The availability and dissemination of information have very significant effects on individual behaviour and on the functioning of the markets. The nature of the contracts traded, the mechanisms and operating rules of the markets often reflect the prevailing information conditions. This course is an introduction to these topics through the methodologies of microeconomic theory. In particular, a first part is dedicated to decisions under uncertainty in perfectly competitive markets. A second part considers decisions with incomplete information and imperfectly competitive markets (monopoly, oligopoly, monopolistic competition); the emergence of strategic behaviours is considered. A final part of the course is dedicated to the functioning of markets in the presence of information asymmetries. Understanding these issues aims to put the student in a position to understand the information that market data transmits and to identify which other data it is important to collect in order to effectively inform the decisions of economic agents.
teacher profile teaching materials
1. Individual decisions Decisioni individuali
• Consumer theory (preferences, utility functions, balance constraint, demand curve, individual welfare).
• Producer theory (technology, cost function, profit maximization, supply function).
• “Big data” and individual decisions: learning about individual characteristics from their choices.
2. "Perfectly competitive" markets: equilibrium, efficiency, equity.
• Single market equilibrium
• General equilibrium, efficiency and equity.
• Information revealed by prices.
Parte II - Choices and transactions under imperfect information
1. Choice under uncertainty. Uncertainty and risk. Lotteries. Expected utility. Attitudes toward. Certainty equivalence and risk premia. Decisions under uncertainty and risk. The importance of risk diversification:
demand of financial assets and insurance. The value of information.
2. Choice under incomplete information: strategic interactions. Game theory. One-stage games. Nash equilibrium. Dynamic games. Backward induction and "sequentially rational" NE. Cooperation and mutual agreements.
3. Incomplete information and market power
• Benchmark Monopoly.
• Oligopoly. Models of price competition (Bertrand-Nash). Models of quantitative competition (Cournot-Nash). Collusion. Barriers to entry and monopolistic competition.
Parte III - Choices and "contracts" under information asymmetries.
1. Market power and price discrimination, two-part tarifs, bundling.
2. An introduction to adverse selection, moral hazard, and contracts.
Additional material will be distributed through the Moodle platform during classes.
Programme
Parte I – The textbook economy with "perfect competition": old concepts and new insights1. Individual decisions Decisioni individuali
• Consumer theory (preferences, utility functions, balance constraint, demand curve, individual welfare).
• Producer theory (technology, cost function, profit maximization, supply function).
• “Big data” and individual decisions: learning about individual characteristics from their choices.
2. "Perfectly competitive" markets: equilibrium, efficiency, equity.
• Single market equilibrium
• General equilibrium, efficiency and equity.
• Information revealed by prices.
Parte II - Choices and transactions under imperfect information
1. Choice under uncertainty. Uncertainty and risk. Lotteries. Expected utility. Attitudes toward. Certainty equivalence and risk premia. Decisions under uncertainty and risk. The importance of risk diversification:
demand of financial assets and insurance. The value of information.
2. Choice under incomplete information: strategic interactions. Game theory. One-stage games. Nash equilibrium. Dynamic games. Backward induction and "sequentially rational" NE. Cooperation and mutual agreements.
3. Incomplete information and market power
• Benchmark Monopoly.
• Oligopoly. Models of price competition (Bertrand-Nash). Models of quantitative competition (Cournot-Nash). Collusion. Barriers to entry and monopolistic competition.
Parte III - Choices and "contracts" under information asymmetries.
1. Market power and price discrimination, two-part tarifs, bundling.
2. An introduction to adverse selection, moral hazard, and contracts.
Core Documentation
B. Douglas Bernheim, Michael D. Whinston, Microeconomia, Mc Graw Hill, 2022.Additional material will be distributed through the Moodle platform during classes.
Type of delivery of the course
Class lecturesAttendance
Class lecturesType of evaluation
A final, written exam, to be taken in class, closed book. The exam will contain questions and problems.