Microeconomics

Author: Mansfield
Publisher:
Publish Date: 2002-02-01
Features: Excerpts: Preface
This textbook is now in its ninth edition, but it still has the same purpose as the edition: to explain microeconomic theory as clearly and interestingly as possible, and to illustrate its wide range of practical applications. However, due to the progress of the theory itself and changes in its applications and teaching methods, we have made substantial revisions to each chapter. In this new edition, we have added two chapters: one discussing the role of competition in promoting economic efficiency (and the role of government intervention), and another explaining how asymmetric information affects the behavior of buyers and sellers in markets. Below, we briefly describe these two chapters and other additions and changes:
1. Following the discussion of perfect competition, we have added a chapter on the role of government intervention, Chapter 10. In this chapter, we examine how perfect competition promotes economic efficiency and the impact of government intervention. It is crucial for students to understand how competitive markets respond to such intervention and to be able to (at least roughly) estimate the gains and losses of consumers and producers resulting from it. The analytical tools (and several real-world case studies) provided in this chapter help students develop this ability.
2. The other newly added chapter is Chapter 18 on asymmetric information. In this chapter, we discuss how asymmetric information affects the behavior of buyers and sellers in markets. Our findings can explain various phenomena in modern economies—from disproportionately high numbers of defective cars in used car markets to widespread unemployment in labor markets. Additionally, our results demonstrate why market failures can occur in a perfectly competitive economy when asymmetric information exists.
3. This edition includes a new cross-chapter case study: "FCC and the Global Largest Auction." This case study examines the auction of wideband personal communication service licenses by the Federal Communications Commission (FCC) in May 1995 and the auction of narrowband personal communication services in 1994. The FCC's auction is a milestone in the application of microeconomic theory.
4. To accommodate the added content, we have condensed the discussion of input prices and quantities and placed it in Chapter 14. In the previous edition, this content occupied two chapters, but it is now condensed into one.
5. We have introduced many new topics. For example, in Chapter 12, we have added the Stackelberg model and the Bertrand model; and in Chapter 13, we introduce the concept of game trees and discuss the largest size strategy.
6. We have added many new examples. In particular, the following examples are new:
(1) Coffee shops invading Manhattan;
(2) Cotton prices: the highest level since the Civil War;
(3) Are CEOs of large companies really worth $26 million a year?
(4) Gasoline price ceilings;
(5) Milk price supports;
(6) Should gasoline taxes be raised?
(7) Playing slot machines at Foxwoods;
(8) The tire retail market;
(9) Neil Simon to Broadway;
(10) Asymmetric information in the fixed-line market;
(11) "Lemons" in pickup trucks and baseball players;
(12) Dillard's, McDonald's, and the importance of reputation.
7. The end-of-chapter problems have been increased, and many existing problems have been revised to make the discussion more up-to-date. From Chapter 1 to Chapter 19, changes have been made to figures, tables, text, and notes, and every sentence has been reread with a critical eye.