Economics Stack Exchange
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1500 questions
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5 answers

Why isn't the cost of shoes affected by their size?

I have noticed that many shoe selling shops I have visited have the same price tag regardless of the shoe size. Intuitively I'd think the bigger the shoe the more material and consequently capital invested in producing it. That being the case why…
Chimango Chisuwo
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What are the economic impacts of different professions?

Every dollar a research worker earns makes the economy \$5 better off and every dollar a finance worker makes costs the economy \$0.60 So Reddit Economics yesterday posited and later retracted the above claim, and I was wondering, in the field of…
Jason Nichols
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Calculus and Indifference Curves in an Urban Economics Example

I am reading the paper 'The Structure of Urban Equilibria' by Jan Brueckner. It uses a monocentric city model, where all consumers earn income $y$ at the centre of the city. They buy $q$ housing for a price $p$ at distance $x$ from the centre,…
StevenRJClarke1985
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Can econometrics test for correlation or causality between prices and corruption?

This week there was news that some prices are rising. I heard that in some countries where corruption is high the prices are also higher. I wonder if there is causaility or just both at same. It would be interesting to find some material to support…
Niklas Rosencrantz
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Transversality Condition in neoclassical growth model

In the neo-classical growth model there is the following transversality condition: $$\lim_{t\rightarrow\infty}\beta^{t}u'(c_{t})k_{t+1}= 0,$$ where $k_{t+1}$ is the capital at period $t$. My questions are: How we derive this condition? Why do…
Neta_1990
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What is the difference between two stage least squares and instrumental variable regression?

I'm doing independent study and I am having trouble understanding the difference between these two estimators. I get that 2SLS is predicting the endogenous variable, and that instrumental variables are similar to proxy variables, but I don't get how…
Forgot the Jacobian
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second order stochastic dominance without the same mean

Let $F$ and $G$ be two distributions with the same mean. $F$ is said to second order stochastically dominate (SOSD) $G$ if $$\int u(x)\mathrm dF(x)\ge \int u(x)\mathrm dG(x)\tag{1}$$ for all increasing and concave $u(\cdot)$. This above definition…
Herr K.
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Can the Machina Paradox be solved by expanding the choice set?

In another question, the Machina paradox is mentioned as a possible counterexample to the expected utility model: Adding to the list of paradoxes, consider Machina's paradox. It is described in Mas-Colell, Whinston and Green's Microeconomic…
jmbejara
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Why does quantity supplied increase with price in economics?

The Law of Supply is my worst enemy in economics because I could never truly understand it, and as a result, the stuff I learned after that was built on a weak foundation. The Law of Demand is totally different though, it makes perfect sense to me.…
tphilli
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What are the arguments against the rational expectations hypothesis?

I believe the rational expectations hypothesis says that agents in a model bear expectations that are the same as mathematical expectations. Under what circumstances does this hypothesis become questionable? What are the usual arguments against this…
Bravo
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Are There Giffen Inputs?

I am studying for my candidacy exams and I came across this question on a previous exam. The question is in the TFD (True, False, Debatable) section of the exam. The claim is: There are no Giffen inputs in production. I think this question is a…
DornerA
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Wouldn't abolition of cash give rise to a substitute currency?

Some countries (e.g. Sweden and Denmark) plan to abolish physical cash in the future and restrict the use of cash to electronical deposits. One of the reasons for this is to prevent hoarding / boost spending of money, which could be achieved by…
proskor
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Should Costs of Travel to Buy Goods be Regarded as Transaction Costs?

Within the approach of New Institutional Economics associated with Oliver Williamson and others, emphasis is placed on transaction costs as a key factor in explaining why different forms of economic organisation arise in different circumstances. …
Adam Bailey
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Thesis-advisor/student pairs that won the nobel prize

I am trying to compile a list of winners of the Nobel memorial prize in economics whose thesis advisor also won the prize. So far I have Eric Maskin (advisor) / Jean Tirole (student) Are there other pairs?
Ubiquitous
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CES Production Function with $\rho>1$

In using CES production functions of the form $f(x_1,x_2)=(x_1^\rho+x_2^\rho)^{1/\rho} $, we always assume that $\rho\leq1$. Why do we make that assumption? I understand that if $\rho>1$, the production function won't be concave anymore (and hence…
Sher Afghan
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