Economics Stack Exchange
Economics Stack Exchange

Questions tagged [rationality]

17 questions
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How do economists explain why people contribute to Wikipedia?

What incentives do contributors have? I believe they earn no money. And usually, they earn no reputation either, because most of the contributions are anonymous. I believe this is a public goods game. Have economists studied this "Wikipedia puzzle"?…
user16353
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Necessary and sufficient conditions for the existence of a utility function

I was reading Jehle and Reny, Advanced Microeconomic Theory, where they discuss in detail, the choice problem of a consumer. The Consumption Set (or Choice Set) $X$ is a subset of $R_+^n$, is closed and convex and contains $0\in R_+^n$. They define…
Ishan Kashyap Hazarika
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Who is the first one to equate "rational" with "complete and transitive preference"?

MWG taught that, suppose that the menu is finite, "rational" is the same as "complete and transitive". But it seems that it does not cite any sources. Who said this first? vNM said in 1944 that their EU is rational behavior, which is followed by…
High GPA
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Understanding Classical Rationality at a Basic Level

I am a high school student in an intro Microeconomics class (note that we have not covered utility functions) and I'm utterly confused about the classical concept of rationality. I certainly understand that that conception does not accurately…
Will
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Is soil exhaustion rational?

I was talking with friends about soil exhaustion in agriculture. They tell me that it is very frequent because of the methods employed in modern agriculture. They suggest that this amount of exhaustion is 'unsustainable'. What strikes me in contrast…
Ululo
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Violation of completeness axiom (simple everyday examples)

Simple everyday examples of violations of transitivity are not difficult to come up with, but I'm having trouble thinking of some for the completeness axiom. One possible formulation of the completeness axiom in plain English: Given any two…
user18
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1 answer

Analyzing a Gambling Race Paradox

Suppose a number of players are given $100$ points each, and repeatedly engage in a gamble having positive expected value, with the goals of being the first player to reach $100000$ points. Solving for the optimal bet size per round to balance risk…
user37672
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Auctions and finding nash equilibrium of a dynamic game

Suppose we have a sequential version of an Auction game: • Player 1 places a bid. • Player 2 observes player 1’s bid, then places a bid. • The player with the highest bid wins the item at auction. • In case of a tie, the winner is determined…
jeff123
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Rationalizable strategies and Weak Dominance

Can I find the rationalizable strategies for a game where none of the players has strict dominance but only weak dominance?
Micro Economics
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Need help with Wakker (2010) on arbitrage

In Prospect Theory (2010; Cambridge UP), Peter P. Wakker has an exercise assignment 3.3.6 without solution in the book and I'm really unsure about this one. The exercise states on pages 76-77: Assignment 3.3.6. This assignment demonstrates that…
Eric '3ToedSloth'
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Premises on which the Efficient Market Hypothesis is built upon

The Efficient Market Hypothesis tells us that stocks are "fairly priced" (i.e. not systematically over- or under-valued). That is, stock prices reflect all information that is already known about them. This is because any information from current or…
Tan Yong Boon
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Demand correspondence is both upper and lower hemi-continuous; is the preference continuous?

$\succsim$ is a weak order over $\mathbb R^L$. For a closed budget set $B\subset\mathbb R^L$, define demand correspondence: $$D(B)=\{x\in B|x\succsim y\forall y\in B\}$$. We know that $D$ is always none empty and both upper and lower…
High GPA
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Does Pascal's Wager fail archimedean property?

I assume most people have heard of Pascal's Wager, in case you have not: https://en.wikipedia.org/wiki/Pascal%27s_Wager By the Stanford encyclopedia of philosphy: "We have a decision under risk, with probabilities assigned to the ways the world…
plastico
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Could Allais Paradox and similar experiments be harmonized with expected utility theory by noting additional counterparty risks?

My answers to the initial formulations of Allais Paradox are 1B and 2B, but only for setups where I have a high degree of confidence in the method of randomness being employed. In many if not most contexts, I will conform to either the zero effect…
user38234
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Original formulation of the axioms of rationality

Completeness and transitivity are considered to be the two axioms of rationality in case of decisions under certainty. I wanted to know when were these axioms first proposed, by whom and the first paper where they were proposed. I know Allen and…
Ishan Kashyap Hazarika
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