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7 votes

Applications of Optimal Transport in Economics

Optimal transport methods are very much still in use in economics. The show up in two-sided matching with side-payments, contract theory, hedonic pricing, partial identification in econometrics, and a ...
Michael Greinecker's user avatar
7 votes
Accepted

Proving Pareto-efficiency with MRS

One way to check that this allocation is Pareto efficient is using the first welfare theorem. Consider the exchange economy with utility functions \begin{eqnarray*} u_i(x_i, y_i) = \sqrt{x_iy_i}\end{...
Amit's user avatar
  • 8,791
4 votes

Applications of Optimal Transport in Economics

I am very (very) much not familiar with optimal transport, but there are applications in mechanism design. For example, Daskalakis, Deckelbaum & Tzamos (ECTA 2017, "Strong Duality for a ...
Bayesian's user avatar
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3 votes
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Is there still allocative efficiency when a subsidy is placed on a good?

allocative efficiency occurs whenever total market surplus is maximized. This occurs whenever price is equal to the ‘free market’ equilibrium price. There is no surplus of goods at this equilibrium ...
123's user avatar
  • 2,911
3 votes

What is the latest thinking on the economic calculation problem?

Depends what exactly is the authors definition of “radical markets”. A predominant consensus in the economic field is that a mixed economy which relies predominantly on market form of organization but ...
1muflon1's user avatar
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2 votes
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Why is planning coordinated by "disinterested experts"?

"Interest" in this context refers to the notion of ownership or financial stake, not to curiosity or attention. Someone who holds an interest in a company or asset has invested in it, and ...
Nuclear Hoagie's user avatar
2 votes

Deriving factor allocation of production function

You can use Karush-Kuhn-Tucker conditions. As you are considering a minmisation problem, this gives: $$ \frac{\partial F'}{\partial L_i} \ge \lambda \text{ with equality if $L_i > 0$}\\ \frac{\...
tdm's user avatar
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1 vote

The ability of markets and prices to direct resources to higher valued uses: Is this a short run or a long run attribute?

No its not necessary long run phenomenon it can hold in short run as well. Rather what matters is how competitive markets are and whether there are any market failures such as externalities etc. To be ...
1muflon1's user avatar
  • 56.7k
1 vote
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What is the distributional impact of monopoly pricing on consumers?

The consumer rent (area between demand curve and price payed by the consumer) is A under the monopoly and ABC under perfect competition. The producer rent (area between supply or better marginal cost ...
Jan's user avatar
  • 26

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