Consumer choice. Demand Theory. Production. Choice under uncertainty. Competitive equilibrium in pure exchange economies: Walras law, existence of equilibria, Pareto optimality and welfare theorems. The basic theory of noncompetitive markets. An introduction to auction theory.
Mas-Colell, A., Whinston, M.D., Green, J.R., 1995. Microeconomic Theory, Oxford University Press, New York.
Learning Objectives
To understand formal models of consumer, production, general equilibrium theory and welfare economics. To show how competition is modeled when firms are not price takers, and to introduce an important topic in economic theory.
Prerequisites
Prerequisite: MICROECONOMICS 1
Students should also be acquainted with: basic microeconomic theory, basic linear algebra, topology in euclidean spaces, calculus for functions of one variable and several variables, optimization under equality constraints, basic probability theory.
Teaching Methods
Classroom lectures.
Further information
The course will be given by three instructors: Annalisa Luporini (first part), Michele Gori (second part), and Domenico Menicucci (third part).
Type of Assessment
Written exam and oral exam.
Course program
First part: Consumption set and budget constraint. Demand functions. Preferences and utility. The utility maximization problem. Production sets. Profit maximization and cost minimization. Expected utility theory. Risk aversion. Comparison of payoff distributions in terms of return and risk.
Second part: Introduction to General Equilibrium Theory. Further topics in demand theory. Competitive equilibrium in pure exchange economies. Walras law. Differential characterization of equilibria. The case of two consumers and two commodities. Existence of equilibria. Pareto optimality and welfare theorems.
Third part: Monopoly theory, including price discrimination. Static and dynamic oligopoly theory. Auction theory with independent private values.