Dr Francesco Nava 32L. 3.20 and Prof Martin Pesendorfer 32L. 4.19

This course is compulsory on the MSc in Finance and Economics. This course is available on the MPA in European Public and Economic Policy, MPA in International Development, MPA in Public Policy and Management, MPA in Public and Economic Policy, MPA in Public and Social Policy, MSc in Econometrics and Mathematical Economics (2 Year Programme), MSc in Economics, MSc in Economics (2 Year Programme), MSc in Economics and Philosophy, MSc in Environmental Economics and Climate Change and MSc in Quantitative Economic History. This course is available with permission as an outside option to students on other programmes where regulations permit.

Students must have completed Introductory Course in Mathematics and Statistics (EC400).

The aim of the course is to develop the basic tools for analysing problems of resource allocation used by economists working in research, government and business. The course deals with positive and normative problems. It aims to include modern developments without being overly mathematical, and to develop a capacity to apply economic concepts to real-world problems.

The first part of the course focuses on classical theories of market behaviour and strategic interaction. We begin by presenting foundations to utility maximasation, by analysing the optimisation problems of price-taking consumers and firms, and by modelling market interactions and the formation of prices in perfectly competitive markets. We then introduce models of decision making under uncertainty and game theoretic solution concepts. Novel developments in these fields will be discussed in lectures. 

The second part of the course focuses on models of imperfect competition and information economics. We begin with an analysis of models of monopoly, oligopoly, product differentiation, and public goods. Then, we study markets with imperfect and incomplete information including search, adverse selection, auctions, signalling, screening, and moral hazard. Special emphasis will be given to economic applications.

20 hours of lectures and 8 hours of seminars in the MT. 20 hours of lectures and 10 hours of seminars in the LT. 2 hours of seminars in the ST.

There will be mock examinations at the end of MT and the beginning of ST.

The course will draw on a variety of texts, the main ones being: J G Riley, Essential Microeconomics, Cambridge; J R Green, A Mas-Colell & M D Whinston, Microeconomic Theory, Oxford.

More detailed readings will be given at the beginning of the course and some notes will be provided where textbook coverage is inadequate.

Exam (100%, duration: 3 hours) in the main exam period.