Community Digest

Top new questions this week:

In revealed preference (RP), is any two points $x,y$ related by the indirect revealed preference relation?

Let $X$ be the closed compact convex set of alternative and $B$ be a closed compact convex subset of $X$. $C$ is defined on all closed compact convex set $B\subseteq X$. $X$ is ordered by a strictly ...

microeconomics preferences decision-theory choice-theory  
user avatar asked by High GPA Score of 3
user avatar answered by Michael Greinecker Score of 1

What is the issue in mapping verbal concepts to math symbols without proper justification, in economics?

I am really sorry for the vague question. I was going through some research on excessive math in economics, and I stumbled across this thread Criticism of Math in Economics One of the comments was - &...

user avatar asked by Garvit Gupta Score of 3
user avatar answered by Giskard Score of 0

Why does the voter paradox entail 0 turnout?

The decision to cast a vote (under a simplistic FPTP two-candidate model), as formalised by Downs can be written as follows: $pB \geq C$ where $p$ is the probability of you changing the outcome, $B$ ...

game-theory political-economy  
user avatar asked by fruitless fruit juice Score of 2

Find a choice function such that WARP or SARP is violated

WARP implies choice function is raionalizable. Say we have a choice function $C(B)$, $B$ is a closed convex compact set. I am looking for a intuitive example of $C$. The $C$ is economic meaningful, ...

microeconomics demand decision-theory choice-theory  
user avatar asked by High GPA Score of 2

A question about an exercise in Hal R. Varian, Microeconomic Analysis (1984), Ch.3 Exercises 3.1 (c), Page 48

I have a question on the following exercise: A competitive profit-maximizing firm has a profit function $\pi(w_1, w_2) = \phi_1(w_1) + \phi_2(w_2)$. The price of output is normalized to be 1. (c). ...

user avatar asked by ttd Score of 2

Conditions for an interior solution to the UMP

I was wondering under what set of conditions one is allowed to assume an interior solution to the Utility Maximisation Problem. In most of my classes and lecture notes, interior solutions are assumed ...

microeconomics optimization  
user avatar asked by TomUcl2003 Score of 1
user avatar answered by Michael Greinecker Score of 1

What is the meaning of "Nominal GDP was converted to 2021 dollars using the GDP Price Index" in ERP 2023?

Reading the Economic Report of The President 2023, there is a note under the real GDP graph stating: "Nominal GDP was converted to 2021 dollars using the GDP Price Index" What I understand ...

macroeconomics gdp price-index  
user avatar asked by Omar Score of 1
user avatar answered by 1muflon1 Score of 0

Greatest hits from previous weeks:

What is a rational consumer?

There is a lot of debate on whether or not consumers and investors are rational. Unfortunately, I haven't seen much qualification for what is called a rational consumer. What are the requirements ...

reference-request consumer-theory  
user avatar asked by EconJohn Score of 7

Why does Taiwan dominate the semiconductors market?

The recent visit of US politician Nancy Pelosi to Taiwan generated a lot of news about the dependence the world has on Taiwan, given its dominance of the semiconductor market. But I couldn't find ...

international-trade markets competition technology  
user avatar asked by sourcream Score of 38
user avatar answered by 1muflon1 Score of 44

What is the definition of "First Best", "Second Best", etc. in contract theory?

What is the definition of "First Best", "Second Best", etc. in contract theory? Especially, what is the difference between "First Best" in contract theory and "ex-post efficient" in mechanism design?

mechanism-design contract-theory  
user avatar asked by Joe Li Score of 14
user avatar answered by Martin Van der Linden Score of 12

Why are banks providing mortgages?

Currently I'm learning about finance and I want to understand the following. In the Netherlands the interest on a mortgage is about 3%-4% depending on the payback period. When learning about stocks ...

banking mortgage  
user avatar asked by Tim Score of 15
user avatar answered by Adam Bailey Score of 41

A law against selling any house cheaper than it was bought for, what consequences would that have?

I'm looking for a more general and principled answer and use Scandinavia today only as a sketchy example of the kind of scenario I'm asking about. I live in Scandinavia where house prices has had an ...

nonexpert housing law economic-bubble  
user avatar asked by LocalFluff Score of 31
user avatar answered by Klas Lindbäck Score of 79

Can someone explain why sterling-dollar parity is bad?

Please forgive the probable naivety of this question. I am not an economics student I am just trying to understand the currency fluctuations that are currently occurring with GBP as a result of our ...

monetary-policy currency international-economics uk  
user avatar asked by thomasbishop Score of 8

Microeconomics question on elasticity

Two drivers--Walt and Jessie--each drive up to a gas station. Before looking at the price, each places an order. Walt says, 'I'd like 10 gallons of gas.' Jessie says, 'I'd like $10 worth of gas.' What ...

microeconomics consumer-theory elasticity  
user avatar asked by Vinay Sharma Score of 2
user avatar answered by Adam Bailey Score of 6

Can you answer these questions?

Deriving the tax incidence formula -- what am I doing wrong?

I'm trying to derive the tax incidence for an excise $t$ so that producers receive $p$ and consumers pay $q=p+t$ per unit. The formula I am seeing everywhere is some version of $$ \frac{\mathrm{d}p}{\...

taxation elasticity  
user avatar asked by alcedine Score of 1

Durable goods in a (two sector) necolassical growth model

i want to add a firm to a neoclassical growth model that produces a durable good which it rents out in each period to the consumers. Right now i'm using the following approach: The firm maximizes: $\...

macroeconomics optimization dsge solow dynamic-optimization  
user avatar asked by mfba Score of 1

What is a very very famous example of structural estimation?

I took a behavioral econ class and learnt the "structural estimation" of risk-aversion parameter. Later some friends told me that what I learnt is too simple when I was bragging about my ...

macroeconomics microeconomics risk structural-estimation  
user avatar asked by dodo Score of 1
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