Questions tagged [theory]
The theory tag has no usage guidance.
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Why is my growth rate changing after changing base year for inflation?
I had the following problem: a client of mine calculated income growth rates using 2017 as base year for inflation, except for the 2015-2020 growth indicator, where they used 2020 as base year. Wanted ...
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Factor changes in Melitz (2003) model
What would be the effect of changes in factor supplies, for example labor, on the open economy equilibrium?
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Does the Rybczynski theorem also hold in modern trade theory models?
Does the Rybczynski theorem also hold for modern Melitz (2003) type trade models?
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Time series question from book (ma)
I'm trying to understand this subject and I'm stuck in a question found in a book.
I understand white noise characterization, but I'm having some problems with this... maybe it's too much theory? I ...
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Questions regarding Solving Melitz (2003) model
I am editing my question regarding solving the model in order to be more specific.
Regarding the demand side, In the beginning of the model, we have a CES utility function over a continuum of goods
...
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Pareto optimal allocations with uncountably many agents
Consider an economy with some $n$ agents with continuous utility functions $u_1,\ldots,u_n$. It is easy to prove that a Pareto-optimal allocation exists: define the welfare of an allocation $x$ as: $W(...
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Is there a theory in economics about how companies have to withhold surplus goods or services for strategic reasons, creating artificial scarcity? [closed]
I have been thinking about how hotels and hostels have available rooms / beds, but they don’t give them away for free or a heavily discounted price; or how grocery stores and restaurants throw out ...
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Non Continuous Walrasian Demand Function
I have a silly question.
I’m trying to solve some exercises that have to do with the walrasian demand function $x(p,w)$ and excess demand function $z$.
More especifically, I’m asked to show that there ...
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Forgetting name of influential paper on evolution applied to corporations
There is a paper that I would like to cite because I remember what it said except that I am forgetting who wrote it and what its title was. Basically people were skeptical that corporations could ...
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Name of concept where having someone negotiate on your behalf gives you an advantage?
I had a discussion with an Amazon customer service rep yesterday. I asked for something, and they replied "we cannot do that". Amazon was, of course, perfectly capable of doing what I asked.
...
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Language of theoretical economic papers
Could anyone explain, or provide a good source to, the language used in theoretical economic papers?
For example, the difference between an assumption, proposition, postulation, theorem, lemma, axiom,...
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What social aggregators are complete?
I am reading Eliaz (2004) for a general treatment of social-choice impossibilities. I am confused by the fact that it seems that we should get completeness even in situations where we should not have ...
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Can the topological assumption in Debreu's representation theorem of cardinal utility be altered from "connected separable" to "second countable"?
Theorem (Debreu 1959 page 9, 10) Let $X$ be connected separable topological space endowed with product topology. If $\succsim$ is independent and at least three factors are essential, then there exist ...
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What does omitting capital from production function assume about capital?
We have two production functions, one $F(L)$ with labor as only factor of production, the other also includes capital $F(L,K)$.
What do we assume about capital in the first case when we omit it from ...
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Does Debreu's representation theorem of ordinal utility require Hausdorff topology?
By Debreu's theorem of ordinal utility, any continuous weak order on $X$ is represented with a continuous utility function, if $X$ is a second countable or connected separable topological space.
My ...
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Looking for a paper on game theory as a beautiful thing, not needing immediate purpose
I am looking for a paper I am sure to have read a while ago, but cannot recall its title. The message was that we should not judge game theory (or economic theory in general?) by its ability as an &...
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Does continuous preference imply upper-hemi continuous demand correspondence?
Let alternative $x,y,z\in R^N$.
$\succsim$ is convex, rational, monotonic, and continuous.
Let $B=[y,z]$ be a budget segment.
Let demand correspondence be $D[y,z]=\{x\in B||x\succsim B\}$
$D[y,z]$ is ...
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How did econometricians justify the use of $EU$ instead of $EU^2$?
Consider the following two utility functions:
$EU(p)=\sum_i u_ip_i$
$EU^2(p)=(\sum_i u_ip_i)^2$.
In preference theory, $EU$ and $EU^2$ are equivalent because they represent the same preference. A ...
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Any good resources on Information Economics Theory?
I am coming from a political economy/public choice perspective, trying to explore some ideas in signaling, especially the supply-side analysis of information transmission by the media/news. Although I ...
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How useful is the Fisher equation of exchange?
What empirical value does the Fisher equation of exchange MP=PV have given that the velocity of money, V, is measured as PY/M i.e. nominal GDP divided some preferred monetary aggregate? Surely there ...
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For any small perturbation dx, utility cannot change, or else, x* would not be optimal
I am having trouble understanding something that Varian says in "Microeconomic Analysis: Third Edition." For those of you who have the book handy, the question that I have regards something ...
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Salop (1979) model for labor markets
Can the Salop (1979) model also be applied to labor markets or is there any reason why it should not be?
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Does x ≽ y imply x > y or x ~ y in preferences?
Mas Collel Micro Theory question:
Suppose that X is a set. Let ≽ be a binary preference on X. And ~ represents indifference defined from ≽.
If ≽ satisfy completeness, is it okay to assume that:
x ≽ y ...
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Sum of LS-LMSR probabilities is greater than 1
I am trying to implement LS-LMSR in a prediction market with binary outcomes: YES and NO. I am implementing this formula as the cost:
...
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Theoretical basis of consumer confidence
I have read several papers on the formation of consumer confidence, how it is measured and also its role in predicting economic outcomes empirically.
But I haven't come across any theoretical model of ...
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Why does economics escape Godel's theorems?
I've seen many professors say that Godel's incompleteness theorems don't apply to economics. Of course I've seen others like Yanis Varoufakis who has on record said that many economics papers defy the ...
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Interaction of redistributive taxes, monetary policy and the growth rate
While studying macroeconomics, interaction with taxes are not seen to importantly. I am though interested in an interaction with redistributive taxes (such as the income or the inheritance tax rate), ...
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Curiousity the validity of an example of normative, positive and consumer surplus?
Following up a pretty long but very informative discussion with 1muflon1, I want to expand and merge with consumer surplus to have a big picture.
In research of Dasgupta, 2019 about that after ...
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Is there any overlap between Rawlsian approach and uncertainty avoidance?
From the definition of the Rawlsian approach
The Rawlsian approach to social welfare, built on the foundation of
the “veil of ignorance” (Rawls, 1999, p. 118)
where "veil of ignorance" is
...
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Is there any example to see the differences among Rawlsian ethics, Utilitarianism or (classical) liberalism ethics in policy economics?
From a decent answer and comment here of 1muflon1, I am motivated to know more about Rawlsian ethics, Utilitarianism, or (classical) liberalism ethics in policy economics. However, so far, I still not ...
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Why "positive theory" is important in discussions of how antitrust law achieve "normative goal"?
In this description regarding positive theory and normative theory, from what I understand, positive theory is based on fact and cannot be approved or disapproved (e.g., explain how the economy ...
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What is the difference between Impression Management and Signaling Theory?
I'm interested in theories on how organisations shape their stakeholders' (especially consumers' and investors') perceptions and decisions. I read about Impression Management and Signaling Theory. ...
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Effect of bounding action space on the set of equilibria
Suppose $N$ players play a game, where each player's action space is $[0,1]$.
Each player has an identical continuous utility function $u:[0,1]\times [0,1]^{N-1}\rightarrow\mathbb{R}$, where the first ...
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What is the "recursive moral hazard theory" of "trade credit"?
When reading a recently published paper, I saw the paragraph
We construct a sample of over 200,000 supply chains to conduct a
chain-based analysis of trade credit. Our study uncovers novel
stylized ...
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Krugman 1980 AER, Deriving Equation 14
I have been trying to derive equation 14 from Paul Krugman's 1980 AER paper. I keep getting a different result, and further, I find that equation 14 from the paper does not balance payments when I ...
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Definition of strictly convex preference
Let $x,y\in X$.
Does strictly convex preference (which implies that the utility is strictly quasiconcave) mean that:
$x\succsim y$ implies $\alpha x+(1-\alpha)y\succ y$ for any $\alpha\in (0,1)$?
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Convex rationalization when the budget sets are segments?
Backgroud:
SARP can be defined on general budget set.
SARP: Assume for all $B$ the choice $c(B)$ is only one element. If $x_i,x_{i+1}\in B_i$, and $x_i = c(B_i)$, for all $i\in \{1,N-1\}$, then $x_1=...
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Selection of functional form for utility function in theoretical model
I am starting to work on an IO model and I am puzzled in front of the choice of the appropriate utility function. Since the concept of utility is so abstract, and one cannot directly refer to ...
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Can I rename a utility function based on its properties?
A big name researcher gives a name to a specific utility function 30 years ago. Now I am writing a paper and feel that a new name might be more suited because of the properties associated with the ...
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Actions in economics
Mirowski 1989 argues economics and physics have frequently informed each other's theoretical development, and neoclassical economics has the same Lagrangian and Hamiltonian formalism frequently seen ...
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Lecture notes competitive labor market with minimum wage
Can somebody recommend lecture notes that derive competitive labour market model equilibrium with minimum wages? This has been surprisingly hard to find, because most lecture notes use minimum wages ...
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When can one drop time subscripts? Example from Angrist and Kugler (2003)
Not the first time I am asking myself, but in this paper they actually start with a time dependent maximisation problem and then drop all time subscripts.
Background: They have profit maximisation ...
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References on Cobb-Douglas Function
I am wondering why everybody uses Cobb-Douglas production functions? Nowadays they are so standard that they are just written down without further discussion. Does anybody know more about this and can ...
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Brücker et al. (2014) migrant labour supply shock
Brücker et al. (2014) write down a stylized model of wage-setting with a labour supply shock (migration), which I find hard to follow. Maybe somebody worked on it or is interested..
Labour force is ...
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Loosely speaking, are all modern economies 'Keynesian' in their stance on spending during downturns?
Keynesian economics is defined as:
increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression.
Do all modern economies adopt a Keynesian ...
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Intuition of Shephard's Lemma in Reverse
I am not sure how to word this question. I understand the envelop theorem pretty well and as a result Shepard's Lemma. The proof is relatively straightforward. I am getting stuck on the intuition ...
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Why should prices come down (in theory) in an educated society with a well-run government?
In Chapter 1 of Robert Kiyosaki's "Rich Dad, Poor Dad", the rich dad says: "In an educated society with a well-run government, prices should actually come down".
Is there any ...
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Identifiability of Non-Parametric Utility Function?
I recently learned that EU characterized by independence and weak ordering is identifiable, but a utility function like: $U(x)=v_1(x)v_2(x)$ is not identifiable.
Does it mean that "cardinal ...
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Certainty equivalence when the utility is semi-continuous instead of continuous
Let $U:\mathbb R^2\to\mathbb R$ be a utility function.
If $U$ is strictly increasing and continuous, then it is well known that for any $(x_1,x_2)$ there exists a certainty $(c,c)$ such that $$U(x_1,...
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Is it necessary to ask permission before including someone in the acknowledgements of a economic research paper?
Do I need permission to thank someone, even if I said “all mistakes are our own”?
Do I have to make sure that the person being thanked must read the paper, or, it is fine if he just discussed about ...
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