MICRO
BACKGROUND
definition
bargaining game
uncertainty
common
p
buyer's surplus
I
E
benefit total benefit
total cost
producer surplus
a net
D
PS
seller's surplus
net benefit
Rational
us
max
U
Max
A
in
Effinient
W
the individual
best interest
IF
a
market
then
is
perfectly competitive
rational
1 many buyers
choice
seller
Efficiency
surplices
2
Idential
PRICE TAKER
prod
3
free entry exit
Y
No TRANCATION
5
if
NO
I
IOSTS
EXTERNALITIES
of the Pol
rational choices
ANY
efficient
cost
transaction
ex
violated
are
MARKET Failure
outcome
failure
Bryn
WTP
101
Seller
WTA
99
B's Surplus
S's surplus
a
w
if
Pt
Cw
99 1013
then
101
P
P
99
E
transaction is
o
ex
P
101
B's surplus
A
S's
As
su
pl s
101 4101
I
101
99
W
40
2
s a
lets
there's
say
ex
cost
3
WTP
V
transaction cost
a
in
3
of
gas to get to stove
101
98
3
n
still
for
EFFICIENT
but
P
no
is
to acquire
B
for
possible
it
ownership
to
be RATIONAL
Bargaining game
VB
Us
B
KB VB P
As P V
if
and
Vis Us
then
this
each
interest
is
B
a
S
the
s
currently has
ownership
S
negotiate
prior
over
B
wants to max
S
wants to max
COOPERATIVE
to
act
best result
game
in
is
pp
As PM
Us Vis
Pt
needs
t
their
reached
U
the
is
I
An
alloiation
maximum amount
W
w
an
someone
whoever values
ex
V
no
A
else's
surplus
the
resource
in
gang
surplus
someone's
of
surplus
Efficient
www
ownership
total
of
maximized
i
Pareto
I
to party
value
threat
NTP WTA
aka
EFFICIENT
N
the good
of
valuation
without
which
reducing
the
most
Va
105
has
it
4101
A guts
if
99
Us
ownership
105 1
An
ii
if
B
buys
FB
it
100
for
101 100
1
Mine
A bays
if
A
As
for
silo
0
100 99 1
i
if
A buys from B for
Ap
EXTERNALITY
05jf
whenever
benefit
lets
say
ex
there's
cost
3
at
4
t
someone
transaction
102
incurs
positive
t
outside
cost Cargative ext
a
ext
external
an
of the
cost
of
3
due to pollution
101
P
t.it 9
W
Y
RATIONAL
extend
benefit to B
cost to B t
benefit to s
cost to St
massifs
1
efficient
costs
Transaction
longer
Negative externalities
transactions no
rational
rational
longer
transactions no
efficient
h
origin
Us VB
of
4
traditionally thought of
it
as
MC
willingness to ancept
he lowest
price
S will
transfer ownership
Ug Ug
f
endowment
time spent of ownership
opportunity
I
think
for
vesult
lost
of
investment
emotions
U may
problem