This is an archived course. A more recent version may be available at ocw.mit.edu.

Readings

The reading list includes more than we can cover in our allotted time. Articles of interest are included here for those who wish to explore some of the issues in the course in more detail. The readings from [MWG] are required, and any additional required readings will be mentioned in class.

Textbooks

[MWG] = Buy at Amazon Mas-Collel, Andreu, Michael D. Whinston, and Jerry R. Green. Microeconomic Theory. New York, NY: Oxford University Press, 1995. ISBN: 9780195073409.

Some students have also found the following books helpful:

[JR] = Buy at Amazon Jehle, Geoffrey, and Philip Reny. Advanced Microeconomic Theory. 2nd ed. Reading, MA: Addison Wesley, 2000. ISBN: 9780321079169.

[Kreps] = Buy at Amazon Kreps, David. A Course in Microeconomic Theory. Princeton, NJ: Princeton University Press, 1990. ISBN: 9780745007625.

[Varian] = Buy at Amazon Varian, Hal. Microeconomic Analysis. 3rd ed. New York, NY: W.W. Norton, 1992. ISBN: 9780393957358.

Readings by Session

SES # TOPICS READINGS
L1-L4 Part 1: Demand theory

Required readings

Classical demand theory: [MWG] sections 2.B-2.E, 3.D-E, and 3.G-H.

Demand aggregation: [MWG] sections 4.A, 4.B, and 4.D.

Suggested readings

Price changes and welfare: [JR] section 4.3.1.

Diamond, Peter, and Daniel McFadden. "Some Uses of the Expenditure Function in Public Finance." Journal of Public Economics 3, no. 1 (February 1974): 3-21.

Moss, William. "Some Uses of the Expenditure Function in Public Finance: A Comment." Journal of Public Economics 5, nos. 3-4 (April-May 1976): 373-379.

Milgrom, Paul, and Ilya Segal. "The Envelope Theorem for Arbitrary Choice Sets." Econometrica 70, no. 2 (March 2002): 583-601.

Buy at Amazon Hausman, Jerry. "Valuation of New Goods under Perfect and Imperfect Competition." In The Economics of New Goods. Edited by T. F. Bresnahan and R. J. Gordon. Chicago, IL: University of Chicago Press, 1997, pp. 209-248. ISBN: 9780226074153. Also available as National Bureau of Economic Research Working Paper No. 4970, December 1994.

Gordon, Robert J. "The Boskin Commission Report and Its Aftermath." National Bureau of Economic Research Working paper No. 7759, June 2000.

Pakes, Ariel. "A Reconsideration of Hedonic Price Indices with an Application to PCs." American Economic Review 93, no. 5 (December 2003): 1578-1596.

Willig, Robert. "Consumer's Surplus Without Apology." American Economic Review 66, no. 4 (September 1976): 589-597.
L5-L6 Part 2: Producer theory

Required readings

Monopoly pricing: [MWG] section 12.B and sections 5.B-5.C.

Competitive producer theory and robust comparative statics: [MWG] sections 5.B-5.C.

Athey, Susan, Paul Milgrom, and John Roberts. "Robust Comparative Statics." Unpublished monograph, 1998, sections 2.1, 2.2, and 2.6, pp. 1-8.

Suggested readings

Acemoglu, Daron. "Equilibrium Bias of Technology." Econometrica 75, no. 5 (September 2007): 1371-1410.

Milgrom, Paul, and John Roberts. "The LeChatelier Principle." American Economic Review 86, no. 1 (March 1996): 173-179.

Roberts, Kevin. "Rationality and the LeChatelier Principle." Journal of Economic Theory 87, no. 2 (August 1999): 416-428.

Buy at Amazon Topkis, Donald. Supermodularity and Complementarity. Princeton, NJ: Princeton University Press, 1998. ISBN: 9780691032443.
L7 Part 3: Partial equilibrium competitive markets

Required readings

Competitive markets, externalities, and public goods: [MWG] chapters 10 and 11.

Suggested readings

Duality: [JR] section 4.1.

Buy at Amazon Dasgupta, P., and G. Heal. Economic Theory and Exhaustible Resources. Cambridge, United Kingdom: Cambridge University Press, 1979, chapter 3. ISBN: 9780521297615.

Farrell, Joseph. "Information and the Coase Theorem." Journal of Economic Perspectives 1, no. 2 (Fall 1987): 113-129.

Diamond, Peter. "Consumption Externalities and Imperfect Corrective Pricing." Bell Journal of Economics and Management Science 4, no. 2 (Autumn 1973): 526-538.

Dixit, Avinash, and Mancur Olson. "Does Voluntary Participation Undermine the Coase Theorem?" Journal of Public Economics 76, no. 3 (June 2000): 309-335.

Ray, Debraj, and Rajiv Vohra. "Coalitional Power and Public Goods." Journal of Political Economy 109, no. 6 (December 2001): 1355-1384.

Kaplow, Louis, and Steven Shavell. "On the Superiority of Corrective Taxes to Quantity Regulation." Discussion Paper No. 215. Cambridge, MA: John M. Olin Center for Law, Economics, and Business, Harvard Law School, 1997.

Green, Jerry, and Eytan Sheshinski. "Direct vs. Indirect Remedies for Externalities." Journal of Political Economy 84, no. 4, part 1 (August 1976): 797-808.

Lipsey, Richard G., and Kevin Lancaster. "The General Theory of the Second-Best." Review of Economic Studies 24, no. 1 (1956): 11-32.

Weitzman, Martin. "Free Access vs. Private Ownership as Alternative Systems for Managing Common Property." Journal of Economic Theory 8, no. 2 (June 1974): 225-234.

———. "Prices vs. Quantities." Review of Economic Studies 41, no. 4 (October 1974): 477-492.

Coase, Ronald. "The Problem of Social Cost." Journal of Law and Economics 3, no. 1 (October 1960): 1-44.

Jehiel, Philippe, and Benny Moldovanu. "Resale Markets and the Assignment of Property Rights." Review of Economic Studies 66, no. 4 (October 1999): 971-991.

Gomes, Armo, and Philippe Jehiel. "Dynamic Processes of Social and Economic Interactions: On the Persistence of Inefficiencies." Journal of Political Economy 113, no. 3 (June 2005): 626-667.
L8-L13 Part 4: General equilibrium

Required readings

General equilibrium theory: [MWG] chapters 15, 16, 17, and 18.

Suggested readings

Pure exchange, general equilibrium, the competitive firm, and perfect competition: [Kreps] chapters 6 and 8.

Exchange, production, convexity, and uniqueness: [Varian] chapters 17, 18, and sections 21.2 and 21.3.

Buy at Amazon Debreu, Gerard. Theory of Value: An Axiomatic Analysis of Economic Equilibrium. New Haven, CT: Yale University Press, 1972, pp. 98-102. ISBN: 9780300015591.

Debreu, Gerard, and Herbert Scarf. "A Limit Theorem on the Core of an Economy." International Economic Review 4, no. 3 (September 1963): 235-246.

Blackorby, Charles. "Economic Policy in a Second-Best Environment." Canadian Journal of Economics 23, no. 4 (November 1990): 748-771.

Gul, Faruk, and Ennio Stacchetti. "Walrasian Equilibrium with Gross Substitutes." Journal of Economic Theory 87, no. 1 (July 1999): 95-124.

Gale, David, and Lloyd S. Shapley. "College Admissions and the Stability of Marriage." American Mathematical Monthly 69, no. 1 (January 1962): 9-15.

Rosen, Sherwin. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition." Journal of Political Economy 82, no. 1 (January-February 1974): 34-55.

Buy at Amazon Roth, Alvin, and Marilda Sotomayor. Two-Sided Matching: A Study in Game-Theoretic Modeling and Analysis. Cambridge, United Kingdom: Cambridge University Press, 1992. ISBN: 9780521437882.