Advanced Micro Theory

Description

COURSE DESCRIPTION: This course in microeconomic theory is required in the general Ph.D. program. The students learn classic models of decision making under uncertainty and market failure. COURSE SUBJECT AREAS: 1. Preliminaries 1.1 Decision Making under Uncertainty 1.2 Non-Cooperative Game Theory: representations of games (extensive form and normal form), solution concepts (dominance and Nash Equilibrium), static games of complete and incomplete information, dynamic games, subgame perfection, dynamic games of incomplete information 2. Market Failures 2.1 Externalities and Public Goods: bilateral externalities, presence of public goods, multilateral externalities, externalities with incomplete information 2.2 Market power or Imperfect Competition: Monopoly, static oligopolies, repeated oligopolistic competition, entry, precommitment decisions, the competitive limit 2.3 Asymmetric Information: adverse selection, signaling, screening, moral hazard • We start introducing uncertainty into the theory of individual decision making. Here we give the justification for the use of expected utility which is the predominantly used form of utility function in all areas of economics. We define the risk and how risk is measured for given agents. Lastly, we consider whether lotteries can be ranked in the same way for risk averse individuals. This part of the class has many applications in the economics of finance or accounting. • In the section on game theory we study how individuals make decisions.