EC202-Course Outline PDF

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DEPARTMENT OF ECONOMICS

EC202 Microeconomics 2 (30 CATS) 2017/18 Lecturers Dr. Chris Doyle (S2.104, x23935) Module Leader Dr. Costas Cavounidis (S2.97, x28420) Class Tutors

Ghasan Saeed Abdulla Asbool Guillem Ordóñez Calafí Hui-Pei Cheng Davit Khantadze Mahnaz Nazneen

Module Homepage http://www2.warwick.ac.uk/fac/soc/economics/current/modules/ec202/ Moodle Lecture capture and other resources are available through Moodle at: https://moodle.warwick.ac.uk/course/view.php?id=21591 Teaching Format 2 lectures per week and 7 classes in Terms 1 and 2 2 revision lectures and 2 classes in Term 3 Lectures: Dates and Times Term 1, weeks 1-10, 4-5pm Tuesday OC1.05 & 2-3pm Thursday OC1.05 except Thursday 5th October 3-4pm OC 1.05 Term 2, weeks 15-24, 4-5pm Tuesday OC1.05 & 2-3pm Thursday OC1.05 Term 3 two revision lectures, dates and times TBC

EC202 Microeconomics 2 2017/18 Module Overview

Weekly Classes Classes are a key component of the module and held weekly in weeks 3-9 in Term 1 and weeks 17-23 in Term 2. There are also classes scheduled at the beginning of Term 3. Attendance is mandatory. The organization of classes will be as follows: 1. At the first class meeting you will be arranged into four groups 2. Two questions will be prepared for each class 3. The class tutor will distribute one question to each group at the beginning of the class (each question will be answered by two groups) 4. Each group will work together in class on their question and have up to 20 minutes to prepare solutions 5. The class TA will be available to address queries during the time you are working out solutions 6. After completing the questions, two groups doing different questions will nominate a member to present their solutions to the whole class – this will alternate week by week

Students seeking to do additional questions are at liberty to use resources in textbooks and online

Module Assessment The final exam in the Summer Term is worth 80% (see End of Year Exam below) and the two term tests lasting 45 minutes’ each are worth in total up to 20% of the final mark (see Term Tests below). The first test will be held in week 9 of Term 1, Monday 6-7pm, 27 November 2017 and will be based on lecture content up to and including week 8. The second test will be held in week 23 of Term 2, 4 March 2018, Monday 6-7pm and will be based on lecture content presented in weeks 9, 10 and 15-22. Venues TBA.

Feedback, Advice and Online Forum The following is important. Substantive questions relating to course content should always in the first instance be directed to your class tutor. Class tutors are there to provide you with feedback and are your first port of call. Questions of an administrative nature should be raised with the Undergraduate office in the department or the year rep of the SSLC. The module has a HowCloud forum accessed via the module homepage. Lecturers’ and TAs will endeavour to reply to outstanding queries as soon as reasonably possible. Lecturers’ advice and feedback (A&F) hours are not a substitute for classes or missed lectures. Appointments to meet course lecturers during A&F hours should be made when other options have failed. When booking an appointment to meet the module leader, you may scan the QR code below or do so via the homepage link:

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EC202 Microeconomics 2 2017/18 Module Overview

Lecture Capture Lecture Capture is available and accessible via Moodle Module Readings and Resources There are many intermediate level microeconomics textbooks covering the topics on this module and the Library has a good selection. Although we recommend use of the texts by Varian and Nicholson & Snyder, there are other close substitutes you may prefer to use. Given the generic nature of the course content, there is no inherent advantage of one book versus another in regard of exam preparation. Note there are also numerous good resources available online. Lecture slides, problem sets and recommended online resources will form your ‘go to resource pack’ at revision time. Note: There are two versions of the Varian book, one having “with Calculus” in the title. The books are identical in regard of chapter headings and differ in their use of calculus in the main text. On this module they can be regarded as perfect substitutes, though we are recommending the ‘with calculus’ edition below.

End of Year Exam The end of year exam rubric will be the same as in 2015/16 and 2016/17: “Answer ALL FOUR questions in Section A (18 marks each), and ONE question from Section B (28 marks). Answer Section A questions in one booklet and Section B questions in a separate booklet. Approved pocket calculators are allowed. Read carefully the instructions on the answer book provided and make sure that the particulars required are entered on each answer book. If you answer more questions than are required and do not indicate which answers should be ignored, we will mark the requisite number of answers in the order in which they appear in the answer book(s): answers beyond that number will not be considered.” Section A will be made up of 2 questions from Term 1 and 2 questions from Term 2. The time expected to answer each question in Section A is about 30 minutes. The

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EC202 Microeconomics 2 2017/18 Module Overview

questions will involve problem solving and will be similar in structure to past exam questions in Section A. Section B will be made up of 2 questions from Term 1 and 2 questions from Term 2. These questions will also be problem solving in nature but more challenging than in Section A. These questions are more likely to include a ‘give reasons for’ answer. You can access past papers here: Past papers. Note: Exam papers before 2015/16 had a different rubric and the course followed a different structure.

Term Tests There are two term tests. The first test in week 9 of Term 1 is worth up to 9% of the final mark and the second test in week 23 of Term 2 is worth up to 11%. Each test will have the same structure and the following rubric: “Time Allowed: 45 minutes. When the time is up, please close your answer book and wait for it to be collected by an invigilator. All answer books must be collected. Answer ALL questions. The ten questions in Section A are worth 5 marks each. The two questions in Section B are worth 25 marks each. Approved hand calculators may be used.”

Term 1 Class Problem Set Topics & Term 1 Test Week 1

No class

Week 2

No class

Week 3

Class 1: Envelope Theorem

Week 4

Class 2: Uncertainty

Week 5

Class 3: Uncertainty

Week 6

Class 4: General Equilibrium & Welfare

Week 7

Class 5: General Equilibrium & Welfare

Week 8

Class 6: Market Failure

Week 9

Class 7: Market Failure & Term Test

Week 10

No class

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EC202 Microeconomics 2 2017/18 Module Overview

Term 2 Class Problem Set Topics & Term 2 Test Week 15

No class

Week 16

No class

Week 17

Class 8: Game Theory 1

Week 18

Class 9: Game Theory 1

Week 19

Class 10: Game Theory 2

Week 20

Class 11: Game Theory 2

Week 21

Class 12: Game Theory 3

Week 22

Class 13: Game Theory 3

Week 23

Class 14: Game Theory 3 & Term Test

Week 24

No class

Course Textbooks Hal R. Varian (2014) Intermediate Microeconomics with Calculus, Norton Well-established book by leading economist, now Chief Economist at Google, formerly at University of California, Berkeley. More information at: Hal Varian In the readings below is referred to as “V” e.g. Ch. 2, V Available in the University Bookshop and at online sellers, as well as in the Library and Learning Grid (Intermediate Microeconomics version HB172.V34 is almost identical except calculus is relegated to appendices: this book is a perfect substitute)

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EC202 Microeconomics 2 2017/18 Module Overview

Walter Nicholson and Christopher Snyder (2012,2017) Microeconomic Theory: Basic principles and Extensions, Twelfth Edition, Cenage This book covers the same material as Varian – though in greater depth and rigour. It is also available as an ebook In the readings below is referred to as “NS” e.g. Ch. 5, NS Available in the University Bookshop and at online sellers, as well as in the Library and Learning Grid (11th edn. HH 6200.N4 is a near perfect substitute)

Steven Tadelis (2013) Game Theory: An Introduction, Princeton Very useful for the game theory part of the module in Term 2. There are many other substitute texts covering the topics in game theory. In the readings below is referred to as “T” e.g. Ch. 2, T Available in the University Bookshop, online stores, Main Library (HB144.T33)

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EC202 Microeconomics 2 2017/18 Module Overview

Lectures Term 1 2017/18 Lecturer: Chris Doyle Weeks 1-2 Topic 1 – Some key mathematical concepts (Mathematical appendix, V; Ch. 2, NS) Implicit functions, Envelope Theorem, comparative statics, constrained optimisation, shadow prices

Weeks 2-4 Topic 2 – Uncertainty (Chs. 12-13, V; Ch. 7, NS) Uncertainty, risk, expected utility – von Neumann-Morgenstern, comparing risky alternatives, attitudes towards risk, mean-variance portfolio analysis, certainty equivalence, insurance markets, state-contingent space, Allais paradox, Ellsberg paradox (ambiguity aversion)

Weeks 5-7 Topic 3 – General equilibrium (Chs. 32-34, V; Chs. 13, NS) Pure exchange model, market equilibrium, Edgeworth box, Trade, Pareto efficiency, Walras’ Law, First and Second Welfare Theorems and their implications, production, welfare, social welfare functions

Weeks 8-10 Topic 4 –Market failure (Chs. 35 & 37, V; Ch. 19 NS) Externalities, Coase Theorem, Pigovian taxes, public goods, free riding, Lindahl pricing, voting mechanisms, remedying market failure through incentive mechanisms (this topic relates to the formal treatment in Topic 7 of Bayesian games and mechanism design)

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EC202 Microeconomics 2 2017/18 Module Overview

Lectures Term 2 2017/18 Weeks 15-16 Chris Doyle Topic 5 – Game Theory 1: Static Games of Complete Information (Chs. 3-6, T) Game theory and reverse game theory introduction, Normal form games, finite games, pure strategies, dominated strategies, dominant strategy equilibrium, best response, rationalizability, Nash equilibrium, mixed strategies

Weeks 17-19 Chris Doyle Topic 6 – Game Theory 2: Dynamic Games of Complete Information (Chs. 7-11, T) Game trees, imperfect versus perfect information, strategies and Nash equilibrium, paths of play, credibility, sequential rationality, sub-game perfect equilibrium, multistage games, repeated games, The Folk Theorem, strategic bargaining

Weeks 20-24 Costas Cavounidis Topic 7 – Game Theory 3: Static and Dynamic Games of Incomplete Information (Chs. 12, 14-16 T) Bayesian games, Bayesian Nash Equilibrium, Mechanism design, Perfect Bayesian Equilibrium, Sequential Equilibrium, Pooling and Separating Equilibria, Signalling games

Lectures Term 3 2017/18 Two revision lectures recapping material from the year and discussing exam preparation

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