Preface

The 12th edition of Microeconomic Theory: Basic Principles and Extensions continues a suc- cessful collaboration between the authors starting with the 10th edition. This edition rep- resents our efforts to continue refining and modernizing our treatment of microeconomic theory. Despite the significant changes appearing in virtually every chapter, the text retains all of the elements that have made it successful for so many editions. The basic approach is to focus on building intuition about economic models while providing students with the mathematical tools needed to go further in their studies. The text also seeks to facilitate that linkage by providing many numerical examples, advanced problems, and extended discussions of empirical implementation—all of which are intended to show students how microeconomic theory is used today. New developments continue to keep the field excit- ing, and we hope this edition manages to capture that excitement.

NEW TO THE TWELFTH EDITION

We took a fresh look at every chapter to make sure that they continue to provide clear and up-to-date coverage of all of the topics examined. The major revisions include the following.

? Many of the topics in our introductory chapter on mathematics (Chapter 2) have been further revised to conform more closely to methods encountered in the recent econom- ics literature. Significant new material has been added on comparative statics analysis (including the use of Cramer’s rule) and on the interpretation of the envelope theorem.

? New figures have been added to illustrate the most basic concepts (risk aversion, certainty equivalence) in Chapter 7 on uncertainty and the notation streamlined throughout.

? For all the figures exhibiting the game-theory examples in Chapter 8, detailed captions have been added providing synopses and further analytical points. We tightened the exposition by removing several extraneous examples.

? Passages have been added to Chapter 10 to help clear up perennial sources of student confusion regarding different categories of costs—economic versus accounting, fixed versus sunk, and so forth—illustrating with examples from real-world industries.

? Our discussion of the comparative statics of the competitive model in Chapter 12 has been extensively updated and expanded using the new mathematical material provided in Chapter 2.

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? Chapter 14 on monopoly has been extensively revised. A passage has been added mak- ing basic points about the monopoly problem, connecting it to general profit maximiza- tion from Chapter 11. Our revamped approach to comparative statics is now featured in several places in this chapter. We cover recent advances in price discrimination, tracta- ble functional forms, and innovation.

? A significant amount of new material has been added to Chapter 17 on capital by look- ing at savings decisions under uncertainty. The concept of the stochastic discount factor is introduced and used to describe a number of issues in modern finance theory.

? Coverage of behavioral economics has been further expanded with a number of added references throughout the relevant chapters. One or more new behavioral econom- ics problems have been added to most chapters covering topics such as decision util- ity, spurious product differentiation, and the role of competition and advertising in unshrouding information about prices to consumers. These appear at the end of the list of problems, highlighted by the icon of the head with psychological gears turning.

Many new problems have been added with the goal of sharpening the focus on ones that will help students to develop their analytical skills.

SUPPLEMENTS TO THE TExT

The thoroughly revised ancillaries for this edition include the following.

? The Solutions Manual and Test Bank (by the text authors). The Solutions Manual con- tains comments and solutions to all problems, and the Test Bank has been revised to include additional questions. Both are available to all adopting instructors in electronic version on Instructor’s companion site.

? PowerPoint Lecture Presentation Slides. PowerPoint slides for each chapter of the text provide a thorough set of outlines for classroom use or for students as a study aid. The slides are available on Instructor’s companion site.

? MindTap? for Microeconomic Theory: Basic Principles & Extensions, 12th Edition, is a digital learning solution allowing instructors to chart paths of dynamic assignments and applications personalized for their own courses. MindTap also includes real-time course analytics and an accessible reader to help engage students and encourage their high- level thinking rather than memorization.

? Cengage Learning Testing powered by Cognero? is a flexible, online system that allows instructors to import, edit, and manipulate content from the text’s test bank or else- where, including the instructors own favorite test questions; create multiple test ver- sions in an instant; and deliver tests from learning management system used for the course, the classroom, or wherever the instructor wants.

ONLINE RESOURCES

Cengage Learning provides instructors with a set of valuable online resources that are an effective complement to this text. Each new copy of the book comes with a registration card that provides access to Economic Applications and InfoTrac College Edition.

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ACkNOWLEDgMENTS

We are indebted to the team at Cengage, most importantly Anita Verma, for keeping all of the moving parts of this new edition moving and on schedule. The copyeditors at Lumina Datamatics, Inc did a great job of making sense of our messy manuscripts. Joseph Malcolm coordinated the copyediting and supervised the production of page proofs, deal- ing expertly with many of the technical problems that arise in going from text to print equations. We very much appreciate his attention to the complexities of this process and are grateful for his professionalism and hard work.

We thank our colleagues at Amherst and Dartmouth College for valuable conversa- tions and understanding. Several colleagues who used the book for their courses offered us detailed suggestions for revision. We have also benefitted from the reactions of gen- erations of students to the use of the book in our own microeconomics classes. Over the years, Amherst students Eric Budish, Adrian Dillon, David Macoy, Tatyana Mamut, Anoop Menon, katie Merrill, Jordan Milev, and Doug Norton and Dartmouth students Wills Begor, Paulina karpis, glynnis kearny, and Henry Senkfor worked with us revising various chapters.

Walter again gives special thanks to his wife Susan; after providing much-needed sup- port through twenty-four editions of his microeconomics texts, she is happy for the success but continues to wonder about his sanity. Walter’s children (kate, David, Tory, and Paul) still seem to be living happy and productive lives despite a severe lack of microeconomic education. Perhaps this will be remedied as the next generation grows older. At least he hopes they will wonder what the books dedicated to them are all about. He is offering a prize for the first to read the entire text.

Chris gives special thanks to his family—his wife, Maura Doyle, and their daughters, Clare, Tess, and Meg—for their patience during the revision process. Maura has extensive experience using the book in her popular microeconomics courses at Dartmouth College and has been a rich source of suggestions reflected in this revision.

Perhaps our greatest debt is to instructors who adopt the text, who share a similar view of how microeconomics should be taught. We are grateful for the suggestions that teachers and students have shared with us over the years. Special mention in this regard is due genevieve Briand, Ramez guirguis, Ron Harstad, Bradley Ruffle, and Adriaan Soetevent, who provided pages of detailed, perceptive comments on the previous edi- tion. We encourage teachers and students to continue to e-mail us with any comments on the text (wenicholson@amherst.edu or chris.snyder@dartmouth.edu.

Walter Nicholson Amherst, Massachusetts Christopher Snyder Hanover, New Hampshire

June 2016