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Auction theory wrap up!

My previous article looked at a very common type of auction, the open outcry auction. In this article let’s have a quick engagement with other auctions economists study in the static, independent values framework. The last few words may sound slightly unfamiliar. ‘Static’ simply refers to the fact that we are looking at single period models as opposed to ‘dynamic’ models and the term ‘independent values’ is alluding to the idea that the agents valuation of the good being sold by the seller are independent of each other’s valuation.

The auction we should naturally look at after last week’s article is the sealed bid second price auction.

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Going, going, gone!

Through our life as an economics major in undergraduate school, for three years we are repeatedly bombarded with consumer and producer theory, game theory, and general equilibrium theory. It is not until we are very familiar with these different topics, do we then come across what is, in my opinion, one of the most interesting topics in microeconomics. Auction theory and mechanism design.

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Advertising Part 3: Advertising and Market Structure

This article will be the final installment of my advertising series and it will be about the empirical findings from studies of the relationship between advertising and market structure looking at data from three industries: cola, photographic film, and saltine crackers.

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Advertising Part 2 – The Empirics of Advertising and Sales

At long last our arduous obligation as students are temporarily over! Following up from the previous article, I will introduce some empirical findings in the literature that help us better understand ‘advertising’. I am going to split the summary of empirical findings into two articles and here we will look at advertising’s effect on a firm’s sales. The next article will look at empirical findings of advertising’s effect on market share stability.

It is important to recognize the different effects that advertising could have on sales. Firstly, is there a positive relationship between present period advertising and present and future period sales? If the answer to this question was ‘yes’ then it would support some sort of goodwill building mechanism of advertising. Secondly, we need to look at whether advertising impacts the market’s demand or if it is simply a form of competition between firms within the market.

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Advertising – Good or Bad?

This week  I continue my series on the economics of advertising. Adding on to the introduction of the informative and persuasive view that I wrote about in my previous article, let’s proceed to consider some more specific contributions, and advertising’s potential influence on welfare. Have economists been able to come to a sweeping conclusion about the very unusual good ‘advertising’?

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Advertising Part 1: Read this Article NOW!

As the title of the article suggests, this week I am writing about the economics of advertising. I will be writing a series of articles exploring the advertising literature. We start the series off by an overview of the existing literature and how economists think about advertising. Advertising is a particularly interesting topic of study because it is literally ‘everywhere’ if you are a participant in a market economy. From all the screens we own, to the side of buildings, even on the grass we play sports on.

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Asians like to Save more?

Since the second half of the last century we have seen the success of many emerging market economies. These economies were traditionally labeled the ‘Four Asian Tigers’, and refer to the economies of Hong Kong, Singapore, South Korea, and Taiwan. However, now it seems as if we must add two more economies, namely, China and India. The stories behind the success of these economies are rather well known, also it is well documented that the private saving rates of the emerging economies increase while the rates fall for the developed economies during such booms. This article will take a look at how we can explain the divergence of private saving rates in the emerging economies and the already developed economies.

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Study, study and study some more!

Recently I came across an interesting paper, which caught my attention as I was questioning the ‘reason’ I must dedicate so much of my life, just to reach (not even push forward) the frontier of knowledge and research. In this paper by Jones (1995) the exact question is addressed and scrutinized in a theoretical and empirical manner. Apart from my personal pondering on the need to dedicate more or less all my youth to become a researcher, why should anyone care about this?

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The Flight of the Kiwis (Q&A special)

Most people seem to have heard of the wingless (and hence flightless) bird called the Kiwi native to New Zealand. However, we hear of a contradiction to this fact when it comes to the Kiwis flying across ‘the ditch’ into Australia. It is no doubt we have been hearing these flight stories more vigorously in the past couple of years. Is there really a mass exodus of New Zealanders from their home country to Australia? If so, why might this be happening and what are the effects of this exodus on Australia?

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Microfinance and Social capital

Many of us are already probably familiar with what is known as ‘microfinance’ (see ‘Microcrisis’ by Hanbo Li), but what about social capital?  Social capital has been defined by many scholars. To take one famous instance, Putnam in his book ‘Making Democracy Work : Civic Traditions in Modern Italy’  defined social capital as “features of social organizations, such as trust, norms and networks, that can improve the efficiency of society by facilitating coordinated actions”.

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Past-me, Me, Future-me

The term time inconsistency is used to describe a situation where one’s ‘optimal’ decision depends on ‘when’ he/she makes the decision and the preferred decision at each point in time is different to what you thought you would prefer in the past.  In other words, there is (was or will be?) disagreement between the past-me, me, and future me.

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Someone Give this Rational Agent a Heart!

Economics as a discipline is a victim of huge misunderstanding. We are seen to be obsessed about utility maximization, profit maximization, efficiency and equilibria (to name a few among the many words in the economist’s vocabulary that appear to degenerate human behavior into some egotistical mathematical equation!). These perceptions are mostly true; however, the misunderstanding lies within the economist’s relationship with the homo economicus. Most people would think that economists are in love with the rational but fictional economic man.  However the truth is that economists are in some twisted love-hate relationship with this agent.

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