Syllabus in English
Fall, session 2 / Thursdays 4th (15:00-16:30) and 5th (16:40-18:10) / Room G
Office Hours: by appointment
E-mail: yosuke.yasuda <at> gmail.com
Website: https://sites.google.com/site/yosukeyasuda2/home/lectures/grips2025_advancedmicro2
Announcement | お知らせ
[2025, December 9] --- Lecture slides (from Lec1 through Lec4) have been uploaded here and to the course's Teams.
[2025, December 2] --- The first class on December 4 will begin at 3:20 p.m., not 3:00 p.m. Please take note of the 20-minute delay.
[2025, November 30] --- The website (this page) has just been created.
Last update: December 14, 2025
This is the second course in the sequence of advanced microeconomics, succeeding to Advanced Microeconomics I (ECO6000E).
In Advanced Microeconomics II, we study individual economic decisions and their interactions, such as oligopoly markets, bargaining, and contract/mechanism design.
This course offers lectures on microeconomics at the level of advanced master's and doctoral programs in public policy schools.
In modern economics, the analytical tools of microeconomics are used as a foundation for analyzing macroeconomics, finance, and public finance. Therefore, mastery of the material covered in this course will help students understand a wide range of fields of economic research.
Students will learn and apply mathematical frameworks of individual economic decisions and their interactions.
The topics covered include (a) uncertainty and information, (b) other market failures, (c) game theory, and (d) market design.
The goal is to model agent interactions using the above mathematical frameworks.
Basic knowledge of multi-variable calculus and probability is assumed to be the prerequisites of the course.
The final grade will be based on the two homeworks (60 points in total) and the final exam (40 points).
Problem Set 1
Problem Set 2
Anyone in GRIPS (including faculty members) can audit this course.
Required: I use the following book as main textbook for this course.
Jehle, G. and Reny, P. [JR], Advanced Microeconomic Theory, 3rd ed., 2010.
This is a great graduate-level textbook that offers an excellent balance of level, content, reliability of description, and quantity.
The copies of related chapters will be distributed in class (so you don’t need to purchase them).
Others: Supplementary textbooks are as follows. (The asterisk (*) indicates advanced material.)
Microeconomics
Varian, H. [Va], Microeconomic Analysis, 3rd, 1992.
This is an advanced undergraduate to graduate-level text with a reputation for clarity. It offers an excellent description of market theory and market failures and is one of the best books for understanding intuition. The structure is unique because it begins with producer theory rather than consumer theory.
*Mas-Colell, A., Whinston, M. and Green, J. [MWG], Microeconomic Theory, 1995.
This has been a "bible" (essential textbook or standard reference) for economics Ph.D. students over the past few decades.
Kandori, M., Mighty Microeconomics: A Guide to Thinking Like An Economist, 2023.
This extraordinary book provides a comprehensive overview of microeconomics up to the advanced undergraduate level. In particular, the author discusses the importance of market theory very clearly.
This is an English translation of the Japanese book: 『ミクロ経済学の力』
Osborne, M and Rubinstein, A., Models in Microeconomic Theory, 2nd ed., 2023.
You can download the book (pdf) for free here.
Uncertainty and Information
Binmore, K., Rational Decision, 2009.
Laffont, J. J., The Economics of Uncertainty and Information, 1989.
Rubinstein, A., Lecture Notes in Microeconomic Theory: The Economic Agent, 2nd ed., 2020.
You can download the book (pdf) for free from the author's website.
Salanie, B., The Economics of Contract, 2nd, 2005.
Game Theory
Gibbons, R. [Gi], Game Theory for Applied Economists, 1992.
Tadelis, S., Game Theory: An Introduction, 2013.
This is a detailed textbook at roughly the same level as Gibbons.
Cabral, L., Introduction to Industrial Organization, 2nd, 2017.
*Fudenberg, D. and Tirole, J., Game Theory, 1991.
This is the definitive, advanced resource for anyone looking to pursue game theory seriously.
Market Design
Haeringer, G. [Ha], Market Design: Auctions and Matching, 2018.
(To be written ... )
Lec 1. Expected Utility Dec 4
Textbook
JR --- Ch2.4: Uncertainty
Va --- Ch11: Uncertainty
MWG --- Ch3: Choice Under Uncertainty
Reading
Kandori, M. --- Introduction: Why and How We Use Microeconomics
Binmore, K. --- Ch1: Revealed Preferences
Laffont, J-J. --- Introduction
Rubinstein, A. --- Ch7: Expected Utility
Lec 2. Risk Aversion Dec 4, 11
Textbook
JR --- Ch2.4: Uncertainty
Va --- Ch11: Uncertainty
MWG --- Ch3: Choice Under Uncertainty
Reading
Binmore, K. --- Ch3: Risk
Laffont, J-J. --- Ch2: Measuring Risk Aversion and Risk
Rubinstein, A. --- Ch8: Risk Aversion
Lec 3. Principal-Agent Model Dec 11
Textbook
JR --- Ch8: Information Economics
Va --- Ch25: Information
MWG --- Ch14: Principal-Agent Problem
References
Laffont, J.-J. and Martimort, D., The Theory of Incentives, 2001.
*Bolton, P. and Dewatripont, M., Contract Theory, 2004.
Lec 3.5. Screening and Holdup Supplementary
Textbook
JR --- Ch8: Information Economics
Va --- Ch25: Information
MWG --- Ch13: Adverse Selection, Signaling, and Screening
Reading
Salanie, B. --- Ch2.2: A Discrete Model of Price Discrimination
Salanie, B. --- Ch7: Incomplete Contract
Lec 4. Monopoly Dec 18
Textbook
Va --- Ch14: Monopoly
MWG --- Ch12.B: Monopoly Pricing
Reading
Cabral, L. --- Ch5: Market Failure and Public Policy
Cabral, L. --- Ch6: Price Discrimination
References
Train, K., Optimal Regulation: The Economic Theory of Natural Monopoly, 1991.
*Laffont, J.-J. and Tirole, J., A Theory of Incentives in Procurement and Regulation, 1993.
Lec 5. Externalities Dec 18, 25
Textbook
Va --- Ch24: Externalities
MWG --- Ch11: Externalities and Public Goods
Reading
Kandori, M. --- Ch4.1. Externalities
References
*Laffont, J.-J., Fundamentals of Public Economics, 1988.
Lec 6. Public Goods Dec 25
Textbook
Va --- Ch23: Public Goods
MWG --- Ch11: Externalities and Public Goods
Reading
Kandori, M. --- Ch4.2. Public Goods
References
*Laffont, J.-J., Fundamentals of Public Economics, 1988.
Lec 7. Social Choice Supplementary
Textbook
JR --- Ch6: Social Choice and Welfare
Va --- Ch22: Welfare
MWG --- Ch21: Social Choice Theory
Reading
Geanakoplos, J. (2005), Three brief proofs of Arrow’s Impossibility Theorem, Economic Theory, 26: 211–215.
Reny, P. (2001), Arrow’s theorem and the Gibbard-Satterthwaite theorem: a unified approach, Economics Letters, 70(1), 99-105.
References
Sen, A., Arrow and the Impossibility Theorem. In The Arrow Impossibility Theorem (pp. 29-42), 2014.
Sen, A., Collective Choice and Social Welfare: expanded edition, 2017.
D’Antoni, M. (2025), From Condorcet’s paradox to Arrow: yet another simple proof of the impossibility theorem, Social Choice and Welfare, 64(4), 961-970.
Gustafsson, J. E. Sen’s Proof of Arrow’s Impossibility Theorem without Tears, mimeo, 2025. [Link]
Lec 8. Static Games Jan 8
Slide
Textbook
JR --- Ch7: Game Theory
Va --- Ch15: Game Theory
MWG --- Ch7: Basic Elements of Noncooperative Games
MWG --- Ch8: Simultaneous-Move Games
Gi --- Ch1: Static Games of Complete Information
Reading
Cabral, L. --- Ch7: Games and Strategies
Tadelis, S. --- PART2: Static Games of Complete Information
Gibbons, R. (1997), An Introduction to Applicable Game Theory, Journal of Economic Perspectives, 11: 127-149.
References
Watson, J., Strategy: An Introduction to Game Theory, 3rd edition, 2013.
Lec 8.5 Mixed Strategies Supplementary
Slide
Textbook
JR --- Ch7: Game Theory
Va --- Ch15: Game Theory
MWG --- Ch7: Basic Elements of Noncooperative Games
MWG --- Ch8: Simultaneous-Move Games
Gi --- Ch1: Static Games of Complete Information
Reading
Cabral, L. --- Ch7: Games and Strategies
Tadelis, S. --- PART2: Static Games of Complete Information
Gibbons, R. (1997), An Introduction to Applicable Game Theory, Journal of Economic Perspectives, 11: 127-149.
References
Watson, J., Strategy: An Introduction to Game Theory, 3rd edition, 2013.
Lec 9. Olibopoly Jan 8, 15
Slide
Textbook
JR --- Ch4.2: Imperfect Competition
Va --- Ch16: Oligopoly
MWG --- Ch12.C: Static Model of Oligopoly
Gi --- Ch1.2: Applications
Reading
Cabral, L. --- Ch8: Ologopoly
Bagwell, K. and Wolinsky, A. (2002), Game theory and industrial organization, Handbook of game theory with economic applications, 3, 1851-1895.
References
Tirole, J., The Theory of Industrial Organization, 1988.
Lec 10. Dynamic Games Jan 15
Slide
Textbook
JR --- Ch7.3: Extensive Form Games
Va --- Ch16: Oligopoly
MWG --- Ch9: Dynamic Games
MWG --- Ch12.D: Repeated Interaction
Gi --- Ch2: Dynamic Games of Complete Information
Reading
Cabral, L. --- Ch9: Collusion and Price Wars
Tadelis, S. --- PART3: Dynamic Games of Complete Information
References
Tirole, J., The Theory of Industrial Organization, 1988.
Lec 11. Incomplete Information Games <= Skip?
Slide
Textbook
JR --- Ch7.2.3: Incomplete Information
Va --- Ch15: Game Theory
MWG --- Ch8.E: Games of Incomplete Information: Bayesian Nash Equilibrium
Gi --- Ch3: Static Games of Incomplete Information
Reading
Tadelis, S. --- Ch12: Bayesian Games
Lec 12. Mechanism Design and Auctions Jan 22
Slide
Textbook
JR --- Ch9: Auctions and Mechanism Design
MWG --- Ch23: Incentives and Mechanism Design
Gi --- Ch3.3: The Revelation Principle
Reading:
Tadelis, S. --- Ch13: Auctions and Competitive Bidding
Tadelis, S. --- Ch14: Mechanism Design
Reference:
Klemperer, P., Auctions: Theory and Practice, 2003.
Krishna, V., Auction Theory, 2nd, 2009.
Lec 13. Two-Sided Matching Jan 22
Textbook
Ha --- Ch. 9: The Basic Matching Model
Ha --- Ch. 10: The Medical Match
Reading
Roth, A. and Sotomayor, M. (1992), Two-sided matching, Handbook of game theory with economic applications, 1, 485-541.
References
Roth, A. and Sotomayor, M., Two-Sided Matching: A Study in Game-Theoretic Modeling and Analysis, 1990.
Final exam (90 minutes) January xx
The Market for "Lemons"
Textbook
JR --- Ch8.3: Information and Market Performance
Va --- Ch25: Information
MWG --- Ch13: Adverse Selection, Signaling, and Screening
Reading
Kandori, M. --- Ch9: Adverse Selection and Signaling
Assignment Problems
Textbook
Ha --- Ch. 11: Assignment Problems
Ha --- Ch. 16: Kidney Exchange
Jungle Economy