# All Questions

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### Barro's (2009) rare disaster model in the AER: How to derive equation (10)?

In Barro (2009) Rare disasters, asset prices and welfare costs Barro develops a Lucas tree model with Epstein-Zin preferences. My question concerns the paper's equation (10). In this equation Barro ...
413 views

### Stochastic growth in continuous time

Literature: See Chang (1988) for theoretical part and Achdou et al. (2015) for numerical part respectively. Model Consider the following stochastic optimal growth problem in per capita notation. \...
1k views

### Solving the Hamilton-Jacobi-Bellman equation; necessary and sufficient for optimality?

Consider the following differential equation \begin{align} \dot x(t)=f(x(t),u(t)) \end{align} where $x$ is the state and $u$ the control variable. The solution is given by \begin{align} x(t)=x_0 + \...
2k views

I find that many contemporary macroeconomics textbooks are too applied, filled with examples, case studies and intuitive illustrations, often at the expense of quantitative rigour and therefore the ...
278 views

### Contest: earliest written instance of economic thought

Following part 5 of @Lateral fractal answer to "Handy Hints for Committing to the Beta" on the meta "Have fun! No fun = No play. No play = No beta. I'm sure I'm not the only one to feel that a ...
4k views

### Why must the rate of GDP growth be positive?

There are always expectations that GDP should be growing at a certain rate. This is what I see in the newspapers. I am not an economics major and this is a very basic student question. After adjusting ...
2k views

### The supply and demand of Virtual Products

We know that the fundamental economic problem is scarce resources relative to unlimited wants. **Does this apply to apps and Ebooks?**They are essentially virtual products who have in theory have ...
722 views

### R in econ departments?

According to my personal observation the majority of (prominent) economists prefer use Stata for their statistical analysis and Matlab for other mathematical work. SAS and Excel are also used (...
5k views

### Does the US stock market tend to rise after natural disasters?

It seems counter intuitive that markets would rise after a huge disaster that probably affects multiple industries like oil or produce. For example, can someone explain why the US markets actually ...
850 views

### What are is the reasoning behind the sharp fall of oil prices starting in mid 2014?

Things I have considered: Poor economic conditions around the world could have caused an unpredicted decrease in demand. The resulting surplus has begun driving prices down. This could be ...
6k views

### Why do lenders dislike early loan repayments?

I've frequently seen references in blogs and articles about how banks and other lending agencies like to refer to people who repay loans on an accelerated schedule as "deadbeats", because they get ...
630 views

### What are the empirical techniques to show causation?

A simple linear regression only shows correlation between two variables. To establish causation, two commonly taught methods are IV regression and natural experiments. What are the other methods ...
798 views

### Osborne, Nash equilibria and the correctness of beliefs

In Osborne's An Introduction to Game Theory Nash equilibrium is described as follows (p. 21–22): First, each player chooses her action according to the model of rational choice, given her beliefs ...
773 views

### Consumer optimum in an economy with a continuum of commodities

Consider an economy with a continuum of commodities, with one commodity for each point in $[0,1]$. Suppose a consumer wants to maximise $$U = \int_0^1 c_i^\theta\,di\qquad 0<\theta<1$$ subject ...
2k views

### Why in most macro models technology is labor-augmenting?

Take Romer's advanced macro book as reference. In it the Solow model,the Ramsey model and the Diamond OLG all contain the fundamental $A_t$ variable representing technological progress. In all these ...
2k views

### Monopolies are just a mathematical misunderstanding

A little head-scratcher (and a good example why we should be careful with notation). Consider a profit maximizing monopoly, that solves over price $$\max \pi = PQ(P) - C(Q(P)) \tag{1}$$ Following ...
915 views

### How is freelancing viewed under Marxism?

How does Marxism view freelance workers? Since a freelancer is the owner of their means of production, are they still viewed as exploited by the bourgeoisie? Could freelancing exist in a Marxist ...
244 views

### Quality of French wine in the US vs French wine in France

I remember reading a study/paper saying that the AVERAGE bottle of french wine drunk in the US is better than the average bottle of french wine drunk in France, due to the fact that nobody bothers to ...
73k views

### What is the definition of exogenous and endogenous preferences?

Wikipedia states: Exogenous Preference -- one that comes from outside the model and is unexplained by the model. Endogenous Preference -- preferences then cannot be taken as given, but are ...
174 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 ...
2k views

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 ...
252 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 ...
7k views

### Why does any treasury / central bank hold gold?

I know the US treasury is slowly selling its gold reserves, but what is the actual mission and purpose when it comes to the holdings? What is the reasoning behind the slow rate of liquidation? I have ...
924 views

### Why does China buy so much US treasury debt?

What is the reason that China buys so much US debt in form of Treasuries? How does this help the Chinese economy? It seems they are willing to give money to USA so USA economy can function better (...
216 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 ...
666 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 ...
532 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 ...
688 views

### Does land value tax create an incentive to merge land ownerships?

LVT is "a tax on the unimproved value of land", and "in theory, it does not distort decision making". But if I own land then improvements such as buildings on my neighbour's land can easily increase ...
764 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 ... 0answers 247 views ### How accurate is duality? In economic theory we know that with the use of some calculus, Hotellings Lemma and Sheppards lemma we can derive a given firms supply function and in term its Profit function. With data of a given ... 0answers 335 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 ... 6answers 667 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 - ... 4answers 8k views ### Is complex analysis used in economics? It's frequently useful in physics and engineering applications; are there any applications in theoretical economics? (If not, were there any attempts at incorporating CA that just never caught on?) ... 6answers 970 views ### References to learn continuous-time dynamic programming Does anyone know of good references to learn continuous-time dynamic programming? The references don't have to be books. They could be links to online resources as well. Links to clear, concise ... 3answers 463 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 ... 3answers 364 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 ... 3answers 256 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 ... 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 ... 3answers 248 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 ... 2answers 10k 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 ... 4answers 514 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 ... 3answers 577 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 ... 4answers 10k 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 ... 2answers 196 views ### Optimality of Zero Capital Taxation The Chamley-Judd result of zero optimal capital taxation says that 0 capital taxation are required in order to maximize welfare at the steady state. The result is 30 years old. Still assuming that ... 5answers 375 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 ... 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, ... 2answers 4k views ### Visualization tools for game theory: Game trees There are many ways to draw a sequential game 'by hand'. By drawing the game I mean this: Displaying players' decision points, available actions and payoffs. Is there any way I can do this in R or a ... 3answers 571 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. ...