8
votes
Books friendly to self-studying Industrial Organization
While taking Industrial Organization I remember working with:
Strategies and games: theory and practice by Dutta
Introduction to industrial organization by Cabral
Industrial organization: theory and ...
- 970
7
votes
Book recommendations: Introduction to economics
It's great that you're developing an interest in economics. I would suggest Mankiw's Principles of Economics to start with. I believe it meets both your requirements and covers the two major areas of ...
- 81
7
votes
Accepted
Properties on conditional demand correspondence from the textbook of Mas-Colell et al
Let $z_1$ and $z_2$ be $\geq 0$ and solution to
$$\min_z \{w^\top z\lvert f(z)\geq q\}$$
then clearly $f(z_1)\geq q$ and $f(z_2)\geq q$ and since $\{z\geq 0\lvert f(z)\geq z \}$ is convex it then ...
- 313
7
votes
Accepted
MWG 8.B.7 - Any strictly dominant strategy must be a pure strategy
Fix any $\sigma_{-i}$. Assume $\sigma_i$ is strictly dominant but not a pure strategy. Let $X$ be the support of $\sigma_i$. Since $\sigma_i$ strictly dominates all pure strategies $s_i\in X$, we have ...
- 7,450
6
votes
a risk lover agent preferences and the preference of risk natural agent may be the same
Don't commit the cardinal mistake of equating preferences with choices.
In the context of Expected Utility Theory, the fact that a risk-averse agent ($RA$) would choose $N$ over $M$ implies that
$...
6
votes
Interest rate rule in monetary DSGE model
I've just solved this problem. First of all, your solution does not make too much sense, as in a simple interest rate rule it must hold that the sum of all coefficients must be greater than one. In ...
- 148
6
votes
Accepted
Moral hazard vs hidden information.
Hidden information concerns characteristics that are unobservable by one side of the market. For example, a consumer's willingness to pay, a worker's productivity, the quality of a used car all fall ...
- 16.1k
6
votes
Accepted
Is it right to derive social marginal benefit by adding individual prices instead of quantities?
Vertical summation of the individual marginal benefit curves is the correct way to find social marginal benefit if the camera system, so far as the two stores are concerned, is a public good. ...
- 8,773
6
votes
Accepted
Finitely repeated Prisoner’s Dilemma with switching cost
A couple hints.
Regarding the lower bound on $\epsilon$: What happens if deviation occurs at stage $T$? In other words, there is no opportunity for your so-called "punishment stages".
...
- 16.1k
5
votes
Accepted
Homogenous of degree one in utility function.
The way you show that $v(p,m)$ is homogeneous of degree one in $m$ is correct, but the reason why this implies that, $e(p,u)$ is homogeneous of degree one in $u$, is not very precise in your argument. ...
- 341
5
votes
Accepted
What are the prerequisites to study Mathematical Economics?
In the preface, Takayama writes that the book was written with the intention to keep the prerequisites to a minimum: elementary calculus and matrix algebra.
Perhaps he was exaggerating a little, but ...
- 2,156
5
votes
Accepted
Mixed Nash equilibrium
(i) $A$ & $B$
If player 1 play $A$ with probability $p$ and $B$ with probability $(1-p)$, where $0<p<1$, then player 2's expected payoff from playing
$D$ is $4p+4(1-p) = 4$
$E$ is $6p + 2(...
- 9,842
5
votes
Accepted
Question on oligopoly.
You have solved the Cournot part correctly, but then you've gone completely off the road, by mistaking economics for mathematics. This usually happens.
First of all, you shouldn't assume just any ...
- 300
5
votes
Accepted
separable utility function and cross price effect
The following argument assumes that we are dealing only with interior solutions. Let $(x_1,x_2,x_3)$ be an optimal demand bundle at prices $(p_1,p_2,p_3)$ and income $m$ and assume that $(x_1,x_2,x_3)$...
- 13.7k
5
votes
Accepted
Disagreement in Strategic Bargaining
Consider:
Proposer offers $0$
Receiver always rejects the offer regardless of the amount
You should be able to argue that this is a pair of mutually best responding strategies for $T=1$. The $T>...
- 16.1k
5
votes
Accepted
An overview of 4 books for an undergrad course in Mathematical Economics
All four of those books are widely used at the undergraduate level. They are written with the intention to be text-books of a class, so they should be good for self-study. I recommend you to read 1 ...
- 4,208
5
votes
Accepted
Finding the conditional input demand function
Output $z$ is given as $z = x + y$ where $x=min(a,2b)$ and $y = max(3c,4d)$.
So assume that you want $x=12$ then $a=12$ AND $b=6$. Since this part of the production delivers only the minimum of ...
- 3,840
5
votes
Accepted
Why should $dp_2=dm =0$ in this problem?
The assumption $dm =0$ says that we examine the behavior of the consumer under a fixed nominal income, and this is something interesting to study, because it aligns to a large degree with the observed ...
5
votes
Accepted
Find pareto optimal allocations
Set of Pareto efficient allocations is given by the dashed line in the Edgeworth Box. It is the set of feasible allocations satisfying $y_1 = x_1$ and $x_1y_1 \geq 9$
.
- 9,842
5
votes
Accepted
Why there is no supply on monopoly markets?
The argument is that the monopolist's decision is based on the demand curve (in effect matching marginal total revenue to marginal cost) so is not independent of the demand curve, and in that sense ...
- 4,775
5
votes
Accepted
Stochastic AK model derivation
I think you may substitute it directly as mentioned?
$$v(A,k) = \max log(c) + \beta E[v(A',k')|A]$$
Applying the value function expression (note period change):
$v(A',k') = \frac{log(k')}{1-\beta} + v(...
- 516
5
votes
Accepted
Finding the Pareto efficient allocations
Set of feasible allocations in this economy is:
$\mathcal{F}=\{(x_1,x_2,y)\in\mathbb{R}^3_+|x_1+x_2+y^2=30\}$
This set can also be represented in graph in the following way:
To determine (interior) ...
- 9,842
5
votes
Accepted
Stackelberg equilibrium with n+1 firms
Edit: I didn't see that it's a two-stage game. I considered an $n$-stage game in my previous answer. Here's the new modified answer:
The leader firm is denoted by $F_0$ and the next $n$ firms by $F_i$ ...
- 366
4
votes
Resources to improve my economic intuition
While textbooks are the best way to learn the material (MC=MR etc), here are some suggestions for improving your intuitive understanding of economics.
Books
The Undercover Economist by Tim Harford
...
4
votes
Deriving long-run cost function
You're right. Divide Eq (1) by Eq (2):
$$
\frac{a L^{a-1}K^b}{bL^aK^{b-1}} = \frac{aK}{bL} = \frac{w}{r} ~~~\Rightarrow~~~ L = \frac{ar}{bw}K \tag{4}
$$
Now use this in Eq. (3)
$$
C = wL + rK = \...
- 1,226
4
votes
Accepted
Optimization problem with Kuhn-Tucker conditions
Player $1$'s utility maximization problem is the following :
$$\max_{0 \leq t_{12} \leq T} \ \ \left(T-t_{12} + t_{12}t_{21}\right)^a \left(w(T-t_{12})\right)^{1-a}$$
An equivalent way to solve the ...
- 9,842
4
votes
Accepted
Cournot Competition game with 3 Firms
Firm 1's profit maximization problem is :
\begin{eqnarray*} \max_{q_1} & \ p(q_1 + q_2 + q_3)q_1 - c(q_1) \end{eqnarray*}
Firm 1's response to firm 2's and 3's quantity choices will satisfy the ...
- 9,842
4
votes
Subgame Perfect Nash equilibrium: two stage game
In part a, if $B = D_1 + D_2$, then the SGPE should be
$\left\lbrace D_1 = \frac{W}{3},\ D_2 = \frac{W}{3}, \left\lbrace P = \alpha (D_1 + D_2), \ S = (1 - \alpha) (D_1 + D_2) \right\rbrace \right\...
- 316
4
votes
Accepted
Subgame Perfect Nash equilibrium: two stage game
We'll first find manager's strategy. Manager of the charity chooses $S$ and $P$ by solving the following problem :
\begin{eqnarray*} \max_{S, P} & \ \frac{P^a S^{1-a}}{B^a} \\ \text{s.t.} & ...
- 9,842
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