Econ 301a: Advanced Microeconomics

Fall 2010

Instructor

TA

Times:

Course Description

This is the first of a two semester sequence in Ph.D. level microeconomics. This is required of all first year Ph.D. students. It is a rigorous treatment of modern microeconomic theory which includes consumer choice, theory of the firm, and decision making under uncertainty. Other key topics that will be introduced are simple models of perfect and imperfect competition, externalities, and some examples from asset pricing.

Learning Goals

  1. Understand research level tools in modern micro economics
  2. Be able to read journal articles in economics and finance
  3. Develop insights into the basic questions and assumptions in microeconomics

Prerequisites

This course requires an extensive mathematics background. At least 3 semesters of calculus (through multivariate calculus) are required, as is 1 semester of linear algebra. You should be familiar with advanced math topics such as multivariate constrained optimization. Terms such as Lagrangians and Hessian matrices should be familiar to you. Real analysis is not required, but it would be useful.

This course is designed for IBS Ph.D. students. However, some MA and undergraduate students may be qualified. Undergraduates interested in pursuing an economics Ph.D. in the future may find this useful preparation.

Required Readings

This is a large list of books. The tooled up economics Ph.D. student should keep several books on their shelf to cover topics from different areas. Our primary text will be Jehle and Reny and a lot of Varian, but the other books will also prove useful. The Miller notes are available for free download on the web.

  1. Jehle and Reny, Advanced Microeconomic Theory, Addison-Wesley.
  2. Varian, Microeconomic Analysis, Norton, 3rd edition.
  3. Miller, Notes on Microeconomic Theory, web, Kennedy School, Harvard.

Optional Readings

  1. Mas-Colell, Whinston, and Green, Microeconomic Theory, Oxford Press.
  2. Kreps, A Course in Microeconomic Theory, Princeton.
  3. Rubinstein Lecture Notes in Microeconomic Theory, Princeton.
  4. For an interesting, but different, approach to micro check out,
    S. Bowles, Microeconomics: Behavior, Institutions, and Evolution, Princeton, 2004.

Grading

Grades will be based on problem sets (33%), a midterm exam (33%), and a final exam (33%). The midterm will be in class, 12:40-2:00pm on Monday, October 25th. Final exam will be during the standard final exam block (F), Friday, December 10th, 9:15-12:15, Lemberg 54.

Disability Statement

If you are a student with a documented disability on record at Brandeis University and wish to have a reasonable accommodation made for you in this class, please see me immediately.

Academic Integrity

You are expected to be familiar with and to follow the University's policies on academic integrity (see http://www.brandeis.edu/global/current_academic_integrity.php). Instances of alleged dishonesty will be forwarded to the Office of Campus Life for possible referral to the Student Judicial System. Potential sanctions include failure in the course and suspension from the University.

Course Outline

  1. Quick math review (on your own)
    Skim JR appendix
  2. A few thoughts on methodology and microeconomics
    Friedman, M., The methodology of positive economics, in Friedman, Essays in Positive Economics, University of Chicago Press, 1966, pp 3-43.
  3. Consumer theory
    1. Basic choice theory (minimal assumption consumer theory): Miller 1
      Becker, Irrational behavior and economic theory, Journal of Political Economy, vol 70, 1962.
    2. Preferences and utility: JR 1.2, V 7, Miller 2
    3. Consumer optimization: JR 1.3-1.4
    4. Consumer demand: JR 1.5
      Jensen and Miller, Giffen behavior and subsistence consumption, American Economic Review, vol 98, 2008, 1553-1577.
  4. Further topics in consumer theory
    1. Special utility functions and aggregation: Miller 4
    2. Revealed preferences: JR 2.3, Miller 1 (review)
    3. Uncertainty: JR 2.4, V11, Miller 6
      1. Gambles
      2. Von Neuman - Morgenstein Utility
      3. Risk aversion
      4. Portfolio example
      5. Time and uncertainty V19
      6. Complete markets and Arrow/Debreu securities
      7. Behavioral controversies
        Machina, Choice under uncertainty: Problems Solved and Unsolved, Journal of Economic Perspectives, vol 1, 1987: 121-154.
        Rabin and Thaler, Anomalies: Risk Aversion, Journal of Economic Perspectives, vol. 15, 219-232.
  5. Theory of the firm: JR 3, V 1-6, Miller 5
    1. Production, profits, and costs
    2. Duality
  6. Partial equilibrium markets: JR chapters 3-4, V 13-14, Miller 7
    1. Perfect competition
    2. Imperfect competition, Miller 9
    3. Efficiency and welfare
    4. Equivalent and compensating variation
    5. Taxes and subsidies
  7. General equilibrium
    1. Basic tools and key theorems: JR 5.1-5.3
    2. Information and aggregation
      Hayek, F. A., The use of knowledge in society, American Economic Review, vol 35, 1945: 519-30.
    3. Dynamics and decentralized exchange
      Gintis, The dynamics of general equilibrium, The Economic Journal, vol 117, 2007: 1280-1309.
  8. Topics in micro theory
    1. Externalities: V24
      Coase Theorem: Bowles chapter 6 (pages 221-232)
    2. Asset pricing: V20