Econ 8004 Microeconomic Analysis

Spring 2005
Department of Economics, University of Minnesota

Time: Tu-Th 2:30-3:45
Location: CSoM 2-227
Instructor: Andrea Moro
Office: 947 Heller Hall
Phone: 625 8369
Hours: 3:50-5:10 Tuesday
E-mail: amoro@econ.umn.edu
Home: http://www.econ.umn.edu/~amoro/Teaching/Micro8004/index.html

Overview

This is an introduction to game theory and information economics.  Textbook: Robert Gibbons Game Theory for Applied Economists, Princeton University Press. The TA

Assignments and grading policies

There will be weekly problem sets, a midterm, and a final exam. The grade will be determined as 25% from problem sets, 30% midterm and 45% final exam. You are encouraged to work in groups on the problem sets, but you should try the problems on your own before meeting in groups. Groups are helpful to learn from each other, not to facilitate division of labor. Each student should present his/her own solutions, even if working in groups.

Outline

1. Normal form games (3 classes)
   1. Iterated deletion of dominated strategies [1.1 A-B]
      
   2. Nash equilibrium [1.1 C]
      
   3. Mixed strategies [1.3]
      
   4. Arguments for Nash equilibrium
2. Extensive form games (5 classes)
   
1. Definitions [2.4]
   
2. Backward induction, subgame perfection [2.1-2]
   
3. Repeated games and the folk theorem [2.3]
   
3. Games of incomplete information  (4 classes)
   
1. Bayesian-Nash equilibrium [3.1-2]
   
2. Perfect Bayesian equilibrium [4.1-2]
   
4. Moral hazard and Adverse selection  (3 classes)
   
1. The Principal-agent model
2. Akerlof's lemons model
3. Spence's job-market signaling [4.2]
   

Number in brackets refer to Gibbon's sections. It is however recommended that you read all sections.

Other readings

Other useful textbooks

• Myerson, Game Theory - Analysis of Conflict
  
• Osborne and Rubinstein, A course in Game Theory
  

A simple introduction to strategic analysis

• Dixit, Avinash, and Barry Nalebuff. Thinking Strategically: A Competitive Edge in Business, Politics, and Everyday Life. .

Handouts

• Problem set 1
• Problem set 2
• Problem set 3
• Problem set 4
• Midterm
• Midterm-solutions
• Problem set 5
• Final
• Final-solutions
• handout