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ECOM-R311 Advanced Microeconomics 2, 5 cr 
Code ECOM-R311  Validity 01.01.2017 -
Name Advanced Microeconomics 2  Abbreviation Adv Micro 2 
Scope5 cr   
TypeAdvanced studies
  GradingGeneral scale 
    Can be taken more than onceno
Unit Master's Programme in Economics 

Klaus Kultti 

Target group 

Master’s Programme in Economics (Research track). Open to doctoral students in economics.


Annually in the second period

Learning outcomes 

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.
Completion methods 

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.


Advanced Microeconomics 1 and knowledge of the basic concepts of microeconomic theory

Recommended optional studies 

Knowledge of basic analysis is certainly an advantage.


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 target=_blank>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.

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.

Assessment practices and criteria 

The grade on a scale from 0 (fail) to 5 is based on the points earned in the final exam (70%) and in the homework assignments (30%).


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