Structure Definition Consumption externality Production externality The tragedy of commons

Now Add Production ... Add input markets, output markets, describe firms’ technologies, the distributions of firms’ outputs and profits … That’s not easy!

Contents The Edgeworth (艾奇沃斯) Box Pareto improving trade Pareto Efficient Allocation The Core (核心) Trade in a competitive market Walras’ Law of general equilibrium (一般均衡)

Contents Dominant strategy Nash equilibrium Prisoner’s dilemma and repeated games Multiple equilibria and sequential games Pure and mixed strategies

Structure Non-collusive moves – Simultaneous moves Quantity competition –Cournot model Price competition – Bertrand model – Sequential moves Quantity leadership – Stakelberg model Price leadership Collusion

How Should a Monopoly Price? So far a monopoly has been thought of as a firm which has to sell its product at the same price to every customer. This is uniform pricing. Can price-discrimination （差别定价 ）earn a monopoly higher profits?

Structure What causes monopoly Profit-maximizing choices of monopoly Markup pricing Taxing a monopoly Inefficiency of monopoly Natural monopoly (自然垄断)

Structure Market supply Short-run supply and equilibrium Long-run supply and equilibrium Long-run implications for taxation Fixed inputs and economic rent (经济租金)

Structure Market environments Market demand for a competitive firm Short-run supply decision Upward sloping MC curve Shut-down condition Long-run supply decision Comparing long-run and short-rundecisions. Producer’s surplus and profits

Structure Types of cost curves – Fixed, variable and total cost functions – Average fixed, average variable and average cost functions Marginal cost functions Marginal and variable cost functions Marginal and average cost functions Short run and long run cost curves