Module 31-M-Micro2 Microeconomics 2

Non-official translation of the module descriptions. Only the German version is legally binding.

This module gives students three kinds of skills. First, it enables students to model any situation of strategic interaction formally as a game, which is then subject to straightforward analysis with the tools (of e.g. dominant strategies or Nash equilibrium) also given to them in this module. Second, students will come away from this module better prepared to act well themselves in situations of strategic interaction. Third, and finally, students will learn to appreciate and analyze the consequences of strategic behavior of others in any setting (with a special focus in this module on economic problems).

Microeconomics 2A: Game Theory.

Basic elements of noncooperative games: what is a game, extensive form representation of a game, strategies and the normal form representation of a game, randomized choice.

Simultaneous-move games: dominant and dominated strategies, rationalizable strategies, CURB sets, Nash equilibrium, trembling hand perfect equilibrium, proper equilibrium, strategic stability, evolutionary stable strategies. Dynamic games: extensive form rationalizability, sequential rationality, backward induction, subgame perfection, beliefs and sequential rationality, (weak) perfect Bayesian equilibrium, sequential equilibrium, reasonable beliefs and forward induction. Games of incomplete information and Bayesian Nash equilibrium.

Books:
Mas-Colell, A., Whinston, M.D., Green, J., Microeconomic Theory, Oxford University Press, 1995. Chapters 7-9.
Fudenberg, D., and Tirole, J., Game Theory, MIT Press, 1991, Chapters 1-3,6,8,11.
Ritzberger, K., Foundations of Non-Cooperative Game Theory, Oxford University Press, 2002, Chapters 4-6.

Microeconomics 2B: Economics of Information.

Competition among firms: Bertrand, Cournot, repeated interaction and the folk theorem. Interaction with asymmetric information: Adverse selection, moral hazard, and signalling. Auctions with private valuations: Revenue Equivalence and equilibrium characterization. Mechanism Design: revelation principle, general revenue equivalence. Seller optimal mechanisms, efficient mechanisms (Vickery-Clarke-Groves).

Books:
Mas-Colell, A., Whinston, M.D., Green, J., Microeconomic Theory, Oxford University Press, 1995. Chapters 13,14, and 23.
Fudenberg, D., and Tirole, J., Game Theory, MIT Press, 1991, Chapters 5-7.
Krishna, V., Auction Theory, 2nd edition, Academic Press, 2010, Chapters 1-5.

Microeconomics 2

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