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).

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56 views

Cournot competition subgame perfect Nash equilibrium with two products

QUESTION: Assume there are two types of products, labelled $l$ and $n$. Firms compete in the market by choosing which product to sell and then choosing the quantities. Let $Q_n$ and $Q_l$ denote the ...
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584 views

What is the difference between imperfect substitutes and complements in a production function?

According to the following definition: ...
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49 views

Economics of Selling Software

My understanding: Normally, selling a product has an increasing marginal cost per unit produced. Very often this increases more and more due to poor allocation of resources (diminishing returns). ...
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72 views

Take It Or Leave It Strategy: Social Optimum

Here is what I understood Using Backward Induction, I inferred that buyer offers a price, say, $P$ and the seller will sell only if $P \geq c(I)$. Setting the lowest possible Price that will ensure ...
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1answer
59 views

supply-demand imbalance

I have a basic question What are the different means/mechanisms available to address supply-demand imbalance? The answers that come to my mind are : Using pricing (when demand > supply) Using ...
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47 views

Understanding the proof using the mean value theorem

This is from Hopkins and Kornienko (2004) : Running to keep in the same place. The above proof is for the proposition 1 in this paper. I don't understand how the mean value theorem is applied in this ...
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30 views

The Crisis of Argentina

newbie here. Q1 - What needs to be done by the Argentinian government for their currency to regain back its strength? Q2 - Why has the Argentine Peso depreciated against the U.S Dollar for more than ...
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434 views

Real world examples of supply curve shapes

I get the basic intuition that at higher prices, produces would be willing to produce more, but I feel like theory can only take my understanding so far. I want to know what are the real world ...
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41 views

proof verification in George J. Mailath and Andrew Postlewaite (2001b)

I am reading George J. Mailath and Andrew Postlewaite (2001), and this is the lemma 1 in this paper. I don't understand the induction process in this proof. I think that we should use the fact that $...
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236 views

What is Application of Vector Algebra in Economics?

I through one tutors heard that vector is used in economics . But on searching about it on internet could not find anything Recently I studied about Vectors in Mathematics So I was wondering how ...
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17 views

Is the definition of Investment variable in Economics?

I studied that Investment is the expenditure incurred on the procurement of such goods that would help us in production of goods and services. And mainly consists of Fixed and Inventory Investment ...
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36 views

Competitive Market - Production & Number of Firms

The question is as follows: The inverse market demand for provision of gas services is given by p(y) = 1/(1+y), where p is the unit price and y measures output in appropriately scaled units. Suppose ...
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52 views

Lagrangian multiplier

Consumer's problem \begin{equation} \max \sum_{t}\beta^{t}[c_{t}-1/2(1-x_{t})^{2}], \end{equation} \begin{equation} \ s.t. c_{t}+q_{t}b_{t+1} \leq (1-\tau_{t})(1-x_{t})+b_{t}, \end{equation} where c=...
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131 views

Vertical Marginal Cost curves

When would a marginal cost curve be vertical? I understand this happens when the marginal cost jumps, from say 0 to 100, but in such a case, I think there should be a discontinuity rather than a ...
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1answer
309 views

Calculate optimal discount for product bundling

So recently I made some rules with my transaction data. Based on it I can determine which products are profitable to bundle it together. But even though I know e.g. product A→ product B, are there ...
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626 views

Quasi-linear Optimal Consumption Bundle

I have a question involving optimal consumption bundles for quasi-linear preferences. Utility is given by $$U(x_1,x_2) = 16\sqrt{x_1} + 2x_2$$ and $p_1 = 8, p_2 = 4, I = 30$. What I have so far ...
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42 views

Elasticity of Substitution between 2 factors, without knowing relative prices

I'm trying to figure out the elasticity of substitution between input $s$ and input $v$. I know that the marginal rate of substitution between these two inputs are $\frac{v^2}{s(v+k)}$, where $k$ is ...
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23 views

Why is the expected value conditional on the trade taking place in an adverse selection problem?

I have been asked the following question, and I don't understand why the expected value of the firm is conditioned on the trade taking place. "Suppose that a firm owns a business unit that it wants ...
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35 views

Law Of Variable Proportions

In the Law of Variable Proportions, it is said that a producer prefers to work in the second phase where it is the phase of diminishing returns while number of variable factors are increased. But ...
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29 views

Regression on derived consumer preference

I have a data set with some demographics of consumers who bought a product that can be used to imply their preference (beta) using Cobb-Douglas (see comments of original question). I’d like to check ...
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114 views

Signaling questions (separating equilibrium)

Consider two firms Inverse functions: $p(q)=max\{a-q,0\} $ $q$ is total production and a is positive constant. This value of a takes two values ah=2 (high demand) and aL=1 (low demand). Their ...
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12 views

what is the project monitoring and impact analysis(PMIE)?

what is the project monitoring and impact analysis(PMIE)? Can anyone explain basic features of this?
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21 views

Model of sales of a new product

I am looking for any popular model to calculate sales of a new product under the assumption that some goodnesses of the product are given. For example, the novelty $N$ and usefulness $U$ of a new ...
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41 views

Charging a minimum increment on the second price in online advertising auctions

Many ad servers running GSP auctions tend to charge a $0.01 increment on the second price. I was wondering if there was any theoretical basis for this, or is it just a way for ad servers to make a ...
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229 views

Firm's profit max problem, in present value terms

So I am kinda stuck on this question. The question goes as follows: Consider a multiperiod firm, selling q1 units of a product in period t=1 at spot price P1 and q2 units in period t=2 at spot price ...
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77 views

Using aggregate marginal revenue as a way to estimate demand

We also know that for a competitive market, the supply curve is the sum of the marginal cost curves. Can one make an extension of this idea to having the demand curve being equal to the sum of ...
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22 views

Present value of perpetual rise in income

If a student successfully completes an MBA program in 2 years, he will earn $50,000 more than what he could earn without the degree for his lifetime. Calculate the present value of this perpetual rise ...
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110 views

MRS in Walrasian equilibrium price expression?

I have the utility function $U^A=\alpha ln(x^A)+\beta ln(y^A)$ for consumer $A$ and $U^B=\gamma ln(x^B)+\phi ln(y^B)$ for consumer $B$. They are endowed with $\omega^h_x$ and $\omega^h_y$ of $x$ and $...
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51 views

Best strategy for investing and buying out property with many owners(20+)

First I am not economist, so sory if I am not using economicaly correct language. But this is a real life situation. I would like to know what are the buy out strategies for investor when he has to ...
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50 views

Is production side (or so called “firms”) considered in “social welfare”?

When micro-economists refer to "social welfare" as measure of an outcome of a competitive equilibrium economic model, or "welfare economics" in general, is this taken to include a measure of the ...
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67 views

How big is the consumer surplus for typical consumer goods?

Economic transactions happen when both think it will benefit them - that is, when there are gains from trade on both sides. But that says nothing about the size of that gain. If you're a consumer, ...
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230 views

MWG Example 3.E.1

I do not understand how Mas-Collel, Whinston, and Green derive the Hicksian demand functions in Example 3.E.1 in their textbook. Allow me to give further background regarding the problem: The ...
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60 views

Why are share repurchases particularly accretive?

From the "Manual of Ideas"... VALUE CREATION VIA BUYBACKS Share repurchases tend to be particularly accretive in the case of companies generating cash from operations while trading below tangible ...
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147 views

Deriving a Best Response Function in Baik (1994)

I'm reading a game-theory related paper*, and I'm not following the derivation of some property of the best-response functions. Suppose I have two players $1$ and $2$, whose strategies are ...
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93 views

General Equilibrium allocation holding fixed a consumer's utility

I'm having some issues with solving this general equilibrium exercise. The way I started off is by assuming that since consumer 2's utility is fixed, he will have a fixed utility function. Then ...
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63 views

Deviating from Cournot-Nash

Suppose player $1$ and $2$ are playing a simultaneous move game where with continuous strategies $x_1$ and $x_2$. The Cournot equilibrium is $x_1^*,x_2^*$. The following diagram purports to show that ...
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115 views

What's the relation between deadweight-loss and alpha in Cobb-Douglas?

I'm studying for an exam and facing a question about the relationship between the $\alpha$ of the Cobb-Douglas function and the loss of utility of imposing taxes. If I have understood correctly, ...
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99 views

A manifold of agents?

In contract theory and mechanism design, if the agents have one-dimensional characteristics, then they are usually considered as a contiuum on $\mathbb R$; if they have n-dimensional type, then they ...
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180 views

Intertemporal choice with no income flow in the second period

Question: Suppose Mr X maximises his utility for two periods, his total utility is given by log $c_1$ + $\beta$ log $c_2$ where $\beta$ $\in$ ( 0,1) and $c_1$ and $c_2$ are his consumption for ...
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207 views

Non-linear budget constraints written as union/intersection of linear budget constraints

Let $w$ denote wage. Let the price of each unit of food be $p_1$, the price of the first $M$ units of electricity be $p_2$ and the price of each unit of electricity over $M$ units is $q_2$. $M$ is ...
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49 views

Terminology for separability in price and value

Take an agent with mean-variance utility over something that is uncertain: $$ U(x) = \mu_x^\theta - \sigma_x^\lambda $$ $A\in \{0,1\}$ happens if $U(x)>0$, and $x$ is a random variable $$ A = \...
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48 views

Firms Entry/Exit Due to Economic Profit in a Perfectly Competitive Market

According to the textbooks,in a long run equilibrium, the market price will be equal to the minimum point of firm's ATC curve. But every firm's ATC curve will differ i.e each one of them will have ...
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96 views

Technology, Prices, and the Derived Demand for Energy

I was reading the paper by Berndt and Wood (1975), "Technology, Prices, and the Derived Demand for Energy". It was an interesting paper to read but there has not been anything done on this in nearly ...
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83 views

How can I model immigration and xenophobia economically using these equations?

I'm trying to put together a toy model for immigration ($I$), labor prices ($w$), and a measure of xenophobic/nationalistic sentiment ($A$). What I've come up with so far is the following: $$\frac{dI}...
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85 views

Price discrimination

If I have 3 consumers who I want to sell package 1, 2 and 3 to respectively. Meaning consumer 1 I would like to sell package 1 to, consumer 2 I would like to sell package 2 to and so on. The packages ...
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77 views

Increased inflation rate on borrowers and lenders

I'm trying to understand a concept in microeconomics. So if inflation increases while nominal interest rate stays the same, what are the substitution effects and income effects on borrowers and ...
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99 views

Metric for evaluating sales with dynamic pricing

Suppose you have a sausage maker. He buys batches of ground meat, then makes and sells sausages. Suppose each batch of ground meat makes N sausages, and each batch has specific level of quality that ...
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212 views

How does one derive the elasticity of substitution with implicit functions?

I would like to derive the elasticity of substitution. I'm aware that such a thread with a very straightforward explanation already exists, but my case is slightly different and I'm not sure how to ...
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22 views

Perfect complement outputs with each output being composed of substitutable inputs

How does one solve the following maximization problem? $\underset{K_1, K_2, L_1, L_2}{\text{maximize }} min\{K_1 + L_1,K_2 + L_2\}$ subject to $c(K_1 + \mu K_2) + \beta c(L_1 + \mu L_2)$ where $c(...
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21 views

Microeconomics and management science of professional open source companies?

Are there research (and stories more broadly) about professional open source companies? To what types of products their are appropriate, what licensing schemes to choose? How to managed patents and IP?...

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