All Questions
3,690
questions with no upvoted or accepted answers
20
votes
0
answers
865
views
How do I use the Malliavin calculus to solve for the optimal trading strategy in the classic Merton problem?
How do I use the Malliavin calculus to solve for the optimal trading strategy in the classic Merton problem?
In Duffie's book "Dynamic Asset Pricing," he outlines the "Martingale method" of solving ...
- 9,345
15
votes
0
answers
1k
views
How do I compute the relative risk aversion of Epstein-Zin preferences?
$$
\newcommand{\E}{\mathbb{E}}
$$
Preface
This question is related to this one about the elasticity of intertemporal substitution and this one about the definition of absolute risk aversion. (It's ...
- 9,345
13
votes
0
answers
883
views
Modern theory of integrability of demand?
I am aware of Hurwickz Uzawa work in integability, neatly summarized by Border http://people.hss.caltech.edu/~kcb/Notes/Demand4-Integrability.pdf
I am wondering if there is any modern treatment of the ...
- 1,453
13
votes
0
answers
474
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 ...
- 2,208
12
votes
0
answers
327
views
Proofs in the Appendix A of Sannikov (2007)
I have a few questions about the proofs in Appendix A of Sannikov (2007), Games with Imperfectly Observable Actions in Continuous Time.
In lemma 4, when he shows the Lipschitz continuity of $H_a(w,\...
- 2,156
12
votes
0
answers
161
views
Queuing Discipline and Lipschitz Continuity
I was reading a paper by Platz and Østerdal (2014) titled "The curse of the first-in-first-out queue discipline". I was wondering about a particular section of it, particularly the part about last-in-...
- 6,578
12
votes
0
answers
489
views
How can I test for autoregressive residual terms in a fixed effects panel Poisson model?
I have panel data for counts of new firms in different regions for six years. I am estimating a static poisson regression with multiplicative fixed effects$^*$; I have also tried to estimate a dynamic ...
- 296
10
votes
0
answers
134
views
Replicating a state-space model
I am trying to replicate the results of Cochrane, 1998. Most of the paper is just describing the theory behind The Fiscal Theory of the Price Level. But from p. 42 he begins the econometrics aspect.
...
- 101
8
votes
1
answer
133
views
Lab experiments of labour markets
I have been searching for papers that conduct lab experiments simulating a labour market, that means for a minimum there are both participants taking the role of firms, and participants taking the ...
- 1,781
8
votes
0
answers
135
views
Why aren't there more super-stars in educational content delivery?
The super-star phenomena seems to happen in any field where the marginal cost of distribution is very low. I think teaching could be that way just as much as acting or playing basketball - at least as ...
user4207
7
votes
0
answers
131
views
Is 2SLS asymptotically MLE?
$$y_i =\beta_0 +\beta_1 x_{1i}+\beta_2 x_{2i}+\varepsilon_i$$
Suppose $x_1$ is endogenous but $x_2$ is exogenous. We have two excluded instruments, $z_1$ and $z_2$. The first stage is:
$$x_{1i} =\...
- 3,458
7
votes
0
answers
129
views
Small Open Economy Without Government
Suppose we have an economy with a representative consumer with the following utility function: $$U=\sum_{t=0}^\infty\beta^t\frac{c_t^{1-\sigma}}{1-\sigma} $$ There is no uncertainty and the household ...
- 1,048
7
votes
0
answers
228
views
Fixes of quadratic utility when probability of decreasing utility is large
In finance and specifically portfolio theory, a popular utility function is quadratic utility
$$
u(x)=x-\frac{\lambda}{2}(x-\mu_x)^2
$$
where $x$ is wealth and $\lambda$ is the parameter of risk ...
- 2,260
7
votes
0
answers
336
views
Pure exchange economy: Set of multiple equilibria endowments
Initial endowments which can result in multiple equilibria in a pure exchange economy are explained here. Given a pure exchange economy, that is given the utility functions (which fulfil the usual ...
- 28.6k
7
votes
0
answers
397
views
Dynamic Bertrand competition when players take turns
Consider the following game:
There are two players, $i\in\{1,2\}$
Time is discrete and runs to infinity during periods $t=\{1,2,\ldots\}$
At eat point in time, players have a price $p_i(t)\in\mathbb{...
- 16.9k
7
votes
0
answers
266
views
Has any progress been made on the Pacman Conjecture on Finite Time Horizons?
The Pacman conjecture states that the optimal strategy for monopolistic durable goods manufacturers is to set price high and slowly drop it (i.e. eating their way down the demand curve).
Empirically ...
- 3,555
7
votes
2
answers
6k
views
Elasticity of Durable Goods vs Non-Durable Goods
Does anyone know any seminal reference (either a paper in a top economics journal or a book) that compares own-price elasticities of demand for durable vs non-durable goods?
My intuition tells me ...
- 180
6
votes
0
answers
111
views
Solving Rational Expectation Models Linear vs. Nonlinear
Since I am coding some linear New Keynesian models in python and solving them under rational expectations (using the method of undetermined coefficients/linear time iteration), I was wondering whether ...
- 71
6
votes
0
answers
41
views
Do Human Resources use information on applicants' child rearing effort as a signal
In Spence's Job Market Signaling paper (a non-paywalled version is available here) firms observe applicants' educational investment. From these signals the firms glean information on the "type&...
- 28.6k
6
votes
0
answers
6k
views
Topological intuition to continuous preference relation
For a Microeconomics Course, we are going through MWG, and in the lecture we discussed the notion of a continuous preference relation.
A preference relation $\succsim$ on a set $X$ is called ...
- 61
6
votes
0
answers
763
views
Which is a better intermediate micro textbook: Perloff (with calculus) or baby Varian (with calculus)?
I’m currently learning intermediate microeconomics with calculus. I know to take derivatives, partial derivatives, integrals, and multiple integrals, and I know some basic linear algebra (solving ...
6
votes
0
answers
110
views
Signalling Model (How to solve a differential equation?)
I'm currently reading "SAVING RATES AND POVERTY: THE ROLE OF CONSPICUOUS CONSUMPTION AND HUMAN CAPITAL" by Omer Moav and Zvika Neeman, and I encounter some problem deriving one of the equations.
...
- 61
6
votes
0
answers
114
views
How do you strategically vote to put someone in last place?
I watch a dumb reality TV show which has a certain number of contestants to start with, and every week one contestant is eliminated. Here's how the elimination process works. Every week a certain ...
6
votes
0
answers
30
views
Why do co-ops dominate in certain markets rather than more-conventional enterprises?
Why do co-ops dominate in certain markets rather than more-conventional enterprises?
For example, the US dairy processing market seems to be dominated co-ops like Land'O Lakes and Dairy Farmers of ...
- 161
5
votes
0
answers
65
views
p-hacking vs. parameter calibration?
I'm currently tasked in my job to design a Prospect Theory (here CPT-)index as mentioned in Barberis, Mukherjee and Wang (2016): "Prospect Theory and Stock Returns: An Empirical Test", see ...
- 303
5
votes
1
answer
197
views
Solving cass-koopmans planning model with python value function iteration
edit: sorry, I used stack exchange first time, so I didn't know I can type python code. you can now copy and run the code.
I'm practicing solving economic model using python programming. I refer to
...
- 51
5
votes
0
answers
98
views
What are good analogies for explaining negative externalities?
I'm making an infographic about the negative externalities of driving, and I want to explain that taxation is not "just" a tool to get a desired effect; it's a price-correcting mechanism ...
- 217
5
votes
0
answers
95
views
Optimal level of consumption in discrete time model with quadratic preferences and infinite horizon
I am trying to derive an expression for the optimal level of consumption in the basic problem:
$ max \hspace{1cm} U_t = E_t \left[\sum_{s=t}^{\infty} \beta^{s-t} \left( C_s - a\frac{Cs}{2}^2 \right) ...
- 123
5
votes
0
answers
45
views
Comparing voting methods when there are only two voters
Consider the Schulze, Kemeny-Young, Ranked Pairs and Borda count voting methods. (The last is obviously the odd one out in this list!)
Suppose that there are only two voters. Each voter gives a ...
- 232
5
votes
0
answers
50
views
Controversy surrounding the Fiscal Theory of the Price Level (FTPL)
I recently started reading a draft of John Cochrane's book on the Fiscal Theory of the Price Level. In the preface he states that the "[...] theoretical controversies are over." However, ...
- 185
5
votes
0
answers
76
views
In experiments of 2-by-2 games where the dominant action benefits both players, do people frequently choose the other action?
Sayers et al look in Some descriptive aspects of two-person non-zero-sum games at variations of the prisoner dilemma. They had two participants (α and β) pressing press either a black (1) or a red (2) ...
- 151
5
votes
1
answer
167
views
Derive and Decompose The Aggregate Elasticity of Substitution in CES Economy
The paper is Oberfield & Raval 2021.
Consumers have standard Dixit-Stiglitz preferences consuming the bundle
$$Y= \left(\sum_{i \in I} D_{i}^{\frac{1}{\varepsilon}} Y_{i}^{\frac{\varepsilon-1}{\...
- 2,339
5
votes
0
answers
93
views
How to find an optimal strategy in an auction?
I have asked this question in mathematics forum as well but since I have not recieved an appropriate answer yet, I ask it here as well.
Consider an auction of sculptures by four artists: A, B, C and D....
- 151
5
votes
0
answers
185
views
Constant returns to scale and cost function: $C(p,ty) = tC(p,y)$
How can I prove that for a production function $F:\mathbb X \rightarrow \mathbb R$ with constant returns to scale
$$\forall x\in \mathbb X, \forall t > 0: \ \ F(tx) = t F(x)$$
and with the cost ...
- 165
5
votes
0
answers
134
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,...
- 1,816
5
votes
0
answers
146
views
Optimization in discrete time
I have made optimizations in continuous time that belong to the control theory, for example one case:
$\max(\min)V[u(t)]=\int_0^Tf(t,x(t),u(t))dt$
constraint to: $\dot x=g(t,x(t),u(t))$
Where:
$x(t)$: ...
- 821
5
votes
0
answers
103
views
Parsing problem 1.D.5 in MWG
I am a little confused about the statement of 1.D.5 in MWG, which I will reproduce here for convenience. I have "solved" the problem, I just don't understand something particular.
$\textbf{(...
- 151
5
votes
0
answers
15
views
Datasets with pre- and post migration earnings
I am interested in computing the pre- and post-migration earnings of international migrants, especially those migrating from low income to high income countries (or vice versa).
The data should allow ...
- 216
5
votes
0
answers
49
views
Which classical liberal economists promoted the privacy and secrecy of businesses?
Quinn Slobodian (2018) writes:
the idea of businessmen opening their account books beyond the firm represented a revision of the classical liberal vision. The privacy of the businessman was no ...
user16353
5
votes
0
answers
72
views
Estimates of magnitude of externalities generated by education?
It is standard to claim that education generates positive externalities.
For example, Mankiw (2017, Principles of Economics, p. 193):
education also yields positive externalities. One externality ...
user14083
5
votes
0
answers
624
views
Public Bads and Non-Excludability
The term "public bad" is sometimes used for "goods" which, like public goods, are non-excludable and non-rival, but which tend to lower rather than raise welfare. Air pollution is an example.
For a ...
- 8,311
5
votes
0
answers
130
views
Afriat theorem for negative goods
GARP and Afrait theorem assume that the alternative $x\in\mathbb R_+$ is always positive. In some economic contexts, such as financial choices, the attribute can be negative.
I wonder if we can ...
- 1,816
5
votes
0
answers
193
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 ...
- 51
5
votes
0
answers
96
views
Auction mechanism with no trusted third-party
I have been using a double-auction mechanism to solve a two-sided market where multiple agents are competing to supply/use slices of a shared resource. The owner of the resource is a trustable third-...
- 175
5
votes
0
answers
229
views
Solution to Dynamic Programming (Bellman Equation) Problem
Could someone please provide pointers on how to solve the below? If any theoretical approximations are possible, that would be very helpful. If numerical solutions are the right approach, could you ...
- 151
5
votes
0
answers
64
views
Estimating Job Vacancy rate empirically
I'm currently reading up on matching models in terms of their ability to describe frictional unemployment, they generally follow a cobb-douglas form.
$$M(u,v)=m=\mu u^\alpha v^{1-\alpha}$$
Where $M(...
- 8,296
5
votes
0
answers
54
views
Letting clients/guest reserve their space vs keeping space clear so that it is available for people who really need it at the moment
Everybody knows that moment when you are in search for a beach lounger but everything is covered by towels, yet the people who placed them there are untraceable, often back at the hotel or in the town ...
5
votes
0
answers
740
views
Fact-checking Dan Ariely (2008) on Duke basketball tickets story
In Predictably Irrational (2008, pp. 127-133), Dan Ariely describes the Krzyzewskiville phenomenon (Duke students camp for weeks to get basketball tickets), and how he and Ziv Camron used it to study ...
user18
5
votes
0
answers
220
views
Optimal Fight Purse and Boxing Strategies
The following is all public information available to all the players in this scenario.
The General Setup
In the aftermath of the infamous race between the tortoise and the hare, the salty hare went ...
- 6,578
5
votes
0
answers
318
views
Why are inventions inevitably correlated with imperfect competition?
Romer (1990) elaborates the incompatibility of nonrival inputs with constant returns to scale: If a production function depends on rival and nonrival inputs and both inputs are productive, then the ...
- 287