The course is the second part of the microeconomic theory sequence. This course will take off by discussing various forms of market failures, including dealing with questions of externalities and public goods. The course also analyzes non-competitive market structures such as monopoly, oligopoly and monopolistic competition. As we will discover, a systematic treatment of many of these topics requires us to develop an understanding of strategic reasoning. The formal tool kit that economists use to study strategic reasoning is game theory. The course will introduce you to game theory and its two building blocks— normal and extensive form games. In the second half of the course we will deal with information asymmetry and market failure and introduce the concept of adverse selection and moral hazard. This will lead to the discussion of how game theory gives us insights about dealing with situations of information asymmetries in the market.
Prerequisites: ECO 2101 (Microeconomic Theory I)