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Economics

Economic “Enigma” Paper:  The real world is full of initially puzzling outcomes that can be explained using the tools of microeconomics. By following the historical development of a situation and respecting basic behavioral principles, you would be surprised how well you can understand what may initially seem like a puzzle.  For example, why do airlines increase their prices dramatically in the few days before a flight but professional theater companies do exactly the opposite?

 

You will identify a real world enigma and write a brief paper (5-8 pages, double spaced, standard margins and 12 point font) that accomplishes the following:

  • You must clearly document the enigma (unless it a very commonly observable phenomenon – then simply point it out). Ask me about this if you have any questions about your situation.
  • You must motivate why it is initially puzzling.  If you say that “households with high incomes drive more expensive cars than low income households”, you will fall flat on this requirement.
  • Using the concepts we learn in class, (costs & benefits, supply & demand, marginal analysis, consumer tastes & preferences, firm profit maximization, market power, strategic behavior, dynamic games, and many others) along with your common sense and an eye towards historical circumstances, you will explain the enigma.

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