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CONTENTS CHAPTER 1: EQUILIBRIUM, EFFICIENCY, AND ASYMMETRIC INFORMATION 1. ASYMMETRIC INFORMATION 2. TAXI ! 3. ACID RAIN 4. EFFICIENCY 5. EQUILIBRIUM 5.1 Dominant strategy equilibrium 5.2 Nash equilibrium 5.3 The invisible hand 5.4 The incentive to harbor terrorists 5.5 Dissolving a partnership 5.6 The centipede game 5.7 Subgame-perfect Nash equilibrium 6. THE PRISONER'S DILEMMA GAME 6.1 Economic Sanctions 6.2 Public Opinion 6.3 Pollution 6.4 Beggar-thy-neighbor policies 6.5 Disarmament 6.6 Cartels 6.7 Hostile takeovers 7. REPETITION AND EQUILIBRIUM 7.1 Repeated prisoner's dilemma with terminal date 7.2 Infinitely repeated Prisoner's dilemma 7.3 Equilibrium theorem for infinitely repeated games 7.4 Terminal date and unknown type CHAPTER 2: BASIC MODELS AND TOOLS 1. MAXIMIZING A QUADRATIC ? 2. OVERVIEW OF CALCULUS 2.1 Unconstrained maximization 2.2 Constrained maximization 2.3 Strictly concave functions 2.4 Minimization 2.5 The tangency approach 2.6 The total derivative and the chain rule 3. LAGRANGIAN MULTIPLIERS ? 3.1 The Lagrangian multiplier with a single resource constraint ? 3.2 Remark on planning and Lagrangians ? 3.3 Lagrangian multipliers with more than one resource constraint 3.4 The converse of the Pythagorean theorem 4. THE COMPOSITE COMMODITY MODEL 4.1 The budget constraint and preferences 4.2 The composite commodity theorem 5. QUASI-LINEAR PREFERENCES 5.1 Efficiency with quasi-linear utility ? 5.2 Quasi-linear preferences and demand ? 5.3 Consumer surplus 6. DECISION MAKING UNDER UNCERTAINTY 6.1 Asset preferences 6.2 Risk aversion and risk neutrality ? 6.3 Risk aversion and a negative second derivative 6.4 The market opportunity line 6.5 The uniform probability distribution ? 6.6 The continuum case in general. 7. INSURANCE 7.1 The complete insurance theorem 7.2 Sketch of the proof of the complete insurance theorem ? 7.3 Calculus proof of the complete insurance theorem 7.4 Competitive insurance markets 7.5 Efficiency of competitive insurance markets with full information CHAPTER 3: HIDDEN ACTION 1. RESOURCE ALLOCATION 2. MARKETABLE POLLUTION RIGHTS 3. INCENTIVE REGULATION OF THE TELECOMMUNICATIONS INDUSTRY 4. THE SAVINGS AND LOAN DEBACLE 5. PERSONAL BANKRUPTCY 6. MANDATORY RETIREMENT 6.1 Posting a bond 6.2 The formal argument 6.3 The intertemporal budget constraint 7. TENURE AND THE PERFORMANCE OF PROFESSORS 8. PAY AND PERFORMANCE IN US PUBLIC SCHOOLS 9. MORAL HAZARD AND INSURANCE 9.1 Overview 9.2 The formal model 9.3 The binary choice model of moral hazard ? 9.4 A continuum of effort supply levels ? 9.5 Incomplete insurance CHAPTER 4: CORPORATE GOVERNANCE 1. A BRIEF TOUR OF SEVERAL COUNTRIES 2. PARTNERSHIPS 2.1 The model 2.2 A two-person partnership 2.3 Reputation and repeated interaction 3. THE OWNER-EMPLOYEE RELATIONSHIP 4. THE OWNER-MANAGER RELATIONSHIP IN PRACTICE 4.1 How managers are disciplined 4.2 Examples of managerial shirking 4.3 The Enron debacle 4.4 Why shareholders allow managerial shirking 5. AGENCY THEORY 5.1 A diagrammatic introduction 5.2 The basic agency model. 5.3 Risk neutral managers 5.4 Risk averse managers and binary effort supply 5.5 Risk averse managers and a continuum of effort levels CHAPTER 5: HIDDEN CHARACTERISTICS 1. PRICE DISCRIMINATION 2. TWO-PERSON EXCHANGE 2.1 Dominant strategy equilibrium ? 2.2 Nash equilibrium ? 3. THE USED CAR MARKET 4. CREDIT RATIONING 4.1 The borrower's point of view 4.2 The lender's point of view 5. BUNDLING AND PRODUCT QUALITY 5.1 The model ? 5.2 Full information equilibrium ? 5.3 Asymmetric information equilibrium 6. JOB MARKET SIGNALING 6.1 To make a long story short. 6.2 A general model 6.3 When education is productive 7. COMPETITIVE INSURANCE MARKETS 7.1 The model 7.2 The number of contracts in equilibrium ? 7.3 Full information equilibrium ? 7.4 Asymmetric information equilibrium CHAPTER 6: AUCTIONS 1 INTRODUCTION 1.1 Ten significant auctions 1.2 Auctions and efficiency 2 THE VICKREY AUCTION 2.1 Equilibrium bids 2.2 Social cost pricing 2.3 Incentives, efficiency, and social cost pricing 3 FOUR BASIC AUCTION MECHANISMS 3.1 Vickrey, English, Dutch, and first-price auctions 3.2 Outcome equivalence 3.3 Equilibrium bids in a first-price sealed-bid auction ? 3.4 The case of n bidders 4 REVENUE EQUIVALENCE 4.1 Revenue equivalence for the four basic auctions ? 4.2 Expected revenue is equal for the Vickrey and first-price auctions 4.3 Other probability distributions 4.4 Equilibrium payoffs 4.5 Proof of the revenue equivalence theorem ? 4.6 Integral calculus proof of the revenue equivalence theorem 5 APPLICATIONS OF THE REVENUE EQUIVALENCE THEOREM 5.1 Multistage auctions 5.2 Adoption of a standard 5.3 Civil litigation 5.4 Procurement 5.5 Car sales 6 INTERDEPENDENT VALUES 6.1 Revenue equivalence 6.2 The winner's curse CHAPTER 7: VOTING AND PREFERENCE REVELATION 1 VOTING SCHEMES 1.1 Majority rule 1.2 Other voting schemes 1.3 Value-restricted preferences 2 PREFERENCE REVELATION IN GENERAL 2.1 The Gibbard-Satterthwaite theorem 2.2 Proof for two individuals and three alternatives 3 GENERAL PROOF OF THE GIBBARD-SATTERTHWAITE THEOREM 3.1 Proof for two individuals and three or more alternatives 3.2 Proof for two or more individuals and three or more alternatives 4 THE REVELATION PRINCIPLE CHAPTER 8: PUBLIC GOODS AND PREFERENCE REVELATION 1 THE ECONOMIC MODEL 1.1 A continuum of public projects ? 1.2 Efficiency ? 1.3 Competitive market equilibrium 1.4 Voluntary contributions ? 1.5 Average cost taxation ? 1.6 Benefit taxation 2 THE PIVOTAL MECHANISM 2.1 The model 2.2 Two options 2.3 Defects of the pivotal mechanism 2.4 A continuum of options 2.5 Relation to the Gibbard-Satterthwaite Theorem 3 GROVES MECHANISMS 3.1 The model 3.2 The mechanisms 4 EFFICIENCY AND INCENTIVE COMPATIBILITY ? 4.1 Dominant strategy equilibrium 4.2 Nash equilibrium CHAPTER 9: MATCHING 1. STUDENTS AND ADVISORS 1.1 One-to-one matching 1.2 The main results 2. COLLEGE ADMISSIONS 2.1 Students apply to colleges 2.2 Student placement 2.3 Single-test placement 3. HOSPITALS AND DOCTORS 4. ALLOCATING DORMITORY ROOMS 4.1 A commonly used scheme 4.2 An efficient procedure 5. KIDNEY TRANSPLANTS CHAPTER 10: GENERAL COMPETITIVE EQUILIBRIUM 1. COMPETITION, PROPERTY RIGHTS, AND PROSPERITY 1.1 Competition and reputation 1.2 Responsiveness of competitive markets 1.3 Why not China? 1.4 To make a long story short 2. THE ARROW--DEBREU ECONOMY 2.1 The model 2.2 Welfare theorem for an exchange economy 2.3 The welfare theorem in the general model 2.4 Externalities 3. NON-CONVEX ECONOMIES 4. EFFICIENCY AND INCENTIVE COMPATIBILITY 4.1 Dominant strategy equilibrium 4.2 Nash equilibrium 4.3 Subgame-perfect Nash equilibrium 4.4 Price taking 5. COMMON PROPERTY RESOURCES
Library of Congress Subject Headings for this publication:
Social choice -- Mathematical models.