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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What are the (immediate) effects of changing a good's price on consumer and producer surplus?

Basically, I'm trying to understand why the total surplus is maximized at the equilibrium and what happens if the price isn't at the equilibrium. Say the price of a good is the equilibrium price. ...
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101 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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49 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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212 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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141 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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89 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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61 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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109 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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96 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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168 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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202 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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48 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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47 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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73 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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93 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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203 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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49 views

Can the Goodwin Model of cyclical labor growth be applied in a micro context to specific industries?

I have been doing a bit of research into the Goodwin Model (1967), which generates cycles of economic activity. I understand that this is mostly used in macroeconomics. However, I am curious if this ...
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49 views

What is the name for this turn-based property trading game?

Does anyone know what the following allocation strategy is called? Problem: How to allocate N rooms to N roommates? Example: allocate 4 rooms (1,2,3,4) amongst 4 roommates (A,B,C,D) total rent of $...
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29 views

Some issues with HRS (Health and Retirement Study) data

I am using the 1992 HRS (Health and Retirement Study) dataset. The codebook is available at http://hrsonline.isr.umich.edu/modules/meta/1992/core/codebook/14_h1.htm I am trying to construct the share ...
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34 views

Where to start, to know the cost, in hours of work, necessary to produce one more car (or any other good)?

Let's say I want to buy a car. It costs that, so I can know that, for example, I have to work 3 months to pay for it. But does the car really needs three months of human work to be build? What is the ...
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18 views

competitive equilibrium with density functions

Assume there are two competitive markets for goods a and b. Each consumer will either purchase one unit of a and none of b, or one of b and none of a. Consumers never consume both goods. Utilities are ...
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266 views

How to compute Social Welfare in this model?

The first part of this scientific article analyzes reward-based crowdfunding. The assumptions are: Seller is a monopolist Unit mass of consumers Unit demand Two periods Individuals are identified by $...
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225 views

How Would a Firm Which Produces a Giffen Good Maximize Profits?

I am curious as to how a firm which produces a giffen good would maximize profits? Having an upward sloping demand curve seems to imply that we cannot guarantee that there exists a quantity where ...
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800 views

Shape of Isoprofit Curves for Strategic Complements

Two goods are strategic complements if: $$\frac{\partial \pi_1}{\partial q_2}>0\;\text{and}\;\frac{\partial \pi_2}{\partial q_1}>0$$ The image below is a picture of best response functions and ...
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39 views

What are the currently accepted methods to estimate a firm's productivity?

While there are a lot of methods one can think of, like computing the ratio of profits to assets or profits to sales, apparently it is a difficult problem. It would be useful to know how effectively ...
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35 views

How do environmental deregulations push an economy inside its Production Possibility Frontier and make it inefficient?

I read in a textbook that if we plot a PPF with automobile manufacturing and clean air as the axes and the company pollutes the state making clean air (a public good) scarce, automobile manufacturing ...
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111 views

Why shouldn't the relative prices change in the Heckscher-Ohlin model?

I'm having trouble with the Rybczynski theorem. Let's say there's a migration to the domestic economy, increasing the Labor endowment. It states that the production of the good that uses labor more ...
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22 views

Is there a simple way to write a model with firms/sectors with different demand elasticities?

I would like to write down a model where there are firms with different demand elasticities: For some firm's total profits increase and decrease a lot with increases and decreases in demand for their ...
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256 views

Robinson Crusoe economy with saving and borrowing

I am working with a Robinson Crusoe economy, i.e. an economy in which there is no production and only consumption is possible: there are only two goods, $x_1$ and $x_2$. There is just one individual ...
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137 views

Existence of a Competitive Equilibrium

My professor gives us these conditions for the existence of a Competitive Equilibrium (CE) in a pure exchange economy: $U^i$ is continuous, strictly increasing and strictly concave for all $i$ and $\...
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411 views

Calculating a cross price substitution/income effect

I am given a utility function $U(x,y)$, income $I$ and prices $p_x,p_y$. Then the price of $y$ rises to $p_y' = 3 \cdot p_y$. How are we supposed to calculate the substitution effect and income effect ...
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57 views

Stiglitz 1976 on irrelevance of corporate financial policy

In this paper, Stiglitz gives a verbal argument as follows: Let us consider verbally what actions of the individuals are required to offset various actions by the firm. Assume the ...
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80 views

A high store loyalty indicates what kind of competition among cement retailers selling products of the same brand?

To provide some context, this question occurred to me while I was considering the cement retail market. If one considers retailers selling cement of only one brand, then the concept of brand loyalty ...
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61 views

Market with substitutes: Response of prices and quantities

The demand function for theater tickets is $D_t(p_t,p_c)$, where $p_t$ stands for the price of theater tickets and $p_c$ stands for the price of cinema tickets. Supply of theater tickets is described ...
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55 views

Separate optimization problem versus one big Lagrangean

I am a bit confused about when to consider a separate optimization problem and when to combine different problems into a single optimization problem. Consider an individual who derives utility from ...
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161 views

Microeconomic Model of Knowledge and Technology

Can you point me to any microeconomic models of knowledge and technology? It is intended to be used for simulation. The problem that arises is that you need to simulate the effects of technology on ...
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263 views

Convex consumer preferences

Man has blue and red marbles. If he has more red marbles then blue one he wants to exchange one red for two blue($1R:2B$). If otherwise (more blue then red)he wants to exchange one blue for two red($...
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1k views

A stable equilibrium with demand and supply?

My doubt pertains to something that is mentioned in the book by Koutsoyiannis for microeconomics (in the chapter for general equilibrium). http://www.upload.ee/image/5306829/1.jpg http://www.upload....
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486 views

Short Run vs Long Run Cost Functions

Let $z_a$ and $z_b$ are two vectors of inputs. $z_a$ is variable in both long run and short run however $z_b$ is only variable in long run. Now let's suppose that the price of one of the inputs in ...
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289 views

Curvature of Cost and Production Function

I have been trying to understand the duality theory between cost and production function. Please let me know if my following statement is correct; If the cost function $C(w,q)$ is convex in $q$, the ...
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86 views

how can devaluation of a nation's currency lead to increase in government expenditure, hence facilitating economic growth

how can devaluation of a nation's currency lead to increase in government expenditure, hence facilitating economic growth. I was reading through a textbook and saw that the devaluation of a nation's ...
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29 views

Business agreement design - is there science behind this?

I am working on schemas how advertisement space is sold to the ad agencies, ad networks and individual customers. There are lot of questions involved how to design the business agreement. E.g. one can ...

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