28904 - Microeconomics 3

Learning outcomes

Studentsare introduced to an analytical and in-depth study of market failures and of the main topics in the field of information economics. At the end of the course studentsare able to: - formally analyze externalities and public goods; - formally analyze the main topics in Information Economics; - discuss the basic models in Incentive Theory.

Course contents

1. Introduction: the Fundamental Theorems of Welfare Economics and their implications.
2. Public goods.
3. Externalities.
4. Introduction to the economics of information.
5. Markets under adverse selection (the market for lemons). Signaling, and screening.
6. The theory of optimal risk-sharing. The principal-agent problem. Contracts under moral hazard.
7. Contracts under adverse selection.
8. Applications: market failures in health insurance, credence goods.

Readings/Bibliography

Suggested readings for this course are:
- Externalities and public goods: Varian, H., Microeconomic Analysis, III ed., Norton, 1992, chaps 23 and 24.
- The market for lemons, signaling and screening: A.Mas-Colell, M.Whinston and J. Green, Microeconomic Theory, Oxford University Press, 1995, chap 13.
- Optimal risk-sharing and moral hazard: Milgrom-Roberts, Economics Organization and Management, McGraw Hill, 1992, chaps.5 and 7.
- The Revelation Principle: Laffont, J.J. and D. Martimort, The Theory of Incentives: The Principal-Agent Model, Princeton University Press, 2001, chap 2.
- Adverse selection and moral-hazard in contracts theory: Bolton P. and M. Dewatripont, Contract Theory, The MIT Press, 2005, chaps 2 (sections 2.1 and 2.3.3) and 4 (sections 4.1 and 4.2).
- Games with incomplete information: Gibbons R., A primer in Game Theory, Prentice Hall, 1992, chaps 3 and 4.

Teaching methods

30 hours of class lectures.

Assessment methods

Two assignments during the course to be prepared at home and in groups of two students plus a final written exam.

Teaching tools

The course will analyzetheoretical models for which the main tools of Game Theory are a pre-requisite. Some lab and class experiments will beused to better illustrate the course topics.

Links to further information

http://www2.dse.unibo.it/barigozzi/corsi/corsi.htm

Office hours

See the website of Francesca Barigozzi