5 Nobel Prize-Winning Economic Theories You Should Know About - Deepstash

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5 Nobel Prize-Winning Economic Theories You Should Know About

investopedia.com

Management of Common Pool Resources

Political science professor Elinor Ostrom showed that common-pool resources, such as water supplies or fish, can be effectively managed collectively without government or private control.

But this is only possible if those using the resource are physically...

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Behavioural Economics

The economic theory of expected utility maximization says that people will act out of rational self-interest. But psychologist Daniel Kahneman showed that it is incorrect.

  • Common cognitive biases cause people to use faulty reasoning to make ...

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Asymmetric Information

  • In 2001, George A. Akerlof, A. Michael Spence, and Joseph E. Stiglitz won the prize "for their analyses of markets with asymmetric information."
  • Economic models predicated on perfect information are often misguided. In reality, one party usually has superior knowledge

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Game Theory

  • In 1994 Nash, Selten and Harsanyi became Economics Nobel Laureates for their contributions to economic game theory.
  • Non-cooperative games are those where participants make non-binding agreements. They base their decisions on how they think the other participants will behav...

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The Public Choice Theory

  • James M. Buchanan's work within Public Choice earned him the Nobel Prize in Economic Science in 1986.
  • This theory shows that contrary to the conventional wisdom that public-sector actors act in the public's best interests, politicians and bureaucrats tend to act in self-int...

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The Black-Scholes Theorem

This is a key concept in modern financial theory used for valuing European options and employee stock options.

Investors can use an online options calculator to get results by adding an option's strike price, the underlying stock's price, the option's time to expiration, i...

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