Master’s Programme in Economics (General Track). Open to all.

Timing

First autumn term, after completing Microeconomics 1

Learning outcomes

After the course, the student should

Be familiar with game theoretic machinery to the extent that it is used in modelling economic phenomena

Understand the mechanisms behind standard problems of information economics: adverse selection, moral hazard and signalling

Completion methods

The course consists of lectures (24 hours) and exercises either in separate sessions or integrated into the lectures. The lectures and exercise sessions are not mandatory. There is a written final exam and four internet quizzes based on the homework assignments. The homework assignments consist of mostly theoretical exercises.

Prerequisites

The course builds partly upon the contents of Microeconomics 1. Hence, the student is assumed to be familiar with the expected utility theory and the theory of choice

Recommended optional studies

Knowledge of basic analysis is certainly an advantage.

Contents

The course provides an overview of basic game theoretic concepts and techniques used in modelling economically interesting phenomena where strategic behaviour is important. These include normal and extensive form games, and associated solution concepts as well as refinements. Of these subgames, perfectness in extensive form games with perfect information and the intuitive criterion in games with incomplete information are the most important.

The game theoretic machinery is then applied to the economics of information. We cover the problems of moral hazard, adverse selection and signalling. Understanding how private information and incentives in these problems interact is a prerequisite for understanding many of the problems in labour and financial markets as well as in the field of politics.

Study materials and literature

Jehle and Reny: Advanced Microeconomic Theory (3rd ed.), Chapter 7. The information economics part is based mostly on lectures.

Activities and teaching methods in support of learning

All material related to the course is delivered through Moodle. It also contains a discussion forum where students can discuss issues related to the course with each other and the teacher. Each homework assignment involves multiple-choice questions that the students answer through Moodle before the exercise sessions related to the homework assignment.

Assessment practices and criteria

The grade on a scale from 0 (fail) to 5 is based on the sum of points earned in the final exam and the quizzes based on the homework assignments. The maximum number of points is 100, of which 60 come from the final exam and 40 can be earned in the quizzes based on the homework assignments. To pass the course, the student must earn at least 50 points in total and at least 30 points from the final exam.