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

This course is compulsory on the MPhil/PhD in Environmental Economics. This course is available on the MPA Dual Degree (LSE and Columbia), MPA Dual Degree (LSE and Hertie), MPA Dual Degree (LSE and NUS), MPA Dual Degree (LSE and Sciences Po), MPA Dual Degree (LSE and Tokyo), MPA in International Development, MPA in Public Policy and Management, MPA in Public and Economic Policy, MPA in Public and Social Policy, MPA in Social Impact, MPhil/PhD in Economic Geography, MRes/PhD in Management (Marketing), MRes/PhD in Quantitative Economic History, MSc in Economics, MSc in Economics (2 Year Programme), MSc in Economics and Philosophy, MSc in Environmental Economics and Climate Change, MSc in Finance and Economics, MSc in Finance and Economics (Work Placement Pathway), MSc in Quantitative Economic History and Master of Public Administration. 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).

In exceptional circumstances, students may enrol in the course without EC400 provided they meet the necessary requirements and have received approval from the course conveners (at a face-to-face meeting), the MSc Economics Programme Director and their own Programme Director. Contact the Department of Economics for more information (econ.msc@lse.ac.uk) regarding entry to this course.

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 maximization, 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.  Then we study models of decision making under uncertainty and game theoretic solution concepts. Novel developments in these fields are also 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 10 hours of seminars in the MT. 20 hours of lectures and 10 hours of seminars in the LT.

Two marked assignments per term.

The course will draw on a variety of texts, the main ones being:

1. J G Riley, Essential Microeconomics, Cambridge;
2. J R Green, A Mas-Colell & M D Whinston, Microeconomic Theory, Oxford.

More detailed readings will be given at the beginning of the course.

Some notes will be provided where textbook coverage is inadequate.

Exam (50%, duration: 2 hours, reading time: 10 minutes) in the January exam period.
Exam (50%, duration: 2 hours, reading time: 10 minutes) in the summer exam period.