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12
votes
2answers
217 views

How could the Euro zone be broken up in an ordered way?

Let’s assume that the members of Euro zone all agreed that it would end in 18 months time with each country getting its own currency. What process could be put in place to allow this to happen ...
12
votes
2answers
3k views

What is the definition of a “Stackelberg leader-leader equilibrium”?

I have encountered the equilibrium concept of "Stackelberg leader-leader equilibrium" while reading Product Line Rivalry (AER, Brander and Eaton (1984). They say "we define a Stackelberg strategy as ...
12
votes
2answers
281 views

Economics of forgetting

I'm interested to know economic justifications of forgetting in various fields. On example is Green and Porter(1984). To sustain a Cartel, Cartel members have incentive to forget deviations in a ...
12
votes
2answers
2k views

What is the difference between “aggregation” and a “representative agent?”

What is the difference between "aggregation" and a "representative agent?" I'm sorry if I'm not entirely clear on this question, but that's why I ask. It seems to me as if a representative agent is ...
12
votes
2answers
1k views

Depreciation and second-hand markets for bicycles

Probably the answer to this question is "business as usual", but I've observed of late that the market for bicycles is pretty weird. You can buy a brand new factory-produced bicycle in the US (I'm ...
12
votes
3answers
885 views

Understanding the construction of stochastic processes

I've seen stochastic processes modeled/constructed in the following way. Consider the probability space $(\Omega, \mathcal F, Pr)$ and let $\mathbb S$ be the (measurable) transformation $\...
12
votes
3answers
157 views

Economics of Homelessness: Are housing prices to blame?

Lots has been written in terms of the social context of homelessness. Often attributing the causes due to mental illness, previous criminal activity and addiction. I've been wondering, how much of a ...
12
votes
2answers
250 views

Why use empirical macroeconomic models when they are not policy invariant (Lucas Critique)?

With high probability this question is duplicate, and I tried to find one already in the community, but I was unsuccessful. According to the Lucas Critique, in its more general terms, the problem ...
12
votes
1answer
755 views

What are estimates of the elasticity of demand for credit with respect to interest rates?

When interest rates go up one percent (not one percentage point), what happens to demand for credit? I've only been able to find two papers in this area: Gross and Souleles (2001) study credit cards ...
12
votes
1answer
624 views

When does the Divine Equilibrium refinement coincide with that of Perfect Sequential Equilibrium?

In signaling games, it seems that the Cho Kreps refinement (intuitive criterion) is the go to refinement for eliminating bad sequential equilibria. Divine equilibrium and perfect sequential ...
12
votes
2answers
642 views

Is there a solution to the Joker's game in The Dark Knight?

In the final battle in the movie, the Dark Knight (2008), the Joker has rigged two ferries carrying people out of Manhattan Gotham to explode. One ferry carries mostly civilians with a substantial ...
12
votes
2answers
817 views

$1.25 PPP per day poverty threshold - What precisely does it mean?

As Wikipedia states: In 2008, the World Bank came out with a revised figure of $1.25 at 2005 purchasing-power parity (PPP). (Update: In 2015, this was updated to $\$1.90$ at 2015 PPP.) Wikipedia ...
12
votes
0answers
369 views

Can I refine the set of equilibria in a signaling game to the sender-optimal outcome?

Main question: I've been reading about communication games a lot, and I'm wondering if there are good criteria to select between two separating-ish equilibria. I think of a separating equilibria as ...
11
votes
6answers
734 views

What metrics would indicate a house bubble rather than genuine market values?

There are concerns that Auckland, New Zealand, is currently experiencing a housing bubble. Auckland is one of the top 10 cities in the world on a housing unaffordability index. The question is - ...
11
votes
5answers
17k views

When do supply and demand curves shift?

Let's assume that the price of apples has risen and that the quantity of apples sold during the last couple of weeks has decreased. From that, we can infer that the supply curve must've shifted to the ...
11
votes
1answer
4k views

What did “18/9”, “25/”, and “30/” mean in this 1800 British document?

In "The Petition of the Master Taylors of London and its Vicinity, December 1800" (reproduced in Galton, 1896), it is stated the wages and allowances ... were accordingly settled at the ...
11
votes
3answers
503 views

Price discrimination- how much is optimal?

I am of the understanding that as a general rule, price discrimination does not benefit consumers. Yet I can think of a situation where it does. Look at two countries, Australia and India. The price ...
11
votes
3answers
386 views

Can econometrics test for correlation or causality between prices and corruption?

This week there was news that some prices are rising. I heard that in some countries where corruption is high the prices are also higher. I wonder if there is causaility or just both at same. It would ...
11
votes
3answers
298 views

Self-selection bias during the course of experiments

Suppose you are running a randomized experiment to assess the effect of $X$, say some training program for unemployed people, on $Y$, say the chance of finding a job in the coming year. Suppose also ...
11
votes
5answers
14k views

Does the Federal Reserve buy and sell stocks?

Can the Fed buy and sell stock in publicly traded companies? Is there evidence of this and, wouldn't this behavior drive the price as opposed to actual market forces?
11
votes
3answers
4k views

Is scalping tickets harmful?

IMHO, scalping tickets is no different from legitimate arbitrage unless manipulative. Iirc, arbitrage increases surplus and hindering scalping is setting a price ceiling which leads to deadweight ...
11
votes
2answers
32k views

Marshallian Demand for Cobb-Douglas

When trying maximize the utility having a cobb-douglas utility function $u=x_1^ax_2^b$, with $a+b = 1$, I found the following formulas (Wikipedia: Marshallian Demand): $x_1 = \frac{am}{p_1}\\ x_2 = \...
11
votes
3answers
280 views

Influential Theory in the Economics of Poverty

As far as I can tell, research on the economics of poverty is very empirically driven, and this is probably appropriate. What kind of economic theory has been developed though? I'd also be interested ...
11
votes
2answers
13k views

Solow Model: Steady State v Balanced Growth Path

Okay, so I'm having real problems distinguishing between the Steady State concept and the balanced growth path in this model: $$ Y = K^\beta (AL)^{1-\beta} $$ I have been asked to derive the steady ...
11
votes
3answers
19k views

Outputting Regressions as Table in Python (similar to outreg in stata)?

Anyone know of a way to get multiple regression outputs (not multivariate regression, literally multiple regressions) in a table indicating which different independent variables were used and what the ...
11
votes
4answers
679 views

What are some good repositories for economic data

Economic data is a very broad concept. It can include discrete preference relation data-sets as well as extensive time series data. But it is important that theories are tested against data, and the ...
11
votes
7answers
94k views

How interest rate affects currency

I am quite new to economics. I was reading about changes in interest rates and its effect on currency value. The fact is as interest rates increases, the currency value also increases and vice versa....
11
votes
5answers
23k views

How does a country devalue its currency?

I recently read an article in the New York Times that talked about China devaluing its currency (which I believe is held to a peg against the US Dollar). My question is: specifically what tools does a ...
11
votes
3answers
645 views

Collusion and number of firms

How would you answer the following question? You work for a CEO of a large firm. He says to you, "In my experience collusion is less likely to be sustained as the number of firms in the market ...
11
votes
5answers
1k views

Why isn't the cost of shoes affected by their size?

I have noticed that many shoe selling shops I have visited have the same price tag regardless of the shoe size. Intuitively I'd think the bigger the shoe the more material and consequently capital ...
11
votes
3answers
2k views

Open access datasets for teaching IV regression

I am looking for a dataset to show (to a group of engineers) how the instrumental variables technique is used in econometric practice. I could always make up my own data, but I think it might be ...
11
votes
3answers
22k views

What is the definition of “First Best”, “Second Best”, etc. in contract theory?

What is the definition of "First Best", "Second Best", etc. in contract theory? Especially, what is the difference between "First Best" in contract theory and "ex-post efficient" in mechanism design?
11
votes
6answers
1k views

Did previous researchers fail to detect the hot hand simply because of a statistical fallacy?

Many basketball fans/players believe that having made several shots in a row, the next shot is more likely to go in. This is sometimes called the hot hand. Starting (I think) with Gilovich, Mallone, ...
11
votes
3answers
14k views

What is an example of a utility function where one good is inferior?

Say the consumer has a standard convex, monotonic preference over Apples and Bananas. (Update: I'd like the preference to be as 'standard' as possible. So ideally we have diminishing MRS everywhere ...
11
votes
2answers
2k views

What is the Gross Domestic Product (GDP)?

I suppose GDP is supposed to create a measure of a country's wealth/welfare, something easily indexable. But how exactly is it composed? And is its composition disputed? How good is it at measuring a ...
11
votes
2answers
400 views

Are there any states that don't have debt?

I've not been able to find any states that don't have debt to other states. This, to me at least, seems really strange. Are there any nation states that are not in debt to other states, if so which ...
11
votes
3answers
5k views

Log-linearization of Euler equation with an expectation term

There are a few online resources available to help with log-linearization (e.g., here or here). However, log-linearization where an expectation is involved is a little tricky because the log can't ...
11
votes
3answers
799 views

Intuitive explanation of $S(p,w)\cdot p=0$

Can anyone provide an intuitive explanation of why the Slutsky matrix right multiplied by the price vector yields a zero matrix? I know this is true but I do not really understand why it is true. ...
11
votes
2answers
1k views

Inflation and economic growth

Noticeable works about the impact of inflation on economic growth are dated back to the 90s. For example, Barro (1995): the impact effects from an increase in average inflation by 10 percentage ...
11
votes
5answers
424 views

Are options a form of insurance?

In my economics classes we have studied some really rudimentary concepts about insurance. I'm not really sure what qualifies as insurance to be honest. I was wondering if options are considered a ...
11
votes
3answers
931 views

When treating a relative, normalized utility function as a pmf, what is the interpretation of Shannon entropy or Shannon information?

Suppose $\Omega$ is a set of mutually exclusive outcomes of a discrete random variable and $f$ is a utility function where $0 < f(\omega) \leq 1$, $\sum_\Omega f(\omega) = 1$, etc. When $f$ is ...
11
votes
2answers
434 views

The Case for Basic Income in developed and underdeveloped countries

From what I can tell, the idea of the basic income guarantee is very popular in some circles as an excellent alternative to a lot of modern welfare systems. Has anybody developed a theoretic or ...
11
votes
3answers
361 views

What are the recent advancements in building a unified theory of bounded rationality?

It seems that bounded rationality models focus on explaining a particular psychological bias, in a very specific way. In particular, its seems that the state of the art consensus is that one size does ...
11
votes
3answers
2k views

Under what conditions is a monopoly undesirable?

First of all, I realize that "undesirable" is an ambiguous term. So, to clarify, when is a monopoly undesirable under the following metrics? Pareto efficiency Reduces consumer surplus Social Welfare (...
11
votes
1answer
231 views

Is there a folk theorem for repeated games on networks?

Games on networks have been studied extensively, however, I was not able to find a folk theorem for games on networks. Is there one or can it be derived from an already existing folk theorem? With ...
11
votes
2answers
245 views

Why plug deficits with bonds rather than printing money?

The UK is running a budget deficit £107 billion a year. Inflation is currently running at 1%. Given these facts, why do they plug the gap by selling debt rather than just creating the money to cover ...
11
votes
4answers
2k views

Are There Giffen Inputs?

I am studying for my candidacy exams and I came across this question on a previous exam. The question is in the TFD (True, False, Debatable) section of the exam. The claim is: There are no Giffen ...
11
votes
1answer
434 views

Are there fundamental reasons why (exponential) economic growth is highly desirable?

One of the most widely published measures of the economy is the economic growth as a % of the GDP; i.e. the degree to which an economy grows exponentially. In my understanding, when the rate of ...
11
votes
2answers
668 views

Effect of a permanent increase in government expenditure in an open economy?

In Krugman & Obstfeld's International Economics, 8e, Chapter 16, an involved argument is given showing that a permanent fiscal expansion will not affect output even in the short run. It seems to ...
11
votes
4answers
2k views

Why is the Cobb-Douglas production function so popular?

As relatively novice quantitative analyst/ Cost analyst, Ive been asked to estimate the level of a given organizations productivity more than once, and then forecast for the next couple of periods. ...

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