ECON 364 Incentives and Information (Not offered 2004-2005) (Q)
Asymmetries of information are pervasive in economic relationships. For instance, buyers know their willingness to pay but sellers do not, citizens know their earning ability but the government does not, and borrowers know how risky their investments are but banks do not. Informed agents have an incentive to manipulate their private information for their own gain. Uninformed principals (such as governments, banks, auction designers and managers) must design schemes to provide the right incentives. This course analyzes moral hazard, mechanism design and signaling models. It uses mathematical techniques from game theory and contract theory. Applications will include auctions, insurance, banking and microfinance, international health, transition economies, corruption and poverty reduction. Format: seminar. Requirements: problem sets, midterm, final paper and class presentations. Prerequisites: Economics 251 and Mathematics 105. Enrollment limit: 20 (expected: 12). Preference will be given to senior and junior Economics majors.