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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 ...
bajun65537's user avatar
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 ...
Chetna Ahuja's user avatar
7 votes
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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 ...
bomadsen's user avatar
  • 313
7 votes
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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 ...
VARulle's user avatar
  • 6,994
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 ...
chopschoc's user avatar
  • 148
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 $...
Alecos Papadopoulos's user avatar
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 ...
Herr K.'s user avatar
  • 15.4k
6 votes
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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. ...
Adam Bailey's user avatar
  • 8,529
6 votes
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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". ...
Herr K.'s user avatar
  • 15.4k
5 votes
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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. ...
Ziwei Wang's user avatar
5 votes
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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 ...
Theoretical Economist's user avatar
5 votes
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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(...
Amit's user avatar
  • 8,966
5 votes
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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 ...
Ravshan S.K.'s user avatar
5 votes
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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 $(x_1,x_2,x_3)$...
Michael Greinecker's user avatar
5 votes
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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>...
Herr K.'s user avatar
  • 15.4k
5 votes
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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 ...
Regio's user avatar
  • 4,188
5 votes
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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 ...
Jesper Hybel's user avatar
  • 3,466
5 votes
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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 ...
Alecos Papadopoulos's user avatar
5 votes
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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 $x_1y_1 \geq 9$ .
Amit's user avatar
  • 8,966
5 votes
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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 ...
Henry's user avatar
  • 4,765
5 votes
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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(...
qwerty's user avatar
  • 517
5 votes
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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) ...
Amit's user avatar
  • 8,966
5 votes
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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 $F_i$ ...
Rick_Morty's user avatar
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 ...
StevenRJClarke1985's user avatar
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 = \...
caverac's user avatar
  • 1,216
4 votes
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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 ...
Amit's user avatar
  • 8,966
4 votes
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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 ...
Amit's user avatar
  • 8,966
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\...
T. G.'s user avatar
  • 316
4 votes
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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.} & ...
Amit's user avatar
  • 8,966

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