The Microeconomics course aims at giving PhD students a solid intermediate and upper intermediate treatment of the foundations of microeconomic theory, and to present selected extensions, as a basis for enabling the comprehension of the contemporary developments of the theoretical and applied economic literature. The course will be organized around five main topics: Firm’s behavior, Consumer’s behavior, Market structure and policy (Antitrust and Regulation), Partial and general equilibrium analysis, Asymmetric information. These topics will be organised in five teaching blocks: Production theory and functional forms, Theory of choice and consumer’s demand, Game Theory and Industrial Organization, General equilibrium theory, welfare economics and market failure, Asymmetric information. While the main emphasis is put on theoretical aspects, some modules also feature empirical applications, and can present connections with the following blocks “Topics in…” offered after the basic modules (from Spring onwards). Beside general lectures (60 hours), there are also a few training sessions focused on exercises (around 20-5 hours).
- Development of analytical skills so that students can read economic models, both theoretical and applied, and critically evaluate their heuristic power.
- Development of analytical and technical skills, so that students can design and build new economic models to analyze and answer their research questions.
- Development of software usage skills used to build and implement economic models.
Students should have a perfect graduate level knowledge of the following topics, beside that of the complementary algebraic tools:
- Budget constraint, preferences, utility and choice, under certainty and uncertainty;
- Demand, revealed preferences and Slutsky equation;
- Intertemporal choice, uncertainty and risk;
- Demand aggregation, consumer’s surplus, market demand and market equilibrium;
- Technology, production function, cost minimization, factor demand, profit maximization;
- Firm and industry supply;
- Mark up, market power, monopoly, imperfect competition;
- Game Theory;
- Oligopoly and product differentiation;
- Introductory elements of Antitrust and Regulation
- Partial and general equilibrium, optimality. Welfare economics and its theorems. Welfare evaluation;
- Taxation and optimal taxation;
- Public goods, externalities and market failures;
- Asymmetric information (adverse selection and moral hazard);
- Theory of incentives and political economy.
More recent and less formalized microeconomics textbooks used at the Bachelor level do not provide a preparation sufficient to profitably enter the class. A first solution is to use the less recent and more “formalized” intermediate (or upper-intermediate) microeconomics books, such as that of Varian H. R. (2010) Intermediate Microeconomics, (8th edition) W. W. Norton & Company, (especially for Consumer’s and Firm’s behavior), and Tirole, J. (1988) The Theory of Industrial Organization, MIT press. Most of the “prerequisite topics” are covered there. For covering Game Theory, an intermediate level textbook suggested is Osborne, M.J. (2004) An Introduction to Game Theory, OUP. For reviewing algebra, one (among the many) suggestion is Chiang A.C. and Wainwright, K. (2005) Fundamental methods of mathematical economics (4th edition), McGraw-Hill.
Other solutions are equally possible (for example, using more advanced micro-economics books), especially for students having an appropriate mathematical background. A main suggestion is: Jehle G. A. and Reny P. J. (2011) Advanced Microeconomic Theory (3rd ed.), Pearson.
Teaching block 1:
- Production theory: technology, production functions, cost minimization, conditional factor demand, unconditional factor demand, profit maximization, supply function.
- Functional forms (Cobb-Douglas, CES, CES nested, translog, Diewert)
- Introduction to market power: monopoly, imperfect competition, mark-up.
Teaching block 2:
- Theory of choice under certainty and uncertainty
- Demand and consumer’s surplus
Teaching block 3:
- Game theory. Types of equilibria. Simultaneous and sequential games of perfect and imperfect information. Simultaneous and sequential games of complete and incomplete information.
- Industrial Organization: Cournot, Bertrand, Hotelling and other models of product differentiation.
- Fundamentals of Antitrust and market Regulation.
Teaching block 4:
- General equilibrium and properties of optimality.
- Walras's equilibrium, Walras's law, Pareto optimality, first and second theorem of welfare economics
- Welfare evaluation, income test
- Taxation and optimal taxation
- Public goods and externalities.
Teaching block 5:
- Principal-agent model.
- Moral hazard models.
- Adverse selection models.
- Theory of incentives and political economy.
At the end of the course (February), students will be assigned a written exam (closed book) featuring groups of microeconomic exercises and models similar to those presented during classes (100%) in the five teaching blocks. Students that will not pass the exam will resit it later in the year: the resit will be a closed-book written exam.
- Lecturer of 1st block: Stefano Staffolani
- Lecturer of 2nd block: Fabio Fiorillo
- Lecturers of 3th block: Nicola Matteucci and Alessandro Sterlacchini
- Lecturer of 4th block: Fabio Fiorillo
- Lecturer of 5th block: Raffaella Santolini
- Lecturers of exercise sessions: TBA
Due to the ongoing variations of lecturers, here we only provide the main reference textbooks on advanced microeconomics:
- Jehle G. A. and Reny P. J. (2011) Advanced Microeconomic Theory (3rd ed.), Pearson.
- Mas-Colell, A. Whinston, M.D. and Green J. R. (1995), Microeconomic Theory, OUP.
- Varian, H.R. (2003). Microeconomics Analysis (3rd ed.), New York: W.W. Norton C., Inc.
(Some) software for economic modelling:
- Matlab, with free licenses available to UNIVPM members at: www.csi.univpm.it