CFU: 9

Year: I

Instructors: Vittorioemanuele Ferrante and Annalisa Luporini

The first part of the course takes for granted the elements of strategic game theory presented in Microeconomics 1. Dynamic ordinal and cardinal games are introduced, with related equilibrium notions as solutions, starting from Subgame Perfection (SP). Subsequently, refinements of SP are studied: Weak Sequential Equilibrium, Perfect Bayesian Equilibrium, Sequential Equilibrium. Games of incomplete informations and some examples of repeated games are further topics covered. The course is advanced, but will be eminently practical: emphasis will be put on acquiring the ability to solve games, rather than on memorizing mathematical proofs of the theoretical apparatus.

The second part of the course is devoted to the economics of information. Game theoretic methods and models are used to study the consequences of informational asymmetries and in particular the following topics. Adverse selection: effects on market equilibrium and public intervention. Signaling: the education signaling game. Screening in a competitive market. Principal-agent problem with i) hidden actions and ii) hidden information.

Giacomo Bonanno, Game Theory, 2015; online free access at: http://www.econ.ucdavis.edu/faculty/bonanno/

Mas-Colell, A., Whinston, M.D., Green, J.R., 1995. Microeconomic Theory, Oxford University Press (in particular, Chapters 13 and 14).