PREFACE PART 1: ECONOMIC AGENTS CHAPTER 1: CONSUMER THEORY 1.1 Primitive Notions 1.2 Preferences and Utility 1.2.1 Preference Relations 1.2.2 The Utility Function 1.3 The Consumers Problem 1.4 Indirect Utility and Expenditure 1.4.1 The Indirect Utility Function 1.4.2 The Expenditure Function 1.4.3 Relations Between the Two 1.5 Properties of Consumer Demand 1.5.1 Relative Prices and Real Income 1.5.2 Income and Substitution Effects 1.5.3 Some Elasticity Relations 1.6 Exercises CHAPTER 2: TOPICS IN CONSUMER THEORY 2.1 Duality: A Closer Look 2.1.1 Expenditure and Consumer Preferences 2.1.2 Convexity and Monotonicity 2.1.3 Indirect Utility and Consumer Preferences 2.2 Integrability 2.3 Revealed Preference 2.4 Uncertainty 2.4.1 Preferences 2.4.2 Von Neumann-Morgenstern Utility 2.4.3 Risk Aversion 2.5 Exercises CHAPTER 3: THEORY OF THE FIRM 3.1 Primitive Notions 3.2 Production 3.2.1 Returns to Scale and Varying Proportions 3.3 Cost 3.4 Duality in Production 3.5 The Competitive Firm 3.5.1 Profit Maximisation 3.5.2 The Profit Function 3.6 Exercises PART 2: MARKETS AND WELFARE CHAPTER 4: PARTIAL EQUALIBRIUM 4.1 Perfect Competition 4.2 Imperfect Competition 4.2.1 Cournot Oligopoly 4.2.2 Bertrand Oligopoly 4.2.3 Monopolistic Competition 4.3 Equilibrium and Welfare 4.3.1 Price and Individual Welfare 4.3.2 Efficiency of the Competitive Outcome 4.3.3 Efficiency and Total Surplus Maximisation 4.4 Exercises CHAPTER 5: GENERAL EQUALIBRIUM 5.1 Equilibrium in Exchange 5.2 Equilibrium in Competitive Market Systems 5.2.1 Existence of Equilibrium 5.2.2 Efficiency 5.3 Equilibrium in Production 5.3.1 Producers 5.3.2 Consumers 5.3.3 Equilibrium 5.3.4 Welfare 5.4 Contingent Plans 5.4.1 Time 5.4.2 Uncertainty 5.4.3 Walrasian Equilibrium with Contingent Commodities 5.5 Core and Equilibria 5.5.1 Replica Economies 5.6 Exercises CHAPTER 6: SOCIAL CHOICE AND WELFARE 6.1 The Nature of the Problem 6.2 Social Choice and Arrows Theorem 6.2.1 A Diagrammatic Proof 6.3 Measurability, Comparability, and Some Possibilities 6.3.1 The Rawlsian Form 6.3.2 The Utilitarian Form 6.3.3 Flexible Forms 6.4 Justice 6.5 Social Choice and the Gibbard-Satterthwaite Theorem 6.6 Exercises PART 3: STRATEGIC BEHAVIOUR CHAPTER 7: GAME THEORY 7.1 Strategic Decision Making 7.2 Strategic Form Games 7.2.1 Dominant Strategies 7.2.2 Nash Equilibrium 7.2.3 Incomplete Information 7.3 Extensive Form Games 7.3.1 Game Trees: A Diagrammatic Representation 7.3.2 An Informal Analysis of Take-Away 7.3.3 Extensive Form Game Strategies 7.3.4 Strategies and Payoffs 7.3.5 Games of Perfect Information and Backward Induction Strategies 7.3.6 Games of Imperfect Information and Subgame Perfect Equilibrium 7.3.7 Sequential Equilibrium 7.4 Exercises CHAPTER 8: INFORMATION ECONOMICS 8.1 Adverse Selection 8.1.1 Information and the Efficiency of Market Outcomes 8.1.2 Signalling 8.1.3 Screening 8.2 Moral Hazard and the Principal-Agent Problem 8.2.1 Symmetric Information 8.2.2 Asymmetric Information 8.3 Information and Market Performance 8.4 Exercises CHAPTER 9: AUCTIONS AND MECHANISM DESIGN 9.1 The Four Standard Auctions 9.2 The Independent Private Values Model 9.2.1 Bidding Behaviour in a First-Price, Sealed-Bid Auction 9.2.2 Bidding Behaviour in a Dutch Auction 9.2.3 Bidding Behaviour in a Second-Price, Sealed-Bid Auction 9.2.4 Bidding Behaviour in an English Auction 9.2.5 Revenue Comparisons 9.3 The Revenue Equivalence Theorem 9.3.1 Incentive-Compatible Direct Selling Mechanisms: A Characterisation 9.3.2 Efficiency 9.4 Designing a Revenue Maximising Mechanism 9.4.1 The Revelation Principle 9.4.2 Individual Rationality 9.4.3 An Optimal Selling Mechanism 9.4.4 A Closer Look at the Optimal Selling Mechanism 9.4.5 Efficiency, Symmetry, and Comparison to the Four Standard Auctions 9.5 Designing Allocatively Efficient Mechanisms 9.5.1 Quasi-Linear Utility and Private Values 9.5.2 Ex Post Pareto Efficiency 9.5.3 Direct Mechanisms, Incentive Comparability and the Revelation Principle 9.5.4 The Vickery-Clarke-Groves Mechanism 9.5.5 Achieving a Balanced Budget: Expected Externality Mechanisms 9.5.6 Property Rights, Outside Options, and Individual Rationality Contraints 9.5.7 The IR-VCG Mechanism: Sufficiency of Expected Surplus 9.6 Exercises MATHEMATICAL APPENDICES CHAPTER A1: SETS AND MAPPINGS A1.1 Elements of Logic A1.1.1 Necessity and Sufficiency A1.1.2 Theorems and Proofs A1.2 Elements of Set Theory A1.2.1 Notation and Basic Concepts A1.2.2 Convex Sets A1.2.3 Relations and Functions A1.3 A Little Topology A1.3.1 Continuity A1.3.2 Some Existence Theorems A1.4 Real-Valued Functions A1.4.1 Related Sets A1.4.2 Concave Functions A1.4.3 Quasiconcave Functions A1.4.4 Convex and Quasiconvex Functions A1.5 Exercises CHAPTER A2: CALCULUS AND OPTIMISATION A2.1 Calculus A2.1.1 Functions of a Single Variable A2.1.2 Functions of Several Variables A2.1.3 Homogeneous Functions A2.2 Optimisation A2.2.1 Real-Valued Functions of Several Variables A2.2.2 Second-Order Conditions A2.3 Constrained Optimisation A2.3.1 Equality Constraints A2.3.2 Lagranges Method A2.3.3 Geometric Interpretation A2.3.4 Second-Order Conditions A2.3.5 Inequality Constraints A2.3.6 Kuhn-Tucker Conditions A2.4 Optimality Theorems A2.5 Separation Theorems A2.6 Exercises LIST OF THEOREMS LIST OF DEFINITIONS HINTS AND ANSWERS REFERENCES INDEX