texts: How can we estimate the tax incidence from a 20% tariff on Mexican goods?

texts:
President Trump has proposed a 20% tariff on some Mexican imports to the US. Is there a good way to estimate the incidence of this proposal between the Mexican producers and American consumers, as well as the deadweight losses? Perhaps some analyses have already been done?

I know it's hard since there are no real details on the proposal.


texts: The optimal price for a demand curve with a steep slope

texts:
Given the demand function,
$$D(p)=A-ap$$
I've found the optimal price,
$$p=\frac{A+ac}{2a}$$
Where $c$ is cost and $A,a >0$.
My question is how is the optimal price is dependent of $a$ (1) - what will happen with the optimal price when $a$ is arbitrarily high? (2)
(1): My answer is that the optimal price will decrease with an increasing $a$. But what happens when $a$ is arbitrarily high?
(2): My guess is that the optimal price will near $\frac{c}{2}$, but I can't put  a word on why this happens. Why would the firm take an optimal price that is lower than the cost?
It doesn't seem very intuitive for me.


texts: What resources are available for learning Dynare? I think it'd be nice to put together a list of resources that available to those new to Dynare. I've had a little experience with it but it'd be nice to know what resources I might be able to go to for questions on the beginner/intermediate level. Also, I would prioritize resources that have full-fledged examples. Does anybody have any suggestions?


texts: Basic New Keynesian model with flexible price

texts: I would like to know what would be the response of variables in the Basic New Keynesian model but with flexible prices (ie not with Calvo pricing). For example I have troubles to see how having flexible prices will matter for a productivity shockk or for a decrease in interest rate of the central bank.


texts: Is a hyperlink a kind of informational public good?

texts: Links analysis algorithms on the web take the incoming links to a webpage as a sign of its popularity. Given this, can we consider web hyperlinks, in aggregate, as a kind of public good? I am curious if anyone has looked at it from this perspective.


texts:
After read Eric Reinert's "How Rich Countries Got Rich ... and Why Poor Countries Stay Poor", I've got the question:

Reinert theory is:

Rich West countries are investing to advanced branches at their home to get rich, and ...
Buy raw products from poor countries to send them back to stone ages.

If Reinert theory is true, why rich West is investing so much to advanced business branches on new East companies, like Foxconn?


texts: Econometrics: Is elasticity meaningful in my, or any, regression?

texts:
A few months ago I interned at this organization; and, as a going away present, I decided to spend my last week, with whatever off time I had, to investigate the factors that affect teacher salaries. One problem that I ran into with teacher salaries was that the distribution for the given state was skewed. I had a lot of observations that clung to the lower end of the wage spectrum. I tried resolving this by incorporating a Comparable Wage Index into my dependent variable (teacher wages), but the results I found were completely out of date for the scope of my project. I instead decided to log my dependent variable. This was nice because now my wages had a normal distribution and it just looked perfect in the histogram. When I started testing down, I got to the point where I was left with one last independent variable, property tax returns. The problem with my normative wages was also apparent in my property tax return observations. I had a huge skew of property tax return numbers towards the lower end of the spectrum. So, I logged this variable as well and it still passed the null hypothesis test just fine.

I am not sure if this is precisely correct, but by comparing the change of one logged variable to another logged variable gave me the elasticity. Assuming that this is correct, my regression equation (something like LogWages = B0 + B1(LogPropertyTaxReturns)) shows the elasticity between the two variables. Is this meaningful though? If my goal was to see which variable most affected teacher salaries in any given county of my state, then is showing the elasticity between the two variables helpful? We want to raise the counties with the lowest teacher salaries up higher to increase their living standards, but I fear that I've extrapolated so far away from the real observations that my concluding regression equation is meaningless.

Edit: One of my bigger fears is that I should have used a non-linear model to show the relationship. I feel that forcing both the dependent and independent variable to cooperate in a this linear regression is misleading in some way.


texts: Why can money be described as "government non-interest bearing debt"

texts: Trying to get some intuition on this statement I came across while reading Miguel Didrauski's dissertation "Rational Choice and Patters of Growth in a Monetary Economy". My sense is that it has something to do with the fact that money comes about from the Federal Reserve's purchasing of government bonds from the banks, thereby "injecting" money into the financial system. Would love a better idea of why this classification as "non-interest bearing debt" makes sense.


texts: AS-AD Model, what would fall in production/output lead to?

texts:
Suppose there is some exogenous shock in the economy due to which the production of oil has fallen dramatically. Also, let's assume that oil forms a substantive part of the economy's production. What effects are we likely to see in the economy? What would happen to the IS-LM and AS/AD curve?

My understanding: A decrease in output will lead to a decrease in the price level (this will work through the labor market). But I'm confused about whether there will be a shift in the aggregate supply curve?


texts: Can't a country grow its GDP without foreign investment?

texts:
Whenever various developing countries around the world talk about growing their economies, they talk about facilitating foreign investments and they put so much emphasis on it as if a country's economic growth can survive only if foreigners bring money into the country.

To me this is a cynic and dystopian way of thinking as you are dependent on other country's mercy, and those countries which developed themselves in the 1st phase of industrialization-wave are the only ones who rule the roost.

Is it impossible for a country to grow its economy without foreign investment?


texts:
I've got this question:

  Explain why the FCFF does not incorporate interest expenses and what is the potential bias in the valuation if corporate taxes exist.

Now, we know that in the Free Cash Flow to the Firm we do not include interests because we account for the cost of debt capital in the discount rate. But what is the bias when corporate taxes exist? The flows are computed after-taxes, and then discounted. Maybe can emerge a problem when computing the tax shield, but this is easily tackled by using either Weighted Average Cost of Capital (if the project's flows have the same risk of the firm, and the firm keeps constantly the Debt/Value rate constant) or by using Adjusted Present Value when the debt ratio changes during the lifetime of the project.

Any suggestions?


texts: What does annualised GDP shrinkage of 75% and growth of 54.6% mean?

texts:
According to Business Today (India), these are the latest figures for 2020 September 3 for GDP change in World's largest economies.

In simple terms, what do GDP shrinkage of 75% and growth of 54.6% mean?

Update
My question is not about the formal technical definition of GDP, but the meaning of 75% shrinkage in GDP and 54.6% growth in GDP, in layman's language. That is, from the perspective of the history of economies of large human societies, how massive in magnitude are these figures (has 75% GDP meant total economic collapse and has 54.6% growth in GDP meant legendary economic boom)?
For a person who is not trained in economics, these figures are hard to grok.


texts: What exactly is the difference between the PPP ("purchasing power parity") and LOOP ("law of one price")?

texts:
For PPP & LOOP: e = EP/P* = 1
So both are valid if goods in the US and EU cost the same in $ for example.
But then, what exactly is the difference between both?


texts: Bertrand-equilibrium with discrete price set

texts:
Consider a market for a homogenous product with three producers, firms A, B and
C. The firms have constant marginal costs which are equal to $c = 20$ for each firm. Consumers always buy from the firrm with the lowest price. If the lowest price is set by two (three) firms, half (one third) of the consumers go to each of those firms.

Consumer demand is given by $D(p) = 50 - p$. Each firm can only choose prices from the set $\{10, 20, 30, 40, 50, 60\}$.

Determine all Bertrand-Nash equilibria.

Attempt: First, we observe that the monopoly price is 35 (this is easy to determine). Also, profit is zero when the price of any firm is 20, and profit is negative for $p = 10$. I thought that this means that any price-set of the form $\{20, p_B, p_C\}$ would do (and similarly $\{p_A, 20, p_C\}$ and $\{p_A, p_B, 20\}$), as long as all other prices are at least 20. This is not the case, however, since $\{20, 30, 30\}$ will cause all customers to go to firm $A$, resulting in 0 profits for everyone, but if firm $A$ increases price to 30, all firms will make a positive profit, hence $\{20, 30, 30\}$ is not Pareto-efficient. Hence, the only Pareto-efficient price-sets are those where two firms have price 20, and the remaining firm has any price that is 20 or higher.

My mistake was that I missed the $\{30, 30, 30\}$ equilibrium. But how could I have seen this? I always thought that if all companies have constant and identical marginal costs (in this case 20), the only Nash-equilibrium is the one in which all companies have their price equal to the marginal costs. Apparently, this is not the case here.

What am I missing? What is the general approach to problems of this type? Any help is greatly appreciated.


texts: Aside from buying IPOs, what exactly is the point of shareholders?

texts:
The more I look at the shareholder system in modern capitalism, the more it starts to appear as nothing more then an otherwise meaningless system that allows rich people to profit off others work while providing nothing and holding no liabilities.

Of course, I will explain why I think this, then I want someone to explain to me why and how I'm wrong. What exactly am I missing?

A company sells shares in order to raise money from the IPO, however:

  Why couldn't you just use bonds and other forms of debt instead?
  Why should shares give shareholders rights beyond receiving dividends? Couldn't they justify buying the security on that alone?
  Why should the company act for their shareholder's profit? They bought an IPO (or, most of the time, didn't) and are receiving dividends? Why should they arbitrarily be given more?
  Given that major shareholders are often vary rich; doesn't this system just facilitate unhealthy levels of income inequality given how the workers are treated as liabilities to be minimised?
  What's the point of money making via stock buy-backs if smaller companies who could use the money to better compete (and thus help the market) are more rarely in a position to do this?
  Don't hostile takeovers using this system do nothing more then create frustration and monopolies?

Again, I get the point of the system, but how does having all this gunk help? Again, it just looks to me like a simple idea that was pumped full of crap that conveniently helps no one except power interests.

But as I said; am I wrong? And if so, how?


texts: Very basic question about confidence intervals

texts:
Suppose that I estimate a (frequentist) confidence interval for the sample mean of a variable $X$, say at the 95% level. Suppose I also estimate a 95% confidence for the sample mean of a variable $Y$.

Claim: we cannot reject the hypothesis that $X$ and $Y$ have the same
mean at the 5% level if and only if these confidence intervals
overlap.

Is this true? I have a vague recollection that the answer is 'no'.


texts: How do I calculate price elasticity of demand using historical price and quantity data?

texts:
I work for a company that produces retail items and I am tasked with calculating the price elasticity of demand for a subcategory that shall remain unnamed. I have 5 years of monthly market data that shows market price as well as ounces sold. My independent variables include IV estimated prices, monthly income spent on non-durables (national Fred data), ounces sold of a related subcategory, and 11 dummy variables for the 12 months of seasonality. The model is Log-Log.

My idea was to control for everything that would be a supply side factor and then use the coefficient of price as my demand curve slope. Of course, the demand curve is always changing, but in aggregate I would assume a relatively steady demand curve. It would at least be better than simply calculating dQ/dP. The problem is my coefficient for price is positive. Also, even though the R-Square is around 70% and the F-Stat is significant at the 99%+ level, my individual parameters are mostly not statistically significant.

The problem is, I am looking at monthly data for an entire subcategory. The volume sold and weighted average prices continue to rise and I am not sure how to isolate demand. Any ideas would be greatly appreciated.

Regarding the IV price estimator to remove endogeneity, I ran the stage 1 regression with the cost of raw materials as my X and price as Y. This price estimator has an R-Square of .91. The cost of raw materials has a correlation of .11 versus .32 when run against quantity.


texts:
I am really a beginner guy in game theory.

Which kind of books could you suggest me as beginner/intermediate/advanced textbooks in game theory ?
I have no problem in maths, so any books with full of maths are ok for me.

As I don't really know so much about this tool, I can not evaluate which book fits well to my situation.


texts: Elasticity of Durable Goods vs Non-Durable Goods

texts:
Does anyone know any seminal reference (either a paper in a top economics journal or a book) that compares own-price elasticities of demand for durable vs non-durable goods?

My intuition tells me that durable goods should be more elastic ... but not sure how to defend that statement without a reference.

Edit:

As requested I added some more content to the question. However, the question trying to find an answer to is merely an empirical question and therefore I do not have a specific model in mind. To be slightly more precise:

Consider a demand function for good $i$: $P_i = f(Q_i, X_i)$ where $P_i$ is the price of good $i$, $Q_i$ is the quantity and $X_i$ are other factors that influence demand. What I am looking are empirical estimates for $\frac{\partial Q_i}{\partial P_i} \frac{P_i}{Q_i}$ for two sectors: durable goods and non-durable goods. Now usually there is a problem in estimating this elasticity given the standard endogeneity problems. However, there are methods that have been used to disentangle such quantities. Two examples are: Berry,Levinson and Pakes (1995) and Broda and Weinstein (2004).
There are few anecdotal evidence of differences in elasticities for durable and non durable goods. One example taken from here is:

Duration of price change: For non-durable goods, elasticity tends to be greater over the long-run than the short-run. In the short-term it may be difficult for consumers to find substitutes in response to a price change, but, over a longer time period, consumers can adjust their behavior. For example, if there is a sudden increase in gasoline prices, consumers may continue to fuel their cars with gas in the short-run, but may lower their demand for gas by switching to public transportation, carpooling, or buying more fuel-efficient vehicles over a longer period of time. However, this tendency does not hold for consumer durables. The demand for durables (cars, for example) tends to be less elastic, as it becomes necessary for consumers to replace them with time.

But this is not an sufficient academic reference which is what I am looking for.


texts:
I have the following utility function:
u($x_1$,$x_2$)=($x_1$+$b_1$)$^c$($x_2$+$b_2$)$^{1-c}$
I'm asked to explain what $b_1$, $b_2$ and $c$ stand for, maybe for c is like a weight of every good. but I'm not sure, any help would be perfect.
Thanks


texts: Time affecting price elasticity of supply

texts: I'm given to understand that the supply of any product at one moment is fixed regardless of the price but on the long run the firm could produce more of the product and so the supply become more price elastic. Ehat I'm asking is how come when we draw a supply curve and an increase in price has occured wich means and extension in the supply curve and the quantity is increased , how come the curve didn't flatten (because it became more more price elastic) how come it extended ?!


texts: What does national debt really mean? and why is it bad to pay it off?

texts:
I can't get my head around the concept.
This question didn't help much either.
Could you please explain what it really means? and why is it bad to pay it off and have zero national debt?
Thanks.


texts:
What is Rent dissipation? Please explain with an example.
I tried to search it on the internet about it. And I couldn't find anything in simple language. It was the esoteric language and was unclear. I wish there might have been a simple paragraph out there that could explain its meaning.


texts: Transparent Fractional-reserve banking as an alternative to the current system

texts:
I come from a layman perspective, but I've been trying to understand macroeconomics and finance. Currently I'm struggling with the current topic. Here I'm not worried about the system transition just arguing about the consequences of two different systems.

I accept that lending capital that is not being used is great for growing the economy, and banks seem a great and impersonal way to intermediate between borrowers and lenders. I understand fractional-reserve banking in it's current form, but I disagree with it, it makes the good times better and the bad times worse and than we need monetary policy to smooth it out. Wouldn't it make more sense to smooth banking in the first place? But expanding the money supply by lending money but still keeping it available in a deposit account seems to lead to financial bubbles. I argue that we could avoid this by being transparent about deposits in the following way:

When you open an account you settle how much you're comfortable to loan out and must be made aware of the risks implied.
When you check your balance, the funds that have been loaned out or are marked to be loaned out are displayed but are not available to use.
This makes intuitive sense to me because if I lend 100\$ to my friend, than I'm short of those 100$ and I'm aware of that, I can't use them. Why shouldn't banks be held up to this standard?

I argue that this would avoid bank runs, because you can clearly check how much is available and won't fear that you'll lose everything, while still having the benefits of borrowing albeit with slower growth but also milder recessions. This might be argued to be impractical, but dealing with the consequences of the current system seems to me to be even more impractical.

Would this be a realistic alternative, and if so what would be the effects on the economy, comparing to the current system?


texts: (Why) was von Neumann not a fan of the Nash equillibrium concept?

texts:
Charles A. Holt and Alvin E. Roth's The Nash equilibrium: A perspective notes:
"In a personal communication with one of the authors, Nash notes that von Neumann was a “European gentleman” but was not an enthusiastic supporter of Nash's approach."

Is there any more information about why von Neumann had this attitude?  Or can we infer a reasonable answer?


texts: Stock Price vs Stock Return Autocorrelation

texts: There are a lot of paper that claim stocks follow a random walk and therefore not predictable. A basis for this statements often times a autocorrelation test of the returns. However, what if there is no autocorrelation in the returns time-series but there is autocorrelation in the price time-series? Wouldn't this make stock movemenst still predictable?


texts: Which part of the market value a thief can expect to get for the stolen item?

texts:
If a thief steals an item to make money from it, which percent of the legal market value the thief typically gets?

For instance, if the thief steals a bike that costs $1000 new in the shop, how much money that thief typically makes from this operation?

Most likely it should be much less than $1000, because why someone would buy a used item from the questionable sources for the same price. Also, if a thief would use some black market handler, that handler also needs to earn.

If this differs a lot for different goods, please address the differences.


texts: Historically has the "decoupling" of world trade from GDP not lead to (or deepened) a recession?

texts:
The ECB speaks (somewhat euphemistically, in my opinion) of a "decoupling" of world trade from "activity" (i.e. GDP) in Q1 2019:

Historically, has it been the case that such a "decoupling" can last, i.e. not lead to a reduction in world GDP, i.e. to a global recession?


texts: Does anyone know of a free source for bankruptcy data? I'm specifically interested in the companies' balance sheets before they filed for bankruptcy.


texts: OLS estimator derivation: second-order condition to prove global minimum?

texts:
In deriving our ordinary least squares estimates, we can partially differentiate the sum of squared errors $\sum_{i=1}^{n} {e_i^2} = \sum_{i=1}^{n} {(Y_i- \hat{\alpha}-\hat{\beta}X_i )^2}$ with respect to our estimators $\hat{\alpha}$ and $\hat{\beta}$ to get the following first order conditions:

$$\frac{\delta SSR}{\delta \hat{\alpha}}= -2\sum_{i=1}^{n} {e_i}=-2\sum_{i=1}^{n} {(Y_i- \hat{\alpha}-\hat{\beta}X_i)}=0$$
$$\frac{\delta SSR}{\delta \hat{\beta}}= -2\sum_{i=1}^{n} {X_i e_i}=-2\sum_{i=1}^{n} X_i {(Y_i- \hat{\alpha}-\hat{\beta}X_i)}=0$$

How can we then prove that the sum of squared residuals is a global minimum?

Firstly, can I confirm that the Hessian looks like this?

\begin{array}{cc}
   2n & 2\sum_{i=1}^{n}X_i  \\
   2\sum_{i=1}^{n}X_i  & 2\sum_{i=1}^{n}(X_i)^2  \\
  \end{array}

Secondly, how can I show that the determinant of this Hessian is positive definite, i.e. $ 4[n \sum_{i=1}^{n}(X_i)^2 - (\sum_{i=1}^{n}X_i)^2]>0?$ The presentation bears some resemblance to the population variance formula, and I know that variance must be non-negative, but I'm wondering how to move on. Is there some way to factorise this? Thank you.


texts: Why is the New Zealand dollar on parity with the Australian dollar?

texts:
The New Zealand dollar has reached parity with the Australian dollar for the first time in more than forty years.

The question is - what are the economic factors that have caused this?


texts:
Is there much research into the long term impacts of government fiscal contractions.

I have heard about 2nd generation unemployed as a result of Thatcher's policies but that is very much anecdotal. What does the literature have to say on the matter?

I have left the interpretation of government fiscal contraction open so as to capture a broad variety of policies.

There are many articles focusing on short term impacts, not so much long term impacts


texts: Deriving intertemporal budget constraint from flow constraint

texts:
I am trying to learn how to solve difference equations in order to derive intertemporal budget constraints. Consider the government's flow budget constraint:

$$\frac{B_{t}-B_{t-1}}{p_{t}} + \frac{M_{t}-M_{t-1}}{p_{t}} + s_{t} -i_{t-1}\frac{B_{t-1}}{p_{t}} = 0$$

where $s_{t}$ is real taxes net of government consumption. I re-write the above as

$$\frac{R_{t}B_{t-1} + M_{t-1}}{p_{t}} = \frac{B_{t} + M_{t}}{p_{t}} + s_{t}$$

where $R_{t}$ is the gross nominal interest rate.

Now I am quite lost. I think what is confusing me is that I have $t-1$ and $t$ terms on the left-hand side. The examples I have tried before are usually on the form $a_{t} = a_{t+1} + b_{t} +(...)$ which I then solve "forward" by substituting for $a_{t+1}$ over and over again until I see a pattern developing. But in this case I can't really re-write the LHS in a proper manner.

Any thoughts on how I should proceed? And if there are any books that go through difference equations I would be very interested in some names as I am self teaching myself so far.

EDIT: Thanks to @luchonacho I have obtained the following:

$B_{t} = \frac{B_{t+T}}{R_{t+1}R_{t+2}...R_{t+T}} + \frac{D_{t+T}}{R_{t+1}R_{t+2}...R_{t+T}} ...\frac{D_{t+1}}{R_{t+1}}$ since we are in an inifite period world I write this as"

$B_{t} = \lim_{T\to\infty}  \frac{B_{t+T}}{R_{t+1}R_{t+2}...R_{t+T}} + \sum\limits_{j=1}^{\infty} \frac{D_{t+j}}{\prod_{s=1}^{j} R_{t+s}}$

I might have messed up the summation/product notation but this is one of the expressions I have seen for the intertemporal constraint. However, another common way I have seen it written is as follows:

Ignore the right-hand side as it assumes a functional form of the utility function. I am interested in obtaining an expression with both $B_{t-1}$ and $M_{t-1}$ on the LHS. Is there a way I can go from the expression I obtained above to the one with both $B_{t-1}, M_{t-1}$? I am interested in deriving this because I want an expression for the valuation of all government liabilities.


texts: How much leverage has the Federal Reserve taken on today (Jan 2016)?

texts:
http://nymag.com/daily/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html?mid=twitter-share-di

  What makes you most nervous about the future? Debt. The idea that
  growth will remedy our debts is so addictive for politicians, but the
  citizens end up paying the price. The public sector has really stepped
  up as a consumer of debt. The Federal Reserve’s balance sheet is
  leveraged 77:1. Like I said, the absurdity, it just befuddles me.

How did Michael Burry arrive at the 77:1 figure? Is this close to reality? How could the Fed be leveraged when they can simply print money to pay down debt in the first place?


texts: Exchange rate modeling using a system of ODEs

texts:
I am looking for a book that explains exchange rates, capital flows, reserves, trade balance using a system of ordinary differential equations.
An economist by the name of Muller-Plantenberg has this paper, which has the level of explanation I was looking for. I could use this paper as is, I am just curious if anyone else, especially in a recent book, with code, data has similar approach to this topic.


texts: Who determines the exchange rate and how?

texts: I have almost no knowledge about economics. However, a question always comes in my mind. How exchange rate really differ? I live in Bangladesh. So how, why, who changing BDT and US Dollar exchange rate?


texts: Difference between capital and current account

texts: Why is an increase in foreign assets in a country different from us just selling foreigners our goods? As in why is one (inc. in assets) in capital account and the other (exports) in current account?


texts: What are some good repositories for economic data

texts:
Economic data is a very broad concept. It can include discrete preference relation data-sets as well as extensive time series data.

But it is important that theories are tested against data, and the earlier this happens in the development of an economic model, or of a new economic hypothesis, the more beneficial will be to the researcher, providing early signals on how good or bad a match with the real world his theoretical endeavors are. Economics being a Social Science, it is also important to have plentiful of different data sets, since testing a theory on just one data set does not provide strong enough evidence of the model's usefulness or uselessness.

So I am posting this question with the hope that it will be gradually enhanced with answers and it will become a point of reference for Economic data of all sorts for this community.

My offering: The World Bank for example has very useful information on trade lanes. Other repositories:

-Data links hosted at the
Econometrics
Journal

-Data archive of the
Journal
of
Applied
Econometrics

-Supplemental material for
Econometrica


texts: What is the effect on GDP when foreigners buy lots of domestic bonds?

texts:
I am trying to figure out the effect on GDP of foreigners buying lots of domestic bonds. From what I understand, when foreigners buy lots of domestic bonds:

They need to convert their foreign currency into the domestic currency. This increases the demand for the domestic currency, leading to appreciation of the domestic currency. This appreciation of the currency makes domestically produced goods more expensive to foreigners, while making foreign goods cheaper. Exports fall and imports rise. Net exports fall. Therefore, GDP decreases.

The influx of foreign money into bonds causes bond prices to rise, and bond yields to drop. The increased demand for bonds leads to lower bond yields. As a result, domestic firms will find it easier to borrow money. This leads to an increase in investment. Therefore, GDP rises.

Is my understanding correct? What am I missing? In the real world, when foreigners buy lots of bonds, what happens to the GDP?


texts: Oil price decreases due to supply decrease?

texts:
I am reading this article on the Financial Times: Oil prices hit as US gulf coast faces hurricane

If the production of oil is forecast to decrease, that means the supply would decrease. Surely the price should rise, not fall?

The article says:
The price of crude oil was driven down on Friday as Tropical Storm Nate was forecast to strengthen and hit the US Gulf of Mexico coast with hurricane force winds on Saturday night, and as traders anticipate disruption to refineries.

What am I missing?


texts: Why the source profit is not only trade markups?

texts:
I'm researching the source of profit. In Marx I've found the following passage:

  If then, speaking broadly, and embracing somewhat longer periods, all
  descriptions of commodities sell at their respective values, it is
  nonsense to suppose that profit, not in individual cases; but that the
  constant and usual profits of different trades spring from the prices
  of commodities, or selling them at a price over and above their value.
  The absurdity of this notion becomes evident if it is generalized.
  What a man would constantly win as a seller he would constantly lose
  as a purchaser. It would not do to say that there are men who are buyers without being sellers, or consumers without being producers. What these people pay to the producers, they must first get from them for nothing. If a man first takes your money and afterwards returns that money in buying your commodities, you will never enrich yourselves by selling your commodities too dear to that same man. This sort of transaction might diminish a loss, but would never help in realizing a profit.

  Karl Marx - "Value, Price and Profit", 1865, the last pararaph in section VI "Value and labour"

I can't construct a numerical example which could illustrate this logic for me. It seems like even critics of Marx didn't argue against this passage just like it was very clear to them. But it not clear for me.

Please check my logic. Consider a capitalist who has costs of 10 USD per unit including others' margins of 5 USD. According to Marx she has to sell for at least 10+5=15 USD and it will be just a zero profit. But mathematically 15-10=5 USD and it's not zero. May be Marx means that these 5 USD of profit will be unavoidably spent for a bare survival of the capitalist. But why, if so?


texts:
I want to model an interaction between a government and its citizens using the game theory extensive form, but I want to express the posibility that the citizens don't act as a unique agent. For example, government imposes a new tax, some of the citizens pay it without problems, but others don't do it because socioeconomical problems.

Obviously, both situations can happen at the same time so in the extensive form there wouldn't be a unique selected leaf node. ¿Does this mean that I can't use extensive form in this case?

I'm looking for an example in the game theory literature, but I can't find anything.

Thank you


texts: Why does an increase in jobs in the USA devalue the the Australian dollar, oil, iron, gas, gold, and copper?

texts: Why does an increase in the number of jobs in the USA make make the Australian dollar, oil, iron, gas, gold, copper devalue?


texts:
50-year-old truck drivers can't retrain to become programmists or anything (on a large scale, at least): plainly biologically, their old brains are way worse at absorbing new information and get new skills than young, 20-year-old brains. Heck, many of them still can't get the hang of all the things related to the internet and smartphones. Additionally, to be truly competitive in the modern world, you need to spend years and years (your entire life, preferably) at getting better and better at something you already have a natural talent for. Besides, global knowledge not as much updates as accumulates, and, say, modern-day doctors need to learn a great deal more than their 19th-century colleagues. Is former aspiring Democratic nominee Andrew Yang correct in, essentially, assuming that there's no solution that wouldn't require some sort of UBI (that is, simply implementing retraining programs is inefficient crap)? What are, at least theoretical, answers to this automation conundrum? Will those, potentially, millions of people living on government benefits be happy or will they become depressive and suicidal due to the sense of uselessness (I assume truck drivers and people of other yet-to-be-replaced professions are more socially conservative than young and bold programmists so the former would, I again assume, undergo that "parasitic" life significantly worse)?

Edit: I've been suggested to take a look at this question: How will non-rich citizens make a living if jobs keep getting replaced by robots and are outsourced?. While it's somewhat concerned with the same topic, the three most-upvoted answers don't answer my question. The first one simply describes the situation as opposed to suggesting solutions; the second one is more about increased productivity rather than the replacement of some jobs altogether and in terms of solutions only mentions UBI in passing; the third one just references a few studies. I believe it's clear that my question is not answered, even partially, by those answers.


texts: Optimization problem with Kuhn-Tucker conditions

texts:
Consider a game with two players where each player $i=1,2$ has preferences $u_i=s_i^a c_i^{1−a}$, where $c_i$ is consumption and $s_i$ is social interaction. $s_i$ is given by $s_i=t_i+t_{ij}\times t_{ji}$ , where $t_i$ is the time spent by player $i$ alone and $t_{ij}$ is the time player $i$ spends with player $j$. Player $i$ has to decide how much of his or her time $T$ to allocate between work, having time alone, $t_i$, and social interaction $t_{ij}$. Assume that for each hour, player $i$ works, that he or she earns the wage $w$ and assume that the price of the consumption good $c_i$ is normalized to $p=1$.

  Carefully define the optimization problem for player 1. Write down the Kuhn-Tucker conditions and discuss these conditions. Explain why player 1 faces a strategic situation. Find the best-response functions for player 1 and 2. Graph these functions.

My solution :

$L = s_i^a c_i^{1-a}  - \lambda(c_i + s_i - (T-s_i)w) + \mu (c_i + s_i - T)$

FOC:

$\frac{\partial L}{\partial \lambda} =  c_i + s_i - (T - s_i)w = 0$

$\frac{\partial L}{\partial s_i} = a s_i^{a-1} c_i^{1-a} - \lambda(1+w) +\mu = 0$

$\frac{\partial L}{\partial c_i} = (1-a) s_i^a c_i^{-a} - \lambda +\mu = 0$

$\frac{\partial L}{\partial \mu} = c_i + s_i - T  = 0 $

By following this procedure, I cannot come to the solution.
Please share your ideas with me.

Solving that I obtain :


texts:
I have doubts about some
economic interpretation:
Why is the long-term equilibrium price inelastic?
But in the short run, the equilibrium price is not necessarily inelastic. What is the economic interpretation of it?


texts: Solow model and a change in the savings rate

texts:
In the solow model why does an increase in the savings rate shift the investment curve instead of move along it? Intuitively not mathematically
Thanks


texts: Why is the Argentine Peso still so expensive?

texts:
In the last twelve months, the argentine peso (ARS) lost about 11% of its value in comparison to USD.

In the same time range the prices rouse about 29% (spanish).

What's the reason for this effect? I am living in Argentina for about 2 years, and the prices even feel worse to the published statistics. The government is acting very "special": it's starting social programs one after another and is building lots of (unneeded, or at least oversized) infrastructure using money with unclear origin (well, a lot of this money is draining in similar circumstances, too).

So, who is willing to pay this price for Pesos, since they do not have any value outside of argentina? In my expectation the demand for Pesos is really low, and since Argentina maintains a trade deficit, it is forced to import lots of goods, payed with Dollars. They should have a pressing demand for Dollars. And economics say: low demand + great offer = low price.


texts: Do all prices just reflect absence of information?

texts:
In information economics, information has economic value because it allows an agent to make better decisions. For example if an agent needs to buy some good, he will benefit from knowing about the existence of all possible sellers since he will be able to buy at the lowest price.

I was wondering if there is work in economics that takes this view to the extreme and considers that the price of a good/service entirely reflects the absence of information about this good/service (to simplify it would be the sum of “not knowing how to efficiently manufacture this” + “not knowing where to get the raw material”)


texts: Does Russia have higher inflation than US and Canada? If so, why in this particular case does money supply increase doesn't lead to higher prices?

texts:
My understanding is that Russian inflation in recent years is considered to be running in the 5-6 % range, while US and Canada - in the 2-3% range (as measured by price increases/CPI). But I'd expect that the inflation of the money supply in Russia is much lower than in North America, as the Russian government spending deficit is in the low single digits % of GDP, while US and Canada annual budget deficits are both above 15% of GDP in 2020, necessitating much higher amounts of money printing by central banks.
Are my assumptions incorrect, or is there a logical explanation of this phenomena? Does money supply inflation not translate into price inflation, are there other forces at play, etc?
[EDIT] I understand that the relationship is not direct (as per Krugman),
but I want dig into what could be happening in this particular example.

Is CPI misrepresenting actual price inflation in 'some' of these countries (so
nothing to explain)?
Is money velocity different between them, affecting the value of money in each of these countries differently?
Are international trade and currency exchange rates a factor?
Have the recent Canadian and US increased deficits have not been prolonged
enough, and inflation is behind the corner?
Is USD status of a reserve currency - an important factor?

Or Something else...


texts: Should publishers of scientific papers such as Elsevier be regulated by the government?

texts:
To get a pdf copy of a paper published in Elsevier is quite difficult. You need to pay a high price. Publishers like Elsevier used to have good reasons to charge people a lot: before the invention of internet it was expensive to make those papers accessible.

However, now the cost to make those papers accessible is very low. The marginal cost of sending out a pdf copy is zero. The fixed cost of administration expense is extremely low compare to the publishers' stunningly high profit. What's worse is that the creators of those research papers do not get paid from publishers at all most of the time.

According to the most basic theory of economics, the consumer surplus is maximized if and only if the price is equal to the marginal oppotunity cost. So if we want to benifit the society as a whole, we should set the price of those pdf papers to nearly zero. So the copyright laws today actually unfairly benefit Publishers at the cost of the interest of the whole society.

So should the government force publishers of research papers to make their price more reasonable? Is there any other solution to this problem?

I am an ESL learner. please condone my error if it was a language problem. Thank you.


texts: How can a consumer economy possibly be sustainable?

texts:
Some consumer economies

In 2017, the United States household final consumption expenditure (HFCE) is $13t, which is 68% of its GDP.
In 2017, the United Kingdom has a HFCE of 1.7t, which is 66% of its economy.
In 2017, Hong Kong has a HFCE of 228b which is 68% of its economy.

Source: Wikipedia
What is consumer economy?
A consumer economy is an economy driven by consumer spending unlike production exports like industrial economies.
While I fully understand how consumer economy works in microeconomics (basically everything is the same and perfectly normal) and noted that US is an exception to the norms of international economic norms (since it's the owner of USD), I would like to be enlightened on how a consumer economy is possibly sustainable in terms of balance of trade, …aside from waiting for miraculous FDI injection

How can I continuously consume without running out of money&resources? (assuming this nation is not a Juche/Soviet)
Does this not eventually cause a devaluation of your national currency if you keeps on importing more than you export?
Is it OK for me to conclude that consumer spending is bad, we should save as much as possible like Singapore, China and Japan and focus on exports to make as much incoming money as possible?


texts:
I really can't understand how the sum of the rectangles leads to the sum of the triangle.
My book's(Chapter 12, page 430)  explanation is:

Equivalence of these areas can be shown by recognizing that each point
in the supply curve in Figure 12.11d represents minimum average cost
for some firm. For each such firm, P - AC represents profits per unit
of output. Total longrun profits can then be computed by summing over
all units of output.

The author doesn't explain how the bold part is valid and its not obvious from the graph as well.


texts:
In Chile, most of prices are measured in the local currency, the peso (currency code CLP). However, there are two other units of account. These are the UF and the UTM. These keep track of the real value of the currency, and are updated daily based on past inflation. For instance, the 16th of March of 2009, the UF was equivalent to CLP$21,000.46, whereas today (10th of July of 2017), its value is CLP\$26,666.19. The difference reflects the effect of inflation between the two dates.

It serves several purposes. For example, it eases the denomination of assets paying real interest rates (e.g. UF + 2%); it is the standard used to price real estate; and it is the denomination of several state fines and minor taxes (e.g. parking fines). (It can also lead to hysteresis in inflation, when used to price wages).

Is there any other country using such inflation-adjusted units of account? Or perhaps a country that used it in the past? I have never seen or read anything about this. I want to know more about the inspiration and usages of such monetary tools.


texts: Are Parameter Estimates Unbiased If the Dependent Variable is a Per Capita Rate Based on Approximate Population Data?

texts:
Suppose we want to estimate a model:

$Y_i  =  \beta_0 + \beta_1X_i + \epsilon_i\tag{1}$

where the $Y_i$ are averages or rates per capita for geographical regions or zones, so that if $Z_i$ is the regional aggregate variable of interest and $P_i$ is population:

$Y_i  =  Z_i / P_i\tag{2}$

If all the variables are accurately measured, and if there exist $β_0^*$ and $β_1^*$ such that for all i:

$E[Y_i - \beta_0^* - \beta_1^*X_i]  =  E[\epsilon_i]  =  0\tag{3}$

then OLS estimation of model (1) should yield an unbiased estimate of $\beta_1$.

Suppose however that estimates of $P_i$ are only approximate.  This is in practice likely since the values of $P_i$ will almost certainly be obtained or derived from census data, leading to several possible sources of error:

error in the original census data;
extrapolation from census data using assumptions on population
trends where data are required in respect of a later date;
the regions used in the model may not correspond to census areas, eg
concentric rings around a central point.  An example is a
travel cost valuation study reported in Herath (1999) (1) where
populations in the range 5,000 to 35,000 for concentric ring zones
are all stated in exact multiples of 5,000, suggesting that the
figures are only very approximate.

The errors in $P_i$ will obviously ‘infect’ the values of $Y_i$, but not in a straightforward way, since the absolute effect on $Y_i$ of a given error in $P_i$ will depend on the size of $Z_i$ (and if $Z_i = 0$ there will be no error in $Y_i$).

Question: Given errors in $P_i$, will OLS estimation of model (1) yield an unbiased estimate of $\beta_1$, and if not, under what additional conditions would the estimate be unbiased?

Reference

Herath, G (1999) Estimation of Community Values of Lakes: A Study of Lake Mokoan in Victoria Australia  Economic Analysis & Policy  29(1)  Table 1 p 37


texts:
Suppose I have $n>2$ firms selling differentiated products. These firms form a cartel for the price. The cartel has size $n_c$. Let $\pi_{i,m}$ be the payoff of a firm $i$ outside the cartel and $\pi_{j,c}$ be the payoff of a firm $j$ inside the cartel.

I would like to know whether there exists a set of assumptions (a reference to a paper in the literature describing that set of assumptions and relative proofs is sufficient) under which

For any firm $j$ outside the cartel:

(i) entering the cartel is weakly convenient in terms of        profits for any $n_c$, i.e. $\pi_{j,m}(n_c-1)\leq \pi_{j,c}(n_c)$ $\forall n_c$

(ii) the higher is $n_c$ the higher is the profit increase from entering the cartel for any $n_c$, i.e. $\pi_{j,c}(n_c)-\pi_{j,m}(n_c-1)\leq \pi_{j,c}(n_c+1)-\pi_{j,m}(n_c)$ $\forall n_c$

For any firm $i$ inside the cartel:

(i) the profit is increasing in $n_c$, i.e. $\pi_{i,c}(n_c-1)\leq \pi_{i,c}(n_c)$ $\forall n_c$

(ii) the higher is $n_c$ the higher is the profit increase from letting someone else entering the cartel, i.e. $\pi_{i,c}(n_c)-\pi_{i,c}(n_c-1)\leq \pi_{i,c}(n_c+1)-\pi_{i,c}(n_c)$ $\forall n_c$

All inequalities could hold also strictly.


texts:
I have a question regarding the national debt.  I understand that foreign governments and/or central banks hold somewhere north of $6 trillion of US Treasury securities.  I have found minimal information as to how much, if any, foreign national debt the US Treasury and/or the Federal Reserve Bank hold.  I am curious if there are countries that hold our securities and the US, in turn, holds their securities.  If so, doesn’t it make sense to clean-up the respective national balance sheets by calculating values for those securities and simply offset or cancel as much of those positions as possible?

I suspect this is an oversimplification of a complicated issue.


texts: Having difficultly to understand two indices with regard to inflation

texts: What are these terms "provisional headline inflation" and "imputed index" used to predict in terms of inflation?


texts:
I am pretty new to Microeconomics so please bear with me if I am missing something obvious.
I am solving the following problem:
The question is in the setting of pure exchange economy with two consumers A, and B who have the utility functions:
$u_A(x_{1A}, x_{2A}) = x_{1A} x_{2A}$,
$u_B(x_{1B}, x_{2B}) = x_{1B} + 2x_{2B}$.
It is assumed that the endowments of both customers is positive for both commodities.
(a) Sketch the Edgeworth box, indifference curves of the consumers and the Pareto set where $\bar{\omega_1} = \omega_{1A} + \omega_{2A} = \omega_{1B} + \omega_{2B} =  \bar{\omega_2}$.
I have solved this part and the Edgeworth box looks like this:

Next it is asked (b) wether all the Pareto Optima of this economy can be sustained as price quasi-equilibria with transfers. I know that I should us the second welfare theorem but I am not sure how I can check the convexity of the preferences using utilities.


texts: Impact of Economic Crisis on Supermarkets And Chemists?

texts:
In the undergoing Greek financial crisis, I’ve heard more than once that the three prime sufferers in any economic crisis are the 'bankers', 'supermarkets 'and 'chemists'. I do understand why the bankers could have trying times in a situation like this.

However, how does a recession like this impact supermarkets and chemists?

The only thing I can think of is it being a result of a hyper-inflation scare. If you could put it to me in the context of Greece's current situation, it'll help me understand it a lot better. So, for instance, how can dropping the Euro cause prices to rise?


texts: Do contemporary Marxist economists still deny the utility/value theory which underpins classical economics?

texts: Do contemporary Marxist economists still apply the labor theory of value when analysing economic phenomena? Or do they e.g. acknowledge that value (and utility) is subjective as is common knowledge in modern economics?


texts: Authoritative Books on Subprime Mortgage Crisis

texts:
I'm looking to learn more in detail about the situations and actions that setup the sub-prime mortgage crisis. In particular I'm looking for an authoritative book or books that provides a multifaceted approach such as

overview of the tools that were used (such as mortgage backed securities (MBS), collateralized debt obligations (CDO)).
Role of investment banks and predatory lending techniques.
Role of derivatives of the securities.
Role of  government regulations and government entities (Fannie mae freedie mac).
Role of crediting agencies such as Moodys S&P
Role of regulators (SEC) and how they failed to see the bubble.
Role of federal reserve.
What were the economic indicators that were picked up by people who saw the bubble early on?

I would appreciate if someone could tell me about books that provide a generic overview and books that go into great depth


texts: University course references for Market Structure/Industrial Organization

texts: Are there any books that are used in University-level courses that contain a detailed analysis of market structure ( Perfect competition , Monopoly and so on)?


texts: Knowing that share prices are determined by the forces of supply and demand, other factors can also play a role in this but lets consider the fact that prices are only based on supply and demand.In this case is it possible for someone to buy a big amount of shares thus making the price rise and then sell them to make a profit ? If so how can the impact on the price be calculated depending on the amount of shares bought ?


texts: Bayesian Nash Equilibria in Battle of Sexes

texts: Consider the static Bayesian game as described below. $\ t_1$ and  $\ _2$ are the types of the row and column player respectively, which are both uniformly distributed on the interval $[0,1]$. The first part of the question is asking us to find a Bayesian Nash Equilibrium. Trivially, don't the the top left and bottom right corners correspond to equilibrium outcomes? Unless I've misunderstood the definition of a BNE.


texts: How to define world interest rate using IS-LM-BP diagram?

texts:
Can you suggest where is the world interest rate in the economy which has a positive current account and a financial account surplus, fixed exchange rate and relative capital immobility? The graph of this should look like this:
Since NX and FA are positive, BP line is righter than the intersection of IS and LM curves, so $i_0$ is the country's interest rate, but what is the world's one?


texts: Measure combining growth and distribution of income

texts:
A frequently used measure of economic progress is GDP growth. (There are alternative economic indicators as well, such as the Human Development Index.) But there are problems with GDP growth. For example population growth also causes the GDP to grow, because more people produce and consume more goods. You could correct for this by usind GDP/capita growth instead.

But GDP/capita growth still does not take into account the distribution of wealth. Perhaps 90% of the population are doing worse than last year but 10% are doing so much better that on average there is still growth. You could argue that this is still 'better' overall, but I would argue that in a democratic setting most people would probably not vote for an economic policy that clearly and openly supports such an income shift. (If you are thinking of cases where this has happened and will happen: I am afraid I don't care about the political side of this argument. You are welcome to post about it over at politics SE.)

Are there indicators that capture both distribution and growth of income?
 A simple example with its own faults would be median GDP/capita growth. Something better (and slightly more complicated) could probably be constructed using the GINI index.
 Alternatively: Are there arguments against measuring something other than aggregate or average GDP?


texts: How does a consumption shock decrease the real interest rate?

texts:
If prices/wages are flexible, with a negative shock to consumption, for example, I have heard that the real interest rate should fall to keep the demand constant (since consumption is decreasing in the interest rate), but I am confused as to how this would happen. If prices decrease, then it seems like consumption would increase, but I don't know where to go from there.

Does it have to do with a response from the financial system?


texts: Do unsold goods still make it into the GDP?

texts:
Assuming Car Motors in Tiny Country has 1m USD and it spends it on workers and suppliers to produce 1m USD worth of cars (cost) for export at 2m USD (1m USD profit).

A tsunami hits and drags all the cars under the ocean rendering them worthless.

Assuming the workers and suppliers spent 500k USD (of the 1m USD from Car Motors) to produce the car and hid the other 500k USD under their pillows.

Will the GDP of Tiny Country be zero? 500k USD? or 1m USD?


texts: Can preference be convex when utility is not a concave function (e.g. $U=x_1^2 + x_2^2$)?


texts: Does a tighter spread between occupancy and stabilized occupancy indicate higher demand?

texts:
I'm trying to understand how to think about real estate markets and how to identify markets where there might be strong demand for additional housing (I'm looking at senior housing in particular) and am new to real estate, so I had a few questions about metrics.

In particular, two that seem important are occupancy rates (measured as beds filled/available beds in all facilities) and stabilized occupancy rates (measured as beds filled/available beds for facilities that are at least 2 years old.

Obviously, if there's lots of new construction, we'd expect occupancy to fall as a lot of new beds are coming online and it takes time to fill them.

What I'm wondering, however, is if there is significance in comparing the spread between occupancy and stabilized occupancy. For example, if we had a fake and overly simplistic example of two markets that looked like this:

Market 1, Occupancy Rate of 88%, Stabilized Occupancy Rate of 90%, Construction vs. Inventory of 5%
Market 2, Occupancy Rate of 50%, Stabilized Occupancy Rate of 90%, Construction vs. Inventory of 7%

then the conclusion I would draw is there is likely much more latent demand in Market 1 than Market 2 because at at the same new construction levels, the spread is so much lower in Market 1 (2%) than Market 2 (40%), indicating that properties are filling up much faster in Market 1.

Is that the right way to think about this metric? If so, how should I think about adjusting or scaling this kind of metric for the amount of new construction?


texts: How to linearize the following difference equation?

texts:
I'm doing economic modelling where $x_t$ is the intertemporal cash-flow variable. I need to solve the following recurrence relation

$$x_{t+1}=\frac{x_{t+8}}{x_{t+1}}$$

My problem is that I don't exactly know how to linearize this function. Maybe I should introduce a new variable $y_{t} = x_{t+1}$ and get

$$y_{t}^2={x_{t+8}}$$

Could you help me out with the correct linearization technique, please? I'm looking forward to your answer.


texts: Why investing in bonds imply a decrease in money demand?

texts:
In the description of so-called money market, we have demand,Md, for liquid money from individuals (and firms) and supply,Ms, of liquid money, likely from central banks. Now it is assumed that if interest rate,r, would increase, the demand for money,Md, would decrease due to people's preference of bonds(or other high yield securities) over money at high interest rate.

This doesn't make sense; whereas it is true that "households" would buy bonds in exchange for money at higher r, bonds are simply transfers of money, from households to firms or governments. So the aggregate money in the economy remains constant, as firms/governments would utilize the bonds' money in the economy. Thus, if we consider the economy as a whole, the "demand" for money does not change with people opting for bonds.

If we only consider the households' demand for money, then the analysis in money theory and LM curve would be inaccurate; In the discussion of LM curve, we have MV=PY and M/P =Md(Y,r). M/P essentially denote the "real money" supply from central bank. In the first formula MV=PY derived from money theory, If M/P hold constant, Y, also known as the aggregate income, is also constant; This is consistent if we consider the economy as a whole. However, in the second formula, It is understood that the money demand Md(Y,r) account for only the "households". It is unreasonable to discuss the dynamic between money supply and money demand when we have the whole economy in consideration on one hand and have only a sector of the economy weighted on another hand.

To sum up, I can understand that higher interest rate could encourage people to save up, thus effectively reduced the amount of money in circulation so reducing the "demand" but I do not see how opting for bonds decrease the demand for money unless only a sector of the economy is taken into consideration. Can someone provide some insight into this?


texts: Revealed preference when there is no substitution effect

texts:
I've started reading about revealed preference, and in particular, how it works in the context of price changes.
I understand that revealed preference can show us the general direction of the substitution effect. However, can revealed preference help us if there is no substitution effect present? As in, is there any information we can discern from it about the final choice?
For example, consider a scenario where Px and Py increase by the same amount. (I've drawn this diagram below). If they initially chose Bundle X1, then they would choose it again on the "hypothetical" bundle after income is compensated for.

However, what does this mean for the final choice, if anything? Would they consume at X = 4 also? Or can we not know anything else, as the 0 substitution effect means we can't know the direction of the final choice?
My apologies if I've missed something obvious, but it's a problem that's been bugging me for a while!


texts: I want to analyse the relationship between the level of globalization,and the level of income inequality between two specific countries. however, I'm quite lost as to which method is good to use (in spss). I'm certain I have to perform a time series analysis, but can someone advise which one is good to use? Kind regards


texts: If $a$ and $b$ are two pure rationalizable strategies, can $0.5a+0.5b$ fail to be a rationalizable strategy?

texts:
It is easy to see that if $\sigma$ is mixed rationalizable strategy, then a pure strategy $a$ such that $\sigma(a)>0$ is also rationalizable, but it seems not vice versa.

For a two-player finite game, let $P_1$ be the set of all pure rationalizable strategies for player 1, then the set of her rationalizable strategies is simply $\Delta(P_1)$, which can be seen as a corollary of equivalence of iterated strict dominance and rationalizability for two-player finite games.

What is an example for a finite game with more than two players such that the set of rationalizable strategies is strictly smaller than the mixed extension of the set of pure rationalizable strategies?


texts:
Are the following true?

m0 is only created by destroying something else (federal reserve deposits)?
m0 can be created as a loan?

Related questions: can something other than federal reserve deposits be exchanged for m0? what happens to the FRD, they get destroyed?


texts: Will the third Heathrow runway fill up within 25 years?

texts:
From a Wired article published 9 June 2018 about the proposed third Heathrow Airport runway:

  But Warnock-Smith1 warns that Heathrow will eventually fill up again unless air travel is redistributed to make use of spare capacity at other UK airports. “Otherwise in 25 years, we will be having the same debates about a fourth runway at Heathrow,” he adds.

Did Warnock-Smith base his estimate on something (e.g. a mathematical model) or was it "an off-the-cuff remark"? Have there been published studies on this topic?

1Associate head of the School for Aviation and Security at Buckinghamshire New University

Note 1: This question does not belong on Aviation.SE. (see here)

Note 2: This question does not belong on Skeptics.SE. (see here)


texts: How to convert daily returns to annual returns?

texts:
I have a task: to download daily stock quotations, create a portfolio and draw a CML-line. Risk-free rate was given: 6.5% of annual.
I decided to convert daily returns to annual returns, using formula from here:
$$AnnualReturn = [(DailyReturn + 1)^{365} - 1]*100\%$$
I found out, that result numbers are just insane. For example, for one company price 2017/09/07 was 27.025 , price 2017/09/08 was 27.77. Then
$$ DailyReturn = \frac{27.77-27.025}{27.025} = 0.0276$$
$$AnnualReturn = [(1.0276)^{365} - 1]*100\%=2069063\%$$
I suppose I did something wrong. Could you help me, please?
And there is one more question: can I convert a daily return to annual return like this?
$$AnnualReturn = DailyReturn*365$$


texts: Why do two-sided marketplaces often charge both sides of the transaction?

texts:
Why do marketplace apps often charge both sides of the transaction, when charging one side could raise as much (or more) revenue and be simpler?
i.e. if the marketplace knows which side of the market is less price sensitive than the other, wouldn't it make more sense to simply levy the entire fee on that side, rather than splitting it across both sides?
Example (airbnb)

The guest pays a service fee that's between 6 and 12% ... and the host pays a flat 3%.

Why not just charge the guest 12 + 3 = 15%?


texts: If protectionist policies hinder economic growth, why do we need border taxes at all?

texts:
I understand that free movement of labour and goods are a net positive for economic growth, and protectionist policies, which would make exports and imports harder would not be.
But if this is the case, why do we need any border tax?
Like in the European Economic Area, where there is a free flow of labour and goods, there is no tax to bring something form one country to another, but if it comes from e.g. Russian there is. Would it make sense to get rid of that tax too, if every single country in the world would do it too?


texts: Why Does National Data Usually Cite Average Income Rather than Median Income?

texts:
When I try to look into standard of living in a given country, I try to find median income figures. I can almost never find them. Instead, all of the data I can find is about average income, GDP per capita, etc. This data is (I think) pretty useless in determining how most people live, because in many of the countries I am looking at, a small number of people receive a disproportionate amount of income.

Is there a reason why median income is not used as the primary figure?


texts: Regarding the group formation in an oil-price experiment

texts:
I'd like to have your opinion on the following;

Assuming that I'm doing a research on setting the optimal price for gasoline for a company and my client wants me to perform a study on customers' gasoline purchasing habits when they notice an increase in the price of gas.

I have a training data on these categories:

People who have not noticed a gas-price increase

People who drive electric cars

People who have recently noticed a gas-price increase

People who ride their bikes to work

People who ride the bus

Where I am going to form a treatment and a control group. Though I'm not sure how to pick the categories I'll be including in the test.

My opinion (definitely not an expert), I would ignore the people who ride their bikes to work and who drive electric cars, as they are simply out of the interest of the research. And randomly distribute the other categories' members. Thing I'm not sure is about the people who ride the bus; should I include them or not?

However my other opinion is that there might be also some switches for EVs, bikes or public bus. In this case I'd better include every category in the data.

Thanks in advance for every opinion.


texts:
Science is full of apparent puzzles and paradoxes, some of which still remain unexplained. Economics is not an exception.

It would be interesting to get a list of  unresolved puzzles in Economics. By unresolved I mean there is a considerable divergence of opinions and evidence on what explains the puzzle, or perhaps not sufficient evidence to provide a clear explanation to the puzzle.

As always with these type of question, one puzzle/paradox per answer would be ideal. When doing so, please back up your answer with references that certify that the issue is currently a puzzle/paradox among academics and researchers. Resolved puzzles are off-topic (another thread for that might be appropriate).


texts: Economic interpretation of the concavity of the expenditure function

texts: What is the interpretation of the expenditure function's being concave?


texts: Is there any research, theory, or anything which shows how much of a market has to be in power of a few companies to be a force against free market?

texts:
According to Free market

  a free market is a system in which the prices for goods and services
  are determined by the open market and by consumers. In a free market,
  the laws and forces of supply and demand are free from any
  intervention by a government or other authority and from all forms of
  economic privilege, monopolies and artificial scarcities

Being monopolies and oligopolies a force against free market, is there any study, theory or anything which shows how much of a market has to be in power of a few companies for them to be able to alter the free market laws/rules?


texts: Muth exposition of the rational expectations hypothesis

texts:
I am reading in statistical decision theory and stumbled upon the rational expectations literature (rationality with incomplete information->dynamic problem->N.L Stokey->husband). The assumption that subjective expectation approximates the objective probabilities without adaptive learning seems almost ridiculous if one considers that the whole enterprise of statistics is to learn from the past to infer about the future.

Nevertheless, as explained clearly in the answer to another question, Muth (1961) proposed the hypothesis of rational expectations as a purely descriptive model, to facilitate explanation of certain market behavior, however unrealistic it might be to generalize this hypothesis to all behavior.

Please refer to the full text of the paper.

If I understood it correctly, section 3 of the paper is an exposition of how such a rational expectations hypothesis, as the author proposed and shortly justified in section 2, can be applied to analyze several market situations.

I had difficulty understanding the reasoning around equations 3.3-3.4. In particular:

  Referring to (3.3) we see that if $\frac{\gamma}{\beta}\neq-1$ the rationality assumption (3.4) implies that $p_t^e=0$, or that the expected price equals the equilibrium price.

What does the last part of the sentence mean? That equation (3.4) holds? How can $\frac{\gamma}{\beta}\neq-1$, $p_t^e\neq0$ and equations (3.3) and (3.4) hold together?

If I understand his exposition as imposing the rational expectations hypothesis (equation 3.4) on the market equilibrium price (equation 3.3), then the solution would be that either $\frac{\gamma}{\beta}=-1$ or that $p_t^e=0$. What does this mean? Or is he trying to show something else?


texts: Does the Independence Axiom Require Statistical Independence?

texts:
First: Given this definition of the Independence Axiom,

If for all $P$, $P'$, $P''$ in the set of lotteries over outcome space $X$, when:
$P$ preferred to $P'$ $\implies$ $aP + (1-a)P''$ preferred to $aP' + (1-a)P''$ for all $a$ in $(0,1)$."

Can I do what I do here?
Then $P$ preferred to $P'$ $\implies$ $P$ preferred to $aP' + (1-a)P$ for all $a$ in $(0,1)$.
Second:
Does satisfaction of the Independence Axiom rely on the statistical independence of the lotteries involved? It doesn't seem to be mentioned anywhere I've looked.
Any direction that can be offered is greatly appreciated.


texts: Why would an investor choose to invest in one index fund as opposed to another?

texts:
Assuming no transaction costs or management fees, why would an investor choose to invest in a fund tracking the Nikkei 225 over say the S&P500.

If I was quite bullish on Japan, and I made the conscious decision to invest in the Nikkei tracking index, wouldn't this in effect be active management because I am using fundamental analysis to select my portfolio?

Assuming we take the academic consensus that passive > active management, would this decision make sense?

I can understand choosing a fund over another due to liquidity and fund characteristics, but not much else.


texts: Comparing GDP contractions between Russia and US

texts:
I was reading Rogoff's piece on the Russia's economic outlook, and in a paragraph, he states

  The shock to the real economy has been severe, with Russia suffering a decline in output in 2015 and 2016 comparable to what the United States experienced during its 2008-2009 financial crisis, with the contraction in GDP totaling about 4%.

I'm wondering how did they reach this figure. I was trying to redo the calculations, this time with OECD data on GDP, but none of the figures obtained are comparable - I just did $GDP_{t+1}/GDP_{t}=1+gr$ For Russia, I got 6-7%, and USA 2-3%,  depending whether we use GDP or GDP per capita.

Any help would be appreciated.


texts: Can tariffs be said to subsidise domestic industry?

texts:
If a state places a tariff on a good, domestic manufacturers of that good become more price-competitive in the domestic market at the expense of overseas suppliers.

Could this be said to be a policy choice that subsidises that industry?


texts:
This video on the Austrian business cycle seems to state that when rates are low this signlas to investors that there is plenty of money to borrow and plenty of resourses to deploy. However I dont understand to 100% how resources and available cash are linked tho, whats the idea? Why must low rates mean plenty of resourses?
video


texts: How is the "value added" of firms distributed

texts:
While it can be justified that the sales (or revenues) of firms in an industry follow a Pareto-distribution, I wonder how the value added (sales minus input costs minus taxes, excluding depreciation) can be summarized by a parametric distribution. Pareto seems not to work, since negative values are possible.

Is there an econometric theory that gives ground for a specific class of distributions? My dataset suggest something like Gumbel.


texts: What are the Industries and sectors who performs better during COVID?

texts:
Maybe I'm a bit late with this question, but I just want to list all the sectors who benefit in these covid times.
My current list is

cure researchers
food delivery
tech companies overall
especially tech the ones like zoom which we people actively use working from home

Who else benefits?


texts: Interpreting 10-YR TREAS 21/32 yield 2.913%

texts:
As I see the WSJ front page, I saw 10-YR TREAS 21/32 yield 2.913%.
I know what the yield means but I don't know what the 21/32 means and how it relates to the yield. Could you please tell me?


texts: How is the differential definition of money supply, velocity, and GDP defined?

texts:
I was reading: This article on money velocity (see the summary section)
Where two formulas are presented:
first an equality:
$$\text{Quantity of Money} (M) \times \text{Velocity of Money} (V)  =  \text{Real GDP} (Y) \times \text{Prices} (P)  $$
or just stated as
$$ MV = YP$$
then its derivative is stated in the article as:
$$ \Delta M + \Delta V =  \Delta Y + \Delta P $$
This second statement makes no sense to me, since if I apply the product rule I should get
$$ M \Delta V + V\Delta M = Y \Delta P + P \Delta Y$$
And I see no way to easily drop the non differential terms. Where did I go wrong here?


texts: What does it mean if a country's exchange rate is said to be “overvalued”?

texts: For instance, China's or Switzerland's currencies are often said to be overvalued.


texts: Constant marginal cost for a firm and perfect competition

texts: What happens if the demand curve is flat because the firm is a price-taker in the market, but the firm has a constant marginal cost. If the equations are the same I assume the price would be set with a theoretically infinite quantity, but what happens if they are different?


texts:
My book defines player $i$s 'belief' about player $j$s type as $p_i(t_j)$.

It then goes on to say that if $t_j$ is presumed to be uniformly distributed on $[0,x]$, then $p_i(t_j) = 1/x$ for all $t_j$.

That makes no sense to me. What do they mean by $1/x$? So if $x = 1$, then $p_i(t_j = 2) = 1$? Even though $2 \notin T_j$??


texts: Are there any production function $f(x_1,\ldots,x_n)$ that is having decreasing returns to scale, given that the marginal product in every input $i$ in the function $f$ is constant?


texts:
Never encountered such a problem as I am new.
$$U(x_1,x_2)=(a\ln(x_1)+b\ln(x_2))^n$$
and  $a,b,n>0$ with income $w>0$ and prices $p_1,p_2>0$.

Find the demand function.

Attempt
I am thinking that I am able to use that $h(u(x))$ for a strictly increasing function represents the same præferences. I.e I can just work on $a\ln(x_1)+b\ln(x_2)$. I am also thinking about using the $MRS$ but not sure on how to continue.


texts: Has the ban of single-use plastics sparked innovation in biodedgradable recyclable plastics?

texts: One of the rationales of the single-use plastics ban adopted by the EP in 2019 is that it will spark innovation in cheap biodegradable recyclable plastics. Has any progress been registered in this regard?


texts:
Could you help me to identify monopoly, because I got confused. There is a company with market share of 54 %. The second one has market share of 21 %.
Can this market be characterized as monopoly or maybe duopoly? Thanks in advance.


texts: Given any bilateral zero-sum game G, show that strategy proﬁle σ is a Nash equilibrium for G if, and only if, it is a Nash equilibrium for the constant-sum game G' obtained from G by adding any ﬁxed amount "d" to the payoffs of both players. Is the conclusion affected if the ﬁxed amount, call it now $d_i$ for each i = 1 , 2 , differs between the two players?


texts: Typical Growth Model Social Planner Problem

texts:
Consider the following social planner's problem, hand-waving the usual assumptions on the preference, technology, endowment, and inelastic supply of labor:

$V(k_o^*)= max_{\{c_t,k_{t+1}\}_{t=0}^{\infty}}\quad \sum\limits_{t=0}^\infty \beta^t U(c_t)$

s.t. $\quad c_t+k_{t+1}=f(k_t)+(1-\delta)k_t$, $c_t,k_{t+1}\geq0, k_o=k_o^*$

$\textbf{My Question}$:

(Q1) Is the following a correct description of what happens in $t=0,1$?

(a) The economy starts with the given preference, technology, and endowment $k_o^*$.

(b) The planner chooses how much to put into the production and leave as to carried on as undepreciated capital to the next period. In other words:

(i) A fraction of $k_o^*$ is devoted to into the technology $f(\cdot)$.
(ii) The rest is simply carried onto the next period with the penalty of depreciation .

(c) Still in $t=0$ and with (b)-(i), the technology produces $y_t$.

(d) The consumer makes a choice as to how much to consume and invest from $y_t$ as $c_t+i_t=y_t$

(e) In $t=1$, the capital stock for tomorrow is defined as, $k_1=(1-\delta)k_o^*+i_t$, how much you left over from the initial capital stock to be carried over to $t=1$ plus how much you decided to leave out from the production as investment.

(Q2) In the social planner's problem, we have control vectors as a sequence of $c_t$ and $k_{t+1}$. These are two distinct control vectors, because the sequence $\{c_t\}_{t=0}^\infty$ requires the decision to be made after what you get from the production within the same period, but the decision of how much of the capital stock to have tomorrow involves how much of the capital stock today you will leave to be carried over to tomorrow in addition to the investment decision. For example, if for some reason, the capital stock is perishable, this $\delta=1$, our choice variable would be only $c_t$ as $c_t$ determines the level of $i_t$, which in turn determines the level of $k_{t+1}$, correct? Is $k_{t+1}$ not a control variable?


texts: GDP accounting: Insurance spending belong to which part of GDP?

texts:
We know that $GDP = C + I + G + NX$, where $C$ is household consumption and $I$ is private investment. I don't know whether insurance spending (e.g life insurance) belongs to $C$ or $I$.
I've googled and read some stuff but still haven't found the answer.
Any response is highly appreciated. Thanks in advance!


texts: What are the effects of liquidity crisis?

texts:
What are the actual effects of the lack of liquidity?
Economists always say, we need to increase liquidity at a time of recession, but why is liquidity is important for us? Could anyone explain it in an example?


texts: What is the formula for how many more I need to sell in order to justify raising cost?

texts:
I need to know the name and formula for this problem.

I have widgets which have a certain lube content to them.  We currently are selling the widgets for 3.00 each.  The lube costs .50 cents for each widget, but we are considering a change in the lube content from the current state of 1 oz.  We currently are making sales of 1000 widgets per year.  I want to know how many more widgets we would have to sell in order to justify a given increase in the lube content of a widget.  I am not asking how many more we would sell if we increased the lube content or what the revenue would actually be.  I am merely asking what the number of additional widgets sold must be in order to justify a given lube content increase.

Price of widgets is constant.

What is the name of the formula I am seeking?  What is the formula I am seeking?  What is the answer?


texts: A survey on the economics of loyalty programs

texts: Is there a good survey that covers the theory and empirics of loyalty programs? I am thinking of programs like Amazon Prime, Starbucks, and airlines miles/points. What are the mechanisms? Are they effective in a causal sense?


texts: If saving equals investment, can there ever be a stock of savings?

texts:
National product accounting identities imply $S=I$. Since these are flow quantities, everything saved in a particular period is invested, thus there is never an accumulated stock of savings.

Is this reasoning correct? If so, where do household savings during a particular year (say bank account balances) go?


texts:
I wondered if someone would be willing to provide an intuitive presentation of the so-called integrability of demand/integrability conditions.

My own knowledge of these conditions is that they're the conditions required of an individual (and subsequently a market) to be acting 'rationally', (i.e. consistently maximising/or minimising welfare using price signals)

My own interpretation is that these conditions are required so that economics is an economic science, adhering to certain predictable laws (such as the compensated law of demand).

Economic behaviour should therefore be time-invariant, path-independent , universal, and not subject to illusion.

For example,

Homogeneity of degree should hold (money units do not matter in economic decision making, instead it is relative prices).
Individuals maximise consumption (MRS = price ratio)
Behaviour is characterised by symmetry (universality). Compensated change in demand for X, given a change in Y is the same as the compensated change in demand for Y, given the change in X.

I wondered if my interpretation here is the correct one?

I am especially interested to here some intuitive explanations of Slutsky Symmetry with real world examples, and also an intuitive explanation of 'negative semidefinite' beyond that it must chracterise a 'concave utility function'.

Would be nice to hear everybody's input on these matters, and really get to the essence of the topic matter.

Best,

Andrew


texts: Do conceptual ideas that become standardised ever make money?

texts:
TL;DR - Do standardised concepts ever make money?

Recently I have been wondering if conceptual ideas ever make money, more specifically whether a conceptual idea that is standardised ever makes money? If so, how does it do this? If not, why do they not make money?

An example of a concept that has become a standard is the OSI model, the OSI model is a conceptual idea which governs how traffic passes through a network from the physical layer (layer 1) right up to the application layer (layer 7). This concept has become a standard idea and guideline in networking so much so we now "speak in OSI" what that means is, if there's a cable issue it's a "layer 1 problem" and if there is a routing issue it's considered to be a "layer 3 issue"


texts: How does economics cope with production processes that have large lumpy investment requirements?

texts:
If seems that all equations (e.g. Price elasticity of supply ) assume that there is a marginal cost of production that is nicely related to the level of output.  But clearly you can’t buy half a new machine.

Also if you buy the new machine then the price decreased you can’t afford to pay the interest on the loan, so manager loses his job with the company closing down, compared to the manager getting a small incentive for the increase in production.

Therefore how is "real life" coped with!


texts:
I'm looking for a comparison I can make between "traditional" energy sources and solar energy.

Ideally, I'd like to show how much solar energy has yet to come down in price before it is cheaper than, say, gas or coal. I would like to know the historical rate at which this has been currently happening.

The question is then what metric is good for this. Levelized cost of electricity by source in time would be my preference, however, I cannot find data for this over time and by source (e.g solar, coal & gas)..

Any advice would be appreciated.


texts: Why do we add Net Foreign Factor Income instead of substracting it while calculating GDP?

texts:
(It's assumed that we use the income method.)

GDP is supposed to include all incomes received on territory of given country, no matter if receivers of income are citizens or not. So incomes of foreigners in given country (I will write them as FH, stands for "foreigners here") are included into GDP, but incomes of citizens abroad(I will write them as CA, stands for "citizens abroad") are NOT included. GDP=Wages+Rent+Interest+Profits+Sales Taxes+Deprecation+Net Foreign Factor Income. For sake of simplicity I will replace "Wages+Rent+Interest+Profits+Sales Taxes+Deprecation" with "A". The formula can be rewritten as GDP=A+NFFI

As for Net Foreign Factor Income, it's the difference between income that citizens of given country earned abroad and income that foreigners earned in given country. Or in my notation, NFFI=CA-FH.
Considering this, the formula of GDP can be rewritten as GDP=A+CA-FH. But it's wrong! This way we will include incomes of citizens aborad and exclude incomes of foreigners in given country, but it should be reverse of that, we should include incomes of foreigners in given country and exclude incomes of citizens abroad. In short, it should be GDP=A-CA+FH. We can get this effect either if we change how NFFI is calculated (NFFI=-CA+FH would do the trick) OR if we substracted NFFI from A, instead of adding it.


texts: Could Depreciation of Capital $=\delta(K(t))^{\theta}$ with $\theta<1$ Be a Realistic Assumption?

texts:
In the context of a long-term growth model with $K$ representing aggregate (man-made) capital, what theoretical or empirical reasons, if any, might be given for assuming that depreciation of capital $D(t)$ could be given by:

$$D(t) = \delta(K(t))^{\theta}$$

where $\delta$ and $\theta$ are fixed parameters both $> 0$ and (this is the key point) $\theta<1$?

[The question is prompted by this paper by Buchholz, Dasgupta & Mitra which considers the feasibility of constant consumption to infinity in a growth model containing a single produced good which can be either consumed or used as capital and a single nonrenewable resource.  It implies (p 553) that constant consumption is impossible when $\theta=1$, reducing the above formula to the familiar $D(t)=\delta K(t)$, but is in some circumstances possible when $\theta<1$. Hence it is of interest to consider whether $\theta<1$ could ever be a realistic assumption.]


texts: Are "organizational slack" and "organizational capability" opposite?

texts: The word "organizational slack" is extracted from one paper, and "organizational capability" is extracted from another paper. I am wondering if they are opposite to each other. For example, can I say "a firms experience less organizational slack" and "a firms experience better organizational capability" interchangeably?


texts: How to interpret the intersected information partition element of different actors?

texts:
In this paper, it said that given $\omega$ is the current state of the world and $P_1(\omega)$ is the unique element from the information partition $\textit{P_1}$ of actor 1 in which the player 1 is informed that $P_1(\omega)$ contains $\omega$. According to the aforementioned paper (p.1237), it says that "To say that 1 knows that 2 knows (Event) E means that E includes all $P_2$ in the information partition $\textit{P_2}$ that intersect $P_1(\omega)$."
 I wonder why is the aforementioned intersection in this passage so important, since intersection here only mean that two information partition elements share some states.

I think there are two thing I need to understand: The interpretation of the shared states of two information partition elements from different people; the interpretation of the case when two informational partition elements intersect.

Also why is it seem to be inapplicable for the case when the partition elements mentioned are partially in $E$


texts: Are BLS labor productivity measures in current dollars or constant dollars?

texts:
I am using BLS labor productivity measures to estimate the impact of automation in the US. Looking through the BLS handbook and online, I haven't been able to determine if the LPC measures are in current dollars or constant dollars. Do you happen to know?

For example, the BLS reports Value of production by industry in $ millions.  Is this a current-dollar or a constant-dollar measure?

BLS page on the topic & with access to data: http://www.bls.gov/lpc/


texts:
According to the answer key for a problem set, there is no pure strategy Nash equilibrium in the following problem. Yet I can't see why not. Could it be an error in the answer key? Here's the problem:
"Consider two risk-neutral buyers that submit bids to buy an object whose value v is either 0 or 1.

The informed buyer $I$ knows whether v = 1 or v = 0.
The uninformed buyer $U$ assigns $Pr(v = 1)=Pr(v=0)=1/2$

The high price buyer wins the object at a price equal to the high price."
I don't understand why the following strategy profile $\{P_I^*, P_U^*\}$ is not a pure Nash equilibrium (where $P_i^*$ is the bid submitted by $i\in \{I, U\}$):
\begin{equation*}
    P_I^* =
    \begin{cases}
    0 \quad \text{if}\quad v=0 \\
    1 \quad \text{if}\quad v=1
    \end{cases}
\end{equation*}
\begin{equation*}
    P_U^* =
    \begin{cases}
    0 \quad \text{if}\quad P_I=0 \\
    1 \quad \text{if}\quad P_I\neq 0
    \end{cases}
\end{equation*}
Am I right that this is a pure NE? If not, can someone help me see why it is not? Thanks in advance!
[Here is why I think it is a pure NE:

If $v=0$, then Buyer $I$ cannot gain by deviating from $P_I^*$ (because that would mean losing the bid given $U$'s strategy unless both bids are 1 in which case there is no profit anyway)
If $v=1$, then Buyer $I$ cannot gain by deviating because that would mean losing the bid given $U$'s strategy.
If Buyer $U$ submits a price higher than $P_I$ when $P_I=0$, then $U$ will win the bid and lose money (because in that case $v=0$).
If Buyer $U$ submits a price lower than $P_I$ when $P_I=1$, then $U$ loses the bid and gets nothing.]


texts:
I've found an interesting question looking at perfect-bayesian-equilibrium. I haven't seen a question where beliefs are not discrete.

There is a single potential buyer of an object which has zero value to
the seller. This buyer’s valuation v is uniformly distributed on [0, 1] and is
private information. The seller names a price $p_1$ which the buyer accepts or
rejects.

If he accepts, the object is traded at the agreed price and the buyer’s
payoff is $v − p_1$ and the seller’s is $p_1$.

If he rejects then the seller makes another
price offer, p2. If the buyer accepts this, his payoff is $\delta_(v − p_2)$ and the seller’s
is $\delta p_2$, where $\delta = 0.5$.

If he rejects, both players get zero (there are no further
￼￼￼offers).

Find a Perfect Bayesian Equilibrium.

My usual approach is to fix beliefs, but I don't quite know how to do this with continuous beliefs. Any advice?


texts: Do banks take money to repay deposits from required reserves?

texts:
Say I deposit 200 dollars in the bank and 20 dollars is set aside for the required reserves. Other customers also deposit money and more money goes into the required reserves.

If I go and get the 200 dollars back, can the bank take money from the required reserves, or can that not be touched unless a bank run occurs?


texts: How Much Gold Did Weimar Have Pre-Hyperinflation?

texts:
A few years ago, Peter Schiff and a few other Austrians (not all Austrians, as Mish was stating the opposite) were adamant about hyperinflation and Paul Krugman stated that it was like talking about fire problems during a flood, which made sense because of the credit crunch (the inverse problem).  However, Schiff kept pointing to Zimbabwe and the Weimar Republic as examples of hyperinflation and even now, we're seeing it in Ukraine.

As far as Ukraine and Zimbabwe are concerned, neither appeared to have much gold before their hyperinflation.  For instance, Ukraine has next to 0, if not 0 and Zimbabwe, from what I could find, had less than 5 metric tonnes.  When I was looking online to see if anyone knew how much gold they estimate the Weimar Republic had, I couldn't find a figure and was curious if anyone knew, or could find a historic estimate?

The reason I ask this is because the United States owns the most gold in the world (and it's not a close competition), assuming we don't believe the people who think it's not there, and thus it's hard to believe that, unless the U.S. begins to liquidate its position, that it would face hyperinflation like these other countries even without a currency backed by gold because people know that in a really bad situation, it could trash the dollar, create a new currency backed by its gold (note that I'm not saying this would happen, but the US is hardly a country comparable to Zimbabwe when you consider its gold holdings).


texts: Is it considered acceptable or unacceptable to use currency as a measure of utility?

texts:
There will always exist at least one economist who condones measuring utility in US dollars and another who does not. However, I am wondering which way the majority of contemporary economists lean.
Would it be safe to say that at least 75% of author of academic papers published between the years 2000 and 2020 measured utility in terms of US dollars? Is it standard practice, or not standard practice?
I took many economic courses in college, but I have no idea what is done in contemporary economics research.

One potential drawback to approximating utility with currency is that currency is associated with diminishing marginal utility per unit of currency.
Suppose that Bob is stranded in the desert with two bottles of water.
Sarah is stranded in a similar desert with six bottles of water.
If all other contributing factors are the same, then it hurts Bob more to lose one bottle of water than it hurts Sarah to lose one bottle of water.
If someone who made 10,000 USD last year earns 9,000 USD this year, their decrease in personal happiness (utility) might be greater than if someone who made 101,000 USD last year year earns 100,000 USD this year.

Statistically speaking, in the United States, wealthy parents tend to spend more hours playing with their children than poor parents. I once read an economics textbook where the author expressed incredulity as to why that might be.
If you make 300 USD per hour as an attorney at law, the opportunity cost of spending 4 hours with your kid(s) is 1,200 USD.
If a poor person spends the same amount of time with their children, then the opportunity cost might be $40 in forgone wages.
The opportunity cost, in US currency, of a wealthy parent spending time with their children is greater for the wealthy parent than for a poor parent. The author of the textbook went as far as to deem the phenomenon "a paradox."
The solution is simple to me: The poor person would lose more utility, yet less money. The wealthy person would give up a great deal of money, but very little utility, to play with their children  for 4 hours.
If a wealthy attorney plays with their kids one more day per week on average, then the family might own 3 cars instead of 4. However, if the poor American parent plays with their kids one more day per week on average, then family might forgo new shoes for the children and the family might eat soup made from water and stolen ketchup packets every Friday. Having 3 cars instead of 4 cars hurts less, relatively speaking, than having uncomfortable shoes and eating badly. The poor person stands to lose quite a lot of utility when small financial losses occur. The wealthy individual loses very little utility when small financial losses occur.
Is currency is a poor quality measure of utility/happiness?


texts: Why does Slutsky compensation "overcompensate" the consumer?

texts:
Suppose I have a Marshallian demand function $x_M(p_x^0,p_y,m^0)$. As I understand it, Slutsky compensation is defined as

$$T_S = \Delta p_x \cdot x_M(p_x^0,p_y,m^0)$$

Can someone explain why this compensation overcompensates the consumer?


texts:
Income tax, Poll tax, Land tax, or VAT?

Georgist argue for land taxes.

I think jizya is a form of poll tax.

VAT? I don't know.

I don't like income tax but can't really articulate why it's so bad.

Which one, for the same amount of revenue, reduces a country's GDP?

It seems that thrifty people will like VAT and spendthrift people will like income tax. Am I correct?

Would encouraging spending or encouraging investing a form of distortion?