Prior knowledge of basic game theory will be assumed. We want to understand outcomes in environments where some players have more information than others. For example, a car salesman knows more about the value of the car than a customer, a person buying car insurance knows more than the insurance provider about his/her driving style, a job applicant is more aware of her abilities than the interviewer. The objective of this course is to understand player incentives and strategies in such environments with the use of formal economic models. We will highlight the role played by asymmetric information and study how it changes outcomes compared to an environment where everyone has the same information. Specific topics include models involving adverse selection, moral hazard, signalling, cheap talk, reputation and information cascades.
Prerequisites: ECO 2102 (Microeconomic Theory II)