# Elementary Microeconomics of the Talmudic Rule

## TL;DR

This paper analyzes the Talmudic 1/N investment rule using microeconomic theory, deriving a utility function, examining supply and demand effects, and exploring liquidity provision benefits.

## Contribution

It introduces a Cobb-Douglas utility function for Talmudic investors and analyzes their market behavior and liquidity provision strategies.

## Key findings

- Derived a Cobb-Douglas utility function for Talmudic agents.
- Compared individual supply and demand to market depth.
- Showed benefits of liquidity provision for Talmudic investors.

## Abstract

This paper takes a look at the Talmudic rule aka the 1/N rule aka the uniform investment strategy from the viewpoint of elementary microeconomics. Specifically, we derive the cardinal utility function for a Talmud-obeying agent which happens to have the Cobb-Douglas form. Further, we investigate individual supply and demand due to rebalancing and compare them to market depth of an exchange. Finally, we discuss how operating as a liquidity provider can benefit the Talmud-obeying agent with every exchange transaction in terms of the identified utility function.