Information in Competitive Markets In purely competitive markets all agents are fully informed about traded commodities and other aspects of the market. What about markets for medical services, or insurance, or used cars?

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)

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

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 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 The cost minimization problem Average costs Returns to scale and total and average costs Short run and long run costs

OTHER GOOD Rebating a Consumption tax based on inder RTP initial consumption RTP budget constraint Baseline

Quasi-linear Indifference preferences curves Final budget line Original budget Pivot Substitution effect=total effect