After the course, the student should
- Understand how individual preferences and choices aggregate into allocations in various non-strategic settings. These include perfect markets as modelled in general equilibrium theory, matching mechanism like Gale-Shapley algorithm, assignment models, and frictional markets.
- Be able to construct and analyse general equilibrium models both under certainty and under uncertainty, use Gale-Shapley algorithm, understand how complementarities affect efficient allocation.
The course consists of lectures (24 hours) and exercise sessions (8 hours), where solutions to the homework assignments are discussed. The course is completed by a final exam. Extra points can be earned from quizzes. While highly recommended, the exercise sessions are not mandatory.
In the first part of the course we study the basics of general equilibrium theory (GET): modelling, the existence of equilibrium, welfare
theorems. The relationship between the equilibrium and the core is highlighted via the core convergence theorem. Finally, we study how GET can handle uncertainty.
In the second part of the course we study non-strategic and non-market ways of allocating resources. These include Gale-Shapley algorithm, assignment models and frictional markets of directed search.
|Study materials and literature
Slides are available at http://www.fdpe./current-courses-and-workshops/mi11516.html
/>The main text of the course is Microeconomic Theory by Andreu Mas-Colell, Michael Whinston and Jerry Green (MWG), Oxford University Press 1995, chapters 15-19.
A good reference is Microeconomic Foundations I: Choice and Competitive Markets, by David Kreps (K), Princeton University Press 2012.
Maskin E, Roberts K. On the Fundamental Theorems of General Equilibrium. Economic Theory. 2008;35(2): 233-240.
Roth A. Misrepresentation and stability in the marriage problem. Journal of Economic Theory, 1984, 383-387.
Zhou L. Stable matchings and equilibrium outcome of the Gale-Shapley's algorithm for the marriage problem. Economics Letters, 1991, 25-29.
Chade H, Eeckhout J. and Smith L. Sorting through search and matching models in economics. Journal of Economic Literature 2017, 493-544. The beginning of the article is required, the rest is good to peruse to get the idea where further research goes.
Terviö M. The difference that CEOs make: An assignment model approach. American Economic Review 2008, 642-668. The first, theoretical, part is required reading.
Virag G. High Profit Equilibria in Directed Search Models. Games and Economic Behavior, (71/1) 2011, 224-234.