Advanced Microeconomics II (2013)

Last up-dated: July 11, 2013

0. Office Hours:

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

TA: Yoko Oishi: by appointment (Student ID: PHD11108)

1. Important Announcement

  • The final exam will be on July 18 (Thu), 14:00 - 17:00 at room 5J. July 11

  • There will be a TA session on JuLy 17 (Wed), 10:40 - 12:10 at room 5K. July 4

  • There will be a TA session on JuLy 10 (Wed), 10:40 - 12:10 at room 5D. July 4

  • There will be a TA session on June 24 (Mon), 10:40 - 12:10 at room 5J. June 16

  • There will be a final exam on Advanced Microeconomics I on June 6 from 15:00 to 18:00 at room 5J. June 2

  • From May 30, our lecture schedule will move to Thursday, 13:20 - 16:30 at room 5J. May 29

  • We have the first lecture on May 23 (Thu), 9:00 - 10:30 at room 5F. May 14

  • This web page is under construction. April 3

2. Course Description syllabus

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 23

  2. Externalities May 28

    • Reading: Varian, Chapter24

  3. Public Goods May 30

    • Reading: Varian, Chapter23

  4. Static Games May 30

    • Practice: Quiz1

    • Supplementary note: file

  5. Oligopoly June 13

    • Assignment: PS1

    • Reading: Cabral, Chapter7

    • Reading: Bagwell and Wolinsky (2002)

  6. Dynamic Games June 13

    • Supplementary note: file

    • Reading: Fudenberg and Tirole (1984)

  7. Repeated Games June 20

    • Practice: Quiz2

    • Reading: Kandori (2008)

  8. Incomplete Information Games June 20

    • Reading: Gibbons, Chapter3.2.C

  9. Auction Theory June 27

    • Assignment: PS2

    • Reading: McAfee and McMillan (1987)

    • Reading: Klemperer (2003)

  10. Dynamic Games with Incomplete Information June 27

    • Reading: Gibbons (1997)

    • Reading*: Kohlberg and Mertens (1986)

  11. Adverse Selection July 4

    • Practice: Quiz3

    • Reading: Salanie, Chapter 2.2

  12. Moral Hazard July 4

    • Assignment: PS3

    • Reading: Salanie, Chapter 7

  13. Social Choice July 11

    • Reading: Geanakoplos (2005)

    • Reading: Reny (2001)

  14. Bargaining and Cooperative Game July 11

    • Reading: Nash (1950)

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

  15. Final Exam July 18

4. Assignments

    • Practice Quiz (Not Graded. Just for your practice!)

      • Quiz1: file

      • Quiz2: file

      • Quiz3: file

    • Problem Sets (Inside ( ) shows the due day)

      • PS1 (June 20): file

      • PS2 (July 4): file

      • PS3 (July 17): 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

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

For introduction to game theory, the following books are recommended:

Avinash Dixit, Susan Skeath, and David Reiley, Games and Strategies, 3rd, 2009

Joel Watson, Strategy, 3rd, 2013

Detailed textbooks at roughly the same level as Gibbons are:

Martin Osborne, An Introduction to Game Theory, 2004

Steven Tadelis, Game Theory: An Introduction, 2012

Those of you interested in pursuing game theory further may consult the advanced and authoritative sources such as:

Drew Fudenberg and Jean Tirole, Game Theory, 1991

Roger Myerson, Game Theory, 1991

Martin Osborne and Ariel Rubinstein, A Course in Game Theory, 1994

(You can download it for free from this website)

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

Luis Cabral, Introduction to Industrial Organization, 2000

On contract theory, the following concise textbook is helpful:

Bernard Salanie, The Economics of Contracts, 2nd, 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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