ECS505 Advanced microeconomic theory II
The purpose of this course is to give a solid introduction to microeconomic analysis of strategic interaction (games) and contracting, including principal-agent relationships. It introduces the basic analytical tools that are necessary to conduct research in any field in economics where such issues are of importance.
The course is organized in two parts. Part A covers central topics in non-cooperative game theory. It presents relevant theory and equilibrium concepts for static and dynamic games, and for games of complete and incomplete information.
Part B provides a solid introduction to contract theory. It covers first contracting problems where the agent has private information or can take actions that are unobservable to the principal in settings where complete contracts are feasible. It then covers the theory of incomplete contracts.
Both parts A and B of the course apply the theory in several areas, including industrial organization, auctions, labour markets and financial economics.
At the end of the course, students should
- have a thorough understanding of the main results in game theory and contract theory;
- be able to apply the methods to study problems related to strategic behaviour of individual agents in settings of symmetric and asymmetric information.
- be able to address a microeconomic problem in these areas by structuring it as a mathematical model and to obtain useful economic predictions through the use of mathematical tools and a sound economic intuition.
Regular lectures and assignment classes.
Students should have good knowledge of microeconomic concepts and tools at the intermediate level (such as SAM2 and SAM4).
Requirements for course approval
Two written assignments.
4-hour written school exam.
Andreu Mas-Colell, Michael Whinston & Jerry Green (1995) Microeconomic Theory (Oxford: Oxford University Press).
Patrick Bolton and Mathias Dewatripont (2005) Contract theory, The MIT Press
Robert Gibbons (1992) A Primer in Game Theory (New York: Prentice Hall)
Drew Fudenberg and Jean Tirole (1991) Game Theory, The MIT Press
Salanie, B. The Economics of Contracts, The MIT Press, 1999.
Laffont, J-J. and D. Martimort, The Theory of Incentives, The Princeton University Press, 2002.
Spring. Offered spring 2019.
Professor Eirik G. Kristiansen, Department of Economics and Professor Trond Olsen, Department of Business and Management Science