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Gravity model of trade. The gravity model of international trade in international economics is a model that, in its traditional form, predicts bilateral trade flows based on the economic sizes and distance between two units. [ 2 ] Research shows that there is "overwhelming evidence that trade tends to fall with distance."
A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves consent [ 1 ] to transfer of goods, services, money, or promise to transfer any of those at a future date. The activities and intentions of the parties entering into a contract may be ...
In contract theory, signalling (or signaling; see spelling differences) is the idea that one party (the agent) credibly conveys some information about itself to another party (the principal). Although signalling theory was initially developed by Michael Spence based on observed knowledge gaps between organisations and prospective employees, [ 1 ...
Calvo (staggered) contracts. A Calvo contract is the name given in macroeconomics to the pricing model that when a firm sets a nominal price there is a constant probability that a firm might be able to reset its price which is independent of the time since the price was last reset. The model was first put forward by Guillermo Calvo in his 1983 ...
Theory of the firm. The theory of the firm consists of a number of economic theories that explain and predict the nature of the firm, company, or corporation, including its existence, behaviour, structure, and relationship to the market. [1] Firms are key drivers in economics, providing goods and services in return for monetary payments and ...
Free-rider problem. In economics, the free-rider problem is a type of market failure that occurs when those who benefit from resources, public goods and common pool resources do not pay for them [1] or under-pay. Examples of such goods are public roads or public libraries or other services or utilities of a communal nature.
Auction theory is a branch of applied economics that deals with how bidders act in auctions and researches how the features of auctions incentivise predictable outcomes. Auction theory is a tool used to inform the design of real-world auctions. Sellers use auction theory to raise higher revenues while allowing buyers to procure at a lower cost.
The O-ring theory of economic development is a model of economic development put forward by Michael Kremer in 1993, [1] which proposes that tasks of production must be executed proficiently together in order for any of them to be of high value. The key feature of this model is positive assortative matching, whereby people with similar skill ...