Prof Dieter Balkenborg and Dr Flavio Toxvaerd (rooms TBC).

This course is optional for BSc Mathematics and Economics,  BSc Mathematics with Economics, BSc Economics, BSc Econometrics and Mathematical Economics, BSc Philosophy and Economics, BSc Social Policy and Economics and MSc Econometrics and Mathematical Economics (Two Year Programme). This course is also available to General Course students.

Students should have completed Microeconomic Principles I or II (or equivalent). Fluency in calculus is essential, some knowledge of analysis, linear algebra and set theory. A highly motivated student with a less technical background could do the course, if he or she finds handling economics mathematically comes naturally. Any such student should see Prof Razin before the course starts.

This course reviews fundamental concepts in Economic theory and presents some of its most successful applications. The first part of the course will introduce the student to the field of non-cooperative and cooperative/coalitional game theory and to models of bargaining. After setting up the primitives of the game theory framework, different solution concepts like are going to be studied with an emphasis through different applications. In studying models of bargaining, both axiomatic and non-cooperative approaches will be examined, such as Nash's axiomatic approach, the Rubinstein-Stahl model and the Baron-Ferejohn model of legislative bargaining.

The second part of the course consists of an introduction to Auction Theory. It presents standard auction formats and discusses strategic behaviour in such environments. Auctions will be analyzed both in private and interdependent value environments. Fundamental topics such as the revenue equivalence theorem, the optimal auction design problem and the linkage principle will be covered in detail. Throughout the course departures from the standard model will be considered allowing for heterogeneity among players, risk aversion, and budget constraints. The focus of the course is mainly theoretical, but when possible some evidence supporting the formal models will be discussed with references to relevant work in the field.

Lectures EC319: 30 MT and LT.

Classes EC319.A: 20 Sessional.

Students are urged to attempt the assigned problems before attending classes. At least four pieces of written work will be required.

M. Osborne, An Introduction to Game Theory, Oxford University Press, 2003. D. Ray, A Game-Theoretic Perspective on Coalition Formation, Oxford University Press, 2007. V. Krishna, Auction Theory, Academic Press, 2002.

A three-hour written examination in the ST.