ECON0929-1 : Games and Information Economics

Study Programmes 2015-2016

ECON0929-1

Games and Information Economics

Duration :

30h Th, 15h Pr

Number of credits :

Master in economics : general (120 ECTS)		5
Master in economics : general (60 ECTS)		5

Lecturer :

Axel Gautier

Language(s) of instruction :

English language

Organisation and examination :

Teaching in the first semester, review in January

Units courses prerequisite and corequisite :

Prerequisite or corequisite units are presented within each program

Course contents :

Following the recent financial crisis, many questions are raised on the role of (possibly misaligned) incentives in the financial sector and on the importance of information in markets: Do bonuses based on short-term portfolio performance induce the financial managers to take excessive risk? Should financial bonuses be re-designed to include a penalty in case of bad performance? Is there a conflict between short-run performance and long-term growth? Is the information provided by private credit rating agencies accurate? and trustable? How should these agencies be rewarded? Is it possible to align the incentive of the bankers with public interest and how? These debates illustrate the importance that incentives, information and strategic interactions have taken in modern economics.
The course of Games and Information Economics focuses on these three concepts. The objectives of the course are twofold: First, it develops analytical tools to understand strategic interaction between agents and the role of information in bilateral relations and markets. Second, the course abundantly illustrates the main theoretical concepts with real-world examples and applications.
Course outline
1. Static games of complete information.
Applications: natural resources, oligopoly, football, prisoner's dilemma
2. Dynamic (repeated) games of complete information.
Applications: bargaining, tacit collusion, bank runs
3. Games of incomplete information
Applications: auctions
4. Markets with imperfect information
Applications: insurance theory, lemon market, liquidity dry-out, open-source sofware
5. Information economics
Applications: incentives and performance related pay

Learning outcomes of the course :

Understanding the basic concepts of game theory (strategies, Nash equilibrium...)
Be able to use the game theory toolkit to analyze real-world economic problems

Prerequisite knowledge and skills :

Basic knowledge of single variable calculus and probability.

Planned learning activities and teaching methods :

Lecture (30h)
Exercice sessions (15h)

Mode of delivery (face-to-face ; distance-learning) :