Microeconomics I (Michaelmas Term)


 

I. Consumer and Producer Theory: Dr. Jacco Thijssen

 

Textbooks

Mas-Collel, Whinston and Green (1995), Microeconomic Theory, Oxford University Press. (MWG)

Varian (1992), Microeconomic Analysis, Norton. (Var)

 

  1. Preferences and consumer choice
    1. MWG ch1
    2. MWG ch 2
    3. Var ch 7 (pp. 94-98)
    4. Var ch 8 (pp. 116-124)

 

  1. Demand Theory I
    1. MWG ch 3 (pp 40-74)
    2. Var ch 7 (pp 98-112)
    3. Var ch8 (pp 125-143)
    4. Var ch 6

 

  1. Demand Theory II
    1. MWG ch 3 (pp. 75-96)
    2. Var ch 10

 

  1. Demand Theory III, Production I
    1. MWG ch 4
    2. Var ch 9
    3. MWG ch 5 (pp. 127-138)
    4. Var ch 1, 2,

 

  1. Production II
    1. MWG ch 5 (pp 139-159)
    2. Var ch 4, 5

 


II. Game Theory: Dr. Jacco Thijssen

 

Textbooks

Mas-Collel, Whinston and Green (1995), Microeconomic Theory, Oxford University Press. (MWG)

Osborne and Rubinstein (1994), A Course in Game Theory, MIT Press. (OR)

 

  1. Static Games with Complete Information
    1. MWG: ch 7, Section 8.A-8.D
    2. OR: Section 2.1-2.4, ch 4, Section 5.1-5.2

 

  1. Static Games with Incomplete Information (Bayesian Games)
    1. MWG: Section 8.E-8.F
    2. OR: Section 2.6
    3. Krishna (2003), Auction Theory, Academic Press. ch 2,3

 

  1. Dynamic Games with Complete Information
    1. MWG: Section 9.A-9.B, Section 12.D
    2. OR: ch 6, Section 7.1-7.3, Section 8.1-8.5

 

  1. Dynamic Games with Incomplete Information
    1. MWG: Section 9.C-9.D
    2. OR:  ch 11, ch 12

 

  1. Information
    1. MWG: Section 13.A-13.C, Section 14.A-14.B
    2. Var: ch 25

 

Microeconomics II (Hillary Term)


 

 

III. General Equilibrium and Choice under Uncertainty: Dr. Andrew Sommerville

 

Textbook

Mas-Collel, Whinston and Green (1995), Microeconomic Theory, Oxford University Press. (MWG)

 

  1. General Equilibrium I (competitive economy, existence)
    1. MWG: ch 15, Section 17.A-17.C

 

  1. General Equilibrium II (welfare theorems, core)
    1. MWG: ch 16, 18

 

  1. General Equilibrium III (stability, uniqueness)
    1. MWG: Section 17.D-17.H

 

  1. Expected Utility Theory
    1. MWG: ch 6

 

  1. Risk aversion

 


IV. Demand and Pricing Systems under Imperfect Competition:

Dr. Patrick Paul Walsh

In this section of the course I derive various functional forms for demand and pricing systems under imperfect competition in the presence of homogeneous and differentiated products.  I then show how to estimate these forms using data from existing papers. Such structural models of industries are used in merger cases throughout the US and EU. In addition, these models are also used to evaluate the effect of new pricing strategies or to evaluate the impact of introducing new brands into the market. Assessment consists of two problem sheets and   two econometric projects. In addition, there is a one and a half hour written exam for this section of the course.

 

Background Topics

 

1.  Inter-Industry Studies: The Structure-Conduct-Performance Bain Paradigm.

*Schmalensee, R. 1989, “Inter-Industry Studies of Structure and Performance”, in Schmalensee, R. and R D. Willig, Handbook of Industrial Organization, Volume II, Chapter 16, Amsterdam: North-Holland.

Martin, S. (1993), Advanced Industrial Economics, Blackwell, Chapter 16.

Salinger, M. 1990, “The Concentration-Margin Relationship Reconsidered”, Brookings Papers on Economic Activity: Micro: pp287-335.

2.  Monopoly and Oligopoly

*Borenstein, Severin and Nancy Rose. 1994. “Competition and Price Dispersion in the U.S. Airline Industry,” Journal of Political Economy 102 (August): 653-83.

*Walsh, Patrick Paul and Ciara Whelan. 1999. “Modeling Price Dispersion as an Outcome of Competition in the Irish Grocery Market" The Journal Of Industrial Economics, Vol. XLVII, No. 3, pp.1-19.

Barron JM, Taylor BA, Umbeck JR “Number of sellers, average prices, and price dispersion” International Journal of Industrial Organisation, 22 (8-9): 1041-1066 NOV 2004

Blackstone, Erwin. 1975. “Restrictive Practices in the Marketing of Electrofax Copying Machines: The SCM Corporation Case,” Journal of Industrial Economics 23(3), 89–202.

Borenstein, Severin. 1991. “Selling Costs and Switching Costs: Explaining Retail Gasoline Markets,” Rand Journal of Economics 22 (Autumn): 354-69.

Cohen, Andrew. 2000. “Package Size and Price Discrimination in the Paper Towel Market,” University of Virginia mimeo.

Nevo, Aviv and Catherine Wolfram. 2002. “Prices and Coupons for Breakfast Cereals,” RAND Journal of Economics, 33(2), 319-339.

Phillip Leslie. 1997. “A Structural Economic Analysis of Price Discrimination in Broadway Theater,” UCLA: mimeo.

Shepard, Andrea. 1991. “Price Discrimination and Retail Configuration,” Journal of Political Economy 99 (February): 30-53.

 

Demand and Pricing Systems in Homogeneous Products

 

1. Static Analysis: Demand and Pricing Systems in Homogeneous Products

*Bresnahan, Timothy. 1989. “Empirical Studies of Industries with Market Power,” in Schmalensee and Willig (eds.), Handbook of Industrial Organization, Volume II: 1011-1058. Amsterdam: North-Holland.

Bresnahan, Timothy. 1982. “The Oligopoly Solution is Identified,” Economic Letters 10, 87-92.

Corts, Ken. 1998. “Conduct Parameters and the Measurement of Market Power,” Journal of Econometrics 88 (2): 227-250.

*Genesove, David and W. Mullin. 1998. “Testing Static Oligopoly Models: Conduct and Cost in the Sugar Industry, 1890-1914,” Rand Journal of Economics, 9(Summer): 355-77.

Wolfram, Catherine. 1999. “Measuring Duopoly Power in the British Electricity Spot Market,” AmericanEconomic Review 89 (September): 805-26

 

3. Dynamic Analysis: Demand and Pricing Systems in Homogeneous Products

*Borenstein, Severin and Andrea Shepard. 1996. “Dynamic Pricing in Retail Gasoline Markets,” Rand Journal of Economics 27(Autumn): 429-51.

*Porter, Robert. 1983. “A Study of Cartel Stability: The Joint Executive Committee, 1880-1886,” Bell Journal of Economics 14(Autumn): 301-314.

*Haltwanger, J. and J. Harrington, (1991); “The Impact of Cyclical Demand Movement on Collusive Behavior” The Rand Journal of Economics Vol. 22 no.1, pp. 89-106.

*Green E. and R. Porter, (1984); “Noncooperative Collusion Under Imperfect Price Information”, Econometrica pp. 87-100.

Ellison, Glenn. 1994. “Theories of Cartel Stability and the Joint Executive Committee,” Rand Journal of Economics 25(Spring): 37-57.

*Rotemberg, J. and Saloner, G. (1986); “A Supergame Theoretic Model of Price Wars During Booms”, American Economic Review, Vol. 76, no. 3, pp. 390-407.

Aguirregabiria, Victor. 1999. “The Dynamics of Markups and Inventories in Retail Firms,” Review of Economic Studies, 275-308.

Chevalier, Judy, Anil Kashyap and Peter Rossi. 2000. “Why Don’t Prices Rise During Periods of Peak Demand?  Evidence from Scanner Data,” NBER WP No. 7981.

Fershtman C. and A. Pakes (2000); “A Dynamic Oligopoly with Collusion and Price Wars”, The Rand Journal of Economics, vol. 31, no. 2, pp. 207-236.

 


Demand and Pricing Systems in Differentiated Products

1. Models of Observable Product Differentiation

*Salop, S. 1979, “Monopolistic Competition with Outside Goods”, The Bell Journal of Economics, vol.10, pp.141-156.

d’Aspremont, C., J. Gabszewicz and J. Thisse (1979), “On Hotelling’s Stability in Competition”, Econometrica, vol. 47, no. 5, pp. 1145-50.

Hotelling, H. 1929. “Stability in Competition”, Economic Journal.

Irmen, A. and Thisse, J.F. (1998), ``Competition in Multi-Characterisitcs Spaces: Hotelling was almost right,' Journal of Economic Theory, 78, pp76-101.

Sutton, J. and Shaked, A. 1982 "Relaxing Price Competition through Product Differentiation", Review of Economic Studies, 1982.

*Sutton, J. and Shaked, A.  1983 "Natural Oligopolies,'' Econometrica, 1983, vol 51, pp. 1469-1483.

2. Estimating Demand and Pricing Systems for Differentiated Products

Train, K. “Discrete Choice Methods with Simulation” Cambridge University Press, 2003(http://emlab.berkeley.edu/users/train/distant.html) Chapter 1-7

*Bresnahan, Timothy. 1987. "Competition and Collusion in the American Automobile Market: The 1955 Price War," Journal of Industrial Economics 45(June): 457-482.

*Berry, Steve. 1994. "Estimating Discrete-Choice Models of Product Differentiation," Rand Journal of Economics 25(Summer): 242-262.

Berry, Steve, Levinsohn, James, and Ariel Pakes. 1995. "Automobile Prices in Market Equilibrium," Econometrica 63(July): 841-990.

Berry S., Levinsohn J. and Pakes A. (2004). ``Differentiated Products Demand Systems from a Combination of Micro and Macro Data: the New Car Market,'' Journal of Political Economy, 112(1), 68-104.

Nevo A., (2000). ``A Practitioners Guide to Estimation of Random Coefficients Logit Models of Demand,'' Journal of Economics & Management Strategy, 513-548, Vol. 9, Issue 4.

Nevo A., (2001). ``Measuring Market Power in the Ready-to-Eat Cereal Industry,'' Econometrica, 307-342, Vol. 69, Issue 2.

Petrin A. (2002). ``Quantifying the Benefits of New Products: the Case of the Minivan,'' Journal of Political Economy, 110, 705-729.

Mariuzzo, Franco, Walsh, Patrick Paul, and Ciara Whelan, “Embedding Consumer Taste for Location Convenience into a Structural Model of Equilibrium”, Trinity Economic Papers, 2005/3.

Mariuzzo, Franco, Walsh, Patrick Paul, and Ciara Whelan. 2003. “Firm Size and Market Power in Carbonated Soft Drinks" The Review of Industrial Organization, December 2003.