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10.4 Aggregation - Lecture 13

10.4 Aggregation - Lecture 13 - Producer Theory(Part 1...

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Producer Theory (Part 1) Producer Theory Production Sets Producer Theory (Part 1) October 3, 2011
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Producer Theory (Part 1) Producer Theory Production Sets Exam Comments Exam grades returned soon Random thoughts Grades will be back soon Time management Algebra on problem 1 was harder than desired When all else fails... ... don°t substitute in terms - leave as reduced form .... explain what you would do
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Producer Theory (Part 1) Producer Theory Production Sets Digression - How to write a model ... Three desiderata for a model 1 Novelty 2 Depth 3 Parsimony (a.k.a. "Beauty")
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Producer Theory (Part 1) Producer Theory Production Sets What is Parsimony? Decide what you want to model Embed in the simplest economics model you can Makes it clear what makes the model "turn" Leverages intuitions for the well-understood parts of the model Makes the papers easier to read and extend Novice theorists usually add too many features to their setting Overly complicated incentives Elaborate forms of uncertainty Equilibrium concepts that are di¢ cult to work with For every feature of your model, have a good reason why it is important to add to the model There is a reason we have a section labeled "Extensions" ....
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Producer Theory (Part 1) Producer Theory Production Sets Example from my work Goal: Model mood and memory, ±nd ±nance applications 1 Develop model of recall with cues 2 Embed the model in traditional Bayesian framework 3 Embed the Bayesian framework in straightforward asset pricing problem 4 Find comparative statics of e/ects of emotion By making parts 2 - 4 using standard models, any di/erences clearly emanate from (1)
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Producer Theory (Part 1) Producer Theory Production Sets Digression - How to write a model ... Consumer Theory - Great for techniques Producer Theory Reinforce math techniques Useful model for macro, labor etc.
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