Advanced Microeconomics II (2014-15)

Syllabus

Last Update: January 20, 2014

1. Important Announcement

• There will be a final exam on Feb 3 (Tue), 13:00-16:00 at 5H.

• There will be a midterm exam on Dec 22 (Mon), 10:00-11:30 at 5J.

2. Lecture Hours:

Instructor, Yosuke YASUDA (yosuke.yasuda<at>gmail.com)

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

3. Office Hours:

Tuesdays 15:00-16:00 or by appointment (Room C911)

TA: Yoko Oishi: by appointment (phd11108<at>grips.ac.jp)

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 (33%) and a final exam (67%). Problem sets will be distributed, but not be graded.

5. Course Outline

1. Expected Utility Nov 25

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

   • Reference: Laffont Chapter1

2. Risk Aversion Nov 25

   • Reading: Laffont Chapter2

3. Monopoly Dec 2

4. Static Games Dec 2

   • Exercise 1

   • Supplementary note: slide 1

5. Mixed Strategies Dec 9

   • Supplementary note: slide 2

   • Review of Final Exam (for Ad. Micro 1) Dec 9

6. Oligopoly Dec 16

   • Problem Set 1

   • Reading: Cabral, Chapter7

   • Reference: Bagwell and Wolinsky (2002)

7. Dynamic Games Dec 16

   • Exercise 2

   • Supplementary note: slide 3

   • Reading: Watson, Chapter15

   • Reference: Tadelis, Chapter8

     • Problem Set 1: Solution

8. Midterm Exam (90 minutes) Dec 22

   • • It covers Lectures 1-6. (Lecture 7 is NOT covered.)

9. Repeated Games Jan 6

   • Supplementary note: slide 4

   • Reading: Kandori (2008)

10. Incomplete Information Games Jan 6

    • Reading: Gibbons, Chapter3.2.C

    • Exercise 3

11. Auction Theory Jan 13

    • Reading: Klemperer (2003)

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

12. Dynamic Games with Incomplete Information Jan 13

    • Problem Sets 2+3

    • Reference: Gibbons (1997)

13. Social Choice Jan 20

    • Reading: Geanakoplos (2005)

14. Mechanism Design Jan 20

    • Problem Sets 2+3: Solution

    • Reading: Tadelis, Chapter14

15. Final Exam (180 minutes) Feb 3

6. Assignments

• • Exercise and Problem Sets (uploaded day)

    • Exercise 1 : Q

    • Problem Set 1 : Q

    • Exercise 2 : Q

    • Problem Set 2+3: Q

    • Exercise 3 : Q

7. Past Exams

You can download the past exams below.

• 2013-14: Midterm; Final

• 2013: Final

• 2012: Final

• 2011: Final

• 2010: Midterm; Final

• 2009: Final

• 2008: Final

8. 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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