Microeconomics II - Period 4

This is a course in Microeconomics aimed at the intermediate level. The course addresses the general (competitive) equilibrium. This includes a discussion of the concept of Pareto efficiency and the conditions under which efficiency can be reached. In this context social welfare is considered. The concept of Pareto efficiency is being compared to the concept of "fair" allocation. Externality and public good are reasons for missing markets and may cause Pareto efficiency to be violated. Monopoly is a market structure that leads to absence of Pareto efficiency in the equilbirium. Causes of monopoly, such as the natural monopoly, are considered. Monopolist can use their power to conduct specific pricing strategies such as price discrimination. An market structure in between competition and monopoly is monopolistic competition. Firms in such markets have market power, but free entry drives profits to zero in the long run. In oligopolistic markets strategic interactions play an important role. Examples of such interactions are the decision to cooperate or not, and to deter entry or not. Game theoretic methods provide insight in various aspects of the strategies. With the rise of information technology new forms emerged by which supplies offer their products. Some specific issues in these new markets are discussed. An auction is an allocation mechanism with various applications, among which is the auctioning of radio frequencies. In auctions strategy and game theoretic aspects play a role as well. Information is a very important aspect in the functioning of markets. Information asymmetry can lead to market failure, but also induce agents to find mechanisms to signal information and to find incentive payment schemes that function even if information is incomplete. The concept of revealed preference will be explained during the course.

Vrije Universiteit Amsterdam (VU Amsterdam) awards credits based on the ECTS system. Contact hours listed under a course description may vary due to the combination of lecture-based and independent work required for each course therefore, CEA?s recommended credits are based on the ECTS credits assigned by VU Amsterdam. 1 ECTS equals 28 contact hours assigned by VU Amsterdam.