Advanced Microeconomic Theory

Citation

Jehle, G. A., & Reny, P. J. (2011). Advanced Microeconomic Theory (3rd ed.). Financial Times/Prentice Hall (Pearson).

Chapter Summary

The third edition has nine chapters in three parts, followed by an appendix chapter on sets and mappings, lists of theorems and definitions, hints and answers to exercises, references and an index. The publisher describes the book as a rigorous, up-to-date standard in microeconomics that gives the core mathematics and modern theory an advanced student must master, in a student-friendly, efficient theorem-and-proof organisation with many examples and exercises. The chapters follow the order of the parts: the economic agents, the markets and welfare they produce, and strategic behaviour.

Part 1: Economic Agents (Chapters 1–3)

Chapter 1, Consumer Theory, opens the book with the theory of the individual consumer, the basic building block for what follows. Chapter 2, Topics in Consumer Theory, extends it with further topics on the consumer side. Chapter 3, Theory of the Firm, gives the parallel account of the producer. Together these three chapters set up the two kinds of agents whose decisions the later parts combine.

Part 2: Markets and Welfare (Chapters 4–6)

Chapter 4, Partial Equilibrium, analyses markets one at a time, taking the agents of Part 1 to a single market. Chapter 5, General Equilibrium, treats all markets together. Chapter 6, Social Choice and Welfare, steps back to ask how individual preferences and welfare are aggregated into social judgments.

Part 3: Strategic Behaviour (Chapters 7–9)

Chapter 7, Game Theory, introduces strategic interaction among a small number of decision-makers. Chapter 8, Information Economics, considers settings in which parties differ in what they know. Chapter 9, Auctions and Mechanism Design, treats the design of rules and the analysis of auctions.

Appendix: Sets and Mappings (Chapter A1)

A mathematical appendix chapter on sets and mappings supports the proofs in the main text. It is followed by a list of theorems, a list of definitions, hints and answers, references and the index.

Key Concepts

Part 1: Economic Agents

• Consumer theory: the model of individual choice that underlies demand.
• Theory of the firm: the corresponding model of production and the producer's decisions.

Part 2: Markets and Welfare

• Partial equilibrium: equilibrium in a single market.
• General equilibrium: equilibrium in all markets at once.
• Social choice and welfare: aggregating individual preferences into a social ranking.

Part 3: Strategic Behaviour

• Game theory: models of interdependent decisions.
• Information economics: models in which parties are unequally informed.
• Mechanism design and auctions: rules chosen to achieve outcomes, and the study of auction formats.

Critical Analysis

Strengths

• Theorem-proof organisation. The publisher highlights an efficient theorem-proof structure, so definitions, assumptions and results are laid out explicitly and can be located again.
• A clear progression. Nine chapters in a volume of about 670 pages move from single agents to markets and welfare to strategic interaction, which makes the book easy to map onto a first-year graduate sequence.
• Exercises with support. The back matter includes hints and answers, and lists of theorems and definitions that make it a usable reference after the course.
• Complete coverage in one volume. One book covers consumer and producer theory, competitive and general equilibrium, social choice, game theory, information economics and mechanism design.

Limitations

• Mathematically demanding. The book is meant for advanced students and builds on proofs and sets-and-mappings language.
• Compact on strategic topics. Game theory, information economics and mechanism design each get one chapter, so a course concentrating on them will need a specialist text.
• Edition dates vary. Pearson's page lists the third edition as published in 2010, while library records give 2011; check the printing when citing.

Where It Fits in the Course

This book belongs to the graduate end of the microeconomics list. Varian and Melitz's Intermediate Microeconomics and Pindyck and Rubinfeld's Microeconomics are undergraduate courses that use graphs and modest mathematics; Parkin's Microeconomics is a principles-level text, and Dixit's Microeconomics: A Very Short Introduction is a non-technical overview. All of these come before Jehle and Reny.

Mas-Colell, Whinston and Green's Microeconomic Theory is the other graduate text: a first-year graduate treatment that is rigorous and comprehensive, covering individual choice, game theory, market equilibrium, general equilibrium and welfare economics with incentives. Jehle and Reny covers a similar set of topics in a theorem-and-proof format. Many students use one as the main text and the other as a second explanation of the same results. Because the two overlap, there is little reason to work through both completely; choose the one your course follows and read the other selectively when a proof or an example does not make sense.

How to Use This Book

The book is for first-year graduate students and for advanced undergraduates who have completed intermediate microeconomics and multivariable calculus. Some linear algebra and real analysis make the proofs easier to follow.

A practical plan:

• Core: Part 1 (Chapters 1–3) in order, then Chapters 4–5, which together make up the standard consumer, producer and equilibrium sequence.
• Next: Chapter 7 (game theory) and Chapter 8 (information economics), which most courses treat as essential.
• Optional or later: Chapter 6 (social choice and welfare) and Chapter 9 (auctions and mechanism design), and the appendix on sets and mappings as needed when a proof depends on it.

Work through the exercises, check hints and answers at the back, and use the lists of theorems and definitions when revising. A useful habit is to read each theorem statement first, try to sketch the proof before reading it, and then compare; this makes the theorem-proof format work for you. Students who are taking a game theory course in parallel can treat Chapter 7 as a compact summary rather than the main text.