10

This sounds glib, but The Internet is an ongoing example. In economic models where access to information is an explicit factor, we often gloss over the fact that mere exposure to information about the state of the world is not enough to improve welfare - one also needs the cognitive skills to use those facts to develop plans in support of preferences, and ...


10

The “to be announced” or TBA market for agency mortgage-backed securities is a great example of this. The short version is as follows: The TBA market is a market wherein one can purchase or sell for future delivery pools of mortgages that conform to certain characteristics (e.g., and to vastly simplify, 30 year mortgages at a 4.5% coupon) without ...


7

The post of @Mmmmmm about traffic reminded me of Braess's Paradoxon: There are situations in a traffic network (under the assumption that all drivers are rational) where removing some roads leads to a lower average amount of time spent driving. While the paradox itself was constructed with another goal in mind it assumes that all drivers know the optimal ...


6

We have that ${\cal I} = ((X^i)_i, \mu)$​ and ${\cal J} = ((Y^i)_i, \nu)$​ are two information structures. An Interpretation mapping for player $i$​​ is a mapping $\phi^i: X^i \to \Delta(Y^i)$​ so it associates with every $x^i$​ a distribution over $Y^i$​. Let $x^i \in X^i$​. Then $\phi^i(x^i)$​ is a distribution over $Y^i$​ so $\phi(x^i)(y^i)$​ is the ...


5

In a standard cheap-talk setting, a sender (S) has better information on a state of the world and wants to communicate this information to a receiver (R) who then takes an action. However, S and R prefer different actions conditional on the state. Importantly, S is free to send any message independent of what she knows. That is, she cannot commit to a signal ...


5

In the Samuelson's definition of public good, the good must be non-excludable and non-rivalrous. Hyperlinks (if public and pointing to public pages) are non-excludable, and --to the condition of not overloading the hosted content-- non-rivalrous. The frequency of publication (and other criterions) of hyperlinks pointing to specific pages/domain, is used by ...


5

Suppose you have a product that you can distribute for constant marginal cost $c$. For every $v\geq0$ assume there are some consumers who value the good at $v$. The net welfare created when someone consumes the good is their value minus the cost of production. Thus, if we want to maximise the total social surplus (net of costs), we should give the good to ...


5

Let me use capital letter $W$ instead of small letter $w$ (as $W$ is actually a matrix). So, let $W$ be the matrix that contains in row $i$ and column $j$ the probability that $j$ hears from $i$. Then average number of pieces of information that $j$ gets from $i$ in one period is given by $W(i,j)$. The average number of information that $j$ gets from $i$ ...


4

There is a large economic literature on intellectual property rights. However, the issue seems far from settled on what even the optimal duration for patents are. Note that open source is even a step further than a 0 day patent duration. A strong case for your view would probably be found in Boldrin/Levine: http://levine.sscnet.ucla.edu/general/intellectual/...


4

This definitely is not a complete answer. But I can imagine the case of increasing returns to scale. Or natural entry barrier. Increasing returns to scale is often discussed in international trade theory, but it can be also relevant here. Example: think about commercial aircraft industry, dominated by Boeing and Airbus. Aircraft industry is seen as ...


4

Paul Krugman recently discussed the Bloomberg terminal, a classic example of a resource with the following properties: Those who get it are at an advantage, so naturally everyone gets it; It's not free, so everyone getting it cancels out the benefits, making even worse off. The world must be full of examples of this. Dave Gorman once mentioned another ...


4

In your example, the playstation is a public good to be used by both roommates. Note that $\theta_1,\theta_2 < \theta_3$, but $\theta_1+\theta_2>\theta_3$, that is, one roommate alone would not buy it, but together it is efficient to buy. The idea of your VCG mechanism is that people only pay when they are "pivotal," that is, when they have ...


3

Eric Maskin has a paper called “Friedrich von Hayek and Mechanism Design”, which tries to connect some of Hayek’s ideas to the (formal) theory of mechanism design. This paper, and the references therein, might interest you.


3

It seems to me based on the 2019 JEL review of the same authors that they had published more-or-less what you ask about in a 2015 paper about monopolies and price discrimination (as an application of their BCE theory); see section 5 (and 5.1 in particular) in the 2019 paper. Here the relevant information is the monopolist's knowledge of the consumers ...


3

The classic paper on preferences over the timing of information revelation is Kreps and Porteus (1978). This seems to capture at least a little, if not most, of what you seem to be describing, so you should definitely have a look. Strzalecki also has a nice paper connecting Kreps-Porteus to the various modern approaches to preferences under ambiguity.


3

Well, you cannot take the derivative of $E(n)$ with respect to $n$, because $n$ is an integer variable. More generally, you want to prove a property with respect to $n$. The problem you have is that the corresponding domain is not a convex set: say, for $n$ and $n+1$, $0<\lambda <1$, the value $\lambda n + (1-\lambda) (n+1) = n+1-\lambda$ does not ...


3

The way hierarchies of beliefs are specified, beliefs on the same events are encoded in different places. The basic idea is actually quite simple. You have two players, Ann and Bob, say. Ann's first order beliefs specify how likely she thinks each strategy choice of Bob. Ann's second order beliefs specify how likely she thinks each combination of a ...


3

There is a position that the efficient market hypothesis is essentially untestable. That's because purported tests of efficient markets are actually joint tests of two claims Market X is efficient An efficient markets looks / behaves like Y A rejection of a market X as not behaving like Y could be because market X is efficient but it is false that ...


3

Yes, there is a simple and well accepted doctrine of why EMH fails - it is impossible, so long as arbitrageurs do not work for free, and firms only pay wages for marginal product. The argument was first formalised by Stiglitz and Grossman (1980), in the American Economic Review. Consider that all information on the fair price of financial assets is costly ...


3

I think this piece by John Cochrane represents a typical defense of the efficient market hypothesis from this kind of critique. Here's another. The basic summary is that market efficiency does not imply that expected returns cannot vary or that bubbles will not happen. Bubbles should be unpredictable, and variation in expected returns should be driven by ...


3

Two notes. A. "Conditioning on information" has always been applied in economics without much attention to probability theory-rigor, because it has (indeed) such a strong intuitive sense: "based on the information I have (where "information" here means data, processing algorithms, psychological makeup, almost anything) I somehow form ...


2

I don't recognize your moral hazard example, but there are a couple situations where a monopoly is desirable. A monopoly is desirable when the cost of entry is close to zero or good substitutes are available, and the economies of scale are always increasing. One might argue that Amazon.com, Google, and other internet companies are cases of this. The ...


2

I haven't seen the model you mention (so this answer should be taken with a grain of salt!) but, intuitively, I guess the story would go something like this: Suppose a firm is selling insurance. If price is very low then selling is not very profitable so supply is low. Higher prices cause selling insurance to become more profitable so supply increases. If ...


2

Two points. Common knowledge is defined by Aumann in terms of partitions, not $\sigma$-algebras. There is generally no natural correspondence between these. The grand state space is trivially common knowledge. So however you conceive of the relevant states, something that holds everywhere, such as the structure of the model, is common knowledge even if ...


2

A foundational result from models of perfect competition is that the competitive market equilibrium (i.e. setting price and quantity such that supply = demand) is efficient. By efficiency we mean that the sum of consumer surplus and producer surplus are maximised. This is actually quite an amazing thing! It means that each individual consumer buys the good ...


2

You can certainly do it. However, keep in mind that the BCE will not be a lot "smaller". This is because there are many information structures that are almost perfectly informative, or that fully reveal some states but not all of them. Therefore, by disallowing the complete information structure you are simply removing one element in the boundary of the set ...


2

This is a very old idea in general equilibrium models with imperfect information and incomplete markets. More information could be detrimental if the agents that face uncertainty situations decide to insure and the equilibrium under full insurance is pareto optimal. If in such a situation the state would be revealed with a perfectly informative signal the ...


1

https://www.gov.uk/government/statistics/percentile-points-from-1-to-99-for-total-income-before-and-after-tax/ The ONS has freely available data on the percentile points of the income distribution as estimated from the Survey of Personal Incomes. The data is collected on a yearly basis, and is currently designated as "Percentile points from 1 to 99 for ...


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