Instructional goals
This course is the second in the micro sequence. It introduces the students to the workhorse models of information economics. The approach is formal and rigorous; students are expected to understand, and be able to reproduce, formal proofs of the various claims of the theory. Some of the proofs are left to homework assignments. Solving the assignments, and their discussion in class, are an integral part of the course and of the learning process. The key objective is to provide the students with the tools to formalise and understand strategic issues in social and economic interactions.
Prerequisites
Mathematics, microeconomic analysis.
Intended learning outcomes
Students are expected to understand, and be able to reproduce, formal proofs of the various claims of the theory. They are expected to be able to solve problems that concerns various aspects of the theory. They are expected to develop their rigorous thinking and ability to formalise in abstract terms real-world strategic interactions, formulating claims in a precise manner and being able to prove them.
Course Contents
Information in decision problems (Blackwell's theorem). Hidden information and adverse selection. Hidden action and moral hazard. Mechanism design: the revelation principle, VCG mechanisms, auctions, Myerson and Satterthwaite's theorem.
Reference Books
1. D.A Blackwell and M.A. Girshick, "Theory of games and
statistical decisions", 1979. (Information in Decision Problems.)
2. Lars Stole “Lectures on the Theory of Contracts and Organizations”
(Adverse Selection: pp. 5-41. Moral Hazard: pp. 55-85.)
3. Andreu Mas-Colell, Michael Whinston & Jerry Green: "Microeconomic Theory". (Adverse Selection: 12.B, 13.A, 14.C. Moral Hazard: 14. A-C.)
4. Jean-Jacques Laffont and David Martimort: "The Theory of Incentives". (Adverse Selection: 2-3. Moral Hazard: 4.)
5. Tilman Borgers, An Introduction to the Theory of Mechanism Design
Teaching Methods
The course will be lectured with a formal approach and rigorous proof of most of the claims. Home assignments intended to help students better understand the material covered in the lectures. Students are frequently asked to answer questions, and take turns in presenting to the class and to the teacher the solutions of the home assignments.
The presentations by students of the solutions to problem sets will be graded.
Assessment Method
Written (compulsory) exam. Class partecipation (in particular presentation of solutions of problem sets) will be evaluated and will be part of the final grade.
Thesis assignment criteria
Personal judgment and full marks for the exam session.