Salale University

College of Business and Economics

Department of Economics
Course outline of Microeconomics II
Course Code: Econ 2022
Course Description
This course covers theories of market structure like monopolistic competition and oligopoly,
game theory, factor market pricing, general equilibrium analysis and asymmetric information.

Course Objective
 Offer a deeper understanding of the different market structures and how firms behave
under monopolistically competitive and oligopoly markets.
 Give students an overview discussion of general equilibrium analysis and asymmetric
information.
By: Solomon T. (Assistant Professor)
Lecture Topic of the Lecture Reference Materials
(hours)
Chapter One: Monopolistic Competition
6 hours 1.1. Assumptions o Koutsoyannis: pp 202 – 209
1.2. Product Differentiation, the demand curve and cost of the firm o Dwivedi: PP 378 – 388
1.3. The Concept of Industry and product ‘group’ o Pindyck: PP 421 – 425
1.4. Short-run and long-run equilibrium of the firm
1.5. Excess capacity and welfare loss
Chapter Two: Oligopoly
12 2.1. Non Collusive Oligopoly o Koutsoyannis: pp 216 – 251
hours 2.1.1. Cournot’s Duopoly Model o Dwivedi: PP 395 – 418
2.1.2. The Kinked Demand Model o Pindyck: PP 428 – 453
2.1.3. Bertrand’s Duopoly Model
2.1.4.Stackelberg’s Duopoly Model
2.2. Collusive Oligopoly
2.2.1. Cartels
2.2.1.1. Cartels Aiming at Joint Profit Maximization
2.2.1.2. Market Sharing Cartel
2.2.2. Price Leadership
2.2.2.1. The Low Cost Price Leader
2.2.2.2. The Dominant Firm
Chapter Three: Game Theory
6 hours 3.1. Dominant Strategy Equilibrium o Koutsoyannis: pp 405 – 415
3.2. Nash Equilibrium o Pindyck: PP 458 – 470
3.3. Mixed Strategy Equilibrium o Varian: PP 259-280
3.4. Prisoner’s Dilemma
3.5. Repeated Games and Enforcing A Cartel
3.6. Sequential Game
3.7. Game of Entry Deterrence
Chapter Four: Pricing of Factors of Production and Income Distribution
4.1. Factor pricing in a perfectly competitive market o Koutsoyannis: pp 438 - 451
15 4.1.1. The demand for factors of production o Dwivedi: PP 435– 452
hours 4.1.1.1. The demand for one variable productive factors o Pindyck: PP 488 – 506
4.1.1.2. The demand for several variable inputs
4.1.1.3. Market demand for a factor
4.1.2. Factor supply and factor prices
4.1.2.1. The supply of labour by an individual worker
4.1.2.2. The market supply of labour
 4.1.2.3. Factor pricing
4.2. Factor pricing in imperfectly competitive markets o Koutsoyannis: pp 451 - 480
4.2.1. Monopolistic power in product market o Dwivedi: PP 458 – 475
4.2.1.1. Demand of the firm for a single variable input o Pindyck: PP 509 – 518
4.2.1.2. Demand of the firm for two or more variable inputs
4.2.1.3. Market demand and supply of factors
4.2.2. Monopolistic power in the factor market (monopsony)
4.2.2.1. A monopolist using a single variable factor
4.2.2.2. A monopolist using two or more variable inputs
4.2.3. Bilateral monopoly
4.3. Elasticity of factor substitution, technological progress and
income distribution
Chapter Five: General Equilibrium and Welfare Economics
6 hours 5.1. Partial and General Equilibrium Analysis o Koutsoyannis: pp 495 - 506
5.2. General Equilibrium in a Pure Exchange Economy o Dwivedi: PP 557 – 561
5.3. General Equilibrium in Production o Pindyck: PP 562 – 568, 573
5.4.Simultaneous Equilibrium of Production and Consumption – 580
5.5 Welfare Economics: Criterions
Chapter Six: Introduction to Asymmetric Information
3 hours 6. Asymmetric Information o Pindyck: PP 591 – 615
6.1. Adverse Selection
6.2. Moral Hazard
6.3. Signalling and Screening
Course Delivery Methods
The delivery method shall be student-centered. Students are highly expected to participate in
class works at the middle and end of each session and in group discussions inside and outside
of the class. Specifically the course will be delivered through the following methods:
 Lecture Method
 In-class problem solving
 Group Work
 Assignment
Assessment Methods
Student evaluation in this Courseconsist both formative and summative assessments including
quizzes, test and final exam. Marks will be allocated according to the following grading
schedule.
Assessment Method Weight
Assignment(Indiv/group) 20%
Quizzes/Tests (Max of 15% each) 30%
Final Exam 50%
Total 100%
REFRENCES
1. A. Koutsoyiannis, Modern Microeconomics
2. H.S. Agrawal, Principles of Economics, 7th edition.
3. Hal R. Varian, Intermediate Microeconomics: A Modern Approach, Forth Edition
4. C. Ferguson, Microeconomic Theory
5. R.S Pindyck and D.L.Rubinifeld, Microeconomics
6. E. Mansfield, Microeconomics: Theory and Applications
7. Robert H. Frank, Microeconomics and Behavior
* Any other Intermediate Microeconomics text book can also be used as a supplementary
reading material.