MICROECONOMICS 2
- Academic year
- 2018/2019 Syllabus of previous years
- Official course title
- MICROECONOMICS 2
- Course code
- EM2Q03 (AF:278911 AR:160864)
- Modality
- On campus classes
- ECTS credits
- 7
- Degree level
- Master's Degree Programme (DM270)
- Educational sector code
- SECS-P/01
- Period
- 2nd Semester
- Course year
- 1
- Where
- VENEZIA
- Moodle
- Go to Moodle page
Contribution of the course to the overall degree programme goals
This course provides both an introduction to game theory, viewed as the scientific language to deal with strategic interaction and a representation of the theory of insurance, the theory of agency, the problems of adverse selection and moral hazard. Differently from a university-wide policy that equates 1 ECTS with 3.75 actual hours of frontal instruction, this 7-ECTS course equates 1 ECTS with 6.43 actual hours of frontal instruction.
Expected learning outcomes
a.1) Ability to build formal models of strategic interactions.
a.2) Ability to discern (iteratively) dominated strategies.
a.3) Ability to conceptualise randomisation in strategic play.
a.4) Ability to build formal models of choices under uncertainty
a.5) Ability to conceptualise the role of information in economics
b) Applying knowledge and understanding:
b.1) Ability to compute different kinds of equilibria.
b.2) Ability to build formal models for strategic interactions.
b.3) Ability to handle randomisation in strategic play.
b.4) Ability to compute optimal solutions under uncertainty.
b.5) Ability to build formal models of equilibrium under different market structures.
c) Making judgements
c.1) Ability to detect and discuss trade-offs in strategic choices.
c.2) Ability to rank the plausibility of different predictions about strategic interactions.
c.3) Ability to detect and discuss trade-offs in the context of risk and the context of markets affected by asymmetric information.
d) Lifelong learning skills
d.1) Ability to reframe issues in terms of the opponents' viewpoint.
d.2) Ability to elaborate issues in terms different starting assumptions.
d.3) Ability to make use of new tools and adapt competences.
Pre-requirements
Students are required to be familiar with standard material in analysis and probability at the level of the mathematical appendix in Jehle and Reny (2011), Advanced Microeconomic Theory, third edition. No previous formal knowledge of game theory is required, although familiarity with simple examples such as the Prisoners' Dilemma or the Battle of Sexes is assumed. No previous formal knowledge of choices under uncertainty or of information economics is required though students might already know concepts such as “expected utility”. Specific economic situations where these concepts are relevant will be taken as examples.
Contents
1. Strategic dominance.
2. Nash equilibrium.
3. Mixed strategies.
4. Backward Induction.
5. Alternating-offer bargaining.
6. Subgame perfect equilibrium.
7. Repeated games.
8. Incomplete information.
9. Auctions.
10. Perfect Bayesian equilibrium and refinements
11. Risk dominance.
12. Evolutionary stability.
Part 2
13. The role of information in economics.
14. Decision making under uncertainty.
15. The expected utility model, risk aversion, risk premium, the structure and value of information.
16. Contingent markets and insurance: The case of symmetric information
17. The role of insurance and risk sharing.
18. State-space representation.
19. Asymmetric information and incentives.
20 The revelation principle. Adverse selection. The market of lemons.
21 Optimal contracts, signalling and screening, adverse selection in insurance markets.
22. Moral hazard. The standard principal-agent problem, moral hazard and insurance.
Referral texts
G.A. Jehle and P. Reny (2011), Advanced Microeconomic Theory, third edition, Prentice-Hall.
Mas-Colell, A., Whinston, M.D., Green, J.R. (1995). Microeconomic Theory. Oxford University Press.
Salanié, B. (2005). The Economics of Contracts. MIT Press.
A detailed timeline of the lectures containing sections/chapters of the above textbooks will be provided at the beginning of the lectures and in the dedicated websites
Assessment methods
The exam is closed-notes and closed-book, but you are allowed to use a pocket calculator and two sides of an A4-sheet prepared by you at home. Failing to register for the exam is sufficient cause for denying admission.
Teaching methods
Teaching language
Further information
Ca’ Foscari abides by Italian Law (Law 17/1999; Law 170/2010) regarding support services and accommodation available to students with disabilities. This includes students with mobility, visual, hearing and other disabilities (Law 17/1999), and specific learning impairments (Law 170/2010). If you have a disability or impairment that requires accommodations (i.e., alternate testing, readers, note takers or interpreters) please contact the Disability and Accessibility Offices in Student Services: disabilita@unive.it.