wir874 - Advanced Microeconomics (Complete module description)

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Students
• understand the importance of incentive systems for economic processes and can analyze the effects of incentive systems;
• have a firm knowledge in game theory and contract theory, and can address questions in the context of scientific discussion;
• are able to apply methods from game theory and contract theory largely independently to the analysis of situations in which agents interact strategically;
• are able to design incentive schemes – on their own and in teams – and to acquire knowledge on their own for this purpose and, to present their results, and to defend them in the scientific discourse.

The first part of the module covers game theory. Game theory is an important method in economics to analyze strategic interactions of agents, e.g., on markets, in organizations or in bargaining situations.
The second part of the module covers contract theory that – according to the Nobel laureate Kenneth Arrow – has been „the most important development in economics in the last forty years“. We work out the fundamentals of screenings, signaling and moral hazard and apply them to different topics, e.g., from labor economics, economic organization and management, law and economics as well as industrial economics.
In both parts, there is a tutorial. Here students largely independently apply the acquired knowledge to different situations of strategic interaction in economics and present their results.

- Gibbons, R. (1992): A Primer in Game Theory. FT Prentice Hall (main text for 1st part)
- Tadelis, St. (2012): Game Theory. An Introduction. ‎ Princeton Univers. Press.
- Watson, J. (2013): Strategy: An Introduction to Game Theory. Norton (main text for 2nd part)
- Osborne, M.J. (2003): An Introduction to Game Theory. Oxford University Press.
- Salanie, B. (2005): The Economics of Contracts: A Primer. MIT Press.

At the end of the lecture period.

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