Principles of Microeconomics: An Integrative Approach

Preface to the Second Edition
Preface to the First Edition
Contents
Part I Introduction
1 First Principles
1.1 What Is Economics About?
1.2 Some Methodological Remarks
1.2.1 True and Reasonable Theories
1.2.2 Theories and Models
1.2.3 The Virtue of Thriftiness
1.2.4 Do Assumptions Matter?
1.2.5 An Example
1.2.6 Critical Rationalism
1.2.7 Positive and Normative Theories
1.2.8 Schools of Economic Thought
References
Further Reading
2 Gains from Trade
2.1 Introduction
2.2 An Example
2.3 How General Is the Theory of Comparative Advantage?
2.4 Comparative Advantage and the Organization of Economic Activity
References
Further Reading
Part II A Primer in Markets and Institutions
3 Introduction
3.1 General Remarks
3.2 Taxonomy of Markets
References
Further Reading
4 Supply and Demand Under Perfect Competition
4.1 Introduction
4.2 Determinants of Supply and Demand
4.3 Equilibrium
4.4 Equilibrium Analysis
References
Further Reading
5 Normative Economics
5.1 Introduction
5.2 Normative Properties of Competitive Markets
5.3 Willingness to Pay and Preferences
References
Further Reading
6 Externalities and the Limits of Markets
6.1 Introduction
6.2 Transaction Costs
6.2.1 An Example
6.2.2 Analysis of Externalities on Markets
6.2.3 The Bigger Picture
6.2.3.1 Externalities in Traffic
6.2.3.2 Environmental Externalities
6.2.3.3 Morality and Corporate Social Responsibility
6.2.3.4 Status
6.3 Four Boundary Cases
References
Further Reading
Part III Foundations of Behavior and Interaction
7 Decisions and Consumer Behavior
7.1 Basic Concepts
7.1.1 Choice Sets and Preferences
7.1.2 Indifference Curves
7.1.3 Utility Functions
7.2 Demand on Competitive Markets
7.2.1 Graphical Solution
7.2.2 Analytical Solution
7.2.2.1 Necessary Conditions for a Maximum
7.2.2.2 Sufficient Conditions for a Maximum
7.2.3 Three Examples
7.2.3.1 Homothetic Strictly Convex Preferences
7.2.3.2 Perfect Substitutes
7.2.3.3 Perfect Complements
7.2.4 Comparative Statics and the Structure of Market Demand
7.2.5 Changes in Income
7.2.6 Changes in Price
References
Further Reading
8 Decisions Under Uncertainty and Risk
8.1 A Model of Uncertainty and Risk
8.2 Decisions Under Uncertainty
8.2.1 Maximin Rule
8.2.2 Maximax Rule
8.2.3 Hurwicz Rule
8.2.4 Minmax-Regret Rule
8.2.5 Laplace Rule
8.3 Decisions Under Risk
8.3.1 Lotteries and Expected-Payoff Rule
8.3.2 Critique of the Expected-Payoff Rule
8.3.3 Expected-Utility Theory
8.3.4 The Allais Paradox
8.3.5 Propensities Towards Risk
8.3.6 Insurance
8.3.6.1 A Model with Fixed Coverage
8.3.7 A Model with Endogenous Coverage
References
Further Reading
9 Principles of Game Theory
9.1 Introduction
9.2 What Is a Game?
9.3 Elements of Game Theory
9.4 Normal-Form Games
9.4.1 Multiple Equilibria
9.4.2 Collectively and Individually Rational Behavior
9.4.3 Simple Games as Structural Metaphors
9.5 Extensive-Form Games
9.6 Summary
References
Further Reading
10 Behavioral Economics
10.1 Introduction
10.2 Basic Concepts
10.3 Social Preferences
10.3.1 Kin Selection
10.3.2 Reciprocity
10.3.3 Altruism and Spite
10.3.4 Inequality Aversion
10.3.5 Intention-Based Preferences
10.3.6 Conclusions
10.4 Boundedly Rational Behavior
10.4.1 Prospect Theory
10.4.1.1 The Structure of Subjective Value Functions
10.4.1.2 The Structure of Decision Weights
10.4.1.3 Applications
10.4.1.4 Summary
10.4.2 Anchoring
10.4.3 Confirmation Bias
10.5 An Evolutionary Perspective on Biases and Rationality
References
Further Reading
11 Foundations of Perception and Decision-Making
11.1 Introduction
11.2 A Multilevel Model of Adaptation
11.2.1 Genetic Adaptation
11.2.2 Epigenetic Adaptation
11.2.3 Affective Adaptation
11.2.3.1 Dopamine
11.2.3.2 Fear and Anxiety
11.2.3.3 Disgust
11.2.3.4 Oxytocin
11.2.3.5 Testosterone
11.2.4 Cognitive and Metacognitive Adaptation
11.2.4.1 Confabulation
11.2.4.2 The Narrative Self
11.2.4.3 Concluding Remarks and Implications for Economics
11.3 Where Do We Stand?
11.3.1 Virtue Ethics and the Creation of Good Habits
11.3.2 Implications for an Economy that Promotes the Good Life
References
Further Reading
Part IV Firm Behavior and Industrial Organization
12 Costs
12.1 What Are Costs, and Why Are They Important?
12.2 A Systematic Treatment of Costs
Reference
Further Reading
13 Firm Behavior Under Perfect Competition
13.1 Introduction
13.2 Production Technology and Market Structure
13.3 The Short Versus the Long Run
13.4 Firm and Market Supply
References
Further Reading
14 Firm Behavior in Monopolistic Markets
14.1 Introduction
14.2 Conditions for the Existence of a Monopoly
14.3 Profit Maximization in Monopolistic Markets
14.4 Monopoly Without Price Discrimination
14.4.1 The Single-Product Monopoly
14.4.2 Two- or Multi-Sided Markets
14.5 Monopoly with Price Discrimination
14.5.1 First-Degree Price Discrimination
14.5.2 Second-Degree Price Discrimination
14.5.3 Third-Degree Price Discrimination
14.6 Monopolistic Competition
References
Further Reading
15 Firm Behavior in Oligopolistic Markets
15.1 Introduction
15.2 Cournot Duopoly Model
15.3 The Linear Cournot Model with n Firms
15.4 The Bertrand Duopoly Model
15.5 Conclusion and Extensions
References
Further Reading
Part V Appendix
16 A Case Study
16.1 The Grounding of Swissair
16.2 Some Facts About the Aviation Industry in Europe
16.3 Applying Economic Theory
16.3.1 Costs
16.3.2 The Linear Cournot Model with n Firms
16.3.3 Extensions
16.4 How About Swissair?
16.5 Concluding Remarks
17 Mathematical Appendix
17.1 General Remarks
17.2 Functions with Several Explanatory Variables
17.3 Solution to Systems of Equations
17.4 Optimization Under Constraints
17.4.1 Sufficient Conditions
17.4.2 Necessary Conditions
17.5 Elasticities
Further Reading
Index