Microeconomic Theory II (2060) – Spring 2011
Instructor: Kfir Eliaz
TA: Takeshi suzuki
Textbooks - The course will follow,
Main text: Mas-Colell, A., M. Whinston and J. Green (1995), Microeconomic Theory, Oxford University Press. [henceforth, MWG]
Ariel Rubinstein (2006), Lecture Notes in Microeconomic Theory, Princeton University Press [henceforth, AR]
(free access to the January 2010 version of the book is available at http://arielrubinstein.tau.ac.il/Rubinstein2007.pdf)
Martin J. Osborne and Ariel Rubinstein (1994), A Course in Game Theory, MIT. [henceforth, MOAR]
(free access to the book is available at http://theory.economics.utoronto.ca/books/)
1. Choice under risk and uncertainty
- MWG, Chapter 6
- AR, Lectures 8, 9
- slides on expected utility violations (normative appeal of the Independence Axiom, reference-dependence, framing contingencies)
2. Game Theory: Strategic games and dominance
- MWG, Chapter 7
- MOAR, Section 2.1, Section 6.1.1-6.1.2
3. Game Theory: Nash equilibrium
- MWG, Chapter 8
- MOAR, Sections 2.2-2.6, 3.1-3.2, 4.1-4.3
4. Game Theory: Extensive-form games
- MWG, Chapter 9, Sections 9A-9C, Appendix A
- MOAR, Sections 6.1.3-6.5, 8.1-8.2, 8.5, 11.1, 11.4, 11.5, 12.1-12.4
- slides (contains slightly more than what we covered in class)
5. Adverse selection, signaling and screening
- MWG, Chapter 13 (Unfortunately, we are not allocated enough time to cover the whole chapter,
so in class I present a very brief version of the chapter using discrete type examples.
Hopefully, this will convey the basic idea and will allow you to better understand Ch. 13 from MWG.
You should read the whole chapter!).
- MOAR, Section 12.3.1 and Example 246.1 on p.246 (this is the version of signaling and the intuitive
criterion, which I did in class).
- Notes on the market for lemons and competitive screening (these notes summarize MWG's
treatment of the subject, where screening is applied to the labor market).
- Ran Spiegler's notes on credit markets with adverse selection (this is the example of
competitive screening that I will do in class).
- MWG, Chapter 14 (except for 14.D)
- Notes (I'll cover in class only the case of moral hazard, the case
of adverse selection is very similar to monopolistic screening, which
we've covered. For the sake of completeness, and for consistency with
the book, the notes do cover adverse selection. You should read this
part of the notes as it describes a different interpretation of monopolistic
- Monopolistic screening (taken from Patrick Bolton and Mathias Dewatripont (2005), Contract
Theory, MIT Press) - a nice treatment of the topic, including the discrete version, which is
absent from MWG. My class lecture on this topic will follow this treatment.