Microeconomics / Robert S. Pindyck and Daniel L. Rubinfeld

Includes index

Preface xxv
Part One Introduction: Markets and Prices
1 (64)
Preliminaries
3 (18)
The Themes of Microeconomics
4 (3)
Trade-Offs
4 (1)
Prices and Markets
5 (1)
Theories and Models
5 (1)
Positive versus Normative Analysis
6 (1)
What is a Market?
7 (5)
Competitive versus Noncompetitive Markets
8 (1)
Market Price
8 (1)
Market Definition---The Extent of a Market
9 (3)
Real versus Nominal Prices
12 (3)
Why Study Microeconomics?
15 (3)
Corporate Decision Making: Ford's Sport Utility Vehicles
15 (2)
Public Policy Design: Automobile Emission Standards for the Twenty-First Century
17 (1)
Summary
18 (1)
Questions for Review
18 (1)
Exercises
18 (3)
The Basics of Supply and Demand
21 (44)
Supply and Demand
22 (3)
The Supply Curve
22 (1)
The Demand Curve
23 (2)
The Market Mechanism
25 (1)
Changes in Market Equilibrium
26 (8)
Elasticities of Supply and Demand
34 (6)
Point versus Arc Elasticities
37 (3)
Short-Run versus Long-Run Elasticities
40 (9)
Demand
40 (5)
Supply
45 (4)
Understanding and Predicting the Effects of Changing Market Conditions
49 (9)
Effects of Government Intervention-Price Controls
58 (3)
Summary
61 (1)
Questions for Review
61 (1)
Exercises
62 (3)
Part Two Producers, Consumers, and Competitive Markets
65 (282)
Consumer Behavior
67 (44)
Consumer Behavior
67 (2)
Consumer Preferences
69 (14)
Market Baskets
69 (1)
Some Basic Assumptions about Preferences
70 (1)
Indifference Curves
70 (2)
Indifference Maps
72 (2)
The Shape of Indifference Curves
74 (1)
The Marginal Rate of Substitution
75 (1)
Perfect Substitutes and Perfect Complements
76 (7)
Budget Constraints
83 (3)
The Budget Line
83 (1)
The Effects of Changes in Income and Prices
84 (2)
Consumer choice
86 (6)
Corner Solutions
90 (2)
Revealed Preferences
92 (3)
Marginal Utility and Consumer Choice
95 (5)
Cost-of-Living Indexes
100 (6)
Ideal Cost-of-Living Index
101 (1)
Laspeyres Index
102 (1)
Paasche Index
103 (1)
Price Indexes in the United Statics: Chain Weighting
104 (2)
Summary
106 (1)
Questions for Review
106 (1)
Exercises
107 (4)
Individual and Market Demand
111 (48)
Individual Demand
112 (8)
Price Changes
112 (1)
The Individual Demand Curve
113 (1)
Income Changes
114 (1)
Normal versus Inferior Goods
115 (1)
Engel Curves
116 (3)
Substitutes and Complements
119 (1)
Income and Substitution Effects
120 (5)
Substitution Effect
121 (1)
Income Effect
121 (1)
A Special Case: The Giffen Good
122 (3)
Market Demand
125 (7)
From Individual to Market Demand
125 (2)
Elasticity of Demand
127 (5)
Consumer Surplus
132 (4)
Consumer Surplus and Demand
132 (4)
Network Externalities
136 (4)
The Bandwagon Effect
136 (1)
The Snob Effect
137 (3)
Empirical Estimation of Demand
140 (4)
The Statistical Approach to Demand Estimation
140 (2)
The Form of the Demand Relationship
142 (2)
Interview and Experimental Approaches to Demand Determination
144 (1)
Summary
144 (1)
Questions for Review
145 (1)
Exercises
146 (3)
Demand Theory---A Mathematical Treatment
149 (8)
Utility Maximization
149 (1)
The Method of Lagrange Multipliers
150 (1)
The Equal Marginal Principle
151 (1)
Marginal Rate of Substitution
151 (1)
Marginal Utility of Income
152 (1)
An Example
152 (2)
Duality in Consumer Theory
154 (1)
Income and Substitution Effect
155 (2)
Exercises
157 (2)
Uncertainty and Consumer Behavior
159 (36)
Describing Risk
160 (5)
Probability
160 (1)
Expected Value
161 (1)
Variability
161 (2)
Decision Making
163 (2)
Preferences Toward Risk
165 (5)
Different Preferences Toward Risk
167 (3)
Reducing Risk
170 (6)
Diversification
170 (2)
Insurance
172 (2)
The Value of Information
174 (2)
The Demand for Risky Assets
176 (9)
Assets
177 (1)
Risky and Riskless Assets
177 (1)
Asset Returns
178 (1)
The Trade-Off Between Risk and Return
179 (1)
The Investor's Choice Problem
180 (5)
Behavioral Economics
185 (6)
More Complex Preferences
186 (2)
Rules of Thumb and Biases in Decision Making
188 (1)
Probabilities and Uncertainty
189 (1)
Summing Up
189 (2)
Summary
191 (1)
Questions for Review
191 (1)
Exercises
191 (4)
Production
195 (26)
The Production Decisions of a Firm
195 (1)
The Technology of Production
196 (2)
The Production Function
197 (1)
The Short Run versus the Long Run
197 (1)
Production with One Variable Input (Labor)
198 (9)
Average and Marginal Products
199 (1)
The Slopes of the Product Curve
200 (1)
The Average Product of Labor Curve
201 (1)
The Marginal Product of Labor Curve
202 (1)
The Law of Diminishing Marginal Returns
202 (3)
labor Productivity
205 (2)
Production with Two Variable Inputs
207 (8)
Isoquants
207 (2)
Input Flexibility
209 (1)
Diminishing Marginal Returns
209 (1)
Substitution Among Inputs
209 (2)
Production Functions---Two Special Cases
211 (4)
Returns to Scale
215 (3)
Describing Returns to Scale
215 (3)
Summary
218 (1)
Questions for Review
218 (1)
Exercises
219 (2)
The Cost of Production
221 (50)
Measuring Cost: Which Costs Matter?
221 (7)
Economic cost versus Accounting Cost
222 (1)
Opportunity Cost
222 (1)
Sunk Costs
222 (2)
Fixed Cost and Variable Costs
224 (1)
Fixed versus Sunk Costs
225 (2)
Marginal and Average Cost
227 (1)
Cost in the Short Run
228 (6)
The Determinants of Short-Run Cost
228 (2)
The Shapes of the Cost curves
230 (4)
Cost in the Long Run
234 (9)
The User Cost of Capital
234 (1)
The Cost-Minimizing Input Choice
235 (1)
The Isocost Line
236 (1)
Choosing Inputs
237 (4)
Cost Minimization with Varying Output Levels
241 (1)
The Expansion Path and Long-Run Costs
241 (2)
Long-Run verus Short-Run Cost Curves
243 (5)
The Inflexibility of Short-Run Production
243 (1)
Long-Run Average Cost
243 (2)
Economies and Diseconomies of Scale
245 (2)
The Relationship between Short-Run and Long-Run Cost
247 (1)
Production with Two Outputs---Economies of Scope
248 (3)
Product Transformation Curves
249 (1)
Economies and Diseconomies of Scope
250 (1)
The Degree of Economies of Scope
250 (1)
Dynamic Changes in Costs---The Learning Curve
251 (5)
Graphing the Learning Curve
252 (1)
Learning versus Economies of Scale
253 (3)
Estimating and Predicting Cost
256 (4)
Cost Functions and the Measurement of Scale Economies
258 (2)
Summary
260 (1)
Questions for Review
261 (1)
Exercises
261 (3)
Production and Cost theory---A Mathematical Treatment
264 (5)
Cost Minimization
264 (1)
Marginal Rate of Technical Substitution
265 (1)
Duality in Production and Cost Theory
266 (1)
The Cobb-Douglas Cost and Production Functions
267 (2)
Exercises
269 (2)
Profit Maximization and Competitive Supply
271 (38)
Perfectly Competitive Markets
271 (3)
When Is a Market Highly Competitive?
273 (1)
Profit Maximization
274 (2)
Do Firms Maximize Profit?
274 (1)
Alternative Forms of Organization
275 (1)
Marginal Revenue, Marginal Cost, and Profit Maximization
276 (3)
Demand and Marginal Revenue for a competitive Firm
277 (2)
Profit Maximization by a Competitive Firm
279 (1)
Choosing Output in the Short Run
279 (5)
Short-Run Profit Maximization by a Competitive Firm
279 (1)
The Short-Run Profit of a Competitive Firm
280 (4)
The Competitive Firm's Short-Run Supply Curve
284 (3)
the Firm's Response to an Input Price Change
284 (3)
The Short-Run Market Supply Curve
287 (5)
Elasticity of Market Supply
288 (3)
Producer Surplus in the Short Run
291 (1)
Choosing Output in the Long Run
292 (7)
Long-Run Profit Maximization
293 (1)
Long-Run Competitive Equilibrium
294 (3)
Economic Rent
297 (1)
Producer Surplus in the Long Run
297 (2)
The Industry's Long-Run Supply curve
299 (6)
Constant-Cost Industry
299 (1)
Increasing-Cost Industry
300 (2)
Decreasing-Cost Industry
302 (1)
The Effects of a Tax
302 (1)
Long-Run Elasticity of Supply
303 (2)
Summary
305 (1)
Questions for Review
306 (1)
Exercises
306 (3)
The Analysis of Competitive Markets
309 (38)
Evaluating the Gains and Losses from Government Policies--Consumer and Producer Surplus
309 (6)
Review of Consumer and Producer Surplus
310 (1)
Application of Consumer and Producer Surplus
311 (4)
The Efficiency of a Competitive Market
315 (4)
Minimum Prices
319 (5)
Price Supports and Production Quotas
324 (7)
Price Supports
324 (1)
Production Quotas
325 (6)
Import Quotas and Tariffs
331 (4)
The Impact of a Tax or Subsidy
335 (7)
The Effects of a Subsidy
339 (3)
Summary
342 (1)
Questions for Review
342 (1)
Exercises
343 (4)
Part Three Market Structure and Competitive Strategy
347 (236)
Market Power: Monopoly and Monopsony
349 (42)
Monopoly
350 (11)
Average Revenue and Marginal Revenue
350 (2)
The Monopolist's Output Decision
352 (1)
An Example
353 (1)
A Rule of Thumb for Pricing
354 (3)
Shifts in Demand
357 (1)
The Effect of a Tax
357 (2)
The Multiplant Firm
359 (2)
Monopoly Power
361 (5)
Measuring Monopoly Power
362 (1)
The Rule of Thumb for Pricing
363 (3)
Sources of Monopoly Power
366 (2)
The Elasticity of Market Demand
367 (1)
The Number of Firms
367 (1)
The Interaction Among Firms
368 (1)
The Social Costs of Monopoly Power
368 (5)
Rent Seeking
370 (1)
Price Regulation
370 (2)
Natural Monopoly
372 (1)
Regulation in Practice
373 (1)
Monopsony
373 (3)
Monopsony and Monopoly Compared
376 (1)
Monopsony Power
376 (5)
Sources of Monopsony Power
377 (2)
The Social Costs of Monopsony Power
379 (1)
Bilateral Monopoly
380 (1)
Limiting Market Power: The Antitrust Laws
381 (6)
Enforcement of the Antitrust Laws
383 (1)
Antitrust in Europe
384 (3)
Summary
387 (1)
Questions for Review
387 (1)
Exercises
388 (3)
Pricing with Market Power
391 (52)
Capturing Consumer Surplus
392 (1)
Price Discrimination
393 (10)
First-Degree Price Discrimination
393 (3)
Second-Degree Price Discrimination
396 (1)
Third-Degree Price Discrimination
397 (6)
Intertemporal Price Discrimination and Peak-Load Pricing
403 (3)
Intertemporal Price Discrimination
403 (1)
Peak-Load Pricing
404 (2)
The Two-Part Tariff
406 (7)
Bundling
413 (11)
Relative Valuations
414 (4)
Mixed Bundling
418 (3)
Bundling in Practice
421 (2)
Tying
423 (1)
Advertising
424 (4)
A Rule of Thumb for Advertising
426 (2)
Summary
428 (1)
Questions for Review
429 (1)
Exercises
429 (4)
Transfer Pricing in the Integrated Firm
433 (8)
Transfer Pricing When There Is No Outside Market
433 (3)
Transfer Pricing with a Competitive Outside Market
436 (2)
Transfer Pricing with a Noncompetitive Outside Market
438 (1)
A Numerical Example
439 (2)
Exercises
441 (2)
Monopolistic Competition and Oligopoly
443 (36)
Monopolistic Competition
444 (5)
The Makings of Monopolistic Competition
444 (1)
Equilibrium in the Short Run and the Long Run
445 (1)
Monopolistic Competition and Economic Efficiency
446 (3)
Oligopoly
449 (7)
Equilibrium in an Oligopolistic Market
449 (1)
The Cournot Model
450 (3)
The Linear Demand Curve---An Example
453 (2)
First Mover Advantage---The Stackelberg Model
455 (1)
Price Competition
456 (5)
Price Competition with Homogeneous Products--The Bertrand Model
456 (2)
Price Competition with Differential Products
458 (3)
Competition versus Collusion: The Prisoners' Dilemma
461 (3)
Implications of the Prisoners' Dilemma for Oligopolistic Pricing
464 (5)
Price Rigidity
465 (1)
Price Signaling and Price Leadership
465 (3)
The Dominant Firm Model
468 (1)
Cartels
469 (6)
Analysis of Cartel Pricing
470 (5)
Summary
475 (1)
Questions for Review
475 (1)
Exercises
476 (3)
Game Theory and Competitive Strategy
479 (42)
Gaming and Strategic Decisions
479 (3)
Noncooperative versus Cooperative Games
480 (2)
Dominant Strategies
482 (2)
The Nash Equilibrium Revisited
484 (6)
Maximin Strategies
486 (2)
Mixed Strategies
488 (2)
Repeated Games
490 (4)
Sequential Games
494 (3)
The Extensive Form of a Game
495 (1)
The Advantage of Moving First
496 (1)
Threats, Commitments, and Credibility
497 (6)
Empty Threats
498 (1)
Commitment and Credibility
498 (2)
Bargaining Strategy
500 (3)
Entry Deterrence
503 (6)
Strategic Trade Policy and International Competition
505 (4)
Auctions
509 (8)
Auction Formats
510 (1)
Valuation and Information
510 (1)
Private-Value Auctions
511 (1)
Common-Value Auctions
512 (1)
Maximizing Auction Revenue
513 (1)
Bidding and Colusion
514 (3)
Summary
517 (1)
Questions for Review
517 (1)
Exercises
518 (3)
Markets for Factor Inputs
521 (30)
Competitive Factor Markets
521 (13)
Demand for a Factor Input When Only One Input Is Variable
522 (2)
Demand for a Factor Input When Several Inputs Are Variable
524 (2)
The Market Demand Curve
526 (3)
The Supply of Inputs to a Firm
529 (2)
The Market Supply of Inputs
531 (3)
Equilibrium in a Competitive Factor Market
534 (5)
Economic Rent
535 (4)
Factor Markets with Monopsony Power
539 (4)
Monopsony Power: Marginal and Average Expenditure
539 (1)
Purchasing Decisions with Monopsony Power
540 (1)
Bargaining Power
541 (2)
Factor Markets with Monopoly Power
543 (6)
Monopoly Power over the Wage Rate
544 (1)
Unionized and Nonunionized Workers
545 (4)
Summary
549 (1)
Questions for Review
549 (1)
Exercises
550 (1)
Investment, Time, and Capital Markets
551 (32)
Stocks versus Flows
552 (1)
Present Discounted Value
553 (3)
Valuing Payment Streams
553 (3)
The Value of a Bond
556 (4)
Perpetuities
556 (1)
The Effective Yield on a Bond
557 (3)
The Net Present Value Criterion for Capital Investment Decisions
560 (4)
The Electric Motor Factory
561 (1)
Real versus Nominal Discount Rates
562 (1)
Negative Future Cash Flows
563 (1)
Adjustments for Risk
564 (4)
Diversifiable versus Nondiversifiable Risk
564 (1)
The Capital Asset Pricing Model
565 (3)
Investment Decisions by Consumers
568 (2)
Investments in Human Capital
570 (3)
Intertemporal Production Decisions---Depletable Resources
573 (4)
The Production Decision of an Individual Resource Producer
574 (1)
The Behavior of Market Price
574 (1)
User Cost
575 (1)
Resource Production by a Monopolist
576 (1)
How Are Interest Rates Determined?
577 (3)
A Variety of Interest Rates
579 (1)
Summary
580 (1)
Questions for Review
580 (1)
Exercises
581 (2)
Part Four Information, Market Failure, and the Role of Government
583 (112)
General Equilibrium and Economic Efficiency
585 (32)
General Equilibrium analysis
585 (5)
Two Interdependent Markets---Moving to General Equilibrium
586 (1)
Reaching General Equilibrium
587 (3)
Efficiency in Exchange
590 (7)
The Advantages of Trade
590 (1)
The Edgeworth Box Diagram
591 (1)
Efficient Allocations
592 (1)
The Contract Curve
593 (1)
Consumer Equilibrium in a Competitive Market
594 (2)
The Economic Efficiency of Competitive Markets
596 (1)
Equity and Efficiency
597 (3)
The Utility Possibilities Frontier
597 (2)
Equity and Perfect Competition
599 (1)
Efficiency in Production
600 (6)
The Production Possibilities Frontier
601 (2)
Output Efficiency
603 (1)
Efficiency in Output Markets
604 (1)
The Gains from Free Trade
605 (1)
Comparative Advantage
606 (4)
An Expanded Production Possibilities Frontier
607 (3)
An Overview---The Efficiency of Competitive Markets
610 (2)
Why Market Fail
612 (2)
Market Power
612 (1)
Incomplete Information
613 (1)
Externalities
613 (1)
Public Goods
613 (1)
Summary
614 (1)
Questions for Review
614 (1)
Exercises
615 (2)
Markets with Asymmetric Information
617 (28)
Quality Uncertainty and the Market for Lemons
617 (6)
The Market for Used Cars
618 (2)
Implications of Asymmetric Information
620 (1)
The Importance of Reputation and Standardization
621 (2)
Market Signaling
623 (5)
A Simple Model of Job Market Signaling
624 (3)
Guarantees and Warranties
627 (1)
Moral Hazard
628 (2)
The Principal---Agent Problem
630 (6)
The Principal---Agent Problem in Private Enterprises
631 (2)
The Principal--Agent Problem in Public Enterprises
633 (2)
Incentives in the Principal---Agent Framework
635 (1)
Managerial Incentives in an Integrated Firm
636 (3)
Asymmetric Information and Incentive Design in the Integrated Firm
637 (2)
Applications
639 (1)
Asymmetric Information in Labor Markets: Efficiency Wage Theory
639 (3)
Summary
642 (1)
Questions for Review
642 (1)
Exercises
643 (2)
Externalities and Public Goods
645 (50)
Externalities
645 (6)
Negative Externalities and Inefficiency
646 (2)
Positive Externalities and Inefficiency
648 (3)
Ways of Correcting Market Failure
651 (12)
An Emissions Standard
652 (1)
An Emissions Fee
653 (1)
Standards versus Fees
654 (2)
Tradeable Emissions Permits
656 (4)
Recycling
660 (3)
Stock Externalities
663 (6)
Stock Buildup and its Impact
664 (5)
Externalities and Property Rights
669 (4)
Property Rights
669 (1)
Bargaining and Economic Efficiency
670 (1)
Costly Bargaining--The Role of Strategic Behavior
671 (1)
A Legal Solution---Suing for Damages
671 (2)
Common Property Resources
673 (3)
Public Goods
676 (4)
Efficiency and Public Goods
677 (1)
Public Goods and Market Failure
678 (2)
Private Preferences for Public Goods
680 (2)
Summary
682 (1)
Questions for Review
683 (1)
Exercises
683 (4)
Appendix: The Basics of Regression
687 (8)
An Example
687 (1)
Estimation
688 (1)
Statistical Tests
689 (2)
Goodness of Fit
691 (1)
Economic Forecasting
691 (3)
Summary
694 (1)
Glossary 695 (16)
Answers to Selected Exercises 711 (12)
Photo Credits 723 (2)
Index 725

eng.