# Economics 701: Advanced microeconomic theory, spring 2011

Instructor: Jeremy A. Sandford

Office hour: W 1-2pm 335L B&E, or by appointment

Lecture:
2:00-3:15
TH, BE 214

Midterm date:
Friday, March 4, 1-4pm

Final date: Friday, May
6, 8am-10am

**Required text**: Mas-Colell, Whinston, and Green, Microeconomic Theory, Oxford University Press

**Homework 1**,
answers

**Homework 2**,
answers

Homework 3, answers

Homework 4, answers

Homework 5, answers

Homework 6, answers

Homework 7, answers

# Schedule

**Thursday, January 13:** deficiencies of GE, normal form
games, randomized strategies

readings: Mas-Colell, chapter 7

Gale,
D. (2000), *Strategic Foundations of General Equilibrium*, chapter
1

**Tuesday, January 18:** expected utility, extensive form games

readings: Mas-Colell, chapter 6B

Mas-Colell, chapter 7

Handout on expected
utility

handout on
extensive form game notation

**Thursday, January 20:** solution concepts for normal form
games: dominance, iterated strict dominance, rationalizability

reading: Mas-Colell, chapter 8

handout on
dominant/dominated strategies

**Tuesday, January 25:** solution concepts for normal form
games: Nash equilibrium

reading: Mas-Colell, chapter 8

**Thursday, January 27:** Interpretations of Nash
equilibrium, credibility of commitments in
extensive form games, refinements of Nash equilibrium for extensive form games

reading: Mas-Colell, chapter 9

handout on subgame perfect
equilibrium

**Tuesday, February 1:** subgame perfect equilibria, perfect
Bayesian equilibria

Handout on perfect Bayesian
equilibrium

reading: Mas-Colell, chapter 9

**Thursday, February 3:** sequential equilibrium

reading: Mas-Colell, chapter 9

**Tuesday, February 8:** extensive form perfection, calculating
sequential equilibria

reading: Mas-Colell, chapter 9

Example
problem about bargaining

**Thursday, February 10:** Asymmetric information, signaling
games

reading: Cho, I. and D. Kreps, 1987, "Signaling games
and stable equilibria," QJE, **52** pp. 179-222

Handout on
signaling games

Mas-Colell, chapter 8.E, 9.D

**Tuesday, February 15:** Equilibrium domination and the
intuitive criterion in signaling games, examples

reading: Cho, I. and D. Kreps, 1987, "Signaling games
and stable equilibria," QJE, **52** pp. 179-222

Handout on the
intuitive criterion

**Thursday, February 17:** minmax theorem, zero sum games

**Tuesday, February 22:** repeated games

reading: Mas-Colell, chapter 12, appendix A (nb. as Mas-Colell has
comparatively paltry material on repeated games, it may be helpful to consult
other game theory books for this portion of the course, such as books by
Gibbons, Myerson, Fudenberg and Tirole, Osborne, or Osborne and Rubinstein)

handout on repeated
games notation

**Thursday, February 24:** repeated games

**Tuesday, March 1:** oligopoly models: the basic Cournot model

reading: Mas-Colell, chapter 12

**Thursday, March 3:** oligopoly models: Cournot, collusion in
the Cournot model

reading: Mas-Colell, chapter 12

**Friday, March 4:** Midterm exam, answers (answers updated on 3/6 with a minor change to
2b)

**Tuesday, March 8:** No class

**Thursday, March 10:** No class

**Friday, March 11, 9:30am:** oligopoly models: Stackelberg

reading: Mas-Colell, chapter 12

**Tuesday, March 15:** No class

**Thursday, March 17:** No class

**Tuesday, March 22:** No class

**Thursday, March 24:** oligopoly models: Bertrand, capacity
constaints, strategic precommitments, entry

reading: Mas-Colell, chapter 12

**Tuesday, March 29:** Adverse selection

reading: Mas-Colell, chapter 13

Akerlof, G. 1970, "The Market for
Lemons", QJE, 84, pp. 488-500

**Thursday, March 31:** Adverse selection in a labor market
setting

reading: Mas-Colell, chapter 13

**Tuesday, April 5:** Education as a labor market signal

reading: Mas-Colell, chapter 13

Spence, M. 1973, "Job market signaling", *QJE*,
**87**, pp. 355-374

**Thursday, April 7:** Spence model ctd, screening

reading: Mas-Colell, chapter 13

**Tuesday, April 12:** Statistical discrimination and
pervasive discrimination

reading: Coate, S. and G. Loury (1993), "Will
affirmative-action policies eliminate negative stereotypes?" *AER*,
**83**, pp. 1220-1240

**Thursday, April 14:** Coate and Loury equilibria, numerical
example

reading: Coate, S. and G. Loury (1993), "Will
affirmative-action policies eliminate negative stereotypes?" *AER*,
**83**, pp. 1220-1240

**Tuesday, April 19:** Affirmative action in Coate and Loury

reading: Coate, S. and G. Loury (1993), "Will
affirmative-action policies eliminate negative stereotypes?" *AER*,
**83**, pp. 1220-1240

**Thursday, April 21:** Principal agent models: observable
effort and unobservable effort with risk neutral agents

reading: Mas-Colell, chapter 14.B

**Tuesday, April 26:** Principal agent models: unobservable
effort

reading: Mas-Colell, chapter 14.B

**Thursday, April 28:** principal-agent models: examples

reading: Mas-Colell, chapter 14

**Friday, May 6:** Final exam, answers