Microeconomics_4__Besanko

Microeconomics_4__Besanko


DisciplinaMicroeconomia I7.614 materiais206.230 seguidores
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541
Why Are the Cournot and Bertrand Equilibria 
Different? 543
The Stackelberg Model of Oligopoly 544
13.3 Dominant Firm Markets 546
13.4 Oligopoly with Horizontally Differentiated
Products 549
What Is Product Differentiation? 549
Bertrand Price Competition with Horizontally
Differentiated Products 553
13.5 Monopolistic Competition 558
Short-Run and Long-Run Equilibrium in Monopolistically
Competitive Markets 558
Price Elasticity of Demand, Margins, and Number of Firms
in the Market 560
Do Prices Fall When More Firms Enter? 560
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xxii CONTENTS
APPENDIX The Cournot Equilibrium and the Inverse 
Elasticity Pricing Rule 570
LEARNING-BY-DOING EXERCISES
13.1 Computing a Cournot Equilibrium 536
13.2 Computing the Cournot Equilibrium for Two or 
More Firms with Linear Demand 540
13.3 Computing the Equilibrium in the Dominant Firm
Model 548
13.4 Computing a Bertrand Equilibrium with Horizontally
Differentiated Products 556
CHAPTER 14 Game Theory and Strategic
Behavior 571
What\u2019s in a Game?
14.1 The Concept of Nash Equilibrium 573
A Simple Game 573
The Nash Equilibrium 574
The Prisoners\u2019 Dilemma 574
Dominant and Dominated Strategies 575
Games with More Than One Nash Equilibrium 579
Mixed Strategies 583
Summary: How to Find All the Nash Equilibria in a
Simultaneous-Move Game with Two Players 584
14.2 The Repeated Prisoners\u2019 Dilemma 584
14.3 Sequential-Move Games and Strategic 
Moves 590
Analyzing Sequential-Move Games 590
The Strategic Value of Limiting One\u2019s Options 593
LEARNING-BY-DOING EXERCISES
14.1 Finding the Nash Equilibrium: Coke versus Pepsi 578
14.2 Finding All of the Nash Equilibria in a Game 582
14.3 An Entry Game 592
PART 7 SPECIAL TOPICS
CHAPTER 15 Risk and Information 604
What Are My Chances of Winning?
15.1 Describing Risky Outcomes 606
Lotteries and Probabilities 606
Expected Value 608
Variance 608
15.2 Evaluating Risky Outcomes 611
Utility Functions and Risk Preferences 611
Risk-Neutral and Risk-Loving Preferences 614
15.3 Bearing and Eliminating Risk 617
Risk Premium 617
When Would a Risk-Averse Person Choose to Eliminate
Risk? The Demand for Insurance 620
Asymmetric Information in Insurance Markets: Moral
Hazard and Adverse Selection 622
15.4 Analyzing Risky Decisions 627
Decision Tree Basics 627
Decision Trees with a Sequence of Decisions 629
The Value of Information 631
15.5 Auctions 633
Types of Auctions and Bidding Environments 634
Auctions When Bidders Have Private Values 635
Auctions When Bidders Have Common Values: 
The Winner\u2019s Curse 639
LEARNING-BY-DOING EXERCISES
15.1 Computing the Expected Utility for Two Lotteries 
for a Risk-Averse Decision Maker 614
15.2 Computing the Expected Utility for Two Lotteries:
Risk-Neutral and Risk-Loving Decision Makers 616
15.3 Computing the Risk Premium from a Utility 
Function 620
15.4 The Willingness to Pay for Insurance 621
15.5 Verifying the Nash Equilibrium in a First-Price 
Sealed-Bid Auction with Private Values 636
CHAPTER 16 General Equilibrium Theory 648
How Do Gasoline Taxes Affect the Economy?
16.1 General Equilibrium Analysis: Two Markets 650
16.2 General Equilibrium Analysis: Many 
Markets 654
The Origins of Supply and Demand in a Simple 
Economy 654
The General Equilibrium in Our Simple Economy 660
Walras\u2019 Law 664
16.3 General Equilibrium Analysis: Comparative
Statics 665
16.4 The Efficiency of Competitive Markets 669
What Is Economic Efficiency? 669
Exchange Efficiency 670
Input Efficiency 676
Substitution Efficiency 678
Pulling the Analysis Together: The Fundamental Theorems
of Welfare Economics 681
16.5 Gains from Free Trade 682
Free Trade Is Mutually Beneficial 682
Comparative Advantage 686
APPENDIX Deriving the Demand and Supply Curves
for General Equilibrium in Figure 16.9 and Learning-
by-Doing Exercise 16.2 692
LEARNING-BY-DOING EXERCISES
16.1 Finding the Prices at a General Equilibrium with 
Two Markets 654
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CONTENTS xxiii
16.2 Finding the Conditions for a General Equilibrium 
with Four Markets 663
16.3 Checking the Conditions for Exchange 
Efficiency 674
CHAPTER 17 Externalities and Public Goods 697
When Does the Invisible Hand Fail?
17.1 Introduction 699
17.2 Externalities 700
Negative Externalities and Economic Efficiency 702
Positive Externalities and Economic Efficiency 711
Property Rights and the Coase Theorem 716
17.3 Public Goods 719
Efficient Provision of a Public Good 720
The Free Rider Problem 722
LEARNING-BY-DOING EXERCISES
17.1 The Efficient Amount of Pollution 704
17.2 Emissions Fee 707
17.3 The Coase Theorem 717
17.4 Optimal Provision of a Public Good 721
Mathematical Appendix 729
Solutions to Selected Problems 749
Glossary 771
Photo Credits 781
Index 783
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1
1.1
WHY STUDY MICROECONOMICS?
1.2
THREE KEY ANALYTICAL TOOLS
1.3
POSITIVE AND NORMATIVE ANALYSIS
APPLICATION 1.1 Generating Electricity: 8,760
Decisions per Year
APPLICATION 1.2 The Toughest Ticket in Sports
ANALYZING ECONOMIC
PROBLEMS
1.1 WHY STUDY MICROECONOMICS?
1
APPLICATION 1.3 Positive and Normative
Analyses of the Minimum Wage
Microeconomics and Climate Change
By the late 2000s, the scientific consensus had formed: climate change is for real, and it cannot be 
explained entirely by natural forces:
\u2022 There is compelling scientific evidence that concentrations of greenhouse gasses\u2014compounds such as
carbon dioxide and methane whose properties work to warm surface temperatures on the Earth\u2014
have accumulated to levels substantially higher than those that prevailed at any time during the last
500,000 years.
\u2022 There is strong evidence that the climate is warming. According to the Fourth Assessment of the
Intergovernmental Panel on Climate Change (IPCC) issued in 2007\u2014the best representation of the 
scientific consensus on climate change\u2014\u201cWarming of the climate system is unequivocal, as is now 
evident from observations of increases in global average air and ocean temperatures, widespread
melting of snow and ice, and rising global average sea level.\u201d1
1\u201cSummary for Policymakers\u201d in Climate Change 2007: The Physical Science Basis. Contributions of Working
Group I to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, S. Soloman, 
D. Qin, M. Manning, Z. Chen, M. Marquis, K. B. Avery, M. Tignor, and H. L. Mikllers (eds.) (Cambridge:
Cambridge University Press 2007), p. 5. http://www.ipcc.ch/ipccreports/ar4-wg1.htm (accessed April 3,
2009).
c01analyzingeconomicproblems.qxd 7/14/10 10:54 AM Page 1
2
\u2022 There is persuasive evidence that climate change
has been induced, in part, by humans. According
to the IPCC: \u201cThe common conclusion of a wide
range of fingerprint studies conducted over the
last 15 years is that observed climate changes cannot
be explained by natural factors alone.\u201d2
But if the diagnosis of climate change is un-
equivocal, what to do about it is less obvious.
Greenhouse gas emissions come from power plants,
factories, and automobiles all over the world. The
number of pollution sources that potentially need to
be controlled is mind-boggling. And large countries such as China and the United States, the two coun-
tries accounting for the largest share of greenhouse gas emissions, might balk at the enormous price
tag associated with curtailing their emissions. In light of these issues, the challenge of combating
global climate change would appear to be insurmountable.
Microeconomics offers powerful insights into why climate change is such a difficult problem and
what to do about it. Climate change is a tough problem to deal with because the parties