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Holmström's Theorem
In economics, Holmström's theorem is an impossibility theorem or trilemma attributed to Bengt R. Holmström proving that no incentive system for a team of agents can make all of the following true: # Income equals outflow (the budget balances), # The system has a Nash equilibrium, and # The system is Pareto efficient. Thus a Pareto-efficient system with a balanced budget does not have any point at which an agent can not do better by changing their effort level, even if everyone else's effort level stays the same, meaning that the agents can never settle down to a stable strategy; a Pareto-efficient system with a Nash equilibrium does not distribute all revenue, or spends more than it has; and a system with a Nash equilibrium and balanced budget does not maximise the total profit of everybody. The Gibbard–Satterthwaite theorem in social choice theory is a related impossibility theorem dealing with voting systems. Statement of the theorem Suppose there is a team of ''n'' > ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Economics
Economics () is the social science that studies the production, distribution, and consumption of goods and services. Economics focuses on the behaviour and interactions of economic agents and how economies work. Microeconomics analyzes what's viewed as basic elements in the economy, including individual agents and markets, their interactions, and the outcomes of interactions. Individual agents may include, for example, households, firms, buyers, and sellers. Macroeconomics analyzes the economy as a system where production, consumption, saving, and investment interact, and factors affecting it: employment of the resources of labour, capital, and land, currency inflation, economic growth, and public policies that have impact on these elements. Other broad distinctions within economics include those between positive economics, describing "what is", and normative economics, advocating "what ought to be"; between economic theory and applied economics; between rational a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Proof Of Impossibility
In mathematics, a proof of impossibility is a proof that demonstrates that a particular problem cannot be solved as described in the claim, or that a particular set of problems cannot be solved in general. Such a case is also known as a negative proof, proof of an impossibility theorem, or negative result. Because they show that something cannot be done, proofs of impossibility can be the resolutions to decades or centuries of work attempting to find a solution. Proving that something is impossible is usually much harder than the opposite task, as it is often necessary to develop a proof that works in general, rather than to just show a particular example. Impossibility theorems are usually expressible as negative existential propositions or universal propositions in logic. The irrationality of the square root of 2 is one of the oldest proofs of impossibility. It shows that it is impossible to express the square root of 2 as a ratio of two integers. Another consequential proof o ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Trilemma
A trilemma is a difficult choice from three options, each of which is (or appears) unacceptable or unfavourable. There are two logically equivalent ways in which to express a trilemma: it can be expressed as a choice among three unfavourable options, one of which must be chosen, or as a choice among three favourable options, only two of which are possible at the same time. The term derives from the much older term ''dilemma'', a choice between two or more difficult or unfavourable alternatives. The earliest recorded use of the term was by the British preacher Philip Henry in 1672, and later, apparently independently, by the preacher Isaac Watts in 1725. In religion Epicurus' trilemma One of the earliest uses of the trilemma formulation is that of the Greek philosopher Epicurus, rejecting the idea of an omnipotent and omnibenevolent God (as summarised by David Hume): # If God is unable to prevent evil, then he is not all-powerful. # If God is not willing to prevent evil, the ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Bengt R
Bengt may refer to: People In arts, entertainment and media Actors * Bengt Djurberg (1898–1941), Swedish actor and singer * Bengt Ekerot (1920–1971), Swedish actor and director * Bengt Eklund (1925–1998), Swedish actor * Bengt Logardt (1914–1994), Swedish actor, screenwriter and film director * Bengt Nilsson (actor) (born 1954), Swedish actor Journalists and writers * Bengt Feldreich (1925-2019), Swedish journalist and teacher * Bengt Frithiofsson (born 1939), Swedish wine writer * Bengt Lidner (1757–1793), Swedish poet * Bengt Linder (1929–1985), Swedish writer and journalist * Bengt Magnusson (born 1950), Swedish journalist and a TV presenter * Bengt Pohjanen (born 1944), Swedish author, translator and priest In music * Bengt Berger (born 1942), Swedish jazz drummer, composer and producer * Bengt Calmeyer, Swedish musician in the band Turbonegro * Bengt Djurberg (1898–1941), Swedish actor and singer * Bengt Forsberg (born 1952), Swedish concert pianist * Be ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Incentive System
The term incentive system refers to a variety of fields, including biology, education, and philosophy. Organizational Psychology, Economics, and Business In organizational psychology, economics and business an incentive system denotes a structure motivating individuals as part of an organization to act in the interest of the organization. A fundamental requirement of creating a working incentive system for individuals and the organization is understanding human behavior and motivators of human behavior. Relevant theories helping to understand human behavior include utility theory, principal-agent theory, need hierarchy theory, two factor theory, cognitive evaluation theory, expectancy theory, goal-setting theory, and equity theory. The many determinants influencing human judgment and decision-making highlights the complexity of understanding human behavior. Bonner grouped them into Knowledge and personal involvement, cognitive processes, task variables, and environmental vari ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Balanced Budget
A balanced budget (particularly that of a government) is a budget in which revenues are equal to expenditures. Thus, neither a budget deficit nor a budget surplus exists (the accounts "balance"). More generally, it is a budget that has no budget deficit, but could possibly have a budget surplus. A ''cyclically'' balanced budget is a budget that is not necessarily balanced year-to-year, but is balanced over the economic cycle, running a surplus in boom years and running a deficit in lean years, with these offsetting over time. Balanced budgets and the associated topic of budget deficits are a contentious point within academic economics and within politics. Some economists argue that moving from a budget deficit to a balanced budget decreases interest rates, increases investment, shrinks trade deficits and helps the economy grow faster in the longer term. Other economists, especially those associated with Modern Monetary Theory (MMT), downplay the need for balanced budgets among c ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Nash Equilibrium
In game theory, the Nash equilibrium, named after the mathematician John Nash, is the most common way to define the solution of a non-cooperative game involving two or more players. In a Nash equilibrium, each player is assumed to know the equilibrium strategies of the other players, and no one has anything to gain by changing only one's own strategy. The principle of Nash equilibrium dates back to the time of Cournot, who in 1838 applied it to competing firms choosing outputs. If each player has chosen a strategy an action plan based on what has happened so far in the game and no one can increase one's own expected payoff by changing one's strategy while the other players keep their's unchanged, then the current set of strategy choices constitutes a Nash equilibrium. If two players Alice and Bob choose strategies A and B, (A, B) is a Nash equilibrium if Alice has no other strategy available that does better than A at maximizing her payoff in response to Bob choosing B, and Bo ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Pareto Efficient
Pareto efficiency or Pareto optimality is a situation where no action or allocation is available that makes one individual better off without making another worse off. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engineer and economist, who used the concept in his studies of economic efficiency and income distribution. The following three concepts are closely related: * Given an initial situation, a Pareto improvement is a new situation where some agents will gain, and no agents will lose. * A situation is called Pareto-dominated if there exists a possible Pareto improvement. * A situation is called Pareto-optimal or Pareto-efficient if no change could lead to improved satisfaction for some agent without some other agent losing or, equivalently, if there is no scope for further Pareto improvement. The Pareto front (also called Pareto frontier or Pareto set) is the set of all Pareto-efficient situations. Pareto originally used the word "optimal" for ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Gibbard–Satterthwaite Theorem
In social choice theory, the Gibbard–Satterthwaite theorem is a result published independently by philosopher Allan Gibbard in 1973 and economist Mark Satterthwaite in 1975. It deals with deterministic ordinal electoral systems that choose a single winner. It states that for every voting rule, one of the following three things must hold: # The rule is dictatorial, i.e. there exists a distinguished voter who can choose the winner; or # The rule limits the possible outcomes to two alternatives only; or # The rule is susceptible to tactical voting: in certain conditions, a voter's sincere ballot may not best defend their opinion. While the scope of this theorem is limited to ordinal voting, Gibbard's theorem is more general, in that it deals with processes of collective decision that may not be ordinal: for example, voting systems where voters assign grades to candidates. Gibbard's 1978 theorem and Hylland's theorem are even more general and extend these results to non-determi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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 some sense.Amartya Sen (2008). "Social Choice,". ''The New Palgrave Dictionary of Economics'', 2nd EditionAbstract & TOC./ref> Whereas choice theory is concerned with individuals making choices based on their preferences, social choice theory is concerned with how to translate the preferences of individuals into the preferences of a group. A non-theoretical example of a collective decision is enacting a law or set of laws under a constitution. Another example is voting, where individual preferences over candidates are collected to elect a person that best represents the group's preferences. Social choice blends elements of welfare economics and public choice theory. It is methodologically individualistic, in that it aggregates preferences and behaviors of individual membe ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Voting System
An electoral system or voting system is a set of rules that determine how elections and referendums are conducted and how their results are determined. Electoral systems are used in politics to elect governments, while non-political elections may take place in business, non-profit organisations and informal organisations. These rules govern all aspects of the voting process: when elections occur, who is allowed to vote, who can stand as a candidate, how ballots are marked and cast, how the ballots are counted, how votes translate into the election outcome, limits on campaign spending, and other factors that can affect the result. Political electoral systems are defined by constitutions and electoral laws, are typically conducted by election commissions, and can use multiple types of elections for different offices. Some electoral systems elect a single winner to a unique position, such as prime minister, president or governor, while others elect multiple winners, such as memb ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Risk Neutral
In economics and finance, risk neutral preferences are preferences that are neither risk averse nor risk seeking. A risk neutral party's decisions are not affected by the degree of uncertainty in a set of outcomes, so a risk neutral party is indifferent between choices with equal expected payoffs even if one choice is riskier. For example, if offered either \$50 or a 50\% chance each of \$100 and \$0, a risk neutral person would have no preference. In contrast, a risk averse person would prefer the first offer, while a risk seeking person would prefer the second. Theory of the firm In the context of the theory of the firm, a risk neutral firm facing risk about the market price of its product, and caring only about profit, would maximize the expected value of its profit (with respect to its choices of labor input usage, output produced, etc.). But a risk averse firm in the same environment would typically take a more cautious approach. Portfolio theory In portfolio choice,Merton ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
