Advanced Microeconomics II (2012)

Last up-dated: July 20, 2012

Office Hours:

Instructor, Yosuke YASUDA: Mondays 10:00-12:00 or by appointment (Room C911)

TA: Ryoko SUSUKIDA: TBA (TBA)

1. Important Announcement

  • The last problem set (PS6) was just uploaded, which is due on July 30 (Mon) The weight is 50% larger than the usual problem set, i.e., 15 points. July 15

  • There will be a final exam on July 20 (Mon) from 9am. The exam does not cover the materials from the last two lectures (on July 18 and 19). June 28

  • This web page is under construction. April 3

2. Course Description

This is an advanced course in microeconomics, succeeding to Advanced Microeconomics I (ECO600E) in which we study individual economic decisions and their aggregate consequences under ideal situations. In this course, we extend our previous analyses to incorporate externalities, imperfectly competitive market structures, dynamic market competitions, incomplete information, and indivisible goods. To this end, we study game theory, a collection of mathematical tools for analyzing strategically interdependent situations, and economics of information. Many of the topics covered in this course are parallels to those of Game Theory (ECO290E), but are explained in much more rigorous way. Course grade will be determined by homework assignments (50%) and a final exam (50%).

3. Course Outline

  1. Monopoly May 31

  2. Externalities June 7

    • Assignment: PQ5

    • Reading: Varian, Chapter24

  3. Public Goods June 13

    • Reading: Varian, Chapter23

  4. Static Games June 14

    • Assignment: PS4

  5. Oligopoly June 20

    • Reading: Cabral, Chapter7

    • Reading: Bagwell and Wolinsky (2002)

  6. Dynamic Games June 21

    • Assignment: PQ6

    • Supplementary note

    • Reading: Fudenberg and Tirole (1984)

  7. Repeated Games June 27

    • Reading: Kandori (2008)

  8. Incomplete Information Games June 28

    • Assignment: PS5

    • Reading: Gibbons, Chapter3.2.C

  9. Auction Theory July 4

    • Reading: McAfee and McMillan (1987)

    • Reading: Klemperer (2003)

  10. Dynamic Games with Incomplete Information July 5

    • Assignment: PQ7

    • Reading: Gibbons (1997)

    • Reading*: Kohlberg and Mertens (1986)

  11. Adverse Selection July 11

    • Reading: Salanie, Chapter 2.2

  12. Moral Hazard July 12

    • Assignment: PS6

    • Reading: Salanie, Chapter 7

  13. Social Choice July 18

    • Reading: Geanakoplos (2005)

    • Reading: Reny (2001)

  14. Bargaining and Cooperative Game July 19

    • Reading: Nash (1950)

    • Reading: Osborne and Rubinstein (1990), Chapter 2

  15. Final Exam July 20

4. Assignments

Inside ( ) shows the due day for each assignment.

    • Practice Quiz

      • PQ5 (June 14): file

      • PQ6 (June 28): file

      • PQ7 (July 12): file

    • Problem Sets

      • PS4 (June 21): file

      • PS5 (July 5): file

      • PS6 (July 30): file

5. Textbooks

Advanced Microeconomics (I and II) does not use specific textbooks. Instead, I provide my own lecture slides, which are downloaded from above course outline. There are three textbooks which you may find useful to complement my lecture notes. You are encouraged to purchase the second ([NS]), since it will serve as the main textbook for Advanced Microeconomics III and IV. For the first one ([JR]), the copies of related chapters will be distributed in class.

[JR] Geoffrey Jehle and Philip Reny, Advanced Microeconomic Theory, 3rd edition, 2011.

[NS] Walter Nicholson and Christopher Snyder, Microeconomic Theory: Basic Principles and Extensions, 10th edition, 2007

[G] Robert Gibbons, Game Theory for Applied Economists, 1992

A useful text at roughly the same level as Gibbons, but contains variety of example is:

Martin Osborne, An Introduction to Game Theory, 2004

A useful textbook for game theoretical analyses on oligopoly markets is:

Luis Cabral, Introduction to Industrial Organization, 2000

Those who look for more lucid treatment than the above textbooks may consult with the following authoritative sources. The former incorporates game theoretical perspectives into microeconomics in depth, and the latter is as standard textbook most widely used in Economics Ph.D. microeconomics courses.

David Kreps, A Course in Microeconomic Theory, 1990

Andreu Mas-Colell, Michael Whinston and Jerry Green, Microeconomic Theory, 1995

On contract theory, the following concise textbook is helpful:

Bernard Salanie, The Economics of Contracts, 2nd ed. 2005

6. Related Materials

  • Bagwell, Kyle and Asher Wolinsky (2002), "Game Theory and Industrial Organization," A chapter in Handbook of Game Theory with Economic Applications. SSRN

  • Bolton, Patrick and Mathias Dewatripont (2004), Contract Theory, MIT Press.

  • Farrell, Joseph and Matthew Rabin (1996), "Cheap Talk," Journal of Economic Perspectives, 6: 83-101. JSTOR

  • Fudenberg, Drew and Jean Tirole (1984), "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review (Papers and Proceedings), 74: 361-366. JSTOR

    • Geanakoplos, John (2005), "Three brief proofs of Arrow’s Impossibility Theorem.," Economic Theory, 26: 211–215.

  • Gibbons, Robert (1997), "An Introduction to Applicable Game Theory," Journal of Economic Perspectives, 11: 127-149. JSTOR

    • Kandori, Michihiro "Repeated Game" in The New Palgrave Dictionary of Economics, 2nd edition, 2008.

  • Klemperer, Paul (2003), "Why Every Economist Should Learn Some Auction Theory," Chapter 2 in Advances in Economics and Econometrics, Volume 1, edited by Dewatripont, Hansen, and Turnovsky. Link to the final draft

  • Kohlberg, Elon and Jean-Francois Mertens (1986), "On the Strategic Stability of Equilibria," Econometrica, 54: 1003-1037. JSTOR

  • McAfee, Preston and John McMillan (1987), "Auctions and Bidding," Journal of Economic Literature, 25: 699-738. JSTOR

  • Nash, John (1950), "The Bargaining Problem," Econometrica, 18: 155-162. JSTOR

  • Osborne, Martin and Ariel Rubinstein (1990), Bargaining and Markets, Academic Press.

  • Reny, Philip (2001), "Arrow’s Theorem and the Gibbard-Satterthwaite Theorem: A Unified Approach," Economics Letters, 70: 99–105.

  • Watson, Joel (2008), Strategy: An Introduction to Game Theory, W. W. Norton.

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