Readings | Microeconomic Theory III | Economics

Readings that are highly recommended cover core topics that will be examined. The suggested readings are supplementary, but you should look at least some of them. When more than one of them is available, the Kreps, Mas-Colell/Whinston/Green and Varian readings are substitutes, depending on the style you prefer.

Textbooks

Kreps, D. A Course in Microeconomic Theory. Princeton, NJ: Princeton University, 1990. ISBN: 0691042640.

Varian, H. Microeconomic Analysis. 3rd ed. New York, NY: W.W. Norton, 1992. ISBN: 0393957357.

Mas-Colell, A., M. Whinston, and J. Green. Microeconomic Theory. New York, NY: Oxford University Press, 1995. ISBN: 0195073401.

Readings by Class Session

Course readings.
Lec #	TOPICS	READINGS
1	Existence and Optimality of General Equilibrium	Kreps, D. Chapters 6 and 8. Varian, H. Chapters 17, 18, 21.2, and 21.3. Mas-Colell, A., M. Whinston, and J. Green. Chapters 10, 15, 16, and 17. Diamond, P., and D. McFadden. "Some Uses of the Expenditure Function in Public Finance." Journal of Public Economics 3, no. 1 (February 1974): 3-21. Moss, W. "Some Uses of the Expenditure Function in Public Finance: A Comment." Journal of Public Economics 5, nos. 3-4 (April-May 1976): 373-379. Suggested Readings Debreu, G. Theory of Value: An Axiomatic Analysis of Economic Equilibrium. New York, NY: Wiley, 1959, pp. 98-102. Reprinted in Uncertainty in Economics: Readings and Exercises. Edited by Peter A. Diamond and Michael Rothschild. San Diego, CA: Academic Press, 1989. ISBN: 0122148517. Arrow, K., and F. Hahn. General Competitive Analysis. San Francisco, CA: Holden-Day, 1971. ISBN: 0816202753. Mas-Colell, A. The Theory of General Economic Equilibrium: A Differentiable Approach. Cambridge, UK: Cambridge University Press, 1985. ISBN: 0521265142. Blackorby, C. "Economic policy in a second-best environment." Canadian Journal of Economics 23, no. 4 (1990): 748-771. Gul, F., and E. Stacchetti. "Walrasian Equilibrium with Gross Substitutes." Journal of Economic Theory 87, no. 1 (1999): 95-124.
2	The Core and Convergence Theorem	Mas-Colell, Whinston, and Green. Chapter 18B. Suggested Readings Hildenbrand, W., and A. Kirman. Equilibrium Analysis: Variations on themes by Edgeworth and Walras. New York, NY: Elsevier, 1988, chapter 1. ISBN: 0444705112. Debreu, G., and H. Scarf. "A Limit Theorem on the Core of an Economy." International Economic Review4, no. 3 (September 1963): 235-246.
3	Arrow's Impossibility Theorem	Kreps. Chapter 5. Mas-Colell, Whinston, and Green. Chapter 21A-C. Suggested Readings Arrow, K. Social Choice and Individual Values. 2nd ed. New York, NY: Wiley, 1963. Sen, A. "Social Choice." In The New Palgrave: A Dictionary of Economics. Edited by John Eatwell, Murray Milgate, and Peter Newman. Vol. 4. London, UK: Macmillan, 1987. ISBN: 0333372352. Geanakoplos, J. Three Brief Proofs of Arrow's Impossibility Theorem. New Haven, CT: Cowles Foundation for Research in Economics, 1996. (Discussion paper no. 1123R.) Ubeda, L. "Condorcet Paradox and Arrow's Impossibility Theorem." Unpublished.
4	Externalities and Public Goods	Kreps. Chapters 6 and 8. Varian. Chapters 23 and 24. Mas-Colell, Whinston, and Green. Chapter 11. Dasgupta, P., and G. Heal. Chapter 3 in Economic Theory and Exhaustible Resources. Cambridge, UK: Cambridge University Press, 1979. ISBN: 0720203120. Farrell, J. "Information and the Coase Theorem." Journal of Economic Perspectives 1, no. 2 (Fall 1987): 113-129. Diamond, P. "Consumption Externalities and Imperfect Corrective Pricing." Bell Journal of Economics and Management Science 4, no. 2 (Autumn 1973): 526-538. Dixit, A., and M. Olson. "Does Voluntary Participation Undermine the Coase Theorem?" Journal of Public Economics 76, no. 3 (June 2000): 309-335. Kaplow, L., and S. Shavell. "On the Superiority of Corrective Taxes to Quantity Regulation." Cambridge, MA.: John M. Olin Center for Law, Economics, and Business, Harvard Law School, 1997. (Discussion Paper no. 215.) Suggested Readings Green, J., and E. Sheshinski. "Direct vs. Indirect Remedies for Externalities." Journal of Political Economy 84, no. 4, pt. 1 (August 1976): 797-808. Sheshinski, E. Note on Atmosphere Externality and Corrective Taxes. Jerusalem, Israel: Center for Rationality and Interactive Decision Theory, Hebrew University, October 1995. (Discussion Paper no. 84.) Lipsey, R. G., and K. Lancaster. "The general theory of the second-best." Review of Economic Studies 24, no. 1 (1956): 11-32. Weitzman, M. "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, R. "The Problem of Social Cost." Journal of Law and Economics 3, no. 1 (October 1960): 1-44. Laffont, J. J. Fundamentals of Public Economics. Cambridge, MA: MIT Press, 1988, chapter 1. ISBN: 0262121271
5	Intertemporal Competitive Equilibrium	Kreps. Chapter 6, Section 5. Varian. Chapter 19. Mas-Colell, Whinston, and Green. Chapter 20.
6	Uncertainty with Complete Markets	Varian. Chapter 6, Section 5. Varian. Chapter 20. Mas-Colell, Whinston, and Green. Chapter 19, Parts A-E. Suggested Readings Arrow, K. "The Role of Securities in the Optimal Allocation of Risk- Bearing." Review of Economic Studies 31 (1963-1964): 91-96. Debreu, G. "Theory of Value." In Uncertainty in Economics: Readings and Exercises. Edited by Peter A. Diamond and Michael Rothschild. San Diego, CA: Academic Press, 1989. ISBN: 0122148517. Dasgupta, P., and G. Heal. Economic Theory and Exhaustible Resources. Cambridge, UK: Cambridge University Press, 1979, chapters 4 and 6. ISBN: 0521297613. Hirshleifer, J., and J. G. Riley. The Analytics of Uncertainty and Information. Cambridge, UK: Cambridge University Press, 1992. ISBN: 0521283698. Malinvaud, E. "The Allocation of Small Risks in Large Markets." Journal of Economic Theory 4 (1972): 312-328. Laffont, J. J. The Economics of Uncertainty and Information. 4th ed. Cambridge, MA: MIT Press, 1993.
7	Incomplete Markets	Diamond, P. "Efficiency with Uncertain Supply." Review of Economic Studies 47, no. 4 (July 1980): 645-651. ———. "The Role of a Stock Market in a General Equilibrium Model with Technological Uncertainty." American Economic Review 57, no. 4 (September 1967): 759-776. Reprinted in Uncertainty in Economics: Readings and Exercises. Edited by Peter A. Diamond and Michael Rothschild. Rev. ed. San Diego, CA: Academic Press, 1989. ISBN: 0122148517. Mas-Colell, Whinston, and Green. Chapter 19, Parts F and G. Hirshleifer, J. "The Private and Social Value of Information and the Reward to Inventive Activity." American Economic Review 61, no. 4. (September 1971): 561-574. Reprinted in Uncertainty in Economics: Readings and Exercises. Edited by Peter A. Diamond and Michael Rothschild. Rev. ed. San Diego, CA: Academic Press, 1989. ISBN: 0122148517. Suggested Readings Magill, Michael, and Martine Quinzii. Theory of Incomplete Markets. Cambridge, MA: MIT Press, 1996. Hart, O. "On the Optimality of Equilibrium When the Market Structure Is Incomplete." Journal of Economic Theory 11 (December 1975): 418-443. Loong, L. H., and R. Zeckhauser. "Pecuniary Externalities Do Matter When Contingent Claims Markets are Incomplete." Quarterly Journal of Economics 97, no. 1 (February 1982): 171-179. Stiglitz, J. "The Inefficiency of Stock Market Equilibrium." Review of Economic Studies 49, no. 2 (1982): 241-261. Geanakoplos, J. "An Introduction to General Equilibrium with Incomplete Asset Markets." Journal of Mathematical Economics 19, no. 1 (1990): 1-38. Makowski, L. "Perfect Competition, The Profit Criterion, and the Organization of Economic Activity." Journal of Economic Theory 22 (1980): 222-242. Acemoglu, D., and F. Zilibotti. "Was Prometheus Unbound by Chance? Risk, Diversification and Growth." Journal of Political Economy 105, no. 4 (1997): 709-751. Bisin, A. "General Equilibrium and Endogenously Incomplete Financial Markets." Journal of Economic Theory 82, no. 1 (1998): 19-45.