EconS 503, Advanced Microeconomic Theory II

Syllabus – EconS 503, Spring 2022
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. Pure strategy Nash equilibrium (psNE):
  4. Mixed strategy Nash equilibrium (msNE):
    - Mixed strategies with two players.
    - Mixed strategies with N players.
    - Strictly competitive games, and max-min strategies.
    - Examples of msNEs in games with continuous action spaces (from my book on Auction Theory exercises, and my book on IO exercises).
  5. 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.
    - Optional: Application of SPNE to time-inconsistent preferences.
    - Applications of SPNE to: Strategic pre-commitment.
    - Applications of SPNE to: Bargaining games over finite and infinite periods.
      - Optional: Legislative bargaining (Baron and Forejohn, 1989).
  6. Repeated games:
  7. 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.
  8. More applications of BNE with continuous action spaces (Auction Theory):
    - Auction Theory-I: Paper and Slides
    - Auction Theory-II: The Revenue Equivalence Theorem.
    - Auction Theory III: Common value auctions.
    - More exercises on auction theory in this book.
  9. Optional: More applications of BNE – Information aggregation among several players.
  10. From Bayesian Nash Equilibrium (BNE) to Perfect Bayesian Equilibrium (PBE):
    - Why do need the PBE solution concept? Slides and Handout.
    - 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):
  13. Cheap-talk games:
  14. Signaling games in which both players (sender and receiver) are privately informed about their own type.
  15. Equilibrium refinement criteria (the “Intuitive Criterion” and the “Divinity Criterion”).
    - You can find more details about the application of these two refinement criteria, including worked-out examples, here: Paper and Slides.
- Signaling games with continuous action spaces:
  1. Signaling and limit pricing.
  2. Spence’s job market signaling game: Slides, and Handout.
- Contract theory.
  - Chapter 10 (Contract Theory) – All slides
  - Moral hazard:
  - Adverse selection and screening:
    - Adverse selection and screening (labor).
    - Adverse selection and two-part tariffs (monopoly).
- General equilibrium theory – All slides.
- Mechanism design:
- Social choice theory:
- 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.
- Homework assignments:
  1. Homework #1, Answer key.
  2. Homework #2, Answer key.
  3. Homework #3, Answer key.
  4. Homework #4, Answer key.
  5. Homework #5, Answer key.
  6. Homework #6, Answer key.
  7. Homework #7, Answer key.
  8. Homework #8, Answer key.
- Exams:

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