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Is risk aversion bounded in CRRA utility?

For instance, Cagetti (2003) estimates ρ > 2 by targeting the median wealth of households, Gourinchas and Parker (2002) find ρ < 2 by targeting the mean consumption of households, Chetty (2006), using the effects of wage changes on labor supply,…
Vayu
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Topological intuition to continuous preference relation

For a Microeconomics Course, we are going through MWG, and in the lecture we discussed the notion of a continuous preference relation. A preference relation $\succsim$ on a set $X$ is called continuous if $\forall x,y\in X$, for all sequences…
J. Dekker
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How can non-US banks issue USD loans?

I understand, commercial banks are entitled by the Central Bank to "create new money" when they issue a loan and correspondingly "destroy the money" when the loan is paid back (with the constraints of the fractional reserve system). Correct? If so,…
elemolotiv
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How to evaluate whether the synthetic control is good enough

I'm using the synthetic control method to evaluate a state-level policy (using synth package in Stata). I've read the seminal ADH papers on CA tobacco & Germany reunification, but I still don't know exactly how to decide if the constructed synthetic…
deeyuan
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What is the opportunity cost of doing something in your spare time?

My university is using this textbook. The text clearly states, “Economists use the term opportunity cost to indicate what must be given up to obtain something that is desired.” This leads me to believe that if you are a salaried worker who makes 50…
Will
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Does it matter if your decision might not matter?

I have read several experimental papers which ask people to make decisions which only matter with a certain probability. For example, individuals might be asked to submit bids in an auction, but told that their bids only 'count' with a certain…
Itzhak Rasooly
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Can somebody explain to me why exactly people necessarily had to starve under "communist rule"?

So, all my life, I've been told certain things. One of the least controversial is the "truth" that if you pick communism for a country, people will automatically starve. Allegedly, this is because the rulers will (I frankly have no idea if this is…
Edwind Podsiadlik
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What is the difference between a perfect foresight equilibrium and a rational expections equilibrium?

What is the difference between a perfect foresight equilibrium and a rational expections equilibrium? Why is it the same in case of a non-stochastic model? Can there be a perfect foresight equilibrium in a stochastic model?
Beck Batucada
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Approximately Optimal Mechanism Design vs. Revelation Principle

The abstract of the article "Impossibility Results for Truthful Combinatorial Auctions with Submodular Valuations" (Dobzinski, Vondrak, 2016) states A long-standing open question in algorithmic mechanism design is whether there exist…
gwtw14
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(Why) was von Neumann not a fan of the Nash equillibrium concept?

Charles A. Holt and Alvin E. Roth's The Nash equilibrium: A perspective notes: "In a personal communication with one of the authors, Nash notes that von Neumann was a “European gentleman” but was not an enthusiastic supporter of Nash's…
capybaralet
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Fixed cost of a firm

Suppose that a firm has a total cost function given by: $TC(q) = \frac{5}{q+1} + 5 + 5q + q^2$. What is the fixed cost? I seem to be able to come up with two "answers", which cannot be correct. My hunch is that it is because I do not have a…
pc724
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Does consumer surplus over-weigh the interests of high-income consumers?

An individual's willingness to pay for a good not only depends on how much they value that good, but also on their income level (at least under the conventional non-economics definition of the word 'value'). Consider the case with a single…
H Rogers
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What does economics say about "price gouging" during an emergency?

Many states have laws against "price gouging" during an emergency. Are these laws counterproductive? Take the current situation with toilet paper and water. When someone sees rolls of toilet paper on the shelf, they buy them all. Not because they…
FreeMarketUnicorn
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Mechanisms to incentivise social welfare

Suppose there is a set of agents causing loss $l_i$ to themselves and aggregate loss $L$ to the society, both of which can be minimised by their investments $c_i$. The social planner who is concerned with minimising $L(c_i)$ wants to incentivise…
Bravo
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Is there a reproducibility crisis in Economics?

I am an undergraduate economics student, and came across this paper by John Ionnadis on 'The Power of Bias in Economics Research'. the findings are quite bleak. https://academic.oup.com/ej/article/127/605/F236/5069452 Some examples I have come…
riemann_lebesgue
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