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Are there two deadweight welfare losses associated with a Pigovian tax?

I think the green DWL is correctly represented due to taxes however after taxes the MSB curve can itself shift to the right for example the reduction in cigarette consumption due to the tax leads to a ...
Subh's user avatar
  • 1
2 votes

Economics as non zero sum game

Economics is name of a scientific field (e.g. similar to biology, psychology, physics etc.). You probably meant to say economy which is the sum total of economic activity in some area. Economy is not ...
1muflon1's user avatar
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1 vote

Zero-Sum Game with two Mixed Equilibrium Interpretation

A two-playerr zero-sum game in normal form is expressed as: $g_1\left(s_{1,i}, s_{2,j}\right) + g_2\left(s_{1,i}, s_{2,j}\right) =0 \forall s_{1,I } \in S_1,\forall s_{2,j} \in S_2 $ where $ S_1=\left\...
marco tognoli's user avatar
6 votes
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How do I measure well-being without Utility function?

First, the consumer cannot be worse of. If the consumer would want to buy the same consumption bundle, he could. Here, he does not. Second, if you assume that there is a unique optimal consumption ...
Michael Greinecker's user avatar
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bertrand duopoly with discrete price

By "discrete price", I assume both firms can charge price from the set of non-negative integers. Define the players as $N = \{A,B\}$ Price competition Action set of both players = $\mathbb{...
Divyam Verma's user avatar
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bertrand duopoly with discrete price

Since the Marginal cost of firm 1 is $10$, i.e. $\frac{\partial C_A(q)}{\partial q}=10$ and the Marginal cost of firm B is 21, i.e. $\frac{\partial C_B(q)}{\partial q}=21$ and both firms are only ...
econhead's user avatar
2 votes
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Lump sum transfers to implement any Pareto efficient equilibrium as the market outcome

Here is the Edgeworth box of your exercise: The green dot with the curves running through it is your equilibrium allocation. The red and blue lines are indifference curves of $A$ and $B$, while the ...
Giskard's user avatar
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2 votes
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How to solve a Leontief Production function?

Short Run Cost Minimisation problem: \begin{eqnarray*} \min_{l\geq 0} & \ wl +rk \\ \text{s.t. } & y\leq \min(\sqrt{l},\sqrt{k}) \end{eqnarray*} where $y\geq 0$, $k\geq 0$, $w>0$, $r>0$ ...
Amit's user avatar
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1 vote

How to solve a Leontief Production function?

I'll solve the Cost-Minimization and Profit-Maximization problems for the Leontief Production Function in the Long Run Solution: Here we are given the production as, $$y=f(l,k)=min\{l^{0.5},k^{0.5}\}$$...
SGP's user avatar
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1 vote
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Derive indirect utility function - Problem with CES

Fix some good $r$. For notational convenience, let me drop the supscript $h$. From the first order conditions, we get: $$ x_{j} = \zeta_j + \left(\frac{p_{r}}{p_{j}}\right)^{\sigma}(x_{r} - \zeta_{r}) ...
tdm's user avatar
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2 votes

When are marginal rates of substitution consistent with a utility function?

This is a rather indirect way. For $\omega, z \in \mathbb{R}_{++}$, define the (demand) correspondence: $$ D(\omega, z) = \left\{(x,y) \in \mathbb{R}^2_+| MRS(x,y) = \omega \text{ and } \omega x + y = ...
tdm's user avatar
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1 vote
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Consumer surplus calculation

If we are going to consider the separate effects on consumer surplus (CS) of $q_1$ and $q_2$, what we must do is first find the CS when $Q=q_1$ and then consider the total change in CS which results ...
Adam Bailey's user avatar
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2 votes
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Question About Proof of Proposition 3.C.1 in MWG - Step 1

Requires continuity which is already assumed. Proof. Consider an open ball $B_0$ around $0$ with radius $\epsilon_0 < x/2$ and an open ball $B_x$ around $x$ with radius $\epsilon_x < x/2$. Pick ...
uninterestedacademic's user avatar
2 votes
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Understanding the definition of monotone

Throughout my answer, I assume that $x \succ y$ is read as "$x$ is strictly preferred to $y$". Refer to footnote (a) if that is not the case. I was wondering if it is possible for two ...
uninterestedacademic's user avatar
1 vote

Total Effect, Substitution Effect, and Income Effect

(I'll be using formulae from Hal Varian.) ...
Shreya's user avatar
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2 votes
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Paper suggestions on innovation-economics

I believe the old "learning-by-doing" models can be also interpreted as worker driven innovation, although it is broader concept. Here is a reference for modern version of the model (...
WilliamT's user avatar
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1 vote

Cost function from a weighted CES production function

I'll use $(w_1, w_2)$ to denote the factor prices instead of $(p_1, p_2)$ as the latter is traditionally used for output prices. $c(w_1, w_2, y)$ solves the maximization problem: $$\max_{x_1, x_2 \ \...
uninterestedacademic's user avatar
4 votes

Different elasticities of substitution

This note only answers the last of your question. All these elasticities tend to disappear from the empirical literature since the publication of the influencial paper by Blackorby, C. and R. R. ...
Bertrand's user avatar
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4 votes
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Net product marginal in Acemoglu's article "Modeling inefficient institutions"

Calculate the first-order-condition (FOC) wrt labour: $$\begin{align}\frac{\partial}{\partial l_t^j} \left( \frac{1 - \tau_t^j}{1 - \alpha} (A^j)^\alpha (k_t^j)^{1-\alpha} (l_t^j)^\alpha - w_t l_t^j - ...
uninterestedacademic's user avatar
1 vote

Different elasticities of substitution

To everyone interested in the same problem, I have found a perfect article that goes into great length and detail explaining what are the interconnections and attributes/characteristics of each of ...
Athaeneus's user avatar
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4 votes
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Convex to origin - precise definition

The term "convex to the origin" seems to have been used in the prosaic meaning of "bending towards the origin" without a formal mathematical definition. The note Kozlik, Adolf. &...
Michael Greinecker's user avatar
2 votes

Finding Utility Function for Optimal Allocation in Consumer Choice Model

I think your formula is still too general, so what you want will not be possible. Given $-1 < \alpha < 0$ and $$ m^* = A \left(\frac{p}{\omega}\right)^\alpha, $$ we have $$ \frac{m^*p}{w} = A \...
Giskard's user avatar
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0 votes

"Convex to origin" indifference curves

There are two points to be noted here about the indifference curve: It is downward sloping => negative relation between 'Y' and 'X' => If 'Y' increases then 'X' decreases and vice-versa. The ...
user5281371's user avatar
1 vote

Regression with one independent variable bounded for some observations

One possibility is to replace the maximum floor-to-area ratio in your regression with a new variable that represents the reciprocal of that ratio. So if the maximum ratio is 5, the variable would be 0....
H Rogers's user avatar
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