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1500 questions
5
votes
2 answers
Arrow-Debreu Theorem of Existence: Non satiation
Let $n$ be the number of consumers and $m$ be the number of commodities.
The Arrow-Debreu theorem requires closed and convex consumption sets $X_i \subset \mathbb{R}^m$ for all buyers $i \in [n]$. Additionally, it requires the utility function of…
Denizalp
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5
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2 answers
Cobb–Douglas utility maximized by spending a "fixed fraction of income on each good"?
Consider a Cobb–Douglas utility function having the form
$$u(x) = \prod_{j=1}^n x_j^{a_j} $$
where $x$ is an allocation vector and $a_j$ are utility parameters with $\sum a_j = 1$. My question has to do with the demand of a buyer with a Cobb–Douglas…
Max
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5
votes
2 answers
The role of reinforcement learning in Economics
While working on different research projects I got fascinated by RL which got applied to many fields that are focused on agent based modeling. Though it is a field in Machine Learning what interests me is the overlap between that apporach with…
Nikolai Kl
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5
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2 answers
Does Modern Monetary Theory (MMT) provide a useful insight into how to manage the economy?
According to advocates of [Modern Monetary Theory][MMT] (MMT), the primary risk once the economy reaches full employment is inflation, which can be addressed by gathering taxes to reduce the spending capacity of the private sector. Deflation is not…
Slarty
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5
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1 answer
Interpretation of a 2SLS Coefficient - Civil War Determinants
I am a bit confused because of the interpretation of a coefficient in my analysis. I am using 2SLS in two different subsamples with economic growth as endogenous variable. It is instrumented by a variable for natural disasters. The outcome variable…
Hokkaido21
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5
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In the BLP paper, why interacting consumer characteristic with product characteristic can generate more desirable substitution pattern
Got a question about the famous BLP paper (http://people.stern.nyu.edu/wgreene/Econometrics/BLP.pdf). When there is no interaction between product characteristic and consumer characteristic, the utility of consuming product $j$ is given by equation…
ExcitedSnail
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5
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1 answer
Payoff from an option contract
In period 1 the consumer of type $\theta$ selects an option contract consisting of an up-front fee, $B>0$, and exercise price, $\bar{R}$. The consumer pays $B$ at the end of the first period. In period 2, he realises his valuation, $\theta$,…
Charles
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5
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1 answer
What does 'continuation' as in continuation games, strategies, plays, etc. exactly mean?
I am in my first course in grad level game theory. While I was reading through Fudenberg and Tirole's Game Theory, I constantly come into contact with the word 'continuation' to describe some games and strategies but I was never able to find where…
David Kim
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5
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2 answers
Utility function for introductory microeconomics
What are the utility functions standardly used in introductory microeconomics courses. My own list would include
Perfect substitutes: $U(x,y) = ax+by$
Perfect complements: $U(x,y) = \min(ax,by)$
Cobb Douglas: $x^\alpha y^{1-\alpha}$
Quasi-linear:…
Jesper Hybel
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5
votes
1 answer
CobbDouglas: Constant marginal costs and constant returns to scale
A company has a production function:
$$y=x_1^{\alpha}x_2^{1-\alpha}$$
where $0<\alpha<1$. Factor input 1 costs $w_1> 0$ and factor input 2 costs $w_2> 0$. The company wants to minimize its production costs when it produces y> 0 units of the…
Lifeni
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5
votes
2 answers
Why is the rate of profit not important?
I've been taking some time to read up on the history of economic thought and am wondering why the rate of profit (which was a measure heavily discussed up to the 1970s) seems to disappear out of economics education all together.
I have my own ideas…
EconJohn
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5
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Constant returns to scale and cost function: $C(p,ty) = tC(p,y)$
How can I prove that for a production function $F:\mathbb X \rightarrow \mathbb R$ with constant returns to scale
$$\forall x\in \mathbb X, \forall t > 0: \ \ F(tx) = t F(x)$$
and with the cost function
$$C(p,y):=\min_{x \in \mathbb X} \{p^\top…
user270396
- 165
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5
votes
1 answer
Derivation of Surplus in Paul Romer's paper on "mathiness"
In this paper by P. Romer https://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.p20151066
I'm wondering the Surplus $S$ was derived.
By using the given condition I found that $$q_0=m^{-\tfrac{1}{a+b}}N^{-\tfrac{b}{a+b}}$$
By Surplus I assume he means…
actuarialboi9
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5
votes
2 answers
What is the returns to scale of the production function q = min {K, L^(1/2)}?
I learned that when there is decreasing returns to scale, the average cost is always increasing.
But the professor told us today that the other way around might not always be true. So if average cost is increasing, it might not necessarily mean that…
Robin311
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5
votes
1 answer
Perfect substitutes and Lagrange
How does one solve utility maximization of perfect substitutes using Lagrangian function?
Consider the problem
$$\max_{x,y} ax +by $$
subject to the constraint that
$$px + qy \leq I$$
where $a,b,p,q,I>0$.
Note problem statement are subject to the…
Jesper Hybel
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