Microeconomic Theory II (PhD)
These notes are meant as a supplement to the text, Mas-Colell, Whinston, and Green (1994). I will also draw from Fudenberg and Tirole (1992). Next to the set of notes I have them abbreviated MWG and FT with the chapters from which I am drawing the information listed. Gibbons (1992) may be a useful reference for some of the material earlier in the semester.
Recent papers in top finance journals that use game theoretic models
Schedule:
1/12 – Introduction, PSNE, Simultaneous move games of complete information
1/19 – MSNE, Sequential move games of complete information, SPNE
1/26 – Fellingham and Newman paper, Repeated games
2/2 – Games with a continuum of strategies
2/9 – Maksimovic paper, likely begin Bayes-Nash equilibria
2/16 – Test 1
2/23 – Individual meetings about paper
3/2 – Spring Break
3/9 – Bayes-Nash equilibria, Begin Sequential move games of incomplete information
3/16 – No class meeting
3/23 – Sequential move games of incomplete information
3/30 – Mechanism Design
4/6 – Principal Agent problems
4/13 – Bruce and Llobet paper; brief discussion on bargaining; Easley and O’hara discussion
4/20 – Test 2
4/27 – Individual meetings about paper
5/11 – Paper due
Notes:
Methods of Proof: Background notes
Simultaneous move games of complete information: MWG 7-8; FT 1-2
Sequential move games of complete information: MWG 7,9; FT 3-4
Games with a continuum of strategies: MWG 12; FT 3
Bayes-Nash equilibria: MWG 8, 23; FT 6
Sequential move games of incomplete information: MWG 9; FT 8
Mechanism Design: MWG 23, FT 7
Principal-Agent problems: MWG 14
Bargaining MWG 22.E, 9 Appendix A
Problem Sets:
Problem set 1; Answers
Problem set 2; Answers
Problem set 3; Answers
Problem set 4; Answers
Readings:
Fellingham, John C. and D. Paul Newman (1985). Strategic Considerations in Auditing. The Accounting Review 60:4, 634-650.
Maksimovic, Vojislav (1990). Product Market Imperfections and Loan Commitments. Journal of Finance 45:5, 1641-1653.
Bruce, M. and G. Llobet (2014). Preventing Zombie Lending. Review of Financial Studies 27:3, 923-956.
Easley, D. and M. O’Hara (2023). Financial Market Ethics. Review of Financial Studies 36:2, 534-570