Lecture10Competitive Marketlocal equilibrium theory I(微观经济学(浙大- 叶剑亮)).pptVIP

Lecture10:Competitive Marketlocal equilibrium theory I Content Competitive equilibrium Local analysis Complete compete market Monopoly Competitive equilibrium An allocation A x1,…xI;y1……yJ is a combine of consumption vector x and production vector y. A is feasible ifCompetitive equilibrium Pareto Optimal Pareto efficient : An allocationis Pareto efficient optimal if there isn’t any the other feasible allocation, madefor any i andfor some i.See the fig. Competitive equilibrium Competitive equilibrium: An allocationand priceare a competitive Walrasian equilibrium, if: Profit maximization Utility maximization Market clearing Local analysis Hicksian Separability Divide the consumption bundle into two sub-bundles, and priceThe prices of z are change homogenously Choice: Letthen so Local analysis For every i1,…I, they have the quasi-linear utility function:andInada condition. Standardization the price of m as 1,and pricing commodity l as p. Local analysis For the firm j Profit maximization First order condition: Local analysis For the consumer i Utility maximization First order condition: Local analysis Market clearing i’s Demand function Local analysis Aggregation demand function for l. It’s continuous and non-increasing forSee the fig. Local analysis j’s supply functionAggregation supply function It’s continuous and non-increasing forSee the fig. Local analysis Welfare So we can metric the welfare by Marshallian aggregate surplus: Local analysis if Because of Then Complete compete market Free entrance same cost function） If,new firms enter, otherwise, some firms will exit. See the fig. equilibrium: Monopoly Market power to control the price First order condition Welfare lost Monopoly Consider the first order condition, we can get: If,no distorts occurs. if,we have:asis a constantMonopoly Price discriminationPigou,1920 First degree price discrimination The firm set a “take-it-or-leave-it” contract with q and it’s