All Questions

1
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1answer
53 views

What are the costs of requiring banks to have more equity?

In The Bankers' New Clothes: What's Wrong with Banking and What to Do about It (2013), Admati & Hellwig recommend much higher equity requirements: Requiring that banks’ equity be at least on ...
1
vote
1answer
91 views

Utility maximimization for unusual Leontief utility function

The problem is basic utility maximization subject to a budget constraint with $$u(x,y) = min\{x+y,4\sqrt{x},4\sqrt{y}\}$$ $$p_x = 1, p_y = 1, M = 4$$ I will have to first plot the Indifference ...
3
votes
1answer
30 views

Necessary indifference conditions in mixed equilibrium

Suppose we are playing a game where the Action set for Player 1 is $(a,b)$, for Player 2 is $(c,d)$, and for Player 3 is $(L,M,R)$. Assume that for Player 3, the action $M$ is weakly dominated by some ...
1
vote
2answers
62 views

Proof of Choice Coherence in Kreps (2013)

In the first chapter of Kreps (2013), there is a proof that the choice function satisfies choice coherence. Kreps writes: I do not understand how the third sentence of (b) logically follows from the ...
0
votes
0answers
12 views

Is there a 19th century or early 20th century economist who proposed an energy-based currency?

I'm familiar with the '20s era attempts at the "energy dollar" from Edison and Ford, but are there earlier instances of energy currencies?
1
vote
0answers
21 views

How to interpret the proof that information cascades will form?

I am reading the 1992 paper of Bikchandani, Hirshleifer and Welch on information cascades. They claim and prove that, given an environment of sequential decision making, an information cascade will ...
0
votes
0answers
10 views

Critical Point in the Rothschild&Stiglitz (RS) Insurance Model

RS model suggests that (among others), in a binary setting (high/low risk) where there is an information asymmetry, if the proportion of high risks in a population is not sufficiently large, no ...
1
vote
0answers
26 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). ...
0
votes
0answers
10 views

Comparing values of 5s and 7% notes

I am a beginner in investment. I was reading Security Analysis (Sixth Edition) by Benjamin Graham, and on page 63 the last paragraph is written that: A third kind of analytical conclusion may be ...
0
votes
0answers
35 views

Active Passive Monetary and Fiscal Policy

I'm trying to understand a little better the operational differences between active and passive monetary-fiscal policy. For instance, is it that one should see different Taylor Rule feedback ...
1
vote
1answer
28 views

Non-negative deviations from Nash Equilibrium

I know that in a Nash Equilibrium, no player can profitably deviate from the equilibrium strategy assuming that the strategies of the other players remain the same. My question is, what if a player ...
5
votes
2answers
135 views

Why doesn't economy of scale bring down prices of food?

I have little to no experience in economics and would enjoy a simple answer, if possible. Additionally, I base this question on subjective data, so I might be completely wrong in my assumptions. EDIT:...
0
votes
1answer
31 views

Question about Locally non-satiated preferences

If a consumer has locally non-satiated preferences, which of these 2 bundles is preferred and why? Bundle A: (1,3) Bundle B: (4,2) This is what I've reasoned from my very limited understanding of ...
0
votes
1answer
37 views

Optimal choice for a weird leontief function

Compute the optimal choice for a consumer with the following utility function: $$u(x_1, x_2) =\max \{\min(2x_1, x_2), \min(x_1, 2x_2)\}$$ I'm familiar with computing optimal choice for perfect ...
-2
votes
2answers
35 views

Why can we replace dependent variable y with the residuals e?

I don't understand why we can replace y with e: Mainly, why can we simply replace y with e, given that y is defined as: Thanks ...
1
vote
1answer
26 views

Effect of Promotional Sales on a Demand Curve

If there is news that shops are having a sale on dress shoes (beginning right now), will it shift the demand curve for this good? I initially said yes, as a sale should increase the quantity demanded ...
0
votes
1answer
27 views

Here's a question about the solow model [closed]

At first, I was confused by how y keeps increasing after depreciation exceeds savings, then I finally found what was truly bothering me. The fact that when depreciation exceeds savings, capital per ...
1
vote
1answer
28 views

Solving for Pareto Efficient Utility Possibility Frontier using constrained optimisation

The economy is a one-good two individual endowment economy in which individual $i’s$ preferences are given by $𝑈_𝑖(𝑥_𝑖)=𝑥_𝑖$, for 𝑖∈1,2, and the feasibility constraint on the amount of x ...
1
vote
1answer
13 views

how is a trade imbalance related to domestic savings?

I was confused by a statement in an article from Paul Krugman in the NY Times: The reason America runs persistent trade deficits isn’t that we’ve given away too much in trade deals, it’s that we ...
2
votes
0answers
44 views

When is the PPF convex to the origin?

Given a 2X2 model (2 goods, 2 inputs), if the factor intensities (capital/labour ratio) of the two goods along the Pareto set are unequal, then we get a concave PPF. Can we get a convex PPF in some ...
3
votes
0answers
35 views

Combining Difference-in-Differences with Matching Methods When Parallel Trends Are Met in Unmatched Data

I'm running a difference-in-differences (DID) regression on panel data as follows: $$ Y_{it} = \beta_{0} + \beta_{1}Treat_{i}\times Post_{t} + \mathbf{\Pi}\mathbf{X}_{it} + \tau_{i} + \gamma_{t} +\...
1
vote
1answer
25 views

Giffen Goods & Complementary Goods

Consider that good X and good Y are complements and good X is a Giffen good. If I increase the price of good X, what affect does this have on the price and quantity demanded of good Y? My reasoning ...
4
votes
2answers
286 views

Questions of the type “What do you think other people would think?”

For a study in the adoption of new technology, a student and I are developing a questionnaire that will poll domain experts on their opinions of what their colleagues would think about benefits/...
1
vote
0answers
17 views

What were the limits of trade and exchange in the Soviet Union? What about other communist countries?

I'm particularly wondering about what implications the abolition of private property had for families. Since private property was to be abolished, I assume houses were not legally allowed to be traded ...
2
votes
1answer
48 views

What is the assumption behind “indifference curve does not cross”?

If only weak-ordering and continuity is assumed, "ICs" can definitely intersect. If we assume Monotonicity or convexity in addition to weak-ordering, then we can get "no cross of IC". But those two ...
3
votes
2answers
77 views

“The citizens know their own utility functions better than the politicians”

In informal discussions about public policy, I often hear the claim that the government should not intervene in a certain way, because the citizens know what is good for them better than the ...
1
vote
0answers
24 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 ...
0
votes
0answers
17 views

Net Present Value with investments in multiple phases

I am trying to calculate the Net Present Value for a theoretical project in which, unlike most examples in textbooks and on internet tutorials, investments do not only happen in t=0, but they also ...
0
votes
0answers
5 views

Relation between Captial Market Line and Security Market Line

I am referring to the book, "William Sharpe et al, Investments, 6th Edition. I am trying to wrap my head around some lines from the book, pertaining to Security Market Line. It reads, "Earlier it ...
1
vote
1answer
17 views

Convert USD2005 PPP per-capita GDP to USD2011 PPP per-capita GDP for a number of countries

Which conversion factor / formula should be used to convert USD2005 PPP per-capita GDP to USD2011 PPP per-capita GDP for different countries? I have found an identical question, but without a clear, ...
2
votes
1answer
50 views

Definition of Pareto efficiency and prisoner's dilemma

Pareto efficiency is defined in Wikipedia as: Pareto efficiency or Pareto optimality is a state of allocation of resources from which it is impossible to reallocate so as to make any one ...
0
votes
1answer
35 views

How to read PPP$ aloud?

How to read PPP$ aloud? That is in a paper that I should read loud in a presentation, but I don't know the most Is it "purchasing power parity in US Dollar," or "purchasing power parity in terms ...
0
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0answers
12 views

Finding correlated equilibria

I am a bit confused in my game theory class when it comes to finding correlated equilibria. I understand how to write the constraints using probability distributions, but I don't know how to find the ...
0
votes
1answer
42 views

Selling price of a widget at competitive equilibrium

Let's suppose that it costs producers a minimum of y dollars to produce a widget (it may actually cost more, depending on the producer, but that is the bare minimum). In a competitive equilibrium, ...
0
votes
0answers
4 views

Deficit adjustment - role of exchange rates

Krugman states the following: Suppose the world economy is in equilibrium. Suddenly the dollar depreciates for some reason. Almost all economists would agree that long run effect would be some ...
0
votes
0answers
18 views

Disaggregated price index

im trying to make my own consumer price index using the laspeyres index methology. However im having problems finding the individual prices. However i have the disaggregated cpi components. For ...
0
votes
1answer
33 views

Who looses Forex if someone gains?

My understanding of forex exchange is that when there are two currencies cur1 and cur2, they are balanced in the world with a ...
6
votes
1answer
88 views

Why are banks allowed to resell mortgages?

It just seems like a way to get around money creation limits imposed by liquidity requirements. For example if a bank creates new money by extending new morgages then securitizes them and resells them,...
0
votes
0answers
18 views

How can I represent players with different information given continuous choice ranges?

I must represent in extended (tree) form the following Game Theory problem: A committee of experts must recommend a policy $a_1\in \mathbb R$ to Congress. Congress will then choose a policy $a_2\in ...
1
vote
1answer
44 views

Strict preference and utility function

If strict preferences over three outcomes x, y and z, do not satisfy transitivity, so that $x \succ y \succ z \succ x$, then these preferences cannot be represented by a utility function. Is this ...
2
votes
1answer
77 views

How successful is the Islamic banking model?

Under Islamic law (Sharia), any interest is considered usury and is prohibited. This makes banking in Islamic ruled countries difficult as the normal way for banks to create profit is through lending ...
1
vote
1answer
35 views

Rothschild-Stiglitz (RS) Separating Equilibrium

In RS model, where there are only two risk types (high and low risks), there is no pooling equilibrium but a separating one (when there are sufficiently large number of high risks.) Additionally, ...
2
votes
1answer
29 views

The impact of news in the stock market?

I am currently working on a large sample of textual data from news articles. I was just wondering whether there exists any studies which tries to explain the market anomaly known as "The-Day-Of-The-...
0
votes
0answers
5 views

Investor sentiments in large open economy under Mundell Fleming Model

So I have been studying the Mundell Fleming Model, I fail to understand the impact of investment sentiments in a large open economy. This is what I think : Positive investment sentiments will ...
2
votes
1answer
36 views

Fed must hold collateral equal in value to notes in circulation

The Fed's website has a FAQ "Is U.S. currency still backed by gold?". Part of the answer writes: The Congress has specified that Federal Reserve Banks must hold collateral equal in value to the ...
1
vote
0answers
37 views

“The odds of a bailout in the next century are still nearly 70%.”

In a 2017 Wall Street Journal op-ed, President of the Minneapolis Fed, Neel Kashkari, wrote: The odds of a bailout in the next century are still nearly 70%. I found it surprising that anyone could ...
2
votes
1answer
42 views

Is an EU single currency still a trade advantage in 2019?

When the single currency was planned, there was no internet and there all currency exchange was manual. Today the web can automatically convert prices using multiplication of the numbers in the ...
2
votes
0answers
20 views

Since the financial crisis, what measures have been taken to solve the too-big-to-fail problem?

Ben Bernanke (2010): If the crisis has a single lesson, it is that the too-big-to-fail problem must be solved. So, what measures have been taken to solve the too-big-to-fail problem? To what ...
0
votes
0answers
17 views

Average Return for Commodity

Suppose I have a function of a varying values represented by randomness. A stock or price of a commodity would be a good example. What is the average return for that stock on any given interval of ...
0
votes
0answers
182 views

Question about an economy with 3 components household, firm and government with functions given

I've spent considerable amount of time on this question, in vain. It is from one of the competitive exams for admission to a grad econ program. Help would be tremendously appreciated. Thanks. An ...

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