# Tag Info

Accepted

I think you're referring to the decoy effect. A popular example of this is the Economist subscription puzzle, popularized in Dan Ariely's TED Talk (starting at 12:22).
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### Definiton of information sets in rational expecations models

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: &...
• 31.8k
Accepted

### What does it mean if a economic model is internally consistent?

In theoretical modeling the consistency is applied in the same way as in philosophy/logic. Internal consistency simply means that the argument is consistent with itself and has no contradiction within ...
• 41.5k
Accepted

• 1,206
1 vote

### Solving rational expectations model - Sims form

If you are planning on using Dynare, you do not need to "solve" the model using Sim's method. Dynare takes care of the solution algorithm for you. If you want to get to IRFs quickly, I suggest ...
1 vote

### Solving rational expectations model - Sims form

I think I have managed to solve it. However, not the way I was initially hoping. I simplified the stacked matrices using the given conditions and some assumptions. Here is my solution: Eq. (3) I ...
• 641
1 vote

### Saddle path equilibrium on financial market with rational expectations

In fact, saddle path equilibrium is one of the most common equilibrium in canonical growth models, mainly in dynamic optimization problems. It is possible that he makes a reference to a decentralized ...
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1 vote

### What conditions must we demand for the economy to be always on the saddle path?

To stick to the simpler deterministic case, it is perfect foresight and the Transvarsality condition (TVC)that guarantees that an optimizing agent will stay on the saddle-path, because all other paths ...
• 31.8k

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