8
Terms such as $a$ or $ta+(1-t)b$ are consumption bundles, not numbers, and $\succ$ is not the same as $>$, so you cannot simply "subtract" $ta$ from both sides of an expression or "divide" both sides by $1-t$ as though this were an inequality in the real numbers. To work in the real numbers you have to use utilities, e.g. write $u(ta+(...
8
Behavioral economics is in large parts a collection of models and theories that purport to explain deviations from the predictions of neo-classical theory. For this reason, textbooks in behavioral economics include neo-classical theory, experimental evidence of deviations, and models trying to explain those. (This is why the Dhami has 1764 pages.) To ...
7
The market price is the current price at which something may be bought or sold. If a good is not sold or bought at a particular price, then that is not the market price. Whether or not any particular individual thinks that price is too high or too low makes no difference, as the market price is by definition the price that someone is willing to pay/receive ...
6
The vast majority of economists subscribe today to the subjective theory of value that was in economics introduced by Jevons, Walras, and Menger. Subjective theory of value posits that value is subjective. A corollary to that is that there is no correct objective price.
However, if you talk about market price existing as an objective number that is ...
6
Some papers that interested me this year (in game theory):
Subgame-perfect equilibrium in games with almost perfect
information: Dispensing with public randomization
They show the seminal result of Harris, Reny, Robson that a correlation device is required for existence of subgame perfect equilibria in continuous games can be weakened when nature is ...
6
I think the randomized trial of mask effectiveness is one of the most notable economic papers in 2021. This is not a pure economics paper and it is published in science that does not specialize in economics, but public health is part of the economics of healthcare and the leading authors are economists.
I think the paper is notable because it was the first ...
6
This is an opinion question, but I'll give my opinion.
In terms of methods, I like Arkhangelsky et al.'s synthetic diff-in-diff.
In terms of applied economics, I liked Goncalves and Mello's study of racial bias in the U.S. police force.
6
It is basically a restatement of the first order condition - at an extrema (maxima or minima) of a well-behaved function its first derivative is equal to zero.
If you are at the point of maximization, any deviation should either be of no benefit to you or violate some constraints. By continuity, it means that, unless you are constrained, at the optimal point ...
6
Let $X$ be the convex set of alternatives, let $\succeq$ be a preference relation and let $u(.)$ be a utility function that reflects these preferences, which means that $u(x) \ge u(y)$ if and only if $x \succeq y$.
The preference relation $\succeq$ is convex if
For all $y$, $x$ and $z$ in $X$, if $x \succeq y$ and $z \succeq y$ then for all $\alpha \in [0,1]...
6
Parallel to Arrow and Debreu, there is the approach of Lionel McKenzie, in which no ownership is specified and all technology has constant returns to scale. In such a model, firms can make no profit.
If all firms in an Arrow-Debreu economy have constant returns to scale, equilibrium profits must necessarily be zero. A firm then always has the option to ...
4
Upward sloping demand curves are rare but they can exist for a class of a good that is called Giffen good.
Upward sloping demand can exist because price of a good or service has two effects:
Substitution Effect: Higher price of a good means that people will rather buy something else.
Income Effect: Higher price means peoples budget constraint is tighter.
...
4
Despite the fact that I am tired of reading paper's on natural experiments, there is one contribution in this field that captured my attention. Not only the topic is fascinating (Switzerland offered up to two years of income tax exemptions to its inhabitants), but also because the results are quite surprising: almost no behavioral change occurred. Here is ...
3
The other two up-voted answers are both correct but unnecessarily convoluted for such simple quesiton.
Simple answer is that market price is objective. Market price is:
The market price is the current price at which an asset or service can be bought or sold.
This is as objective as measuring a temperature of a room. You confuse market price and value which ...
3
This is Sweezy's (1939) kinked demand curve model. In equilibrium, quantity is at F and price at A. I guess the answer B results from a misconception. The profit maximization equation MR = MC determines the equilibrium quantity, not the equilibrium price.
2
We need to solve the following problem:
$$
\min_{q_A, q_B}\left\{50 \times I_{q_A > 0} + 5 q_A + q_B^2\right\} \text{ s.t. } q_A + q_B = q \text{ and } q_A, q_B \ge 0
$$
We split up according to whether $q_A = 0$ or $q_A > 0$.
If $q_A = 0$ then $q_B = q$ and we have a total cost of $q^2$.
If $q_A > 0$ then we will choose $q_A$ and $q_B$ such that (...
2
Becker, G. S. (1991). A note on restaurant pricing and other examples of social influences on price. JPE.
2
The answer in short is that adding the same vector to both the sides need not preserve the preference relation because the added utilities to both sides may be different even when the same vector is added. The additional utility also depends on the quantities of all the goods already owned. For example, suppose having 10 bananas is indifferent to having 10 ...
1
I think your talking about three different prices and that's the source of your confusion. They can be defined as:
bid price - how much buyer is wanting to pay
ask/offer price - for how much seller is wanting to sell
market price - price at which those two prices meet and actual transactions happen
Therefore, market price can thought as 'objective price'. ...
1
If you own the lake then your profit is the sum of the profit of all boats, so
$$
\pi(b) = \sum_{i = 1}^b \left(p_f\frac{f(b)}{b} - \frac{p_f}{4}\right).
$$
1
To answer my own question, continuity can allow for thick indifference curves, but it precludes open areas, such as the dotted line shown in the picture.
Continuity guarantees the existence of a closed indifference set, that being the intersection of the weakly-better-than-set and weakly-worse-than-set.
1
Looking at the numbers again plan B is simply worse (assuming a non-negative interest rate). In any specific month you look at, you have to pay no less under plan B than under plan A.
1
It should be (Nominal Price for Selected Year)*((Index of base year)/(Index of selected))
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