A Dynamic Theory of Random Price Discounts
- How do rational people behave?
- How do various markets function?
- How can market failures be corrected?
- How can institutions ameliorate market failures?
- Should health markets be liberalized?
Microeconomics begins on individual decision making and, from this foundation, builds a theory of economic mechanisms. Game theoretic techniques are used to capture rational and strategic aspects of behavior.
Microeconomic theory is partly basic research, building solid and tractable foundations for economics. But modern microeconomic theory is also much more. It is, in particular, vital in solving practical real world problems. For example, theoretical tools are needed to evaluate how different – often hypothetical – economic institutions work. This knowledge is crucial in designing our economic environment.