Questions tagged [theory]
The theory tag has no usage guidance.
104
questions
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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 $\alpha\in (0,1)$?
3
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2answers
111 views
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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0answers
19 views
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 ...
1
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1answer
69 views
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 ...
1
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1answer
87 views
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 ...
4
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1answer
72 views
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 ...
5
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1answer
72 views
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 ...
0
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0answers
25 views
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 ...
2
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0answers
20 views
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 ...
0
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0answers
38 views
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 ...
0
votes
1answer
58 views
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 ...
2
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2answers
133 views
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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0answers
35 views
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 ...
5
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0answers
102 views
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,...
2
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1answer
318 views
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 ...
4
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0answers
67 views
Who were the first economists arguing that utility maximization is the core of rationality and economic behavior?
I am looking for the first economists arguing that maximizing utility function is the iff condition of rational behavior.
I've learned that neoclassical economics is founded on this argument. Is this ...
1
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1answer
79 views
What additional axiom to GARP do we need to generate a differentiable or smooth utility function
After researching for a while, I find this:
https://www.jstor.org/stable/1913607?seq=2#metadata_info_tab_contents
They come up with an axiom called SSARP that generates a preference with smooth demand ...
-3
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2answers
43 views
Famous recent paper on monetary Unions
do you know any (theoretical or empirical) recent famous paper about monetary unions ? I heard that topics like "monetary unions at ZLB" or "fiscal coordination during crisis time" ...
3
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0answers
56 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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3answers
58 views
Theoretical economy calculation of closed country
Is there any well-known theoretical solution to the problem as described below? I am considering an ideal very simplified case.
There is a closed country/community of N people. All people are working. ...
2
votes
1answer
56 views
Are there some examples of theoretical models that discuss pandemics?
I am looking for some papers/references that showcase theoretical economic models that incorporate pandemics. Most work seem to be purely empirical. Does anyone know of some papers that try to model ...
0
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1answer
68 views
Economics perspective of connected workers
According to the Deloitte report published here, a connected worker is defined as someone whose working life is changing due to digital and other technologies. This is due to advancement of ...
1
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1answer
45 views
Where can I find economics theories to learn about? [closed]
I'm a beginner to economics so I do not have much knowledge. However, I enjoy learning new economics theories. For now, I normally search for economics theories by looking at those that won nobel ...
12
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3answers
992 views
What is the point of all the models in an economics degree?
I am a student of Economics doing my masters degree and I have to say I am a bit tired of all the models.
On the one side, there is these models where I can see how they are derived, which always ...
0
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1answer
102 views
Continuity of preferences
Let $\succsim$ be a transitive and reflexive relation on a metric space $X$ with closed upper and lower contour sets. If $\succsim$ is not complete, does it hold that: for all converging sequences ...
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1answer
78 views
Prove that a preference is linear
Given the following two conditions:
$x\succ y$ implies $x+a\succsim y+a$,
And,
$x\prec y$ implies $x+a\precsim y+a$
We want to prove that $\succsim$ is a linear preference.
One of the ...
1
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1answer
91 views
When to use a lagrange multiplier?
I have a question in regards to the use of Lagrange multipliers in macro models.
I have seen that when writing a Lagrange there are two ways to write the Lagrange multiplier: 1) Indexed or 2) ...
1
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1answer
101 views
MWG Proposition 2.F.1
Is homogeneity of degree zero necessary in proposition 2.F.1?
It seems like the proof does not assume homogeneity of degree zero to establish the proposition.
If this is true, it seems that ...
1
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1answer
27 views
The notation cl co (A)
I stumbled upon this notation, (cl co(A+C), while reading "Set Optimization—A Rather Short Introduction" by Andreas H. Hamel, Frank Heyde, Andreas Löhne, Birgit Rudloff and Carola Schrage.
Is it ...
5
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1answer
293 views
How does expected utility theory treat losses?
I've been reading about prospect theory lately and have read often that prospect theory predicts people will be risk averse in gains and risk seeking in losses. This statement is typically ...
1
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0answers
43 views
Rotation of Quasilinear Utility
Let $u(x,y)=f(x)+y$ be a quasilinear utility. Now we rotate it by 45 degrees, (such that the $x-$axis becomes the direction of $(1,1)$)
$v(x,y)=f(x-y)+x+y$. Is $v$ also a quasilinear utility? What is ...
3
votes
1answer
72 views
Envelope Theorem in Hopkins and Kornienko (2010)
This is from Hopkins and Kornienko (2010). In this model, $x$ is investments, $s$ is status, and $y=z-x$ is leisure, where $z$ is endowments. $x(r)$ is the optimal investment, and the relative ...
6
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1answer
154 views
GARP and SARP assumed mononticity?
Monotonicity means the decision maker prefer more goods than less. It is not mentioned in textbook that SARP and GARP preasumed monotonicity, implicitly.
GARP: if $a$ is indirectly revealed preferred ...
3
votes
1answer
264 views
Is First Order Stochastic Dominance (FOSD) relation convex?
A convex relation is that $x\succeq y$ implies $\alpha x+(1-\alpha)y\succeq y$.
Let $>_{FOSD}$ be $\succ$, is the FOSD convex? Intuitively it seems convex.
3
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1answer
73 views
Understanding agents selecting among markets
Let's say an entrepreneur can choose between starting a business in a competitive market with zero economic profit, and starting a business in a market that is not perfectly competitive with positive ...
1
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1answer
70 views
Factor-augmenting technologies (Acemoglu and Restrepo 2018c)
In that paper, they consider the following production function:
$Y = F(A_KK,A_LL)$.
Where:
K denotes capital, L is labor, and $A_K$ and $A_L$ denote capital-augmenting
and labor-augmenting ...
1
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1answer
147 views
Why does socialism not work? [closed]
There are many arguments that socialism doesn't work. It's becoming an increasingly popular topic as congresspeople such as Bernie Sanders and Alexandria Ocasio-Cortez push for policies that are ...
1
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1answer
35 views
Implication of the concavity of u
Suppose that we have the following inequality:
$u( y- d) - u(y-d') \ge u(y' - d) - u( y' -d')$.
The concavity of $u$ together with $y\le y'$ then implies that $d \le d'$.
I sometimes come across this ...
2
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1answer
118 views
Statistical Learning and Econometrics
The principal goal of Econometrics is to find causal effects between economic variables. But the growing technology level seems to show us that Big Data and Statistical Learning result in a tradeoff ...
1
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1answer
56 views
Calculating Market Concentration without sales data
I want to calculate market concentration (HHI and C4) but I don't have sales data. Is it accurate to use the share of establishments of each firm as a proxy for market power?
Could you list some ...
1
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0answers
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 $...
0
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1answer
47 views
Theories that complement/contradict prospect theory?
Kahneman and Tversky's prospect theory, which they developed to contradict expected utility theory, is obviously an interesting result.
But, after their experiments has anyone tried to completement ...
4
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2answers
436 views
Is utility in neoclassical economics a circular argument/concept?
Neoclassical economics as a utility function that represents a consumer's preference ordering over a choice set.
Joan Robinson criticized utility for being a circular concept:
"Utility is the ...
3
votes
3answers
116 views
Can measures of “efficiency” be objective?
So I've noticed the reliance on the term "efficiency" on some cases of economic practice. But I've also recognized problems, e.g. problems of abstraction or problems of pseudo-objectivity, related to ...
1
vote
2answers
78 views
What are “the fundamental categories of economics”?
I had an introductory class in marketing last week, and the professor wanted to test our previous knowledge of economics (we are juniors).
He asked us this simple question: "What are the fundamental/...
2
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1answer
82 views
need help from theorists: proof in Cole, Mailath, and Postlewaite (2001)
I have one question in the proof for section 4.1. in Cole, Mailath, and Postlewaite (2001).
$$\lim_{\varepsilon \to 0}\frac{1}{2\varepsilon}\int_{\overline{l}-\varepsilon}^{\overline{l}+\varepsilon} ...
2
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0answers
97 views
Afriat's number
I discovered the Afriat's theorem on the possible rationalization of a given data set of demand observations and would like to ask for your help in understanding how to compute Afriat numbers in ...
1
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2answers
112 views
Rationale for discounting
I am interested in understanding the rationale behind discounting in the context of government policy appraisal.
As far as I understand it, there are three main components to the discount values ...
1
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1answer
437 views
When can one read the general theory of employment,interest and money?
I am a first-year undergrad econ student and was interested in reading Keynes' book. in the preface, Keynes pointed out that the text deals in the abstract and is meant for his fellow economists. ...
3
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0answers
92 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 ...
