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A Micro-Equation for Economic Action: Action Generation under Path-Absence

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  • cook, kim

Abstract

Existing theories often implicitly presuppose that choice becomes action. This paper explicitly formalizes that missing link: how an economic action is generated when no path is given ex ante. From three axioms and the structural properties of the probability function, we derive the direction coefficient k and obtain the action equation dx = k · s · w · dφ, where dφ is the local expected surplus, s is loss–gain sensitivity, w is probability weighting, and k is determined by the optimal input intensity. This equation specifies both direction and intensity from local information alone, without presupposing an ex ante path or transition rule. We further show that classical optimality conditions — the equimarginal principle, P = MC, and NPV = 0 — can be interpreted as boundary conditions where the action incentive is exhausted (dφ = 0). This paper provides a minimal structure for action generation that serves as a common micro-framework for diverse economic actions.

Suggested Citation

  • cook, kim, 2026. "A Micro-Equation for Economic Action: Action Generation under Path-Absence," MPRA Paper 129054, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:129054
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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