5 votes

Confused by the Term "Welfare Relative to Full Information Welfare"

What it means is the following: Consider the same bargaining game played by two players that are fully informed (i.e. the buyer is also informed about the value of $q$). Then find the equilibrium of ...
pegasus's user avatar
  • 151
5 votes

Market with changing number of goods and services

I think the best candidate would be monopolistic competition as introduced by Dixit and Stiglitz (1977) Monopolistic Competition and Optimum Product Diversity, in which two models are introduced. ...
Jesper Hybel's user avatar
  • 3,356
5 votes

Arrow’s Impossibility & Validity of Social Welfare and Pareto Improvement Analysis

Let $X$ be the nonempty set of alternatives, $\mathcal{P}_X$ the set of preference relations on $X$ and $N=\{1,\ldots,n\}$ a finite set of agents. Under the universal domain condition, Arrow's theorem ...
Michael Greinecker's user avatar
5 votes
Accepted

Why does optimal allocation call for unlimited distribution of information?

Suppose you have a product that you can distribute for constant marginal cost $c$. For every $v\geq0$ assume there are some consumers who value the good at $v$. The net welfare created when someone ...
Ubiquitous's user avatar
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4 votes
Accepted

CV, EV for additive utility; confirm or deny

Questions with numbers are usually not as good as questions without numbers. If you had written down the formula for CV and EV you would probably have noticed that your premise is false. CV and EV ...
Giskard's user avatar
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4 votes
Accepted

Is comparative advantage undermined by a welfare state?

The basic result about the effect of trade on income distribution is Stolper-Samuelson in the Heckscher-Ohlin model, which says that trade liberalization is associated with a rise in the prices of the ...
Ege Erdil's user avatar
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3 votes
Accepted

Question regarding General Equilibrium under non-convexities

You are right. Set of Pareto efficient allocations consist of all feasible allocations $((x_{11}, x_{21}), (x_{12}, x_{22}))$ satisfying the property that individual 1 consumes all of good 2 i.e. $x_{...
Amit's user avatar
  • 8,466
2 votes

Why is EV<CV if the good is inferior?

I believe Marshallian demands are less steep than Hicksian demands because we reverse the y and x axis in economics. Thus a larger derivative of x with respect to p will be less steep since p is on ...
MHall's user avatar
  • 326
2 votes
Accepted

Intuition of Shephard's Lemma in Reverse

Expenditures on good $2$ are, indeed, included and can vary. We know from Shephard's lemma that whenever the marginal change in expenditure for good $1$ with respect to its price varies with the price ...
Michael Greinecker's user avatar
2 votes
Accepted

Does cornering a market has any "bad" economic consequence?

You already have your answer in the last sentence. A monopoly can be established and that leads to well known "bad" economic consequences, i.e. economic inefficiencies.
BB King's user avatar
  • 6,148
2 votes

How do I correctly incorporate a $3 tax on supply to each unit sold?

You first solve for $P$ in the supply curve. $Q = 3P + 50 \iff 3P = Q - 50$ $\iff P = \frac{Q}{3} - \frac{50}{3}$. Since the producers got taxed, they need to charge a higher price to cover their ...
Nicolas Torres's user avatar
2 votes

What tools the central banks and governments can use to tame profit-led inflation and is the monetary tightening one of such tools?

Inflation can be either driven by supply or demand shocks (e.g. see Eickmeier & Hofman 2022 What drives inflation?). If you observe excess profits while there is inflation, it is likely that the ...
1muflon1's user avatar
  • 56.4k
1 vote

Can investments fund welfare?

Theoretically it could be possible. Investing is not a zero sum game. However, practically government welfare spending is too large. The Norwegian Sovereign Wealth fund, that is widely considered to ...
1muflon1's user avatar
  • 56.4k
1 vote
Accepted

Understanding Duality between Individual and Collective Maximization in Macroeconomic Models

The proof of the first welfare theorem is almost the same as the one you are familiar with from MWG. The main difference is that if you have recursive budget constraints, you have to show that you can ...
Michael Greinecker's user avatar
1 vote

How do I correctly incorporate a $3 tax on supply to each unit sold?

the subscript $d$ denote demand and $s$ denote supply. Using this notation let us rewrite the demand and supply functions. Demand function before tax: $Q_d(P_d)=400-2P_d \quad \dots (1)$ Supply ...
mynameparv's user avatar
1 vote

Interpersonal comparison of utility

There are not just rules but whole theories. Namely cardinal utility allows you to make interpersonal utility comparisons (as opposed to ordinal utility). A common cardinal utility framework is the ...
1muflon1's user avatar
  • 56.4k
1 vote

What is the Walras law vs first welfare theorem

Walras' law describes market equilibria conditions, which states roughly speaking that if there exists within an exchange economy market equilibria for $n-1$ good markets, then the last good market $n$...
Holger I. Meinhardt's user avatar
1 vote

Do we really need accurate utility functions?

To the extent you are constructing marginal decisions from preferences, the general answer is no. Any utility function that preserves preference orderings maps to the same partial or total order ...
Dave Harris's user avatar
  • 2,006
1 vote
Accepted

Why is EV<CV if the good is inferior?

The answer comes from looking at the Hicksian compensated demand: Since, WLOG, EV for only one good price change can be written as $$EV(p_1,p_0,u) = \int_{p_1}^{p_0} h(p,u_1)dp$$ and CV as $$CV(p_1,...
RAGMS's user avatar
  • 160
1 vote

Is there a difference between deadweight loss and welfare loss?

I would say all deadweight loss is welfare loss but not all welfare loss is deadweight loss. For example an unregulated polluter causing a negative externaly results in a welfare loss compared to ...
Giskard's user avatar
  • 29.5k
1 vote

The Economical "justification" of mass killings

I'm not really sure why this is tagged [social-welfare] or [welfare economics]. It seems to me that more appropriate tags would be [history] and/or [international economics] (since the question ...
Marcus Pivato's user avatar

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