Microeconomic Theory - II

Paper Code: 
24ECO 221
Credits: 
4
Contact Hours: 
60.00
Max. Marks: 
100.00
Objective: 
  1. To acquaint the students with the price and output determination of firms under monopoly, monopolistic competition and oligopoly markets, particularly the models like inter-temporal price discrimination, peak load pricing, two-part tariff and alternative theories of firms.
  2. To help students understand factor pricing determination under different market conditions and theories related to wage differential, collective bargaining and elasticity of factor demand.
  3. To help students to explain the attainment of Pareto optimality and problems in attainment of Pareto optimality.

 

Course Outcomes: 

Course

Learning outcome (at course level)

Learning and teaching strategies

Assessment Strategies 

Course Code

Course Title

24ECO 221

Microeconomic Theory –II

(Theory)

Students will-

CO37: determine the equilibrium under monopoly and monopolistic competition market.

CO38: determine the equilibrium under various models of oligopoly market.

CO39: examine and comprehend the alternative theories of firm and various related aspects

CO40: analyze the functioning of the factor markets and the determination of factor prices under perfect and imperfect competition

CO41: analyze various aspects of welfare economics.

CO42: contribute effectively in course-specific interaction.

Approach in teaching: Interactive Lectures, Discussion, Case studies.

 

Learning activities for the students:

Presentations, Assignments and Group discussions.

Class activity, Assignments, Quiz and Semester end examinations.

 

12.00
Unit I: 
Monopoly and Monopolistic competition
  • Monopoly: Short run and long run equilibrium
  • Price discrimination, Inter-temporal Price Discrimination, and Peak Load Pricing, Two part Tariff,
  • Welfare aspect of Monopoly, monopoly control and regulation
  • Bilateral Monopoly
  • Monopolistic competition: Equilibrium of the firm and the group
  • excess capacity under monopolistic competition.

 

 

12.00
Unit II: 
Oligopoly
  • Non-collusive models of Oligopoly: Cournot, Bertrand,Chamberlin, Paul M. Sweezy  and Stakelberg
  • Collusive oligopoly: Cartels and Price Leadership

 

12.00
Unit III: 
Alternative Theories of the Firm

·       Full cost pricing Rule-Hall & Hitch

·       Bain’s limit pricing theory

·       Baumol’s sales revenue maximization model

·       Marris’s model of managerial enterprise

 Williamson’s model of managerial discretion

12.00
Unit IV: 
Factor Pricing
  • Marginal productivity theory of Distribution
  • Factor Pricing under perfect and imperfect markets
  • Price of fixed factors: Rent & Quasi Rent; Product Exhaustion Theorem; Wage Differential
  • Collective Bargaining; Elasticity of factor demand.

 

12.00
Unit V: 
Welfare economics
  • Pareto optimality
  •  New welfare economics
  • Social Welfare Function, First and Second Theorem of Welfare Economics,
  • Market failure- Public Goods and externalities
  •   Theory of second best, Arrow’s Impossibility Theorem.

 

Essential Readings: 
  1. Koutsoyiannis, A., Modern Microeconomics, 2nd Edition, Macmillan, 2008. .
  1. Pindyck, Robert S., Rubinfeld, Daniel L. and Mehta, Prem L., Microeconomics, Pearson Education, 2009.
  1. Varian, Hal R.,Intermediate Microeconomics – A Modern Approach, W.W. Norton, 8th ed., 2014.
  1. Salvatore, Dominick, Microeconomics: Theory and Application, Oxford University Press, 2008.

 

 

References: 

Suggested Readings:

  1. Marshall, Alfred, Principles of Economics, Macmillan, 1926.
  2. Robinson, Joan, The Economics of Imperfect Competition, Macmillan, 1933.
  3. Chamberlin, E. H., The Theory of Monopolistic Competition, Harvard University Press, 1933.
  4. Fellner, W., Competition among the Few, Knopf, 1949.
  5. Hicks, Sir John R., The Theory of Wages, 2nd ed., Macmillan, 1963.

E Resources:

  • Haveman, A., and DeBartolo, K. , ‘The Revenue Maximisation Oligopoly Model,’

American Economic Review, 1968.

  • Baumol, W. J., ‘On the Theory of Expansion of the Firm,’ American Economic Review, 1962.
  • Cyert, R. M., and Kamien, M.I., ‘Behavioural Rules and the Theory of the Firm’, in Prices: Issues in Theory, Practice, and Public Policy, ed. A. Phillips and O. E. Williamson, Pennsylvania Press, 1967.
  • Bator, F. M., The Simple Analytics of welfare Maximisation,’ American Economic Review, 47, 1957.
  • Hall, R. L. and Hitch, C. J., ‘Price Theory and Business Behaviour,’ Oxford Economic Paper, 1939.
  • Mishan E. J., ‘A Survey of Welfare Economics, 1939-1959’, Economic Journal,         Vol. LXX, 1960.

Journals:

  • American Economic Journal: Microeconomics
  • American Economic Journal: Applied Economics
  • Studies in Microeconomics, SAGE.

 

Academic Session: 
2024-25
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