Course Outline

1.   Optimization

Concave and quasi-concave functions, constrained maximization. The economics of shadow prices. The Envelope Theorem. Applications: Multi product firms with joint costs. Consumer and producer surplus.

Students will use Excel to solve problems that are too big to be solved analytically

 2.   Price taking agents

Laws of supply and input demand for price taking firms. Decomposition of price elasticity.  Measuring the loss form a price increases as a compensated change in income.

3.   Equilibrium and efficiency, the two fundamental welfare theorems

Focus on the constant returns to scale economy to obtain insights on the impact of lowering trade barriers.

4.  Choice over time

Consumer and firm decision-making with spot and futures markets. Role of market intermediaries.

5. Choice under uncertainty

Demand for risky assets, equilibrium pricing of risky assets, the Capital Asset Pricing Model.

6.  Private information

Moral Hazard and adverse selection, two part pricing as indirect price discrimination, introduction to mechanism design, auctions

 7.  Strategy

Course Reading: 

Extensive reading for this course will be placed on the web. 

For the second half of the course you may also wish to read

"The Analytics of Uncertainty and Information" by Sushil Bikhchandani, J. Hirshleifer and John G. Riley

Cambridge University Press Second Edition