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1500 questions
7
votes
3 answers
Question about the Ellsberg Paradox in Expected Utility Theory
The von Neumann-Morgenstern theorem states that, assuming a person's preferences under risk satisfy certain rationality axioms, then there exists a utility function u, the von Neumann utility function, such that the person will tend to maximize the…
Keshav Srinivasan
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2 answers
CES nested in a Cobb-Douglas Function
I have the following CES nested in a Cobb-Douglas production function:
$$y(i)=[l(i)^{\frac{\epsilon - 1}{\epsilon}} +\alpha(i)(\tilde{\gamma}x(i))^{\frac{\epsilon - 1}{\epsilon}}]^{\frac{\epsilon \beta}{\epsilon-1}}h(i)^{1-\beta}$$
$\beta \in…
John M.
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7
votes
2 answers
Asymmetric vs incomplete information
I am having difficulties in distinguish them. I kind of understand what is the difference intuitively, but I still fail to put some games in the correct category.
Can you give me two examples of games and show me the difference from a mathematical…
Lex
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7
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2 answers
on economic growth and Second Welfare theorem
While I was studying eighth edition of Mankiw's Macroeconomics, in chapter 9 on Economic Growth(pg. 245), the author mentions :
"Some economists have proposed increasing the incentive to save by replacing the current system of income taxation with a…
Dhruv Goel
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7
votes
1 answer
What is the connection between the money market and loanable funds market?
I am studying economics with Khan Academy and came across these 2 articles on
The money market and
The loanable funds market.
(LF = Loanable funds)
Now, clearly these 2 systems must be related, right? After all, loanable funds are money. More…
pjq42
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7
votes
2 answers
Why are stock markets not open 24/7?
All of the stock markets have limited trading days and hours. Why there should be off day? Why are stock markets not run 24/7?
Hadman
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7
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0 answers
Is 2SLS asymptotically MLE?
$$y_i =\beta_0 +\beta_1 x_{1i}+\beta_2 x_{2i}+\varepsilon_i$$
Suppose $x_1$ is endogenous but $x_2$ is exogenous. We have two excluded instruments, $z_1$ and $z_2$. The first stage is:
$$x_{1i} =\delta_0 +\delta_1 z_{1i}+\delta_2 z_{2i}+\delta_3…
Michael Gmeiner
- 3,643
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7
votes
3 answers
Why do grains cost so much more than flour?
I don't know if this is the case everywhere, but at least here in Germany: The same amount (usually 1kg) of grains - for human consumption - costs 3-10 times as much as flour. This holds at least for wheat, rye, oats.
Where did I get that…
Kjara
- 173
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7
votes
1 answer
Complement in production and the slope of factor demand curves
Considering a firm taking prices for granted and maximizing profits
$$pf(x_1,...,x_K) - \sum_{i=1}^K q_i x_i,$$
where $f$ is strictly concave. Furthermore, let the factor demand curves be the solutions $x^*_i(p,q)$ and the slopes the derivative with…
Jesper Hybel
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7
votes
1 answer
Why are labor, capital, and land traditionally denoted by the letters L, K, and T?
AFAIK, at least in the English-speaking world, labor, capital, and land are (in economics) usually denoted by the letters L, K, and T.
Who first popularized the use of these letters and why?
My uneducated guesses are that:
L would certainly make…
user18
7
votes
1 answer
How can the Swiss exchange rate be very biased in a free market?
In 2002, when Germany, France, Italy and Austria adopted the Euro currency, the exchange rate with Switzerland was 1.60 CHF (Swiss Franc) = 1€ (Euro).
The prices and salaries in Switzerland were slightly higher than in its neighbours, but reasonably…
Bregalad
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7
votes
2 answers
Why do top professional sport players get usually paid so much?
I'd like to find an answer to this question as I can't see how something like this can be happening. I can see three reasons that they would earn that much but any of them if thought better is wrong.
1) They generate all the money they win. I don't…
Guest
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7
votes
2 answers
What are the primary differences between the Chicago and Austrian school of economics?
I've been reading some thinkers like Mengel, Mises, and others, who are all Austrian School theorists. But I have also been reading Milton Friedman and Thomas Sowell works, who are proponents of the Chicago School. That being said, they don't seem…
Luke Hill
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7
votes
5 answers
Real Life Examples of Optimization in Economics
I am trying to find some real life ("non trivial") examples of optimization related to economics.
So far, most of the examples that I come across are from introductory economics textbooks involving some basic example about farmers choosing between…
stats_noob
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7
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2 answers
Testing for serial correlation with General Regressors
This is from Introductory Econometrics (Wooldridge) 5th Edition page 420.
Consider:
$$y_t =\beta_0 +\beta_1 x_{1t}+\beta_2 x_{2t}+...+\beta_k x_{kt}+u_t$$
where $Cov(u_t, x_{jt})=0$ for all $j$ but perhaps $Cov(u_t, x_{jt-1}) \ne 0$ for some $j$. We…
Michael Gmeiner
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