Department of Economics & International Development, Unit Catalogue 2007/08 |
EC30145 Economics of incentives |
| Credits: 6 |
| Level: Honours |
| Semester: 2 |
| Assessment: CW 40%, EX 60% |
| Requisites: |
| Before taking this unit you must take EC20010 |
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Aims: The aim of this course is to provide an understanding of the effects of asymmetric information on the incentives of agents involved in various situations of economic interaction.
Learning Outcomes: On completion of this course the student should be able to demonstrate an understanding of and be able to formally model moral hazard and adverse selection, and solve problems involving these concepts. Skills: Ability to critically analyse problems characterised by asymmetric information and develop solutions. Content: This course is concerned with formal analysis of various situations of trade between agents who have different information. The specific topics that will be covered are: (a) Auction Theory: Private value auction; the optimal design of auctions; common value auctions; the winner's curse; (b) Non-linear pricing; (c) Moral Hazard Theory: Principal-agent moral hazard problems; incentive problems in employment contracts; multiple agent problems; (d) Adverse Selection Theory: The revelation principle; examples including the control of externalities, revelation of preferences for public goods, price discrimination and the regulation of a monopolist with private information. |