Economics 603 Micro III

Transcription

1 Economics 603 Micro III Axel Anderson Fall, 2014 Office: ICC 558 Office Hours: Wed: 9:30-11:30am and Game Theory Reference: Fudenberg, Drew and Jean Tirole (1995): Game Theory. The MIT Press, Cambridge, MA. Supplemental References: Mas-Colell and below by topic. For Later: Thomson, William (1999): The Young Person s Guide to Writing Economic Theory, Journal of Economic Literature, 37, Thought Provoking: Rubinstein, Ariel (2006): Dilemmas of an Economic Theorist, Econometrica, 74(4), Requirements/Assessments for this course. Micro I and II (Ec. 601 and 602) are prerequisites Problem sets will be handed out during the course of the semester, most likely one problem set per main topic in the outline on the following pages. There will be a midterm and a final based on material covered in the lectures and problems sets. Final grades will be determined according to the following weights: Final: 45% Midterm: 35% Problem Sets: 20% 1

2 Tentative Course Outline Within a given section, the articles are ordered (roughly) in the order I recommend reading them. In addition, the following codes are used. Background Reading: Often helpful to understanding the more technical articles. Core Reading Supplemental Reading: Usually a good place to start if you are particularly interested in a topic, or plan an applied project in an area. I reserve the right to add, subtract, demote or promote articles during the semester as needed. It is probably a good idea not to read anything more than 1-2 lectures ahead. 1 Bargaining 1.1 Foundations Zeuthen, F. (1930): Problems of Monopoly and Economic Warfare. Routledge and Sons, London. Nash, John. F., Jr. (1953): Two-Person Co-operative Games, Econometrica, 21, Harsanyi, John C. (1956): Approaches to the Bargaining Problem Before and After the Theory of Games: A Critical Discussion of Zeuthen s, Hicks, and Nash s Theories, Econometrica, 24(2), Nash, John. F., Jr. (1950) The Bargaining Problem, Econometrica, 18, Kalai, Khud, and Meir Smorodinsky (1975): Other Solutions to Nash s Bargaining Problem, Econometrica, 43(3), Rubinstein, Ariel, Zvi Safra, and William Thomson (1992): On the Interpretation of the Nash Bargaining Solution and Its Extension to Non-Expected Utility Preferences, Econometrica, 60(5), Young, Peyton (1993): An Evolutionary Model of Bargaining, Journal of Economic Theory, 59(1),

3 1.2 Complete Information Fudenberg, Drew, and Jean Tirole (1995): Game Theory. The MIT Press, Cambridge, MA, Rubinstein, Ariel (1982): Perfect Equilibrium in a Bargaining Model, Econometrica, 50(1), Binmore, Ken, Ariel Rubinstein, and Asher Wolinsky (1986): The Nash Bargaining Solution in Economic Modelling, The RAND Journal of Economics, 17(2), Ochs, Jack, and Alvin E. Roth (1989): An Experimental Study of Sequential Bargaining, The American Economic Review, 79(3), Smith, Lones, and Ennio Stacchetti (2002): Aspirational Bargaining, University of Michigan Mimeo. 1.3 Application: Search Shimer, Robert and Lones Smith (2000): Assortative Matching and Search, Econometrica, 68, Mortenson, Dale (1982): Property Rights and Efficiency in Mating, Racing, and Related Games, American Economic Review, 72, Rogerson, R, Shimer, and Wright (2004): Search-Theoretic Models of the Labor Market-A Survey, NBER Working Paper. Diamond, Peter (1982): Wage Determination and Efficiency in Search Equilibrium, The Review of Economic Studies, 49(2), Pissarides, Christopher (1987): Search, Wage Bargains, and Cycles, The Review of Economic Studies, 54(3), Personal Notes. Shimer, Robert (2005): The Cyclical Behavior of Unemployment and Vacancies, The American Economic Review, 95, Hall, Robert, and Paul Milgrom (2008): The Limited Influence of Unemployment on the Wage Bargain, The American Economic Review, 98, Hall, Robert (2005): Employment Fluctuations with Equilibrium Wage Stickiness, The American Economic Review, 95,

4 1.4 Incomplete Information Fudenberg, Drew, and Jean Tirole (1995): Game Theory. The MIT Press, Cambridge, MA, Chapter 10. Rubinstein, Ariel (1985): A Bargaining Model with Incomplete Information About Time Preferences, Econometrica, 53(5), Ausubel, Lawrence M., and Raymond J. Deneckere (1989): Reputation in Bargaining and Durable Goods Monopoly, Econometrica, 57(3), Vincent, Daniel (1989): Bargaining with Common Values, Journal of Economic Theory, 48(1), Watson, Joel (1998): Alternating-Offer Bargaining with Two-Sided Incomplete Information, Review of Economic Studies, 65(3), Abreu, Dilip, and Faruk Gul (2000): Bargaining and Reputation, Econometrica, 68(1), Ausubel, Lawrence M., and Raymond J. Deneckere (1992): Bargaining and the Right to Remain Silent, Econometrica, 60(3), Cho, In-Koo (1990): Uncertainty and Delay in Bargaining, The Review of Economic Studies, 57(4), Cramton, Peter C. (1992): Strategic Delay in Bargaining with Two-Sided Uncertainty, The Review of Economic Studies, 59(1), Fudenberg, Drew, and Jean Tirole (1983): Sequential Bargaining with Incomplete Information, The Review of Economic Studies, 50(2), Monotone Methods 2.1 Supermodularity and Complementarity Amir, Rabah (2005): Supermodularity and Complementarity in Economics: An Elementary Survey, Southern Economic Journal, 71(3), Topkis, Donald (1998): Supermodularity and Complementarity, Princeton University Press, Princeton, NJ., Milgrom Paul and Chris Shannon (1994): Monotone Comparative Statics, Econometrica, 62(1),

5 Application: Matching Shapley L. and M. Shubik (1971): The Assignment Game I: The Core, International Journal of Game Theory, 1(1): Becker G. (1973): A Theory of Marriage: Part I, Journal of Political Economy, 81(4): Legros P. and A. Newman (2002): Monotone Matching in Perfect and Imperfect Worlds, The Review of Economic Studies, 69(4): Gretsky N., J. Ostroy, and W. Zame (1992): The Nonatomic Assignment Model, Economic Theory, 2: Anderson A. and L. Smith (2010): Dynamic Matching and Evolving Reputations, The Review of Economic Studies, 77(1): Chiappori P., R. McCann, and L. Nesheim (2010): Hedonic price equilibria, stable matching, and optimal transport: equivalence, topology, and uniqueness, Economic Theory, 42(2): Application: Supermodular Games Vives X. (1990): Nash Equilibria with Strategic Complementarities, Journal of Mathematical Economics, 19: Milgrom P. and J. Roberts (1990): Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities, Econometrica, 58: Milgrom P. and J. Roberts (1994): Comparing Equilibria, American Economic Review, 84: More monotone methods Further readings forthcoming! 3 Mechanism Design 3.1 Principal-Agent Models Mas-Colell, Chapter 14. Holmström, B. (1979): Moral Hazard and Observability, Bell Journal of Economics, 10,

6 Jewitt, I. (1988): Justifying the First Order Approach to Principal Agent Probelms, Econometrica, 56, Mirrlees, J. (1999): The Theory of Moral Hazard and Unobservable Behavior: Part I, Review of Economic Studies, 66(1), Hart O. and B. Holmström (1987) The Theory of Contracts, in Advances in Economic Theory, Fifth World Congress, Cambridge, Cambridge University. 3.2 Implementation Mas-Colell, Chapter 23. Fudenberg and Tirole, Chapter 7. Moore, John (1990): Implementation, Contracts, and Renegotiation in Environments with Complete Information, in Advances in Economic Theory, Sixth World Congress Vol. I, Cambridge, Cambridge University Press. Palfrey, Thomas (1990): Implementation in Bayesian Equilibrium: the Multiple Equilibrium Problem in Mechanism Design, in Advances in Economic Theory, Sixth World Congress Vol. I, Cambridge, Cambridge University Press. Roth, A. (2002): The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics, Econometrica, 70(4), McMillan, J. (1994): Selling Spectrum Rights, The Journal of Economic Perspectives, 8(3), Groves, T. and J. Ledyard (1977): Optimal Allocation of Public Goods: A Solution to the Free Rider Problem, Econometrica, 45, Dasgupta, Partha, Peter Hammond, and Eric Maskin (1979): The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility, The Review of Economic Studies, 46(2), Vickrey, W. (1961): Counterspeculation, Auctions, and Competitive Sealed Tenders, Journal of Finance, 16, Gibbard, A. (1973): Manipulation of Voting Schemes: A General Result, Econometrica, 41, Jehiel, P., B. Moldovanu, and E. Stacchetti (1996): How (Not) to Sell Nuclear Weapons, American Economic Review, 86(4),

7 Satterthwaite, M. and S. Williams (1975): Strategy-Proofness and Arrow s Conditions: Existence and Correspondence Theorems for Voting Procedures and Social Welfare Functions, Journal of Economic Theory, 10, Balinski, Michel and Tayfun Sonmez (1999): A Tale of Two Mechanisms: Student Placement, Journal of Economic Theory, 84(1), Optimal Trading Mechanisms Myerson, R. (1981): Optimal Auction Design, Mathematics of Operations Research, 6, Myerson, R. and M. Satterthwaite (1983): Efficient Mechanisms for Bilateral Trading, Journal of Economic Theory, 29, Satterthwaite, M. and S. Williams (1989): Bilateral Trade with the Sealed Bid Double Auction: Existence and Efficiency, Journal of Economic Theory, 48, Myerson, Roger (1979): Incentive Compatibility and the Bargaining Problem, Econometrica, 47, Holmström, Bengt and Roger Myerson (1983): Efficient and Durable Decision Rules with Incomplete Information, Econometrica, 51, Information and Learning Dixit, Avinash and Robert Pindyck (1994): Investment Under Uncertainty, Princeton University Press, Princeton, NJ., Øksendal, B. (1998): Stochastic Differential Equations, Springer-Verlag. 4.1 The Value of, and Demand for, Information Hirshleifer, Jack and John G. Riley (1992): The Analytics of Uncertainty and Information, Cambridge, Cambridge University Press, Sections Blackwell, David (1953): Equivalent Comparison of Experiments, Annals of Mathematics and Statistics, 24, Radner, Roy and Joseph Stiglitz (1984): A Nonconcavity in the Value of Information, in Bayesian Models in Economic Theory, Elsevier Science Publishers, New York, Marcel Boyer and Richard Kihlstrom eds.,

8 Schlee, Edward and Hector Chade: Another Look at the Radner-Stiglitz Nonconcavity in the Value of Information, Journal of Economic Theory, forthcoming. Moscarini, Giuseppe and Lones Smith (2005): The Demand for Information: More Heat than Light, Working Paper, University of Michigan. Moscarini, Giuseppe and Lones Smith (2002): The Law of Large Demand for Information, Econometrica, 70(6), Athey, Susan and Jonathan Levin (2000): The Value of Information in Monotone Decision Problems, MIT Working Paper. 4.2 Optimal Experimentation Easley, David, and Nicholas Kiefer (1988): Controlling a Stochastic Process with Unknown Parameter, Econometrica, 56, Aghion, Phillipe, Patrick Bolton, Chris Harris, and Bruno Julien (1991): Optimal Learning by Experimentation, Review of Economic Studies, 58, Bergemann, Dirk, and Juuso Valimaki (1996): Learning and Strategic Pricing, Econometrica, 64, Bolton, Patrick and Chris Harris (1999): Strategic Experimentation, Econometrica, 67, Moscarini, Giuseppe and Lones Smith (2001): The Optimal Level of Experimentation, Econometrica, 69, Sequential Social Learning Banerjee, Abhijit (1992): A Simple Model of Herd Behavior, Quarterly Journal of Economics, 107, Bikhchandani, Sushil, David Hirshleifer, and Ivo Welch (1992): A Theory of Fads, Fashion, Custom and Cultural Change as Informational Cascades, Journal of Political Economy, 100, Smith, Lones and Peter Sørensen (2000): Pathological Outcomes of Observational Learning, Econometrica, 68, Gale, Douglas (1996): What Have We Learned from Social Learning?, European Economic Review, 40, Smith, Lones and Peter Sørensen (2001): Informational Herding and Optimal Experimentation, Review of Economic Studies, forthcoming. 8

9 4.4 Information Aggregation Feddersen, Timothy, and Wolfgang Pesendorfer (1997): Voting Behavior and Information Aggregation in Elections With Private Information, Econometrica, 65(5), Young, Peyton (1988): Condorcet s Theory of Voting, The American Political Science Review, 82(4), Ottaviani, Marco, and Peter Sorensen (2007): Aggregation of Information and Beliefs in Prediction Markets, Working Paper. Ottaviani, Marco, and Peter Sorensen (2001): Information Aggregation in Debate, Journal of Public Economics volume, 81(3), Stochastic Calculus in Economics Further readings forthcoming! 5.1 Mathematical Tools Oksendal, Bernt (1998): Stochastic Differential Equations, Springer. 5.2 Application: Repeated Games 5.3 Application: Dynamic Principal-Agent 5.4 Application: Dynamic Learning 6 Repeated Games 6.1 Perfect Monitoring Fudenberg, Drew and Jean Tirole (1995): Game Theory. The MIT Press, Cambridge, MA, Stacchetti, Ennio (1996): Infinitely Repeated Games, University of Michigan Notes. Rubinstein, Ariel (1990): Comments on the Interpretation of Repeated Games Theory, in Advances in Economic Theory, Sixth World Congress, Cambridge, Cambridge University Press. Abreu, Dilip (1988): On the Theory of Infinitely Repeated Games with Discounting, Econometrica, 56:

10 Fudenberg, Drew and Eric Maskin (1986): The Folk Theorem in Repeated Games with Discounting or with Incomplete Information, Econometrica, 54: Benoit, Jean-Pierre and Vijay Krishna (1985): Finitely Repeated Games, Econometrica 53(4): Abreu Dilip, David Pearce, and Ennio Stacchetti (1993): Renegotiation and Symmetry in Repeated Games, Journal of Economic Theory, 60(2), Chade, Hector, Pavlo Prokopovych, and Lones Smith (2004): Repeated Games with Present-Biased Preferences, Working Paper, University of Michigan. Maskin, Eric and Jean Tirole (1988): A Theory of Dynamic Oligopoly I: Overview and Quantity Competition with Large Fixed Costs, Econometrica, 56, Maskin, Eric and Jean Tirole (1987): A Theory of Dynamic Oligopoly III: Cournot Competition, European Economic Review, 31, Bernheim, B.D. and M. Whinston (1990): Multimarket Contact and Collusive Behavior, Rand Journal of Economics, 21, Farrell, J. and Eric Maskin (1989): Renegotiation in Repeated Games, Games and Economic Behavior, 1: Public Monitoring Green, Edward and R. Porter (1984): Noncooperative Collusion under Imperfect Price Information, Econometrica, 52, Fudenberg, Drew, and Jean Tirole (1995): Game Theory. The MIT Press, Cambridge, MA, Abreu Dilip, David Pearce, and Ennio Stacchetti (1990): Toward a Theory of Discounted Repeated Games with Imperfect Monitoring, Econometrica, 58, Abreu Dilip, David Pearce, and Ennio Stacchetti (1986): Optimal Cartel Equilibria with Imperfect Monitoring, Journal of Economic Theory, 39, Phelan, Christopher and Ennio Stacchetti (2001): Sequential Equilibria in a Ramsey Tax Model, Econometrica, 69(6), Fudenberg, Drew, David Levine, and Eric Maskin (1994): The Folk Theorem with Imperfect Public Information, Econometrica, 62,

11 6.3 Private Monitoring Sannikov, Yuliy (2007): Games with Imperfectly Observable Actions in Continuous Time, Econometrica, forthcoming. Kandori, Michihiro (2002): Introduction to Repeated Games with Private Monitoring, Journal of Economic Theory, 102(1), Mailath, George J. and Stephen Morris (2002): Repeated Games with Almost-Public Monitoring, Journal of Economic Theory, 102(1), Ely, J. and J. Valimaki (2000): A Robust Folk Theorem for the Prisoner s Dilemma, Journal of Economic Theory, 102(1), Kandori, M. and H. Matsushima (1998): Private Observation, Communication, and Collusion, Econometrica, 66, Compte, O. (1998): Communication in Repeated Prisoner s Dilemma with Private Monitoring, Econometrica, 66, Kandori, M. (1992): Social Norms and Community Enforcement, Review of Economic Studies, 59: Ellison, G. (1994): Cooperation in the Prisoner s Dillemma with Anonymous Random Matching, Review of Economic Studies, 61: Anderson, A. and Lones Smith (2012): Dynamic Deception, working paper. 11