Category: Mathematical economics

Isoelastic function
In mathematical economics, an isoelastic function, sometimes constant elasticity function, is a function that exhibits a constant elasticity, i.e. has a constant elasticity coefficient. The elasticity
Karush–Kuhn–Tucker conditions
In mathematical optimization, the Karush–Kuhn–Tucker (KKT) conditions, also known as the Kuhn–Tucker conditions, are first derivative tests (sometimes called first-order necessary conditions) for a so
Mathematical economics
Mathematical economics is the application of mathematical methods to represent theories and analyze problems in economics. Often, these applied methods are beyond simple geometry, and may include diff
Computational economics
Computational Economics is an interdisciplinary research discipline that involves computer science, economics, and management science. This subject encompasses computational modeling of economic syste
Kuhn's theorem
In game theory, Kuhn's theorem relates perfect recall, mixed and unmixed strategies and their expected payoffs. It is named after Harold W. Kuhn. The theorem states that in a game where players may re
Sethi model
The Sethi model was developed by Suresh P. Sethi and describes the process of how sales evolve over time in response to advertising. The model assumes that the rate of change in sales depend on three
Maximum theorem
The maximum theorem provides conditions for the continuity of an optimized function and the set of its maximizers with respect to its parameters. The statement was first proven by Claude Berge in 1959
Replicator equation
In mathematics, the replicator equation is a deterministic monotone non-linear and non-innovative game dynamic used in evolutionary game theory. The replicator equation differs from other equations us
Quantum economics
Quantum economics is an emerging research field which applies mathematical methods and ideas from quantum physics to the field of economics. It is motivated by the belief that economic processes such
Iron law of prohibition
The iron law of prohibition is a term coined by Richard Cowan in 1986 which posits that as law enforcement becomes more intense, the potency of prohibited substances increases. Cowan put it this way:
Social Choice and Individual Values
Kenneth Arrow's monograph Social Choice and Individual Values (1951, 2nd ed., 1963, 3rd ed., 2012) and a theorem within it created modern social choice theory, a rigorous melding of social ethics and
Charles F. Roos
Charles Frederick Roos (May 18, 1901 – January 6, 1958) was an American economist who made contributions to mathematical economics. He was one of the founders of the Econometric Society together with
Productive matrix
In linear algebra, a square nonnegative matrix of order is said to be productive, or to be a Leontief matrix, if there exists a nonnegative column matrix such as is a positive matrix.
Elasticity of a function
In mathematics, the elasticity or point elasticity of a positive differentiable function f of a positive variable (positive input, positive output) at point a is defined as or equivalently It is thus
Brander–Spencer model
The Brander–Spencer model is an economic model in international trade originally developed by James Brander and Barbara Spencer in the early 1980s. The model illustrates a situation where, under certa
Median voter theorem
The median voter theorem is a proposition relating to ranked preference voting put forward by Duncan Black in 1948. It states that if voters and policies are distributed along a one-dimensional spectr
Game theory
Game theory is the study of mathematical models of strategic interactions among rational agents. It has applications in all fields of social science, as well as in logic, systems science and computer
Ramsey problem
The Ramsey problem, or Ramsey pricing, or Ramsey–Boiteux pricing, is a second-best policy problem concerning what prices a public monopoly should charge for the various products it sells in order to m
Almost ideal demand system
The Almost Ideal Demand System (AIDS) is a consumer demand model used primarily by economists to study consumer behavior. The AIDS model gives an arbitrary second-order approximation to any demand sys
Operations research
Operations research (British English: operational research), often shortened to the initialism OR, is a discipline that deals with the development and application of analytical methods to improve deci
Optimal rotation age
In forestry, the optimal rotation age is the growth period required to derive maximum value from a stand of timber. The calculation of this period is specific to each stand and to the economic and sus
Contract theory
From a legal point of view, a contract is an institutional arrangement for the way in which resources flow, which defines the various relationships between the parties to a transaction or limits the r
Coate-Loury model
The Coate-Loury model of affirmative action was developed by Stephen Coate and Glenn Loury in 1993. The model seeks to answer the question of whether, by mandating expanded opportunities for minoritie
Ergodicity economics
Ergodicity economics is an approach to economic theory which emphasizes the ergodicity question, namely whether expectation values of stochastic processes are equal to their time averages. This yields
Social choice theory
Social choice theory or social choice is a theoretical framework for analysis of combining individual opinions, preferences, interests, or welfares to reach a collective decision or social welfare in
All-pay auction
In economics and game theory, an all-pay auction is an auction in which every bidder must pay regardless of whether they win the prize, which is awarded to the highest bidder as in a conventional auct
Social welfare function
In welfare economics, a social welfare function is a function that ranks social states (alternative complete descriptions of the society) as less desirable, more desirable, or indifferent for every po
Averch–Johnson effect
The Averch–Johnson effect is the tendency of regulated companies to engage in excessive amounts of capital accumulation in order to expand the volume of their profits. If companies' profits to capital
Transportation theory (mathematics)
In mathematics and economics, transportation theory or transport theory is a name given to the study of optimal transportation and allocation of resources. The problem was formalized by the French mat
Mean-field game theory
Mean-field game theory is the study of strategic decision making by small interacting agents in very large populations. Use of the term "mean field" is inspired by mean-field theory in physics, which
DNSS point
DNSS points, also known as Sethi-Skiba points, arise in optimal control problems that exhibit multiple optimal solutions. A DNSS pointnamed alphabetically after Deckert and Nishimura, Sethi, and Skiba
Gravity model of trade
The gravity model of international trade in international economics is a model that, in its traditional form, predicts bilateral trade flows based on the economic sizes and distance between two units.
Gordon–Loeb model
The Gordon–Loeb model is a mathematical economic model analyzing the optimal investment level in information security. Investing to protect company data involves a cost that, unlike other investments,
Recursive economics
Recursive economics is a branch of modern economics based on a paradigm of individuals making a series of two-period optimization decisions over time.
Shadow price
A shadow price is the monetary value assigned to an abstract or intangible commodity which is not traded in the marketplace. This often takes the form of an externality. Shadow prices are also known a
St. Petersburg paradox
The St. Petersburg paradox or St. Petersburg lottery is a paradox involving the game of flipping a coin where the expected payoff of the theoretical lottery game approaches infinity but nevertheless s
Slutsky equation
The Slutsky equation (or Slutsky identity) in economics, named after Eugen Slutsky, relates changes in Marshallian (uncompensated) demand to changes in Hicksian (compensated) demand, which is known as