Professor:             Yang-Ming Chang

Office & Phone:   319 Waters Hall, ph. 532-4573
E-mail:                 ymchang@ksu.edu
Class Hours:        2:30 - 3:45 p.m., Monday and Wednesday
Office Hours:       1:30 - 2:30 p.m., Tuesday and Thursday, or by appointment

Objective:

         This is the second course in a two semester sequence in graduate microeconomic theory.
This course is intended to focus on advanced topics in microeconomic theory in the light of
contemporary thought.  Attention will be given to general equilibrium theory and applications,
welfare economics, and the economics of choice under uncertainty.

Prerequisites:

        A working knowledge of graduate microeconomic theory I (ECON 940) is required.
Abilities to use the techniques of mathematical optimization and the method of comparative  statics
are necessary.

Grading:

        You are required to solve a number of homework assignments which will count for 20%
of your course grade.  All assignments are due at the beginning of class on the due date. There
will be two exams: one midterm (40%) and one final (40%).

        There will be no extra credit work available.  Grading will be based on a curve.

Required Textbooks:

        Varian, H. R., Microeconomic Analysis, 3rd Edition, W. W. Norton & Company, 1992.

        Silberberg, E., The Structure of Economics: A Mathematical Analysis, 2nd Edition,
        McGrow-Hill, 1990.  (Third edition will be available in July 2000.)
 
Topics and Associated Readings: (Tentative)

        Students are expected to do the assigned readings in Varian and Silberberg. Some
supplemental papers are provided for each topic.  Additional references can be found in Varian
and Silberberg.  Some papers that will be used for discussion will be assigned in class. Students
may read unassigned papers at their discretion.

(1)  General Equilibrium and Welfare Economics

        Key Topics (1.1)
        General Equilibrium Methodology
        Linear and Non-linear Models
        Fixed-Coefficient Technology
        The Linear Activity-Analysis Model
        Duality Analysis in General Equilibrium
        The Edgeworth-Bowley Box Diagram
        Contract Curve and Production Possibilities Frontier
        The Stolper-Samuelson Theorems
        The Rybczynski Theorem
        Pure Exchange Model of General Equilibrium
        The Core of an Exchange Economy
        Walrasian Competitive Adjustment Mechanism
        Existence and Stability of Walrasian Equilibria

        Key Topics (1.2)
        Pareto Optimality in Production
        Pareto Optimality in Consumption
        Overall Pareto Optimality
        The Efficiency of Perfect Competition
        The Efficiency of Imperfect Competition
        External Economies and Diseconomies in Production and Consumption
        Taxes and Subsidies - Solutions to Pareto Suboptimality
        Optimal Pricing (or Taxation) to Maximize Social Welfare
        Public Goods

        *Silberberg, "General Equilibrium I: Linear Models," Chapter 15.

        *Silberberg, "General Equilibrium II: Non-Linear Models," Chapter 16.

        *Varian, "Production," Chapter 18.

        *Varian, "Exchange," Chapter 17.
 
        *Silberberg, "Welfare Economics," Chapter 17.

        *Varian, "Welfare," Chapter 22.

        Stolper, W. R., and P. A. Samuelson, "Protection and Real Wages," Review of Economic
        Studies, 9  (1941): 58-73.

        Jones, R. W., "The Structure of Simple General Equilibrium Models," Journal of Political
        Economy,  73 (1965): 557-572.

        Mayer, W., "Short-Run and Long-Run Equilibrium for a Small Open Economy," Journal  of
        Political Economy, 82 (1974): 955-967.

        Johnson, H. G. and P. M. Mieszkowski, "The Effect of Unionization on the Distribution
        of Income: A General Equilibrium Approach," Quarterly Journal of Economics, 84
        (November 1970): 539-561.

        Jones, R. W., "Distortions in Factor Markets and the General Equilibrium Model of
        Production," Journal of Political Economy, 79 (1971): 437-459.

        Baumol W. and Bradford, D., "Optimal Departures from Marginal Cost Pricing,"
        American Economic Review, 69 (1970): 256-283.

        *Varian, "Public Goods," Chapter 23.

        *Varian, "Externalities," Chapter 24.

        Varian, H.R., ��A Solution to the Problem of Externalities When Agents are Well-
        Informed,�� American Economic Review, 84(December 1994):1278-1293.
 

(2)  Economics of Choice under Uncertainty

        (2.1) Key Topics
        The Expected-Utility Hypothesis
        The Expected-Utility Theorems
        Attitudes Toward Risk: Risk Aversion, Risk Neutrality, and Risk Preference
        The Measurement of Risk Aversion

        *Silberberg, "Behavior under Uncertainty," Chapter 13.

        *Varian, "Uncertainty," Chapter 11.
 
         Pratt, J. W., "Risk Aversion in the Small and Large," Econometrica, 32 (January-April
        1964): 122-136.

         Friedman, M. and L. Savage, "The utility Analysis of Choices Involving Risk," Journal of
         Political Economy, 56 (1948): 279-304.

         Brunk, G. G., "A Test of the Friedman-Savage Gambling Model," Quarterly Journal of
         Economics, (May 1981): 341-348.

         (2.2) Special Topics I
         Risk Shedding and Risk Pooling
         Risk-Bearing, Demand for Protection and Insurance
         Insurance and Moral Hazard

         Ehrlich, I. and G. S. Becker,"Market Insurance, Self-Insurance, and Self-Protection,"
         Journal of Political Economy, 82 (1972): 623-648.

         Chang, Y. M. and I. Ehrlich, "Insurance, Protection from Risk, and Risk-Bearing,"
         Canadian Journal of Economics (August 1985): 574-586.

         Pauly, M. V., "Overinsurance and the Public Provision of Insurance: The Role of Moral
         Hazard and Adverse Selection," Quarterly Journal of Economics, 88 (1974): 44-54.

         Routhchild, M. and J. Stiglitz, "Equilibrium in Competitive Insurance Markets: An Essay
         on the Economics of Imperfect Competition," Quarterly Journal of Economics, (November
         1976): 629-649.

         Wu C. and P. F. Colwell, "Moral Hazard and Moral Imperative," Journal of Risk and
         Insurance, (March 1988): 101-107.

         Briys, E. and H. Schlesinger, "Risk Aversion and the Propensities for Self-Protection and
         Self-Insurance," Southern Economic Journal, (1985):458-467.

         Cleeton, D. L. and B.B. Zellner, "Income, Risk Aversion, and The Demand for Insurance,"
         Southern Economic Journal, 60 (July 1993): 146-156.

         (2.3) Special Topics II:
         Comparative Statics of the Risk-Bearing Optimum
         Theory of Firm under Uncertainty
         Production Uncertainty
         Price and Cost Uncertainty
         Consumption and Saving Decisions under Uncertainty (If time permitting)

 
         Sandmo, A.,"On the Theory of The Competitive Firm under Price Uncertainty," American
         Economic Review, (March 1971): 65-71.

         Batra, R. and A.Ullah,"Competitive Firm and the Theory of Input Demand under
         Uncertainty," Journal of Political Economy, (June 1974): 537-548.

         Ishii, Y., "On the Theory of The Competitive Firm under Price Uncertainty: Note,"
        American Economic Review, (September 1977): 768-769.

        Flacco and D. M. Larson, "Nonparametric Measures of Scale and Technical Change for
        Competitive Firms under Uncertainty," American Journal of Agricultural Economics,
        February 1992, 173-176.

        Schmitz, A., H. Shalit and S. J. Turnovsky, "Producer Welfare and the Preference for Price
        Stability," American Journal of Agricultural Economics, (1981): 158-160.

        Coyle, B. T. ��Risk Aversion and Price Risk in Duality Models of Production: A Linear Mean-
        Variance Approach,�� American Journal of Agricultural Economics, (November  1992):
        173-176.

         Saha, A. ��Risk Preference Estimation in the Nonlinear Mean Standard Deviation Approach,��
         Economic Inquiry 25 (October 1997):770-782.

         Leland, H. E., "Saving and Uncertainty: The Precautionary Demand for Saving," Quarterly
         Journal of Economics, 82 (1968): 465-473.

         Dreze, J. H., "Consumption Decisions under Uncertainty," Journal of Economic Theory, 5
         (1972): 308-335.

         Sandmo, A., "The Effect of Uncertainty on Saving Decisions," Review of Economic
         Studies, 37 (1970): 353-360.

         Kimball, M., "Precautionary Savings in the Small and in the Large," Econometrica,
         (January 1990): 53-74.

         Chang, Y. M. and I. Ehrlich, "On the Economics of Compliance with the Minimum Wage
         Law," Journal of Political Economy, 93 (January 1985): 84-91.

         Chang, Y. M., "Noncompliance Behavior of Risk-Averse Firms under the Minimum Wage
         Law," Public Finance Quarterly, 20 (July 1992): 390-401.
 
 

 
Academic Accommodations for Disable Students

         If you have any condition, such as a physical or learning disability, which will make it
difficult for you to carry out the work as I have outlined it or which will require academic
accommodations, please notify me in the first two weeks of the course.
 

Plagiarism and Cheating

         The administration requires that each syllabus include the following statement regarding
KSU's policy on plagiarism and cheating:

"Plagiarism and cheating are serious offenses and may be punished by failure on the exam, paper
or project; failure in the course; and/or expulsion from the university. For more information refer
to the 'Academic Dishonesty' policy in Inside KSU or Appendix F in the Faculty Handbook."
 
  Updated: 9/12/23