Notes in Micreconomics Theory

Topics: Economics, Preference, Utility Pages: 188 (51202 words) Published: April 23, 2014
Lecture Notes in
Microeconomic Theory

This is a revised version of the book, last updated June 16th, 2013. Please e-mail me any comments and corrections.
Ariel Rubinstein
rariel@post.tau.ac.il

Lecture Notes in
Microeconomic Theory
The Economic Agent
Second Edition

Ariel Rubinstein

PRINCETON UNIVERSITY PRESS
PRINCETON AND OXFORD

Copyright c 2012 by Princeton University Press
Published by Princeton University Press, 41 William Street, Princeton, New Jersey 08540
In the United Kingdom: Princeton University Press, 60 Oxford Street, Woodstock, Oxfordshire OX20 1TW
press.princeton.edu
All Rights Reserved
Library of Congress Cataloging-in-Publication Data
Rubinstein, Ariel.
Lecture notes in microeconomic theory : the economic agent / Ariel Rubinstein. – 2nd ed.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-691-15413-8 (pbk. : alk. paper)
1. Microeconomics. 2. Economics. I. Title.
HB172.R72 2011
338.5–dc23
2011026862
British Library Cataloging-in-Publication Data is available
This book has been composed in Times.
Printed on acid-free paper. ∞
Typeset by S R Nova Pvt Ltd, Bangalore, India
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1

Contents

Preface

vii

Introduction

ix

Lecture 1. Preferences
Problem Set 1

1
10

Lecture 2. Utility
Problem Set 2

12
20

Lecture 3. Choice
Problem Set 3

23
42

Lecture 4. Consumer Preferences
Problem Set 4

46
59

Lecture 5. Demand: Consumer Choice
Problem Set 5

61
74

Lecture 6. More Economic Agents:
a Consumer Choosing Budget Sets,
a Dual Consumer and a Producer
Problem Set 6

76
88

Lecture 7. Expected Utility
Problem Set 7

93
104

Lecture 8. Risk Aversion
Problem Set 8

107
119

Lecture 9. Social Choice
Problem Set 9

121
127

Review Problems

130

References

149

Preface

This is the second edition of my lecture notes for the first quarter of a microeconomics course for PhD (or MA) economics students. The lecture notes were developed over a period of 20 years during which I taught the course at Tel Aviv, Princeton, and New York universities. I published this book for the first time in 2007 and have revised it annually since then. I did so with some hesitation since several superb books were already on the shelves. Foremost among them are those of David Kreps. Kreps (1990) pioneered the shift of the game theoretic revolution from research papers into textbooks. His book covers the material in depth and includes many ideas for future research. His recent book, Kreps (2013), is even better and is now my clear favorite for graduate microeconomics courses.

There are four other books on my shortlist: Mas-Colell, Whinston and Green (1995) is a very comprehensive and detailed textbook; Bowles (2003) brings economics back to its authentic political economics roots; Jehle and Reny (1997) has a very precise style; and finally the classic Varian (1984). They constitute an impressive collection of textbooks for an advanced microeconomics course. My book covers only the first quarter of the standard course. It does not aim to compete with these other books, but rather to supplement them. I published it only because I think that some of the didactic ideas presented might be beneficial to both students and teachers and it is to this end that I insisted on retaining its lecture notes style.

Downloading Updated Versions
The book is posted on the Internet, and access is entirely free. I am grateful to Princeton University Press for allowing it to be downloaded for free right after publication. Since 2007, I have updated the book annually, adding material and correcting mistakes. My plan is to continue revising the book annually. To access the latest electronic version go to: http://arielrubinstein.tau.ac.il.

Solution Manual
Teachers of the course can also get an updated solution manual. I do my best to send the manual only to teachers of a graduate...


References: 153
Yaari, M. E. (1985). “On the role of ‘Dutch Books’ in the theory of choice
under risk.” Nancy Shwartz Memorial Lecture, reprinted in Frontiers
of Research in Economic Theory: The Nancy L. Shwartz Memorial
Lectures, 1983–1997 ed. D. P. Jacobs, E. Kalai, M. I. Kamien, N. L.
Shwartz, P. Hammond, and A. Holly. New York: Cambridge University Press.
Yaari, M. E. (1987). “The dual theory of choice under risk.” Econometrica 55: 95–115.
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