Advanced Microeconomics II (2013-14)

Syllabus

Last up-dated: January 23, 2014

1. Important Announcement

• We have a (in-class) final exam on January 28 (Tue), 11:00 - 13:30 at room 5J. Jan 21

• There will be three make-up classes on January 16 (Thu), 9:00- 10:30, 10:40 - 12:10 and 13:20 - 14:50. Jan 14

• We have a (in-class) midterm exam on January 7 (Tue), 10:40 - 12:10 at room 5J. Dec 24

• There will be no lecture on December 10. Instead, we have a final exam for Advanced Microeconomics I. Dec 3

2. Lecture Hours:

Instructor, Yosuke YASUDA

Tuesdays 10:40-12:10; 13:20-14:50 Room 5J

3. Office Hours:

Wednesdays 9:30-11:00 or by appointment (Room C911)

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

4. 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 a midterm exam (40%) and a final exam (60%). Problem sets will be distributed, but not be graded.

5. Course Outline

1. Expected Utility Dec 3

   • Reading: Ken Binmore, Rational Decision, 2009. Chapter3

   • Reference: Laffont Chapter1

2. Risk Aversion Dec 3

   • Reading: Laffont Chapter2

3. Monopoly Dec 17

4. Static Games Dec 17

   • Supplementary note: slide 1

5. Mixed Strategies Dec 24

   • Supplementary note: slide 2

   • Exercise 1

   • Problem Set 1

6. Midterm Exam (90 minutes) January 7

7. Oligopoly January 7

   • Reading: Cabral, Chapter7

   • Reference: Bagwell and Wolinsky (2002)

8. Dynamic Games January 14

   • Exercise 2

   • Reading: Watson, Chapter15

   • Reference: Tadelis, Chapter8

9. Repeated Games January 14

   • Reading: Kandori (2008)

10. Incomplete Information Games January 16

    • Reading: Gibbons, Chapter3.2.C

11. Auction Theory January 16

    • Reading: Klemperer (2003)

    • Reference: Krishna, Auction Theory (2nd ed.), 2009

12. Dynamic Games with Incomplete Information January 16

    • Exercise 3

    • Reference: Gibbons (1997)

13. Social Choice January 21

    • Problem Set 2+3

    • Reading: Geanakoplos (2005)

14. Bargaining and Cooperative Game January 21

    • Reference: Osborne and Rubinstein, Bargaining and Markets, Academic Press, 1990. Chapter 2

15. Final Exam (150 minutes) January 28

6. Assignments

• • Exercise and Problem Sets (uploaded day)

    • Exercise 1 (December 31): Q

    • Problem Set 1 (December 31): Q, A

    • Exercise 2: Q

    • Problem Set 2+3: Q, A

    • Exercise 3: Q

7. 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 of you look for more lucid treatment than the above textbooks may consult with the following authoritative sources. The former is most widely used for microeconomics courses for economics Ph.D. students. The latter is more accessible and contains recently developed topics.

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

John Riley, Essential Microeconomics, 2012

A classic and rigorous textbook for information economics is:

Jean-Jacques Laffont, The Economics of Uncertainty and Information, 1991

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

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

• 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.

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