Microeconomics 3A-CI/MS

Objective

The purpose of this microeconomics course is to study the consequences of questioning the assumptions of pure and perfect competition. A methodological preamble (chapters 1 and 2) is devoted to reminders of general equilibrium as well as elements of game theory. The first part (chapters 3 and 4) introduces industrial economics by studying some examples of imperfect competition. The second part (chapters 5, 6 and 7) deals with information asymmetries and proposes elements of contract theory. The third part (chapters 8 and 9) covers problems of public economics.

• At the end of the course, the student will know :
• Decompose a simple microeconomic situation in order to understand how agents behave and interact.
• Determining the economic optimum
• Model imperfect competition with game theory tools
• Identify the origins and consequences of the market power of companies
• Explain how social welfare is affected by imperfect competition
• Linking major competition law issues (barriers to entry, dominance, collusion, mergers) to economic modeling
• Identify, if necessary, the reasons why the optimum is not reached and propose ways to restore efficiency.
   

Planning

1. General equilibrium reminders (welfare theorems)
2. Game theory (best response, Nash equilibrium, refinements; static, dynamic or repeated games)
3. Imperfect competition 1 (profits, surplus, welfare; monopoly; oligopoly: quantity competition)
4. Imperfect competition 2 (oligopoly: price competition; the removal of Bertrand's paradox: capacity constraints, collusion, product differentiation; barriers to entry; vertical relationships)
5. Selection (the example of regulation)
6. Moral hazard (the example of contingent production; limited liability)
7. Signaling (Bayesian games, antiselection as seen by Akerlof, education as seen by Spence)
8. Public economy (public goods, externalities)

References

Fudenberg D., Tirole J. : "Game Theory", MIT Press
Laffont J.-J., Martimort D. : "The Theory of Incentives", Princeton University Press
Mas-Colell A., Whinston M., Green J. : "Microeconomic Theory",  Oxford University Press
Salanié, B. : "Microéconomie : les défaillances du marché", Economica
Tirole, J. : "The Theory of Industrial Organization", MIT Press