Graduate course

Time:

- Thursday 10.15– 11.45 (English)

Room: L9

Performance evaluation: The final grade of the course will be composed of two elements. There will be three homeworks that will count 50% towards the final grade. Furthermore, each student will have to write a term paper at the end of the course, which will also count 50%.

The course provides an advanced introduction to the theory of incentives and information, usually called contract theory. It starts off with an introduction to dynamic game theory under incomplete information and then adresses signalling, screening, scanning, hidden-action, and incomplete contracting problems. The theories are mostly applied to problems in finance, such as IPOs, insurance, market microstructure, banking, takeovers or portfolio management.

The course will not be based on a particular textbook. A good basis for many of the discussions in the course is

P. Bolton, M. Dewatripont, *Contract Theory*, MIT Press 2005.

Also the book by

J.J. Laffont, D. Martimort, *The Theory of Incentives*, Pronceton University Press 2002,

is excellent. And of course, good old MasColell, Whinston, Green is always useful.

A good reference for the game theory needed in the course is

D. Fudenberg an J. Tirole, *Game Theory*, Cambridge (MA), London: MIT Press 1991.

The books by

O. Hart, *Firms, Contracts, and Financial Structure*, Oxford: Oxford University Press 1995 and

J.J. Laffont an J. Tirole, *Theory of Incentives in Procurement and Regulation*, Cambridge (MA), London, 1993

are excellent references for part of the material discussed in the course, but have a diffrent focus.

A stimulating reference for those interested in contracts in practice is

A. Schwartz, R. Scott, "Contract Theory and the Limits od Contract Law", Yale Law Journal 113, 2003.

Graduate course

Time:

- Monday 08.30– 10.00 (English)
- Thursday 13.45– 15.15 (English)

Room: P 043 (L7)

Problem sessions: Thursday, 15:30 - 17:00, L9, 002

Performance evaluation: Final examination, solutions to problem sets, and participation in exercise sessions.

The course is taught in the form of 4h of class teaching and 2h of exercises.

Topics:

1) Consumer Choice under Certainty

2) Preferences

3) Aggregate Demand

4) Choice under Uncertainty

5) Theory of Production

The recommended textbook, which covers a large part of the course (and much more), is

A. Mas-Colell, M. Whinston, E. Green: *Microeconomic Theory*; Oxford, New York: Oxford University Press, 1995.

The course assumes a solid knowledge of basic mathematics. A good reference is

Norman Schofield: Mathematical Methods in Economics and Social Choice, Springer 2004.