Advanced Microeconomics: Information Economics

Credits: 
2.0
Term: 
Winter
Course Description: 

To familiarize students with the basic concepts, models, and methods in information
economics, the study of the effects of information asymmetries on economic outcomes. The
topics covered are:
 - Adverse Selection in Markets
◦ Akerlof's lemons model
 - Nonlinear Pricing
◦ The basic two-type model of hidden information
◦ Competitive screening
-  Moral Hazard
◦ The basic two-effort model of hidden action
◦ Career concerns
-  Mechanism Design
◦ Pivotal mechanisms
◦ The revelation principle
◦ Auction theory

Learning Outcomes: 

Understanding of the basic models used to capture the various effects of asymmetric
information: adverse selection, nonlinear pricing, moral hazard, mechanism design. Learning
techniques to solve these models. Ability to spot when asymmetric information is an
important aspect of an economic situation, and to identify the type of asymmetry at play
and the modeling tools to use.

Assessment: 

There will be 3 problem sets in the course. The schedule has to be finalized yet. Each
problem set is due at the beginning of class on the given day. The problem sets will not
count toward the grade, but it is essential for understanding the material that you do them.
The final will be held in the final week of class. The grade will be determined entirely by the
final.
2

Prerequisites: 

Micro I and Micro II