Economics 703: Advanced Microeconomics [ Syllabus ]

Professor Peter Cramton

Tuesday and Thursday, 9:30 am to 10:45 am, Tydings 0111, Fall 2014

Presents a formal treatment of game theory, and then introduces market design. The game theory portion covers foundations, dynamic games, games with incomplete information, mechanism design and signaling. Then we turn to market design. Market design combines behavioral and experimental economics with auction and matching theory to design innovative markets. Applications are seen in almost all markets and government programs that attempt to assign and sometimes price scarce resources. Market design research leads to better understand­ing of the incentives that guide behavior. Then the incentives can be designed to better achieve goals. Applications include matching students to schools, interns to hospitals, and kidneys to patients. In settings where prices are used to motivate behavior, auctions have been developed to assign and price scarce resources. Applications include the assignment of radio spectrum for mobile communications, the allocation of emission allowances, electricity market design to price and allocate wholesale electricity, and financial market microstructure to trade financial securities.

Changes to Regular Class Schedule

No class days:

Thursday, Sep 11
Tuesday, Oct 14
Thursday, Oct 16
Tuesday, Oct 21
Thursday, Oct 23
Tuesday, Nov 4
Tuesday, Nov 11
Tuesday, Nov 18

Double class days (class starts at 8:10am):

Thursday, Sep 4
Tuesday, Sep 9
Tuesday, Sep 23
Tuesday, Sep 30
Tuesday, Oct 7
Tuesday, Oct 28
Thursday, Nov 6
Thursday, Nov 13


Course Materials

There are a number of simple web exercises that are helpful in motivating the course material and understanding the assumptions of the theory. The web exercises and due dates are shown below; once the due date has passed the results will be made available at the links below for each web exercise:

Web Exercises, available at course number 2382, class password 6073
1. Introductory Games, due Sep 4
2. Classical Matrix Games, due Sep 9
3. Finite Horizon Games, due Sep 18
4. Ultimatum and Dictator Games, due Sep 23
5. Bargaining and Auctions, due Sep 25 [Gneezy-Smorodinsky 2006]

The lecture notes, slides, problem sets, and answers (once available after the due date) are all available below:

Lecture Notes Slides
  1. Foundations
  2. Dynamics
  3. Mechanism Design
  4. Refinement
  5. Signaling
  6. Auctions, Reputations, and Bargaining
  7. Demand Reduction
  8. Optimality of Being Efficient
  9. Clock-Proxy Auction
  10. Combinatorial Auctions
  11. Spectrum Auction Design
  12. High Frequency Trading Arms Race
  1. Foundations
  2. Dynamics
  3. Mechanism Design
  4. Refinement
  5. Signaling
  6. Auctions, Reputations, and Bargaining
  7. Auctioning Many Similar Items
  8. Auctions with Resale
  9. Practical Auction Design
  10. Spectrum Auction Design
  11. Incentive Auctions
  12. High Frequency Trading Arms Race
Problem Sets Problem Set Answers
  1. Problem Set 1 due Sep 16
  2. Problem Set 2 due Sep 23
  3. Problem Set 3 due Oct 2
  4. Problem Set 4 due Oct 9
  5. Problem Set 5 due Oct 30
  6. Problem Set 6 due Nov 13
  7. Problem Set CV Auction due Nov 20
  8. Problem Set 7 due Nov 25
  9. Problem Set 8 not assigned
  10. Problem Set 9 due Dec 4 (problems 1-3 only)
  11. Problem Set 10 due Dec 11
  1. Answers 1
  2. Answers 2
  3. Answers 3
  4. Answers 4
  5. Answers 5
  6. Answers 6
  7. Answers CV Auction
  8. Answers 7
  9. Answers 8
  10. Answers 9
  11. Answers 10

Other Materials
Vayanos RESTUD 1999, strategic-trading-in-dynamic-market