Program Overview

Ec 121a: Theory of Value

The course, Ec 121a: Theory of Value, is offered in the Fall 2020 semester. It takes place on Tuesdays and Thursdays from 10:30-11:55 a.m. US/Pacific Time.

Course Description

The course explores various questions related to markets, efficiency, fairness, and the role of prices in decentralizing decision-making. It delves into topics such as the difference between short-run and long-run responses in the economy, the challenges of the health insurance market, and the implications of monopoly power. To discuss these questions, the course utilizes powerful toy models and mathematics at a level that students should be familiar with.

Textbook

The recommended textbook for this course is Hal Varian's Microeconomic Analysis, third edition, 1992, New York: Norton.

Grading

Grades will be based in part on four to six homework assignments, which are due at approximately two-week intervals. Exams may also be used if there is demand, and attendance may be graded as well. Details regarding the grading criteria are to be determined.

Homework Assignments

Collaboration is allowed on the homework, but each student's write-up must be in their own words and may not be copied. Students are encouraged to ask for clarification if anything is unclear.

• HW 1: Due Thursday, October 15

Notes for Lectures

The course includes a series of lectures, with notes available for each. The dates indicate the latest revision.

• Lecture 1
• Lecture 2
• Lecture 3
• Lecture 4
• Lecture 5
• Lecture 6
• Lecture 7
• Lecture 8
• Lecture 9
• Lecture 10
• Lecture 11
• Lecture 12
• Lecture 13
• Lecture 14
• Lecture 15
• Notes on Arrow's Theorem
• Lecture 16
• Lecture 17
• Lecture 18
• Lecture 19

Supplemental Notes

Some supplemental notes are provided, including:

• Desultory notes on aspects of maximization, including convex analysis
• Notes on linear algebra
• Week 1:
  • Maximization of a function of one variable
  • Increasing differences and comparative statics
  • Maximization of a function of several variables
  • More than you want to know about quadratic forms
  • Comparative statics
• Week 2:
  • Homogeneous functions
  • Envelope theorem
  • Notes on support functions, or profit and cost functions
  • Traditional approach to cost minimization
• Week 3:
  • Production possibility frontier and marginal costs
  • Saddlepoints and constrained maximization
  • Linear programming and saddlepoints
  • Simplex Algorithm
• Week 6:
  • Preference relations
  • Neoclassical demand theory
  • Duality and demand theory
  • The weak axiom of revealed preference
  • Rational choice
  • The Integrability Problem
• Week 8:
  • Notes on Uncertainty
• First Welfare Theorem
• Second Welfare Theorem
• Second Welfare Theorem via Saddlepoints
• Auction Design
• Revenue Equivalence
• Moral Hazard in Teams

Additional Information

The course webpage may change throughout the term, and students are advised to check back often for updates.