11

Here's a solid example of it in formal literature, with about 1k citations: Competition with Switching Costs and Network Effects by Joseph Farrell and Paul Klemperer The general thought of the article is that customers who are "locked in" to a particular product can lead to competitors preferring to separate markets rather than competing with one ...


10

Even four decades ago, there were some references around, see for instance: Katz Michael L. and Carl Shapiro, 1985, "Network Externalities, Competition, and Compatibility," American Economic Review, 75, 424-440. The literature is mainly considering oligopoly theory, however, because competition between different standards is often an important ...


7

To follow up on the answer of @VARulle let me give you some conditions for which the indifference curve is path connected. The argument can also be found in the book Mathematical Methods and Models for Economists by Angel de la Fuente. Preferences are monotone if $x > y$ implies $x \succ y$ and that preferences are continuous if $x_n \succeq y_n$, $x_n \...


7

Given your last comment above it seems that what you are really asking is whether the indifference sets of a continuous preference relation on $\mathbb R^n_+$ are path-connected. The answer is No. Let $n=1$ and let the preference relation be represented by $u(x)=(1-x)^2$. Then the indifference set e.g. for $u=1$ is $\{0\}\cup\{2\}$, which is not path-...


4

There is another way to compute the symmetric BNE in increasing strategy. Let $U(v)$ denote the expected utility of a player in equilibrium when his type is $v$: Given that the bidding strategy is increasing, a player with type $0$ will get the good with probability zero. Thus he/she must bid zero and $U(0) = 0$. For any other $v > 0$, the probability ...


4

Arrows impossibility theorem deals with what we call a social welfare ordering. For any profile of preferences, it provides a ranking over all alternatives. What you refer to is called a social choice function (or voting rule). This gives, for any profile of preferences, an "most preferred" option. The most famous impossibilty theorem for social ...


4

To expand on @1muflon1's answer. The theory of rational addiction assumes that the utility of a consumer at time instance $t$ depends both on current consumption of the addicitve good, say $c_t$, and the consumption of the addictive good in the past. For simplicity say $c_{t-1}$. So at period $t$ the instantaneous utility looks something like: $$ u(c_t, c_{t-...


3

This looks like a contest. There is a large economic literature on contests. Have a look at this survey by Corchón and Serena. Often these papers use a Tullock contest success function or model the contest as an all-pay auction, see, e.g., papers by Ron Siegel. There are papers that analyze given contests (research contests, lobbying, etc) and papers that ...


3

Production functions are defined without specific values for parameters, so they all could if you impose that the logical parameter implies a negative return. For example, consider a Cobb-Douglas production function of capital and labor, $Y=\beta_0 K^{\beta_k}L^{\beta_l}\omega \varepsilon$ where $\omega$ denotes firm-observed productivity and $\varepsilon$ ...


3

It is possible for an addict to be rational. A famous work on this was done by Becker (1988) Theory of Rational addiction. In order for agent to have rational preferences the preferences have to satisfy the following definition (See MWG Microeconomic Theory pp 6): Definition 1.B.1: The preference relation $\succeq$ is rational if it possesses the following ...


3

I don't think you need convexity. However, I think you do need to assume some monotonicity condition. The following should work (but might not be the minimal set of assumptions that provides the result). Consider the production possibility set $V(.)$. $$ V(y) = \{x \in \mathbb{R}^n_+| x \text{ can produce } y\}. $$ We assume that $V(y)$ is a closed non-empty ...


3

There is most likely an assumption in the background that utility is increasing in the amount of flour, independently of its packaging. Then you are willing to exchange two 1kg-bags of flour for one 2kg-bag of flour. Thus the MRS is -2 (or -0.5, depending on the direction of exchange).


3

You want to show $$ \frac{dMR}{dQ} < 0. $$ As you point out in the comments $$ \frac{dMR}{dQ}= Q\frac{d^2P(Q)}{dQ^2} + 2\frac{dP(Q)}{dQ}. $$ The linear case When $P(Q) = a - bQ$, assuming $a,b>0$, you get $$ \frac{dMR}{dQ}= Q \cdot 0 - 2b = - 2b< 0. $$ The general case $$ Q\frac{d^2P(Q)}{dQ^2} + 2\frac{dP(Q)}{dQ} < 0 $$ does not hold for all ...


2

We cannot judge if your answer is correct because we don't see the game tree. First, I would not say that "we can rule out this equlibrium as a possible pooling PBE by the intuitive criterion" because the intuitive criterion is simply a refinement. The PBE is still an equilibrium - it's just that we can say that it appears "unreasonable" ...


2

Think about the incentives of player $i$: If he knew that no one else helps, he'd want to help. If he knew that at least one other player helps, he'd rather not help. A single player helping would make everyone happy, but no one wants to be that single player, because it's costly to help. This is the classical problem of finding a volunteer, so that's why ...


2

Let $x = D(p)$ be the demand for a good if the price is equals to $p$. The inverse demand curve (as you would draw it) is then given by $p = D^{-1}(x)$. It gives the price as a function of the quantity. If there is a rebate of $r$ and if $p$ is the price, then the consumer only pays $p^\ast = p - r$. Then the demand is given by: $$ x = D(p^\ast) = D(p - r). $...


1

Because by definition of short-run it is not possible. In economics, short-run is defined as a period when (some) factors/variables are fixed and not flexible. Consequently, by definition firm cannot exit or enter in the short-run as it cannot change it's fixed costs - for example firm prepaid rent and can't get the money back, or it takes few days to rent ...


1

No, it is not. The verbatime citation is The slope of this curve represents the rate at which the individual is willing to trade $x$ for $y$ while remaining equally well off. To trade $x$ for $y$ here means to give up some $\Delta x$ to receive $\Delta y$ per unit of $\Delta x$. Letting $\Delta x\rightarrow 0$ the rate is $-\frac{dy}{dx}=MRS_{xy}$.


1

It was certainly a large part of the DOJ's case against Microsoft at the turn of the millennium. Get your favorite internet search tool and search for "doj v microsoft monopoly network effects" (no quotes) and you'll find the original complaint (https://www.justice.gov/atr/complaint-us-v-microsoft-corp): Microsoft has maintained a monopoly share (...


Only top voted, non community-wiki answers of a minimum length are eligible