dragon0606vn
02-03-2011, 14:20
Contents
List of Tables
List of Figures
Preface
1 Introduction
1.1 The rôle of microeconomic principles
1.2 Microeconomic models
1.2.1 Purpose
1.2.2 The economic actors
1.2.3 Motivation
1.2.4 The economic environment
1.2.5 Assumptions and axioms
1.2.6 Testinga model
1.3 Equilibrium analysis
1.3.1 Equilibrium and economic context
1.3.2 The comparative statics method
1.3.3 Dynamics and stability
1.4 Background to this book
1.4.1 Economics
1.4.2 Mathematics
1.5 Using the book
1.5.1 A route map
1.5.2 Some tips
2 The Firm
2.1 Basic setting
2.1.1 The rm: basic ingredients
2.1.2 Properties of the production function
2.2 The optimisation problem
2.2.1 Optimisation stage 1: cost minimisation
2.2.2 The cost function
2.2.3 Optimisation stage 2: choosing output
2.2.4 Assembling the solution
2.3 The rm as a black box
2.3.1 Demand and supply functions of the rm
2.3.2 Comparative statics: the general case
2.4 The short run
2.5 The multiproduct rm
2.6 Summary
2.7 Reading notes
2.8 Exercises
3 The Firm and the Market
3.1 Introduction
3.2 The market supply curve
3.3 Large numbers and the supply curve
3.4 Interaction amongst rms
3.5 The size of the industry
3.6 Price-setting
3.6.1 Simple monopoly
3.6.2 Discriminating monopolist
3.6.3 Entry fee
3.7 Product variety
3.8 Summary
3.9 Reading notes
3.10 Exercises
4 The Consumer
4.1 Introduction
4.2 The consumers environment
4.3 Revealed preference
4.4 Preferences: axiomatic approach
4.5 Consumer optimisation: xed income
4.5.1 Cost-minimisation
4.5.2 Utility-maximisation
4.6 Welfare
4.6.1 An application: price indices
4.7 Summary
4.8 Reading notes
4.9 Exercises
5 The Consumer and the Market
5.1 Introduction
5.2 The market and incomes
5.3 Supply by households
5.3.1 Labour supply
5.3.2 Savings
5.4 Household production
5.5 Aggregation over goods
5.6 Aggregation of consumers
5.7 Summary
5.8 Reading notes
5.9 Exercises
6 A Simple Economy
6.1 Introduction
6.2 Another look at production
6.2.1 Processes and net outputs
6.2.2 The technology
6.2.3 The production function again
6.2.4 Externalities and aggregation
6.3 The Robinson Crusoe economy
6.4 Decentralisation and trade
6.5 Summary
6.6 Reading notes
6.7 Exercises
7 General Equilibrium
7.1 Introduction
7.2 A more interesting economy
7.2.1 Allocations
7.2.2 Incomes
7.2.3 An illustration: the exchange economy
7.3 The logic of price-taking
7.3.1 The core of the exchange economy
7.3.2 Competitive equilibrium and the core: small economy
7.3.3 Competitive equilibrium and the core: large economy
7.4 The excess-demand approach
7.4.1 Properties of the excess demand function
7.4.2 Existence
7.4.3 Uniqueness
7.4.4 Stability
7.5 The rôle of prices
7.5.1 The equilibrium allocation
7.5.2 Decentralisation again
7.6 Summary
7.7 Reading notes
7.8 Exercises
8.2 Consumption and uncertainty
8.2.1 The nature of choice
8.2.2 State-space diagram
8.3 A model of preferences
8.3.1 Key axioms
8.3.2 Von-Neumann-Morgenstern utility
8.3.3 The felicityfunction
8.4 Risk aversion
8.4.1 Risk premium
8.4.2 Indices of risk aversion
8.4.3 Special cases
8.5 Lotteries and preferences
8.5.1 The probability space
8.5.2 Axiomatic approach
8.6 Trade
8.6.1 Contingent goods: competitive equilibrium
8.6.2 Financial assets
8.7 Individual optimisation
8.7.1 The attainable set
8.7.2 Components of the optimum
8.7.3 The portfolio problem
8.7.4 Insurance
8.8 Summary
8.9 Reading notes
8.10 Exercises
9 Welfare 227
9.1 Introduction
9.2 The constitution
9.3 Principles for social judgments: e¢ ciency
9.3.1 Private goods and the market
9.3.2 Departures from e¢ ciency
9.3.3 Externalities
9.3.4 Public goods
9.3.5 Uncertainty
9.3.6 Extending the e¢ ciency idea
9.4 Principles for social judgments: equity
9.4.1 Fairness
9.4.2 Concern for inequality
9.5 The social-welfare function
9.5.1 Welfare, national income and expenditure
9.5.2 Inequality and welfare loss
9.6 Summary
9.7 Reading notes
9.8 Exercises
10 Strategic Behaviour
10.1 Introduction
10.2 Games basic concepts
10.2.1 Players, rules and payo¤s
10.2.2 Information and Beliefs
10.2.3 Strategy
10.2.4 Representing a game
10.3 Equilibrium
10.3.1 Multiple equilibria
10.3.2 E¢ ciency
10.3.3 Existence
10.4 Application: duopoly
10.4.1 Competition in quantities
10.4.2 Competition in prices
10.5 Time
10.5.1 Games and subgames
10.5.2 Equilibrium: more on concept and method
10.5.3 Repeated interactions
10.6 Application: market structure
10.6.1 Market leadership
10.6.2 Market entry
10.6.3 Another look at duopoly
10.7 Uncertainty
10.7.1 A basic model
10.7.2 An application: entry again
10.7.3 Mixed strategies again
10.7.4 A dynamicapproach
10.8 Summary
10.9 Reading notes
10.10Exercises
11 Information 327
11.1 Introduction
11.2 Hidden characteristics: adverse selection
11.2.1 Information and monopoly power
11.2.2 One customer type
11.2.3 Multiple types: Full information
11.2.4 Imperfect information
11.2.5 Adverse selection: Competition
11.2.6 Application: Insurance
11.3 Hidden characteristics: Signalling
11.3.1 Costly signals
11.3.2 Costless signals
11.4 Hidden actions
11.4.2 Outline of the problem
11.4.3 A simpli ed model
11.4.4 Principal-and-Agent: a richer model
11.5 Summary
11.6 Reading notes
11.7 Exercises
12 Design 381
12.1 Introduction
12.2 Social choice
12.3 Markets and manipulation
12.3.1 Markets: another look
12.3.2 Simple trading
12.3.3 Manipulation: power and misrepresentation
12.3.4 A design issue?
12.4 Mechanisms
12.4.1 Implementation
12.4.2 Direct mechanisms
12.4.3 The revelation principle
12.5 The design problem
12.6 Design: applications
12.6.1 Auctions
12.6.2 A public project
12.6.3 Contracting again
12.6.4 Taxation
12.7 Summary
12.8 Reading notes
12.9 Exercises
13 Government and the Individual 431
13.1 Introduction
13.2 Market failure?
13.3 Nonconvexities
13.3.1 Large numbers and convexity
13.3.2 Interactions and convexity
13.3.3 The infrastructure problem
13.3.4 Regulation
13.4 Externalities
13.4.1 Production externalities: the e¢ ciency problem
13.4.2 Corrective taxes
13.4.3 Production externalities: Private solutions
13.4.4 Consumption externalities
13.4.5 Externalities: assessment
13.5 Public consumption
13.5.1 Nonrivalness and e¢ ciency conditions
13.5.2 Club goods
13.6 Public goods
13.6.1 The issue
13.6.2 Voluntary provision
13.6.3 Personalised prices?
13.6.4 Public goods: market failure and the design problem
13.6.5 Public goods: alternative mechanisms
13.7 Optimal allocations?
13.7.1 Optimum with lump-sum transfers
13.7.2 Second-best approaches
13.8 Conclusion: Economic Prescriptions
13.9 Reading notes
13.10Exercises
Bibliography 473
A Mathematics Background 485
A.1 Introduction
A.2 Sets
A.2.1 Sets in Rn
A.3 Functions
A.3.1 Linear and a¢ ne functions
A.3.2 Continuity
A.3.3 Homogeneous functions
A.3.4 Homothetic functions
A.4 Di¤erentiation
A.4.1 Function of one variable
A.4.2 Function of several variables
A.4.3 Function-of-a-Function Rule
A.4.4 The Jacobian derivative
A.4.5 The Taylor expansion
A.4.6 Elasticities
A.5 Mappings and systems of equations
A.5.1 Fixed-point results
A.5.2 Implicit functions
A.6 Convexity and Concavity
A.6.1 Convex sets
A.6.2 Hyperplanes.
A.6.3 Separation results
A.6.4 Convex and concave functions
A.6.5 quasiconcave functions
A.6.6 The Hessian property
A.7 Maximisation
A.7.1 The basic technique
A.7.2 Constrained maximisation
A.7.3 More on constrained maximisation
A.7.5 A point on notation
A.8 Probability
A.8.1 Statistics
A.8.2 Bayesrule
A.8.3 Probability distributions: examples
A.9 Reading notes
B Answers to Footnote Questions
B.1 Introduction
B.2 The rm
B.3 The rm and the market
B.4 The consumer
B.5 The consumer and the market
B.6 A simple economy
B.7 General equilibrium
B.8 Uncertainty and risk
B.9 Welfare
B.10 Strategic behaviour
B.11 Information
B.12 Design
B.13 Government and individual
C Selected Proofs
C.1 The rm
C.1.1 Marginal cost and the Lagrange multiplier
C.1.2 Properties of the cost function (Theorem 2.2)
C.1.3 Firms demand and supply functions (Theorem 2.4)
C.1.4 Firms demand and supply functions (continued)
C.1.5 Properties of pro t function (Theorem 2.7)
C.2 The consumer
C.2.1 The representation theorem (Theorem 4.1)
C.2.2 Existence of ordinary demand functions (Theorem 4.5)
C.2.3 Quasiconvexity of the indirect utility function
C.3 The consumer and the market
C.3.1 Composite commodity (Theorem 5.1):
C.3.2 The representative consumer (Theorem 5.2):
C.4 A simple economy
C.4.1 Decentralisation (Theorem 6.2)
C.5 General equilibrium
C.5.1 Competitive equilibrium and the core (Theorem 7.1)
C.5.2 Existence of competitive equilibrium (Theorem 7.4)
C.5.3 Uniqueness of competitive equilibrium (Theorem 7.5)
C.5.4 Valuation in general equilibrium (Theorem 7.6)
C.6 Uncertainty and risk
C.6.1 Risk-taking and wealth (Theorem 8.7)
C.7 Welfare
C.7.1 Arrows theorem (Theorem 9.1)
C.7.2 Blacks theorem (Theorem 9.2)
C.7.3 The support theorem (Theorem 9.5)
C.7.4 Potential superiority (Theorem 9.10)
C.8 Strategic behaviour
C.8.1 Nash equilibrium in pure strategies with in nite strategy
sets (Theorem 10.2)
C.8.2 Existence of Nash equilibrium (Theorem 10.1)
C.8.3 The Folk theorem
C.9 Design
C.9.1 Revenue equivalence (Theorem 12.6)
C.9.2 The Clark-Groves mechanism (Theorem 12.7)
Index 632
List of Tables
List of Figures
Preface
1 Introduction
1.1 The rôle of microeconomic principles
1.2 Microeconomic models
1.2.1 Purpose
1.2.2 The economic actors
1.2.3 Motivation
1.2.4 The economic environment
1.2.5 Assumptions and axioms
1.2.6 Testinga model
1.3 Equilibrium analysis
1.3.1 Equilibrium and economic context
1.3.2 The comparative statics method
1.3.3 Dynamics and stability
1.4 Background to this book
1.4.1 Economics
1.4.2 Mathematics
1.5 Using the book
1.5.1 A route map
1.5.2 Some tips
2 The Firm
2.1 Basic setting
2.1.1 The rm: basic ingredients
2.1.2 Properties of the production function
2.2 The optimisation problem
2.2.1 Optimisation stage 1: cost minimisation
2.2.2 The cost function
2.2.3 Optimisation stage 2: choosing output
2.2.4 Assembling the solution
2.3 The rm as a black box
2.3.1 Demand and supply functions of the rm
2.3.2 Comparative statics: the general case
2.4 The short run
2.5 The multiproduct rm
2.6 Summary
2.7 Reading notes
2.8 Exercises
3 The Firm and the Market
3.1 Introduction
3.2 The market supply curve
3.3 Large numbers and the supply curve
3.4 Interaction amongst rms
3.5 The size of the industry
3.6 Price-setting
3.6.1 Simple monopoly
3.6.2 Discriminating monopolist
3.6.3 Entry fee
3.7 Product variety
3.8 Summary
3.9 Reading notes
3.10 Exercises
4 The Consumer
4.1 Introduction
4.2 The consumers environment
4.3 Revealed preference
4.4 Preferences: axiomatic approach
4.5 Consumer optimisation: xed income
4.5.1 Cost-minimisation
4.5.2 Utility-maximisation
4.6 Welfare
4.6.1 An application: price indices
4.7 Summary
4.8 Reading notes
4.9 Exercises
5 The Consumer and the Market
5.1 Introduction
5.2 The market and incomes
5.3 Supply by households
5.3.1 Labour supply
5.3.2 Savings
5.4 Household production
5.5 Aggregation over goods
5.6 Aggregation of consumers
5.7 Summary
5.8 Reading notes
5.9 Exercises
6 A Simple Economy
6.1 Introduction
6.2 Another look at production
6.2.1 Processes and net outputs
6.2.2 The technology
6.2.3 The production function again
6.2.4 Externalities and aggregation
6.3 The Robinson Crusoe economy
6.4 Decentralisation and trade
6.5 Summary
6.6 Reading notes
6.7 Exercises
7 General Equilibrium
7.1 Introduction
7.2 A more interesting economy
7.2.1 Allocations
7.2.2 Incomes
7.2.3 An illustration: the exchange economy
7.3 The logic of price-taking
7.3.1 The core of the exchange economy
7.3.2 Competitive equilibrium and the core: small economy
7.3.3 Competitive equilibrium and the core: large economy
7.4 The excess-demand approach
7.4.1 Properties of the excess demand function
7.4.2 Existence
7.4.3 Uniqueness
7.4.4 Stability
7.5 The rôle of prices
7.5.1 The equilibrium allocation
7.5.2 Decentralisation again
7.6 Summary
7.7 Reading notes
7.8 Exercises
8.2 Consumption and uncertainty
8.2.1 The nature of choice
8.2.2 State-space diagram
8.3 A model of preferences
8.3.1 Key axioms
8.3.2 Von-Neumann-Morgenstern utility
8.3.3 The felicityfunction
8.4 Risk aversion
8.4.1 Risk premium
8.4.2 Indices of risk aversion
8.4.3 Special cases
8.5 Lotteries and preferences
8.5.1 The probability space
8.5.2 Axiomatic approach
8.6 Trade
8.6.1 Contingent goods: competitive equilibrium
8.6.2 Financial assets
8.7 Individual optimisation
8.7.1 The attainable set
8.7.2 Components of the optimum
8.7.3 The portfolio problem
8.7.4 Insurance
8.8 Summary
8.9 Reading notes
8.10 Exercises
9 Welfare 227
9.1 Introduction
9.2 The constitution
9.3 Principles for social judgments: e¢ ciency
9.3.1 Private goods and the market
9.3.2 Departures from e¢ ciency
9.3.3 Externalities
9.3.4 Public goods
9.3.5 Uncertainty
9.3.6 Extending the e¢ ciency idea
9.4 Principles for social judgments: equity
9.4.1 Fairness
9.4.2 Concern for inequality
9.5 The social-welfare function
9.5.1 Welfare, national income and expenditure
9.5.2 Inequality and welfare loss
9.6 Summary
9.7 Reading notes
9.8 Exercises
10 Strategic Behaviour
10.1 Introduction
10.2 Games basic concepts
10.2.1 Players, rules and payo¤s
10.2.2 Information and Beliefs
10.2.3 Strategy
10.2.4 Representing a game
10.3 Equilibrium
10.3.1 Multiple equilibria
10.3.2 E¢ ciency
10.3.3 Existence
10.4 Application: duopoly
10.4.1 Competition in quantities
10.4.2 Competition in prices
10.5 Time
10.5.1 Games and subgames
10.5.2 Equilibrium: more on concept and method
10.5.3 Repeated interactions
10.6 Application: market structure
10.6.1 Market leadership
10.6.2 Market entry
10.6.3 Another look at duopoly
10.7 Uncertainty
10.7.1 A basic model
10.7.2 An application: entry again
10.7.3 Mixed strategies again
10.7.4 A dynamicapproach
10.8 Summary
10.9 Reading notes
10.10Exercises
11 Information 327
11.1 Introduction
11.2 Hidden characteristics: adverse selection
11.2.1 Information and monopoly power
11.2.2 One customer type
11.2.3 Multiple types: Full information
11.2.4 Imperfect information
11.2.5 Adverse selection: Competition
11.2.6 Application: Insurance
11.3 Hidden characteristics: Signalling
11.3.1 Costly signals
11.3.2 Costless signals
11.4 Hidden actions
11.4.2 Outline of the problem
11.4.3 A simpli ed model
11.4.4 Principal-and-Agent: a richer model
11.5 Summary
11.6 Reading notes
11.7 Exercises
12 Design 381
12.1 Introduction
12.2 Social choice
12.3 Markets and manipulation
12.3.1 Markets: another look
12.3.2 Simple trading
12.3.3 Manipulation: power and misrepresentation
12.3.4 A design issue?
12.4 Mechanisms
12.4.1 Implementation
12.4.2 Direct mechanisms
12.4.3 The revelation principle
12.5 The design problem
12.6 Design: applications
12.6.1 Auctions
12.6.2 A public project
12.6.3 Contracting again
12.6.4 Taxation
12.7 Summary
12.8 Reading notes
12.9 Exercises
13 Government and the Individual 431
13.1 Introduction
13.2 Market failure?
13.3 Nonconvexities
13.3.1 Large numbers and convexity
13.3.2 Interactions and convexity
13.3.3 The infrastructure problem
13.3.4 Regulation
13.4 Externalities
13.4.1 Production externalities: the e¢ ciency problem
13.4.2 Corrective taxes
13.4.3 Production externalities: Private solutions
13.4.4 Consumption externalities
13.4.5 Externalities: assessment
13.5 Public consumption
13.5.1 Nonrivalness and e¢ ciency conditions
13.5.2 Club goods
13.6 Public goods
13.6.1 The issue
13.6.2 Voluntary provision
13.6.3 Personalised prices?
13.6.4 Public goods: market failure and the design problem
13.6.5 Public goods: alternative mechanisms
13.7 Optimal allocations?
13.7.1 Optimum with lump-sum transfers
13.7.2 Second-best approaches
13.8 Conclusion: Economic Prescriptions
13.9 Reading notes
13.10Exercises
Bibliography 473
A Mathematics Background 485
A.1 Introduction
A.2 Sets
A.2.1 Sets in Rn
A.3 Functions
A.3.1 Linear and a¢ ne functions
A.3.2 Continuity
A.3.3 Homogeneous functions
A.3.4 Homothetic functions
A.4 Di¤erentiation
A.4.1 Function of one variable
A.4.2 Function of several variables
A.4.3 Function-of-a-Function Rule
A.4.4 The Jacobian derivative
A.4.5 The Taylor expansion
A.4.6 Elasticities
A.5 Mappings and systems of equations
A.5.1 Fixed-point results
A.5.2 Implicit functions
A.6 Convexity and Concavity
A.6.1 Convex sets
A.6.2 Hyperplanes.
A.6.3 Separation results
A.6.4 Convex and concave functions
A.6.5 quasiconcave functions
A.6.6 The Hessian property
A.7 Maximisation
A.7.1 The basic technique
A.7.2 Constrained maximisation
A.7.3 More on constrained maximisation
A.7.5 A point on notation
A.8 Probability
A.8.1 Statistics
A.8.2 Bayesrule
A.8.3 Probability distributions: examples
A.9 Reading notes
B Answers to Footnote Questions
B.1 Introduction
B.2 The rm
B.3 The rm and the market
B.4 The consumer
B.5 The consumer and the market
B.6 A simple economy
B.7 General equilibrium
B.8 Uncertainty and risk
B.9 Welfare
B.10 Strategic behaviour
B.11 Information
B.12 Design
B.13 Government and individual
C Selected Proofs
C.1 The rm
C.1.1 Marginal cost and the Lagrange multiplier
C.1.2 Properties of the cost function (Theorem 2.2)
C.1.3 Firms demand and supply functions (Theorem 2.4)
C.1.4 Firms demand and supply functions (continued)
C.1.5 Properties of pro t function (Theorem 2.7)
C.2 The consumer
C.2.1 The representation theorem (Theorem 4.1)
C.2.2 Existence of ordinary demand functions (Theorem 4.5)
C.2.3 Quasiconvexity of the indirect utility function
C.3 The consumer and the market
C.3.1 Composite commodity (Theorem 5.1):
C.3.2 The representative consumer (Theorem 5.2):
C.4 A simple economy
C.4.1 Decentralisation (Theorem 6.2)
C.5 General equilibrium
C.5.1 Competitive equilibrium and the core (Theorem 7.1)
C.5.2 Existence of competitive equilibrium (Theorem 7.4)
C.5.3 Uniqueness of competitive equilibrium (Theorem 7.5)
C.5.4 Valuation in general equilibrium (Theorem 7.6)
C.6 Uncertainty and risk
C.6.1 Risk-taking and wealth (Theorem 8.7)
C.7 Welfare
C.7.1 Arrows theorem (Theorem 9.1)
C.7.2 Blacks theorem (Theorem 9.2)
C.7.3 The support theorem (Theorem 9.5)
C.7.4 Potential superiority (Theorem 9.10)
C.8 Strategic behaviour
C.8.1 Nash equilibrium in pure strategies with in nite strategy
sets (Theorem 10.2)
C.8.2 Existence of Nash equilibrium (Theorem 10.1)
C.8.3 The Folk theorem
C.9 Design
C.9.1 Revenue equivalence (Theorem 12.6)
C.9.2 The Clark-Groves mechanism (Theorem 12.7)
Index 632