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Can the Machina Paradox be solved by expanding the choice set?

In another question, the Machina paradox is mentioned as a possible counterexample to the expected utility model: Adding to the list of paradoxes, consider Machina's paradox. It is described in Mas-...
5k views

Difference-in-differences in 2SLS regression

Usually when we do a difference-in-differences estimation, we do it in a OLS reduced form as follows:  Y_{it}=\alpha After_t+\gamma Treatment_i+\delta After*Treatment_{i,t}+X_{it}\beta+\epsilon_{i,...
260 views

Price dispersion in online retail

There are a number of online booksellers that are popular in India right now. The prices they charge for the same book often differ by as much as 10% (See this price comparison site to check http://...
228 views

Why is bargaining more common in poor countries?

In poor countries, one might bargain over even say a bottle of water. This is unthinkable in most rich countries. (And in countries that develop rapidly, one can actually notice the steady movement ...
414 views

Situations where revelation principle may not hold

Revelation principle is a powerful statement regarding Bayesian Nash equilibrium. However it may not hold always, as where players do not fully know their preferences, or when preference elicitation ...
245 views

Has the assumption that individuals' tastes do not change over time been rigorously challenged?

In their seminal paper De Gustibus non est Disputandum, Stigler and Becker (1977) surveyed four classes of phenomena widely believed to be inconsistent with the stability of tastes: addiction, ...
207 views

Why do stock exchanges not operate at a fixed frequency?

Would this not be more fair towards traders who don't trade at high frequency? And would it not be possible to distribute this fixed frequency to other exchanges, modulo relativity? The reason I'm ...
290 views

How does GNU software development sustain economically?

I apologise if this question is out of topic, but it is simultaneously an economy and a programming question. If it should go to another SE communality, please indicate me. In theory, GNU software is ...
824 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 ...
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 (...
1k views

CES Production Function with $\rho>1$

In using CES production functions of the form $f(x_1,x_2)=(x_1^\rho+x_2^\rho)^{1/\rho}$, we always assume that $\rho\leq1$. Why do we make that assumption? I understand that if $\rho>1$, the ...
218 views

When should a receiver randomize across actions in a signaling game?

Suppose there is a signaling game with a finite message space $M$, finite action space $A$, and finite type space $T$. Even simpler, all sender types have identical preferences (the receiver just ...
3k views

Homogenous of degree one in utility function.

Question My solution is as follows. Please check my solution. If I make a mistake, please tell. I am really not sure about my solution. Thank you U(x) is homogenous of degree one i.e. u(...
5k views

Productivity vs real earnings in the US — what happened ca 1974?

Somewhat related to the most recent US elections, I've been researching the whole "white working class" situation, and one strange anomaly has popped up. When one looks at a graph of productivity (...
716 views

Examples of Applied Micro Paper with R (!) Code and Data in Public Repository

Can anyone suggest examples of relatively simple applied micro papers (e.g. an RCT or straightforward regression model) of possible interest to a general audience, that have their data and code, ...
138 views

Does 'ethical investing' have any effect?

Some mutual funds make a point of only investing in ethical companies (eg avoiding arms companies, polluters, human rights violators, etc). Or other organisations pressure funds to stop investing in ...
177 views

Fair voting procedure when there are many issues

When several people have to decide about a single yes/no issue*, the natural decision rule to use is the majority rule. But when there are many issues to decide upon, the majority rule is "unfair" ...
353 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 ...
328 views

Straub and Werning, 2014, on zero capital taxation

This is a test balloon to see whether these kinds of questions are appreciated/welcome on Econ.SE: I had a hard time grasping Straub and Werning (2014) (no paywall). I understand the general ...
182 views

Do large public companies ever “quit while they're ahead”?

Large public companies (e.g. S&P 500) seem to end their lives in one of two ways: either they're acquired (or taken private), or they go bankrupt. Theoretically it seems like there should be a ...
714 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 ...
5k views

Does recycling lead to fewer jobs?

Say I buy a glass bottle, I can either put it in the landfill or recycle it. My understanding is, glass will breakdown into sand. (Not sure how well though, since we sometimes find glass from Roman ...
5k views

Why are high/rising property values considered a good thing?

Increasing prices for housing are pretty much universally treated as positive in the news and in political discourse: newspapers run headlines like "Good news: Home values are up" and talk about "...
516 views

What kind of economic freeware exists for economics students?

Can anyone recommend some free software for students studying economics for use in senior projects, theses, or dissertations?
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Why does the Brexit cause a fall in crude oil prices?

Oil prices have also fallen sharply in the wake of the referendum outcome, with Brent crude down 5.2%. The price of Brent crude fell by \$2.68 to \$48.24 a barrel, its biggest fall since February. ...
470 views

I'm working on my master's thesis in industrial organization and I have a model that is based on social networks. I have had two courses about social networks (one more focused on basic industrial ...
10k views

How to show that a homothetic utility function has demand functions which are linear in income

A homothetic utility function is one which is a monotonic transformation of a homogeneous utility function. I am asked to show that if a utility function is homothetic then the associated demand ...