The Core Theory in Economics

by Telser; Lester

• ISBN13: 9780415701440
• ISBN10: 0415701449
• Edition: 1st
• Format: Hardcover
• Copyright: 1995-09-25
• Publisher: Routledge

Summary

The Core Theory in Economicsillustrates the various arenas in which Core Theory can be applied, including; the working of markets, applications to the gold standard that illuminate Hume's quantity theory of money, supply responses requiring solutions of combinatorial problems, successful deregulations of markets and game theory.

Author Biography

Lester G. Telser is Emeritus Professor of Economics at the University of Chicago, USA.

Table of Contents

Acknowledgments	xiv
PART I Introduction	1	(60)
1 Prologue	3	(9)
2 The evolution of economics	12	(19)
I.2.1 The beginning	12	(3)
I.2.2 Steam engines and railroads	15	(3)
I.2.3 Electric grids	18	(1)
I.2.4 Consensus by selection: how markets work	18	(5)
I.2.5 Corporate takeovers	23	(1)
I.2.6 The status of the core for the Treasure of Sierra Madre	24	(1)
I.2.7 The theory of games and economic behavior	25	(3)
I.2.8 The core in economics	28	(1)
I.2.9 The software challenge to economics	29	(1)
I.2.10 Fixed, variable, and marginal cost	29	(1)
I.2.11 Summary	30	(1)
3 A rationale for the core	31	(17)
I.3.1 Introduction	31	(1)
I.3.2 Varieties of superadditivity	32	(1)
I.3.3 Imputations and the core	33	(1)
I.3.4 The quasi-core	34	(1)
I.3.5 Characteristic .functions that are individually superadditive	35	(3)
I.3.6 Competition and the status of the core	38	(2)
I.3.7 The security value of a coalition must he weakly superadditive	40	(1)
I.3.8 Applications to bankruptcy and division of an estate among heirs	41	(2)
I.3.9 Must a reasonable solution be an imputation?	43	(1)
I.3.10 Bankruptcy with three creditors	44	(4)
4 Zero-sum games	48	(4)
I.4.1 Prelude	48	(1)
I.4.2 Formalities	48	(2)
I.4.3 Constant-sum games	50	(1)
I.4.4 Quasi-core of a zero-sum game	50	(1)
I.4.5 Conclusions	51	(1)
5 The saddlevalue for n-person games: why and how	52	(9)
I.5.1 Why saddlevalue	52	(2)
I.5.2 Some fundamentals	54	(2)
I.5.3 The solution of a suitable LP problem is the saddlevalue	56	(2)
I.5.4 The saddlevalue is unique	58	(1)
I.5.5 Previous work	58	(3)
PART II Markets	61	(150)
1 Single unit trade	63	(6)
II.1.1 Description of the model	63	(3)
II.1.2 A numerical example to illustrate the model	66	(1)
II.1.3 The main results for this model of single unit trade	67	(2)
2 Extreme applications of core theory	69	(9)
II.2.1 A highly concentrated market with a core	69	(5)
II.2.2 The core vanishes	74	(4)
3 Market rules	78	(43)
II.3.1 Cash and credit	78	(5)
II.3.2 Borrowing, lending, and the core	83	(6)
II.3.3 Cash in a neoclassical spot market	89	(3)
II.3.4 A neoclassical model of spot markets	92	(15)
II.3.5 A core model for Hume's Quantity Theory: central bank gold stocks under the gold standard 1919-33	107	(14)
4 Socially induced valuations	121	(15)
II.4.1 Popular commodities	121	(6)
II.4.2 Autonomously and socially induced valuations of private commodities	127	(5)
II.4.3 Prestige goods	132	(4)
5 Best allocation of n goods among in traders	136	(32)
II.5.1 Summary	136	(3)
II.5.2 Type I valuation functions: the E-core for subhomogeneous valuation functions and the algorithm for a class of superhomogeneous valuation functions	139	(11)
II.5.3 Positive or zero valuations at positive threshold quantities	150	(18)
6 Truth telling	168	(13)
II.6.1 Introduction	168	(4)
II.6.2 The core approach	172	(2)
II.6.3 To reveal or conceal the true valuations	174	(7)
7 Noncooperative trading games	181	(30)
II.7.1 Bargaining and the Ultimatum Game	182	(4)
II.7.2 Noncooperative models of trade for two and three traders	186	(16)
II.7.3 Karl Menger 's model in terms of expected utility	202	(9)
PART III Multiproduct industry total cost functions with avoidable costs	211	(108)
1 The standard model	213	(16)
III.1.1 How the standard theory treats fixed cost	214	(5)
III.1.2 How flexible are prices in a modern economy	219	(10)
2 The electricity market	229	(17)
III.2.1 Introduction	229	(1)
III.2.2 An empty core illustrated by an electric grid	230	(4)
III.2.3 The production and distribution of electrical power	234	(12)
3 Multiproduct industry total cost functionals	246	(42)
III.3.1 Introduction	246	(4)
III.3.2 A primal and dual linear programming problem	250	(6)
III.3.3 Comparisons between the LP and BP solutions	256	(3)
III.3.4 The algorithm	259	(5)
III.3.5 A plausible but mistaken alternative	264	(1)
III.3.6 Conclusions	265	(1)
III.3.7 Binary algorithm for firm-specific and commodity-specific avoidable costs	266	(22)
4 A practical model of demand	288	(17)
III.4.1 Introduction	288	(2)
III.4.2 The model and the algorithm	290	(1)
III.4.3 Sufficient conditions for feasibility	291	(1)
III.4.4 Discussion	292	(1)
III.4.5 Relations to the standard demand model	292	(1)
III.4.6 Basic requirements and avoidable cost	293	(3)
III.4.7 Some LP fundamentals	296	(1)
III.4.8 Dual problem	297	(2)
III.4.9 Multiproduct problem	299	(1)
III.4.10 Lessons	300	(1)
III.4.11 Program	300	(5)
5 Indicator functions as applied to demand	305	(3)
III.5.1 Some properties of indicator functions	307	(1)
6 Software's challenge to economics	308	(11)
III.6.1 Stating the problem	308	(1)
III.6.2 How the valuation of software determines the minimal cost of its features	308	(4)
III.6.3 How the cost of active software applications determines the maximal receipts from its sale	312	(2)
III.6.4 Equilibrium conditions	314	(1)
III.6.5 More properties of the solutions	315	(1)
III.6.6 Appendix	316	(3)
PART IV Critical analyses of noncooperative equilibria	319	(52)
1 Lighthouses and weather forecasting: public or private?	321	(3)
IV1.1 Fact or fiction	321	(3)
2 Noncooperative and cooperative models of research outlays	324	(12)
IV.2.1 Introduction	324	(1)
IV.2.2 A noncooperative model of research in which success is certain	325	(5)
IV.2.3 A cooperative model of research with a certain outcome	330	(1)
IV.2.4 Noncooperative model of research when the outcome of the research is uncertain	331	(4)
IV.2.5 Conclusions	335	(1)
3 Dilemma of cooperation	336	(13)
IV.3.1 Introduction	336	(1)
IV.3.2 Three-person principal–agent	337	(5)
IV.3.3 Two and three-firm cartels	342	(7)
4 The typical inefficiency of noncooperative equilibria	349	(11)
IV.4.1 A mixed equilibrium cannot be efficient	349	(2)
IV.4.2 The typical inefficiency of noncooperative equilibria	351	(9)
5 Computing Cournot–Nash equilibria for three-person non-zero-sum games	360	(11)
IV.5.1 Prologue	360	(2)
IV.5.2 The R function	362	(2)
IV.5.3 Comments	364	(7)
Bibliography	371	(6)
Index	377