Econ 301 Final Terms

Front 1

adverse selection

Back 1

form of market faillure resulting when products of different qualities are sold at a single price becaus of asymmetric information, so that too much of the low quality product and too little of the high quality product are sold

Front 2

asymmetric information

Back 2

situation in which a buyer and a seller possess different information about a transaction

Front 3

Coase Theorem

Back 3

principle that when parties can bargain without cost and to their mutual advantage, the resulting outcome will b efficient regardless of how property rights are specified

Front 4

Credible commitment

Back 4

In a sequential game, a player may gain first-mover advantage by doing something that signals a commitment to selecting the strategy that most benefits it; but its opponent must believe the signal.

Front 5

Dominant strategy

Back 5

strategy that is optimal no matter what an opponent does

Front 6

efficiency wage theory

Back 6

explanation for the presencee of unemployment and wage discrimination which recognizes that labor productivity may be affected by the wage rate

Front 7

emission fee

Back 7

charge levied on each unit of a firm's emissions

Front 8

emission standard

Back 8

legal limit on the amount of pollutants that a firm can emit

Front 9

externality

Back 9

action by either a producer or a consumer which affects other producers or consumers, but is not accounted for in the market price

Front 10

marginal expenditure

Back 10

additional cost of buying one more unit of a good

Front 11

marginal revenue product

Back 11

additional revenue resulting from the sale of output created by the use of one additional unit of input

Front 12

marginal social cost

Back 12

sum of the marginal cost of production and the marginal external cost

Front 13

market signaling

Back 13

process by which sellers send signals to buyers conveying information about product quality

Front 14

Maximin strategy

Back 14

strategy that maximizes the minimum gain that can be earned

Front 15

moral hazard

Back 15

when a party whose actions are unobserved can affect the probablity or magnitude of a payment associated with an event

Front 16

Noncooperative game

Back 16

game in which negotiation and enforcement of binding contracts are not possible

Front 17

Nonexcludability

Back 17

good that people cannot be excluded from consuming, so that is difficult or impossible to charge for its use

Front 18

Nonrivalness

Back 18

good for which the marginal cost of its provision to an additional consumer is zero

Front 19

Optimal strategy

Back 19

strategy that maximizes a player's expeted payoff

Front 20

principal-agent problem

Back 20

problem arising when agents (e.g. a firm's managers) pursue their own goals rather than the goals of the principals (e.g., the firm's owners)

Front 21

Strategic move

Back 21

decision that takes into account each other's actions and responses

Front 22

Tit-for-tat strategy

Back 22

repeated-game strategy in which a layer responds in kind to an opponent's previous play, cooperating with cooperative opponents and retaliating against uncooperative ones

Front 23

tradable emission permits

Back 23

system of marketable permits,, allocated among firms, specifying the maximum level of emissions that can be generated