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This paper analyzes an economy in which investors operate under partial information about technology-relevant state variables. It is shown that for Gaussian information structures under incomplete observations, the consumer's problem can be transformed into an equivalent program with a completely observed state: the conditional expectation of the underlying unobservable state variables. A consequence of this transformation is that classic results in finance remain valid under an appropriate reinterpretation of the state variables. [ABSTRACT FROM AUTHOR]

This article comments on a study which attempts to reconcile the observed high return on equities with reasonable levels of risk aversion on the part of individuals. The paper also calculates the risk aversion of consumers who invest in the stock market. It exploits the first-order conditions of the individual utility maximization problem, which relate expected asset returns and the covariance of marginal utility of consumption with asset returns. It innovates on the existing literature by measuring that covariance as the covariance of consumption with lagged asset returns, rather than with contemporaneous asset returns as previous researchers have done. It finds that consumers who invest nonzero amounts in the stock market have risk aversion coefficients in the range that most researchers would consider reasonable. Thus one might be tempted to argue that the equity premium puzzle has been solved. In conclusion, the failure of large sections of the population to hold stock is a puzzle for economic theory. Although many things could explain this nonparticipation, researchers have yet to find a reasonable model that matches the observed distribution of participation.

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In this article, the authors reply to the criticism of their paper by professor Brian T. Ratchford in his paper "Operationalizing Economic Models of Demand for Product Characteristics," published in the June 1979 issue of "Journal of Consumer Research." The authors address Ratchford's concern that they had condemned the Lancaster theory. While not their intent to do so, they were arguing for empirical verification before application. Instead, the authors hoped to relax some of its assumptions. Further, the author confront Ratchford's Equation 2, their demand function, continuity or infinitely divisible goods, and discuss their concerns with Ratchford's model.

Copyright of Journal of Evidence-based Healthcare is the property of Journal of Evidence-based Healthcare and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Customers often resent priority queues even though priorities are often necessary to maximize either social welfare or revenue. Consequently, it is useful to consider the level of social inefficiency introduced when the design of a priority scheme is turned over to a revenue-maximizing firm. In this paper we study how the priority scheme chosen by a revenue-maximizing firm differs from the one a social planner would use. We study a single-server queue with customers who draw their valuations from a continuous distribution and have a per-period waiting cost that is proportional to their realized valuations. The decision maker must post a menu offering a finite number of waiting time-price pairs. There are then three dimensions on which a revenue maximizer and social planner can differ: coverage (i.e., how many customers in total to serve), coarseness (i.e., how many classes of service to offer), and classification (i.e., how to map customers to priority levels). We show that differences between the decision-makers' priority policies are all about classification. Both are content to offer very coarse schemes with just two priority levels, and they will have negligible differences in coverage. However, differences in classification are persistent. Further, a revenue maximizer may—relative to the social planner—have too few or too many high-priority customers. Whether the revenue maximizer overstuffs or understuffs the high-priority class depends on a measure of consumer surplus that is captured by the mean residual life function of the valuation distribution. The e-companion is available at https://doi.org/10.1287/mnsc.2017.2987. This paper was accepted by Noah Gans, stochastic models and simulation. [ABSTRACT FROM AUTHOR]

Copyright of Canadian Journal of Economics is the property of Wiley-Blackwell and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This article presents a simple multperiod general equilibrium theory of asset prices that can be tested observing the market portfolio or aggregate consumption. The authors note that their model is developed using the minimum set of assumptions needed in the Intertemporal Sharpe-Litner (ISL) model. They intend to show that expected excess returns on risky assets are proportional to their covariances with the next-period riskless rate of interest. The authors interpret this to indicate the market portfolio is mean-variance efficient with changes in value of the market portfolio providing the same amount of information about the aggregate risk of an economy that changes in investors' marginal utilities to provide wealth.

Consumption of a good typically diminishes the marginal utility of consuming more, but for how long? This paper adapts a model of consumption capital to allow consumption to have a lasting effect that diminishes the marginal utility of future consumption. Estimates of the model find that it takes the 25th, median and 75th percentile of consumers 19, 32 and 43 days for their marginal utilities to return to pre-consumption levels, and they are forward-looking with respect to these effects. This generates intertemporal substitution of consumption that leads to an overestimate of the own-price elasticity of demand of ten percent when it is estimated using temporary price changes. In addition to these implications consumption effects share with those of durable and storable goods, consumption effects also raise concerns for capacity constrained industries because the timing of consumption affects capacity utilization. In the empirical application in this paper, price variation in one time period generates substantial changes in capacity utilization in that period, but minimal changes in other periods because the intertemporal substitution is spread over many time periods. [ABSTRACT FROM AUTHOR]

In the literature on optimal indemnity schedules, indemnities are usually restricted to be non-negative. Keeler [1974] and Gollier [1987] show that this constraint might well bind: insured could get higher expected utility if insurance contracts would allow payments from the insured to the insurer at some losses. This paper extends Collier’s findings by allowing for negative indemnity payments for a broader class of insurers’ cost functions and argues that the indemnity schedule derived here is more appropriate for practical applications (e.g. in health insurance). [ABSTRACT FROM AUTHOR]

This lecture examines the nature of the changing focus of economics during the 19th century, which is often referred to as the 'marginal revolution'. The change is characterised as a focus on the theory of exchange, and the beginnings of welfare economics. Attention is given to early contributions by J.S. Mill, Cournot, and Whewell, and the 'neoclassical economists, Jevons, Marshall, Walras and Edgeworth. [ABSTRACT FROM AUTHOR]

This article focuses on the article written by Russian statistician and economist Eugen Slutsky that appeared in an Italian journal "Giornale delgi economisti." The first appreciation of Slutsky's work in the economic literature was economist Valentino Dominedo's long 1933 paper on the theory of demand. Dominedo devoted the last pages of this article to Slutsky's mathematical and theoretical exposition, and he was certainly the first author to have grasped the importance of Slutsky's paper. In an early article economist Umberto Ricci had considered a case in which a person's utility function was additively separable in the quantities. Instead of assuming diminishing marginal utility for all commodities, Ricci allowed one of the commodities to have at first increasing and subsequently decreasing marginal utility. The first published recognition of Slutsky's important paper in America may be found in Henry Schultz's 1935 article, "Interrelations of Demand, Price, and Income." Actually, it is known that Milton Friedman, a young research assistant to Schultz at Chicago, participated actively in this article and in the subsequent 1938 book.

In this paper, we study the optimal resource allocation problem in a wireless network, where all types of traffic including best effort and quality of service (QoS; Soft QoS and Hard QoS) are described by a unified utility function. The attacked problem is casted into a network utility maximization (NUM) model. We formulate the fairness index in terms of users' utility and traffic type parameters, and then study their relationships. Law of diminishing marginal utility is widely accepted in economics. In this paper, we establish the principle of equality and diminishing marginal utility that enables us to find the desired optimal solution to the NUM model by using this principle, correspondingly for the case where the total resource is sufficient and for the case where the total resource is insufficient. We propose some essential theorems and algorithms to find the optimal solution for the above two cases. The proposed algorithms are evaluated via simulation results. The theoretical analysis and simulation results not only validate the efficacy and efficiency of the proposed algorithms but also disclose the relation between the optimal resource allocation and the factors of traffic types, total available resource and user's channel quality and the relation between fairness and total resource with respect to a certain allocation scheme. [ABSTRACT FROM AUTHOR]

Abstract: In this paper, I study the role of changes in the wage structure and expectations about marriage in explaining the college gender gap reversal. With strongly diminishing marginal utility of wealth and in the presence of a gender wage gap, single women have a greater incentive than single men to invest in education. Marriage‐market distortions tend to depress the overall benefit of education for women relative to men. I develop a tractable two‐period model and parameterize it using US census data for the cohort born in 1950. I then show that it can generate a reversal and that the most important driving force for this is the decline in marriage rates. [ABSTRACT FROM AUTHOR]

Although the link between risk aversion and diminishing marginal utility of wealth is academically well established, theoretical discussions concerning its empirical validity remain. The presented, review-type paper aims to briefly examine theoretical roots responsible for the different views on this association in order to provide a broader perspective to alternative explanations. This latter task is assisted by comparative analysis of two recent pieces of research by Rick Falkenstein and Matthew Rabin; a duo of papers, handpicked at the author's discretion to demonstrate the convergence of alternative ideas from different authors (and backgrounds). In support of its argumentation, the paper also presents a critical overview of the equity premium puzzle as seen through the prism of behavioural finance. The main contributions of the paper include evidence-based support for the concept of relative utility and reconfirmation of the meaningful role of behavioural finance in economics and finance. [ABSTRACT FROM AUTHOR]

This paper presents first the choice of the optimal insurance policy under a state-dependent utility function (S.D.U.F.) when the probabilities of loss are dependent on the actions of the insured. Moral hazard is shown to be an important problem under the S.D.U.F.. This paper also verifies whether the problem of moral hazard is more or less important under a S.D.U.F. than under a state-independent utility function (S. I. U.F.). The measure of moral hazard in terms of insurance coverage is a function of two factors: 1) the undesirability to the individual of the accident or illness and 2) the dependence of the marginal utility of income on the states of the world. The first factor always has a negative effect on moral hazard, but the second may affect moral hazard in different ways. Finally the paper analyses the variation of the ‘deductible’ with moral hazard and finds that the optimal ‘deductible’ does not necessarily vary in the same way as moral hazard. [ABSTRACT FROM AUTHOR]

The Giffen paradox is one of the most prominent curiosities in economics. Few price theory textbooks fail to mention the possibility that a utility-maximising consumer may consume more of a good at a higher price. Fewer textbooks, however, show awareness as to why the precise nature of the price increase is a crucial element in the Giffen curiosity. This paper will demonstrate that the Giffen curiosity is an artifact of simplification. It only arises when people do not exploit available options and do not plan their consumption in anticipation of (certain or probabilistic) price changes. In a fully specified model, a maximising individual wilt never buy more of a good when its price increases. This paper demonstrates that the price of a Giffen good is positively related to the marginal utility of income. The consumer will therefore structure his expenditures such that he will spend more in the higher price period and less in the lower price period. Giffen goods being inferior goods, the consumer will consume less vegetables when the price is high and more when the price is low. In this paper we demonstrate that the Giffen paradox will not arise when consumers plan their consumption in anticipation of price changes. Using a framework of expected utility maximisation or of lifetime utility maximisation, we show that maximising behaviour is inconsistent with upward sloping demand curves. Our paper thus provides a theoretical justification for the empirical regularity known as the law of demand. [ABSTRACT FROM AUTHOR]

The paper analyses the possibilities of optimal government (national) debt management, trying to maximize the made-up net value for the debtor with the help of funds borrowed by the government. The integral portfolio of debtor assets and debt service liabilities, based on the borrowed funds, is chosen as a solution for the above-described problem. In the paper, an asset is understood as a position of government expenditures, where funds borrowed by the government are used and create a quantifiable profit (value) or the measurable damage or loss is avoided if funds are borrowed. Actually, liabilities are the main debt service positions. Naturally, the value generated by assets, as well as funds spent to settle the liabilities, could be analytically adequately evaluated only in stochastic dimension. Consequently, multidimensional multicriteria stochastic optimization technique is used as a technical solution to the formulated problem. In analytical decisions, the budget funds borrowed by the government are treated as marginal funds. Taking into account a completely new decision technique that has been invoked for government debt management, the methods of decisions are described quite particularly. [ABSTRACT FROM PUBLISHER]