Course 2005-2006 a.y.



Department of Economics

Course taught in English

Go to class group/s: 17
DIEM (8 credits - II sem. - CC)
Course Director:

Classes: 17 (II sem.)

Course Objectives

The first part of the course is devoted to explaining the work of perfectly competitive markets. This provides a benchmark against which it is possible to assess other (more realistic) market structures. The second part of the course focuses on departures from perfectly competitive markets, such as monopoly, monopolistic competition, and oligopoly. Basic notions of game theory are introduced and used to solve some real world cases.

Course Content Summary

The course is designed to allow participants to reach an understanding of key economic concepts and principles. The focus is on individual agents' - mainly consumers and producers - behaviour and on their interactions.
The following topics are covered:

  • The methodology of microeconomics. Microeconomics and managerial economics. The market: definition, boundaries and mechanics. Shifts in demand and supply. Elasticities of supply and demand. Short-run and long-run. Government policies and their effects.
  • Prior to choice. Budget constraints. Individual demand. Substitutes and complements. Consumer's surplus as a measure of welfare change. Revealed preference and price indices. Market demand. Elasticity. Network externalities.
  • Choice under uncertainty. Risk. Demand for insurance.
  • Production functions. Isoquants. Substitutability among inputs. Returns to scale. Measures of scale economies. Reasons for economies of scale.
  • Economic costs, opportunity costs, accounting costs, sunk costs. Short-run costs: average and marginal costs, shape of cost curves. Long-run costs: cost minimization, long-run average cost, shape of cost curves. Joint production and economies of scope. Empirical studies of cost curves.
  • The behavior of a single firm. The competitive industry. Price-taking among competitive firms and the residual demand curve. Zero profit conditions. Entry and exit. Restrictions on entry. Contestable markets.
  • Monopoly behavior. Market power and its determinants. Pricing and market power. Price discrimination and bundling. Natural monopoly. Monopsony.
  • Monopolistic competition. Price and quality competition. Product differentiation. Preferences for characteristics of a product.
  • Oligopoly and strategic decisions. Cooperative and non-cooperative strategic behavior. Dominant strategies. Nash equilibrium. Repeated games. Sequential games. First-mover advantages. Threats, credibility and entry deterrence.
  • Introduction to auctions. First price auctions and second price auctions.
  • General equilibrium and economic efficiency. Efficiency of free markets. Potential reasons for market failure.

Detailed Description of Assessment Methods

Exam in written form.
Students have two options: they may take the exam in two written parts, a 1st partial exam and a 2nd partial exam, or they may take one general exam. 


  •  R. PINDYCK, D. RUBINFELD, Microeconomics, Prentice Hall, 2001, 5th ed.
  •  A. DIXIT, S. SKEATH, Games of Strategy, Norton, 1999.
  •  R. GIBBONS, A Primer in Game Theory, Harvester Wheatsheaf, 1992.

For further and continuously updated information consult the  IEP web site or contact  S.I.D. - Servizio Informazioni Didattica - Institute of Economics - via Gobbi, 5 - Room 313.

Exam textbooks & Online Articles (check availability at the Library)
Last change 15/06/2005 00:00