Economy 1.0 Summary
Unit 4: Social Interactions
Key Concepts
Types of Social Preferences
Game Theory and Strategic Interaction
Examples of Social Interactions
Fairness and Social Norms
Modeling Social Preferences
Cooperation and Punishment
Key Equations and Graphs
Unit 5: Property and Power - Notes
Key Concepts
Institutions and Power
Efficiency and Fairness
Models of Interaction
Pareto Efficiency vs. Inefficiency
Fairness Evaluation Methods
Case Study: Angela and Bruno
Key Terms
Graphs and Diagrams
Efficiency in Economic Models
Unit 6: The Firm - Owners, Managers, and Employees
Key Concepts
Firms, Markets, and Division of Labour
Capitalist Firms as Planned Economies
Coordination of Work
Contracts and Relationships
Separation of Ownership and Control
Incomplete Contracts
Employment Rent and the Labour Discipline Model
Determinants of Employment Rent
Principal-Agent Problem
Models of Interaction
Units 7 & 8: Notes
Key Concepts
Part 1: The Firm and Its Customers
Economy 1.0 Summary 1
, Part 2: Competitive Markets
Part 3: Efficiency and Fairness
Examples and Applications
Equations & Formulas
Unit 12: Markets, Efficiency, and Public Policy - Notes
Key Concepts
Market Failure
Solutions to Market Failures
External Costs and Taxes
Public Goods
Policy Examples
Graphical Analysis
Key Figures
Unit 4: Social Interactions
Key Concepts
1. Social Preferences: How individuals care about the outcomes of others in addition to
their own outcomes.
2. Strategic Interaction: Decisions made by individuals considering the reactions and
decisions of others.
3. Nash Equilibrium: A situation where no player can benefit by changing their strategy
while the other players keep their strategies unchanged.
4. Dominant Strategy: The best strategy for a player regardless of the strategies chosen by
other players.
5. Altruism: A selfless concern for the well-being of others.
6. Reciprocity: Responding to another's action with a similar action.
7. Public Goods: Goods that are non-excludable and non-rivalrous, leading to free-rider
problems.
8. Social Norms: Unwritten rules about how to behave.
Types of Social Preferences
Self-interest: Acting solely for personal benefit.
Altruism: Acting out of concern for others' welfare.
Economy 1.0 Summary 2
Unit 4: Social Interactions
Key Concepts
Types of Social Preferences
Game Theory and Strategic Interaction
Examples of Social Interactions
Fairness and Social Norms
Modeling Social Preferences
Cooperation and Punishment
Key Equations and Graphs
Unit 5: Property and Power - Notes
Key Concepts
Institutions and Power
Efficiency and Fairness
Models of Interaction
Pareto Efficiency vs. Inefficiency
Fairness Evaluation Methods
Case Study: Angela and Bruno
Key Terms
Graphs and Diagrams
Efficiency in Economic Models
Unit 6: The Firm - Owners, Managers, and Employees
Key Concepts
Firms, Markets, and Division of Labour
Capitalist Firms as Planned Economies
Coordination of Work
Contracts and Relationships
Separation of Ownership and Control
Incomplete Contracts
Employment Rent and the Labour Discipline Model
Determinants of Employment Rent
Principal-Agent Problem
Models of Interaction
Units 7 & 8: Notes
Key Concepts
Part 1: The Firm and Its Customers
Economy 1.0 Summary 1
, Part 2: Competitive Markets
Part 3: Efficiency and Fairness
Examples and Applications
Equations & Formulas
Unit 12: Markets, Efficiency, and Public Policy - Notes
Key Concepts
Market Failure
Solutions to Market Failures
External Costs and Taxes
Public Goods
Policy Examples
Graphical Analysis
Key Figures
Unit 4: Social Interactions
Key Concepts
1. Social Preferences: How individuals care about the outcomes of others in addition to
their own outcomes.
2. Strategic Interaction: Decisions made by individuals considering the reactions and
decisions of others.
3. Nash Equilibrium: A situation where no player can benefit by changing their strategy
while the other players keep their strategies unchanged.
4. Dominant Strategy: The best strategy for a player regardless of the strategies chosen by
other players.
5. Altruism: A selfless concern for the well-being of others.
6. Reciprocity: Responding to another's action with a similar action.
7. Public Goods: Goods that are non-excludable and non-rivalrous, leading to free-rider
problems.
8. Social Norms: Unwritten rules about how to behave.
Types of Social Preferences
Self-interest: Acting solely for personal benefit.
Altruism: Acting out of concern for others' welfare.
Economy 1.0 Summary 2
