texts: Change in Consumer Surplus with Two Price Changes: Is it Path Dependent?

texts:
The diagrams below showing demand for goods X1 and X2 are adapted from Johansson P-O (1991) An Introduction to Modern Welfare Economics (p 43).  Demand for each good is assumed to be a function of its own price and the price of the other good.  At the initial price P2i of X2, demand for X1 is D1i, and at the final price P2f of X2, demand for X1 is D1f.  Similarly, demand for X2 increases from D2i to D2f when the price of X1 falls from P1i to P1f.  (Thus the goods seem to be complements, but that’s incidental).

Question: What is the change in total (Marshallian) consumer surplus resulting from the combination of the two price changes.

Johansson argues that it depends on the sequence of the price changes.  Suppose that the price of X1 changes first.  Considering the change in price of X1 with the price of X2 remaining at P2i, the relevant demand for X1 is D1i and we can infer that consumer surplus increases by area A.  Considering the change in price of X2, however, by assumption the price of X1 has already fallen to P1f, so the relevant demand is D2f and consumer surplus increases by area B + C.  In total, therefore consumer surplus increases by A + B + C.  But if the price of X2 changes first, then parallel reasoning leads to the conclusion that total consumer surplus increases by A + B + D.

It seems to me that this should instead be analysed as follows:

The change in total consumer surplus is the difference between a)
the initial total consumer surplus and b) the final total consumer
surplus.
The sequence of the price changes has no bearing on either (a) or (b).
(a) is E + F and (b) is (A + D + E + G) + (B + C + F + H).
Hence the change in total consumer surplus is an increase equal to (b) minus (a) or A + D + G + B + C + H.

Am I missing something?


texts: Why not just print money to combat deflation?

texts: If interest rates are zero and inflation is under 2% per year then why not have the fed print money without borrowing until inflation is back at 2% per year? The money could be used to pay off the national debt. Businesses would have a predictable floor of a 2% inflation rate.  The slippery slope argument against that sort of policy could be prevented by having the policy written into law. It's a fix where everyone wins, right?


texts:
If I know that one USD buys 0.90 euros or 1.42 Australian dollars, can I reliably conclude that one Australian dollar buys 0.63 euros? (0.90 / 1.42)

That seems to make sense. But would this be true for every case? For example, if you were to collect historic currency data for all currencies with respect to a single base currency, could you then accurately calculate all relative exchange rates, or are there are other factors to consider?


texts: What does one-sided polynomial on lag operator $L$ mean?

texts:
In some time series texts, there are some talks about one-sided polynomial on lag operator $L$. I tried looking up what this means, but I cannot find one.

So what does one-sided polynomial on lag operator, $a(L)$, mean?


texts:
Being a mathematician, I am familiar with probability calculations, but I need to ask a question related to investments and probability, and how this is handled seen from an economics view.

Given a project which involves two tasks, task 1 and task 2. Developing task 1 cost X dollars, while developing task 2 takes Y dollars if developed at the same time as task 1 and Z dollars if developed at a later stage.

The probability that we actually need Task 2 i 70%

What is the the "probable cost" of implementing Task 1 and 2 at the same time. vs. Task 1 and then Task 2 with a certain probability.
And what is this called in economics? Probable cost? Estimated cost??


texts:
In the most basic Diamond-Mortensen-Pissarides (DMP) model we have the variable $V$ which represents the present discounted value of expected profits from a vacant job. The corresponding Bellman equation is

$rV = -pc + q(\theta)(J-V)$

Where $pc$ is the cost of a vacant job per unit of time, $q(\theta)$ is the rate at which vacancies are filled and $J$ is the present discounted value of expected profits from an occupied job. If I think of a vacancy as an asset for the firm the Bellman equation makes sense but how can a vacancy be an asset?

What I don't understand is the intuitive meaning of $V$. How can a vacant job result in profits for the hiring firm? Furthermore, my textbook says

  In equilibrium all profit opportunities from new jobs are exploited, driving rents from vacant jobs to zero. Therefore the equilibrium condition for the supply of vacant jobs is $V=0$

Again, how are there 'rents' from having a vacant job?


texts: Possible "debt-to-..." ratio indicators for debt-to-economic growth relationship?

texts:
Suppose we are interested in the relationship between public or external debt and economic growth.

One can look at the debt-to-GDP ratio or debt-to-export ratio.

  What may be other possible "debt-to-... ratio" indicators that might be useful to investigate the relationship between public or external debt and economic growth?


texts:
I have recently started studying mechanism design (after having taken a basic graduate micro course) through Borgers' 'Introduction to the theory of mechanism design'.

I was wondering if people are aware of any books/papers that explore how to actually construct real-world indirect mechanisms that implement the optimal allocations/transfer rules that are characterized throughout the text. So far I have not detected some methodology underlying going from drms to indirect mechanisms, just scattered examples. Am I missing something here?


texts: Why does a homothetic function have constant ratio of marginal products along rays?

texts:
A homothetic ordering is defined as

$x \succeq y \Rightarrow \lambda x \succeq \lambda y \qquad \forall \lambda >0$

where $x,y \in \mathbb{R}^n$

Then, any differentiable function representing the ordering has the property

$\frac{\partial f}{\partial x_i}(\lambda x)= k \frac{\partial f}{\partial x_i }(x)$

with $k,\lambda >0$

How is this results derived?

I can see how we can derive properties of the function values from homothety, but have no idea how we can say anything about its derivatives.


texts: Vegetarians vs shoppers of humane meat/eggs/dairy - Who has the biggest impact on the factory farming meat industry?

texts:
I apologize for not being able to word this in a non subject specific way.

So, for people who don't support widespread factory farming practices, there are people that abstain from meat completely, and then there are those who buy humane sources, such as cage free/organic/grass fed whatever. These terms differ by definition and enforcement by region, but for the sake of the argument please assume a best case scenario.

So, I have heard non-meat eaters claim they make the most impact by not supporting the meat industry at all.

I have also heard that they have no impact, since they are simply not a part of the market, and that meat eaters who buy 'humane' meats have much more of an impact because they are still buying meat, but putting it towards a minority practice helping it grow and showing demand for it.

I would appreciate a mathematical summary/explanation, as I'm not sure which explanation is correct.


texts: profit maximization intuition capital(K) and labor (L)

texts:
$$\underset{K,L}{\text{max}}\;\;{F(K,L)−rK−wL}$$
What is the difference between maximizing profit using this process above, or simply increasing each factor of production by 1 when the existing number no longer supports? Is there a big difference in these two forms?
the above method can be solved using lagrange method, but isn't it much simpler to create a linear programming model with the capacity constraints of each production factor?
it seems to me that the classic way that microeconomics shows how the company maximizes profit is something much more theoretical than practical.


texts: The equation for the firm's demand for labour

texts:
I have been stuck on this for a few hours (actually a few days). I can't find much useful information on the web that has made it any clearer.

Suppose that a firm’s production function of output Q is a function of two inputs, labour (L) and capital (K) and can be written Q = 25LK.

Letting the wage rate for labour be w and the price of capital be r, what is the equation for the firm’s demand for labour?

I understand that the answer is L=√(rQ/25w) but I don't know how to get there.


texts: Competitive markets, taxation and international trade

texts:
Suppose that in a competitive market, the supply function is given by $S(p) = 5000(p-2)$ and the demand function is given by $D(p) = 2000(16-p)$. Suppose still, that in order to recompose its' budget balance, the government decides to tribute the industry with a $\\\$0.70/\text{ unit produced}$ tax. Answer:
c) Now suppose the government decides to open this sector to external competition, keep the domestic tax on production. The international price is $4$. What will the new domestic supply be? What will the imported volume be? What will be the industry gain (increase in profit) if the government, keeping the economy open, decides to remove the tax?
Any tips are appreciated.
EDIT: I think I got it:
For a price of $\\\$4$, the domestic supply and demand are (in this case the price the producers receive per unit is $\\\$4-0.7$ due to the tax):
$$
\boxed{Q^D = 2000 \cdot (16-4) = 24000}, \quad \boxed{Q^S = 5000 \cdot [ (4-0,70)-2]= 6500}
$$
And, therefore, the imported volume is:
$$
\boxed{I = 17500}
$$
In the absence of the tax, we have:
$$
Q^D = 2000 \cdot (16-4) = 24000, \quad Q^S = 5000 \cdot (4-2) = 10000
$$
and thus the industry gain is $10000 \cdot 4 - 6500 \cdot (4-0.7) = \boxed{\\\$18550}$.
Is it correct?


texts: Are there "Grossman/Hart/Moore" models without efficient negotiation outcomes?

texts: Sanford Grossman, Oliver Hart, and John Moore have developed a theory of the firm based on incomplete contracting (Hart was awarded the Nobel Prize in 2016 for this branch of the literature). In the Grossman/Hart/Moore model, ex-post negotiations always yield an efficient outcome. (Ownership rights influence only the division of the ex-post surplus, which in turn influences incentives to make investments.) In contrast, Oliver Williamson (who was awarded the Nobel Prize in 2009) emphasizes that ex-post negotiations may well yield inefficient outcomes (see e.g. Williamson’s article on the new institutional economics in the Journal of Economic Literature, 2000). Are there any formal models (assuming standard profit-maximization goals of the firm owners) that somehow incorporate Williamson’s insight in the Grossman/Hart/Moore theory of the firm?


texts: Why did Mexico have such a high deposit rate in the 70's despite fixed exchange rate?

texts:
Why did Mexico have a high deposit rate in the 70's?
Why would a bank want to pay the public such a high interest rate?


texts:
Principal is interested in buying lake. The revenues of operating the lake as a camping site are determined by the weather (a random parameter $w$ distributed uniformly on $[0, 1]$) and by the development programme $d$. The revenue function is $wd$, the cost of development is $(d^2-1)/2$ and the agent outside option is $x>0$. Principal needs to specify a contract paying the agent an amount $π$ (if the site produces revenue $R$, the principal gets $R-π$ and the agent get $π$). Suppose that the agent have to accept or reject the contract before observing $w$, but choose the development programme after observing it.

First assume that the principal can observe the revenue $R$ but cannot separately observe $d$ or $w$. You may assume that the contract takes the form $π = aR$ where $a$ is a (not necessarily positive) parameter. Find the agent optimal development as a function of $a$, $x$ and $R$, and use this to compute the value of $a$ that maximises the investor’s expected utility. Also, find the optimised expected value of the lake as a function of $x$.

Need help solving this I don't want solution but just guidelines. First time on stack exchange so please ignore if I am breaking any rules while asking this question. I am struggling with how to form expected payoffs for agent and principal separately help will be appreciated thanks. As far as off topic is concern I think mechanism design is economic topic although little focused on but it is pure financial economics.

should agent expected payoff be $$\int_0^1 {[awd-(d^2-1)/2] dw} $$ and principal expected payoff be $$\int_0^1 {[wd-awd] dw} $$


texts:
Some countries offer good earning, but some of them also have high taxes and living expenses.

How can I find which country offers the best income to expense ratio?

Is there any index available?


texts:
There are $N>0$ Households in an economy.

The government has aim to maximize a weighted average of income by imposing tax on the rich people and redistribute the tax revenue to the labor ones.

In this case, the objective function is given:

$${b \times cN \times (1-T)R(a-dT)+(1-b)\times (1-c)N\times (w+t)}\over N $$
(equation 1)
where
$c$=the portion of the households who are wealthy ones and $0<c<1$

$a>0$ = each one have a wealth stock

$R$= each one earns a gross return.

$(1-c)N$ is the remaining measure of households and they earn each $w>0$

$0<T<1$ is tax rate.

$t$= the transfer for each labor.

If the ruler apply a tax, the wealthy ones do not save as determined by $d>0$

The government is constrained by its balanced budget which holds

$$T\times cN \times R(a-dT)=t\times (1-c)N$$

(equation 2)

I need to find optimal tax rate $T^*$.

———

I cannot know how to solve it. What is objective function and what is constraint function.

My guess is that I should maximize the equation 1 subject to equation 2. Since the question 2 consists of equality, I should integrate equation 2 into the equation 1. And then I take derivative with respect T.

Is this right?

Please let me know your ideas. Thanks a lot.

————

EDIT

$$\max_{T} {b \times cN \times (1-T)R(a-dT)+(1-b)\times (1-c)N\times (w+t)}\over N $$

Subject to $$T\times cN \times R(a-dT)=t\times (1-c)N$$

First, I insert the constraint into the objective function

$${bcN(1-T)R(a-dT)+(1-b)(1-c)Nw+(1-b)(1-c)aNt}\over N$$

$${bcN(1-T)R(a-dT)+(1-b)(1-c)Nw+(1-b)TcNR(a-dT)}\over N$$

Secondly, I re-write this equation

$${bcNR[a-(d+a)T+dT^2]+(1-b)(1-c)Nw+(1-b)cNR(aT-dT^2)}\over N$$

Thirdly, I take its derivative with respect to $T$ and this derivative is equal to zero.

$${{bcNR[-(d+a)+2dT]+(1-b)cNR(a-2dT)}\over {N} }=0$$

Then, I find the optimal $T^*$

$$T^*= {{(2b-1)a+bd}\over{2d(2b-1)}}$$

Since we know that $0<T^*<1$,

$$0< {{(2b-1)a+bd}\over{2d(2b-1)}}<1$$

From this inequality, I found the condition $1/2<b<{{a-2d}\over {2a-3d}}$

This question refers to the Laffer curve.


texts:
I have a question from an old assignment that I cant wrap my head around.

Other things remaining the same, if households suddenly decide to save more at each level of income, then the consumption function will:

a) become steeper because the marginal propensity to consume (MPC) falls.
b) become less steep because the marginal propensity to save (MPS) rises.
c) make a parallel shift downward as autonomous consumption expenditure falls.
d) remain unchanged but the savings function will shift downward.

I don't understand why it can't be option B.
   Since

MPS+MPC = 1

and

C = C₀ + (MPC)Y (Consumption function = Auto. Consumption + MPC(Income))

Given this, if MPS increases - it should mean that MPC decreases and so the slope of the consumption function decreases. Hence, option B. The answer however is C and I don't understand why.


texts: Why do we need both the UMP and the EMP?

texts:
I understand that there are two common applications of Lagrangian multipliers in consumer theory: the utility maximization problem (UMP) ans the expenditure minimization problem (EMP).

These seem like the same problem to me but with different parameters being the focus. Why does my professor emphasize the importance of duality between these theories? I don't understand why both are needed.

my question:

To what extent are the UMP and EMP different economic ideas/problems as opposed to just simply being a different way of mathematically stating the same thing?


texts:
I am having a countries panel data on macro variables<gdp, inflation etc) and a continuous quality indicator variable(with gaps) . My models suggests that the quality indicator is a factor for gdp to reach its potential output. Potential output is constructed with hp filter.  I need to find what is the ideal value the indicator should assume for each period in order gdp to be on it's potential value.
How is this possible to be done?
Is it possible to apply hp filter or other filter on quality indicators?
If not what's the most appropriate method (I e likelihood) to do that and how ?


texts: Why is Walras equilibrium inefficient when we are dealing with public goods?

texts:
I know that when we have public goods we have that:

$$MRT = MRS_a + MRS_b$$

Though I fail to understand why does this makes Walras equilibrium inefficient.

Thank you very much for your help!


texts: How to derive the demand function of $U(x_1,x_2)=x_1-x_2$

texts:
I'm trying to find the uncompensated demand function. How would you do that, when I have the following utility function $u(x_1,x_2)=x_1-x_2$, and the budget constraint $p_1\cdot x_1+p_2\cdot x_2=p_1\cdot e_1+p_2\cdot e_2$.

I've found the following.

$\max\ u(x_1,x_2)=x_1-x_2 \ s.t. \ p_1(x_1-e_1)+p_2(x_2-e_2)=0$

With use of substitutions I must maximize the following expression

$\max\ u(x_1,x_2)=x_1-\frac{p_1(e_1-x_1)+p_2e_2}{p_2}$

I find the f.o.c.

$\frac{\partial u}{\partial x_1}=1+\frac{p_1}{p_2}=0$


texts: Shouldn't corporate tax be calculated based on EBIT instead of EBT?

texts:
When I was studying Corporate Finance in university, I was surprised to learn that it is more advantageous for corporations to take more debt (even if they don't need to) because it creates tax shield which leads to a gain for equity holders.
This feels like a distorting incentive. Therefore, wouldn't it be optimal to tax corporations based on earning before interest and taxes rather than based on earnings after interest?


texts: Question regarding Carlstrom and Feurst (1997)

texts:
I am reading through Carlstrom and Feurst's 1997 paper Agency Costs, Net Worth, and Business Fluctuations: A Computable General Equilibrium Analysis and had a question, although it could apply to other papers as well. In the paper the authors derive 9 equations that uniquely derive an equilibrium in their model. Then in the next section they run empirical tests by starting at a steady state and then hitting the system with productivity and wage shocks to see the dynamics.

What I am confused about:

The equations that uniquely describe the solution already have shocks in them, so I am a little confused about what the steady state in the empirics section is. Here is the best answers I could come up with: They taking out the shocks, deriving the steady state, and then seeing how the shocks will move the system away from the steady state and then back over time.
If anyone could confirm or deny this answer that would be great. This is a problem I have come across before when reading these papers with general equilibrium models with shocks.


texts: Does quantity demanded refer to all consumers or individual consumers?

texts:
When looking at points along the demand curve, is each quantity corresponding with each point referring to the total quantity demanded by all consumers in a market or the quantity demanded by individual consumers?

I am looking at the market supply and demand graph and the graph for each individual firm in perfect competition (the horizontal demand).


texts: Is the Occupy Wall Street famous 1% stable?

texts: Occupy Wall Street has a famous slogan "we are the 99%", refering to the "fact" that 1% of the people in the US take nearly the quarter of the national income.  However, this does not seem to consider that many people with extreme incomes have very variables revenues and have to borrow a lot from the private sector to finance their source of revenue, and that this revenue is unstable.  Are there any studies/data confirming that the 1% that has nearly 25% of the national income is in fact nearly composed of the same people year after year?  Any data that considers "permanent income" instead of "annual income"?


texts:
Let $u (x) = \prod_{{i\leq n}}$ $(x_i-m_i)^{a_i}$, where $m_i\geq$0 and $a_i\geq$0, Σ$_{{i\leq n}}a_i=1$ show that the expenditure function $e(p,u)$ is linear in $u$.
Based on the definition of the EF, my first guess would be to find the MRS in terms of $x_i$ and $m_i$ to we get $x_i^*$ and $m_i^*$. After we find these two in terms of each other, we substitute it back to the $u$ function to get now $x_i^*$ and $m_i^*$ in terms of $u$ as well. After this we substitute what we found to the budget constraint and prove that the expenditure function is linear in $u$ somehow.
I don't know if I should follow this logic or is there some other way to approach this problem? Any help is appreciated.


texts: How should the general public evaluate economic arguments?

texts:
This is a follow-up question to Why do economists disagree so much?

I know little about economics - just enough to know that it's a complex field I don't understand. However I see economic arguments in the media quite often. Since I don't understand economics, how should I make sense of the economics politicians might argue?

For example, in the Scottish independence debate, there are people who say Scotland is economically better off independent and people who say the reverse. Clearly they can't both be right. Ubiquitous's answer in the linked question indicates that this difference in opinion is because we aren't sure what will happen after Scottish independence, and the two camps make different assumptions as to what is more likely. Well and good, but that doesn't tell me how to vote (assuming economics is my main concern).

Hence the question: given that I can't evaluate economic arguments myself, how can I tell who to vote for? Is there a way to tell if a certain view is more fringe than the other? Can I just count the number of economists with a certain view? Can I go by fame? Popularity? Or just flip a coin?


texts: What is the difference between USD/EUR and EUR/USD when talking about Forex

texts:
I was recently watching the Forex market and I want to know what does it means when you see something like

EUR/USD  -0.04% -1.1208

Does that mean the USD dropped with 0.04% against EUR or vice versa? Can you please also extend the explanation to stock indices?


texts: Determine if goods are substitutes or Complements based on demand function

texts:
So I have a consumer with a utility function of the Cobb-Douglas form $v(x_1,x_2)=x^{\frac{1}{2}}_1x^{\frac{1}{2}}_2$.

From that I constructed the demand function for good 1 and good 2:
$x_1=\frac{1}{2} \cdot \frac{m}{p_1}$

$x_2=\frac{1}{2} \cdot \frac{m}{p_2}$

From here, I am to determine whether good 1 and good 2 are substitutes or complements. I was told by my teacher to take the derivative with respect to $m, p_1$ and $p_2$, however I can't get a sensible result. As far as I've come to understand from my book, I need to find $\frac{dx_1}{dp_2}$, the change in the demand for good 1 as the price of good 2 changes. Substituting m back to $p_1x_1+p_2x_2$ becomes messy as well. I understand the problem theoretically, but I simply can't figure out how to properly argue using math, rather than logic.

I hope someone is willing to help


texts: How can I estimate the disconnect between book value and market capitalisation?

texts:
There are several questions on Stack Exchange as to what difference the stock price makes to a company after its IPO. Surely, management cares, it is important to be credible to trading partners, etc.

However, with passive investment being about 50%(?) of the stock market and at the same time the stock price not having a direct influence on the balance sheet, external shocks like the coronavirus won't be blamed on management. To some extent the stock price is just determined by people talking up (sellers) or down (buyers) the stock price. Perhaps short sellers talking it down and long holders talking it up.

How do I make a quantitative indicator that describes the disconnect between the market capitalisation and the book value? What options are there?

Sub 1: When it is said there is an asset price bubble, it usually means stock prices (or RE). Are the assets that actually are on companies' balance sheets also inflated?

I thought it interesting to be an investor: to invest in companies that have worthwhile plans. In reality however, I seem to be buying stock (secondary market) from previous stockholders (primary market). The problem is that the primary market largely ceases to exist after the IPO. You might say that stock buybacks and re-emissions are primary market operations, so I guess my question is focused on the difference between those two.

Sub 2: Why are secondary market participants called investors?

Sub 3: Would it be possible to keep the primary market alive by changing the law?


texts: Collapse of Lehman Brothers: What did they have in their books?

texts: What kind of products did Lehman Brothers have on their books that caused the collapse? Do we have access to data on this topic?


texts:
I have a question regarding the Bartik Instrument.

I understand that this instrument is a particularly important tool that is used in labor economics. From my understanding, this instrument attempts to isolate demand shocks from supply shocks.

Consider the following thought experiment:

Say that we have an equilibrium quantity determined both the labor demand and labor supply. Call it total labor employed in period t
  in region i.
  We can express it as:$$L_{it}=\sum_{j}L_{ijt}$$
  where the RHS is the summation over all industries hiring labor in this region.

Now, the problem is as follows: the changes in total labor hired in each industry is a result of both supply and demand shocks. What the Bartik Instrument does is that it constructs local labor demand shocks in the following manner:$$\tilde{L_{it}}=\sum_{j}\omega_{jt}L_{ijt-1}$$
 where the LHS is region $i's$
  predicted employment. The summation is basically a weighted average using weights which corresponding to growth rates in national level employment in industry $j$
  times the labor force employed in industry j
  by region $i$
  at time $t$.
  In a sense, these are changes that are unrelated to local labor supply shocks. The Bartik instrument is then calculated as $\frac{\tilde{L_{it}}-L_{it-1}}{L_{it-1}}$

This is where I am lost. Once I construct this 'instrument', what would be my first stage? Do I need a first stage anymore? My intuition tells me yes. What I mean is that is this already the predicted value that we obtain after a first stage? Let me phrase my question in a more intuitive manner:$$L=f(L^{d},L^{s})$$

As a result,$$dL=f_{L^d}dL^{d}+f_{L^S}dL^{s}$$

Now, in a stochastic environment:$$dL=f_{L^D}dL^{d}+f_{L^S}dL^{s}+v
 =f_{L^D}dL^{d}+\epsilon$$
 where I assume that $$cov(dL^{d},\epsilon)=0$$
  or that demand shocks and supply shocks are unrelated. In the first stage then, is the RHS the constructed Bartik instrument? In that case, I would regress the total observed change in labor on the Bartik instrument and obtain $\hat{dL}$
 . Or is it the case that the constructed Bartik instrument by itself serves as $\hat{dL}$
 ?

Thanks a lot!


texts: Is a shrinking money supply environment painful for an economy?

texts:
During the great depression the money supply in the US fell by about a third. It is my suspicion that any economy with a falling money supply will generally be doing badly but of course I could be wrong. So I was wondering if the were any examples in any countries (preferably not going back to ancient times) where an economy has had a steadily shrinking money supply but has been doing well with respect to other economic variables like unemployment?

EDIT: I am interested in theoretical answers to this question too.

EDIT: there are multiple measures of a money supply - so I should say that I am referring to any measure which includes notes and coins as well as "demand deposits" a.k.a. "credit" a.k.a. "cheque book money" (so many names for the same thing!).


texts: I'm looking for a dataset with stats on tertiary education enrollment in the US, per state, at least a couple decades back. I've searched but cannot seem to find anything. Could someone help me out?


texts: Whats the name of the famous hostile takeover where the winner payed less than the loser

texts:
In my studies I learned about a bid war ending in a hostile takeover where the winner ended up paying less than the loser offered. It is a very nice demonstration of elements of game theory so I would like to reread that again and to recommend it to a friend.
Unfortunately, I cannot find it in the internet regardless of what search terms I try. I will state the details I remember. I would be very glad if the answer could tell which companies were included so I can research the interesting details.
Here we go:

Two companies, A and B, competed about to acquire a third one.
The bid war happened at least 10 years ago, maybe more.
The bid war ended in a hostile takeover.
Company A offered a fixed amount. I am not sure, but that offer might have been valid only if enough shareholders accepted it.
Company B offered a higher amount regardless of enough shareholders accepting it. However, if a certain number of shares were reached, the offered price was reduced linearly.
B's offer was dominating A's offer. B won the hostile takeover.
In the end, shareholders received less for their shares than what A offered initially. (This is the crazy thing about this bid war).

I was unable to translate that list in sufficient search terms. Does it ring a bell for someone?


texts: Who were the economists who made lots of money in the financial markets?

texts: I prefer to learn economic theories from economists who made lots of money from the financial markets and were aided by their economic ideas. Who were they? What are the notable economic theories did they formulate?


texts: Whatever happened to Henry George's ideas?

texts: I have heard that Henry George wrote one of the biggest selling economics books in history (Progress and Poverty) and was so famous that 100,000 people attended his funeral, and yet his ideas about land are nowhere to be seen in most economics textbooks. Why is this? Were his ideas thoroughly rebutted?


texts: Difference between frictional unemployment and seasonal unemployment

texts:
Julie spent the entire summer of 2007 working for a tree planting company in Central British Columbia. At the end of July, her contract ended because of weather conditions. She spent the month of August looking for a job but was unsuccessful. In September of 2017 Julie stopped looking for work and instead decided to attend the UBC. As a result, Julie would be considered seasonally unemployed in August but would not be unemployed in September because she is not part of the labour force.

I cannot figure out if this paragraph is true or false. I think it is frictional unemployment in August as she is actively looking for jobs. But it also fits for the seasonal unemployment since she is dismissed because of weather condition. So I dont know how to define this situation.


texts: Effect of Import Tariff on Supply of Currency on Foreign Exchange Market

texts:
I'm struggling with this question below for my macroeconomics course.

If Argentina were to impose a tariff on its imports, how will the supply of Argentina's currency and its exchange rate be affected in foreign exchange markets?

Answer: Supply - Decrease. Currency - Appreciate.

I think I understand, but need someone to say "no" or "yes, but..." to my rationale.

If Argentina imposes a protective tariff, that's to encourage Argentinian domestic industry and exports and discourage imports into Argentina. I know that if a country exports more than it imports (a "favorable" balance of trade), there is a greater demand for its goods - and thus, a greater demand for its currency - on the Foreign Exchange Market. With that said, when demand for Argentinian currency increases, the price level increases, and the Argentinian currency appreciates.

I think I can also explain why supply decreases...is it because demand increases? But, we don't typically say "Oh, since demand increases, I'm also going to decrease supply", though. Can somebody explain, please?


texts:
Suppose I have a regression model:
$$y_{i}=x_{1i}\beta_{1}+x_{1i}D_{i}\beta_{2}+\epsilon
$$
 where $\mathbb{E}\left[\epsilon_{i}|x_{i}\right]\neq0$ , and there
is a problem of endogeneity. In the above, think of the dummy variable
being equal to $1$ when $i$ is male. As such, this model allows
for a differential effect of $x_{1i}$ on $y_{i}$, if the individual
is a male or female. In order to obtain consistent estimates, suppose
I have an instrument $z_{1i}$, which is both a relevant instrument
for $x_{1i}$, and satisfies the exclusion restriction (such that
$cov(z_{i},\epsilon_{i})=0).$ If there were no interaction term,
it would be trivial to estimate the above using Two stage least squares,
or simply just computing:
$$
\hat{\beta}=\left(\boldsymbol{z'}x\right)^{-1}\left(\boldsymbol{z'y}\right)
$$

However, the complication arises due to the interaction term. How
would I go about obtaining estimates for both $\beta_{1}$ and $\beta_{2}$?
One option is to construct another instrument $D_{i}Z_{1i}$. Would
such a procedure be valid?


texts:
Is there some evidence to support the hypothesis of Marx's commodity fetishism?
Since I find that it sounds like a true phenomenon. But a single subjective belief is not ascertaining.
So is there e.g. support for:

Markets produce surplus of "fetishing commodities" due to inequality. The reason that I see "super donuts" is not because they're somehow intrinsically superior, but because donut makers try to find a way to make more appeal in a market, since they cannot compete with anything else. Or applied to other things, one sees a myriad of variations on similar basic ingredients just because there are too many producers.


texts: Does it affect locals negatively when a new company moves in?

texts:
I want to specifically discuss Dallas,TX if possible but a broader answer is still appreciated.

Ever since Toyota and State Farm moved to Dallas, among others, the housing prices have sky rocketed to unreal proportions. Rent prices are at least $200 more than 2 years ago. Houses are about 40% more expensive from 5 years ago.

They say that this is great economic growth for DFW but is it really? How do the locals adapt to this economy? No longer are they building houses in the 200s or 100s. Anything in the 100s is 30 years old and minimally updated.

Are the incoming employees keeping their California wages, causing this inflation? I know for a fact those who sold their homes come in overbidding for much more because in their perspective the houses are cheap.

But what is going to happen to the locals? Will the companies have to raise wages to keep market? Or are local people buying homes on salaries that cannot afford it and wages not go up and cause a crash?

What usually happens in this scenario?


texts:
Given the following two conditions:

$x\succ y$ implies $x+a\succsim y+a$,

And,

$x\prec y$ implies  $x+a\precsim y+a$

We want to prove that $\succsim$ is a linear preference.

One of the definition of linear preference is that:
$x\succsim y \Leftrightarrow x+a\succsim y+a$

So I am trying to do this:

Since $x\succsim y$ means that $x\succ y$ or $x\sim y$

We already know that $x\succ y$ implies $x+a\succsim y+a$,

all things left is to prove that $x\sim y$ also implies that $x+a\succsim y+a$.


texts:
In the context of preferences on a set of lotteries on a finite set $X$, what is an example of a preference that is independent, Archimedean but not mixture continuous?

I know the mixture continuous implies Archimedean but cannot think of an example where the reverse implication fails.

For completeness, I provide here the definitions of the terms above. Suppose $X=\{x_1,\ldots,x_n\}$ is finite. Let $\Delta X=\{\pi\in\mathbb{R}^n:\sum_{i=1}^n\pi_i=1, \pi_i\geq 0\}$. A preference $\succeq$ on the elements of $\Delta X$ is:

Independent: if $\forall$ lotteries $\pi,\rho,\sigma$ and $\forall \alpha\in(0,1)$:
$$
\pi\succ\rho\iff\alpha\pi+(1-\alpha)\sigma\succ \alpha\rho+(1-\alpha)\sigma,\\
\pi\sim\rho\iff\alpha\pi+(1-\alpha)\sigma\sim \alpha\rho+(1-\alpha)\sigma;
$$
Archimedean: if $\forall$ lotteries $\pi,\rho,\sigma$,
$$
\pi\succ\rho\succ\sigma\implies\exists\alpha,\beta\in(0,1): \alpha \pi+(1-\alpha)\sigma\succ\rho, \beta \pi+(1-\beta)\sigma\prec\rho
$$
Mixture continuous: if for all $\pi,\rho,\sigma$, the sets
$$
\{\alpha\in[0,1]:\alpha\pi+(1-\alpha)\rho\succeq\sigma\}\quad\text{and}\quad \{\alpha\in[0,1]:\alpha\pi+(1-\alpha)\rho\preceq\sigma\}
$$
are closed in $[0,1]$


texts: Isn't the concept of "Currency Manipulation" really much ado about nothing?

texts:
(edit this bracket out: i'm sorry for being unclear in my question, it was too mild or undirected earlier, i hope the following is better; thanks)

You keep hearing politicians and sometimes the biz press harp on "Currency Manipulation" when it becomes fashionable, and then the story subsides. But what is considered "manipulation" by central banks, also has market effects, no? So that "manipulation" is not really dangerous.

Am i correct that manipulation can be done by outright money printing, which is inflationary, or completely sterilized, which increases borrowing costs. So it seems all "manipulation" is having a market effect anyway (not a free lunch).

Are there other ways of doing manipulation? which of these two modes of manipulation is more popular? which one does the Unites States use, as the host of the Reserve Currency?


texts: How to prove the WPBE is SE in signaling game?

texts:
The definition of a signaling game:

A signaling game is an extensive game with the following structure:

(i) A move of chance first determines a state of the world/type $t ∈ T$, which is drawn from T according to a probability distribution $π ∈ ∆T$,

(ii) The first player, referred to as the sender (player s), observes the true state/his type $t ∈ T$, and chooses a signal/message $m ∈ M$ to send to the second player, referred to as the receiver (player r),

(iii) The receiver observes the sender’s message m (but not the sender’s type t), and chooses an action $a ∈ A$,

(iv) The players’ payoffs are given by functions $u_i: T × M × A → R$, where $i ∈ {s, r}$.

I need to prove:

  If the sets $T$, $M$, and $A$ are finite, then an assessment $<\beta_s, \beta_r, \mu>$ is a WPBE if and only if it is an SE.

The SE must be a WPBE, this is trivial. But I'm struggling with proving WPBE is SE in this game.

I wanna define a strictly mixed strategy sequence and the corresponding belief system to prove that when the receiver's information set cannot be reached, the belief is still consistent. But I'm stuck here.

Can anyone please give me some hints about how to prove this? And how to define such a sequence?


texts: Proving there exists no arbitrage opportunities given 3 states and 2 assets

texts:
Assume there are 3 states of the world: w1, w2, and w3. Assume there are two assets: a risk-free asset returning Rf in each state, and a risky asset with Return R1 in state w1, R2 in state w2, and R3 in state W3. Assume the probabilities are 1/4 for state w1, 1/2 for state w2, and 1/4 for state w3. Assume Rf=1.0 and R1= 1.1, R2=1.0 and R3= 0.9.

(a) Prove that there are no arbitrage opportunities.
(b) Describe the one-dimensional family of state price vectors (q1,q2,q3)>

For (a), I believe this is equivalent to showing there exists a state price vector.

I know p=Xq, but since we are only given two assets X doesn't have an inverse so I don't know how to compute q. Further, we are not given p. How do I show a state price vector exists?


texts: Directed technical change, Acemoglu (2002) framework - trying to understand how an equation is derived

texts:
You may have read Acemoglu (2002) on the topic of directed technical change. I am reading a similar research paper, and I could not understand how the author derived the final equation using integration. Below are details:

Equation A:

$Y_L=\frac{1}{1-\beta}\left [\displaystyle\int_0^{N_L}x_L(j)^{1-\beta}\,dj\right ]L^{\beta }$

Equation B:

$x_L=\left [\frac{p_L}{\chi_L(j)}\right ]^{1/\beta}L$

Equation C:

$Y_L=\frac{1}{1-\beta}p_L^{\frac{1-\beta}{\beta}}N_LL$

where,

$N_L$ is the number of varieties of machines
$x_L$ is the range of machines, so $x_L(j)$ is a machine type $(j)$
$\chi_L(j)$ is the price of machine type $(j)$

The rest are the usual macro variables.

The author uses the equation B in equation A and derives the equation C after integration. I was wondering if anyone could please help understand how this could be done?


texts:
I have some doubts about the Edgeworth box, it's a newbie one so thanks in advance for the patience. In case, I'm confused if we can count the root of the contract curve (point M) as one of the efficient points since it's part of the contract curve? In this case the indifference curves in the box don't "touch each other", therefore is not a point of efficient trade (as if MRSa = MRSv). Is my line of thinking correct? Can we also assume that every point in the contract curve are Pareto Optimal? Is it also possible for the utility change from one to another (say from N to P)?

*MRS= Marginal Rate of substitution


texts: Type - I Error & Type - II Error: Pregnancy test analogy - is it legit?

texts:
I found this picture in my stats book but I'm now confused to what 'positive' and 'negative' is referring to.

As seen in the table below, Type 1 error is the error that its H0 is actually true but FALSEly claims that it's false. Type 2 error, on the other hand, is the error that its H0 is actually false but FALSEly claims that it's true.

So my question is, how do the pregnancy analogy and whole 'false positive' & 'false negative' thing make sense?

For the first picture to be a type 1 error,  H0 (null hypothesis) should be "The person is NOT pregnant" so that "You're pregnant" statement becomes false.

However, the second picture has the complete opposite H0, where H0 should be "The person is pregnant" so that "You're not pregnant" statement becomes false.

I thought it was really confusing because I thought false POSITIVE and false NEGATIVE corresponded to "You're pregnant"(positive) / "You're NOT pregnant"(negative)

But based on the Chart given below, that doesn't seem to make any sense.

So the question is, is there anything that I'm missing here or is it just that textbook's analogy sucks?


texts: Is my logic on taxation for this question legit?

texts:
At Fenway Park, home of the Boston Red Sox, seating is limited to 39,000. Hence, the number of tickets issued is fixed at that figure. Seeing a golden opportunity to raise revenue, the City of Boston levies a per ticket of 5 bucks to be paid by the ticket buyer. Boston sports fans, a famously civic-minded lot, dutifully send in the 5 bucks per ticket. Draw a well-labeled graph showing the impact of the tax. On whom does the tax burden fall - the team's owners, the fans, or both? Why?

Now, for this question, my take is that the tax burden fall on the fans, because the fans paid 5 bucks extra on tax, and the government imposes a 5 bucks tax. Hence, it doesn't affect the sellers/team's owners. But from what I've learnt is that tax burden is shared amongst sellers and buyers.

I'm equally confused. If it's shared, then who gets to decide the amount buyers and sellers have to split for the tax burden? (If the amount is not provided?) Thank you.


texts:
Learning from different sources I got the impression that the European Central Bank targets at a inflation rate of 2% (not sure along which time scale actually).

Can it be explained by general principles why a (long-term) inflation rate of 2% seems optimal?

Or does it depend on the current economic situation, and in some scenarios an inflation rate of 0%, 1%, or even 5% or deflation would be optimal (in the short or mid run)? But in the long run always 2%?


texts: What's the relation between economic growth and buying power?

texts:
If a country had economic growth last year (2015) does that mean that the average citizen had a better buying power in that year (2015) than in the previous year (2014)?
For example with their monthly wage they could buy 800 kilos of rice in 2015 up from 700 kilos in 2014.

Or to put it in other words: can an country have economic growth while in the same time the average citizen face a reduced buying power (for example by increased prices of commodities) in the same period of time?


texts: Industrial Revolution: Induced technical change and factor shares

texts:
I have been reading about various explanations for the British industrial revolution. A strand of research lead by Allen (2009) tries to provide an incentives based explanation whereby high wage and cheap energy (coal-based) economy of Britain induced labour-saving and capital-deepening technical change. That's, low cost of capital relative to high wages encouraged innovative activities which lead to the substitution of expensive labour with machines i.e. mechanisation of manufacture, textiles, agriculture etc. and this transformation sustained the productivity growth.

If the businesses tried (perhaps, managed) to reduce their labour costs, the labour's share in national income should decline over time. However, looking at the time series of labour's share in national income estimed by Clark(2009), I see the opposite.

The data does not show any support to Allen's hypothesis, which, if true, I would expect the aggregate wage bill to go down in the 19th century due to labour saving and the share of capital to go up due to capital deepening.

Any thoughts or suggestions as to why the wage bill increased despite the efforts to save labour?


texts: Structure of Non-profits and Moral Hazard

texts:
When one looks at a Non-Profit Organization there are three main things people notice.

1.They are an Income tax exempt organization

2. They are primarily financed by donations
3.They are heavily reliant on volunteer labour

what systems are in place to see that surplus income is not redistributed among stakeholders or among board members?


texts: For someone who already knows micro and macro economics, are there any good books to understand chaos theory in economics and mathematical economics in general?


texts: Who holds the Reverse Repo and Repo respectively in a Repurchase Agreement?

texts:
According to investopedia.com in this definition

  A reverse repurchase agreement, or "reverse repo", is the purchase of
  securities with the agreement to sell them at a higher price at a
  specific future date. For the party selling the security (and agreeing
  to repurchase it in the future) it is a repurchase agreement (RP) or
  repo; for the party on the other end of the transaction (buying the
  security and agreeing to sell in the future at a specific date and at a higher price) it is a reverse
  repurchase agreement (RRP) or reverse repo.

However while watching this Khan Academy video from 6:29 to 7:30 (although watching from 0:00 to 6:29 may also be helpful for contextual purposes), it seems that the instructor is switching the definition around where it would be:

  For the party selling the security (and agreeing
  to repurchase it in the future) it is a reverse repurchase agreement (RRP) or
  reverse repo; for the party on the other end of the transaction (buying the
  security and agreeing to sell in the future at a specific date and at a higher price) it is a
  repurchase agreement (RP) or repo.

Thank you everyone for your time and efforts. I really appreciate it!


texts: Why is there negative sign for income effect in slutsky equation?

texts:
Slutsky identity is given by: ∆x/∆p = (∆x/∆p)|substitution effect + (∆x/∆p)|income effect
Now we know ∆m= x*∆p => ∆p=∆m/x
Therefore, ∆x/∆p = (∆x/∆p)|substitution effect + (x*(∆x/∆m))|income effect
But in HAL Varian's book there's minus sign in front of income effect. I am not being able to figure out how the minus sign came there.
I think of income effect as total effect minus substitution effect.


texts: Competitive Market - Production & Number of Firms

texts:
The question is as follows:

The inverse market demand for provision of gas services is given by p(y) = 1/(1+y), where p is the unit price and y measures output in appropriately scaled units. Suppose the technology of gas provision is summarized by the total cost curve C(yi) = (10^−2)yi, where yi represents the units produced by firm i. Suppose all firms have access to the same technology. What is the long run competitive equilibrium of this market? Specify output exchanged, equilibrium price, number of active firms in the market, and profits of each of them.

My attempt at a solution:

I know that for a competitive equilibrium market in the long run, profit is 0. Thus, I can write 0 = p(y)*y - C(yi)y. I also know that P = MC.

Solving either gives P = 1/100 and y = 99. My question is, is this y for each individual firm or total output in the market? I am thinking it is the former since supply should be infinitely elastic at the optimal price in a competitive equilibrium. But I am stuck on solving for the number of active firms are in the market. How do I go about doing this? Thanks.


texts:
I'm reading some note of Eric Sims on extensions to RBCs and he writes «In any balanced growth path, feasibility requires that hours do not grow». The author then explains that this is so, because if it decreased than working hours would eventually decrease to zero, and if they were increasing, then they would reach the max which is 1.

Honestly, I don't get what he means by feasibility here. Is it a mathematical term, or should I read it as plain english?

Any help would be appreciated


texts: How is the level of full employment in an economy determined?

texts: Is this a statistical thing or...? It seems very abstract to me, haha!


texts: How much money was distributed during quantative easing?

texts:
I am trying to discover how much money was created as a result of quantative easing. I do not want to start a political debate. But, I am genuinely interested in learning how much money was signed into law by President Bush and then how much money was signed into law by President Obama. I would also like to learn how much money has been distributed while President Obama has been in office.

I expected to be able to find this information on the web somewhere. However, I have not been able to find a real breakdown. Once again, I have no interest in a political debate. I'm simply seeking the real dollar numbers.


texts: Bayesian Lasso Standardized Variables Coefficient Interpertability

texts:
I am attempting to duplicate Belmonte et al. 2014. The paper applies a Bayesian Lasso to state space models to get better out of sample prediction. Bitto et al 2019 expands on this model. Their expansion includes a simulation study showing that the Bayesian Lasso shrinkage estimator recovered the true coefficients. Both papers, along with Park and Casella 2008, assume that the covariates are standardized mean zero and variance one. However, in most cases data we have is not standardized. How is it possible for data to first be standardized, then analyzed with a Bayesian Lasso and still recover the true DGP in a simulation study? Why is it when I standardize the variables the Bayesian Lasso returns the wrong coefficients and when I don't standardize it returns the right coefficients?

References:

Bitto et al 2019: https://www.sciencedirect.com/science/article/pii/S0304407618302070

Belmonte et al. 2014: https://onlinelibrary.wiley.com/doi/full/10.1002/for.2276

Park and Casella 2008: https://www.tandfonline.com/doi/abs/10.1198/016214508000000337


texts: Floating exchange rate and cost-push inflation?

texts:
I have a trouble understanding the following text from my textbook. I bolded the fragments that don't make sense to me.

"Disadvantages of a floating exchange rate:
A floating exchange rate regime may worsen existing levels of inflation. If a country has high inflation relative to other countries then this will make its exports less competitive and its imports relatively less expensive. The exchange rate will then fall, in order to rectify the situation. However, this could lead to even higher import prices of finished goods, componetns, and raw materials, and thus cost-push inflation, which may further fuel the overall inflation rate."

If there's high inflation, exports become less competitive and imports become less expensive - that's obvious. But why do they say that it would make imports' prices even higher? Why "even" and why "higher"? They've said that imports are cheaper after inflation, so imported raw materials, etc. should be cheaper as well so the costs of productions should be cheaper too and don't cause cost-push inflation but totally opposite.


texts:
It is a common conception these days that exposure to international trade and its adverse effects is a major factor in the rise of protectionist parties or candidates in the most advanced economies (Brexit, D.Trump, Front National, ...). The underlying assumption is probably that workers who have lost their job (or fear losing it) due to international competition are more likely to endorse a candidate with a protectionist agenda.

I would like to know if there has been any attempt at identifying the causal effect of exposure to globalization on voting. If someone knows an article whose authors have found some exogenous variation in the data to address this question I would be very interested. Thank you.


texts: I'm not an econ person, so this is a super naive question, but here goes: why, given the comparative advantage that specialization produces, does anyone prepare their own food rather than buying from restaurants all the time? It seems like there should be economies of scale with respect to food production (restaurants prepare food far more efficiently than I can do at home). Where I live, it's often cheaper to prepare your own food than ordering take out, but I can't understand why.


texts: Does diminishing government spending lead to a reduction in trade deficit?

texts:
NX ≡ (S-I) + (T-G)

  Read this as “the trade balance (net exports) is identical to the sum
  of net savings (savings minus investment) and the government’s budget
  surplus or deficit (taxes minus spending).”  This is not a theory of
  what causes what; it’s an identity, different ways of expressing the
  same “what”.

http://econospeak.blogspot.com/2016/12/the-identity-equals-causation-fallacy.html?m=1

Since the government spending less won't impact negatively savings, especially if savings is already low (people will save more because they will want insurance, etc.) and won't necessarily lead to companies spending a lot more to offset it, it will most of the time lead in a reduced trade deficit. It seems that although cause/effect relationship in a large system is complex and goes both ways, the government spending less will in almost all cases lead to a reduction in trade deficit. Is this true?


texts: Why did the price level of government consumption increase in the United States?

texts:
From The Penn World Tables (PWT7):

Before 1970, the price levels of the three GDP components had been going in parallel. In the late 60s, the price level of government consumption went up (the Nixon Shock + Vietnam War?), and then it steadily increased since after 1980. Investments also behaved differently since then.

Is this price behavior due to the budget deficit (for government consumption) and trade deficit (for investment deflation) or there're some other important factors?


texts: What does perfectly inelastic demand imply about gains from trade and domestic consumers?

texts:
Source: p 191, Question 9.7b, 9.7c, Principles of Microeconomics, 7 Ed, 2014, by NG Mankiw

  Consider a country that imports a good.
  True or false. Explain your answer.
  b) “If demand is perfectly inelastic, there are no gains
  from trade.”
  c) “If demand is perfectly inelastic, consumers do not
  benefit from trade.”

Please explain if this Best Answer is wrong? It claims that b) and c) are true. Yet my own work below shows a surplus of $+B$ after imports $\implies$ Gains from importing $\implies$ B and C are false.
Please feel free to correct my graph, but please also explain the intuition.
I wish to develop intuition, rather than be mechanically engrossed in graphs.


texts: Individuals vs. groups as decision makers

texts: In economics, why do people focus on the individual rather than groups of individuals as decision-makers? Wouldn't considering actions decided by a group of individuals reduce the chance of socially nonoptimal outcomes?


texts:
I have a question so basically.
I have two model $$y= X_1b_1+X_2b_2+u$$
And $$X_2=y\beta_1+X_2\beta_2+v$$
I want to show $b_1=\beta_1$
Are these estimators are equivalent?
$$b_1= (X_1’M_1X_1)^{-1} X_1’M_2y$$
And
$$\beta_1= (X_1’M_2y)^{-1} (X_1’M_1X_1)$$


texts: What is a good way te represent analytically two markets with different price elasticities of demand?

texts: It seems that two linear demand curves with different slopes would be a good way to do it, but linear demand curves are hard to work with otherwise.


texts: I understand the systemic risk that can be associated with the trading of credit default swaps, but is it the same with interest rate swaps? What was the "default rate" on interest rate swaps during the 2007-2008 crisis compared to CDS for instance?


texts: Choosing a econometric model for this situation

texts:
I want to estimate the effect of adoption of a policy (POL1) by firms on their Value (Y). The adoption of POL1 is driven by self-selection. A new law forces a subgroup of firms to adopt a policy called POL2. Adopting POL2 does not guarantee adoption of POL1, and adopting POL1 does not guarantee adoption of POL2. While the connection between POL1 and POL2 has not been explored deeply in literature, I have a few reasons to believe that adopting POL1 will make it easier to comply with POL2. Given these reasons, I am planning a DiD with Treatment firms being firms that were forced to adopt POL2 and also adopted POL1 after the law was passed. The control firms are firms that were not forced to adopt POL2 and also never adopted POL1. The matching is based on nearest neighbour, Mahalanobis distance on industry, Y and some firm characteristics in the PRE period. The model is
deltaY= Y_POST - Y_PRE = b0 + b1.POL1 + Xb2 + e
The sample has 60 treatment firms and hence, the model above has 120 observations.
Please let me know (a) what do I need to do to justify the model above, and (b) is there some cleaner way to arrive at the needed inference?