Delivered at:: International College of Economics and Finance

Course type:: Compulsory course

When:: 1 year, 1-4 module

Instructors

Abstract

This is a yearlong course in Advanced Microeconomics. During the first two modules we study the decisions of individual economic agents, beginning with the theory of consumer choice and the producer theory. We introduce the concept of duality and analyze it in the context of consumption and production decisions. Afterwards, we study decision-making under uncertainty and introduce the expected utility theory. We also discuss its critiques. The first part concludes with the study of competitive equilibrium and its welfare properties in a general equilibrium setting. The remaining modules can be divided into four subparts: game theory, contract theory, matching theory, and social choice theory. Game-theoretical subpart covers static and dynamic games, both of complete and incomplete information. All other subparts use tools introduced here. Theory of contracts focuses on the principal-agent models with asymmetric information and unobservable actions. As another example of a mechanism design problem, we cover two-sided matching. We end the course by social choice theory that studies preference aggregation rules and their normative appeal. Pre-requisites: Calculus, Probability Theory, Mathematics for Economists.

Learning Objectives

At the conclusion of the course, students should be able to use microeconomic models to understand economic decisions of consumers and firms
introduce basic concepts of microeconomics related to economic decisions of consumers and firms
; - evaluate economic and social outcomes using the concept of Pareto efficiency;
introduce basic concepts of game theory
- apply game-theoretic concepts to carry out theoretical research;
relate the concept of Pareto efficiency to economic and social outcomes
- design mechanisms taking into account the asymmetry of information;
connect studied theoretical concepts to real life
- identify and model real life situations where the studied concepts are applicable;
- critically evaluate theoretical research in economics.

Expected Learning Outcomes

Analyze properties of demand functions.
Analyze the relationship between properties of technologies and firm production decisions
Apply deferred acceptance algorithm to one-to-one matching problems
Apply the key efficiency concept – Pareto efficiency to evaluate market and non-market allocations of goods and resources
Be able to discuss properties of different social choice functions
Discuss and apply the standard approach to modelling uncertainty in the economics and finance literature
Evaluate the impact of information asymmetries on strategic reasoning and equilibrium outcomes
Evaluate the role of communication in determining economic outcomes
Explain the relationship between observed choices and unobserved consumer preferences
Explain the role of time and observation of the opponents' moves in dynamic strategic interaction
Outline the fundamental principles of strategic reasoning
Outline the main tradeoffs in models with adverse selection and moral hazard
Predict the equilibrium outcomes among agents with strategic power
Predict the long term outcomes of repeated strategic interaction
Set up and solve decision problems involving uncertainty
Set up and solve firm problems, derive and analyze individual and aggregate market supply functions
Set up and solve models of consumer choice theory to obtain individual and aggregate market demands for goods
Set-up and solve the benchmark general equilibrium model, find the equilibrium prices and allocations of goods and compare these allocations to the socially optimal outcomes

Course Contents

Consumer Choice Theory
Producer Theory
Choice Under Uncertainty
General Equilibrium
Game theory
Contract Theory
Matching theory
Social choice theory

Assessment Elements

Homework assignments from Part II
Exam winter
Winter exam is comprehensive for the first part of the course.
Homework assignments from Part III
Midterm
Quiz
Intermediate test
Exam spring
Homework assignment from Part I

Interim Assessment

2024/2025 2nd module
0.65 * Exam winter + 0.03 * Homework assignment from Part I + 0.29 * Intermediate test + 0.03 * Quiz
2024/2025 4th module
0.45 * Exam spring + 0.05 * Homework assignments from Part II + 0.05 * Homework assignments from Part III + 0.45 * Midterm

Bibliography

Recommended Core Bibliography

Contract theory, Bolton, P., 2005
Martin J Osborne, & Ariel Rubinstein. (2009). A Course in Game Theory. Levine’s Bibliography. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.p.cla.levrem.814577000000000225
Mas-Colell, A., Whinston, M. D., & Green, J. R. (1995). Microeconomic Theory. Oxford University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.b.oxp.obooks.9780195102680
Roth, A. E., & Sotomayor, M. A. O. (1992). Two-Sided Matching. Cambridge University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.b.cup.cbooks.9780521437882

Recommended Additional Bibliography

Gibbons, R. (1992). Game Theory for Applied Economists. Princeton: Princeton University Press. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=390677
Mathematics for economists, Simon, C. P., 1994

Authors

MAYSKAYA TATYANA SERGEEVNA
USVITSKIY ALEKSANDR VADIMOVICH
YURKO ANNA VYACHESLAVOVNA

Master’s Programme 'Financial Economics'

Microeconomics. Advanced Level