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Course Syllabus

Master 2020/2021

Microeconomics: applications

Type: Elective course (Economics: Research Programme)
Area of studies: Economics
Delivered by: Department of Theoretical Economics
Where: Faculty of Economic Sciences
When: 1 year, 3, 4 module
Mode of studies: offline
Instructors: Tatiana Mayskaya, Marina Sandomirskaia
Master’s programme: Academic Economics
Language: English
ECTS credits: 5
Contact hours: 76

Course Syllabus

Full Syllabus

Abstract

This course has two parts. The first part is devoted to the advanced topics in Game Theory and its applications. The issues in non-cooperative theory cover some modern approaches to dynamic games, including games with incomplete information, and its essential applications, such as the model of job market signaling. The special attention will be paid to cooperative game theory, basic solution concepts, bargaining solution and the connection and open problems between cooperative and non-cooperative modeling. The course will include discussions on evolutionary games, bounded rationality behavior, hierarchical games, and some other related topics. The second part of the course introduces Contract Theory, Matching Theory, and Social Choice. The theory of contracts studies situations when a principal (e.g. manager) offers a contract to an agent (e.g. worker). The agent either has some private knowledge relevant for the principal (screening model) or can take a hidden action (moral hazard model). The theory of matching seeks to design mechanisms to match one side of a market (e.g. men) to the other side of the market (e.g. women). The social choice theory that studies preference aggregation rules and their normative appeal. In the 4th module of 2019/2020 academic year all classes will be switched to online format via ZOOM.
Learning Objectives

Learning Objectives

  • The course is designed to equip students with both the foundations and the modern game-theoretical tools for economic modeling. A special attention will be paid to popular solution concepts, relation between a cooperative and non-cooperative approaches and modern trends in game-theoretical applications.
  • After successful passing the course, a student will: • know mathematical models and concepts of game theory; • be able to construct adequate model for economic interactive situation and analyze it; • understand the area and limitations of game-theoretical method.
Expected Learning Outcomes

Expected Learning Outcomes

  • A student should learn and solve the simplest games concerning the following topics. Static games of complete information. Nash equilibrium. Iterated strict dominance, rationalizability. Correlated equilibrium.
  • The student should learn and solve the problems on the topics of: Dynamic games of complete information. Backward induction and subgame perfection. Critiques and limitations. Repeated games. Folk theorem.
  • Tha student should learn the general specific of static games of incomplete information. She should find a Bayesian equilibrium in simple games. Know the classification of auctions and general approach to solving them.
  • A studen should learn the concepts of a dynamic game, information set, beliefs, weak and strong sequential equilibria.
  • Students should distinguish different solution concepts for dynamic games and apply them to real examples.
  • A student should learn the specific of signaling games, separsting and pooling equilibrium and can construct and solve job market game.
  • A atudent should learn about this class of games and understand their specific properties and differences from repeated games.
  • A student should formulate and solve simple bargaining two-person problems.
  • A student should formulate and solve the simplest cooperative games, should learn the main solution concepts and their differences.
  • A student should formulate anf find a solution in the simplest evolutionary games.
  • A student should understand the main definition and apply it to market games.
  • A student should know the alternatives to Nash equilibrium, the results for some classic experiments and should apply the logic to simplest games.
  • A student should know the limitations of the modern game theoretical approach and the main critique of it.
  • A student should be able to recognize adverse selection mechanism in real life
  • A student should formulate and solve simple models based on screening motives
  • A student should be able to recognize moral hazard phenomenon in real life
  • A student should be able to solve a simple model of moral hazard.
  • A student should be able to apply DA algorithm.
  • A student should be able to formulate Arrow theorem.
  • A student should be able to discuss advantageous and disadvantageous of various voting rules
Course Contents

Course Contents

  • Static games of complete information. Nash equilibrium. Iterated strict dominance, rationalizability. Correlated equilibrium.
    The topic covers the following notions and concepts. Static games of complete information. Nash equilibrium. Iterated strict dominance, rationalizability. Correlated equilibrium.
  • Dynamic games of complete information. Backward induction and subgame perfection. Critiques and limitations. Repeated games. Folk theorem.
    The topic covers the following concepts and classes of games: Dynamic games of complete information. Backward induction and subgame perfection. Critiques and limitations. Repeated games. Folk theorem.
  • Static games of incomplete information. Bayesian equilibrium. Application to mechanism design problems.
    The topic covers the introduction in Static games of incomplete information, Bayesian equilibrium, Application to auctions as a mechanism design problem.
  • Dynamic games of incomplete information. Perfect Bayesian equilibrium. Sequential equilibrium.
    The topic covers the main aspects of dynamic games of incomplete information. The corresponding solution concepts are introduced.
  • Trembling hand perfect equilibrium. Proper equilibrium.
    The topic covers two refinements of NE for dynamic games.
  • Signaling games. Separating and pooling equilibria. Additional refinements and criteria. Applications: job-market signaling.
    The topic introduces the specific class of dynamic games of incomplete information and solution concepts for them. Several examples are considered.
  • Reputation effects. Games with a single long-run player. Extensions.
    The topic covers reputation aspects in a games with a single long-run player.
  • Bargaining problem.
    The topic covers bargaining problem in games with non-transferable utilities. Nash bargaining solution and its properties. Relation with Rubinstein sequential bargaining.
  • Cooperative games.
    The topic covers coalitional games with transferable utilities. Characteristic function. Imputation. Special families of games. Solutions: the core, the Shapley value, the nucleolus.
  • Evolutionary games.
    The topic covers introduction to evolutionary games. Examples and the concept of Evolutionary stable sets will be considered.
  • Markov perfect equilibrium.
    The topic introduces the notion of Markov perfect equilibrium. Payoff-relevant strategies. A reduction of infinitely repeated games.
  • Limitations and contradictions of game theoretical approach
    The topic discusses the main limitations and contradictions of game theoretical approach.
  • Hierarchical games. Bounded-rationality approach.
    The topic discuss the cognitive hierarchies and boundedly rational solution concepts. Experimental foundations for them are analyzed.
  • Screening model
    Seller-buyer, lender-borrower, employer-employee examples. Ex-ante contracting. Limited liability. Different outside options. Optimal income taxation.
  • Moral hazard
    Binary setup. First best: risk-neutral, risk-averse, risk-loving agent. Second best: risk-neutral / risk-averse agent, full-limited liability. Multiple outcomes / actions. Continuum outcomes / actions. Linear contracts.
  • Matching theory
    Stable matchings. Deferred acceptance algorithm. Stability vs Pareto optimality. Rural Hospital theorem. Lattice structure of stable matchings. Strategic behavior. Many-to-one matching.
  • Social choice theory
    Examples of social choice unctions. Arrow impossibility theorem. Gibbard-Satterthwaite theorem. May theorem. Restricted domain: single-peaked preferences and median voter theorem.
Assessment Elements

Assessment Elements

  • non-blocking домашнее задание 1
    вес 0.1
  • non-blocking домашнее задание 2
    вес 0.15
  • non-blocking контрольная работа midterm
    after 3d module, Game Theory part of the course only
  • non-blocking домашнее задание 3
    вес 0.08
  • non-blocking домашнее задание 4
    вес 0.07
  • non-blocking домашнее задание 5
    вес 0.05
  • non-blocking домашнее задание 6
    вес 0.05
  • non-blocking финальный экзамен
    Экзамен проводится в письменной форме. Экзамен проводится на платформе Zoom (https://us02web.zoom.us/j/8577231768). К экзамену необходимо подключиться за 10 минут до начала. Компьютер студента должен удовлетворять требованиям: наличие рабочей камеры и микрофона, поддержка Zoom и MS Teams, возможность просматривать задания, выложенные на MS Teams, и загружать туда готовую работу. Для участия в экзамене студент обязан: включить камеру при подключении, подтвердить получение задания. Во время экзамена студентам запрещено: выключать камеру, получать помощь от кого-либо, кроме преподавателя. Во время экзамена студентам разрешено: пользоваться своими конспектами и слайдами лекций, задавать вопросы преподавателю (через чат или по телефону). Кратковременным нарушением связи во время экзамена считается нарушение связи / отсутствие студента перед экраном менее 3х минут. Долговременным нарушением связи во время экзамена считается нарушение связи более 3х минут или совокупное нарушение связи за время проведение экзамена на более 10 минут. При долговременном нарушении связи студент не может продолжить участие в экзамене и получает 0 баллов за экзамен без права пересдачи.
Interim Assessment

Interim Assessment

  • Interim assessment (4 module)
    0.1 * домашнее задание 1 + 0.15 * домашнее задание 2 + 0.08 * домашнее задание 3 + 0.07 * домашнее задание 4 + 0.05 * домашнее задание 5 + 0.05 * домашнее задание 6 + 0.25 * контрольная работа midterm + 0.25 * финальный экзамен
Bibliography

Bibliography

Recommended Core Bibliography

  • A course in game theory, Osborne, M. J., 1994
  • An introduction to game theory, Osborne, M. J., 2004
  • An introduction to game theory, Osborne, M. J., 2009
  • Camerer, C. F., Ho, T.-H., & Chong, J.-K. (2004). A Cognitive Hierarchy Model of Games. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsbas&AN=edsbas.4DA7457D
  • Contract theory, Bolton, P., 2005
  • Game theory : analysis of conflict, Myerson, R. B., 1997
  • Game theory : analysis of conflict, Myerson, R. B., 2004
  • Game theory, Fudenberg, D., 1991
  • Jacob K. Goeree, & Charles A. Holt. (2001). Ten Little Treasures of Game Theory and Ten Intuitive Contradictions. American Economic Review, (5), 1402. https://doi.org/10.1257/aer.91.5.1402
  • Microeconomic theory, Mas-Colell, A., 1995
  • Vincent P. Crawford, Miguel A. Costa-Gomes, & Nagore Iriberri. (2013). Structural Models of Nonequilibrium Strategic Thinking: Theory, Evidence, and Applications. Journal of Economic Literature, (1), 5. https://doi.org/10.1257/jel.51.1.5
  • Vincent P. Crawford. (2013). Boundedly Rational versus Optimization-Based Models of Strategic Thinking and Learning in Games. Journal of Economic Literature, (2), 512. https://doi.org/10.1257/jel.51.2.512

Recommended Additional Bibliography

  • Advances in behavioral economics, , 2004
  • Behavioral game theory : experiments in strategic interaction, Camerer, C. F., 2003