Questions tagged [mathematical-economics]

The application of mathematical methods to represent theories and analyze problems in economics.

146 questions with no upvoted or accepted answers
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15
votes
1answer
397 views

How accurate is duality?

In economic theory we know that with the use of some calculus, Hotellings Lemma and Sheppards lemma we can derive a given firms supply function and in term its Profit function. With data of a given ...
10
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767 views

Modern theory of integrability of demand?

I am aware of Hurwickz Uzawa work in integability, neatly summarized by Border http://people.hss.caltech.edu/~kcb/Notes/Demand4-Integrability.pdf I am wondering if there is any modern treatment of the ...
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565 views

Calculus and Indifference Curves in an Urban Economics Example

I am reading the paper 'The Structure of Urban Equilibria' by Jan Brueckner. It uses a monocentric city model, where all consumers earn income $y$ at the centre of the city. They buy $q$ housing for ...
8
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0answers
343 views

Local and Central Wage Bargaining: What Is the Difference?

Consider the following setting: Profit maximizing firms with production functions $\Pi(w,L)$, where $w$ is the wage and $L$ is employment. Unions who want to maximize the expected utility of their ...
7
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1answer
127 views

Uniform bounds on rate of merging for Bayesian learners

Update. Cross posted at Cross Validated. In a well-known paper, Blackwell & Dubins (1962) show that the posterior probabilities of two Bayesian agents, whose priors agree on events of measure $0$,...
5
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0answers
101 views

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 ...
5
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0answers
286 views

On the uniqueness of utility functions for both risk and time

I have a question regarding the uniqueness of preference functionals under risky and dynamic settings. Two well known models to represent preferences for both settings are the Expected Utility Model ...
5
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0answers
81 views

Simulations Using Binomial Coefficients

In closed loop toy models with a fixed money supply, what are the downsides of calculating probable outcomes with a binomial coefficient? For example, given a toy economy where trades yield a profit ...
4
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0answers
44 views

Optimization in discrete time

I have made optimizations in continuous time that belong to the control theory, for example one case: $\max(\min)V[u(t)]=\int_0^Tf(t,x(t),u(t))dt$ constraint to: $\dot x=g(t,x(t),u(t))$ Where: $x(t)$: ...
4
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0answers
66 views

Afriat theorem for negative goods

GARP and Afrait theorem assume that the alternative $x\in\mathbb R_+$ is always positive. In some economic contexts, such as financial choices, the attribute can be negative. I wonder if we can ...
4
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0answers
61 views

How to econometrically identify perfect complements in production?

The production $$f(x_i,...,x_n)=\min\{x_i,...,x_n\}$$ is pretty straight forward and usually with smaller size data sets and can usually be picked up on rather quickly in an intuitive sense. ...
4
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130 views

Does a determinant ever have its own interpretation in economics?

I know there are applications of determinants in economics to compute equilibrium, aide in identifying profit maximisation/cost minimisation and in calculating elasticity of substitution. However, is ...
4
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0answers
74 views

References on mathematically rigorous general equilibrium theories

I'm looking for a relatively recent survey on the state of the art for mathematical general equilibrium. I'm especially interested in questions of uniqueness, stability and dynamics. (I'm planing on ...
4
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1answer
423 views

Criticism of “Modern Political Economics” by Varoufakis, Halevi, Theocarakis

The book "Modern Political Economics" is quite critical about "neoclassical economics", the basic claim being, if I understand correctly, that the models which "neoclassical economics" (armed with ...
3
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0answers
51 views

Conditional distributions in model with continuum of agents

Many economic models consider a continuum of agents, $i \in [0,1]$. Suppose these agents have characteristics $(x_i, y_i)$, which are independently distributed. Are all possible values of $(x_i,y_i) \...
3
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0answers
59 views

Continuous logit models - random utility with uncountable choice set

This question is about the mathematical foundations of the continuous logit model, as derived in McFadden (1976) (https://eml.berkeley.edu/reprints/mcfadden/math_theory.pdf) and Ben-Akiva et al (1985) ...
3
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0answers
65 views

Some questions about Kyle's model in Continuous Auctions and Insider Trading (1985)

I was trying to understand Kyle'e Theorem 1 in page $1319$ in Continuous Auctions and Insider Trading in 1985. As we can see by the proof, this factor $\beta=\frac{1}{2\lambda}$ refers to the ...
3
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0answers
34 views

Estimating probability of Central Bank's interest rate changes

Recently, I came across this article, which offers a simple model for estimating the probabilities of interest rate cut/hike from a central bank. This is done by using market data, especially normal ...
3
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0answers
65 views

Mathematics of Marxian Economics

I have studied some Marxian economics, and realise that Marx's writings were not very mathematical. I recently came to know of Analytical Marxism and Neo-Marxian economics. I read the Wikipedia page ...
3
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1answer
65 views

Regarding the Expenditure Function Underlying a Bliss Point

I've been looking at expenditure systems and have been really interested in the behaviour of the demand system that underlies bliss points: Consider the bliss point utility function of the following ...
3
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0answers
56 views

Existence of symmetric trembling hand perfect equilibria

Consider symmetric and finite game. By Nash (1950), the game must have at least one symmetric equilibrium (proof). Also, it must have at least one trembling hand perfect equilibrium (proof). ...
3
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0answers
89 views

Linear Homothetic Utility

A Homothetic Utility is where $$ \forall x,y, \forall a \in \mathbb{R}_+: \ u(ax,ay)=au(x,y) $$ (or its monotonic transformation). A linear Homothetic utility is defined as $$ \forall x,y, \forall ...
3
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45 views

Mean Field/Differential Game and Measurability

Consider the following scenario. There is a continuum of players in a population, with population measure normalized to $1$. Each player has a type $\theta \in [0,1]$ and we suppose that $\theta$ is ...
3
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0answers
60 views

How should I calculate bulk selling price for a small business?

Some friends of mine run a small business, in a small garage-like space, with a few employees, making and selling "plumbuses". The typical customer orders about 5 plumbuses at a time. When I heard ...
3
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0answers
88 views

Open Foundational Problems in Mathematical Economics

What are some open problems in mathematical economics which are treated as if they have been solved in economics papers? As an example, one of my teachers has previously pointed out to me that there ...
3
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0answers
71 views

Mathematically optimal age to begin drawing Social Security retirement benefits as a function of expected life span?

So, for most of us Americans, our official retirement age is 66 and we get 100% of our retirement benefits. If we delay retirement, that benefit increases by 8% each year (up to age 70) and if we ...
3
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0answers
341 views

A theoretical/mathematical approach to cost-benefit analysis and cost-utility analysis in health economics

I am looking to get some resources looking at health economics from a pure mathematical point of view, ie developing models using partial differential equations or complex analysis. In particular, I ...
3
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0answers
106 views

Solving this system of ODE

I have the following system of equations $$ \rho V(u, \epsilon^i) = F(u, \epsilon^i) + V_u(u, \epsilon^i)g(u, V(u, \epsilon^i) + \lambda^i \left(V(u, \epsilon^{-i}) - V(u, \epsilon^i)\right)$$ with $...
3
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0answers
145 views

Ultrafilters in Social Choice Theory Literature Request

I am an undergraduate math major who is intrigued about social choice theory. I am in the early stages of planning my senior project and was wondering if anybody had some recommendations of literature ...
2
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0answers
26 views

Nash in demand functions!

I am searching for some types of games that are played in linear demand functions. Altough I hear that there is a vast literatrure for games that are played in the intercept or the slope of the demand ...
2
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0answers
18 views

How are productions called that solve the pooling problem

A well known mathematical optimization problem is called the pooling problem (see here pooling problem) It has many application for example in oil production, food, chemical processes. Basically you ...
2
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2answers
96 views

Complementary slackness conditions (Kuhn-Tucker)

Consider the problem of maximising a smooth function subject to the inequality constraint that $g(x) \leq b$. The complementary slackness condition says that $$ \lambda[g(x) - b] = 0$$ It is often ...
2
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0answers
75 views

Linearization of the dynamic system (I did it, but I have a mistake that I cannot catch. Help me please)

I have the following dynamic system in discrete time For p is price, d is demand and s is supply. $$p_{t+1}-p_t= a(d_t-s_t)$$ $$s_{t+1}-s_t=bp_ts_t-ws_t$$ $$d_t= k-gp_t$$ I have to linearize this ...
2
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0answers
49 views

Behavioral Dictator Game

I am doing a self study on behavioral economics and I am trying to solve behavioral version of the dictator game with following utilities for person 1 and 2. $$ u_1( \sigma_1, \sigma_2 ) = \...
2
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0answers
56 views

Finding optimal path in continuous time

I have the following optimal control problem $$\max_{c_t,l_t} \int_0^{\infty} [ln(c_t)+\theta ln(1-l_t)]e^{-pt}dt$$ st. $$\dot{k_t}=k_t^{1/2}l_t^{1/2}-c_t-\beta l_t$$ $$k_0>0$$ I do big part of ...
2
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0answers
83 views

Bliss point hamiltonian function

I have the following utility function $$u(c_t)=g(c_t-b)^2$$ for constants $g,b>0$ Edited: in order to be bliss utility function, It must be g is negative. But in the question g is given to be ...
2
votes
1answer
70 views

How to test if the effect of one regressor entirely comes from other regressors?

I have a regression model that includes IQ test scores as the dependent variable; my own education, my father's education and my mother's education as independent variables. Suppose I want to know ...
2
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0answers
30 views

Software used for solving demands of different functions

I'm currently doing some research on demand systems and have been experimenting with different underlying utility functions which will generate different systems of demands. However I've been doing ...
2
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0answers
56 views

Neoclassical Economic Growth Model Shadow Price for Discrete vs Continuous Time

I recently learned about the neoclassical growth model in both discrete and continuous time. The intuitive meaning of the shadow price for both cases is that it represents the value of one additional ...
2
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0answers
111 views

Derivation of demand function

Hello. I'm graduate student in Japan. This time, what I want to ask is how to solve the profit maximization problem using the image production function and derive the demand function. This ...
2
votes
1answer
67 views

Existing metric for personal productivity hours needed per life hour?

With about 50 hours of productivity a week, including work, cooking, etc. I can complete the tasks and pay the expenses necessary to live about a week. Subtract maybe 5 hours of labor that goes into ...
2
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0answers
31 views

Showing that a market model has arbitrage and describing martingales

This is an exercise which I came upon while studying an introduction to financial mathematics. Exercise : Consider the finite sample space $\Omega = \{\omega_1,\omega_2,\omega_3\}$ and let $\...
2
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0answers
230 views

Applications of Pure Mathematics in Economics

Are there any applications of number theory and abstract algebra in economics? An economist had told me that number theory had an application to a theorem in economics, however he did not remember ...
2
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0answers
109 views

Use of the Lagrangian in empirical work

In my own studies I have noticed that many of the constrained optimization type questions that are often covered in intermediate/advanced microeconomics courses are seldom seen in more empirical types ...
2
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0answers
413 views

Second order condition for symmetric game

Denote by $i \in \{1, \ldots, n\}$ an economic agent. Let $\mathbf x \in \mathbb R^n$ denote a vector of actions and $x_i \in \mathbf x$ a typical element. Let further $f_i : \mathbb R^n \to \mathbb ...
2
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0answers
84 views

Visualising eigenvectors/values

This might seem like an odd question but seeing as I haven't had any formal education in solving ratex models yet, it is something I have been thinking about a lot recently. Consider the following ...
2
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0answers
39 views

Question on a sufficient condition of contractiveness of best reply functions in Vives (1999)

I have trouble in understanding why a sufficient condition that a best reply function is a contraction. The following is a screenshot of Xavier Vives's Oligopoly Pricing: Old Ideas and New Tools from ...
2
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0answers
210 views

Bayes Nash Equilibrium in a game with continuous actions

I am attempting to think through a particular type of game with continuous strategies, with Bayes Nash equilibrium as the solution concept. I first describe the game below, followed by questions. ...
2
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0answers
54 views

What model did the MONIAC use?

Phillips designed a hydraulic computer to model the UK economy in 1949; 12-14 copies were built. What model did it compute with? How have modern models of the UK built on that work?
2
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0answers
712 views

Euler's Homogenous Function Theorem with elasticity

I'm currently reviewing my prof's slides in preparation for an exam. In one of them, he talks about Euler's Homogenous Function Theorem: Let $f(x_1, x_2, ..., x_n)$ be a function homogenous in ...