Questions tagged [microeconomics]
Microeconomics is a branch of economics that studies the market behavior of individual actors (usually firms and consumers) and the aggregation of their actions in different institutional frameworks (usually the market).
3,092
questions
0
votes
0
answers
28
views
Choice function and IIA
I'm new to microeconomics and struggle to understand choice function in practice. E.g. lets say I have a set X=(a,b,c). How many possible choice functions I could in theory have? Then other concept ...
- 1
0
votes
1
answer
23
views
What is wrong with this tax revenue formula?
The authors state that the tax revenue is
$$T = tq^{*}c(q^{*})$$
, where $t$ being the tax percentage, $c$ being the total cost function based on the quantity supplied $q^{*}$.
This is not quite right ...
- 3
1
vote
1
answer
84
views
Understanding Second-Order Approximations in Translog Production Functions
Consider a model with the following production technology:
\begin{equation}
Q_i=F(\Omega_i,K_i,S_i,N_i) = \Omega_i\Big(\nu N_i^\sigma+(1-\nu)(\tau K_i^\rho+(1-\tau)S_i^\rho)^{\frac\sigma\rho}\Big)^{\...
- 143
1
vote
1
answer
67
views
Take intermed or advanced series for phd application
I am an undergrad majoring in Math and want to apply for a PhD in Economics (maybe in theory and Econometrics). I have taken the intro series (intro micro and macro) already. Since I am about to ...
- 11
1
vote
0
answers
64
views
Convexity of indirect utility in probabilities
I am interested in the concavity in $p$ of the indirect utility function
$$V(p,W)=max_{x,y,z} pf_1(x,y)+(1-p)f_2(x,z)$$
under the constraint
$$x+py+(1-p)z=W$$
where $0<p<1$ and where $f_1,f_2$ ...
- 11
0
votes
0
answers
19
views
Given Q=80-4P where MC=0, Q=Q_1+Q_2+Q_3+...+Q_n, find the reaction curve for firm A,B, and C
Does the condtion Q=Q_1+Q_2+Q_3+...+Q_n affect the process of finding the reaction curves and cournot equilibrium or do we treat it as if were given the condition of Q=Q_1+Q_2+Q_3??
0
votes
0
answers
16
views
How to explain the claim mathematically: The effect considered local, and locally, the elasticity is approximately constant if the demand is "smooth"?
My book has considered the effects of supply and demand changes on price (specifically the equilibrium price and quantity themselves) when the supply and demand themselves have constant elasticity and ...
- 3
0
votes
2
answers
70
views
Obtain profit-maximizing supply curve (an exercise)
Exercise 2.2.3 from Introduction to economic analysis by McAfee:
An entrepreneur has a factory that produces $L\alpha$ widgets, where
$\alpha<1$, when $L$ hours of labor is used. The cost of labor ...
- 3
0
votes
0
answers
16
views
Breakeven analysis for computer upgrade decision making
I need to perform a break-even analysis of moving from one system design to another.
Definitions
$M_0, M_1$ = one-time initial manufacturing cost of currently deployed system design and new system ...
- 1
3
votes
1
answer
53
views
Characterization of profit functions arising from Cournot competitions
I would like to know what exactly are the functions of the form
$$
\pi(x, y) = P(x+y)x - C(x),
$$
i.e., the profit functions arising from symmetric Cournot duopolies with inverse demand functions $P$ ...
- 141
1
vote
0
answers
44
views
Why do Unobservable Licensing Contracts Exist?
In many vertical markets, licensing agreements are common. One instance of these contracts is between manufacturers and distributors, whereby the manufacturer permits the distributor access to its ...
- 827
1
vote
1
answer
64
views
Convexity and Strict Preferences
I was looking into convexity while reading Varian's intermediate micro textbook, and an article by Richter and Rubinstein said, "The canonical definition of convex preferences requires that if a ...
- 13
0
votes
1
answer
79
views
Economics Textbooks
What are some good textbooks for learning
Microeconomic Theory
Macroeconomics
Econometrics
Are there any textbooks that are particularly popular for post-grad courses?
- 45
1
vote
0
answers
33
views
"Cournot competition" with different prices for different firms
This operations research paper considers a "Cournot" competition modeled as follows.
[E]ach [firm] $i$ incurs a cost $w$ in obtaining one
unit of the product, sells $q_i$ units of the ...
- 141
0
votes
0
answers
18
views
Marginal value curve is the inverse of demand function
From Introduction to Economic Analysis by McAfee and Lewis. They write that:
the marginal value curve is the inverse of the demand function, where the demand function gives the quantity purchased at ...
0
votes
1
answer
46
views
How to find marshallian demand for Leontief Utility with 3 goods. u(x 1 ,x 2 ,x 3 )=min{2x1 + x3, x2/2}
I have a utility function
$$u(x_1, x_2, x_3) = \min \{2x_1 + x_3, x_2/2\} $$
I would have assumed that the relationship established is $2x_1 + x_3 = x_2/2$ but my solution manual has it as $$x_1 + ...
- 1
7
votes
1
answer
99
views
Aggregation and Labor Shares in a Static Model
I'm studying a recent article published by Autor et al. (QJE, 2024). The model is presented in Appendix, Section J. I'm working on solving the model, but I'm stuck at the final step, particularly with ...
- 428
0
votes
1
answer
33
views
Do negative-cashflow properties imply greater appreciation?
Some areas, such as the Bay Area in California and Cambridge, England have housing that, not accounting for appreciation, have a poor ROI compared to housing in the rest of the country due to ...
- 385
0
votes
0
answers
13
views
Calculate CPI of multiple price indexes
I need to calculate the composite CPI of a basket of products. Each product is measured as its own standalone price index.
Note how 2016 = 100
...
- 113
4
votes
1
answer
112
views
Comparative Statics in Acemoglu's Article
I'm struggling to derive equation 8 from the paper by Acemoglu and Restrepo (AEA Papers and Proceedings, 2018).
Consider an economy where aggregate output is produced in perfect competition according ...
- 428
0
votes
0
answers
31
views
Definitional ambiguity for weakly dominated strategy with beliefs
I have been reading some game theory and I have come across the following belief-based definitions. As is recommended, it is instructive to prove the equivalence between definition 3 and the usual '...
- 93
0
votes
2
answers
120
views
How to formally define the preference profile in which the top alternative of one player becomes the bottom alternative of the next player?
I need to generically define a strict preference profile with Condorcet cicles when the number of players and alternatives coincide. To illustrate my problem, consider the following four-player & ...
- 211
3
votes
1
answer
56
views
Comparative Statics - Capital Augmenting Technological Change
I am reading the article by Acemoglu and Restrepo (AEA Papers and Proceedings, 2018) and have encountered some difficulties deriving equation (1). I hope you can help me work through it.
The aggregate ...
- 319
2
votes
0
answers
120
views
Is the Constrained Pareto Frontier Linear in Bilateral Trade?
Suppose we have a Myerson-Satterthwaite model of bilateral trade between a buyer and seller. The buyer has private information about their valuation, $v$, and the seller has private information about ...
- 827
3
votes
3
answers
271
views
How come Intel and AMD do not bankrupt each other?
Their R&D costs a lot of money (fixed cost). And Intel's and AMD's main products are largely interchangeable (no moat)(1). One could expect that they'd compete on price, until their prices are ...
- 584
0
votes
0
answers
13
views
Question on neutral and stochastic voting rules of variable size
I have a question regarding neutral and stochastic voting rules with domain of variable size.
THE SETUP
Let $N=\{1,2\}$ be a two player set, let $A_\tau=\{a_1,\dots,a_\tau\}$ be a finite alternative ...
- 211
2
votes
0
answers
141
views
Logarithmic utility and zero consumption
I am working on a model that assumes expected utility maximisation with a vNM function $u$ that exhibits some standard properties:
$u'(w) > 0$ and $u''(w) < 0$ for all $w \geq 0$.
$\lim_{w \...
- 886
1
vote
1
answer
130
views
Is It necessary for a monopoly firm to be profitable at the elastic region of the demand curve?
Considering a linear demand curve, we conclude that the monopolist only produces at the elastic region of the demand curve (given, he doesn't discriminate prices). But if the cost is a function of ...
- 13
1
vote
1
answer
35
views
Why is the demand curve that a perfectly competitive firm faces horizontal while the market demand curve is negatively sloped?
I'm studying producer-theory and I'm stuck on this. Maybe I'm missing something important, but if the demand curve facing a firm in a perfectly competitive market is the same as the market demand ...
3
votes
1
answer
60
views
Utility function with two goods with declining spending share on one good
My question is somewhat related to utility functions with inferior goods (some answers here).
Suppose there are two goods, $a, b$. I am looking for a utility function such that it satisfies the usual ...
- 1,819
1
vote
0
answers
16
views
Arrow-Pratt Theorem - More risk aversion leads to more balanced bundles
I have an economics question but it more so interested me mathematically; related to Arrow-Pratt theorem - risk aversion; hence I wanted to ask the following.
Given $p \in \mathbb{R^s}_{++}$ $\pi_s \...
- 41
-2
votes
2
answers
102
views
Are individuals under-incentivized to make investments as they aren't able to net all the social surplus they generate?
Since a portion of the social surplus generated by investments goes to consumers and not producers individuals in a free market are always under-incentivized to make investments and therefore a degree ...
- 25
2
votes
0
answers
30
views
Reduction of compound lotteries seem to be incorrect?
Wikipedia reads:
I feel that this axiom is much stronger than the usual "axiom of reduction of compound lottery" that we talk about because the Axiom 4' sufficiently imply EU (with weak ...
- 1,936
2
votes
1
answer
626
views
- Economics 101
Is it possible to learn economics while studying math? If possible what books do you recommend? I'm looking for books that teach the fundamentals and explain them without any use of mathematics.
- 21
1
vote
0
answers
46
views
Spence's signalling problem
My professor uploaded job market signalling question with the solution, but on the solution, I could not get some part, so I would like to get your help to understand it. First, I could not understand ...
- 45
2
votes
1
answer
223
views
Is increasing Average Product(AP) always implying increasing Marginal Product(MP) in microeconomics?
I'm studying microeconomics and came across a statement that I'm not sure is correct:
"If average product ($AP = F(X)/X$) always increases from $X=0$, then marginal product ($MP = F'(X)$) also ...
- 23
0
votes
0
answers
14
views
If both goods are considered economic goods in the economy, then how can their demand be negatively sloped when in a state of satiation or bliss?
if both goods are economic bad, then we can say that they have a negatively sloped demand curve. But how can we say the same for economic goods in a state of satiation or bliss?
1
vote
1
answer
59
views
how to reach Continuous Expected Utility (EU)?
Consider EU on monetary outcomes. Say we have a utility function $u:\mathbb R\to\mathbb R$
The common axioms of EU are continuity, independence and weak order.
These axioms do not imply that the ...
- 329
0
votes
0
answers
27
views
Collections of axioms that imply monotonicity?
I am currently searching for collections of axioms that imply monotonicity.
Let $N$ be a finite set of players, let $A$ be a finite set of alternatives, let $\mathcal{P}$ be the set of all linear ...
- 211
1
vote
1
answer
94
views
Are all subcorrespondences of the weak Pareto correspondence monotonic at the unrestricted domain of linear orders?
I have a doubt regarding the well-known concepts of weak Pareto optimality and monotonicity.
Let $N$ be a finite set of players, let $A$ be a finite set of alternatives, let $\mathcal{P}$ be the set ...
- 211
0
votes
1
answer
42
views
What is the point of Slutsky and Hicksian Compensation. And What to they have to to with WARP?
I am currently working through a Advanced Microeconomics textbook by Muñoz-Garcia for a upcoming class. I am very confused about the idea of compensation in which we take away wealth in price ...
0
votes
0
answers
29
views
Moral hazard, prosecution and fines
I wonder whether there are theoretical or empirical papers on the pros and cons of giving back part of the fines paid by someone to cover a part of the costs endured by the prosecuting body.
I have in ...
- 246
0
votes
0
answers
34
views
Calculating Production Functions using Input Prices
I am trying to estimate production functions and want to correct the endogeneity problem from direct estimation.
I found from these notes that it is possible to estimate production functions using ...
1
vote
1
answer
36
views
Questions about output, quantity, level of output and quantity of output, investment level
Hope your week went well.
These may be basic facts known to many but I am afraid that I have misunderstood the terms.
Does quantity of a good mean the amount demanded or supplied?
Does output refer ...
- 21
2
votes
1
answer
538
views
Pareto Optimal vs Pareto Efficient
Pareto Optimal and Pareto Efficient seem similar but I don't understand the difference. What is the difference between these two concepts?
- 21
1
vote
1
answer
51
views
Individual invest on each asset
Let's say that an individual has $\\\$ 10,000$ to invest in a combination of two risky assets. Each asset can lead to a high return or a low one. However, returns are not independent. Their joint ...
- 77
3
votes
0
answers
68
views
How could define the certainty equivalent in a Bayesian Persuasion model?
For once again I will start describing the Kamenica and Gentzkow Bayesian persuasion model.
Suppose that $\Theta$ is a finite set of states and $\theta$ is the element of the state set. To simplify ...
- 420
1
vote
0
answers
48
views
Help with Deriving Hicksian Demand in the Monocentric City Model?
I have a fairly standard Alonso-Muth-Mills model, but struggling to derive the Hicksian demand.
Starting with the basic utility function:
And this Budget Constraint:
Housing Floor-space is ...
- 11
0
votes
1
answer
32
views
Non-nullity assumption in vNM theorem of cardinal utility
The vNM theorem suggests that weak-ordering, continuity, and independence is equivalent to the existence of expected utility, unique up to an affine transformation.
In Savage's axioms of expected ...
- 329
0
votes
0
answers
16
views
Game Theory Extensive Game
1st question: What is the SPNE?
My answer: A(BW), B(W): (2,1)
2st question: Show the game at its strategic form
My answer:
B
W
BB
2,1
1,2
BW
1,1
2,1
WW
3,0
0,3
WB
3,0
0,3
3rd question: Find all ...
