PREFACE
PART I
ECONOMIC AGENTS

CHAPTER 1 CONSUMER THEORY
1.1 Primitive Notions
1.2 Preferences and Utility
1.2.1 Preference Relations
1.2.2 The Utility Function
1.3 The Consumer's Problem
1.4 lndirect Utility and Expendture
1.4.1 The Indirect Utility Function
1.4.2 The Expenditure Function
1.4.3 Relations Between the Two
1.5 Properties of Consumer Demand
1.5.1 Relative Prices and Real Income
1.5.2 Income and Substitution Effects
1.5.3 Some Elasticity Relations
1.6 Exercises

CHAPTER 2 TOPICS IN CONSUMER THEORY
2.1 Duaity: A Closer Look
2.1.1 Expendirure and Consumer Preferences
2.1.2 Convexity and Monotonicicy
2.1.3 lndirect Utiliy and Consumer Preferences
2.2 Infegrability
2.3 Revealed Preference
2.4 Uncertainty
2.4.1 Preferences
2.4.2 Von Neumann-Morgenstern Utility
2.4.3 Risk Aversion
2.5 Exercises

CHAPTER 3 THEORY OF THE FIRM
3.1 Primitive Notions
3.2 Production
3.2. 1 Returns to Scale and Varying Proportions
3.3 Cost
3.4 Duality in Production
3.5 The Competitive Firm
3.5.1 Profit Maximization
3.5.2 The Profit Function
3.6 Exercises

PART II
MARKETS AND WELFARE

CHAPTER 4 PARTIAL EQUIUBRIUM
4.1 Perfect Compehtion
4.2 Imperfect Competition
4.2.1 Cournot Oligopoly
4.2.2 Bertt'and Oligopoly
4.2.3 Monopolistic Compelition
4.3 Equilibrium and Welfare
4.3.1 Price and IndivivaI Well are
4.3.2 Efficiencv of lhe Coinpetitive Outcome
4.3.3 Efficienc' and Total Surpius Maximization
4.4 Exercises

CHAPTER 5 GENERAL EQUILIBRIUM
5.1 Equilibrium in Exchange
5.2 Equilibrium in Competitive Market
Systems
5.2.1 Existcnce ofEquilihrium
5.2.2 Efficiency
5.3 Equilibrium in Production
.3. 1 Producers
5.3.2 Consumers
5.3.3 Equilibrium
5.3.4 Welfare
5.4 Core and Equilibria
5.4.1 Replica heonoInft':
5.5 Exercises

CHAPTER 6 SOCIAL CHOICE AND WELFARE
6.1 The Nature of the Problem
6.2 Social Choice and Arrow's Theorem
6.2.1 A Diagrammatic proof
6.3 Measurability, Comparability, and Some
Possibilities
6.3.1 The Rawlsian Form
6.3.2 The Utilitarian Form
6.3.3 Flexible Forms
6.4 Justice
6.5 Exercises

PART III
STRATEGIC BEHAVIOR

CHAPTER 7 GAME THEORY
7.1 Strategic Decision Making
7.2 Strategic Form Games
7.2.1 Dorninant Strategies
7.2.2 Nash Equilibrium
7.2.3 Incomplete Information
7.3 Extensive Form Games
7.3.1 Game Trees: A Diagramrnatic
Representation
7.3.2 An Informal Analysis of Take-Away
7.3.3 Extensive Form Game Strategies
7.3.4 Strategies and Payoffs
7.3.5 Games of Perfect Information and Backward
Induction Strategies
7.3.6 Games of lmperfect Information and Subgame
Perfect Equilibrium
7.3.7 Sequential Equilibrium
7.4 Exercises

CHAPTER 8 INFORMATION ECONOMICS
8.1 Adverse Selection
8. 1.1 Information and the Efficiency of Market
Outcomes
8.! .2 Signaling
81.3 Screening
8.2 Moral Hazard and the Principal
Agent Probiem
8.2.1 Symmetric Information
8.2.2 Asymmetric Information
8.3 Information and Market Performance
8.4 Exercises

CHAPTER 9 AUCTIONS AND MECHÂNISM DESIGN
9.1 The Four Standard Auctions
9.2 The Independent Private Values Model
9,2. 1 Bidding Behavior in a First-Price. Sealed-Bid Auction
9.2.2 Bidding Behavior in a Dutch Auction
9.2.3 Bidding Behavior in a Sccond-Price. Scalcd-Bid Auction
9.2.4 Bidding Behavior in an English Auction
9.2.5 Revenue Comparisons
9.3 The Revenue Equivalence Theorem
9.3.1 Incentive-Compatible Direct Selling Mechanisnis
9.3.2 Efficiency
9.4 Revenue-Maximization: An Application of Mechanism Design
9.4.1 Individual Rationality
9.4.2 An Optimal Sclling Mechanism
9.4.3 A Cioser Look at the Optimal Selling Mechanisni
9.4.4 Efficiency, Syrnnietry, and Comparison to the Four Standard Auctions
9.5 Exercises

MATHEMATICAL APPENDIX
CHAPTER A1 SETS AND MAPPINGS
A 1. 1 Elements of Logic
A 1.1. 1 Necessity and Sufficiency
Ai. 1.2 Theoreins and Proofs
Ai .2 Elements of Set Theory
A1.2.1 Notation and Basic Concepts
A 1. 2.2 Convex Sets
A1.2.3 Relations and Functions
A1.3 ALiltieTopology
Al.3.1 Continuity
AI .3.2 Some Existence Theorems
A1.4 Real-Valued Functions
A1.4.1 Related Sets
A1.4.2 Concave Functions
A 1.4.3 Quasiconcave Functions
Ai .4.4 Convex and Quasiconvex Functions
A1.5 Exercises

CHAPTER A2 CALCULUS AND OPTIMIZATION
A2.1 Cokulus
A2.1.1 Functions of a Single Variable
A2.1.2 Functions of Severa] Variables
A2.1.3 Homogeneous Functions
A2.2 Optimization
A2.2.1 Real-Va!ued Functions of Severa! Variables
A2.2.2 SecondOrder Conditions
A2.3 Constroined Optimizcition
A2.3.1 Equality Constraints
A2.3.2 Lagrange's Method
A2.3.3 Geometric Interpretation
A2.3.4 Second-Order Conditions
A2.3.5 Inequality Constraints
A2.3.6 Kuhn-Tucker Conditions
Â2.4 Value Functions
A2.5 Exercises
LIST OF THEOREMS
UST OF DEFINITIONS
HINTS AND ANSWERS
REFERENCES
INDEX