Producers, consumers, and partial equilibrium (Q2825530)

This textbook of advanced level covers almost all themes of modern microeconomic theory, and presents most of them comprehensively. The author highlights the well-known textbooks of \textit{H. R. Varian} [Microeconomic analysis. 3rd ed. New York, NY: W. W. Norton \& Comp. (1992), see also Zbl 0732.90002] and \textit{A. Mas-Colell} et al. [Microeconomic theory. New York, NY: Oxford University Press (1995; Zbl 1256.91002)] as patterns. But he extends and deepens some themes based on his rich tutorial experience.NEWLINENEWLINEThe book consists of four parts. The first part consists of three chapters and presents optimization techniques used in mathematical neoclassical analysis of economic phenomena. In particular, the `Envelope theorem' is presented here, which is used later in the comparative statics' analysis of rational economic agents noted in the title (producers and consumers) who are optimizing their objectives. These agents are described in the second and third parts.NEWLINENEWLINEThe second part consists of Chapters 4--7 and describes producers who are competitive firms in a microeconomics setting. Here, two standard problems for firms -- profit maximization and cost minimization -- are presented, deeper than in the books of Varian and Mas-Colell et al. mentioned above.NEWLINENEWLINEPart 3 describes consumers who are rational and independent in accordance with methodological individualism underlying contemporary neoclassical economics. Chapters 8--11 present standard consumer's theory in the classical setting: preferences, expenditure minimization, utility maximization, Hicks-Slutsky decomposition, and demand integrability (rationalizability) problem. In addition, Chapter 12 describes the problem of consumer welfare. Here, two monetary measures of welfare are presented which are used to evaluate the welfare consequences of price changes. The first measure presents a monetary equivalent to the price increase and is called the `equivalent variation' (EV) of the price increase. The second measure presents a monetary compensation for the price increase and it is called the `compensating variation' (CV) of the price increase. Both measures are defined through expenditure function and indirect utility function.NEWLINENEWLINEPart 4, in Chapters 13--15, represents three themes on the equilibrium problem. Firstly, the partial general equilibrium model limited to two commodities is investigated. Such simplification with respect to the Arrow-Debreu setting provides a simplification of the proof of equilibrium existence and its investigation. Chapter 14 investigates single-product monopoly including the problems of regulation, and price discrimination of consumers. The last, fifteenth chapter presents oligopoly theory. Oligopoly behavior has the character of a strategic game, and thus the author gives a sketch of game theory. On this base, different models of oligopolistic markets are presented: the classical ones of Cournot, Bertrand, Stackelberg, and contemporary investigations of the problem.NEWLINENEWLINEIn general, this textbook for graduate students presents state-of-the-art models and the mathematical apparatus of microeconomics, which is often supplementing some sections of the books mentioned above. All chapters contain bibliographic notes and many exercises.NEWLINENEWLINEIt should be noted that the author positions the book as the representing positive theory which has a predictive potential for real economic phenomena. He defends this contention characterizing standard neoclassical assumptions (postulates) as `refutable hypotheses'. However, refutability means the limitation of any scientific theory respectively infinite complexity of reality; the value of a theory is defined by the degree of its ability of representing and predicting the phenomena under investigation. It is well known nowadays that the neoclassical reductive (individualistic) approach to creating theory of market (collective) demand, which is the object of real economic interest, have revealed insolvency; see, for example, the fourth chapter of the above-mentioned book by Mas-Colell et al., and the Russian paper [``Кризис економической теории'', Èkon. Nauka Sovrem. Ross., No. 1, 46--66 (1998), \url{https://mpra.ub.uni-muenchen.de/22015/}] by \textit{V. Polterovich}.NEWLINENEWLINEThe productive alternative for the individualistic approach is the holistic one developed in the reviewer's Russian papers [Zh. Èkon. Teor. 2009, No. 1, 85--94 (2009; Zbl 1183.91087); Ècon. Nauka Sovrem. Ross. 2013, No. 4, 19--36 (2013; Zbl 1310.91089)] and in the book [Demand of consumers: analytical theory and applications. Ulyanovsk: UlSU Press (2015), \url{http://www.rfbr.ru/rffi/ru/books/o_1945611}]. Here, postulates of the neoclassical theory of individual demand are transferred to market demand theory as hypotheses. These hypotheses should be verified with respect to the trade statistics of the market. Thus, the mathematical apparatus and the formal results of the neoclassical demand theory presented in the author's book are preserved, but here they are referred to the market demand.