ECON 6030: Microeconomic Analysis II

Instructor: Bertan Turhan (bertan@iastate.edu)

Office Hours: Thursday 3-5 PM or by appointment 

Lectures: Tuesday and Thursday: 12:10-2:00 PM in Heady 274

TA: Jibin Jose (jjose@iastate.edu)

Office Hours: Monday and Wednesday, 9:20-10:50 AM in Heady 183

TA Sessions:   Friday 12:10 – 2:00 PM in Heady 274

COURSE DESCRIPTION

This course is the second semester of the first-year Ph.D. microeconomic theory sequence. It focuses on game theory and information economics, providing students with advanced theoretical tools necessary for modern economic analysis. The course emphasizes both theoretical foundations and applications to various fields in economics.

Prerequisite: ECON 601, ECON 602, and permission of the Director of Graduate Education. This course also presumes a knowledge of intermediate microeconomics and basic mathematical skills suited for graduate work in economics.

LEARNING OBJECTIVES

By the end of this course, students will be able to:

• master fundamental concepts in non-cooperative game theory,

• analyze strategic interactions using various solution concepts,

• apply game-theoretic tools to economic problems,

• understand the role of information in economic interactions,

• develop and solve models of adverse selection and moral hazard, and

• read and critically evaluate current research in game theory and information economics.

PROBLEM SETS

Problem sets will be assigned biweekly.  You are expected to work through all the problems and email your answer (or place it in the mailbox) to Jibin Jose by 5:00 PM on Thursday. You may work with others on the problem sets, but you must write up the answers to the problem sets yourself.  The problem sets will be discussed in the Friday discussion section.

EVALUATION 

Your evaluation of ECON 603 will be based on your performance on the homework and exams.  

The specific weighting is as follows:

Homework (6 problem sets, ~ one per two-week) 20%

Midterm Exam I ( Feb 21)                         25%

Midterm Exam II (Mar 28)             25%

Final Exam (TBA by the University)                         30%

Exams will be a closed book, closed notes one hour 50 min long in-class exams. 

TEXTBOOKS

Required

• Mas-Colell, Whinston and Green, Microeconomic Theory, Oxford Univ. Press, 1995.

• Gibbons, Game Theory for Applied Economists, Princeton Univ. Press, 1992.

Recommended 

• Osborne and Rubinstein, A Course on Game Theory, [freely available for download].

• Fudenberg and. Tirole, Game Theory, The MIT Press, 1991.

• Myerson, Game Theory, Analysis of Conflict, Harvard Uni. Press, 1997.

• Krishna, Auction Theory, Academic Press, Elsevier, 2010.

COURSE OUTLINE

Week 1-3: Static Games of Complete Information

• Nash Equilibrium and its properties

• Mixed strategies

• Existence theorems

• Applications to industrial organization 

Week 4-6: Dynamic Games of Complete Information

• Extensive form games

• Subgame perfect equilibrium

• Repeated games and folk theorems

• Applications to political economy 

Week 7-8: Static Games of Incomplete Information

• Bayesian games

• Bayesian Nash equilibrium

• Applications to auctions 

Week 9-10: Dynamic Games of Incomplete Information

• Perfect Bayesian equilibrium

• Sequential equilibrium

• Signaling games

• Applications to labor markets 

Week 11-12: Contract Theory I: Adverse Selection

• Principal-agent models

• Screening

• Self-selection

• Applications to insurance markets 

Week 13-14: Contract Theory II: Moral Hazard

• Hidden action

• Multiple tasks

• Team production

• Applications to corporate finance 

Administrative Syllabus Content and Policies

Free Expression

Iowa State University supports and upholds the First Amendment protection of freedom of speech and the principle of academic freedom in order to foster a learning environment where open inquiry and the vigorous debate of a diversity of ideas are encouraged. Students will not be penalized for the content or viewpoints of their speech as long as student expression in a class context is germane to the subject matter of the class and conveyed in an appropriate manner.

No employee, student, applicant, or campus visitor is compelled to disclose their pronouns. Anyone may voluntarily disclose their own pronouns.

Academic Dishonesty

The class will follow Iowa State University’s policy on academic misconduct (5.1 in the Student Code of Conduct). Students are responsible for adhering to university policy and the expectations in the course syllabus and on coursework and exams and for following directions given by faculty, instructors, and ISU Test Center regulations related to coursework, assessments, and exams. Anyone suspected of academic misconduct will be reported to the Office of Student Conduct in the Dean of Students Office. Information about academic integrity and the value of completing academic work honestly can be found in the Iowa State University Academic Integrity Tutorial.