texts: When considering the wealth of the 19th century American moguls, is it more correct to think in terms of inflation or percentage of GDP?

texts:
I generally see the wealth of Rockefeller and Carnegie variously estimated between \$150 billion and $400 billion when translated into modern terms.

However, when only taking inflation into account, as does a biography of Rockefeller I've been reading lately, their wealth comes out at just a few billion in modern terms, nowhere near the scale the fortunes of today's richest. This seems like some sort of miscalculation, since the scale of their philanthropy and expenditures suggests a far greater heap of funds.

The estimates placing their wealth in the hundreds of billions seem to have reached their conclusion by looking at the moguls' net worth as a percentage of GDP at the time, and calculating how much they'd have to have nowadays to achieve the same percentage.

Is this an accurate way of thinking of it? Does the growth of the country's economy in the past 100+ years necessitate doing more than just accounting for inflation when looking at such fortunes?


texts: Extracting Self-Employed Income from Mixed Income

texts:
I have access to a database with several variables containing data on compensation of employees. I am very interested in creating a variable similar to household income, where the income of the self-employed and wages payed to employees are both taken into consideration.
The data-set contains information on mixed-income, which I could include to this previous variable. However, from my understanding, mixed income includes some form of capital profits as well as this income of the self-employed.
Is there a way to separate pure income from capital profits from this mixed income variable? If not, is there any way at all to estimate household income? This data-set also includes information on value added, consumption of fixed capital and taxes - subsidies. Would subtracting consumption of fixed capital from mixed income work?
Thank you for your help!


texts:
i find the topic of real exchange rate appreciation / depreciation often not very well explained.

even the excerpt below from the following accepted answer on this website is not correct in my opinion.

  The home currency appreciates in real terms against a foreign currency either if the home currency appreciates in nominal terms or if the home country's inflation rate is lower than that in the foreign currency.

specifically, the part in bold i believe is wrong. if the home country's inflation rate is lower than that of the foreign country, then all else equal, the home currency should depreciate in real terms as the domestic consumption basket becomes cheaper relative to the foreign consumption basket

some of the confusion abounds because of the different quoting conventions (X vs 1/X, foreign vs domestic, etc)


texts: In 2016, the Iranian govemment announced that it wanted to privatise its motor vehicle industry. analyze the impact of the privatization on Iran

texts: In 2016, the Iranian government announced that it wanted to privatize its motor vehicle industry. The industry expects to produce 1.6 million cars by 2018 and 2 million by 2020. The sale of the motor car industry is hoped to attract foreign investors. The inclinatory currently operates with outdated technology and needs modification to help take advantage of the large export market in the Middle East


texts: Literature / Evidence on Cash Hoarding of Firms

texts:
I have received anecdotal evidence (heard stories) about many firms hoarding cash (liquid assets) post 2008 and not spending it despite availability of many projects with positive NPV. However, when I tried to find some research / data on this matter, I couldn't dig out too much.

I know that one can use compustat to get a grasp on liquid assets that firms have. Is there any other data on this matter? What papers would be starting points to read up on the related literature?


texts: Showing that a market model has arbitrage and describing martingales

texts:
This is an exercise which I came upon while studying an introduction to financial mathematics.

Exercise :

  Consider the finite sample space $\Omega = \{\omega_1,\omega_2,\omega_3\}$ and let $\mathbb P$ be a probability measure such that $\mathbb P[\{\omega_1\}] > 0$ for all $i=1,2,3$. We define a financial market of one period which is consisted by the probability space $(\Omega,\mathcal{F},\mathbb P)$ with $\mathcal{F} := 2^\Omega$ and the securities $\bar{S} = (S^0,S^1,S^2)$ which are consisted of the zero-risk security $S^0$ and two securities $S^1,S^2$ which have risk. Their values at the time $t=0$ are given by the vector
  $$\bar{S}_0 = \begin{pmatrix} 1\\2\\7 \end{pmatrix}$$
  while their values at time $t=1$, depending whether the scenario $\omega_1,\omega_2$ or $\omega_3$ happens, are given by the vectors
  $$\bar{S}_1(\omega_1) = \begin{pmatrix} 1\\3\\9\end{pmatrix}, \quad \bar{S}_1(\omega_2) = \begin{pmatrix} 1\\1\\5\end{pmatrix}, \quad \bar{S}_1(\omega_3) = \begin{pmatrix} 1\\5\\10 \end{pmatrix}$$
  (a) Show that this financial market has arbitrage.

  (b) Let $S_1^2(\omega_3) = 13$ while the other values remain the same as before. Show that this financial market does not have arbitrage and describe all the equivalent martingale measures.

Attempt :

(a) We have that a value process is defined as :

$$V_t = V_t^\bar{\xi} = \bar{\xi}\cdot \bar{S}_t = \sum_{i=0}^d \xi_t^i\cdot \bar{S}_t^i, \quad t \in \{0,1\}$$

where $\xi = (\xi^0, \xi) \in \mathbb R^{d+1}$ is an investment strategy where the number $\xi^i$ is equal to the number of pieces from the security $S^i$ which are contained in the portfolio at the time period $[0,1], i \in \{0,1,\dots,d\}$.

Now, I also know that to show that a market has arbitrage, I need to show the following :

$$V_0 \leq 0, \quad \mathbb P(V1 \geq 0) = 1, \quad \mathbb P(V_1 > 0) > 0$$

I understand that the different $S$ vectors will be plugged in to calculate $V_t$ but I really can't comprehend $\xi$. What would the $\xi$ vector be ?

Any help for me to understand what $\xi$ really is based on the problem and how to complete my attempt will be much appreciated.

For (b), showing that it does not have arbitrage is similar to (a) as I will just show that one of these conditions will not hold. What about the martingale stuff though ? It's a mathematical substance we really haven't been into so, if possible, I would really appreciate an elaboration.


texts:
I sell so called "tokens" for so called Ether.

I receive an arbitrary amount of Ether in a transaction. I sent back a calculated amount of tokens.

I want the price of a token increase as more tokens are sold.

At first I introduced the formula $t=\frac{e}{T+e}$ where $e$ is the amount of Ether received in this transaction, $T$ is the total amount of Ether received before this transaction, and $t$ is the amount of tokens sent back in this transaction.

This formula has the deficiency that the very first payment (that is when $T=0$) always sends back $1$ token, no matter how much Ether we receive in this transaction. This is silly.

Please propose any alternative formulas with less silly results.

Note that it is impossible to make the total amount of tokens received to be independent of whether the purchase is done in one big transaction or several smaller transactions, as I proved in my answer to https://math.stackexchange.com/q/2709460/4876.

Despite the project is nonprofit (noncommercial), the main purpose of this is to receive as much Ether as we can.


texts: I wanted to know what is the formal name of the (gain/cost)x100 ratio calculation (growth rate perhaps?). Any clarification would be greatly appreciated.


texts: U.S. Bureau of Economic Analysis, when was that created?

texts:
I thought that GDP in the United States was computed by the Bureau of Labor Statistics, but I find that now it is made by the "U.S. Bureau of Economic Analysis" which I never heard of.

For how long has been case? Has this agency always been responsible for GDP? If not, when did it start?


texts:
Suppose we have a Cobb-Douglas utility function: $$U(x,y)=x^\alpha y^\beta$$ and a budget constraint: $$p_{x}x+p_{y}y=I$$ where $\alpha+\beta=1$.

It can be shown that the Marshallian demand for $x$ and $y$ is $x^*=\frac{\alpha I}{p_{x}}$ and $y^*=\frac{\beta I}{p_{y}}$ respectively.

Does a change in $p_{y}$ affect the quantity of $x$ demanded? By looking at $x$'s Marshallian Demand, it seems as though such a change will not affect the quantity of x demanded but $p_{x}$ and $p_{y}$ are related by the budget constraint which makes me not quite sure.


texts: You regularly hear in the media how countries are billions or even trillions of US dollars in debt. How does a country get so far in debt, and who is it in debt to? How can countries of the world operate owing such vast amounts of money?


texts: factors of production (and their relative contribution)

texts:
I am reading mankiw's intermediate economics text. what i find is that when he writes a production function for how much will be produced in an economy. he says it is dependent upon quantity of inputs (capital, labour) and technology (defined by the production function itself).

Now my question why he ignored raw materials, energy and land? When you need to produce more cars. you will need more energy, more raw material (steel or whatever) and more land (after a certain threshold).

Secondly, the idea of technology is kind of tricky. Like usually technology does not hang in thin air. It is usually embedded in the capital itself. pentium 3 as compared to pentium 4 computer, for instance. Also labour. every hour of labour is not equal. Highly skilled labor may be more productive.

So, how do you actually go about disentangling what is the contribution of "technology", capital and labour to output, in a real world data. Like some growth accounting exercises do. It may be very hard to say what is capital and what is technology. every dollar of investment in capital is not same, and it is not independent of technology.


texts: Monopoly second degree discrimination - two part tariff

texts:
In a Monopoly with second degree discrimination - two part tariff will the consumer with higher demand always pay a higher entrance fee and lower unit price than the cunsumer with lower demand or is this assumption not correct?

That is if in optimum High demand chooses offer (T1,P1) and Low demand chooses (T2,P2), do (T1 > T2) and (P1 < P2) always hold?


texts: Taylor Rule: Relationship between interest rate and inflation

texts:
Q. According to the Taylor Rule, what should the central bank do to stabilize the economy after an increase in oil price?

My points:

Increase in oil prices (1970's) raises the price of production for producers and hence shifts the AS curve to the left.
With lower AS and a constant demand the price for goods is raised and inflation increases.
Taylor rule suggests that in order to counter the effect of inflation and lower it back down to its target (usually 2%), for every percentage point that inflation is above its target, the Fed funds rate should be raised by 0.5%. For example if inflation is at 8% and the target is 2%, 8-2=6% above target so Fed funds rate should be raised by 6x0.5 = 3%.

I think I am correct in saying this but if am not please let me know. What I don't understand is why raising interest rates will actually help?

A higher Fed funds rate means banks will have to charge higher interest to its customers which will surely discourage consumption?

I understand the relationship between inflation and Real interest rate:

i = r + pi (Fisher Equation)

I'm just finding it hard to explain why increased interest will lower inflation in practice, i.e. what this means for consumers.

Does anyone have any pointers?

Thanks again in advance


texts: Solving Stochastic Dynamic Optimization Problems: A difficulty with Lagrange Multipliers

texts:
In Wickens' Macroeconomics book, in page 552, the author states the following:

«The stochastic problem can be solved using the method of Lagrange multipliers, but there is a problem with this solution.»

However, if I'm not mistaken, it's very usual to see other books using lagrange multipliers to solve this type of problems. Are they wrong? Am I wrong? Is there a way to go around this apparent limitation?

Any help would be appreciated.

Here's a the image:


texts:
Consider an example of a risk-neutral seller that has two distinct indivisible goods for sale. The seller wants to maximize the expected revenue. The buyer's utility is $$I_av_a+I_bv_b-t,$$ where $I_a,I_b$ are indicators of whether the buyer gets good $a$ or $b$ and $t$ is the monetary transfer. Both $v_a,v_b$ are the types of the buyer (willingness to buy the good).
Let $v_a$ and $v_b$ be i.i.d. draws from a uniform distribution on $[0,1]$.

Assume a seller quotes three prices: $p_a,p_b,p_{ab}$, where $p_{ab}\leq p_a+p_b$. What is the optimal choice of $p_a,p_b,p_{ab}$?

The textbook (T. Borgers, An Intro to the theory of Mechanism Design) I am studying simply says that this is a simple calculus problem and gives the solution as $$p_a=p_b=2/3\\
p_{ab}=\frac{4-\sqrt{2}}{3}.$$

I am not sure how to do that. I'd appreciate any help or hint. Thank you.


texts: What's effect of introducing infinitely high denomination bank notes during hyperinflation?

texts:
Countries that suffer from hyperinflation often print banknotes with many zeroes.

Recently I had a showerthought: Let's imagine a government suffering from hyperinflation go crazy and begin begin printing money with Googolplex denomination for example.
That's a so large number that if we would turn all atoms in the universe into paper and ink it would be still too few to write it down.

Or they simply print an infinitely high denomination "omega" bill: omega is the symbol used to denote the "infinitary" in the hyperreal number plane, which is larger than any real number.

What are the consequences of such an infinite banknote entering the circulation? Would that country in question be able to buy the entire world before the market can react?


texts:
I wasn't 100% sure if this was the right community to ask this in, this seemed the most appropriate.
Is there a database or source where I can find how much businesses spend on their Telecommunications budget. I work for a Telecom company and am trying to do data analysis for network planning. I apologize if this isn't the right location.


texts: Price elasticity of demand always increases with price?

texts: Is there a closed-form continuous demand function whose price elasticity of demand decreases with the price?


texts:
What's the meaning of the standard error of a coefficient in a regression when the whole population is included?

I've been so puzzled by this question. Because it seems to me, standard errors make no sense when the whole population is included -- there is no need for statistical inference since you already have the whole population.

But it is so widely used even by many articles published in top journals. For example, if I am examining the relationship between a country's GDP growth rate and its population density, I run the regression:

$$ GDP_i = \alpha + \beta Pop_i + \gamma \mathbf{X}_i + \epsilon_i$$

with all 195 countries on the earth. In the case, all countries (the population) are included. But all literature still talk about the statistical significance of the coefficients.

Could somebody explain is it a misuse of statistical inference when regressing over the whole population?


texts: Macroeconometrics:How to measure capital depreciation?

texts:
In an econometric sense, how do macroeconomists measure capital depreciation $\delta$ in the formula $K_{t+1}=K_t(1-\delta)+I_{t+1}$.

What data would I need and what kind of regression would I run?


texts:
Let's take as an example the province of Quebec in Canada with a debt of $273B. It just elected a conservative and nationalistic government
to lead the next 4 years. Their platform is that of fiscal prudence and tax reduction. There is a lot of debate around the need to lower the state's debt versus investing more into services and increasing said debt.

With that in mind, I have a few questions for you all:

Who owns all this debt? What happens when the state falls into the red? Is it possible for the state to no longer be able to borrow? Is there a finite amount it can borrow?


texts: I am a total beginner to this, but from the few online videos about how (practical) trading works, I understand that when buyers dominate the market the prices go up and when sellers dominate the prices go down (of course this is an oversimplification). I am not sure I understand how can buyers or sellers dominate. I thought then whenever someone sells some shares someone else buys them. If that is not the case, then where are these shares going, and where are the money going to the seller come from? Going to the extreme case of assuming that everyone sells their stocks, and no one buys, who owns the share anymore and who is paying the people who sold the stocks (which for a reasonable company they are worth a few billions)? Thank you!


texts: Difference between Engel curve and income expansion path

texts:
I was scrolling through many questions on this site about income offer path and it appeared to me that income offer path, income expansion path, engel curve all are different terms with same meaning, i.e. graph of the engel function.

  Can somebody explain what is the difference between these terms, if any?


texts: How can a RTA have a trade imbalance with itself?

texts: I'm looking at ASEAN data for 2015. It seems the intra-ASEAN exports are 305bn USD while the intra-ASEAN imports are only 238 billion USD. Am I misreading the statistics or is it actually possible for a group of countries to have such an imbalance in the group?


texts: Game with predatory player (reference request)

texts:
I am interested in a multiplayer game where one player gains utility, not just by winning, but by seeing one other player (chosen in advance) lose (or come in last place if the game has an ordered finish). Obviously, the best case scenario for this player would be to win and his 'prey' to come in last, and the worst case scenario is where he comes in last and his 'prey' wins. I wanted to look at two scenarios. The first scenario is where the 'prey' does not know that they are being targeted, and the second scenario is where they do know. I have looked for a paper with a similar style game, but have been unsuccessful. Does anyone know if a game like this has been analyzed? Your help would be greatly appreciated.

Note that this is different from a Zero-Sum game in a Predation Model

Also, if there has been no work done on this, do you think this would be an interesting game to analyze, and would it have any real world applications?


texts:
I'm trying to use R for my Macro practise and model solve for the equilibrium price where the inverse demand curve PD(q) and supply curve P.
How do i do this?
Thanks!


texts: Can holding interest rates at zero (ZIRP) for a very long time cause the deflation it is trying to prevent?

texts:
The fisher equation is nominal interest rate = real interest rate + inflation rate.

If nominal interest rate is kept to zero, and real interest rate remains constant positive in the long term, then the inflation rate will be negative, representing deflation!

When the central bank drops nominal interest rate at 0%, the negative delta in the nominal interest rate increases money supply and increases the price level - for a period of time. The boost in demand is because demand is brought forward due to the fall in interest rates. Producers increases production to match this surge in demand, and in doing so, increasing supply of goods come into the market. If there are no more negative deltas in interest rate coming, as is the case under a zero interest rate policy where the nominal interest rate is zero bound, the increased supply is going to cause a decrease in price level due to decreased demand that was consumed to produce the earlier demand surge from the negative interest rate delta, causing deflation.

I'm sure there is a flaw to the logic above, and to the fisher equation, otherwise it would mean a ZIRP, held for a long time, would produce the deflation it was implemented to prevent! Can you point it out?


texts: When there is a third degree price discrimination, why is the total MR curve kinked at the top?

texts: I know that the total MR = MR of student + MR of adult, but wy is it kinked at the top?


texts:
Let's imagine a coin-flip game, which uses an unbiased coin.
Starting with X dollars, your total increases 50% every time you flip heads. But if the coin lands on tails, you lose 40% of your total. You can play this game N times. On each turn, you must bet the total amount you had on the last turn.
Is it worth betting on this case? How can we formalize this in order to have this answer in the general case?
Is it easier to formalize this for a specific value of X and N? Let us assume, for example X = 100 dollars and N = 100 turns.
PS: This scenario appears in an article discussing some ideas of Ole Peters, a theoretical physicist who is claiming that Everything we know about modern economics is wrong.


texts: How the Federal Reserve Manages Money Supply

texts:
I'm trying to understand how the Federal Reserve manages the money supply via open market operations. According to this post, when Fed buys securities, that increases bank reserves, which allows banks to lend more money, which increases the money supply. That makes sense. But when the issuer pays off the bond, wouldn't that reduce bank reserves, thus reducing lending, thus reducing the money supply? It seems like the overall effect of bond buying would be to increase the money supply in the short term but in the long term there may be a slight reduction in the money supply if the bond is paid back with interest.
Please let me know what I'm misunderstanding here. Thanks!


texts: Causes of upward trend in median first marriage age in USA?

texts:
I found a chart here of median age at first marriage by year from 1890 to 2010. It looks like it dips to a low during the 60s then has an upward trend until 2010.

As an answer, I'm looking for any previous economic research about the causes of this trend. I'm also looking for data and theories that might shed light to this trend.

And if anyone can give a summary of proposed causes of this trend, I'd also appreciate that.

Background/side note
There are other demographic trends coming from that pivotal time too, like more women in the work force, more women in college. I would have thought this kind of integration would make the marriage market more efficient and lower/hold constant that age. I guess there are changing preferences and less demand for marriage until later ages nowadays? People fall in love later? Or school and work are bad places to find a partner? Those are just some of my thoughts I'd like to get more info on.

extra note I disagree with people who don't include marriage as an acceptable topic for economics. But they might be kind of right. Marriage is a topic for sociology. To clear this up though, I'm just looking for the information that the discipline of economics can provide. So no, this isn't a sociology question, even though the two overlap. See comments below. Feel free to edit this question if it needs further clarification or narrowing, etc.


texts: Infinitely repeated game: prisoners' dilemma

texts:
I have done most of the legwork, but I have fallen short at the final hurdle.
Could you please correct my mistake(s)?

Given the condition $x>0$ I need to consider the infinitely repeated game where the above strategic form is the stage game. The discount factor: $\delta=\frac{1}{2}$.

I need to find a further condition on the game, such that we have a subgame perfect equilibrium in which both players "cooperate" in each period.

What I have done so far

The profile of strictly dominated strategies $(u,r)$ constitutes the cooperative strategy where $x>0$ and $x \ne 1$.

The prescription (cooperative strategy) will therefore be $(u,r)=(x+1,x+1)$

The grim trigger is $(d,l) = (x,x)$

Payoff from obeying the prescription:

$(x+1) + \delta(x+1) + \delta^2(x+1) +\delta^3(x+1)+... = \frac{x+1}{1-\delta}$

Payoff from deviating (here comes the mistake):

$2x + \delta x + \delta^2 x +\delta^3 x +... =\color{red}{\frac{2x-\delta(x+1)}{1-\delta}}$

The part in red should apparently be:

$$\frac{(2-\delta)x}{1-\delta}$$

I don't understand why I am wrong, could you please explain?
My understanding was that if a player deviates in period 1 in order to obtain $2x$ then both players would have to play the grim trigger profile $(d,l)$ from period 2 to perpetuity. As a result, the players would be missing out on $\delta(x+1)$.  The payoff numerator would therefore be $\color{red}{2x - \delta(x+1)}$ instead of $\color{blue}{(2-\delta)x}$.

Given that the correct numerator is $\color{blue}{(2-\delta)x}$, I can easily finish the question:

$$\frac{x+1}{1-\delta} \ge \frac{(2-\delta)x}{1-\delta}$$

Therefore, we would have a subgame perfect equilibrium iff $x \le 2$.

The problem is that my mistake lies in:

  $2x + \delta x + \delta^2 x +\delta^3 x +...$
  $=\color{red}{\frac{2x-\delta(x+1)}{1-\delta}}$

But, I'm not sure why. I would like to know why I am wrong and why $\color{blue}{(2-\delta)x}$ is the correct numerator.

Thanks.


texts: Panel Data: Fill missing values (on ends) to balance dataset?

texts:
So I have this project to work on with panel data. I am using a dataset featuring most European countries and some of my variables are Macroeconomic such as GDP, GDP per Capita. Thing is, for some cross-sections (countries), I have missing values. In one or two of them, there is like only one or two variables missing, whereas in 3 of them (eg. Latvia's GDP), I have like 5 missing values on the lower end. T goes up to 2018. If I fill the values, I should stand at about (N=19, T=29).
My first thought is to go forecast backwards with ARIMA and Smoothing in those with few observations missing (keep the one that doesn't give me silly negative GDP values) and maybe (linearly) extrapolate for those with more than two missing values?
Couple more questions - Bonus you could say; 1) Some countries, having been part of the USSR because independent in 1991. Should I start my dataset from 1991 simply to include them? Other choice is to include a year more. Still, some Macro varibles like CPI are actually available for those countries pre-1991.
2) How to check/test for heterogeneity?
Few words about the project: It's about causality between energy sources and macro variables. The plan is to go about it using Pesaran's CD for Cross-Dependency, run Unit Root tests (I'll include CIPS in there). See now, to run CIPS on Stata, the panel must be balanced. After that, check for Cointegration. Then, if I do get a long-run relationship (cointegration found), I'll go for FMOLS/DOLS and finally run VECM to check for causality.
Note: The data mentioned is taken from World Bank


texts:
I am of the understanding that an Economy is broken down as follows:

Traditional;
Command;
Market;
Mixed.

Each Economy being made up of Sectors, which in turn, are made up of Industries.

Simply put, what defines a Sector?  I understand that it is the broad categorisation of its associated Industries but is there some kind of universal criteria that need to be met for a term to be viewed as a Sector?

I say criteria, as I come across many interpretations of what a Sector is.  For example, some sources state that a Sector is made up as follows:

Primary;
Secondary;
Tertiary;
Quaternary;
Quinary.

Other sources then approach sectors from a sense of ownership as follows:

Public/State Sector;
Private Sector;
Voluntary Sector.

Then there are the other sources who look at Sectors from the view of a Broad Categorisation of Products/Services.  For example:

Financial;
Healthcare;
Hospitality.

As well as terms seemingly being used interchangeably, it also appears that some sources see Sectors as Industries and vice versa.

Any clarity, on the differentiation, would be greatly appreciated.


texts: Heckscher-Ohlin with heterogeneous preferences

texts:
could someone really help me out I would need to show a situation in which the Heckscher-Ohlin result does not necessarily hold when preferences are heterogeneous.
Does someone have an idea how I could do that?

Would really appreciate the support
Cheers,
James


texts: Metric for evaluating sales with dynamic pricing

texts:
Suppose you have a sausage maker. He buys batches of ground meat, then makes and sells sausages. Suppose each batch of ground meat makes N sausages, and each batch has specific level of quality that dictates the price of the sausage, so each batch of sausages is priced differently. Let's also assume there isn't any shortage of ground meat so the sausage maker can always make more sausage.

The sausages are also priced dynamically in that the price you pay per sausage decreases as you increase the size of your order (i.e. buy 1 for \$2 and 3 for \$5).

Let's also assume that consumers have perfect information about the quality of the sausage. The sausage maker doesn't know the best way to price the sausage based on the quality, so the sausage maker wants to evaluate the performance of each batch of ground meat to try to model the consumer's demand as a function of quality. What would be the best metric?

Naively one could look at the lifetime value of the batch (i.e. how much total revenue was generated from sales from this batch). But this seems wrong, because it fails to take into account the time it took to sell it, and it rewards batches that consumers buy less of in bulk because the price per unit is higher (when in reality consumers buying more of a batch in bulk is an indication of high quality).

So revenue per day (or some time period) seems like the next logical metric, but this also seems naive.

I am certain that this sort of problem is in the Economic literature, but I am not familiar enough to find it. Any guidance would be greatly appreciated.


texts:
In the Solow model, we have the Solow residual often referred to as the level of technology A.

More particularly : \begin{equation} Y(t) = [K(t)]^{\alpha}  [A(t)L(t)]^{1-\alpha} \end{equation}

Here it is defined as "is the portion of output not explained by the amount of
inputs used in production" though there's an explanation of its fluctuations, I still do not understand how it is calculated.

This paper from the National Bank of Belgium does leave me a bit confused because several measurements are said to be used but it sometimes sounds as if one took the total output for a year and substracted what wasn't explained directly by labour and capital, to obtain the residual?

I'm not really sure how it is measured and where said measurements even come from,

Can someone point me to an answer?

Thanks for your time,

Nate


texts: So, I need to determine whether or not $u=x^{0.5}y^{0.5}$ exhibits the same preferences as $u'= log(x) + log (y)$. Any tricks I can use here? I've done the logarithmic transformation so that I now have $(0.5)log (x) + (0.5)log (y)$. My guess is, if I multiply these by $2$ I'll get $log (x) + log (y)$ and thereby proving that u and u' refer to the same preferences, but I'm not sure if this is correct?


texts: A question about intertemporal price discrimination

texts:
Usually intertemporal price discrimination worked like this :
Releasing something at higher price, then lower the price later.
But did this work in reverse too?
I've seen some example on video games where the publisher charge lower prices for in-game cosmetics at release and increasing the price later(Giving Discount at release).
Is this type of pricing strategy more effective than the usual intertemporal price discrimination?
edit :
To give you some context :  In-Game Cosmetics or Skins changes your characters appearance. which means they share some properties with Fashion in real life. They both can give prestige to their consumer("you're rich when you buy X skin").
which means if the publisher applying the usual price discrimination, when you buy a skin at release, you actually get more utility (You can use your skin more, and some additional prestige in the time where the price not yet lowered).
and usually skins are leaked before release, so the hype/publicity usually already there before the skin was released
The Problem is why there's some publisher that actually giving release discount on their skins? While charging higher at release can potentially raise their revenue and profit?
And BTW, Skins Has Effectively 0 Marginal cost, since what they do when a consumer purchase it, it just changing/editing some data on player account details on their server.


texts: Stone-Geary utility function, derivation of Marshallian demand

texts:
I am reading a paper on structural change. It has three sectors and it features non homothetic utility function, namely a CES with some thresholds for the consumption of the three goods. The UMP is as follows:
$$
\max_{C_k; k=1,2,3} \left(\sum_{k}\omega^{\frac{1}{\epsilon}}_k\left(C_k-\bar{C}_k\right)^{\frac{\epsilon-1}{\epsilon}}\right)^\frac{\epsilon}{\epsilon-1}
$$
Subject to the budget constraint
$$
\sum_{K}\left(P_k C_k\right)=W
$$
with $\omega_k$ summing up to 1.
What I find online is mainly a derivation of the log-utility case, which is not that suitable for my case. Also, in the paper authors use a price index which is really close to the one of the Dixit-Stiglitz case.

I'm currently stuck at the level of the FOC, and I wonder what are the steps to derive a proper demand function from these premises. Can anyone show me how to find this demand function?


texts: When is self-selection a problem? Mincer equation

texts:
I need help understanding this selection bias problem. I am estimating a mincer equation for a final year project and I was told I need to worry about self-selection bias IN OCCUPATIONS.

My lecturer said that, because wages vary between occupations, and individuals select occupations as a choice, the sample is selected. In that sense, I need to correct this problem. We were taught the Heckman selection model in the context of people deciding whether to work or not. I understand this case, but not the case of occupations. I mean, all is a choice, isn't? In my model I also have hours of work, public or private sector, full time or part time, region, industry, and other common variables. Why do we worry about occupations but not about everything else? I just cannot get my head around this.

Occupations are low, middle and high skill. I'm estimating the returns to education for Australian workers.

I think one thing is important, which is if the variable is included or not in the regression. For example, normally you cannot include a variable
of employment or inactive, because inactive have no wage. This is why, as I understood from the lecture, we need to test for selection. But choice variables that are included, are they a concern?


texts: Why equilibrium efficiency wage maximizes worker effort per dollar wage

texts:
In the Keynesian model,

  to make as much profit as possible, firms will choose the level of the
  real wage that gets the most effort from workers for each dollar of
  real wages paid

Source: Macroeconomics, 10e
Andrew B. Abel, Ben S. Bernanke, Dean Croushore
Copyright © 2020 Book ID: 1FR37TIEM0I

I think this is assuming that worker effort is equivalent to output, which is equivalent to revenue.

But why does maximizing revenue/cost maximize profit?  I get why maximizing revenue-cost would maximize profit (because revenue-cost is the definition of profit).

Assuming revenue is r(w) and wage is w, we are setting $\frac{\partial}{\partial w}\frac{r(w)}{w}=0$, which is $\frac{r'(w)w-r(w)}{w^2}=0$, so $r'(w)w-r(w)=0$.  But how is that the same as $\frac{\partial}{\partial w}(r(w)-w)=0$ or $r'(w)-1=0$ which is profit maximization?

Not sure if I am thinking about this the right way.


texts: What would happen if someones money would disappear when they die

texts:
So suppose that when anyone died all their net worth would be liquidized and the money would be removed from circulation.

how would this affect the economy? I know this question is a bit broad, but In general, what changes would occur?


texts:
Here is the problem:

Suppose that an oligopolist charges a price of 500 and sells 200 units of output per day. If the oligopolist increases its price about 500, quantity demanded will decline by 4 units for every 1 increase in price. On the other hand, if the oligopolist lowers price below 500, quantity demanded will increase by only 1 unit for every 1 decrease in price.

Here is what I did:
point 1: (200, 500)
point 2: (196, 501)

Then find slope using m=(y2-y1)/(x2-x1) and then use point-slope form for the line. I think I am interpreting the demand increase/decrease incorrectly, but am not sure?

Thanks!


texts: Mr. Yaron Brooks from the Ayn Rand Institute argues that global income inequality is decreasing. True/false?


texts: What is the difference between a free market and a perfectly competitive market?

texts:
I am trying to find the distinction between a free market and a perfectly competitive market, and I can't find the right definition on what makes them different. Can someone give me a clearly expressed definition on what makes one different from the other.

Please Note: I am looking for a reference based answer.


texts: Remove Linear Good From Quasi-linear Utility Function

texts:
Given a quasi-linear utility function: $u(x_1, x_2) = f(x_1) + \beta x_2$,  $\beta > 0 $

What would happen if good 2 ($x_2$) is removed from the market? Would the new utility function be: $u(x_1) = f(x_1)$? If so, would the demand function simply be $x_1 = m/p_1$? I want to find the new demand function as well as the new indifference curves and draw these in a diagram, but I am unsure how to proceed. Surely I cannot graph them in $x_1, x_2$ space if there is no more $x_2$. Or would I still graph them in $x_1, x_2$ space as vertical lines?

I hope my question is understandable, thx for any help.


texts:
$f(x_1,x_2) = min \{x_1,x_2\} + x_2$ if that was the production, what would the isoquant be?
Would it simply follow $x_1 = x_2$? I'm not entirely sure what it the graph would look like.


texts: How do I apply the distance-weighting matrix in a spatial autoregressive model

texts:
Can someone explain how to solve the following problem in a spatial auoregressive model.
The form is:

where p is the SAR coefficient and W is a distance-weighting matrix with a 0-diagonal.

The world only consists of Poland, Germany, and Austria. The weighting matrix is such that a country with a land border receives a w=1 and 0 otherwise. So the Matrix looks as follows:

p = 0.5 and there is a shock to FDI in Poland of size 10. How much would FDI increase in Germany? I cannot make a hold how to make use of W. Thanks!


texts:
Between two countries, Richland and Poorland, with a strict ban on cross-border sales agreed with the Poorlandian government. The respective demand functions for both countries are:
$Q_{poor} = 10 - P_{poor}$ and $Q_{rich} = 14 - 0.5P_{rich}.$
The total cost, TC, in millions, depends on the total amount of units produced $Q = Q_{rich} + Q_{poor}$ and also includes 5 million of fixed costs.
TC $= 5+2Q + \frac{Q^2}{8}$
I. What is the profit-maximization strategy? Please indicate the prices and quantities, as well as the amount of social welfare generated.
II. Also are the prices above consistent with the rule of elasticities?
Can someone please help me with this?
$\textbf{My Idea:}$ I took the derivatives of the TC to find MC. I isolated $P$ for poor and rich and multiplied it by $Q$ to find each revenue function, then subtracted it from TC to get the Total revenue, then I took the derivative to find MR = MC; which is this the maximization for a monopoly. Is this path the optimal one? Can someone please help me solve these? Thank you for your time and help.


texts: Identifying Nash equilibria in extensive form game

texts:
Is there a systematic way of identifying all (pure strategy) Nash equilibria (not just the subgame perfect ones) in an extensive form game? In the following Entrant v Resident example, there are three NEs, two of which ($(OF,F),(OA,F)$) are not subgame perfect. What I've been doing is to convert the extensive form to normal form, and then find NEs there. While reliable, this method is time consuming, and gets complicated as the number of actions/players increases. For example, I suspect that it'd be much easier to spot NEs in a four-player extensive game (each with two action, say) than its normal form equivalent.

I'd be interested to know if there's any procedure that we can use to find pure NEs in a reasonably simple extensive form game.


texts: In the C.E.S. utility function do the parameters need to add up to unity to obtain the Cobb-Douglas utility function?

texts:
Consider the C.E.S. utility function

$$U(x, y) = (ax^{-c} + by^{-c})^{-\frac{1}{c}} $$

Is it true that we must have $a+b=1$ in order to obtain a Cobb-Douglas utility function as $c\rightarrow 0$?


texts: Are there any models which allow to calculate a discount?

texts:
I want to progressively calculate a discount based on the amount of product sold. Are there any models which allow to take into account different type of products and can calculate the discounts based on the target profit? I am using logistic growth function at the moment, but maybe there is better solution lurking around? Where should I look.

I know R and Python and some math, but don't know much about economics. So if anyone can point me to the right direction it would be great.


texts: In which domains independent of trading/investing is candlestick charting used?

texts:
When one queries the term "candlestick chart" in a search engine, the returned results relate to trading and investment techniques which utilize candlestick charts.  However, a candlestick chart also appears on the front cover of this Audible book on the subject of cost and scheduling estimation.  The book is short, and I do not recall it even referencing, let alone describing in detail, the use of candlestick charts in cost and scheduling estimation.

Is candlestick charting used in the domain of cost and scheduling estimation?

In what other domains, besides trading/investing, is candlestick charting used?

Has any interdisciplinary research compared and contrasted the heuristic conclusions drawn from candlestick charting in the various domains in which it is used?  Has anyone attempted to synthesize these domains to learn something more abstract about human psychology/sociology, which may then be applicable to trading or investing (or even the other domains in which candlestick charting is used)?


texts: In what sense is economic growth cumulative?

texts: In my economics syllabus, one of the student competences is to "Show the cumulative nature of growth and measure average and annual rates of growth". What I don't understand is how a country's GDP growth can be subject to cumulative or compounding effects?


texts:
I'm doing an econ course after not having any math or micro for a few years, now I'm totally missing the basics again.
I'm wondering how to show that utility functions are an equivalent to each other:
3xy+2, (xy)^2, e^xy, lnx + lny
should be equal to xy.
Could someone explain me in words what to do? Do you have to take the derivative or can it also be found in another way?
I've seen this post, but for me the explanation is too mathematical.
How can I tell if 2 different utility functions represent the same preferences?
Kind regards and thanks for your help!


texts: How are working hours statistics computed?

texts:
In a recent conversation, I was suggested that national working hours aggregates, as provided by bureaus of statistics, are based on surveys on time use.

Is that true? Can macro labor data, which is used for so many different puzzles and theories, be vulnerable to things such as time-varying biases in estimating time use? How are national working hour statistics computed?


texts: Where do Montenegro and Kosovo get their euros from?

texts: Both Montenegro and Kosovo have unilaterally (?) decided to use euros as their official currencies. I think that most of their capital exists only as records in bank registers, so there is not much problem with that, but what about physical notes and coins that are in circulation? Where do they get them from?


texts: revealed preference given an uncertain environment?

texts:
classical revealed preference is about a situation where we assume an agent has a preference over some set of possible choices $X$. We then construct a revealed preference relation on $X$ from choices made given choice sets $C\subseteq X$.

But is there a theory of revealed preference for the case where the agent doesn't inherently care about his choice $x\in X$, but cares about outcome $o\in O$, where there is a function $f:X\to O$? This function $f$ may possibly be uncertain, or may vary over time?

EDIT: I am asking for a literature on the question of how we infer $u$ in this context, not on how do we infer the   induced preference on $X$.


texts:
I am looking for data sources that measure competition across countries. The variable I'm looking for could be any type of Concentration Ratio, Lerner Index, Herfindahl Index or Markup.

The data does not need to be by industry for each country. It could be an "average" for each. Otherwise data for any specific industry, besides banking and finance would also be welcome.

If a cross-country dataset is not available, data for U.S. states would also be appreciated. Panels are obviously preferable, but a cross-section will do as well.

I'm aware that the World Bank has such data on the financial industry. I am also aware that there are some estimates of markups for several OECD countries, but the number of countries is usally is very small.

Does anyone know where to find such data?


texts: Correcting high AR(1) coefficients in dynamic Gordon model

texts:
I have just finished my thesis on a heterogeneous dividend expectations model applied to the COVID-19 crisis. However after receiving some feedback there is one last issue I want to resolve. I'm using a dynamic Gordon model where estimated AR(1) coefficients (rho and tau) determine variable price-dividend ratios instead of one static value. See the references below for more information on this model.
The problem is that some of my estimated AR(1) coefficients are very high (close to 1) which results in very volatile and unrealistic price-dividend ratios. To pragmatically solve this issue I have corrected these high coefficients by subtracting 1/100 of themselves like this:
$\rho_{new} = \rho_{old} - \frac{1}{100}\rho_{old}$.
This works very well (price-dividend ratios take on realistic values with only a small correction) but it is not very elegant and scientific. Therefore my supervisor asked me to look into this a bit more but I haven't been able to find any related literature on the problem. Does anyone know how to solve this issue in a more elegant way? Any tips and tricks are very welcome!
References:
Hommes, C., & Veld (2017). Booms, busts and behavioural heterogeneity in stock prices. Journal of Economic Dynamics and Control, 80, 101–124
Boswijk, H. P., Hommes, C. H., & Manzan, S. (2007). Behavioral heterogeneity in stock prices. Journal of Economic dynamics and control,31(6), 1938–1970, Appendix B1


texts: Deriving and explaining the weighted cost of capital

texts:
The Wikipedia article for the "weighted cost of capital" (WACC) defines the WACC
as "the rate that a company is expected to pay on average to all its security holders to finance its assets." What exactly does this mean? Does this mean that this is supposed to be the expected returns on the company's stocks as well as the expected return on the company's bonds? Also, how are the two equations, given in the Wikipedia article, derived? For convenience, the two equations are the following. The first is
$$
\text{WACC} = \frac{\sum_{i=1}^N r_i \cdot MV_{i}}{\sum_{i=1}^N MV_i}, \tag{1}
$$
where $N$ is the number of sources of capital (securities, types of liabilities); $r_i$ is the required reate of return for security $i$; and $MV_i$ is the market value of all outstanding securities $i$. The second is
$$
\text{WACC}  = \frac{D}{D+E}K_d + \frac{E}{D+E}K_e \tag{2},
$$
where $D$ is the total debt, $E$ is the total shareholder’s equity, $Ke$ is the cost of equity, and $Kd$ is the cost of debt.

EDIT:
Thanks for the answers below. "Derivation" was too strong of a word to use, which was clear after the explanations given. It was just a little unclear what the objects were in practice. The discussions below clarified things. Also, I found this paragraph from a website linked in one of the answers helpful:

  To understand WACC, think of a company as a bag of money. The money in the bag comes from two sources: debt and equity. Money from business operations is not a third source because, after paying for debt, any cash left over that is not returned to shareholders in the form of dividends is kept in the bag on behalf of shareholders. If debt holders require a 10% return on their investment and shareholders require a 20% return, then, on average, projects funded by the bag of money will have to return 15% to satisfy debt and equity holders. The 15% is the WACC.


texts: When does US Federal Reserve redeem the corporate bonds it bought?

texts:
The US Federal Reserve did the corporate bond buying program in the 2008 crisis and again now during the 2020 pandemic. What happens to the bonds it is buying? That is, someday it matures and corporates pay the money back to Fed. Where can one get this data? I can see the Fed's asset holding from its weekly report (https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm). This one seems to give a picture that bonds bought in 2008 are still held by the Fed. Now in 2020 again there is big spike in holdings due to the purchase again. So, my questions are:

When do the corporates pay back?
What is the impact on economy when they have to payback?
If there is data on such redemptions, where can I find it?
where does the Fed get money from for this corporate bond buying? Tax? But, Would'nt this go cyclical and beat the purpose? That is, government wants to increase money available to public & businesses. So, it buys corporate bonds. If it is done from tax money, it'll spend less on welfare. If it levies more tax, then that will suck money from the hands of public resulting in money crunch again. So, how does the Fed avoid this?


texts: Does the existence of insurance markets negate the broken window fallacy?

texts:
In the wake Harvey and Irma, I did some reading on the Broken window fallacy. It makes sense on it's face that after paying the glazier for the broken window, the shopkeep could not spend his six francs elsewhere, so nothing of value was gained from the breaking of the window.

In the modern world though, the shopkeep probably sets some portion of his funds aside (in the form of either paying an insurer or landlord (who in turn pays his insurer)). Let's also take the child out of the equation and say the window was broken by something an insurer wouldn't deny a payout on, like a very very localized hurricane (it only broke one window, but shattered it to pieces!).

The shopkeeps six francs would not have gone to pay for shoes or bread or the like, they would have gone to the insurance company, possibly at a higher value (let's say he made no claim in a year, with 12 monthly premiums at 1 franc a piece to pay for a six franc window).

For the insurer, he may use some of these funds to pay for his own shoes, but as a responsible insurer he knows he needs to keep a few liquid francs in order to pay out for things like broken windows -- Ergo he probably wouldn't have spent the six francs either.

In this model, it seems like the glazier has produced a product and received payment to nobody else's detriment; ergo the broken window fallacy has broken.


texts: What additional axiom to GARP do we need to generate a differentiable or smooth utility function

texts:
After researching for a while, I find this:
https://www.jstor.org/stable/1913607?seq=2#metadata_info_tab_contents
They come up with an axiom called SSARP that generates a preference with smooth demand function. But what about smooth utility function? What axiom can guarantee that?

The axiom should be best on the demand data set just like GARP


texts: Would $1000/mo UBI funded by 10% goods and services tax cause prices to skyrocket, making the divident useless?

texts:
If everyone in the US was given $1000 per month, paid for by a goods and services tax of 10%, would prices then skyrocket, making the extra money useless?

For example, if I wanted to buy products X, Y, Z in a given month, which each cost \$200, then \$1000 would obviously pay for that. But would merchants all raise their prices drastically higher, since they know everyone has free money and can afford the higher prices? Would this cause so much inflation that the extra $1000 would effectively become meaningless?

Edit: This question is unique from the possible duplicate, because it specifies an income amount, tax amount, and source of the tax which can be input into economic models to get a specific answer.


texts: Linearization around the steady state (Asset pricing application)

texts:
I am working through a linearization example from Colacito and Croce (2011). In the paper the following expression is derived:
\begin{align}
& (v^{i}_{c,t})^{\theta}=E_{t}[\delta e^{\Delta c^{i}_{t+1}\theta(1-\frac{1}{\psi})}(1+v^{i}_{c,t+1})^{\theta}]
\end{align}
Then linearizing around steady state for v: $v^{i}_{ss}=\frac{\delta}{1-\delta}$, they get:
\begin{equation}
v^{i}_{c,t}=E_{t}[\delta + \frac{\delta}{1-\delta}(1-\frac{1}{\psi})\Delta c^{i}_{t+1} + \delta v^{i}_{c,t+1}]\\
\end{equation}
I am struggling to see how you derive the second equation from the first equation by simply linearizing around v. Can someone try to derive this and see how to get there?
Many thanks!


texts: How do I derive the aggregate demand function given two utilities functions?

texts:
Assume that we have two people with the same utility function of $U_i = x^{1/2} + y^{1/2}$ where $i=1,2$ and $I_i$ is the income. Let $P_x$ denote price of good $x$ and $P_y$ denote price of good $y$.

I'm being asked to derive the aggregate demand function. The only thing I got so far was finding the market demand for each good per person, which is

$x^*_1 = {I_1}/2P_x$ , $y^*_1 = {I_1}/2P_y$, for person 1

$x^*_2 = {I_2}/2P_x$, $y^*_2 = {I_2}/2P_y$ for person 2

Am I missing something? Please help.

Thanks.


texts: Alternatives to Capitalism and Communism

texts: Are there any remarkable economists who have envisioned alternative economic system to the ones previously tried? I'm looking for realistic economic system models and their authors.


texts: I have a nice and (I think) significant result. I would like to publish it, but I have no idea how. It's a proof of an optimal institutional structure. Who do I contact?


texts: Trouble at differentiating a consumption function

texts:
everyone.
This is kind of a basic question, but I have a weak background on calculus and I already tried to figure this out by myself for a few hours without success. So, I am finally appealing on you - I even feel embarrassed about asking such a basic question among all of these complex questions in the forum.
Let's get to it: in the middle of a chapter about aggregate demand and IS curve in the textbook "Macroeconomia", by Mario Henrique Simonsen, there is the statement of this consumption function:
$(1)$ $C = aA + bY_d$   with $a>0$ and $b>0$
(C represents consumption, A represents non-human wealth and Yd represents disposable income)
Then, as keynesian theory takes A as given in the short-run (so it is treated as a constant), there is this differentiation of A in respect of t:
$(2)$ $\frac{dA}{dt} = Y_d - C = (1-b)Y_d - aA$
And there is my problem. Mathematically, I don't know how $\frac{dA}{dt} = Y_d - C$.
My train of thought is to differentiate the consumption function like this:
$\frac{dC}{dt} = a \frac{dA}{dt} + b \frac{dY_d}{dt}$
Then, as $\frac{dA}{dt} = 0$:
$0 = b \frac{dY_d}{dt} - \frac{dC}{dt}$
But it is pretty different than equation (2). What are my mistakes? Thank you.


texts: Software for field work: collecting survey data (multi-platform, on-line and off-line)

texts:
As part of an RCT, I am looking for Software to record digitally the answers some survey questionnaires. The questionnaire is somewhat long,  ~100 questions  divided into 10 blocks.
We will collect  3 rounds (baseline, follow-up 1 and 2) of 600 surveys. Surveyors have access to a windows laptop and perhaps an Android or iPhone.

Desired features:

Must function online and offline (as in some places there won´t be internet access).
Must have a functionality to skip questions. Ex: if q1=no, then skip to question 7
Preferably multi-platform (Android, OS and Windows)
Fast to set-up infrastructure and create the questionnaire
Free or reasonably cheap service
Ability to record GPS coordinates (in case of phone survey)
Ability to add Pictures (in case of phone survey)

What do most working on RCTs use?
Do JPAL, IPA and similar outfits have any recommendations on this front?


texts: What is the difference between marginal cost and average cost?

texts:
Marginal Cost is
$$MC(y) = \frac{\partial C(y)}{ \partial y}$$
Average Cost is
$$AC(y) = \frac{ C(y)}{ y}$$
Average Variable Cost is
$$AVC(y) = \frac{VC(y)}{ y}$$
Note:
Cost is
$$ C(y) = FC + VC(y)$$
I don’t understand what the differences are. Like I understand the definition of cost function, fixed costs, and variable costs, but I don’t get how marginal cost, average cost, and average variable costs are related.

Can someone explain?


texts: First order condition of log functions in general and interpretation

texts:
In the following, a first order condition for a log function is calculated.
I know how the left part was calculated, however, I am a little bit confused where the gamma on the right site comes from without further knowledge about the concrete function of N. Could someone explain?
And why can one interpret these findings as elasticity?
Info: R(a) is the ad revenue for a platform i dependent on ad level a. N is the number of viewers which depends on the ad nuisance of platform i and the other platforms -i. The maximisation problem is to choose optimal ad level a.


texts:
Suppose the government puts a tax on all apartment owners (e.g. a certain percentage of the apartment value), whether or not the apartment is rented. Will this tax cause an increase in rent?

From an economics point of view, it seems the answer should be no (at least in the short run): the tax has no effect on the supply or the demand so there is no reason that the rent should change. If landlords could take a higher rent, they would do so now. If they don't take a higher rent, it means that they cannot do so in the current market conditions, so they will not be able to raise the rent even when there is tax.

But from a psychological point of view, the answer may be yes. Why? Because landlords often don't raise the rent to the maximum possible level given the market conditions. Often, when a tenant rents an apartment for many years, the landlord prefers to keep the rent constant in order to keep good relations with the tenant. But, when there is tax, the landlords have an excuse to raise the rent. They can say "we are sorry, we would really like to keep the rent as it is, but we must raise it to cover the new tax".

Are these considerations correct?

What is more likely to happen in reality?


texts:
Currently I am trying to figure out some old problems for an upcoming micro exam. One of them is about production under uncertainty. The exercise seems standard to me, yet I am not sure whether I have the correct solution. The question is as follows.

A firm produces goods with the cost function $C(x) = cx^2$ where $x$ is the good. The price $p_x$ is exogenously given. The utility function of the producer is given as $u(y) = \sqrt{y}$ where $y$ is the income due to profit. Determine the optimal amount of produced goods $x$ in case i.) $p_x$ is deterministic and (ii.) the price is random where it is $p^0_x$ with probability 0.5 and $p^1_x$ with probability 0.5. How will the output change if there is some future price $p^f_x > \mathbb{E}[p^s_x]$?

My solution is as follows. First, we have that the firm's profit is

$$G = p_xx - cx^2$$

and its utility

$$ u(y) = \sqrt{p_xx - cx^2}$$

Now under deterministic prices the firm owner wants to maximize expected utility, hence

$$\frac{d\mathbb{E}[U]}{dx} = (p_xx - cx^2)^{-\frac{1}{2}}(p_x - 2xc) = 0$$

and therefore $$x = \frac{p_x}{2c}$$

In case of random prices the optimality condition is now

$$ \frac{d\mathbb{E}[u]}{dx} = \frac{1}{2}((p^0_xx - cx^2)^{-\frac{1}{2}}(p^0_x - 2xc) + (p^1_xx - cx^2)^{-\frac{1}{2}}(p^1_x - 2xc) = 0$$

right? After that I have to solve for $x$ and I got the result.

Finally, if there is some future price which is higher than the expected price I am not quite sure how to proceed. Intuitively, I'd say that if the owner would produce more goods but how would I show that in an analytic manner?


texts: Growth accounting: technological progress grows at near zero rate

texts: In a growth accounting exercise I backed out the time path of technical progress augmenting a factor. Annual growth rate of this factor saving innovation is very close to zero in the last few years. So, its contribution to growth per head diminished. Can we also say, in these later years the augmentation was more like neutral than factor specific?


texts: How to estimate signifcance of price difference?

texts:
I am trying to estimate how significant is a difference between two prices.

Preface

It seems to not be percentage, as price difference of \$0.10 vs \$0.09 wouldn't make me go for the cheaper shop while \$10000 vs \$9000 is a 10% price difference that I care about and would surely choose the shop that is cheaper.

On the other hand, the absolute value also is not the key - if two shops offer the same thing for \$0.50 and \$5.50, I'd go for the cheaper shop. If it's a big thing and the price is \$9995 vs \$10000, I'd rather go for the shop that somehow seems better or more respectable...

It seems to me that the actual significance of price difference for a rational customer would compare the price difference to costs of choosing the cheaper shop - increased risk, decreased prestige, commuting costs to physically choose the other shop etc. But can this be aproximately estimated?

Main question

Have some researchers worked on quantitavely estimating this? Is there any function that assigns a "signifcant difference" margin to a price? Or directly estimates the significance of the price difference.

I understand that such significance of difference will probably be dependant on customer and currency, I have no objections to involvement of coefficients etc.

My attempt

I will display you my attempts at estimating what I'm looking for - it might help to better understand what I'm interested in if my previous explanations were too muddy.

By some numerical experiments it seems that the significance of price difference is monotonously dependant (and somewhat proportional) on inverse of logarithm of price. I arrived (experimentally) at such formula that somewhat estimates what change seems acceptable in price:

$$\text{Acceptable change} = \text{Price} \frac{1}{10 \log( \text{Price})}$$

From this I can conclude that \$9-\$11 is similar \$10 while similar prices to \$100 are \$95-\$105.


texts: Finland's Universal Basic Income Test - how much in local terms?

texts:
Finland is currently trialling UBI at a rate of €560 (£473) per month. I'm looking for some contextualization of this figure.

Is this figure supposed to cover housing costs, or are they paid from a separate benefit for those who can't afford them? If not, what's the least one might pay for housing in Finland?
How much does a week of food cost in Finland?


texts: What are the empirical techniques to show causation?

texts: A simple linear regression only shows correlation between two variables. To establish causation, two commonly taught methods are IV regression and natural experiments. What are the other methods people use to establish causation?


texts: What is the classic paper that derives borrowing constraints from asymmetric information?

texts:
In reading the Wikipedia article about the "financial accelerator," I read this

  Firms’ ability to borrow depends essentially on the market value of
  their net worth. The reason for this is the familiar story of
  asymmetric information between lenders and borrowers. Lenders are
  likely to have little information about the reliability of any given
  borrower. As such, they usually require borrowers to set forth their
  ability to repay, often in the form of collateralized assets.

So, I believe that models with a financial accelerator, such as Kiyotaki and Moore (1997), assume a credit constraint. I am looking form papers that derive these credit constraints. That is, where do they come from? Could someone provide the reference?

Papers that I can think of are, for example, Hart and Moore (1994), which derives constraints that are driven by asymmetric information and the inalienability of human capital, or Myers and Rajan (1998), which derives debt capacity from inefficient liquidation and the ability of the manager to engage in asset substitution. What are the classic papers on this topic?


texts: What is Tinbergen's "all other income when paid out" measuring?

texts:
In When it all began by Dhaene and Barten (1989), the authors discuss in detail what they claim was the first ever macroeconometric model, Tinbergen's 1936 model of the Netherlands economy.

Some of their summaries of Tinbergen's variables are a bit vague though.

What, for example, is $E$, described as "All other income, when paid out"?


texts: How do economic and financial policies in government deal with cryptocurrencies?

texts:
Given the decentralized nature of cryptocurrencies like bitcoin and ethereum, how can centralized organisations like banks and the government create policies around it without changing the way traditional economies work?

I have read a little bit about Japan accepting bitcoin as legitimate payments, and also countries like Japan, Russia and Estonia wanting to create their own cryptocurrency so it definitely appears to be something that is going into mainstream finances soon.

Can someone explain how a typical government would deal with this?


texts: Logit/Probit with numbers different than 0 or 1?

texts:
I am trying to find an econometric model that helps me to answer the following. I would like to measure how much the increase in the cost of a production factor (my X) shifts the supply curve of a market "A" (my Y). That is, I want to regress Y on X. I have daily data of the supply curve (the pairs Price, Quantity) and the daily cost of the factor. As a first step, I calculated a dummy variable that takes the value 1 if in day t there was a shift to the left with respect to t-1. Then I calculated the variable that measures the displacement if there was a shift (my Y). Which econometric model could I use since Logit and Probit only apply when the variables are 0 or 1, but in this case, I want to know how much the curve moves? Should I take a subsample of all the dummies that are equal to 1 and work with that? I don't think this is the best answer.
Thanks in advance!


texts: How are you supposed to calculate overhead expenses?

texts:
I'm doing a college assignment (creating a software product) in Computer Science and have been given a template for the part of the report about economics. At one moment it states the following:

To calculate overhead expenses we must multiply our overall salary by the coefficient of overhead expenses.

And later in the text it assumes that this coefficient is 1.2 without any context or explanation. This makes absolutely no sense to me. Am I missing something or is it wrong? If it is wrong, how am I supposed to calculate overhead expenses if every reasonable expense is already accounted for?


texts: Properties of orders and preference relations

texts:
Suppose I have alternatives $A$, $B$, and $C$. If I have strict preferences, that means that for any $x,y \in \{A,B,C\}$ such that $x \ne y$, either $x \succ y$ or $y \succ x$. Assume transitivity, non-reflexivity, completeness.

Things get a lot less clear to me when I'm trying to talk about it as an order. How would I say that an agent has an order over the alternatives that would allow some ties? And how would I say an agent has an order over the alternatives that would not allow ties? Is it just the intuitive weak total order and strict total order, over alternatives where the weak and strict carry the same meaning as for preference relations and total is a synonym for complete?


texts: Are stock exchanges like NASDAQ and NYSE market makers? In other words, are they providing liquidity by pairing individual buyers and sellers with each other in real-time? Or does it work differently?


texts: Can be the duality theorem applied to not locally non-satiated utility functions?

texts:
I have the following not locally non-satiated utility function:

$$U(x,y)=-(x-1)^2-(y-2)^2$$

where $U(x,y): \, \!R^n_+ \rightarrow \!R $

The 3D plot of this function is an infinite paraboloid; therefore, $U(x,y)$ can be considered as a not locally non-satiated utility function.

After I've found the Marshallian demand and the indirect utility functions, I'd like to determine the Hicksian demand curve and the expenditure functions using the duality theorem. Can be the duality theorem applied to this type of not locally non-satiated utility functions?


texts: What strategies can the president employ to deflate the dollar

texts:
United States president Donald Trump has publicly declared a desire to deflate the value of the dollar.  I have read in news reports that he has asked aids to find ways to decrease the dollar's exchange rate.

I understand that attempting to influence the Fed to lower interest rates could achieve his goal of a lower exchange rate.

What are other methods a president could undertake to weaken the dollar?


texts: Proof of DCF model by mathematical induction

texts:
I am confident with the concept of DCF. However, I wanted to check the following proof given that if investors hold a share in $ t $, sell it at $t+1$, receive dividend $\ D_{t+1} $ and the price at $t+1$, $\ P_{t+1}$. Plus, the current value of share is the present value of all future cash flows (dividends).

Note that:

$\ D_{t+j} $ stands for dividend at period $ t+j $
$\ P_{t+j} $ stands for price at period $ t+j $

Starting from:

1) $\ P_t = \frac{D_{t+1}}{(1+k)} + \frac{P_{t+1}}{(1+k)} $

Induction Hypothesis:

2) $\ P_{t+j} = \sum\limits_{s=1}^{j} \frac{D_{t+s}}{(1+k)^s} + \frac{P_{t+j}}{(1+k)^s} $ with $j > 1 $

Induction Step:

3) $\ P_{t+j+1} = \sum\limits_{s=1}^{j+1} \frac{D_{t+s}}{(1+k)^s} + \frac{P_{t+j+1}}{(1+k)^{s+1}} $

Now, I was provided with the above proof which does not look right to me. My doubt is the following: why in 1 and 2 the price term on the right side is the present value of the price we are measuring and not the PV of the future price? The same is happening for the dividend terms in the summation. This seems inconsistent with 1 and counterintuitive.

Any help in assessing the rightness of the above proof or providing an entirely new one will be greatly appreciated! Also this is first post, happy to join the community!


texts: Why regulate the financial world rather than take over some of the services?

texts:
The government regulates some of the behavior of financial markets. Understandably, especially considering the crisis.

But would it not be easier if the government overtook some of the aspects of the financial markets? In that case, regulation would not be necessary, since the government was in charge of that particular aspect.

For example, say the government overtook the business of giving out mortgages to house buyers. In this case, the government would not have to worry about banks giving out subprime mortgages, securitizing them, and selling them off, the government would be in charge of the entire process and since the government does not seek profit-maximization, it would make sure to do it right.


texts: With most government bonds having interest rates being rather low, (0.254%) This being a whole 1.75% below target inflation (To clarify all rates are UK rates, and UK target inflation is 2%), and 1.54% below inflation last year (In 2019, the average inflation rate in the United Kingdom was at about 1.79 percent compared to the previous year.) Why are bonds still a popular investment strategy. Are they simply seen as a way for investors to 'hold' money, but at the same time combatting the erosive effect of inflation on said money?


texts:
There are a number of online booksellers that are popular in India right now. The prices they charge for the same book often differ by as much as 10% (See this price comparison site to check http://www.indiabookstore.net/)

Since these are homogenous goods and anyone who can access one of the stores can as easily assess another I wonder how we might explain this price dispersion. I have not done a systematic study but it is my impression that it is not the case that there is an ordering of prices between stores which is the same for different books.

I was wondering whether there are any economic models which can explain this dispersion. In particular are there models which can be tested by using panels of price data.

[I confess I am fishing for a research topic.]


texts:
Can government and people spend money foolishly be a main cause of inflation?

For example if the the arm race happen in two country unwisely, two country will be focus on a military product instead of civilian use product, then some resources will not be use effectively based on the production possibility curve

I am wondering if inflation will happen if people don't know how to balance out which combinations of product is best for them


texts:
We have learned that any "strictly positive monotonous transformation" of utility functions is okay, as long as they preserve the ranking of choices implied by the underlying preferences.

Consider $U(x, y) = (x/y)^\alpha$

The cross derivative is $\frac{\partial^2}{\partial y \partial x} U(x,y) =
-\alpha^2 (\frac{x}{y})^{\alpha - 1}$

Now, consider the monotonous transformation $V(x,y) = \log U(x,y) = \alpha \log x - \alpha \log y$. The cross-derivative of $V$ is $0$.

The cross-derivative incorporates important information on how the ranking of choices of $x$ changes, as we change $y$. Clearly, these two different cross-derivatives cannot be generated from the same underlying preference ranking - or am I mistaken?


texts: If I gain, then someone else loses. Correct?

texts:
On a very small scale, it's certainly true that if I gain, somebody else might lose. If I take away my brother's chocolate, then he will lose it, and will most probably not get anything comparable.

But on greater scale, say, nationally, if one person (e.g. successful start-up founder) makes a fortune, will this generally be bad for the other players? Or can it be beneficial (e.g. if the money is not saved up)? Does it entirely depend on the rich person's spending behavior?


texts:
I am currently using the gravity model for my dissertation on migration flows. Do gravity models need to be augmented by dummy variables only or can other explanatory variables (such as the unemployment rate in the destination/ origin country) be included please?

All your feedback is greatly appreciated.


texts: Random effect Vs Fixed effect with the 10 CAN provs as cross sections

texts: Im working on a model examining the effect of minimum wages on employment over the 10 provinces using a panel data set. I have used the Hausman test to decide to use RE or FE, in which it recommended RE. However, my concern is that is may not be a appropriate assumption that the 10 provinces (error term) are a random sample from a larger population which the RE model assumes. Thoughts? should I use the FE instead?


texts: How do Trade Costs work in International Trade?

texts:
I'm currently reading a paper about trade costs in international trade, but I really struggle to understand the following passage:

  A rough estimate of the tax equivalent of “representative” trade costs for industrialized countries is 170 percent. This number breaks down as follows: 21 percent transportation costs, 44 percent border-related trade barriers, and 55 percent retail and wholesale distribution costs (2.7=1.21∗1.44∗1.55).

What does "tax equivalent of representative trade costs" mean?
"Trade costs for industrialized countries is 170 percent" of what?
How can trade costs exceed 100%?

Please help me out, I'm really loosing my sleep on this one!


texts: Derive demand function $x(p,w)$ from utility function $u(x) = \min\{x_1, x_2\} + x_3$

texts:
I know how to solve the two-good case with $u(x) = \min\{x1, x2\}$, but the addition of $x3$ confuses me.

Problem

Derive the demand function $x(p,w)$ from $u(x) = \min\{x1, x2\} + x3$

What I did so far

We assume that in optimum $x1 = x2$.

Set up the budget constraint $p1x1 + p2x2 + p3x3 = w$

Rewrite budget constraint as $(p1+p2)x1 + p3x3 = w$ or $(p1+p2)x2 + p3x3 = w$

We can write $x1*$ or $x2* = \frac{w-p3x3}{p1+p2}$ and $x3* = \frac{w-(p1+p2)a}{p3}$

Confusion

How to proceed? Can I still use a Lagrangian to solve this?


texts: Does consumer surplus over-weigh the interests of high-income consumers?

texts:
An individual's willingness to pay for a good not only depends on how much they value that good, but also on their income level (at least under the conventional non-economics definition of the word 'value').

Consider the case with a single indivisible unit of a good and 2 consumers, a very wealthy consumer and a very poor consumer. Even if the poor consumer would benefit more from receiving the good than the wealthy consumer  (let's say the good is a drug that the poor consumer medically needs but the rich consumer wants to take recreationally), the 'efficiency-maximizing' free market will still give the good to the wealthy consumer under most conditions. The wealthier consumer has a higher willingness-to-pay not because the good is worth more to them, but because a single dollar of their wealth is worth less.

The normative idea that a good should always go to the individual with the highest willingness to pay is then surely flawed. The policy objective of maximizing surplus, which follows from this idea, must also be flawed. Given how glaring this problem is, I am surprised to see so many papers that still use WTP-derived consumer surplus in their normative analysis.

My questions are:

-What does the literature have to say about this issue?

-Have alternative measures of surplus been proposed?

-Is my reasoning flawed/is the measure of CS not as unfair as I am suggesting?

Partly inspired by some of the arguments in this thread:
What does economics say about "price gouging" during an emergency?


texts: Regarding the Expenditure Function Underlying a Bliss Point

texts:
I've been looking at expenditure systems and have been really interested in the behaviour of the demand system that underlies bliss points:

Consider the bliss point utility function of the following form:

$$U(x_1,x_2)=-(x_1-\delta_1)^2-(x_2-\delta_2)^2$$

for two dimensions the corresponding hicksian demands are:

$$x_1^c=\delta_1-\left[\frac{\bar{U}}{1+\frac{p_2}{p_1}}\right]^\frac{1}{2}$$
$$x_2^c=\delta_2-\left[\frac{\bar{U}}{1+\frac{p_1}{p_2}}\right]^\frac{1}{2}$$

It follows that the expenditure function is:
$$e(p_1,p_2,\bar{U})=p_1\delta_1-p_1\left[\frac{\bar{U}}{1+\frac{p_2}{p_1}}\right]^\frac{1}{2}+p_2\delta_2-p_2\left[\frac{\bar{U}}{1+\frac{p_1}{p_2}}\right]^\frac{1}{2}$$

Obviously expenditure functions can be much larger. however I'm having a hard time for generating a expenditure function for a number of $n$ goods.

tldr What would the hicksian demands look like for the utility function:
$$U(\mathbf{x})=-\sum_{i=1}^n(x_i-\delta_i)^2$$


texts:
I was just wondering as a science major, science can be done through inductive reasoning at first by trying to gather examples and information through observation then coming to general conclusion or hypothesis on this observation.

I believe that in Economics, they also have similar tools to come up with various theories which govern how our economy functions. But towards more behavioral economics, how would one test the hypothesis? Unlike natural sciences, we needs to test on human behavior, but how can one formulate predictions and testify the hypothesis if human trials are not available to a large extent?

In other words, how good are human sciences (such as economics) when formulating theories and coming to making predictions unlike the natural sciences?


texts:
In the previous question here, one comment said:

"Currency unions to work properly need either perfect mobility of all factors of production (i.e. free migration/capital flows etc) or fiscal union".

However, I remember our professor at university once mentioning that gold standard worked like a monetary union. In past countries did not had fiscal unions and people could not move around as easily as today. How come that the gold standard was able to exist? Or was gold standard not monetary union?


texts:
Suppose we use instrumental variables with a single binary instrument $Z$. Let $Y$ denote the (continuous) outcome and $X$ denote the single explanatory variable of interest. If I understand matters correctly, the instrumental variables estimator of the effect of $X$ on $Y$ can be written as
$\beta_{IV} = \frac{\Delta \bar{Y}}{\Delta \bar{X}}$
where $\Delta \bar{Y}$ is the change in the mean outcome and $\Delta \bar{X}$ is the change in the mean explanatory variable.
Suppose now we have two binary instruments, $D_1$ and $D_2$, and conduct a similar exercise. Intuitively, I would expect that the IV estimate is a weighted average of the IV estimate using $D_1$ only, and the IV estimate using $D_2$ only. Is this correct? If so, what are the weights?
Or indeed suppose we have $k$ binary instruments. Is there a simple formula (not involving matrix algebra please!) for the estimator?
N.B. I suspect that using multiple instruments makes no difference if the underlying relationships (between $Z$ and $X$ and $X$ and $Y$) are linear. Non-linearity would seem to be the key to this problem.


texts: When can economists claim to "understand" an event or phenomenon?

texts:
It's a common refrain that economists still don't have a solid grasp of the causes of business cycles (in particular, the Great Depression), despite decades of serious study. What would it take to say that this (or another event/phenomenon -- economic growth, the collapse of the Soviet Union, the causes of inequality) is "understood"? Are any key questions in economics "solved"?

Some additional questions for discussion- Can economists say that they "understand" something when they can craft policy to manipulate it as desired? Does the ability to predict phenomena constitute "understanding"? Is something "understood" when there is a broad consensus in the profession?


texts:
I am currently reading the book "Microeconomics: Principles and Analysis" by Cowell (2006), page 452-453. e have a two-commodity world, in which there are
${n_h}$ agents (households): commodity 1 is a pure public good and commodity 2 is
purely private.

Each agent has an exogenously given income ${y^h}$ , denominated in units of the
private good 2. We imagine that the public good is to be financed voluntarily,
each household makes a contribution ${z^h}$ which leaves

$$x_2^h = {y^h} - {z^h}$$ of the private good available for h’s own consumption
and
$${x_1} = \phi (\bar z + {y^h} - x_2^h)$$    where z is the total input of the good 2 used in the production process. Each agent realises that the total output of the public good depends upon his
or her own contribution and upon that made by others

The expression (13.30)

The expression (13.31)

Did he come to expression (13.33) by applying the chain rule as

$$\eqalign{
  & z = U({x_1},x_2^h)  \cr
  & {x_1} = g({x_2})  \cr
  & {{dz} \over {d{x_2}}} = {{\partial f} \over {\partial {x_1}}}{{d{x_1}} \over {d{x_2}}} + {{\partial f} \over {\partial {x_2}}}{{d{x_2}} \over {d{x_2}}} = {{\partial f} \over {\partial {x_1}}}{{d{x_1}} \over {d{x_2}}} + {{\partial f} \over {\partial {x_2}}} \cr} $$

since ${x_1}$ is a function of $x_2^h$ ?


texts:
According to the doctrine of the money multiplier (https://en.wikipedia.org/wiki/Money_multiplier), a positive reserve ratio means a bank has LESS loans than deposits. See the table in the link. Therefore, if a bank gets a loan of 100, it can lend, say 80. Here I understand that the interest rate on loans must be higher than the interest rate on deposits, so that the bank can make a profit.

HOWEVER, there are other theories like endogenous money theory which state that actually, if a bank has 100 in deposits, it creates 900 of bank money (see https://en.wikipedia.org/wiki/Reserve_requirement). In this case, there is no need for the bank to charge a spread!

Can you guide me on this? I am confused!

Is this a proof that the money multiplier is correct?


texts: Relationship between trade deficit and borrowing

texts: I have seen lots of essays saying that trade deficit means the nation needs foreign funds to finance their imports. In other words, they need to borrow from the foreigners. However, it sounds very unintuitive to me. My concern is that why would do they have to borrow? I always thought financing trade deficit was all about transferring the ownership of financial assets. Of course, if you count the sale of financial assets as borrowing, we are good.


texts: Did (or can) quantitative easing cause an "everything bubble"?

texts:
Wolfstreet claims that

  It’s true that despite QE globally – not just in Japan – there has been relatively little consumer price inflation in the countries whose central banks perpetrated it. But it has caused enormous asset-price inflation. We call it the “Everything Bubble” where practically all asset classes globally have become ludicrously inflated.

Is this correct? I'm having doubts because what is a bubble is usually hard to define. How is this "everything bubble" different from just growth that QE is supposed to stimulate?


texts:
In some new country, there's 1 million credits in circulation, and Product X costs 10 credits. If I were to print, say, 500,000 credits and build a new swimming pool with this, how exactly would inflation increase? Why would the cost of Product X increase (to approximately 15 credits?)?

If prices and thus inflation are set by humans, then how would they know to hike up prices? Is it the increase in 'supply' of money, since whomever received some portion of the 500k stacked on top of what they already had and now they have more to spend?


texts: What happens to consumer surplus and profits as firms get more information in Hotelling's duopoly model?

texts:
In the Duopoly on the line [0,1] with customers uniformly distributed, with firm A on the 0 side and firm B on 1's side, we know that if the firms have no information about the customer, there will be no price discrimination, and the market will be divided into segments [0, 0.5] and (0.5, 1] buying from A and B respectively. If the exact points at which the customers divide is not important, will notate this as [A, B].

If the firms know which half of the line the customer is from, then (loosely speaking) the profits decrease, as the Segments get partitioned not into [A, B], but into [A, B, A, B] with lots of competition going on. Consumer surplus also decreases as there is some inefficient buying.

But what happens when the information increases? Namely, the information of the segment that the customer is from increases from 2 in the previous case, to a large number N. At the limit, this is equivalent to perfect information. Would I be correct to guess that competition gets more fierce in every segment, and so both profits and consumer surplus decreases? Or will we revert back to [A, B]?

In the question above, I was looking for an intuitive answer, not one based on calculations and best responses. But what if I wanted to find the exact equilibrium price and profits at the limit (that is, the firms have perfect information about where the customer is from)?


texts: Meaning of Transversality Conditions in Ramsey Problem

texts:
I'm working on a Ramsey problem for taxation, and am a little confused on the meaning/intuition behind the transversality conditions below:

$\lim_{T \to \infty} \lambda_T b_{T+1}  =  0$

$\lim_{T \to \infty} \lambda_T K_{T+1}  =  0$

These are coming from substituting the FOCs for $b_{t+1}$ and $K_t+1$ into the HH budget constraint and iteratively forward substituting.

BC: $(1-\tau^w_t)w_tL_t + (1-\tau^K_t)R_tK_t + (1+(1-\tau^K_t)r_t)b_t = c_t b_{t+1} +K_{t+1} -(1-\delta)K_t$

FOC:

[$b_{t+1}$] $\lambda_t = \lambda_{t+1}(1+(1-\tau^K_{t+1})r_{t+1})$
[$K_{t+1}$] $\lambda_t = \lambda_{t+1}(1-\tau^K_{t+1})R_{t+1} + (1-\delta))$

After forward substituting and forward iterating to t=T I get:

$\lambda_T(K_{T+1} + b_{T+1}) = \sum_{t =0}^T \{\lambda_t((1-\tau^w_t)w_tL_t - c_t\} + \lambda_{-1}(K_0 + b_0)$

Taking the limit as T-> $\infty$ you get the sum to $\infty$ and the TVC.

I know the transversality conditions have to hold, but what are their meanings/what is the intuition? I can't seem to figure it out.


texts:
Colleagues,
I have started an analysis on spatial econometrics models, and looking for data to compute an exchange rate volatility. My variables to construct the weight matrices are all bilateral including FDI, Trade and et.c
My samples are 15 african countries, and is a bit cumbersome to get their bilateral exchange rates. The only possible way is to get rates per one unit of dollar.
* Where can I get a compiled data about it? and/or How could I compute the bilateral counterpart?


texts: Strategic form representation of extensive form games

texts:
Proposition. Every finite extensive form game is associated with a unique strategic form representation.

I think this proposition is true. But how do we prove it rigorously?


texts: Why the Federal Funds rate isn't detrended in a VAR model?

texts:
In FAVAR (factor augmented VAR) paper (https://faculty.wcas.northwestern.edu/~lchrist/finc520/QJE.pdf), the following transformation code is applied to the data:
1—no transformation; 2—first difference;
4 —logarithm; 5—first difference of logarithm.
There is no transformation for the federal funds rate, among several others. The paper does not say why, but is it because these series are already stationary in levels? Would it hurt to detrend them even if they are stationary in levels?


texts: Existence of Bayes Nash equilibria in behavioural strategies

texts:
Follow up from this question: Perturbing distributional strategies on a measure zero set
In the context of a Bayesian game, $\Gamma = \left< (\Theta_i,\mu_i)_{i \in N}, (A_i)_{i \in N}, (u_i)_{i \in N}\right>$ where type of agent $i$ is drawn from $\Theta_i$ according to a probability measure $\mu_i$, recall that a distributional strategy $\sigma_i$ is a probability measure on $\Theta_i \times A_i$ such that the marginal on $\Theta_i$ is $\mu_i$.
For any distributional strategy $\sigma_i \in \Delta(\Theta_i \times A_i)$, we can define a behavioural strategy as regular conditional distributions
$\beta_i(B,\theta) = \sigma(B \vert \theta)$ where $B$ is a measurable subset of $A$. Note each distributional strategy corresponds to an equivalence class of behavioural strategies.

The question is as follows:
Suppose $(\sigma_i)_i$ is a BNE of $\Gamma$. Does there exist a set of behavioural strategies $(\beta_i)_i$ where $\beta_i(B,\theta_i) = \sigma_i(B \vert \theta_i)$ such that they constitute a BNE?


texts:
I was solving for a stable equilibrium in the following 2 player zero sum game. I need to calculate the equilibrium using maxmin and minmax strategies. In this game they should come out to be identical and coincide with the mixed strategy Nash's equilibrium.

                        P2
               L                R
   L       (0.6,0.4)         (0.8,0.2)

P1

  R        (0.9,0.1)         (0.7,0.3)

If I solve it formally, the expected payoff of P1 will be the expression:

$E = 0.6(pq) + 0.8p(1-q) + 0.9(1-p)(q) + 0.7(1-p)(1-q)$

where p is probability of P1 playing L and q is the probability pf P2 playing L. Now, P2 is trying to minimize E keeping in mind that P1 is trying to maximize it

i.e. min max {E}

and P1 is trying to maximize E keeping in mind that P1 will try to minimize E i.e.

max min {E}

and vice versa. Essentially both strategies played simultaneously should give the same equilibrium. How to go about it, I am stuck in the maths part of the problem now.


texts: Resources on effects of transactions building in externalities

texts: In theory, a nation could build the full economic cost of externalities, be they positive or negative, into a wide range of transactions. Are there any comprehensive resources on the effects this would have, rooted in or citing the primary literature?


texts: The $\sqrt{N}$ convergence of semiparametric estimators of Newey 94, why does it converges to a normal distribution?

texts: The famous Newey 94 paper on the asymptotic convergence of semiparametric estimators with a first non parametric step and a second parametric one, http://www.jstor.org/stable/2951752, establishes that it does not matter the rate of convergence of the particular non parametric estimator, as long a a number of regularity assumptions are fulfilled then the estimator of the second step is $\sqrt{N}$ convergent to a normal distribution. Here I am asking for intuition why does this a complicated stochastic process, say Naradaya-Watson asymptotic distribution converges to this nice distribution.


texts: How to estimate a constant elasticity of substitution for a country in a solow model including human capital and scarce resources

texts:
For my thesis I was looking for some help due to the facts of my little knowledge of econometrics. I appreciate any help whether its directly dealing with my question or literature advice.

Basically I would construct the Solow Model with a CES production function including 2 more variables as mentioned human capital and another restricting variable representing a scarce resource such as oil. I would search for Data then for the needed variables and estimate the sigma.

My question here is the technical part on how to actually estimate that parameter given the data. What kind of methods are there to get an approximate value and what kind of programs would be potentially useful to get the solutions?


texts:
Does anyone know a good review on the debate on effects of minimum wages?
I am interested both in academic and non-academic sources. I have searched a lot but there is so much material written on minimum wages that it seems a bit like a jungle. Anyway, I have not been able to find any non-biased reviews of the research on the topic.


texts: Ranking Sectors Based on "Inclusiveness", greater variance among sectors with less firms

texts:
I am trying to rank sectors in Serbia based on how "inclusive" they are in their development, i.e. I have some indicators such as "share of profitable firms within sector", "share of exporting firms within tradable sector", etc.

However, Serbian sectors that have less firms overall inevitably end up either always at the higher or lower end of the ranking because their sample size is smaller I end up with larger variance among them...

Anyone know any methods to adapt measure such as those I mentioned above as to minimize the effects of these variances, but still retain some of the originally intended information?

Thank you!


texts: Often you hear people speak about how the Fed has created a fake economy, or one that is propped up with their support, and that they have artificially raised asset prices. What does this exactly mean? How as QE created a fake economy?


texts: Expected Utility and Jensen's Inequality

texts:
Consider two random variables (costs and valuations) distributed $v\backsim G(.)$ and
$c \backsim F(.)$ with pdfs $g(.)$ and $f(.)$. Let the supports of $c$ and
$v$ be $[x,y]$. Let $x<a=E(v)<b<y$, so $[a,b]\subset\lbrack x,y]$. Now
consider a strictly concave (twice differentiable and continuous) utility function
$u(.)$, with $u^{\prime}(.)>0$, $u^{^{\prime\prime}}(.)<0$, and $u(0)=0$
(passes through the origin). Establish sufficient conditions such that the
expression
$$\int_{a}^{b}u(E(v)-c)f(c)dc-\int_{a}^{b}\int_{x}^{y}%
u(E(v)-v)g(v)f(c)dvdc\geq0,$$ where $E(v)=\int_{x}^{y}vg(v)dv.$

Things I've tried:

$\int_{0}^{\bar{v}}u(E(v)-v)g(v)dv\leq0$ by Jensen's inequality. To see
this, let $E(v)-v=t$. But $E(t)=E_{v}[E(v)-v]=0$, and so $E(u(t))\leq
u(E(t))=0$, since $u(0)=0$ by assumption.
Clearly, $\int_{a}^{b}u(E(v)-c)f(c)dc\leq0$, since we are integrating the
integrand $(E(v)-c)$ from $a=E(v)$ to $b$.
Intuitively, a variant of Jensen's inequality should apply if $c$ and $v$
are i.i.d. Let $c$ and $v$ be i.i.d. with identical supports. Then the
integrands are the same, and we have the expression
$$\int_{a}^{b}%
u(E(v)-v)f(c)dc-\int_{a}^{b}\int_{x}^{y}u(E(v)-v)g(v)f(c)dvdc.$$
However, we
can't apply Jensen's inequality directly since $\int_{a}^{b}u(E(v)-v)f(c)dc$
is not $u(E(x))$, even if we "factor out" the outer integrals. $\int_{x}%
^{y}u(.)g(v)dv$ seems to be a form of $E(u(x))$.

At a loss as to what to do here. Any help would be greatly appreciated. Thank you!


texts: How does the ban on surge pricing affect the companies, customers and the economy?

texts:
Recently, there has been a ban on surge pricing in two of India's busiest cities, namely Delhi and Bangalore.

I understand that surge pricing is a method to maintain the balance between the supply and demand. So, it's ban would affect the taxi aggregator companies.

However, is it really doing benefit to the consumer, as the Govt. claims?

Overall, how does the ban on surge pricing affects the taxi aggregator companies, the consumers and the economy as a whole?

I have read through articles this this, however, they give a very naive explanation. So, I'm looking for something clearer from a microeconomics point of view.

PS: Delhi has an odd-even rule too (for combating excessive traffic and pollution), which means that cars with an even (registration)number [the one on the number plate] are only allowed in the even dates, and the ones with an odd number o the odd dates. For example, if I am DL 23 BK 1900, I am only allowed on the road on even days, and not in odd days.