|
Money Pump
In economic theory, the money pump argument is a thought experiment showing that rational behavior requires transitive preferences. Classical economic theory assumes that preferences are transitive: if someone thinks A is better than B and B is better than C, then they must think A is better than C. In other words, there cannot be a "cycle" of preferences. The money pump argument notes that if someone held a set of intransitive preferences, they could be exploited (pumped) for money until being forced to leave the market. Imagine Jane has twenty dollars to buy fruit. She can fill her basket with either oranges or apples. Jane would prefer to have a dollar rather than an apple, an apple rather than an orange, and an orange rather than a dollar. Because Jane would rather have an orange than a dollar, she is willing to buy an orange for just over a dollar (perhaps $1.10). Then, she trades her orange for an apple, because she would rather have an apple rather than an orange. Finally, sh ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Economic Theory
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 an ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Thought Experiment
A thought experiment is a hypothetical situation in which a hypothesis, theory, or principle is laid out for the purpose of thinking through its consequences. History The ancient Greek ''deiknymi'' (), or thought experiment, "was the most ancient pattern of mathematical proof", and existed before Euclidean mathematics, where the emphasis was on the conceptual, rather than on the experimental part of a thought-experiment. Johann Witt-Hansen established that Hans Christian Ørsted was the first to use the German term ' (lit. thought experiment) circa 1812. Ørsted was also the first to use the equivalent term ' in 1820. By 1883 Ernst Mach used the term ' in a different way, to denote exclusively the conduct of a experiment that would be subsequently performed as a by his students. Physical and mental experimentation could then be contrasted: Mach asked his students to provide him with explanations whenever the results from their subsequent, real, physical experiment differed ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Transitive Relation
In mathematics, a relation on a set is transitive if, for all elements , , in , whenever relates to and to , then also relates to . Each partial order as well as each equivalence relation needs to be transitive. Definition A homogeneous relation on the set is a ''transitive relation'' if, :for all , if and , then . Or in terms of first-order logic: :\forall a,b,c \in X: (aRb \wedge bRc) \Rightarrow aRc, where is the infix notation for . Examples As a non-mathematical example, the relation "is an ancestor of" is transitive. For example, if Amy is an ancestor of Becky, and Becky is an ancestor of Carrie, then Amy, too, is an ancestor of Carrie. On the other hand, "is the birth parent of" is not a transitive relation, because if Alice is the birth parent of Brenda, and Brenda is the birth parent of Claire, then this does not imply that Alice is the birth parent of Claire. What is more, it is antitransitive: Alice can ''never'' be the birth parent of Claire. "Is ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Behavioral Economics
Behavioral economics studies the effects of psychological, cognitive, emotional, cultural and social factors on the decisions of individuals or institutions, such as how those decisions vary from those implied by classical economic theory. Behavioral economics is primarily concerned with the bounds of rationality of economic agents. Behavioral models typically integrate insights from psychology, neuroscience and microeconomic theory. The study of behavioral economics includes how market decisions are made and the mechanisms that drive public opinion. The concepts used in behavioral economics today can be traced back to 18th-century economists, such as Adam Smith, who deliberated how the economic behavior of individuals could be influenced by their desires. The status of behavioral economics as a subfield of economics is a fairly recent development; the breakthroughs that laid the foundation for it were published through the last three decades of the 20th century. Behavio ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Heuristics
A heuristic (; ), or heuristic technique, is any approach to problem solving or self-discovery that employs a practical method that is not guaranteed to be optimal, perfect, or rational, but is nevertheless sufficient for reaching an immediate, short-term goal or approximation. Where finding an optimal solution is impossible or impractical, heuristic methods can be used to speed up the process of finding a satisfactory solution. Heuristics can be mental shortcuts that ease the cognitive load of making a decision. Examples that employ heuristics include using trial and error, a rule of thumb or an ansatz, educated guess. Heuristics are the strategies derived from previous experiences with similar problems. These strategies depend on using readily accessible, though loosely applicable, information to control problem solving in human beings, machines and abstract issues. When an individual applies a heuristic in practice, it generally performs as expected. However it can alternati ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Dutch Book
In gambling, a Dutch book or lock is a set of odds and bets, established by the bookmaker, that ensures that the bookmaker will profit—at the expense of the gamblers—regardless of the outcome of the event (a horse race, for example) on which the gamblers bet. It is associated with probabilities implied by the odds not being coherent. In economics, the term usually refers to a sequence of trades that would leave one party strictly worse off and another strictly better off. Typical assumptions in consumer choice theory rule out the possibility that anyone can be Dutch-booked. In philosophy it is used to explore degrees of certainty of beliefs. There is no agreement on the etymology of the term.Hajek, Alan ''Dutch Book Arguments'', Chapter 7 in The Oxford Handbook of Rational and Social Choice, ed. Paul Anand, Prasanta Pattanaik, and Clemens Puppe, 173-195, Oxford University Press Gambling The main point of the Dutch book argument is to show that rational people must have ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Applied Probability
Applied probability is the application of probability theory to statistical problems and other scientific and engineering domains. Scope Much research involving probability is done under the auspices of applied probability. However, while such research is motivated (to some degree) by applied problems, it is usually the mathematical aspects of the problems that are of most interest to researchers (as is typical of applied mathematics in general). Applied probabilists are particularly concerned with the application of stochastic processes, and probability more generally, to the natural, applied and social sciences, including biology, physics (including astronomy), chemistry, medicine, computer science and information technology, and economics. Another area of interest is in engineering: particularly in areas of uncertainty, risk management, probabilistic design, and Quality assurance. See also *Areas of application: **Ruin theory **Statistical physics **Stoichiometry and modelli ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Microeconomics
Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics focuses on the study of individual markets, sectors, or industries as opposed to the national economy as whole, which is studied in macroeconomics. One goal of microeconomics is to analyze the market mechanisms that establish relative prices among goods and services and allocate limited resources among alternative uses. Microeconomics shows conditions under which free markets lead to desirable allocations. It also analyzes market failure, where markets fail to produce efficient results. While microeconomics focuses on firms and individuals, macroeconomics focuses on the sum total of economic activity, dealing with the issues of growth, inflation, and unemployment and with national policies relating to these issues. Microeconomics also deal ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Wagering
Gambling (also known as betting or gaming) is the wagering of something of Value (economics), value ("the stakes") on a Event (probability theory), random event with the intent of winning something else of value, where instances of strategy (game theory), strategy are discounted. Gambling thus requires three elements to be present: consideration (an amount wagered), risk (chance), and a prize. The outcome of the wager is often immediate, such as a single roll of dice, a spin of a roulette wheel, or a horse crossing the finish line, but longer time frames are also common, allowing wagers on the outcome of a future sports contest or even an entire sports season. The term "gaming" in this context typically refers to instances in which the activity has been specifically permitted by law. The two words are not mutually exclusive; ''i.e.'', a "gaming" company offers (legal) "gambling" activities to the public and may be regulated by one of many gaming control boards, for example, the ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
