Microeconomic Theory

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  • Format: Hardcover
  • Copyright: 1995-06-15
  • Publisher: Oxford University Press

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Many instructors of microeconomic theory have been waiting for a text that provides balanced and in-depth analysis of the essentials of microeconomics. Masterfully combining the results of years of teaching microeconomics at Harvard University, Andreu Mas-Colell, Michael Whinston, and Jerry Green have filled that conspicuous vacancy with their groundbreaking text, Microeconomic Theory. The authors set out to create a solid organizational foundation upon which to build the effective teaching tool for microeconomic theory. The result presents unprecedented depth of coverage in all the essential topics, while allowing professors to "tailor-make" their course to suit personal priorities and style. Topics such as noncooperative game theory, information economics, mechanism design, and general equilibrium under uncertainty receive the attention that reflects their stature within the discipline. The authors devote an entire section to game theory alone, making it "free-standing" to allow instructors to return to it throughout the course when convenient. Discussion is clear, accessible, and engaging, enabling the student to gradually acquire confidence as well as proficiency. Extensive exercises within each chapter help students to hone their skills, while the text's appendix of terms, fully cross-referenced throughout the previous five sections, offers an accessible guide to the subject matter's terminology. Teachers of microeconomics need no longer rely upon scattered lecture notes to supplement their textbooks. Deftly written by three of the field's most influential scholars, Microeconomic Theory brings the readability, comprehensiveness, and versatility to the first-year graduate classroom that has long been missing.

Table of Contents

Individual Decision-Making
Introduction to Part I
Preference and Choice
Preference Relations
Choice Rules
The Relationship between Preference Relations and Choice Rules
Consumer Choice
The Consumption Set
Competitive Budgets
Demand Functions and Comparartive Statics
The Weak Axiom of Revealed Preference and the Law of Demand
Classical Demand Theory
Preference Relations: Basic Properties
Preference and Utility
The Utility Maximization Problem
The Expenditure Minimization Problem
Duality: A Mathematical Introduction
Relationships between Demand, Indirect Utility, and Expenditure Functions
Welfare Evaluation of Economic Changes
The Strong Axiom of Revealed Preference
Appendix: Continuity and Differentiability Properties of Walrasian Demand
Aggregate Demand
Aggregate Demand and Aggregate Wealth
Aggregate Demand and the Weak Axiom
Aggregate Demand and the Existence of a Representative Consumer
Appendix: Regularizing Effects of Aggregation
Production Sets
Profit Maximization and Cost Minimization
The Geometry of Cost and Supply in the Single Output Case
Efficient Production
Remarks on the Objectives of the Firm
Appendix: The Linear Activity Model
Choice under Uncertainty
Expected Utility Theory
Money Lotteries and Risk Aversion
Comparison of Payoff Distributions in Terms of Return and Risk
State Dependent Utility
Subjective Probability Theory
Game Theory
Introduction to Part II
Basic Elements of Non-Cooperative Games
What is a Game?
The Extensive Form Representation of a Game
Strategies and the Normal Form Representation of a Game
Randomized Choices
Simultaneous-Move Games
Dominant and Dominated Strategies
Rationalizable Strategies
Nash Equilibrium
Games of Incomplete Information: Bayesian Nash Equilibrium
The Possibility of Mistakes: Trembling-Hand Perfection
Appendix: Existence of Nash Equilibrium
Dynamic Games
Sequential Rationality, Backwards Induction, and Subgame Perfection
Sequential Rationality and Out-of-Equilibrium Beliefs
Reasonable Beliefs, Forward Induction, and Normal Form Refinements
Finite and Infinite Horizon Bilateral Bargaining
Extensive Form Trembling-Hand Perfection
Market Equilibrium And Market Failure
Introduction to Part III
Competitive Markets
Pareto Optimality and Competitive Equilibria
Partial Equilibrium Competitive Analysis
The Fundamental Welfare Theorems in a Partial Equilibrium Context
Welfare Analysis in the Partial Equilibrium Model
Free-Entry and Long-Run Competitive Equilibria
Concluding Remarks on Partial Equilibrium Analysis
Externalities and Public Goods
A Simple Bilateral Externality
Public Goods
Multilateral Externalities
Private Information and Second-Best Solutions
Appendix: Non-Convexities and the Theory of Externalities
Market Power
Monopoly Pricing
Static Models of Oligopoly
Repeated Interaction
The Competitive Limit
Strategic Precommitments to Affect Future Competition
Infinitely Repeated Games and the Folk Theorem
Strategic Entry Deterrence and Accommodation
Adverse Selection, Signalling, and Screening
Informational Asymmetries and Adverse Selection
Appendix: Reasonable-Beliefs Refinements in Signalling Games
The Principal-Agent Problem
Hidden Actions (Moral Hazard)
Hidden Information (and Monopolistic Screening)
Hidden Actions and Hidden Information: Hybrid Models
Multiple Effort Levels in the Hidden Action Model
A Formal Solution of the Principal-Agent Problem with Hidden Information
General Equilibrium
Introduction to Part IV
General Equilibrium Theory: Some Examples
Pure Exchange: The Edgeworth Box
The One Consumer-One Producer Economy
The 2x2 Production Model
General versus Partial Equilibrium Theory
Equilibrium and Its Basic Welfare Properties
The Basic Model and Definitions
The First Fundamental Theorem of Welfare Economics
The Second Fundamental Theorem of Welfare Economics
Pareto Optimality and Social Welfare Optima
First-Order Conditions for Pareto Optimality
Some Applications
Appendix: Technical Properties of the Set of Feasible Allocations
The Positive Theory of Equilibrium
Equilibrium: Definitions and Basic Equations
Existence of Walrasian Equilibrium
Local Uniqueness and the Index Theorem
Anything Goes: The Sonnenschein-Mantel-Debreu Theorem
Uniqueness of Equilibria
Comparative Statics Analysis
Tatonnement Stability
Large Economies and Non-Convexities
Characterizing Equilibrium through Welfare Equations
A General Approach to the Existence of Walrasian Equilibrium
Some Foundations for Competitive Equilibria
Core and Equilibria
Non-Cooperative Foundations of Walrasian Equilibria
The Limits to Redistribution
Equilibrium and the Marginal Productivity Principle
Appendix: Cooperative Game Theory
General Equilibrium under Uncertainty
A Market Economy with Contingent Commodities: Description
Arrow-Debreu Equilibrium
Sequential Trade
Asset Markets
Incomplete Markets
Firm Behavior in General Equilibrium Models under Uncertainty
Imperfect Information
Equilibrium and Time
Intertemporal Utility
Intertemporal Production and Efficiency
Equilibrium: The One-Consumer Case
Stationary Programs, Interest Rates, and Golden Rules
Equilibrium: Several Consumers
Overlapping Generations
Remarks on Non-Equilibrium Dynamics: Tatonnement and Learning
Welfare Economics And Incentives
Introduction to Part V
Social Choice Theory
A Special Case: Social Preferences over Two Alternatives
The General Case: Arrow's Impossibility Theorem
Some Possibility Results: Restricted Domains
Social Choice Functions
Elements of Welfare Economics and Axiomatic Bargaining
Utility Possibility Sets
Social Welfare Functions and Social Optima
Invariance Properties of Social Welfare Functions
The Axiomatic Bargaining Approach
Coalitional Bargaining: The Shapley Value
Incentives and Mechanism Design
The Mechanism Design Problem
Dominant Strategy Implementation
Bayesian Implementation
Participation Constraints
Optimal Bayesian Mechanisms
Implementation and Multiple Equilibria
Implementation in Environments with Complete Information
Mathematical Appendix
Homogeneous Functions and Euler's Formula
Concave and Quasiconcave Functions
Matrices: Negative (Semi)Definiteness and Other Properties
The Implicit Function Theorem
Continuous Functions and Compact Sets
Convex Sets and Separating Hyperplanes
Fixed Point Theorems
Unconstrained Maximization
Constrained Maximization
The Envelope Theorem
Linear Programming
Dynamic Programming
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