Advanced Microeconomic Theory

An Intuitive Approach with Examples

by Muñoz-Garcia

ISBN: 9780262342087 | Copyright 2017

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Contents (pg. v)
Preface (pg. xi)
Organization of the Book (pg. xii)
How to Use This Textbook (pg. xii)
Examples of Course Guidelines (pg. xiii)
Ancillary Materials (pg. xiv)
Acknowledgments (pg. xiv)
1 Preferences and Utility (pg. 1)
1.1 Preference and Choice: The Preference-Based Approach (pg. 2)
1.2 Utility Function (pg. 10)
1.3 Desirability (pg. 11)
1.4 Indifference Sets, Upper Contour Sets, and Lower Contour Sets (pg. 16)
1.5 Convexity of Preferences (pg. 17)
1.6 Interpretation of Convexity (pg. 20)
1.7 Quasi-Concavity (pg. 23)
1.8 Common Utility Functions in Economics (pg. 33)
1.9 Properties of Preference Relations (pg. 39)
1.10 Continuous Preferences (pg. 48)
1.11 Existence of a Utility Function (pg. 50)
1.12 Behavioral Economics—Two Utility Functions (pg. 51)
1.13 Choice-Based Approach (pg. 59)
1.14 Consistency on Choices: The Weak Axiom of Revealed Preference (WARP) (pg. 60)
1.15 Consumption Sets (pg. 63)
Appendix: Rational Preference Relations Satisfy the WARP (pg. 68)
Exercises (pg. 69)
References (pg. 74)
2 Demand Theory (pg. 77)
2.1 The Utility Maximization Problem (pg. 78)
2.2 Walrasian Demand—Comparative Statics (pg. 89)
2.3 Indirect Utility Function (pg. 94)
2.4 WARP and Demand (pg. 99)
2.5 Slutsky Matrix (pg. 109)
2.6 Expenditure Minimization Problem (pg. 117)
2.7 Relationships between the Expenditure Function and Hicksian Demand (pg. 128)
2.8 Relationship between the Walrasian and Hicksian Demand (pg. 129)
2.9 Relationship between the Walrasian Demand and the Indirect Utility Function (pg. 133)
2.10 Summary of Relationships (pg. 134)
Appendix A: Duality in Consumption (pg. 139)
Appendix B: Relationship between the Expenditure Function and Hicksian Demand (pg. 146)
Appendix C: Generalized Axiom of Revealed Preference (pg. 148)
Exercises (pg. 153)
References (pg. 161)
3 Demand Theory—Applications (pg. 163)
3.1 Measuring the Welfare Effects of a Price Change (pg. 164)
3.2 Measuring the Welfare Change Associated with the Introduction of a Tax (pg. 172)
3.3 What If We Use the Walrasian Demand to Measure Welfare Changes? (pg. 173)
3.4 When Can We Use the Walrasian Demand as a Measure of Welfare Change? (pg. 179)
3.5 Application of Income and Substitution Effects—I (pg. 182)
3.6 Application of Income and Substitution Effects—II: The Consumer as a Labor Supplier (pg. 184)
3.7 Application of Income and Substitution Effects—III: Income and Substitution Effects among Different Goods (pg. 194)
3.8 Aggregate Demand (pg. 202)
Appendix: Applying Euler’s Theorem to the Hicksian Demand (pg. 208)
Exercises (pg. 210)
References (pg. 220)
4 Production Theory (pg. 221)
4.1 Production Sets (pg. 222)
4.2 Properties of Production Sets (pg. 229)
4.3 Elasticity of Substitution (pg. 244)
4.4 Profit Maximization (pg. 249)
4.5 Cost Minimization (pg. 264)
4.6 Cost Function (pg. 274)
4.7 Conditional Factor Demand Correspondence, z(w, q) (pg. 275)
4.8 Production Function, f(z) (pg. 282)
4.9 Alternative Representation of the PMP (pg. 283)
4.10 Average and Marginal Costs with a Single Output (pg. 289)
4.11 Aggregation in Production (pg. 294)
4.12 Efficient Production (pg. 297)
Appendix A: Graphical Representation of Cost Functions (pg. 304)
Appendix B: Output and Cost Elasticity (pg. 311)
Exercises (pg. 316)
References (pg. 321)
5 Choice under Uncertainty (pg. 323)
5.1 Simple and Compound Lotteries (pg. 324)
5.2 Preferences over Lotteries (pg. 329)
5.3 Violations of the IA (pg. 341)
5.4 Behavioral Theories That Modify Expected Utility Theory (pg. 345)
5.5 Money Lotteries (pg. 348)
5.6 Measuring Risk Preferences (pg. 353)
5.7 Arrow–Pratt Coefficients of Absolute and Relative Risk Aversion (pg. 360)
5.8 Prudence (pg. 366)
5.9 Prospect Theory and Reference-Dependent Utility (pg. 368)
5.10 Comparison of Payoff Distributions (pg. 372)
5.11 Subjective Probability Theory (pg. 381)
5.12 Alternatives to SEU: Ambiguity Aversion (MEU), Capacities (CEU), and Smooth Ambiguity Aversion (SAA) (pg. 384)
Appendix A: State-Dependent Utility (pg. 391)
Appendix B: “Extended” Expected Utility Representation (pg. 393)
Exercises (pg. 398)
References (pg. 408)
6 Partial and General Equilibrium (pg. 411)
6.1 Partial Equilibrium Analysis (pg. 412)
6.2 Comparative Statics (pg. 419)
6.3 Welfare Analysis (pg. 424)
6.4 General Equilibrium (pg. 428)
6.5 Comparative Statics (pg. 460)
6.6 Introducing Taxes (pg. 466)
Appendix A: Large Economies and the Core (pg. 468)
Appendix B: Marshall–Hicks Four Laws of Derived Demand (pg. 477)
Exercises (pg. 479)
References (pg. 487)
7 Monopoly (pg. 489)
7.1 Barriers to Entry (pg. 490)
7.2 Profit-Maximizing Output under Monopoly (pg. 491)
7.3 Welfare Loss of Monopoly (pg. 499)
7.4 Comparative Statics (pg. 504)
7.5 Multiplant Monopolist (pg. 506)
7.6 Price Discrimination (pg. 509)
7.7 Advertising in Monopoly (pg. 529)
7.8 Regulation of Natural Monopolies (pg. 531)
7.9 Monopsony (pg. 536)
Exercises (pg. 539)
References (pg. 546)
8 Game Theory and Imperfect Competition (pg. 547)
8.1 Game Theory Tools (pg. 548)
8.2 Bertrand Model of Price Competition with Homogeneous Products (pg. 580)
8.3 Cournot Model of Quantity Competition (pg. 584)
8.4 Product Differentiation (pg. 594)
8.5 Dynamic Competition (pg. 598)
8.6 Reconciling Cournot and Bertrand: Introducing Capacity Constraints (pg. 606)
8.7 Endogenous Entry (pg. 610)
8.8 Repeated Interaction (pg. 614)
Appendix A: Cournot Model with Asymmetric Costs (pg. 625)
Appendix B: Cournot Competition with J ≥ 2 Firms (pg. 627)
Exercises (pg. 629)
References (pg. 638)
9 Externalities and Public Goods (pg. 641)
9.1 Externalities (pg. 643)
9.2 Common Pool Resources (pg. 649)
9.3 Solutions to the Externality Problem (pg. 657)
9.4 Regulating a Polluting Monopolist (pg. 669)
9.5 Regulating a Polluting Oligopoly (pg. 671)
9.6 Fee Comparison (pg. 676)
9.7 Setting Quotas under Incomplete Information (pg. 680)
9.8 Setting Emission Fees under Incomplete Information (pg. 682)
9.9 Comparing Policy Instruments under Incomplete Information (pg. 684)
9.10 Pollution Abatement (pg. 685)
9.11 Public Goods (pg. 690)
9.12 Inefficiency of the Private Provision of Public Goods (pg. 693)
9.13 Neutrality and the Crowding-out Effect (pg. 699)
9.14 Remedies to the Underprovision of Public Goods (pg. 702)
9.15 Lindahl Equilibria (pg. 704)
9.16 Public Goods That Experience Congestion (pg. 707)
9.17 Behavioral Motives in Public Good Games (pg. 708)
Appendix: More General Policy Mechanisms (pg. 718)
Exercises (pg. 722)
References (pg. 731)
10 Contract Theory (pg. 735)
10.1 Moral Hazard (pg. 736)
10.2 Moral Hazard with a Continuum of Effort Levels—The First-Order Approach (pg. 751)
10.3 Moral Hazard with Multiple Signals (pg. 759)
10.4 Adverse Selection—The “Lemons” Problem (pg. 761)
10.5 Adverse Selection—The Principal–Agent Problem (pg. 766)
10.6 Application of Adverse Selection—Regulation (pg. 777)
Exercises (pg. 785)
References (pg. 800)
Mathematical Appendix (pg. 803)
A.1 Sets (pg. 803)
A.2 Intervals of Real Numbers (pg. 805)
A.3 Inequalities (pg. 806)
A.4 Sequences (pg. 808)
A.5 Functions (pg. 812)
A.6 Limits (pg. 816)
A.7 Continuity (pg. 818)
A.8 Differentiation (pg. 825)
A.9 Integration (pg. 832)
A.10 Introduction to Topology (pg. 835)
A.11 Compactness (pg. 842)
A.12 Fixed Point Theorems (pg. 845)
A.13 Optimization (pg. 848)
A.14 Comparative Statics (pg. 853)
A.15 Monotone Comparative Statics: An Introduction (pg. 856)
A.16 Introduction to Mathematical Proofs (pg. 857)
References (pg. 858)
Index (pg. 861)

Felix Muñoz-Garcia

Felix Muñoz-Garcia is Associate Professor on the School of Economic Sciences at Washington State University.


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