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EC319

Economic Theory and its Applications

**This information is for the 2016/17 session.**

**Teacher responsible**

Dr Andrew Ellis 32L 3.15 and Dr Francesco Nava 32L 3.20

**Availability**

This course is available on the BSc in Econometrics and Mathematical Economics, BSc in Economics, BSc in Mathematics and Economics, BSc in Mathematics with Economics, BSc in Philosophy and Economics, BSc in Social Policy and Economics and MSc in Econometrics and Mathematical Economics (2 Year Programme). This course is available as an outside option to students on other programmes where regulations permit and to General Course students.

**Pre-requisites**

Students should have completed Microeconomic Principles I (EC201) or Microeconomic Principles II (EC202) 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 enrol on the course, if he or she finds handling economics mathematically comes naturally. Any such student should see Dr Nava before the course starts.

**Course content**

This course reviews fundamental concepts in Economic theory and presents some of its most successful applications. The first 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 analysed 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. Departures from the standard model will be also 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. The second part of the course will revise concepts in non-cooperative game theory and will introduce students to game theoretic models of bargaining, voting, and communication. After setting up the primitives of the game theory framework, different solution concepts will be analysed with an emphasis on different applications. In studying models of bargaining, both axiomatic and non-cooperative approaches will be examined, such as Nash's axiomatic approach and the Rubinstein-Stahl model.

**Teaching**

15 hours of lectures and 10 hours of classes in the MT. 15 hours of lectures and 10 hours of classes in the LT.

A revision lecture held in week 11 of Michaelmas term.

**Formative coursework**

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

**Indicative reading**

M. Osborne, “*An Introduction to Game Theory*”, Oxford University Press, 2003.

V. Krishna, “*Auction Theory*”, Academic Press, 2009.

**Assessment**

Exam (100%, duration: 3 hours, reading time: 15 minutes) in the main exam period.

** Key facts **

Department: Economics

Total students 2015/16: 13

Average class size 2015/16: 13

Capped 2015/16: No

Lecture capture used 2015/16: Yes (MT)

Value: One Unit

**PDAM skills**

- Self-management
- Problem solving
- Application of numeracy skills