Master 2022/2023

Microeconomics. Advanced Level

Type: Compulsory course (Financial Economics)

Area of studies: Economics

Delivered by: International College of Economics and Finance

Where: International College of Economics and Finance

When: 1 year, 1-4 module

Mode of studies: offline

Open to: students of one campus

Instructors: Беляев Алексей Юрьевич, Tatiana Mayskaya, Anna Yurko, Alexander Zasorin, Peio Zuazo-Garin

Master’s programme: Financial Economics

Language: English

ECTS credits: 12

Contact hours: 146

Course Syllabus

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

• Quiz
• Intermediate test 1
• Exam winter
  Winter exam is comprehensive for the first part of the course.
• Homework assignments
• Exam spring
• Intermediate test 2
• Intermediate test 3

Interim Assessment

• 2022/2023 2nd module
  0.03 * Quiz + 0.68 * Exam winter + 0.29 * Intermediate test 1
• 2022/2023 4th module
  0.25 * Intermediate test 2 + 0.5 * Exam spring + 0.25 * Intermediate test 3

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