Author Archives: machacea

Gas Station Game Theory: Trigger Strategy

Image there is two companies in an¬†oligopoly competing with homogeneous goods. In this case, lets use Shell and Exon mobile gas companies. Lets imaging that these are the only two gas companies in America and that they are a cartel. … Continue reading

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Advertising Externalities- Cigarettes

Cigarettes are a demerit good which is a good that is over provided by the market and consumption of this good is harmful to society. Cigarettes are harmful to society because they produce a negative externality. This is because the … Continue reading

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week 4: correlation vs. causation

People often get confused with correlation and causation. Because variable A is correlated with a variable B, that does not mean A causes B. It could mean that B causes A, A causes B, or it could be a case … Continue reading

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Why does a refrigerator have a light on the inside, but not a freezer?

For the producers, there is an extra cost for installing a light into each side of the fridge. It is a fixed cost, since there is no extra cost for the light turning on no matter how many times you … Continue reading

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