Mean-field game theory (MFG) is a mathematical framework used to analyze strategic interactions among a large number of agents, each of whom makes decisions based on their own objectives while considering the collective impact of all agents on the system. The essential idea of MFG is that as the number of players becomes very large, the effect of any individual player on the overall dynamics becomes negligible. Instead, each player interacts with the statistical distribution of all other players.
The Median Voter Theorem (MVT) is a proposition in political science and economics that suggests that in a majority-rule voting system, the preferences of the median voter will ultimately be reflected in the policies adopted by the government. The theorem is based on the assumption that voters have single-peaked preferences, meaning that each voter has a most preferred outcome and their preferences decrease as they move away from that outcome.
Quantum economics is a relatively new interdisciplinary field that applies concepts and principles from quantum mechanics to economic theories and models. It seeks to understand economic phenomena using the frameworks and insights derived from quantum theory, which traditionally deals with the behavior of very small particles at the atomic and subatomic levels. The incorporation of quantum concepts aims to address limitations in classical economic theories that often assume rational behavior and deterministic outcomes.
The Ramsey problem is a foundational issue in the field of economics, particularly in the area of optimal growth theory. It is named after the British economist Frank P. Ramsey, who introduced the concept in his 1928 paper on intertemporal economic planning. In essence, the Ramsey problem involves determining the optimal way to allocate resources over time to maximize overall welfare or utility.
A shadow price is an economic concept used in decision-making and resource allocation, particularly in the context of constrained optimization problems. It represents the estimated value of an additional unit of a resource or constraint in a given situation. In simpler terms, the shadow price indicates how much the objective function of an optimization problem (like profit, cost, or utility) would change if there were a marginal increase in the availability of a restricted resource.
"Social Choice and Individual Values" is a seminal work by economist and Nobel laureate Kenneth J. Arrow, published in 1951. In this book, Arrow explores the challenges associated with aggregating individual preferences into collective decisions, a problem now known as social choice theory.
A social welfare function (SWF) is a concept used in economics and social choice theory to represent the wellbeing of a society as a whole. It aggregates the individual preferences or utility levels of the members of a society into a single measure of social welfare. The goal of the SWF is to evaluate and compare different distributions of resources and outcomes to determine which arrangement maximizes the overall welfare of a community.
The St. Petersburg paradox is a famous problem in probability theory and decision theory that highlights the conflict between expected value and practical decision-making. It was formulated by Daniel Bernoulli in 1738. The setup of the paradox is as follows: A player participates in a game where a fair coin is flipped repeatedly until it lands on heads. The pot starts at $2 and doubles with each flip of tails.