Cluster University Srinagar

Department of Economics
Syllabus for 5-Year Integrated Programme
Course Title: Micro Economic Analysis - II Semester :8th
Course Code: IEC-C2181 (Core) Credits: 04
Course Description

This course aims to acquaint students with fundamental theory of oligopoly. Theory of games is
also included to introduce students to the complicacies of oligopolistic markets. Further General
equilibrium theory and Welfare Economics are also covered in this course to acquaint students
with the weaknesses of partial equilibrium analysis.

Unit I: Oligopolistic markets and Game theory

Non-collusive oligopoly– Cournot, Bertrand, Chamberlin, Kinked demand curve and Stackelberg
models; Simultaneous games and sequential games; Zero-sum and Non-zero sum games;
Prisoner’s Dilemma; Dominant strategy equilibrium; Nash Equilibrium; Game in extensive and
normal form, Repeated games; Collusive oligopoly– cartels and price leadership.
Critical evaluation of marginal analysis; Average cost pricing; Bain’s limit pricing theory,
Managerial theories of firm-Baumol’s static and dynamic models of sales revenue maximization.
Unit II: Input markets
Marginal productivity theory; Factor pricing in perfectly competitive markets; Factor pricing in
imperfect product and factor markets; Work-Leisure trade-off; Backward bending supply curve of
labour; Elasticity of technical substitution and factor shares; Technical progress and income
distribution; Pricing of fixed factors of Production- rent and quasi-rent; Euler’s product exhaustion
theorem.
Unit III: General equilibrium
Partial equilibrium Vs General equilibrium; Walrasian system, Existence, Uniqueness and
Stability of an equilibrium, Static properties of general equilibrium- Efficiency in exchange and
production, Production possibility frontier; Simultaneous equilibrium of production and
consumption; Equilibrium and Walras law; Competitive market equilibrium and Pareto efficiency;
Fundamental theorems of welfare economics.
Unit IV: Welfare Economics
Criteria of welfare maximization – Bentham’s criteria, Pareto optimality criterion, Kaldor- Hicks
compensation criteria; Maximisation of social welfare– Grand utility possibility frontier;
Determination of welfare maximizing configuration; Social choice and Arrow’s impossibility
theorem; Social welfare functions- Rawlsian and Benthamite.
References:
1. Henderson, J.M & R.E. Quandt. (1980).Micro Economic Theory: A Mathematical Approach,
McGraw Hall, New Delhi.
2. Varian, H. R. (2009).Intermediate Microeconomics (8thed.).W.W Norton & Company.
3. Nicholson, W. (1992).Microeconomic Theory: Basic Principals and Extensions. The Dryden
Press, USA.
4. Varian, H. R (1992).Microeconomic Analysis (3rd ed.). W.W Norton Company.
5. Perloff, J. M. (2001).Microeconomics, Addison Wisely Longman, India.
6. Koutsoyiannis, A. (1979).Modern Microeconomics, Macmillan Press, London.
7. Layard, P. R. G. and Walters, A.W. (1978).Microeconomic Theory, McGraw Hill, New York.
8. Sen, A. K. (1999).Microeconomics - Theory and Applications, Oxford University Press.
9. Pindyck, R. S. and Rubinfeld, D. L. (1999).Microeconomics, Prentice Hall of India.
10. Hall, R.E. and Lieberman M. (2010).Microeconomics-Principles and applications
(5thed.).Cengage Learning.