This module explores the contributions made by economic theory to several
important economic problems. While the list of topics generally is quite flexible,
the underlying theme will be the use of game theoretic modelling and the use of
mathematical modelling and equilibrium concepts developed in economic theory.
This year the main topics will be on Information Economics: how the fact that
different agents have access to different information can affect their behaviour in
markets. Thus, firms do not know the ability of applicants while the applicants do,
the owners of used cars have much more information on the cars than the buyers
and so on.
The most famous example is due to George Akerlof, who introduced the idea of
“adverse selection” in the used car market. These ideas have now been applied in
a wide variety of economics and political settings and the module will study some
of these applications in depth. Some of the questions we will try to answer are:
Why is there unemployment? Why do forms offer lower premiums to insure who
accept a high deductible? These questions cannot be answered in the standard
The topics covered will be under the broad headings of:
- Static bilateral contracting: problems of Hidden Information: (a) Screening:basic models (b)Signalling
- Static Bilateral Contracting: Problems of Hidden actions: moral hazard
- Applications: Insurance markets, used car market.
- Empirical Evidence)
2 Hour Exam
Take Home Exam
Educational aims & objectives
To provide a course that can make free use of mathematical techniques in economics. - To help prepare students who may wish to study Economics at postgraduate level.
A systematic understanding of the use of mathematics in applied economic analysis. - The technical mathematical skills necessary for formal economic analysis.
1-hour lectures & 1-hour seminar weekly