Lernkarten

Karten 40 Karten
Lernende 0 Lernende
Sprache English
Stufe Universität
Erstellt / Aktualisiert 31.05.2019 / 06.06.2019
Lizenzierung Namensnennung - Nicht-kommerziell - Keine Bearbeitung (CC BY-NC-ND)     (Unversité de Genève, cours de Pr. Monika Mrazova)
Weblink
Einbinden
0 Exakte Antworten 40 Text Antworten 0 Multiple Choice Antworten

1/40

Fenster schliessen

Pareto-improving allocation

An allocation of the endowment that improves the welfare of a consumer without reducing the welfare of another

Fenster schliessen

Edgeworth-Bowley Box: Trade

Lizenzierung: Keine Angabe
Fenster schliessen

All points in the box, including the boundary, represent

feasible allocations of the combined endowment

Fenster schliessen

Edgeworth-Bowley Box: Endowment

Lizenzierung: Keine Angabe
Fenster schliessen

Feasible allocation

xA1 + xB1 < wA1 + wB1 and xA2 + xB2 < wA2 + wB2

Fenster schliessen

general equilibrium analysis

Prices of other goods may/will affect people’s demands and supplies for a particular good (e.g. substitutes, complements ...)

Fenster schliessen

In exchange, we relax some assumptions

Identical consumers
Exogenous prices

Fenster schliessen

Differents payoffs

Lizenzierung: Keine Angabe
Fenster schliessen

Oligopoly: Comparing the outcomes

Lizenzierung: Keine Angabe

Monopoly / Collusion VS Cournot VS Stackelberg

Fenster schliessen

Collusion

Lizenzierung: Keine Angabe
Fenster schliessen

The Stackelberg equilibrium

Lizenzierung: Keine Angabe

Leader’s profit-maximizing output, Follower's profit-maximizing output, Individuals output, Industry output

Fenster schliessen

The leader's problem

Lizenzierung: Keine Angabe
Fenster schliessen

The follower's problem

Lizenzierung: Keine Angabe
Fenster schliessen

Stackelberg Competition: Example
Consider an industry which is characterised as follows:
Two firms producing an identical good
(Inverse) demand is given by: p(y) = a - by = a - b(y1 + y2)
Each firm has a zero marginal cost
Firm 1 has a first-mover advantage
Find the Stackelberg equilibrium (y1;y2) for this industry.

Solve the follower’s problem to obtain the reaction function.
2 Solve the leader’s problem.

Fenster schliessen

Stackelberg Competition: Main Assumptions

Sequential quantity setting
Two firms producing identical product
Assume firm 1 chooses its quantity first. Firm 2 observes q1 and then chooses q2.
! Backward solution: Solve firm 2’s problem first as firm 1 (the leader) needs to anticipate the follower’s reactions.

Fenster schliessen
Lizenzierung: Keine Angabe
Lizenzierung: Keine Angabe
Fenster schliessen

STWE: Can a Pareto efficient allocation be achieved as a competitive equilibrium?

Yes, if preferences are convex
 

Fenster schliessen

FTWE does not hold in 

the presence of externalities

Fenster schliessen

FTWE focuses on efficiency, not fairness

Allocation where one person owns everything is Pareto efficient

Fenster schliessen

The FTWE tells us that

the resulting equilibrium from these independent, self-interested and decentralised actions is efficient

This is the nature of the “Invisible Hand” of Adam Smith

Fenster schliessen

Implicit assumptions of the FTWE: Each consumer knows only

his own tastes, endowment and the market prices

Fenster schliessen

FTWE

any competitive equilibrium is Pareto efficient

Fenster schliessen

Using Walras’ Law we can show that 

if demand equals supply in one market, the same must be true in the other market.

Fenster schliessen

Walras’ law states that

Lizenzierung: Keine Angabe

the value of aggregate excess demands is always 0 (at any prices), i.e

Fenster schliessen

In equilibrium the aggregate excess demand for each good

Lizenzierung: Keine Angabe
Fenster schliessen

Aggregate excess demand for good 1

Lizenzierung: Keine Angabe
Fenster schliessen

Net/Excess demand of consumer A for good 1

Lizenzierung: Keine Angabe
Fenster schliessen

The Algebra of Equilibrium

Lizenzierung: Keine Angabe
Fenster schliessen

Equilibrium is a set of prices (p1*;p2*) such that

Lizenzierung: Keine Angabe

total demand for each good equals total supply

Fenster schliessen

Competitive Equilibrium: we must have

 

Lizenzierung: Keine Angabe