EconS 503, Advanced Microeconomic Theory II

Syllabus – EconS 503, Spring 2026
List of recommended exercises for review. Link.
Class Slides (classified by topics):
- Game Theory
  1. Introduction to games and their representation.
  2. Dominance solvable games: application of IDSDS and IDWDS.
  3. Nash equilibrium (discrete strategy spaces).
    - Optional: Nash equilibrium in games with two players.
    - Optional: Nash equilibrium in games with N players.
  4. Nash equilibrium (continuous strategy spaces).
    - Optional: Applications to oligopoly competition.
    - Optional: Applications to common pool resources.
  5. Mixed strategy Nash equilibrium (msNE):
    - Mixed strategies with two players.
    - Mixed strategies with N players.
    - Strictly competitive games, and max-min strategies.
    - Trembling Hand Perfect Equilibrium and Proper Equilibrium.
    - Examples of msNEs in games with continuous action spaces (from my book on Auction Theory exercises).
  6. Sequential-move games and subgame perfect equilibrium (SPNE):
    - Introduction to backward induction.
    - Mixed vs. Behavioral strategies in extensive-form games.
    - Applications to dynamic oligopoly competition.
    - Applications of SPNE to: Strategic pre-commitment.
    - Applications of SPNE to: Bargaining games over finite and infinite periods.
      - Optional: Application of SPNE to time-inconsistent preferences .
      - Optional: Legislative bargaining (Baron and Forejohn, 1989).
  7. Repeated games:
    - Introduction to finitely and infinitely-repeated games.
    - Extensions (Imperfect monitoring, “stick and carrot” strategies, etc.).
      - Cartels and tacit collusion.
      - Applying repeated games to labor economics: efficiency wages.
    - Optional: Sequential interaction and reputation.
    - Optional: Overlapping generations models and repeated games.
  8. Simultaneous-move games of incomplete information:
    - Bayesian Nash equilibrium (BNE).
    - Applications of BNE: The game of chicken.
    - BNE in games with continuous action spaces: Cournot competition under incomplete information.
    - BNE in games with continuous types: Public good games under incomplete information: The “study group” game.
  9. More applications of BNE with continuous action spaces (Auction Theory):
    - Auction Theory, chapter 9.
    - Auction Theory-I: Paper and Slides
    - Auction Theory-II: The Revenue Equivalence Theorem.
    - Auction Theory III: Common value auctions.
    - Optional: More auction theory exercises in this book.
    - Optional: More applications of BNE – Information aggregation among several players.
  10. From Bayesian Nash Equilibrium (BNE) to Perfect Bayesian Equilibrium (PBE):
    - Chapter 10.
    - A systematic procedure for finding all pure-strategy PBEs: Paper and Slides.
  11. Applications of PBE to signaling games:
    - Labor market signaling game.
    - Monetary authority signaling game.
  12. How to find semi-separating PBEs (involving mixed strategies):
    - Introduction – Reputation in public-good games.
    - Poker game.
    - Brinkmanship game.
  13. Equilibrium refinements (The Intuitive Criterion and the Divinity Criterion).
    - Chapter 11
    - You can find more details about the application of these two refinement criteria, including worked-out examples, here: Paper and Slides.
  14. Signaling games in which both players (sender and receiver) are privately informed about their own type.
  15. Signaling games with continuous action spaces:
    1. Chapter 12
    2. Spence’s job market signaling game: Slides, and Handout.
  16. Cheap-talk games:
    - Chapter 13
    - with two types of privately-informed player
    - with three types of privately-informed player
    - allowing for continuous responses
    - with a continuum of privately-informed players
    - Optional: Legislative organization (open or closed rules in committees?)
    - Optional: Literature review by Krishna and Morgan
  17. Contract theory.
    - Chapter 10 (Contract Theory) – All slides
    - Undergraduate contract theory (as a warm up): Slides.
    - Moral hazard:
    - Adverse selection and screening:
  18. General equilibrium theory – All slides.
    1. Barter economies.
    2. Economies with production.
    3. Core and replicated economies.
    4. Comparative statics.
  19. Mechanism design:
    1. Introductory slides.
    2. Lecture notes on mechanism design.
    3. More examples based on JR, and Example #9.3 in JR.
  20. Social choice theory:
    1. Lecture notes on social choice theory.
    2. Social choice functionals and Arrow’s impossibility theorem.
    3. Literature’s reactions to Arrow’s impossibility theorem.
    4. Revelation of individual preferences (the Gibbard-Satterthwaite theorem).
    5. Alternatives to majority voting.
  21. Weekly review sessions (practice exercises with answer keys):
    1. Basic elements of game theory
    2. Nash equilibrium
    3. Subgame perfect equilibrium
    4. Repeated games
    5. Bayesian Nash equilibrium
    6. Perfect Bayesian equilibrium (PBE) and signaling
    7. PBEs and the application of Cho and Kreps’ Intuitive Criterion
    8. Cheap talk games and labor market signaling
    9. Moral Hazard
    10. Adverse Selection-I
    11. Adverse Selection-II
    12. Adverse Selection-III
    13. General Equilibrium
    14. Mechanism Design
    15. Social Choice Theory
      - For the section of game theory and contract theory, you can find more explanations and examples in my book, Advanced Microeconomic Theory: An Intuitive Approach with Examples, Link and eBook format. You can also find more exercises with detailed answer keys in Practice Exercises for Advanced Microeconomic Theory, MIT Press, Link and eBook format.
      - For the section of game theory, you can find more exercises (with answers) in my book: Strategy and Game Theory, Practice Exercises with Answers. Springer-Verlag (2nd edition), Link and eBook format.
  22. Homework assignments:
  23. Exams: