General Equilibrium
Jihong Lee1
Thinking about the Macro-Economy
I
Partial equilibrium
The models studied so far were about price formation in a
single market assuming the rest of the economy is not
affected.
I
General equilibrium
The economy consists of
Econ 1011A: Section 10 Notes1
TA: Zhenyu Lai (zlai@fas.harvard.edu), 11/17/2011
Nash Equilibrium
Subgame Perfect Nash Equilibrium
1. Finding all Pure and Mixed Nash equilibria
In lecture, we subtly covered a number of concepts. I will describe them in wor
Expected Utility Theory
Jihong Lee1
1 SNU
Choice under Uncertainty
Example (Gary Becker)
He was running late for an exam. He had two options:
(a) put the car in the parking lot and be late
(b) illegally park on the street and risk getting a ticket.
How di
Welfare
Jihong Lee1
Pareto Efficiency
I
Given an initial allocation of goods, a change to a
different allocation that makes at least one individual
better off without making any other worse off is called a
Pareto improvement.
I
An allocation is Pareto eff
General Equilibrium
Jihong Lee1
Thinking about the Macro-Economy
I
Partial equilibrium
The models studied so far were about price formation in a
single market assuming the rest of the economy is not
affected.
I
General equilibrium
The economy consists of
Game Theory
Jihong Lee1
From a single person decision to a game
Steve Ballmers interview question:
I
5 guesses at a number chosen between 1-100 randomly
My game:
I
5 guesses at a number between 1-100 that I chose
Payoff matrix of a game
Prisoner 1 Coopera
Introduction to Probability
Kim, Jae-Young
Seoul National University
Spring 2016
Kim, Jae-Young (SNU Econ)
Introduction to Probability
Spring 2016
1 / 21
Outline
1
Introduction
2
Some Limit Concepts of Probability
3
Conditional Probability and Independenc
2. Random Variables, Distribution Functions, and
Expectation
Kim, Jae-Young
Seoul National University
Spring 2016
Kim, Jae-Young (SNU Econ)
2. Random Variables, Distribution Functions, and Expectation
Spring 2016
1 / 33
Outline
1
Random Variables
2
Probab
Strategic Models of Resource Allocation
Jihong Lee1
Building from First Principles
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Why do we want to know decision theory and game
theory?
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An important objective of economics is to gain
understanding of how scarce resources are allocated.
I
Economic t
Revealed Preference
35
Revealed Preference
A. Motivation
1. up until now weve started with preference and then described
behavior
2. revealed preference is working backwards start with
behavior and describe preferences
3. recovering preferences how to use
Utility Theory
Jihong Lee1
1 SNU
Preferences
I
Modeling individual choice behavior by taking preferences
as the primitive characteristics.
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Axiomatic approach
start with some assumptions (first principles) about the
preferences and derive its consequence