EC201 Class 9
Margaret Bray
LSE, 2015
You have three things to do in preparation for class 9.
Prepare test questions and complete a quiz on taxation and monopoly.
Hand in one long exam question on perfect competition.
Prepare a discussion on the impositio
EC201 Class 4
Margaret Bray, LSE
1
Deadlines
For classes Monday October 26th Friday October 30th
Class Quiz deadline: 12 noon the day before the class.
2
Topics and reading
1.4
Price changes and welfare
Price indices
Substitution bias
Compensating variati
International Economics
KOM Chapter 2
The Gravity Model
Swati Dhingra
Background Readings
K. Head (2007) Elements of Multinational
Strategy, Springer, Ch.4
World Bank (2009) Reshaping economic
geography, World Development Report
2009
World Trade Organizat
Ch.
17
Monopolistic Competition
We already mentioned that markets have some features of
competition and some features of monopoly, i.e., imperfect
competition. In this chapter we shall move away from
monopoly and oligopoly, moving closer to competitive
ma
Ch.
18
The Markets for the Factors of Production
Factors of production are the inputs used to produce goods
and services. In economics, the three most important
factors of production are labor, land, and capital.
The demand for a factor of production is
a
Chapter 1
Introduction
TRUE/FALSE
Answer: F
Diff: 2
1. All natural resources are nonrenewable.
Answer: T
Diff: 2
2. Economics is similar to other social science disciplines in that it examines individual and
social behavior.
Answer: F
Diff: 3
3. Consumer
Ch.
4 The Market Forces of
Supply and Demand
A market is a group of buyers and sellers of a particular
good or service. Economists use the model of supply
and demand to analyze the competitive market.
A competitive market is a market in which there
are ma
Ch.
5
Elasticity and its Application
It is not difficult to imagine that the slopes of the demand curves of
different goods and services differ. Also, the slopes of the supply
curves of different goods and services could differ as well.
Elasticity is a me
Ch.
7
Consumers, Producers, and
the Efficiency of Markets
Buyers and sellers receive benefits from taking part and
interacting in markets. However, economists wish to
know whether the equilibrium price and quantity
maximize the total welfare of buyers and
Introduction to
Economics
Summer. 2012
@ -YY1
Ch.
1
Ten Principles of
Economics
Economics is the study of how society manages its
scarce resources.
Gregory Mankiw
Economics is a method rather than a doctrine, an
apparatus of the mind, a technique of think
Ch.
6 Supply, Demand and
Government
Policies
We now look at policy and their effect using the tools
of supply and demand. Specifically, we shall look at
policies that directly control prices, and the impact
of taxes.
In a free, unregulated market system,
Ch.
2 Thinking Like an
Economist
Is economics science or art? Both! As a science, it
involves observation, theory and prediction. A
major difference with the natural sciences,
however, is that economics deals with observation
rather than experimentation.
3 Interdependence and the
Gains from Trade
Let us illustrate the gains from trade by way of an example. Suppose ther
e are 2 students ( & ). Assume that both students work 1
6 hours a day. Further, assume that takes 4 hrs to produce one
Korean essay and 2
Le partage des donnes de sant pour rvolutionner le parcours des patients
MAJEURE AUDIT & CONSEIL EN SYSTMES DINFORMATION
Jeudi 12 Octobre 2016
Louis COLLINET
Lydia BEL HADJ AMOR
Mohamed Reda LAOUDIYI
Pablo PEPIN
Mehdi HAJRI
Les enjeux de la numrisation du
GAME THEORY Giacomo Bonanno
Thus there is no state (not even e) where a student knows that another student
knows that the third student knows that not all hats are white.
Let us now continue with the formal analysis of the story of the three hats. At
some
GAME THEORY Giacomo Bonanno
Let C be the simple lottery corresponding to the compound lottery
$5 million $0
$5 million
$0
u2
1 u2
Then
.
89
10
1
100
100
100
$0
$5 million
C = 89 10
.
89
10
100 + 100 u2 1 ( 100 + 100 u2 )
By the Independence Ax
GAME THEORY Giacomo Bonanno
(c) Plaintiffs strategies: (1) (sue; if offer settle; if resist drop), (2) (sue; if offer
settle; if resist go to trial), (3) (sue; if offer go to trial; if resist drop), (4) (sue;
if offer go to trial; if resist go to trial),
GAME THEORY Giacomo Bonanno
he gets a payoff of 2, while if he chooses play he gets a payoff of
3
1
1
2
5 (0) + 5 (2) + 5 (0) = 5 < 2 , so that pass is indeed the better choice. Thus we
have found the following weak sequential equilibrium (note, however,
GAME THEORY Giacomo Bonanno
Exercise 11.6. (Challenging Question).
A buyer and a seller are bargaining over an object owned by the seller. The
value of the object to the buyer is known to her but not to the seller. The
buyer is drawn randomly from a popul
GAME THEORY Giacomo Bonanno
If h and h are decision histories not assigned to chance, we write h I (h) as
a short-hand for h I ( h ) (h) . Thus h I (h) means that h and h belong to the
same information set (of the player who moves at h). If h is a history
GAME THEORY Giacomo Bonanno
Before we discuss the properties of weak sequential equilibria we illustrate the
type of reasoning that one needs to go through in order to find weak sequential
equilibria. Consider first the game of Figure 10.4.
Nature
1
4
1
1
References
Alchourrn, Carlos, Peter Grdenfors, and David Makinson. On the logic of theory change:
partial meet contraction and revision functions. Journal of Symbolic Logic, 1985, 50: 510
530.
Aumann, Robert. Agreeing to disagree, Annals of Statistics, 19
GAME THEORY Giacomo Bonanno
IND1 , since a b and be ae . On the other hand, the above plausibility order
satisfies Property IND2 since (1) ad ae and bd be and (2) aeg aef and
beg bef . Furthermore, satisfies Property IND3 : trivially, since a, be D+
but a
GAME THEORY Giacomo Bonanno
Exercise 13.3. (a) and (b.1):
Player 2
B
G (b1 , b2 ) :
H
B
20
20
20
0
H
0
20
0
0
Player 1
Nash equilibria: (H,B) and (B,H)
Player 2
B
G (b1 , not-b2 ) :
H
B
20
40
20
20
H
0
0
0
20
Player 1
Nash equilibrium: (B,H)
Player 2
B
G
GAME THEORY Giacomo Bonanno
1
c
1
0
2
b
a
2
d
3
s
f
0
0
0
e
u
t
g
f
g
f
0
0
1
0
1
0
2
0
1
2
0
1
g
0
1
0
Figure 11.1
Since Player 3s information set cfw_s,t,u is not reached by , Bayesian updating
imposes no restrictions on beliefs at that information set.
GAME THEORY Giacomo Bonanno
Exercise 10.3. The game under consideration is the following:
1
r
a
b
c
c
2
s
1
2
1
t
3
x
2
1
0
0
0
2
d
d
e
2
0
0
y
f
e
f
0
0
4
0
0
12
2
2.5
0
s t
a b r c d e f
=
The assessment =
,
1 1
3
2
1
2
2 2
0 0 1 5 5 3 3
sequentiall
GAME THEORY Giacomo Bonanno
1
a
2
x
f
z
1
0
3
0
g
z
4
6
4
2
f
z
0
3
0
3
2
c
s
b
d
y
w
g
z
4
1
0
1
t
e
3
z
h
k
h
z
z
z
5
3
1
3
6
1
3
1
k
7
0
2
0
z
8
1
1
1
Figure 10.9
x y w z
is a weak sequential
0 1 1 0
The assessment = ( b, ( f , e), h ) with =
equili
GAME THEORY Giacomo Bonanno
L W
n = 1 1
n n
E
1
n
R
1 3n
b
1
n
t
l
1
1 n 1 1n
r
1
n
x2
, n = n1
1+1 =
n n
.
1
=
2
1
1
n + n
x3
1
2
1
n
Clearly lim n n = and lim n n = .
x2 x3
Let = ( R, tr ), = 1
; this assessment is consistent as the following
1
2
2
Chapter
GAME THEORY Giacomo Bonanno
15
Incomplete Information:
The Type-Space Approach
15.1 Types of players
A
s noted in Chapter 13, the theory of games of incomplete
7
information was pioneered by John Harsanyi (1967-68). Harsanyis
approach was develope
GAME THEORY Giacomo Bonanno
Exercise 12.5. The game under consideration is:
1
a
b
2
2
0
1
d
c
3
e
e
f
f
1
1
1
3
g
3
0
2
h g
1
1
1
h
3
0
0
3
1
1
g
h
1
1
3
3
0
1
ac ad
1 0
acf
One perfect Bayesian equilibrium is
.
Let us first verify sequential rationality