For questions regarding the mathematical analysis of economic models and problems. This includes questions about the formulation or solution of models from microeconomics or macroeconomics.

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34 views

Financial Economics. Uncertainty and Spot Market [on hold]

Uncertainty and spot financial markets Consider an exchange economy with two periods (t = 0, 1), L goods and S states in the second period. An endowment is ωi ∈ R L(S+1) and preferences are ...
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1answer
34 views

Lagranges multiplier to minimize function of two variables with two constraints

I have a Cobb Douglas type production function with $K$ and $L$ as inputs; $\alpha$ and $1-\alpha$ as output elasticities and $C$ as efficiency parameter. Now I have to minimize cost $=wL+rK$ w.r.t ...
0
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1answer
130 views

Impatience and interest rate

I'm having difficulties solving the following problem in economics. I come from a mathematical background, and it's hard for me to get some of the terms: Consider a two-period economy with a ...
0
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1answer
154 views

How to derive demand function from a utility function without any knowledge of Lagrange Multipliers?

How do I derive the demand function for a utility function of, say, $U(x,y)=\sqrt{11x+11y}$ for goods X and Y in terms of $P_x$, $P_y$, and income $I$, with basic mathematics (basic calculus, but no ...
0
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1answer
25 views

Utility function, plotting indifference curves

I know how to plot indifference curves; simply take the utility function and plot some level curves in $2D$. But how to plot a specific indifference curve, so all bundles on it are indifferent to a ...
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2answers
47 views

Cost per item. Diminishing marginal discount, if you will. (Bigger discount for first few items) Optimal number of units to buy?

The graph above shows price per unit. Say they are cupcakes. When you buy a higher quantity, you get a lower price per unit. Say it levels off like this graph. Obviously, buying 2 nets a nice ...
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0answers
11 views

Finding the competitive equilibrium in an economy with two consumers and two commodities

I am unable to solve the following problem in general equilibrium. Consider an economy with two consumers and two commodities X and Y. $X_i$ and $Y_i$ are the amounts of commodities present with ...
0
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1answer
24 views

Utility function and preferences?

This might be more of an economical question, but perhaps some of you might've come across it before as math is involved; A person P prefers bundle (x1,x2) over (y1,y2) if (x1*x2) > (y1*y2). What is ...
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1answer
29 views

Utility Max Problem

I have a utility function $U(x,y)=\frac{xy}{x+y}$ and a budget of $200=2x+2y, P_x=P_y=2$. But for the first 50 units of product 1 sell for 2 dollars but for "$x>50$" the price of product 1 ...
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0answers
12 views

Infinite Horizon Representative Agent

Consider an infinite horizon representative agent with utility function u(c(t)), where u'>0 and u"<0. Suppose that c(t), w(t), and x(t) be the consumer’s consumption, wage, and assets at time t, ...
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2answers
85 views

Revenue cost profit [closed]

A company that makes and sell memory chips establishes the followings : Revenue function, $R(x) = x (75 – 3x)$ Cost function, $C(x) = 125 + 16x$ Where $x$ is in millions of chips, and $R(x)$ and ...
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0answers
35 views

Economics, Statistics

Now suppose I am trying to forecast using historical data and using random walk method, In the formula $ y_t = y_{t-1} + u_t $, how can I find the $u_t$ form the model ?
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0answers
15 views

Profit Maximization without an explicit functional form for f(x1, x2) - Need to infer the signs of derivatives

Consider the following 2 input, 1 output profit maximization problem: $$ \max_{y,x1,x2} \{py-w_1x_1-w_2x_2 : y=f(x_1,x_2)\} $$ where f is the producers production function, w_i>0 is the price of ...
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1answer
41 views
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0answers
19 views

Project Management - PERT completion time question

The following represents a project with known activity times. All times are in weeks. Activity--Predecessor--Time A ……………………………..….4 B………………………………....3 C………………….A..…………..2 D………………….B…………...7 ...
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0answers
54 views

Follow-up on solution to Markov process equation

I asked a question here about solving a system related to an absorbing Markov chain. I now have a variation where there are $m$ types (of student, job seeker, etc) each of which applies to ...
0
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2answers
55 views

Simple differentiation / economics marginal cost question

This seems like a very simple question, so I'm sure I'm doing something stupid here, but I'm not quite getting my head around the following question: I have a total cost function: $C = 5x^2 +15x + ...
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0answers
19 views

How to characterize $F(x \mid Y = y)$ satisfies $\exists ! G(\cdot)( G(x) = \int F( x \mid Y = y) dG(y))$?

$F(x \mid Y = y)$ is the conditional distibution function $P(X \leq x \mid Y =y)$. $G(x)$,$G(y)$ represent $P(X \leq x)$ and $P(Y \leq y)$. Is there a charaterization of $F(x \mid Y = y)$ such that ...
0
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3answers
57 views

Capitalization of interest

I've got quiet a strange problem but a simple one I guess. So I have a starting sum of 10 and I would like to know how many years need to pass to achieve 30000 with 32% interest applied every 2 years. ...
0
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1answer
44 views

Calculating the chance of something happening over and over again

I'm trying to calculate the probability, and potential cost on society, of people returning to homelessness after going through the system one, two, or several more times. Let's say that someone who ...
1
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1answer
61 views

Economic Applications of Game Theory

I'm currently looking at this course in economic game theory. However, when attempting this example: In this question you are asked to price a simplified version of mortgage-backed securities. ...
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1answer
26 views

Break Even Point

Suppose that x thousand units of a product will be sold when the price is p(x) = 50 - 1.25x dollars per unit and the cost of producing x thousand units is C(x) = 20x + 100 thousand dollars. a) What ...
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0answers
45 views

How they're doing this calculation?

Consider this paper by Laura Alfaro, Sebnem Kalemli-Ozcan, and Vadym Volosovych: http://econ.sciences-po.fr/sites/default/files/file/pmartin/secondyear/restat.pdf In page 355, (actually page 9 in ...
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1answer
29 views

Variance of OLS estimator

Iam trying to understand how the variance of the OLS estimator is calculated. here is what i have: $E[\hat{ \beta} \mid X] = \beta$ and $V(\hat{\beta} \mid X) = \sigma^2(X^TX)^{-1}$ where ...
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0answers
38 views

Cost functions in economics

A firm has two plants. One plant produces out- put according to the production function $x_1^ax_2^{1-a}$ . The other plant has a production function $x_1^bx_2^{1-b}$ . What is the cost function for ...
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1answer
51 views

Minimizing the cost of production by choosing between two options with different resource demands

Suppose that the firm has two possible activities to produce output. Activity $A$ uses $a_1$ units of good $1$ and $a_2$ units of good $2$ to produce $1$ unit of output. Activity $B$ uses $b_1$ units ...
2
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1answer
49 views

Need help explaining how the elasticity was derived [closed]

We had a lecture on calculating elasticity in microeconomics and I need help understanding how the answer was derived. I didn't quite get how we came up with the answer. My classmate said to just ...
2
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1answer
46 views

How to find the short run and long run cost functions, given the production function?

The production function of car is given by $f(x_1,x_2,x_3) = \sqrt{x_1}+\sqrt{x_2}+\sqrt{x_3}$ (assume competitive input and output markets). Find the short run cost function (let input 3 ...
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2answers
39 views

Problem understanding an implicit differentiation

Here is a general budget constraint: $p{_1}x{_1}+p_{2}x_{2}=M\Leftrightarrow \frac{p_1}{p_2}x_1+x_2=\frac{M}{p_2}\Leftrightarrow {p_{1}}'x_1+x_2=M{}'$. The main idea is that since prices are given, ...
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1answer
42 views

In Courty and Li (2000) “Sequential Screening”, what justifies the last equation in Lemma 3.2?

Regarding the article "Sequential Screening," in Review of Economic Studies, 2000 by Courty and Li: In Lemma 3.2, the last equality states that ...
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0answers
14 views

variance-covariance matrix of 2sls in homoskedasticity and heteroskedasticity

How the variance-covariance matrix of two stage least square estimate in homoskedasticity or heteroskedasticity? The answer in homoskedasticity is $\sigma^2(E[xz'](E[zz'])^{-1}E[zx'])^{-1}$ and in ...
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2answers
26 views

Rounding a real number w.r.t. a given amount of steps

Let $x$ be a real number, $x \in [0,1]$. Suppose a system can only provide a noisy signal about the value of $x$, given the granularity allowed by the system, $N \in \mathbb{N}^*$. I'm looking for an ...
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1answer
26 views

Microeconomics : Total revenue for unit elasticity

I recently read in my microeconomics book that when elasticity = 1, total revenue remains the same. However, I am unable to follow this. I have two questions on this concept: Question#1- ...
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0answers
52 views

Application of a general “Weierstrass theorem”

http://books.google.at/books?id=9OSrV73a40gC&pg=PA45&lpg=PA45 gives a general Weierstrass theorem. Are there notable applications of this theorem, say in the calculus of variations? (I could ...
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0answers
50 views

How to solve a non-homogeneous second-order linear difference equation with both a forward and a backward difference?

Quite a long title for this: I'm looking for the general solution of the following difference equation: $$ax_{t+1} -bx_t + x_{t-1} = c + u_t$$ where $a,b,c$ are real constants and $u_t$ is a bounded ...
13
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2answers
502 views

Pure mathematics in our society

Is there some book or essay which deals with the sociological and economical justification of doing and funding pure mathematics? I'm looking for a modern version of Hardy's A Mathematician's Apology, ...
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2answers
41 views

income distribution from N, min,max and mediansalary, and total compensation

My goal is to obtain a reasonable approximation of the Gini index of a company (UBS). I need to obtain an estimate of the salaries distribution from publicly available data: Nuber of employees=60205 ...
2
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5answers
165 views

A mathematical approach to economics

Are there books or papers where economics is formalized and studied very rigorously? I am very interested in this topic. I would preferably like free online books and/or papers, but that is not ...
0
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1answer
53 views

Profit Model from Ellison Glaeser 1997

Can someone help me understand the following profit maximization problem (from Ellison Glaeser 1997)? Manufacturing plants choose where to locate each of $N$ plants in one of $M$ locations. The ...
4
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1answer
52 views

Expected revenue obtained by the Vickery auction with reserve price $1/2$

I would like to prove that the expected revenue of the Vickery auction with reserve price $1/2$ is $5/12$ when there are one item and two bidders the distribution of valuations are uniformly between ...
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0answers
109 views

preference relation.

In the exercise below I need to check whether the relation below is a preference relation ( need to be transitive (if $x>y$ and $y>z$ then $x>z$) and connected ). But I cannot find an ...
2
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1answer
54 views

Compactness and existence of Pareto-efficient cake partitions

I am trying to understand a fundamental statement in the theory of cake-cutting. BACKGROUND: There is a certain "cake" $C$ (a subset of $R^n$). The cake is divided among two agents, 0 and 1. Each ...
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1answer
33 views

Counterexample in axioms of expected utility theory

This is an exercise problem. Suppose $X_1=200$ with probability $1/3$, $0$ with probability $2/3$. $X_2=200$ with probability $p$, $0$ with probability $1-p$. $X_3=200$ with probability $1-p$, ...
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1answer
30 views

Expected utility representation

I am stuck on some question on utility theory. The question is as follow: Consider $A=[0,+\infty)$, and $Q=${F-cumulative distribution function on $A: \int^{+\infty}_0 x dF(x)<\infty$}, the set of ...
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2answers
39 views

Autocorrelation and var-cov matrix

$$Y_t=\beta_1+\beta_2 X_{t2}+\dots +\beta_k X_{tk}+\epsilon_t \qquad (t=1,\dots,T)$$ $$\epsilon_t=\rho \epsilon_{t-1}+v_t, \qquad v_t \sim \mathrm{i.i.d.}(0,\sigma^2_v)$$ GLS estimation under AR(1) ...
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0answers
51 views

Finding criteria for a household financial budget falsification

I’m working on a financial problem about budget of households. Households in a state fill a form about their net budget in every year and our insurance company investigate their financial status and ...
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2answers
36 views

$\operatorname{Var}(\hat{\beta_1})=\frac{\sigma^2}{\sum(X_i-\bar{X})^2}$ : how to derive this?

$\hat{\beta_1}$ is an OLS estimator for parameter $\beta_1$: $Y_i=\beta_0+\beta_1 X_i+\epsilon_i$, So $\hat{\beta_1}=\frac{\sum(X_i-\bar{X})(Y_i-\bar{Y})}{\sum(X_i-\bar{X})^2}$ and ...
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0answers
66 views

Help to solve this problem, the result doesn't seem right :/ silly mistake somewhere probably

Suppose that Coke and Pepsi are the only firms producing cola. Their products are not identical, but are very close substitutes. Let $P_c$ denote the price of Coke and $P_p$ the price of Pepsi. Demand ...
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1answer
40 views

So I have the following question, dont have much info on class notes and not sure how to tackle it, any suggestions, any help?

A seller has a single item for sale (which she values at zero). There are two potential buyers. The seller decides to use the following auction format to sell the object: each bidder submits a sealed ...
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1answer
53 views

Conditions for a positve vector in null space

Precursor to problem: Preparing for an exam in General Equilibrium Theory. One of the important theorems is the No Arbitrage Theorem which states that for an economy with $S$ states of the world and ...