Topics in Microeconomics

Dr. Barnali Gupta

Office: 216 Upham Hall
Office Hours: T & R, 1:30 - 2:30 pm
Class Hours: T&R, 3:30 - 4:45 pm; W, 10:30 - 1:30 pm and by appointment
Phone #: 529-5037

This course is designed to develop the student's interest and expertise in non-cooperative game theory and its applications to
recent developments in applied microeconomics.

Textbook :

Game Theory for Applied Economists, by Robert Gibbons, Princeton University Press, 1992.

Course Outline:

A. Basic Concepts in Game Theory

1. Static Games of Complete Information
Normal form representation of games
Iterated Elimination of Strictly Dominated Strategies
Motivation and definition of Nash equilibrium
Mixed Strategies and existence of equilibrium
Existence of Nash equilibrium
Applications: Cournot model, Bertrand model, Public goods
2. Dynamic Games of Complete Information
Extensive form representation of a game
Backwards induction method
Subgame perfect Nash equilibrium
Applications: Stackelberg model of duopoly
Wages and Employment in a unionized firm
Bank runs
Tariffs and imperfect international competition
Repeated games: Two-stage and infinitely repeated games

B. Topics in Oligopoly
Journal articles
1. Brander and Spencer, Strategic commitment with R&D: the symmetric case, Bell Journal of Economics, 1983
2. Dixit, A., A model of duopoly suggesting a theory of entry barriers, Bell Journal of Economics, 1979
3. Hamilton J. And S. Slutsky, Endogenous timing in duopoly games: Stackelberg or Cournot equilibria, Games and
Economic behavior, 1990
4. Kreps and Scheinkman, Quantity precommitment and Bertrand Compettion Yield Cournot Outcomes, Bell Journal of
Economics, 1983
5. Novshek, W., On the Existence of Cournot Equilibrium
6. Robson, A., Stackelberg and Marshall, American Economic Review, 1990
7. Salant S., S. Switzer and Reynolds, Losses from Horizontal Merger: the Effects of an Exogenous Change in Industry
Structure on Cournot-Nash equilibrium, The Quarterly Journal of Economics, 1983
8. Saloner, G., Cournot Duopoly with Two Production Periods, Journal of Economic Theory, 1987
9. Salop s. And J. Stiglitz, Bargains and Ripoffs: A model of Monopolistically Competitive Price Dispersion, Review of
Economic Studies, 1977
10. Varian, H., A Model of Sales, American Economic Review, 1980. C. Product Differentiation and Topics in
Location Theory
11. Anderson S. And D. Neven, Cournot Competition Yields Spatial Agglomeration, International Economic Review,
1991
12. Anderson S. and A. DePalma, Spatial Price Discrimination with Heterogenous Product, The Review of Economic
Studies, 1988
13. D'Aspremont, Gabszewicz and J. Thisse, On Hotelling's Stability in Competition, Econometrica, 1979
14. Gupta, b., A. Kats and D. Pal, Upstream Monopoly, Downstream Competition and Spatial Price Discrimination,
Regional Science and Urban Economics,
15. Hamilton H., J. Thisse and A. Weskamp, Spatial Discrimination : Bertrand versus Cournot in a Model of Location
Choice, Regional Science and Urban Economics, 1989
16. Hurter A. and P. Lederer, Spatial Duopoly with Discriminatory Pricing, Regional Science and Urban Economics,
1985
17. Hwang H. And C. Mai, Effects of Spatial Price Discrimination on Output, Welfare and Location, American
Economic Review, 1990
18. Prescott E. And M. Visscher, Sequential Location Among Firms with Foresight, Bell Journal of Economics, 1977
19. Thisse J. And X. Vives, On the Strategic Choice of Spatial Price Policy, American Economic Review, 1988 D.
Government Intervention and Mixed Oligopoly
20. DeFraja G. And F. Delbono, Alternative Strategies of a Public Enterprise in Oligopoly, Oxford Economic Papers,
1989
21. Fershtman C., The Interdependence between Ownership Status and Market Structure: The Case of Privatization,
Economica, 1990
22. Cremer H., M. Marchand & J. Thisse, The Public Firm as an Instrument for Regulating an Oligopolistic Market,
Oxford Economic Papers, 1989 E. Topics in Principal-Agent Theory
23. Baron D. And R. Myerson, Regulating A Monopolist with Unknown Costs, Econometrica, 1982
24. Holmstrom B., Moral Hazard and Observability, Bell Journal of Economics, 1979
25. Holmstrom B., Moral Hazard in Teams, Bell Journal of Economics, 1982
26. Lewis T. And D. Sappington, Regulating a Monopolist with Unknown Demand, American Economic Review, 1988
27. Sappington D., Incentives, Journal of Economic Perspectives, 1992

General Policies for this class

Your grade in this course will be based on the following:
midterm exam: 50 points (date to be announced in class)
final exam: 50 points
homework assignments: 25 points
technical report on a journal article: 25 points
class presentation: 25 points

You will work in groups on your homework assignments and technical report. (The details of group formation will be discussed
in class.) In so far as the exams and the class presentation are concerned, each student is on her/his own!