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Applied Microeconomics

Course Instructor: Professor Michel Zouboulakis, ECTS credits: 5

Course Description

Advanced topics in consumer and producer theory under perfect competition conditions. The General Equilibrium Model. Non competitive markets. Market failures: externalities and Asymmetric Information. Transactions Cost Theory. Modern Organization Theory.

 

Learning Objectives

The aim of this course is to examine the main concepts of modern Microeconomic Analysis. The emphasis is put on the basic economic problems of the functions of the market at the microeconomic level. This course is designed for students who already have a sound knowledge of microeconomic theory and a firm comprehension of appropriate mathematical techniques.

 

Course Outline

Lecture 1Microeconomics, An introduction: The methodological prolegomena. The social frame of competitive markets. The axioms of rational economic behavior.

Lectures 2-3Consumer theory: Axiomatic decision theory and optimization. Demand function. An application: labor demand and unions. Limits of the consumer theory: Habits, conventions, rules. Support from other social sciences. Heterodox theories: hierarchical decision making and its consequences for consumer and demand theory.

Lecture 4Production theory under conditions of perfect competition: Production function. Returns to scale. Cost function. The problem of minimum cost. Duality in production. Profit function and its qualities. The problem of profit maximization.

Lectures 5-6: The General Equilibrium Model.The assumptions of perfect competition for obtaining equilibrium. Diagrammatical and mathematical presentation. Equilibrium conditions. Walras’ Law and Say’s Law: the neutrality of money.

Lectures 7-8Non competitive markets. The model of Imperfect Competition (Robinson). The model of Monopolistic Competition (Chamberlin). Mathematical presentation of the kinked demand curve, price leadership model, Cartels. Duopoly models: Cournot, Bertrand & Edgeworth. Oligopoly power. Repeated games and cooperation. Choice under uncertainty (expected utility, risk aversion, subjective probabilities). Static and dynamic games with imperfect information. Bayes-Nash Equilibrium.

Lecture 9:Market failures: externalities and Asymmetric Information: the return of the social. Beyond the isolated individual/firm. The tragedy of the commons. Social goods and commoditization. When the social cost differs from the private cost. Information Asymmetry models. Quality uncertainty and rigid prices. Market inefficiency due to moral hazard. Adverse Selection. Market Signaling. Combinations of asymmetries and externalities in Health and Television.

Lecture 10-11:Transactions cost theory: The evolution of firm organization. The American paradigm (Chandler). The firm as “technostructure” (Galbraith). The firm as a response to the existence of transactions cost: the model of Coase- Williamson.

Lecture 12Modern organization theory: Organizations as decision places: March & Simon’s model. Internal Organization and agency theory.

 

Bibliography

Gravelle, H. - Rees, R., (2004), Microeconomics, 3rd ed. Prentice Hall.

Nicholson, W., -Snyder, C. (2008), Microeconomic Theory, 10th ed., Thomson.

Varian, H., (2003), Microeconomic Analysis, W.W. Norton & Co.

 

Further Reading:

Jehle G. and P. Reny, (2000), Advanced Microeconomic Theory, 3rdEdition, Addison Wesley.

Hargreaves Heap S. et al (1992), The Theory of Choice: A Critical Guide. Oxford: Blackwell.

March, J. – Simon, H. (1993), Organizations, 2nd ed. Oxford, Blackwell.

Mas-Colell, A, Whinston M. and Green J., (1995), Microeconomic Theory, Oxford University Press.

Williamson, O. (1985), The economic institutions of capitalism, New York, The Free Press.

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