nep-mic New Economics Papers
on Microeconomics
Issue of 2012‒01‒10
six papers chosen by
Jing-Yuan Chiou
IMT Lucca Institute for Advanced Studies

  1. Economic Models as Analogies By Itzhak Gilboa; Andrew Postlewaite; Larry Samuelson; David Schmeidler
  2. A Unifying Impossibility Theorem By Priscilla Man; Shino Takayama
  3. Stochastically stable implementation. By Cabrales, Antonio; Serrano, Roberto
  4. Dual Farrell measures of efficiency By Juan Muro
  5. Scoring rules for judgment aggregation By Dietrich, Franz
  6. Single Peakedness and Giffen Demand By Massimiliano Landi

  1. By: Itzhak Gilboa (HEC, Paris, and Tel-Aviv University); Andrew Postlewaite (Department of Economics, University of Pennsylvania); Larry Samuelson (Department of Economics, Yale University); David Schmeidler (The InterDisciplinary Center in Herzliya, and TAU)
    Abstract: People often wonder why economists analyze models whose assumptions are known to be false, while economists feel that they learn a great deal from such exercises. We suggest that part of the knowledge generated by academic economists is case-based rather than rule-based. That is, instead of offering general rules or theories that should be contrasted with data, economists often analyze models that are “theoretical cases”, which help understand economic problems by drawing analogies between the model and the problem. According to this view, economic models, empirical data, experimental results and other sources of knowledge are all on equal footing, that is, they all provide cases to which a given problem can be compared. We offer some complexity arguments that explain why case-based reasoning may sometimes be the method of choice; why economists prefer simple examples; and why a paradigm may be useful even if it does not produce theories.
    Keywords: Methodology, Case-based reasoning
    JEL: B40 B41
    Date: 2011–12–07
  2. By: Priscilla Man (School of Economics, The University of Queensland); Shino Takayama (School of Economics, The University of Queensland)
    Abstract: This paper considers social choice correspondences assigning a choice set to each non-empty subset of social alternatives. We impose three requirements on these correspondences: unanimity, independence of preferences over infeasible alternatives and choice consistency with respect to choices out of all possible alternatives. With more than three social alternatives and the universal preference domain, any social choice correspondence that satisfies our requirements is serially dictatorial. A number of known impossibility theorems — including Arrow’s Impossibility Theorem, the Muller-Satterthwaite Theorem and the impossibility theorem under strategic candidacy — follow as corollaries. Our new proof highlights the common logical underpinnings behind these theorems.
    Date: 2012–01–04
  3. By: Cabrales, Antonio; Serrano, Roberto
    Abstract: Restricting attention to economic environments, we study implementation under perturbed better-response dynamics (BRD). A social choice function (SCF) is implementable in stochastically stable strategies of perturbed BRD whenever the only outcome supported by the stochastically stable strategies of the perturbed process is the outcome prescribed by the SCF. For uniform mistakes, we show that any ε-secure and strongly efficient SCF is implementable when there are at least five agents. Extensions to incomplete information environments are also obtained.
    Keywords: Robust implementation; Bounded rationality; Evolutionary dynamics; Mechanisms; Stochastic stability;
    JEL: C72 D70 D78
    Date: 2011–04–18
  4. By: Juan Muro (Departamento de Estadística, Estructura y O.E.I. Universidad de Alcalá.)
    Abstract: This paper provides several definitions of efficiency measures in the price space. Economic and scale aspects of inefficiency are considered to give empirical content to the measurement of efficiency when the production technology is described by cost functions models. It shows, in the Hanoch’s symmetric duality approach, how the new definitions preserve the ranking of efficiency, are formally dually symmetric to the ones defined in the input space, and both are established with respect to different descriptions of the same technology. In addition, graphical procedures are utilized to make an insight into the achievement of polar technologies from primal ones and into the relationship between Shephard’s lemma and Roy’s identity.
    Keywords: Efficiency measures, scale measures, duality theory, polar forms
    JEL: D24
    Date: 2011
  5. By: Dietrich, Franz
    Abstract: This paper studies a class of judgment aggregation rules, to be called `scoring rules' after their famous counterpart in preference aggregation theory. A scoring rule delivers the collective judgments which reach the highest total `score' across the individuals, subject to the judgments having to be rational. Depending on how we define `scores', we obtain several (old and new) solutions to the judgment aggregation problem,such as distance-based aggregation, premise- and conclusion-based aggregation, truth-tracking rules, and a Borda-type rule. Scoring rules are shown to generalize the classical scoring rules of preference aggregation theory.
    Keywords: judgment aggregation; social choice; scoring rules; Hamming rule; Borda rule; premise- and conclusion-based rules
    JEL: D70 D71
    Date: 2011–12–26
  6. By: Massimiliano Landi (School of Economics, Singapore Management Unversity)
    Abstract: I provide a simple example of a single peaked utility function that generates a Giffen demand. The utility function is smooth, non piecewise defined, strictly concave but not globally increasing. A full characterization of the parameter conditions under which the Giffen demand arises is provided. In addition the properties of the demand function are studied: I find that the inferior commodity with a Giffen demand must be cheaper relatively to a substitue and that Giffen demand arises at relatively low levels of income. However it is not required that the share of income spent on that commodity be large.
    Keywords: Giffen behavior; Utility function; Single peakedness; Expenditure share.
    JEL: D11
    Date: 2012–01

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