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The Ramsey problem, or Ramsey pricing, or Ramsey–Boiteux pricing, is a second-best policy problem concerning what prices a public monopoly should charge for the various products it sells in order to maximize social welfare (the sum of producer and consumer surplus) while earning enough revenue to cover its fixed costs.
Frank Ramsey's social discount rate is calculated as follows: r = d + n g {\displaystyle r=d+ng} , where d {\displaystyle d} is time preference, n {\displaystyle n} is the elasticity of marginal utility of consumption and g {\displaystyle g} is the growth rate .
A third consideration for optimal taxation is sales tax, which is the additional price added to the base price of a paid by the consumer at the point when they purchase a good or service. Poterba in a second article called "Retail Price Reactions To Changes in State and Local Sales Taxes" tests the premise that sales taxes on the state and ...
The Ramsey–Cass–Koopmans model (also Ramsey growth model or neoclassical growth model) is a neoclassical model of economic growth based primarily on the work of Frank P. Ramsey in 1928, [1] with significant extensions by David Cass and Tjalling Koopmans in 1965.
In 1926, Frank Ramsey introduced Ramsey's Representation Theorem. This representation theorem for expected utility assumes that preferences are defined over a set of bets where each option has a different yield. Ramsey believed that we should always make decisions to receive the best-expected outcome according to our personal preferences.
However, Ramsey’s strategy overlooks a key element: risk. Read more: One dozen eggs in America now costs $3.65 — and $12.63 for a pound of sirloin steak. Both record highs.
It was inadequate for that purpose. In particular, if the price of any of the constituents were to fall to zero, the whole index would fall to zero. That is an extreme case; in general the formula will understate the total cost of a basket of goods (or of any subset of that basket) unless their prices all change at the same rate.
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