LUISS

Microeconomics (2017/2018)

Instructor: Luca Panaccione
E-mail address: lpanaccione@luiss.it
Office hours: Tuesday or Thursday 11.00-12.00 (to be confirmed by email)

Teaching Assistant: Emanuele Brancati
E-mail address: ebrancati@luiss.it
Office hours: Monday, 15.30-16.30 (fifth floor) or by appointment to be scheduled by e-mail


Announcements


Class schedule

  • Monday, 17.00 – 18.30
  • Tuesday, 17.00 – 18.30
  • Thursday, 15.30- 17.00

Exam Rules

  1. The final exam consists of a written test only.
  2. The use of any electronic device such as cellphones/smartphones, tablets, laptops is strictly forbidden during the exam (it will be possible to use only a calculator).
  3. Students must register online for the exam. Each student is personally responsible for registering.
  4. Student will not be allowed to ask the course instructor to do the registration on their behalf after the deadline has expired.
  5. Students can withdraw during the written test at any time.
  6. Exam marks range from 0 (zero) to 30+ (trenta e lode).
  7. Students can register the mark of the final exam if it is at least equal to 18.
  8. Students can refuse to register the final exam. In this case they can resit in any scheduled exam date.
  9. Students who fail the final exam can retake it in any scheduled exam date.
  10. The exam simulation is available here (please note that the questions refer to a slightly different version of the program, hence to topics which are not included in this year’s program. However, the structure of the exam is unchanged).

Course material

  • Main textbook: D. Besanko and R. Braeutigam, Microeconomics (latest edition), Wiley
  • Supplementary textbook: H. Varian, Microeconomics (latest edition), Norton
  • Handouts

For the mathematical requisites, students may consult:

  • the Mathematical Appendix in the main textbook;
  • “Mathematics for Economists” by C.P. Simon and L. Blume (latest edition, Norton)

Course contents

  • Topics in consumer theory: Choice with price-dependent incomes. Inter-temporal choice and the discounted utility model. Choice under uncertainty and the expected utility model
  • The firm and its technology: production function, marginal and average product; isoquants and isocosts; returns to scale; revenue curves, cost curves in short and long run: profit maximization, cost minimization, factor demands.
  • Market structure: perfect competition, oligopoly theory (Bertrand, Cournot and Stackelberg).
  • Game theory: simultaneous and sequential games, dominant strategies, Nash equilibrium, subgame perfect Nash equilibrium.
  • General equilibrium: Edgeworth box and Pareto efficiency. General competitive equilibrium in pure exchange and production economies. The First Welfare Theorem and the Second Welfare Theorem.
  • Externalities. Public goods.

Detailed Syllabus

(Numbered chapter are from Besanko & Braeutigam. Letters refers to the title of chapters in Varian)

Topics in Consumer Theory
A. Buying and Selling
4.3 Borrowing and Lending
5.5 The Choice of Labor and Leisure
Inputs and Production Functions
6.1 Introduction to Inputs and Production Functions
6.2 Production Functions with a Single Input
6.3 Production Functions with More Than One Input
6.4 Substitutability Among Inputs
6.5 Returns to Scale
6.6 Technological Progress
Costs and Cost Minimization
7.1 Cost Concepts for Decision Making
7.2 The Cost-Minimization Problem
7.3 Comparative Statics Analysis of the Cost-Minimization Problem
7.4 Short-Run Cost Minimization
Cost Curves
8.1 Long-Run Cost Curves
8.2 Short-Run Cost Curves
Perfectly Competitive Markets
A. Profit Maximization
9.2 Profit Maximization by a Price-Taking Firm (via the cost function)
9.3 How the Market Price Is Determined: Short-Run Equilibrium
9.4 How the Market Price Is Determined: Long-Run Equilibrium
Market Structure and Competition
13.1 Types of Market Structure
13.2 Oligopoly with Homogeneous Products
13.5 Monopolistic Competition
Game Theory and Strategic Behavior
14.1 The Concept of Nash Equilibrium
14.3 Sequential-Move Games and Strategic Moves
Risk and Information
15.1 Describing Risky Outcomes
15.2 Evaluating Risky Outcomes
15.3 Bearing and Eliminating Risk
Externalities and Public Goods
17.1 Introduction
17.2 Externalities
17.3 Public Goods
General Economic Equilibrium
A. Buying and Selling
B. Profit Maximization
C. Exchange
D. Production


Lectures

Week 1

    1. Introduction to the course. Buying and Selling (12.02.2018)
    2. Income and Substitution Effects with income as value of initial endowment (13.02.2017)
    3. Labor-Leisure Choice (15.02.2017)

Week 2

    1. Practice class 1 (19.02.2018)
    2. Income and Substitution Effect in Labor-Leisure Choice.
      Inter-temporal Choice: Present  and Future Value (20.02.2018)
    3. The Discounted Utility Model (22.02.2017)

Week 3

    1. Lecture cancelled to do weather conditions. To be rescheduled (26.02.2018)
    2. Lecture cancelled to do weather conditions. To be rescheduled (27.02.2018)
    3. Optimal Choice in the Discounted Utility Model. Choice Under Uncertainty: Lottery, Expected Value, Variance (01.03.2018)

Week 4

    1. Lecture cancelled to do elections. To be rescheduled (05.03.2018)
    2. Expected Utility. Risk Preferences. Certainty Equivalent. Applications (06.03.2018)
    3. Inputs. Production Function. Isoquants. Marginal Rate of Technical Substitution (08.03.2018)

Week 5

    1. Practice Class 2 (12.03.2018)
    2. Production Functions (perfect complement, fixed-coefficients, Cobb-Douglas) and Returns to Scale. Profit maximization problem in the short run: iso-profit lines, graphical solution and first-order conditions. Effects of change in prices on solution to profit maximization problem in the short run (13.03.2018)
    3. Profit maximization problem in the long rung. Effects of change in prices on solution to profit maximization problem in the long run. Cost minimization in the long run: iso-cost lines, graphical solution and first-order conditions (interior and corner solution). Effect of change in input price on total cost (15.03.2018)

Week 6

    1. Practice Class 3 (19.03.2018)
    2. Demand for Inputs. Labor Demand Curve. Fixed Costs: Sunk and Non-sunk. Cost Minimization in the Short run. Long run Cost Curve, Average Cost, Marginal Cost (20.03.2018)
    3. Practice Class 4 (21.03.2018)
    4. Short run Cost Curve, Average Cost, Marginal Cost. Profit Maximization in the long run (22.03.2018/A)
    5. General Equilibrium: Exchange Economies. Edgeworth Box. Feasible allocation. Gains from trade (22.03.2018/B)

Week 7

    1. Practice Class 4 (26.03.2018)
    2. Pareto Optimal Allocations. Contract Curve. Auctioneer. Walras’ Law (27.03.2018/A)
    3. Market Equilibrium. First and Second Theorem of Welfare Economics (27.03.2018/B)

Week 8

    1. General Equilibrium with Production: Robinson Crousoe Economy. Refresher on Partial Equilibrium Analysis/1 (12.04.2018)

Week 9

    1. Practice Class 5 (16.04.2018)
    2. Refresher on Partial Equilibrium Analysis/2: Short Run and Long Run Competitive Equilibrium (17.04.2018)
    3. Oligopoly models. Cournot Duopoly (19.04.2018)

Week 10

    1. Practice Class 6 (23.04.2018)
    2. Bertrand Duopoly. Stackelberg Duopoly. Game Theory/1 (24.04.2918)
    3. Game Theory/2 (26.04.2918)
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