Professor: Mark Walker.
Office hours: Tuesdays and Wednesdays 1:00 to 1:45, in McClelland 401NN,
or send me an email to arrange a time to meet: firstname.lastname@example.org
Teaching Assistant: Kyle Wilson email@example.com
Lecture Notes:The lecture notes cover the content of the course. The notes are available at the Lecture Notes page of this website.
Textbook: Microeconomic Foundations I, by David Kreps (Princeton University Press, 2013).
This book is excellent. The approach we'll take, as laid out in the lecture notes, is very similar to the one taken by Kreps, so this book is an especially good resource for this course. There are several other textbooks you might find helpful:
Books Available for Checkout: All five of the books above, and several others you might find useful, are available for checkout from the Department's Barr Library. Checkout information is available here.
2. Market equilibrium.
Focus on prices and quantities. Single market ("partial") equilibrium and "general" equilibrium. Pure exchange model and Edgeworth box. Definition of equilibrium; the implicit role of time; price-taking behavior. Comparative statics and the Implicit Function Theorem. Existence of market equilibrium. Robustness with respect to the assumptions.
3. Welfare considerations.
Pareto improvements, Pareto ordering, Pareto efficiency. The two "classical" welfare theorems. Minkowski's theorem. Characterization by marginal conditions. Social welfare function; aggregation; Arrow's Theorem (if time permits).
4. Recontracting equilibrium (the core).
Recontracting (unilateral improvements by subgroups). Market equilibrium and the core. The importance of the "size" of the economy. The Core Equivalence Theorem. The continuum model of large economies.
5. Market equilibrium and welfare with production.
Fisher's separation theorem. The "adding-up" problem: surplus and profit. Returns-to-scale phenomena. Marginal conditions with production. Intertemporal GE model.
6. Uncertainty, time, and incomplete markets.
Modeling uncertainty and information. Securities, forward and spot markets, and Arrow-Debreu equilibrium. Incomplete markets, temporary equilibrium, and rational expectations.
7. Non-price-taking behavior ("Imperfect Competition").
Monopoly: Market power and price-setting behavior. Strategic equilibrium in oligopoly: Cournot, Bertrand, and Stackelberg equilibirum. Cournot equilibrium when products are homogeneous. Collusion: the core. Comparing strategic market equilibrium, collusion, and competitive equilibrium: Pareto efficiency and consumer surplus.
8. Strategic behavior in general: Game Theory.
Noncooperative game theory and Nash equilibrium. The Prisoners' Dilemma. Extensive-form games. Entry deterrence and the Chain Store Paradox. The importance of the number of participants. Auctions (if time permits).
9. Externalities and public goods.
External economies and diseconomies. Pigovian taxes and subsidies. Strategic issues. Public goods. Lindahl equilibrium, Arrow-Debreu equilibrium, the "Coase Theorem", and the role of the size of markets (with and without externalities).
10. Other topics, as time permits.
Liquidity and bank runs. Overlapping generations models. Disequilibrium behavior and stability. Voting and aggregation of preferences.
Note: Economics 501C covers game theory, informational issues (such as asymmetric information, signalling, moral hazard), and mechanism design. These topics are therefore treated only briefly, if at all, in Economics 501B.
An Exercise Book is available for the course. Solutions for some of the exercises will be made available as well. Weekly exercises will be assigned from the Exercise Book. Most weeks one or two of the assigned exercises will be graded. There may occasionally be a brief quiz at the end of a lecture; the quiz will be one of the exercises you were assigned earlier, or very similar to one of the exercises.
There will be at least one mid-term exam and a comprehensive final exam. The course grade will be determined mostly by performance on the final exam, in the following way: If you do at least as well on the final exam as you did on the midterm exam, the final exam grade will be your course grade. But if you do worse on the final exam, then the midterm exam, the exercises, and the quizzes will be taken into account in determining your course grade.