Economics 30200. Price Theory II.

Course description

The first part of the course will be devoted to the Walrasian model of general competitive equilibrium in price theory, as developed by Arrow and Debreu.  Topics include: basic models of consumers' preferences and demand, the core of an exchange economy, general equilibria in competitive market systems, modeling productive firms in competitive markets, existence and Pareto efficiency of competitive equilibria, and extensions of the general equilibrium model to include time and uncertainty. Then the second part of the course introduces the fundamental ideas of game theory: strategic-form games, Nash equilibrium, games with incomplete information, extensive-form games, sequential equilibrium, and repeated games.
Spring 2017. Instructor: Roger Myerson. TAs: Wenji Xu, Kai Hao Yang.
Groups of up to five students who have met to do a homework assignment together can hand in the assignment as a group.

Main Texts:

  • A. Mas-Colell, M. Whinston, J. Green, Microeconomic Theory, Oxford U Press (1995), chapters 6, 7, 8.
  • G. Jehle, P. Reny, Advanced Microeconomic Theory 3rd ed., Addison-Wesley (2011), chapters 2, 7.
  • R. Myerson, Game Theory, Harvard U Press (1991), chapters 1-4, 7. (4.5)
  • Game theory notes.
  • R. Myerson, "Nash equilibrium and the history of economic theory," J Economic Literature 37(3):1067-1082 (1999).
  • -, "Learning from Schelling's Strategy of Conflict," J Economic Literature 47(4):1109-1125 (2009).
  • -, "Harsanyi's games with incomplete information," Management Science 50(12):1818-1824 (2004).
  • -, "Fundamentals of social choice theory," Quarterly Journal of Political Science 8(3):305-337 (2013).
  • G. Debreu, Theory of Value, Yale U Press (1959).

Homework assignments

Plan of Topics:

  1. Basic models of consumers' preferences and demand: JR chapter 1, pp 3-17, 25-27.
  2. Core and general equilibrium in price theory: JR chapter 5, pp 195-251.
  3. Utility theory, domination, duality: MWG sectn 6B; JR pp 97-118; My sectns 1.1-1.5, 1.8-1.9; gt notes pp 1-5.
  4. Strategic-form games, domination, Nash equilibrium: MWG 7D,8B-8D; JR pp 305-319; My 3.1-3.5; gt notes pp 6-8.
  5. Incomplete-information games: MWG 8E; JR pp 319-325; My 2.8-2.9, 3.9-3.11; gt notes pp 9-16.
  6. Extensive games, sequential equilibrium, repeated games: MWG 7C,9A-C,12AA; JR pp 325-364; My 2.1-2.2, 4.1-4.7 (link to 4.5), 7.1, 7.4; gt notes pp 17-22.