profit maximization Contain: Some definition -Isoprofit curve -Demand function and it's properties supply function and it's properties -Profit function and it's properties lecture 2 for Chu Kechen Honors College

• Perfect Bayesian Equilibrium • Signaling Games • Applications – Job market signaling game – Cheap talk game – Investment financing – Wage bargaining – Reputation and cooperation

Content Lotteries and expected utility Risk aversion Metric Subjective probability theory

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

The Concept of Investment For a one period investment, the ROR can be evaluated each year. For investments that generate returns in many periods, there are two ways of describing the rate of return

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

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

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

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

Structure Definition When to provide a public good – Efficient provision – Private provision: free-riding Variable quantities of public good – Efficient amount – Free-riding problem How to provide public goods? Demand revelation