7

It stands for I-Owe-You. As in a promise.


6

A leader-leader Stackelberg is a situation in the Stackelberg model where both firms believe they are leaders. This leads to global production being much higher than expected by both firms, as they anticipate small production by the other firm in response to their high production.


6

They are related and usually fall into the same discussion, but as @Alecos mentions in the comments, the two theorems show different things. I suppose the connection that you're after is the fact that if the derivative $$ \left .\frac{\partial f(x, a)}{\partial a} \right |_{x=x(a)} $$ exists, then because differentiability implies continuity, you might be ...


6

After posting a bad solution yesterday I believe I got a better one: The strategy of the buyer consists of two functions, $(f_1(v,p_1),f_2(v,p_1,p_2))$ where both functions map to $\left\{A,R\right\}$ (where $A$ stands for Accept, $R$ for Reject). The strategy of the seller is $(p_1,p_2(f_1(v,p_1)))$. You get the solution via backward induction. In PBE $f_2(...


6

(This answer was completely rewritten for greater clarity and readability in July 2017.) Flip a coin 100 times in a row. Examine the flip immediately after a streak of three tails. Let $\hat{p}(H|3T)$ be the proportion of coin flips after each streak of three tails in a row that are heads. Similarly, let $\hat{p}(H|3H)$ be the proportion of coin flips ...


6

A short answer to your question is both yes and no. You have to first define productivity: productivity, in my opinion, cannot simply mean publishing the number of articles, but rather, their impact. A typical way of modelling the impact of authors is by looking at their h-index. There are many other ways of measuring productivity as well- where the articles ...


6

Another aspect is a little bit about network effect. Suppose for a one moment that there are two researchers, one in USA and another in Asia, having both the same paper, do you really think that two researchers have the same chances to publish in Econometrica or in another top journal ? So, the term of productivity is highly biased by this network effect. ...


5

Muth assumes a model of "...short-period price variations in an isolated market with a fixed production lag of a commodity which cannot be stored". It is useful to remember that the model's equations are expressed as deviations from equilibrium values. So in a bit more clear notation than the original (a star denotes long-run equilibrium value) $$\...


5

Higher order approximations such as those generated by Dynare may help a bit in terms of expanding the neighborhood in which the approximation works well, but the fundamental problem remains that the approximation is made about the steady state and deviating too far from the steady state introduces large errors. Judd, Maliar and Maliar have a paper in ...


5

Side note: This is one way of solving it - the alternative would be formulating a Bellman equation and iterating on that. If you assume that the real economy is on or sufficiently close to the steady state, you can also infer about responses to shocks. That is, you can look at the impulse response functions to a change in whatever interests you, and see how ...


5

I think the answer depends on who is impacted by your measure of distance and for what purpose. Kennan and Walker (2011) Econometrica measure distance between states as "the great circle distance between population centroids" in an attempt to model moving costs. They also include an indicator for whether or not the state is adjacent.


5

Macro regressions, especially annual ones, have in general two flaws: They have small sample problems and They have no proper identification In order to circumvent problem #1, people often assume that the DGP process behind different countries are the same, increasing observations from perhaps 60 to 600. In order to attack #2, many people add timing ...


5

These papers look relevant, to one degree or the other: Karlan, D., & Zinman, J. (2009). Observing unobservables: Identifying information asymmetries with a consumer credit field experiment. Econometrica, 77(6), 1993-2008. The authors write:"We estimate the presence and importance of hidden information and hidden action problems in a consumer credit ...


5

The utility function is a representation of preferences, which are traditionally inferred from choices. Preferences come before utility. I would not call the connection between utility and preferences causality, just a mathematical relationship. Risk aversion (risk preference) is not connected to discounting, which measures time preference. It does not make ...


5

I think I've found an answer to my question, in this excerpt from Nobel laureate John C. Harsanyi's 1994 paper "Normative validity and meaning of von neumann-morgenstern utilities", presented at the Ninth International Congress of Logic, Methodology and Philosophy of Science. Harsanyi starts by proving the same lemma that Alecos proved in his answer, namely ...


5

First we need to define the elasticity of substitution $\sigma$. This can be a difficult and confusing concept. (If you want to have your mind blown, look at Table 2 in this survey by Stern, which classifies no fewer than 10 notions of the elasticity of substitution!). That said, the formula that your professor mentions is true only when there are two ...


5

Yes. Consider a two player game described by the following matrix \begin{array}{|c|c|c|} \hline & L & R \\ \hline a & 3,0 & 0,0 \\ \hline b & 0,0 & 3,0 \\ \hline c & 2,0 & 2,0 \\ \hline \end{array} If only pure strategies are allowed, only $a$ and $b$ are rationalizable because they are best responses to $L$ and $...


5

I did my undergraduate double majoring in discrete mathematics and economics. I went through the grad micro sequence, the math for economists grad course, and the game theory field course, though. So I have a good idea of what the courses are like on both ends. (Doing the grad school route now, but that's additional commentary with which I won't bore ...


5

Sorry if this sounds harsh, but: You need to start asking more. You're not stupid for asking questions - you're stupid for not asking questions. Be upfront about your different background and ask away. Of course you should try to research things by yourself, but a lot of assumptions are next to impossible to know or find out in a reasonable amount of ...


5

Here is a somewhat creative (and very imprecise) answer: Let's assume that Philosophy creates no direct value for society (which seems implicit in your question). However, Mathematics and various other scientific disciplines to some extent originated from Philosophy. Most recently, Linguistics originated as a field of Philosophy. Based on this we can ...


4

The strongest story I hear for the benefits of inflation is from undoing the nominal rigidities that make it difficult for some prices to adjust down. The most important of these rigidities is usually thought to be wages. People seem to really hate nominal wage cuts and wages are some of the most important prices in the economy. As such, economists have ...


4

If you take the standard Aumann model, but allow for states occuring with probability zero, you can taje some nonempty event $N$ such that for the agents prior $p$, one has $p(N)=0$. Let $K\cap N=\emptyset$ and $p(K)>0$. If the agent knows $K\cup N$ but not $K$, then she assigns probability $1$ to $K$, even though she does not know $K$.


4

A first price standard and reverse auction are formally equivalent to each other, and the same method can be used to solve both: First Price Auction In a first price auction, $n$ bidders choose their bid, $b_i$, as a function of their value $v_i$ (distributed according to $F$. They seek to maximise their expected payoff: $$[v_i-b_i(v_i)]\Pr(b_i\geq\max_j ...


4

UPDATE After e-mail communication with one of the authors G.W.Kaplan, I recalibrated the value of the vacancy-posting cost parameter $k$ in order to obtain a cross of the two nullclines for $u=0.05$. This is achieved for $k=7.41$ (rounded). Moreover, with this value of $k$, I get a second (but not a third) steady state. A close up diagram : This still is ...


4

The New Palgrave Dictionary of Economics Article on Adjustment Costs gives a nice overview of the use of adjustment costs in economic models. What is the purpose of scaling investment costs with K here? This function form implies that adjustment costs of size X% of capital $I/k$ cost the same fraction of capital ($c(I/k)$) regardless of the amount of ...


4

Quoting the OP from a comment What sort of conditions on utility function and constraint enables us to apply envelope theorem only after we established the continuity of value function by Berge's theorem? people.hss.caltech.edu/~pbs/expfinance/Readings/Lucas1978.pdf In the referenced Lucas (1978) paper, Proposition 1 establishes that where $v(z,y;...


4

This journal article (Oct 29-2011,) has parts from a telephone conversation of the journalist with Sargent: http://www.nytimes.com/2011/10/30/your-money/thomas-sargent-nobel-winner-rejects-philosophical-slogans.html Although none of it mentions "New-Keynsian", there are some interesting points, like "Professor Sargent said he felt insulted by people who ...


4

There is a recent paper which may help you: Games with strategic complements and substitutes (Monaco and Sabarwal (2015))


4

Regarding question 1: From the assumption that the consumer has a single income value $m$, there can only be one value for $m$. So by the notion that $e$ and $v$ are inverses, there can only be one value $e$ for which $m$ corresponds to and thus only one $u$. So there is only one point. Regarding Question 2: If we have (1) a utility function that is ...


4

The idea is that all else equal, areas with inelastic housing supply (e.g., areas that are surrounded by water, so you can't just build some more houses "over that way") will see greater house price growth, which increases household wealth, and that these differences in supply elasticity are exogenous and uncorrelated with other things that matter. In Saiz (...


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