Syllabus:
Lecture Notes:
01/07/14: Introduction and Review of Consumer Theory
01/09/14: Introduction to Firm Theory
01/16/14: The Long and the Short Run
01/21/14: Equilibrium in Exchange and Production Economies
01/23/14: Intervention and Shocks to Partial Equilibrium
01/30/14: General Equilibrium in Production Economies
02/04/14: Equilibrium and Welfare
02/18/14: Strategic Interaction
02/20/14: The Cournot Model of Oligopoly
03/04/14: Price Competition and Differentiated Products
03/06/14: Asymmetric Information
03/11/14: Moral Hazard and Screening
Problem Sets:
Problem Set 1 (due January 16)
Problem Set 2 (due January 23)
Problem Set 3 (due January 30)
Problem Set 4 (due February 6)
Problem Set 5 (due February 20)
Problem Set 6 (due February 27)
Additional Material:
A minimum wage is an example of price floor as we discussed in class on Jan. 28. It has been a big topic of debate in recent months as Obama has pushed for increasing the Federal minimum wage from $7.25 to $10.10 an hour. This topic is discussed in the op-eds in NYTimes below:
We also discussed the problem of externalities and approaches to dealing with them. A summary of some of the approaches applied to climate change is available here.
In class on February 20 we discussed game theory and Nash equilibrium. The following is a paper that tests the predictions of game theory using penalty kicks in soccer:
Chiappori, Groseclose and Levitt (2002)
On February 27 we discussed the possibility of collusion in a repeated setting. In the model that we worked through, firms could always tell if the other firm deviated since they understand the relationship between the other firm's quantity and the price in the market. If there were also random shocks to demand for the product, firms could not distinguish between a period of low demand and a deviation by a competitor. A period of low demand could then trigger a period in which the collusion breaks down. The following papers study such a model and test the predictions empirically using data from 19th century railroad cartels. While the details of the papers are beyond the scope of the class they provide a very important application of the ideas we developed:
In class on March 6 we covered Akerlof's model of asymmetric information and the lemons problem. The original paper is here:
Exams:
Practice Midterm with solutions.
Practice Final 1 with solutions.
Practice Final 2 with solutions.