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Course Syllabus

Master 2023/2024

Microeconomics: Applications

Type: Elective course (Economics and Economic Policy)
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
Open to: students of all HSE University campuses
Instructors: Tatiana Mayskaya, Marina Sandomirskaia
Master’s programme: Economics and Economic policy
Language: English
ECTS credits: 6
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.
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 of complete information.
  • The student should learn and solve the dynamic games of complete information
  • The student should learn the general specific of static games of incomplete information, Bayesian equilibrium, and the classification of auctions and general approach to solving them.
  • A student should learn the concepts of a dynamic game, information set, beliefs, weak and strong sequential equilibria.
  • A student should apply the approach to analysis of equilibrium stability in static and dynamic games.
  • A student should learn the specific of signaling games, separating and pooling equilibrium and can construct and solve job market game.
  • A student should model the bayesian update in multi-stage systems with reputation
  • A student should formulate and solve simple bargaining two-person problems, find Nash bargaining solution.
  • A student should solve the simplest cooperative games, should learn the main solution concepts and their differences.
  • A student should formulate and find a solution in the simplest evolutionary games.
  • A student should understand the main definition of Markov equilibrium and apply it to market games.
  • A student should know the alternatives to Nash equilibrium, the results of classic experiments and should apply the logic to simplest games.
  • 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.
  • 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.
  • Dynamic games of incomplete information. Perfect Bayesian equilibrium. Sequential equilibrium.
  • Trembling hand perfect equilibrium. Proper equilibrium.
  • Signaling games. Separating and pooling equilibria. Additional refinements and criteria. Applications: job-market signaling.
  • Reputation effects. Games with a single long-run player. Extensions.
  • Bargaining problem.
  • Cooperative games.
  • Evolutionary games.
  • Markov perfect equilibrium.
  • Limitations and contradictions of game theoretical approach
  • Moral hazard
  • Screening model
  • Matching theory
  • Social choice theory
Assessment Elements

Assessment Elements

  • non-blocking Homework 1
  • non-blocking Homework 2
  • non-blocking Midterm
    Game theoretical, 1 part only is here.
  • non-blocking Homework 3
  • non-blocking Homework 4
  • non-blocking Homework 5
  • non-blocking Homework 6
  • non-blocking Final exam
    Second part only is here.
Interim Assessment

Interim Assessment

  • 2023/2024 4th module
    0.25 * Final exam + 0.13 * Homework 1 + 0.12 * Homework 2 + 0.08 * Homework 3 + 0.07 * Homework 4 + 0.05 * Homework 5 + 0.05 * Homework 6 + 0.25 * Midterm
Bibliography

Bibliography

Recommended Core Bibliography

  • An introduction to game theory, Osborne, M. J., 2004
  • An introduction to game theory, Osborne, M. J., 2009
  • Contract theory, Bolton, P., 2005
  • Game theory : analysis of conflict, Myerson, R. B., 1997
  • Game theory for applied economists, Gibbons, R., 1992
  • Game theory, Fudenberg, D., 1991
  • Game theory, Maschler, M., 2013
  • Hans Peters. Game Theory: A Multi-Leveled Approach, 2008, Springer
  • 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
  • Maskin, E., & Tirole, J. (2001). Markov Perfect Equilibrium: I. Observable Actions. Journal of Economic Theory, (2), 191. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsrep&AN=edsrep.a.eee.jetheo.v100y2001i2p191.219
  • Microeconomic theory, Mas-Colell, A., 1995

Recommended Additional Bibliography

  • A course in game theory, Osborne, M. J., 1994