In Advanced Microeconomics (ECO 301), we build on the ECO 201 course to go beyond the competitive equilibrium setting and elicit new causes of market failures. We aim to study how the presence of incomplete and asymmetric information affects the standard analysis of microeconomic theory. The starting point is that the presence of asymmetric information leads to market failures and open the question of how to regulate and appropriately design markets to solve or reduce these failures. We will present the basics of two important theories and methods which have been the core of the modern microeconomic analysis since 1970: the signaling games and the mechanism design. The students will learn the tools to analyze markets and interactions in the presence of incomplete and asymmetric information. They will learn how to develop policy tools and how to design markets to mitigate the issues induced by the information structure.
More specially, we will cover the following topics:
- Chapter 1: Game theory under incomplete information (1)
- Chapter 2: Asymmetric Information, Signaling and Application to the Insurance Market (2)
- Chapter 3: The Principal Agent Model (3)
- Chapter 4: Auctions and Mechanism Design (4)
- Chapter 5: Market Design and Matching
The mathematical treatments are rigorous but not as much as at the graduate level. This course will be thus most useful as a preparation for formal graduate studies in Economics.
- (1) Osborne, M. J., & Rubinstein, A. (1994). A course in game theory. MIT press (Chap 2 & 11)
- (2) Jehle, G. A., & Reny, P. J. (2001). Advanced Microeconomic Theory (Chap 7, 8 & 9)
- (3) Laffont, J. J., & Martimort, D. (2009). The theory of incentives: the principal-agent model. Princeton university press (Chap 2 & 4)
- (4) Krishna, V. (2009). Auction theory. Academic press (Chap 2 & 5)