Microeconomic Theory: Markets and Equilibrium Analysis

University of Wisconsin: Economics 713

“The most important single central fact about a free market is that no exchange takes place unless both parties benefit.” — Milton Friedman

1. The Matching Paradigm

  • Nontransferable Utility
    • Stability and the Gale-Shapley Deferred Acceptance Algorithm
  • Transferable Utility
    • Becker’s Conditions for Assortative Matching
    • Monge-Kantorovich Transportation Problem and Shapley-Shubik Assignment Problem

2. Partial Equilibrium

  • The Exchange Paradigm: Double Auctions
  • Partial Equilibrium: Market Supply and Market Demand Curves
  • Market Power: Monopoly, Monopsony, Cournot Duopoly
  • Externalities; Pigouvian Taxes, Coase Theorem and Missing Markets
  • Public Goods

3. General Equilibrium

  • Two Good Exchange Economy
    • Edgeworth box analysis: Welfare theorems, market power
  • Walrasian Equilibrium as a Game: The Arrow – Debreu Existence Theorem
  • Factor Markets
    • Rybczinski Theorem and Stolper-Samuelson Theorem
  • Dynamic Stochastic General Equilibrium: Time and Uncertainty
    • Contingent commodities, Spot markets, forward contracts and option
    • Risk Sharing: Idiosyncratic vs. Aggregate Risk
    • The Informational Content of Prices: Rational Expectations Equilibrium

4.  Spatial Competition: Markets for Similar Goods 

  •     Hotelling Location Model
  •     Chamberlin’s Monopolistic competition
  •     Rosen’s Hedonic Pricing

5.  Implicit Markets: Metaphorical Markets