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The Price and Demand Index in Homothetic Kimball Utility
Suppose with Kimball preferences, utility $Q$ from consuming $\left\{q_{\omega}\right\}_{\omega \in \Omega}$ is implicitly given by $$\int_{\omega \in \Omega} Y\left(\frac{q_{\omega}}{Q}\right) d \omega=1$$. The consumer thus maximizes $Q$ subject…
Alalalalaki
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2 answers
Stimulus Effect of the Minimum Wage
In the question about the minimum wage found here, I have heard several times that an increase in the minimum wage can, as one of several competing effects, "boost the economy" by increasing the income of some workers. Under what conditions could…
jmbejara
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Bayesian Nash Equilibrium in a Duopoly Cournot Competition
I am having a hard time to solve a Bayesian Nash equilibrium game in a duopoly cournot competition setting. So, I have two firms with given production quantities, let's say $q_1$ and $q_2$ (i.e., not a decision). Firm 1's product is low quality…
EagleEdge0423
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Euler equation in Continuous time VS Discrete time
I have seen the euler equation in discrete time for the baseline neoclassical growth model written as:
$$\frac{U'(c_{t+1})}{U'(c_{t})}=\frac{1}{\beta(1+r)}$$
however I have also seen the euler equation for the continous time equivalent written…
EconJohn
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How to find an optimal strategy in an auction?
I have asked this question in mathematics forum as well but since I have not recieved an appropriate answer yet, I ask it here as well.
Consider an auction of sculptures by four artists: A, B, C and D. The auctioneer introduces each item to be sold…
plpm
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Is egyptology a pyramid scheme: Self-perpetuating university programs
My friend got a degree in egyptology, but can’t get a job, So he’s paying more money to get a Phd, so he can work teaching other people egyptology. In his case college is literally a pyramid scheme.
Copied from here, but I have seen the joke…
Giskard
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Did William Nordhaus exclude 87% of economic industries from his climate change analysis?
Economist Steve Keen published in article in 2020 titled, The appallingly bad neoclassical economics of climate change. In it, he alleges that climate economists such as William Nordhaus and Richard Tol have underestimated the impact of climate…
Matthew Barnett
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Does Nash Equilibrium predict the existence of vaccine reluctance?
I was listening to a lecture on Nash Equilibrium, which stated that a Nash Equilibrium by definition occurs at a point that no players in the game have an incentive to change their strategy - everyone is playing their best response to everyone else.…
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CES First order Condition with two labour types
I am struggling to derive a first order in this model with Cobb-Douglas production function and CES labour aggregator with two types labour (here male and female, but could be equally low and high skill).
Setup: Cobb-Douglas production function
$$…
Papayapap
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When can one drop time subscripts? Example from Angrist and Kugler (2003)
Not the first time I am asking myself, but in this paper they actually start with a time dependent maximisation problem and then drop all time subscripts.
Background: They have profit maximisation problem that reads
$$
\Pi = \phi^{t}…
Papayapap
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5
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1 answer
Necessary and sufficient conditions for the existence of a utility function
I was reading Jehle and Reny, Advanced Microeconomic Theory, where they discuss in detail, the choice problem of a consumer. The Consumption Set (or Choice Set) $X$ is a subset of $R_+^n$, is closed and convex and contains $0\in R_+^n$. They define…
Ishan Kashyap Hazarika
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Deriving First Order Condition of Hansen and Singleton (1982)
Hansen and Singleton (1982) considers the maximization of expected utility,
\begin{align*}
\max \mathbb{E} \sum_{t=0}^\infty \beta^t U(C_t)
\end{align*}
with respect to the budget constraint,
\begin{align*}
C_t + \sum_{j=1}^J P_{jt} Q_{jt} =…
user2978524
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Migration wage differential, Borjas (2013) textbook
Basic calculus question here! I started reading the textbook Borjas, G. J. (2014). Immigration economics. Harvard University Press and am confused already with the first result.
Background: He frames the migration decision in terms of wage…
Papayapap
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5
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1 answer
Deriving aggregate output from labor demand and supply
I was reading the following paper:
http://eml.berkeley.edu//~moretti/growth.pdf
I got stuck at equation (7)
The firm's production function is $Y_{i}=A_{i}L_{i}^{\alpha}K_{i}^{\eta}T_{i}^{1-\alpha-\eta}$
Labor supply is…
hbkn
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5
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2 answers
No arbitrage arguments on production machine in a neoclassical model
I am reading a paper (Manuelli & Seshadri 2014) that use a neoclassical model to model technology diffusion. I cannot understand the arbitrage condition that are used to calculate the rent price on the machine service used in the production…
Alalalalaki
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