Economics

The tendency for traders with better private information about the quality of a product to selectively participate in trades which benefit them the most.

The practice of taking advantage of a price difference between two or more markets.

When voters have three or more distinct alternatives (options), no ranked order voting system can convert the ranked preferences of individuals into a community-wide (complete and transitive) ranking while also meeting a pre-specified set of criteria.

The erroneous assumption that low-income and developing economies harbor an irrational attachment to livestock which hinders economic investments, whereas in fact the investment in livestock is a very rational and complex calculation of resource investment, power and esteem, gender, and familial ties.

The economic situation of increasing swings in inventory in response to shifts in customer demand that then move further up the supply chain. The further from the originating signal, the greater the distortion of the wave pattern.

The spontaneous order of the market — from the market coordination of human action to the coordination of human-to-machine and machine-to-machine economies.

If trade in an externality is possible and there are sufficiently low transaction costs, bargaining will lead to a Pareto efficient outcome regardless of the initial allocation of property.

The economic principle where an agent has an advantage over another when a particular good they can produce at a lower relative opportunity cost (i.e. at a lower relative marginal cost prior to trade) than their competitors.

The geometric progression ratio that provides a constant rate of return over the time period.

The phenomenon of spending of money on and the acquisition of luxury goods and services as a way to publicly display economic power.

A loss of economic efficiency that occurs when an equilibrium state for a good or service is not achieved or is not achievable.

A social phenomenon related to consumer goods that comprises two related ideas: the first posits that goods purchased by consumers will be cohesive to their sense of identity, and as a result, will be complementary to one another, and the second that the introduction of a new possession that is deviant from the consumer's current complementary goods can result in a process of spiraling consumption.

In economics, utility is the satisfaction or benefit derived by consuming a product, thus the marginal utility of a good or service is the change in the utility from an increase in the consumption of that good or service. A 'diminishing utility' is simply the ongoing decrease in utility from additional goods or services.

A principle which states that plurality-rule elections (such as first-past-the-post) structured within single-member districts tend to favor a two-party system, and that the double ballot majority system and proportional representation tend to favor multipartism.

The reduced costs per unit that arise from increased total output of a product. For example, a larger factory will produce power tools at a lower unit price, and a larger medical system will reduce cost per medical procedure.

The hypothesis that people ascribe more value to things merely because they own them.

Risks of very bad outcomes or "high consequence", but of low probability. They include the risks of terrorist attack, biosecurity risks such as the invasion of pests, and extreme natural disasters such as major earthquakes.

Finite games are the familiar contests of everyday life; they are played in order to be won, which is when they end. But infinite games are more mysterious. Their object is not winning, but ensuring the continuation of play. The rules may change, the boundaries may change, even the participants may change—as long as the game is never allowed to come to an end.

The advantage gained by the first-moving significant occupant of a market segment (property rights, branding, investments, etc), contrasted with the disadvantage of being the first to move into a market segment (using unreliable or inefficient technologies, making the first mistakes, etc.).

The economic inefficiency situation arises that when those who benefit from resources, goods, or services do not pay for them result in an under-provision of those goods or services.

A pricing strategy by which a product or service (typically a digital offering or application such as software, media, games or web services) is provided free of charge, but money (a premium) is charged for proprietary features, functionality, or virtual goods.

The total direct and indirect costs associated with the execution of a transaction, often applied in finance but not limited to that domain.

The parable of a young husband and wife and how they deal with the challenge of buying secret Christmas gifts for each other with very little money, where they each sell items they own (watch and hair) to buy gifts for the other that, as it turns out in a twist ending, are no longer useful to the other (a watch chain a combs, respectively), an example of comic irony.

A monetary principle stating that "bad money drives out good". If there are two forms of commodity money in circulation — which are accepted by law as having similar face value — the more valuable commodity will gradually disappear from circulation. Seen more often in earlier contexts of silver or even copper coins.

In economics and finance, a probability distribution with a positive mean and right fat tail — a returns profile of a hypothetical investment that produces small returns centered on zero and occasionally exhibits outsized positive returns.

The tendency for people to increasingly choose a smaller (but more immediate) reward over a larger (but later) reward as the delay occurs sooner rather than later in time.

An economic theory where "ideal theory" assumes strict compliance and works out the principles that characterize a well-ordered society under favorable circumstances, and "non-ideal" is worked out after an "ideal conception of justice has been chosen" and addresses what the parties are to do when conditions are not as perfect as they are assumed to be in ideal theory.

Local optimum is a solution that is best for a local area, where a global optimum is the best everywhere — perhaps a trade off for not being ideal in local areas.

The tendency to strongly prefer avoiding losses, as opposed to acquiring gains.

The Lucas critique, named for Robert Lucas's work on macroeconomic policymaking, argues that it is naive to try to predict the effects of a change in economic policy entirely on the basis of relationships observed in historical data, especially highly aggregated historical data.[1] More formally, it states that the decision rules of Keynesian models—such as the consumption function—cannot be considered as structural in the sense of being invariant with respect to changes in government policy variables.[2] The Lucas critique is significant in the history of economic thought as a representative of the paradigm shift that occurred in macroeconomic theory in the 1970s towards attempts at establishing micro-foundations.

Mistaken belief that there is a fixed amount of work to be done in an economy, and therefore increasing automation or immigration will lead to higher unemployment, ignoring the potential for new jobs to be created.

The term for when the government sets future standards beyond what the current market can deliver, and the market pulls that technology into existence.

The process whereby people code, categorize and evaluate economic personal outcomes.

The tendency of people to think of currency in nominal, rather than real, terms. In other words, the numerical/face value (nominal value) of money is mistaken for its purchasing power (real value) at a previous point in the general price level (in the past).

A market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers — the inverse of a monopoly.

The phenomenon of taking more risks because someone or something else bears the cost of those risks.

A proposed solution of a non-cooperative game involving two or more players in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only their own strategy. In terms of game theory, if each player has chosen a strategy, and no player can benefit by changing strategies while the other players keep theirs unchanged, then the current set of strategy choices and their corresponding payoffs constitutes a Nash equilibrium.

The value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives. Assuming the best choice is made, it is the ‘cost' incurred by not enjoying the benefit that would have been had by taking the second-best available choice.

The value of an expected future reward or income as determined on the date of valuation. Often, this value is always less than or equal to the future value because of the time-value of money — i.e. money has interest-earning potential.

A measure of the responsiveness an economic variable is to a change in another variable, such as the relationship between lowering the price of a product and seeing how much more of it will sell as a result.

A standard example of a game analyzed in game theory that shows why two completely ‘rational' individuals might not cooperate, even if it appears that it is in their best interests to do so.

Phenomenon where people may simultaneously hold stereotypical beliefs about a group of people and personally know individuals from that group who do not fit those stereotypes, causing cognitive dissonance and confusion.

A bank regulation employed by most, but not all, of the world's central banks, that sets the minimum amount of reserves that must be held by a commercial bank.

The phenomenon of the seeming paradox that countries and regions with an abundance of natural resources (such as fossil fuels and certain minerals) tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources.

A classic fairytale of desiring to make-do with less, and the sacrifices we are willing to make to achieve our goals, where we become caught in a negative cycle of trying to do more and more with less and less, as we fall further and further behind.

The limited availability of a commodity, which may be in demand in the market.

A body of theoretical work examining communication between individuals, where the central question is when organisms with conflicting interests, such as in sexual selection, should be expected to provide honest signals (no presumption being made of conscious intention) rather than cheating.

A probabilistic technique for approximating the global optimum of a given function. It is often used when the search space is discrete (e.g., all tours that visit a given set of cities).

Speculating typically refers to high-risk trades that are almost akin to gambling, whereas investments are based on fundamentals and analysis.

The economic fallacy where a cost that has already been incurred and cannot be recovered (sunk cost) is tempted to be made nonetheless despite that it misallocates resources by depending on information that is irrelevant to the decision being made.

A classic economic model of price determination in a market. In a competitive market, the unit price for a particular good or other traded item such as labor or financial assets, will vary until it settles at a point where the quantity demanded will equal the quantity supplied, resulting in an economic equilibrium for price and quantity transacted.

Cognitive bias where people assume that expensive and high-quality items are always superior to cheaper or lower-quality alternatives, based on the assumption that price is a reliable indicator of value.

A situation that involves losing one quality or aspect of something in return for gaining another quality or aspect.

 A situation within a shared-resource system where individual users acting independently according to their own self-interest behave contrary to the common good of all users by depleting that resource through their collective action.

Types of luxury goods for which the quantity demanded increases as the price increases, an apparent contradiction of the law of demand, resulting in an upward-sloping demand curve, such as luxury goods (where they are desirable due to their high prices), or a positional good, something few others can own.

Concept introduced by British author Terry Pratchett in his Discworld series that the poor often end up spending more money on necessities like boots in the long run because they can't afford high-quality items initially (quality boots that cost fifty dollars but wouldn't need replacing versus affordable boots for ten dollars that would need replacing often.)

A conflict-resolution process that aims to accommodate all sides.

When the winner of an auction overpays the expected value of the auction item in order to win the auction outright, leaving the winner, ironically, worse off.

Zero-Sum Thinking is a cognitive bias that describes a circumstance where one party's subjective thinking is that the situation is a "zero-sum game" — where one person's gain would be another's loss. In contrast, Non-Zero-Sum Thinking describes a circumstance in which the interacting parties' subjective thinking assumes that aggregate gains and losses can be less than or more than zero (i.e. win-win).