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1500 questions
5
votes
1 answer
Portfolio choice of a risk lover
Take the standard portfolio choice problem as presented in MWG (p.188-189), but with a risk loving decision maker:
with initial wealth $w$
invests an amount $\alpha$ in a risky asset with a random gross rate of return $z$, where $z$ is distributed…
Herr K.
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5
votes
0 answers
Optimal level of consumption in discrete time model with quadratic preferences and infinite horizon
I am trying to derive an expression for the optimal level of consumption in the basic problem:
$ max \hspace{1cm} U_t = E_t \left[\sum_{s=t}^{\infty} \beta^{s-t} \left( C_s - a\frac{Cs}{2}^2 \right) \right] $
$ s.t \hspace{1cm} A_{s + 1} =…
Giorgetto
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5
votes
2 answers
Can a risk-averse agent's Certainty Equivalent be lower than the lowest possible outcome of a gamble?
Suppose there is an agent who faces the following gamble g:
50\$ with probability 1/3
100\$ with probability 1/3
150\$ with probability 1/3
Clearly, the E[g] = 100\$. Since agent is risk averse, we would expect that U(E[g]) < U(CE) , where CE is…
Paul
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5
votes
1 answer
C-statistic when one estimation is just identified
My question is motivated by Do, Joshi, and Stopler's paper "Can Environmental Policy Reduce Infant Mortality? Evidence from the Ganga Pollution Cases".
A simplified form of their models that describes the question is:
$$y_i =\beta_0 +\beta_1 X_i…
Michael Gmeiner
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5
votes
5 answers
Book Recommendation: Price Theory
Can someone please recommend a book or a chapter from a book which provides a good and clear explanation of price theory. How prices are determined what they reflect and how they serve as allocaters of resources.
Rain
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5
votes
1 answer
Pigouvian tax with general utility function
Suppose person a's consumption of good $y$ imposes a negative externality on person b. Person a's utility maximisation problem is
$$\max_{x_a,y_a} \ u_a(x_a,y_a),$$
subject to
$$p_x x_a+p_y y_a=e_a.$$
The first-order condition…
dotpad
- 93
- 4
5
votes
1 answer
What are some important papers using difference-in-difference in economics?
I'm new to difference-in-difference method and wanted to familiarize myself with the literature. I'm familiar with Mostly Harmless Econometrics and the papers on DiD discussed in the book. I would appreciate it if some of you could suggest more…
Jan3
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5
votes
0 answers
Comparing voting methods when there are only two voters
Consider the Schulze, Kemeny-Young, Ranked Pairs and Borda count voting methods. (The last is obviously the odd one out in this list!)
Suppose that there are only two voters. Each voter gives a ranking over $m$ different options, possibly with…
cfp
- 252
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5
votes
1 answer
Nonlinear Least-Squares Estimation in Practice
I am reading Jeong, Kim, Manovskii 2015 and in the paper they apply "a nonlinear least-squares method" to estimate a log-wage equation, , where $D, \Pi$, all $\lambda$s $\theta$s, and $\alpha$ are coefficients, $j$, $e$ are age and experience, and…
Alalalalaki
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5
votes
2 answers
Error while estimating a production function with prodest package in R
I have an unbalanced panel with 15063 firms between 2012 and 2018.
I am using this code to estimate the production function with Levinsohn & Petrin method:
levpet <- prodestLP(Y=base$c_y,
fX=base$c_l,
sX=base$c_k,
pX=base$c_m,
idvar=base$ruc,
…
Jorge Paredes
- 181
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5
votes
1 answer
Why are there so many small farm operations in the US?
Due to the economies of scale that I would expect a large farm operation could provide, I would think the US would be dominated by only a few farming companies. But in reality it's populated by a crazy huge number of small "family" farms, and after…
Jonah
- 333
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5
votes
0 answers
Controversy surrounding the Fiscal Theory of the Price Level (FTPL)
I recently started reading a draft of John Cochrane's book on the Fiscal Theory of the Price Level. In the preface he states that the "[...] theoretical controversies are over." However, given that he is clearly a proponent of the theory, I would be…
Joe
- 185
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5
votes
1 answer
Sequential vs. trembling hand perfect equilibrium
For any game, trembling hand perfect equilibria are a subset of sequential equilibria.
What is a simple example where a sequential equilibrium is not a trembling hand perfect equilibrium?
Is it possible to create a normal form…
Giskard
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5
votes
4 answers
Taxes levied on sellers = Taxes levied on buyers
All page numbers refer to Principles of Microeconomics, 7 Ed, 2014, by NG Mankiw.
[p 125:] Taxes levied on sellers and taxes levied on buyers are equivalent.
[p 156:] ... When a tax is levied on buyers, the demand curve shifts downward
by the…
user4020
5
votes
1 answer
Aren't all cost functions step functions?
Long Question:
Overview:
While I understand that over certain intervals (i.e. less than the width of the step), they may appear not to be because the step is outside of consideration, and over other intervals (much, much larger) the step seems…
Jason Nichols
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