Economics 713: Microeconomic Theory

Spring 1998
1-2:15 and 2:30-3:45, 6116 Social Science

John Kennan, 6438 Social Science, jkennan@macc.wisc.edu
Office Hours: Monday, 2-3:30


This course is the last module in the basic microtheory sequence. It has two objectives. First, the review of basic tools will be completed: by the end of the semester you should have been exposed to all of the standard techniques of microeconomics. Second, the course will attempt to present some applications that illustrate how some of these techniques are actually used.

Main Text:
Microeconomic Theory, by Andreu Mas-Colell, Michael D. Whinston, and Jerry R. Green, Oxford University Press, 1995.

Supplementary Texts
Myerson, Roger B. Game Theory, Cambridge: Harvard University Press, 1991.
Gibbons, Robert, Game Theory for Applied Economists, Princeton: Princeton University Press, 1992.

There will be weekly problem sets, on assorted topics, including some that may be related to the material being covered in class.

Topics:

    1. Principal-Agent Models.
        Text, Chapter 14.
    2. Application: Affirmative Action
      1. Coate, Stephen and Glenn C. Loury, "Will Affirmative Action Policies Eliminate Negative Stereotypes?" American Economic Review, 83, December 1993, 1220-40.
    3. Arrow's Impossibility Theorem.
        Text, Chapter 21.
    4. Trade.
      1. Text, Chapter 15D.
      2. Humphrey, Thomas M., " The Early History of the Box Diagram " Federal Bank of Richmond Economic Quarterly, Winter 1996, 37-75.
    5. Welfare Economics. Text, Chapter 22.
    6. Application: Product Diversity
      1. Dixit, Avinash K. and Joseph E. Stiglitz, "Monopolistic Competition and Optimum Product Diversity," American Economic Review, 67, No. 3. (June, 1977), 297-308.
    7. Application: Bargaining
      1. Text, 22.E
      2. Coase, Ronald H., "Durability and Monopoly", Journal of Law and Economics, 1972, 15, 143-149.
      3. Kennan, John and Robert Wilson, "Bargaining with Private Information," Journal of Economic Literature, March 1993.
    8. Mechanism Design. Text, Chapter 23.
      1. Application: Lemons
      2. Akerlof, George A, "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," Quarterly Journal of Economics, 84,Aug., 1970, 488-500

    Grades:

    There will be an exam just after the last class meeting (at a time to be arranged). This exam counts for 70% of the grade, and homework counts for 30%.