PhD Milano

Ph.D. in ECONOMICS – Universities of Milan and Pavia

Introduction to General Equilibrium Theory

Academic year 2023-24

Course Objective:

In these lectures we will introduce the main ideas of general equilibrium theory, also in economies with uncertainty and asymmetric information.

Course Outline:

Part I: the Arrow Debreu model:

1. The model and the existence of equilibrium. [WMG 17 B, C]

2. The proof of existence. [WMG 17 App B]

3. The first and second theorems of welfare economics. [WMG 16 A-F, 17 App A]

4. Regularity. Generic local uniqueness. [MWG 17 D]

Part II: incomplete markets:

5. Trading securities. No Arbitrage. Radner Equilibrium. The one good case: Finance. [WMG 19 A-E, LN 1, 2]

6. Production: criterion of the firm. The problem of existence with many goods. [WMG 19 F, LN 3,4,5]

7. Constrained inefficiency, a role for fiscal policy. [WMG 19 F, GP86, LN 6]

8. Indeterminacy, a role for monetary policy. [LN 7, 8]

9. Asymmetric information. [LN 9]

10. Trading in contracts. [LN 10]

Mas-Colell, Whinston and Green [MWG] , “Microeconomic theory”, OUP.

chapters: 16, 17 (A-D, app A and B), 19 (A-F).

Additional readings:

Shareholder welfare maximization:

Constrained inefficiency:

Money:

Asymmetric Information: