COURSE SYLLABUS

FOR ADVANCED MICROECONOMIC THEORY II

Shanghai University of Finance and Economics

 Spring, 2007

Course:                          Advanced Microeconomic Theory II

Instructor:                   Guoqiang Tian

                                        Professor of Economics

                                        E-mail: gtian@tamu.edu

                                        http://econweb.tamu.edu/tian

Tentative Topics Outline:

The lecture are divided into four parts.

Part I.  Review of modern economics and mathematics as well as partial equilibrium theory: Nature and role of modern economics, the standard Analytical framework of modern economics, key assumptions commonly adopted in microeconomics, partial equilibrium theory, theory of markets, perfect competition, monopoly, monopolistic competition, oligopoly, monopsony, roles of mathematics, language and methods of mathematic, continuity and concavity of functions, separating hyperplane theorem, unconstrained and constrained optimization, correspondences (point to set mappings), fixed point theorems, KKM lemma, maximum theorem.

        Readings: Mathematical Appendix of Mas‑Colell, Whinston, and Green, and Chapters 1 and 6 of my lecture notes.

Part II. General Equilibrium Theory and Social Welfare:  Perfectly competitive markets, exchange economies, general equilibrium with production, equilibrium with transfer payments, and existence, uniqueness, and stability of general equilibrium, existence of equilibrium of abstract economy, Pareto efficiency, the First and Second Theorems of Welfare Economics, economic core, welfare functions, characterizations of efficient social outcomes, social choice rules, Arrow's impossibility theorem.

       Readings: Chapters 10, 15‑18, and 21 of Mas‑Colell, Whinston, and Green, and Chapters 7-10 of my lecture notes.

Part III Externalities and Public Goods: Consumption externality (preference externality), production externality, competitive equilibrium with externalities, Pigovian taxes, voluntary negotiation a la Coase, compensatory tax/subsidy, creating a missing market with property right, public goods, efficient provision of public goods, Lindahl equilibrium, and free-rider problem.

       Readings: Chapter 11 in Mas‑Colell, Whinston, and Green, Chapters 11-12 in my lecture notes.

Part IV.         Information, Incentives, and Mechanism Design: Principal‑agent model, hidden action, moral hazard, adverse selection, signaling, contract theory, incentives and information of an economic system, economic mechanism design, implementation in Nash equilibrium and in Bayesian equilibrium, truth telling and dominant mechanism, the pivot mechanism, optimal dominant mechanisms, and the revelation principle.

       Readings: Chapters 1-5 of Laffont and Martimort, Chapters 13-14 and Chapter 23 of Mas‑Colell, Whinston, and Green, and  Chapters 13-15  of my lecture notes.