest proxies housing demand.

Online activity leaves digital traces of human behavior. In this paper we investigate if online interest can be used as a proxy of housing demand, a key yet so far mostly unobserved feature of housing markets. We analyze data from an Italian website of housing sales advertisements (ads). For each ad, we know the timings at which website users clicked on the ad or used the corresponding contact form. We show that low online interest-a small number of clicks/contacts on the ad relative to other ads in the same neighborhood-predicts longer time on market and higher chance of downward price revisions, and that aggregate online interest is a leading indicator of housing market liquidity and prices. As online interest affects time on market, liquidity and prices in the same way as actual demand, we deduce that it is a good proxy. We then turn to a standard econometric problem: what difference in demand is caused by a difference in price? We use machine learning to identify pairs of duplicate ads, i.e. ads that refer to the same housing unit. Under some caveats, differences in demand between the two ads can only be caused by differences in price. We find that a 1% higher price causes a 0.66% lower number of clicks.