In most cases, first-year courses in economics assume no differences in the information which agents hold when they interact. For example, buyers and sellers are perfectly informed about the quality of the goods being sold in the market; employers perfectly know the productivity of employees at the time they recruit them and they also know the effort they exert when they are employed; banks and courts perfectly know what borrowers do with loans; etc. This course will relax that assumption and study the extent to which economic outcomes differ when agents do not hold complete information. We will study different types of incomplete information, the problems that this may cause for the efficient functioning of markets, and the various institutions that may help correct or mitigate those problems. The overarching goal of the course is therefore to introduce students to the main themes and tools of Information Economics, a field that witnessed many exciting developments in the past 30 years.
Microeconomics 1 and 2, Mathematics 1, and Statistics
The course will be structured in three parts. The first part will provide the theoretical tools needed to fully understand the rest of the course, namely specific topics in game theory and decision-making under uncertainty. Then, the second part will study in detail the first type of information asymmetry called moral hazard. The third part will go over a second type of information asymmetry, called adverse selection, and some of the institutions or mechanisms that are often used to overcome it: screening, signaling, and auctions. The focus will be on the theoretical causes of, consequences of, and possible remedies to, such informational limitations. Attention will also be paid to the relevance and validity of those theories in practical (real-life or laboratory) situations.
2-hour interactive lecture and 2-hour tutorial in the typical week
Type of instructions
Type of exams
The numerical grade for the course consists of two parts. 70% of your course grade stem from the final written examination; 30% stem from two homework assignments.
The written exam is multiple choice.
No one textbook will be required. The course will be based on a number of papers and/or excerpts listed on the course website.