Microeconomics II: General equilibrium existence and efficiency

 This course-module provides a first understanding of the possible outcomes of agents' interactions for an entire economy. In particular, it focuses on those interactions consisting in trading commodities within perfectly competitive markets and explains their possible outcomes through the notion of competitive equilibrium. Of competitive equilibria it explores the welfare properties and some other key positive properties, such as existence and uniqueness. The remaining part of the course is devoted to discuss two important cases in which some economic interactions do not take place in competitive markets; classical market failures such as externalities and public goods.

Syllabus

Textbook references

Required:

  • Mas-Colell, A., Whinston, M., and Green, J., Microeconomic Theory, Oxford University Press, New York, 1995.
  • Laffont J.J., Foundamentals of Public Economics, MIT Press, Cambridge, 1994.
  • Class handouts (see below).

    • Supplemental references:

  • Mas-Colell, A., The Theory of General Equilibrium: A differentiable approach, Econometric Soc. Monograph 9, Cambridge Un. Press, 1985 [Advanced!]
  • Varian, Hal R., Microeconomic Analysis, Norton, New York, 1992

    • Also
  • Debreu G., Theory of Value, monograph 17, Cowles Foundation, Yale Un. Press
  • Handbooks of Mathematical Economics (HME), vol. II, edited by K.J. Arrow and M.D. Intrilligator, North Holland Publisher.
  • Takayama A., Mathematical Economics, Cambridge University Press, II edition, 1985


    • General course announcements

    I receive students by appointment (e-mail me).

    Problem set

    Problem 1 Due date: Thursday Nov. 18 (before practice starts)
    Problem 2 Due date: Thursday Nov. 25 (before practice starts)
    Problem 3 Due date: Thursday Dec. 2 (before practice starts)
    Problem 4 Due date: Thursday Dec. 9 (before practice starts)
    Problem 5 Due date: Thursday Dec. 16 (before practice starts)
    Problem 6 Due date: Wednesday Jan. 12, 3:00 pm (before practice starts)
    Postponed to Jan. 31, 3:00 pm

    Solution set

    Problem 1 (Solution)
    Problem 2 (Solution)
    Quasilinear preferences (Complements)
    Problem 3 (Solution)
    Problem 4 (Solution)
    Problem 5 (Solution)
    Problem 6 (Solution)

    Class handouts

    Handout 1 On the sign of equilibrium prices.
    Handout 2 Negishi's approach to equilibria .

    Final exam and grading

    The final exam will be of two hours. It will contain problems of the same level of difficulty of problem sets handed out during the course, net of those which required purely technical proofs, such as establishing the properties of the demand correspondence.
    Grades will be 25% based on problem sets, and 75% on the final exam.
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