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Program

Updated A.Y. 2022-2023

Presentation

Microeconomics II deals with modelling strategic interactions among rational agents using a logico-mathematical approach. Relevant economic examples of such interactions concern competition among firms who have market power, conflicts among nations, auctions and trading behavior in financial markets. The course tackles non-cooperative game theoretic analysis both for strategic and extensive form games. It deals with complete and incomplete information settings and uses various economic settings as illustrations of the different strategic behaviors.

Programme of the course

Static games of complete information: main solution concepts.  Nash Equilibrium.

Applications: models of imperfect competition.

Dynamic games of complete information. Representation through extensive form and backward induction. Subgame perfection.

Introduction to repeated games. Applications: bargaining models.

Games of incomplete information and Bayesian equilibria.

Applications: auctions, oligopoly models with incomplete information.

Auctions as mechanisms. The Revelation Principle. 

Contracts as mechanisms: the problem of adverse selection. A lender-borrower negotiation: the two types case, symmetric and asymmetric distribution of information.

(IF POSSIBLE : Moral hazard. Application: Strategic default  in financial markets and/or credit rationing.)

 

Main references

Gibbons R., “A Primer in Game Theory”, 1992, Pearson Education Limited.

Osborne M.J., "An Introduction to Game Theory", Oxford University Press.

Macho-Stadler I. and D. Perez-Castrillo, "An Introduction to the Economics of Information", 2001, Oxford University Press. 

Mas Colell A., Whinston M., and J. Green “Microeconomic Theory” , 1995, Oxford University Press.

Additional material provided during lectures. 

 

Pre-requisites: Notions of Mathematics and Probability. Microeconomics.

 

Knowledge and Understanding

The course provides the fundamental instruments to analyse strategic interactions that often appear in the contemporary economic debate. Students will be exposed to logico-mathematical thinking and rigorous development of line of thoughts. At the end of the course, students  will have acquired a good knowledge of non-cooperative game theory.