Microeconomics II (310-B-62)
Instructors
James Andrew Hornsten
847/491-8220
I'm a microeconomist interested in intellectual property, clever pricing schemes, corporate boards of directors, regulatory issues, and the myriad ways businesses compete for customers. I commute year-round from Skokie on a folding bike and always wear my helmet (while biking). Technically, I've worked as a professional actor, mover, dance instructor, book reviewer, custodian, and screen printer (but my experience in each is VERY limited). As a Northwestern graduate student, I camped out for tickets and saw the Wildcats play in the 1996 Rose Bowl. In the next year, I aspire to try a lot of new restaurants, bicycle 3000 miles, finish some dated (but still unopened) computer games, learn to juggle, watch the Vikings win the Super Bowl, and eat properly-made s'mores around a campfire while watching a good meteor shower on a clear night out in the boondocks with my wife and two sons.
Meeting Info
University Hall 101: Wed 6:15PM - 9:15PM
Overview of class
This course uses mathematical models to analyze the behavior of optimizing (but constrained!) consumers and producers in market economies, thereby providing insights regarding the fundamental inner workings of markets. Given a spectrum of competition defined by perfect competition and monopoly at the ends, we will fill in the middle by exploring oligopoly, which requires an understanding of game theory, both static and dynamic. We will also explore advanced pricing methods, insurance (and decisions under uncertainty), asymmetric information (moral hazard and adverse selection), general equilibrium, and some behavioral and experimental economics. ECON 310-B is a course primarily for economics majors, so it will emphasize the development and application of economic theory.
Registration Requirements
Prerequisite: ECON 310-A.
Learning Objectives
During this course you will use three basic tools of economic analysis (equilibrium, constrained optimization, and comparative statics) to model and analyze a variety of economic problems. After completing this course you will be able to:
Given demand and cost conditions, determine the revenue-maximizing pricing approach (e.g., first-, second-, or third-degree price discrimination or bundling) for a monopolist.
Compute Nash Equilibria in static games and determine an oligopolistic firm's optimal choice of a strategic variable (e.g., Bertrand price or Cournot capacity).
Find Subgame Perfect Nash Equilibria in dynamic games, identify non-credible threats, and assess first-mover (dis)advantages.
Use expected utility to explain the demand for insurance by risk-averse consumers and to prescribe how to make decisions under uncertainty; also, to explain the impact of asymmetric information (e.g., moral hazard and adverse selection) on markets.
Use general equilibrium tools to analyze how a shock impacts multiple markets, how resource allocation affects exchange in consumer economies, and how production economies function.
Class Materials (Required)
Materials may include the following. Confirm course texts and materials by contacting instructor or viewing course Canvas site or University bookstore website.
Recommended:
Access to a recent edition of the "B&B" textbook:
David Besanko and Ronald R. Braeutigam (2014) Microeconomics, 5thedition, John Wiley & Sons, ISBN 978-1-118-57227-6, wiley.com/college/besanko (a 4thedition is a good substitute)
We may also use bits and pieces of the following well-known books:
Austan Goolsbee, Steven Levitt, and Chad Syverson (2016) Microeconomics, 2ndedition, Macmillan, ISBN 978-1-319-04566-1
Jeffrey Perloff (2017) Microeconomics: Theory and Applications with Calculus, 4thedition, Pearson, ISBN 978-0-13-416738-1
Douglas Bernheim and Michael Whinston (2014) Microeconomics, 2ndedition, McGraw Hill Irwin, ISBN 978-0-07-337585-4
Hal Varian (2014) Intermediate Microeconomics, 9thedition, Norton, ISBN 978-0-393-91967-7
All of these books are reasonable substitutes, and they tend not to change substantially, so if you choose to obtain a book, seek a current or recent edition of any of these. I will occasionally post additional readings (e.g., recent articles from the business press) on Canvas. Because you will often need to draw graphs, you should obtain a straight edge (6 inches is sufficient) and perhaps multi-color pens. You may not use calculators or other electronic devices on exams.