ECON 7050: Advanced Economic Theory

ECON 7050: Advanced Economic Theory

Fall 2011

Instructor: Professor Yongmin Chen

Office: Econ 112

Class Time: 1:30-2:45 MW

Class Room: ECON 119

E-mail: Yongmin.Chen@colorado.edu

http://spot.colorado.edu/~cheny/

Office Hours: 3:00-5:00 p.m. on Wednesday

Course Description: This is the third graduate course in microeconomic theory. It contains several important topics that were not covered in the two previous microeconomic theory courses. It will also discuss additional topics of interest.

Course Materials: The textbook is Microeconomic Theory, by Mas-Colell, Whinston, and Green. Other reading materials, including articles, are indicated below or will be added during the semester.

Grading: Grades are based on homework and class participation (10%), a modeling exercise (20%), and two exams (70%). You are encouraged to form study groups to discuss homework and lecture materials. In the modeling exercise, you will be asked to develop a simple model to describe and analyze a microeconomic problem.

Lecture Topics: Below is a tentative plan for the lectures. Changes will be announced in class during the semester and you are responsible for updating the information.

Topic 1 Dynamic Models of Imperfect Competition and Entry

Readings: Ch. 12: 12D-12G.

Problem Set 1: 12.C.18, 12 D.2., 12 E.4., 12 E.7, 12G.1.

Topic 2 Adverse Selection, Signaling, and Screening

Readings: Ch. 13

Problem Set 2: 13.B.2, 13.B.4, 13.C.1, 13.C.5.

Topic 3 The Principal-Agent Problem

Readings: Ch. 14

Problem Set 3: 14.B.4, 14.C.3, 14.C.7, 14.C.8.

Modeling Exercise: Develop a simple model to describe and analyze a microeconomic problem. I will discuss the requirements in class.

Exam 1.

Topic 4 Theory of the Firm

Readings:

Coase, R., “The Nature of the Firm,” Economica (1937), 386-405.
Williamson, O.E., The Economic Institutions of Capitalism, 1985, New York: Free Press.
Grossman, S. and O. Hart, “The Costs and Benefits of Ownership”, JPE (1986), 691-719.
Hart, O., “The Market Mechanism as an Incentive Mechanism”, BELL (1983), 366-382.
Binmore, K., A. Rubinstein, and A. Wolinsky, “The Nash Bargaining Solution in Economic Modeling.” RAND (1986).

Topic 5 Vertical Contracting

1. The Problem of Vertical Control

2. Resale Price Maintenance (RPM)

3. Contracts as a Barrier to Entry

4. Naked Exclusion

5. Recent Developments

Rquired Readings:

· Aghion, Philippe and Patrick Bolton, "Contracts as a Barrier to Entry," AER, 77(3), 1987.

· Chen, Yongmin, “Oligopoly Price Discrimination and Resale Price Maintenance,” RAND, 1999.

· Rasmusen, Eric, J. Mark Ramseyer, and John Wiley, "Naked Exclusion," AER, 1991.

· Segal, Ilya and Michael Whinston, "Exclusive Contracts and the Protection of Investments," RAND, 2000.

Other Readings:

· Armstrong, M. and Y. Chen, “Inattentive Consumers and Product Quality,” Journal of the European Economic Association, (2009), pp. 411-422.

· Bagwell, K. and G. Ramey, “Coordination Economies, Advertising, and Search Behavior in Retail Markets”, AER (1994), 498-517.

· Bester, H., “Bargaining, Search Costs and Equilibrium Price Distributions”, RES (1988), 201-214.

· Chen, Y. and C. He, “Paid Placement: Advertising and Search on the Internet,” Economic Journal, 2011 (in press).

· Chen, Y. and T. Zhang, “Equilibrium Price Dispersion with Heterogeneous Searchers,” International Journal of Industrial Organization, 2011 (in press).

· Reinganum, J., “A simple Model of Equilibrium Price Dispersion”, JPE (1979), pp. 851-858.

· Grossman and Shapiro, “Informative Advertising with differentiated products”, RES, 1984, 63-81.

· Chen, Y. and R. Rosenthal, “On the Use of Ceiling-price Commitments by Monopolists”, RAND (1996), 207-220.

· Baye, Michael and John Morgan. 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets." AER, 91, 454-474.

· Baye, M.R. and J. Morgan. 2004. "Price Dispersion in the Lab and on the Internet: Theory and Evidence." Rand, 35(3), 449-466.

· Burdett, Kenneth and Kenneth L. Judd. 1983. "Equilibrium Price Dispersion." Econometrica, 51, 955-969.

· Janssen, Maarten C. and Jose Luis Moraga-Gonzalez. 2004. "Strategic Pricing, Consumer Search and the Number of Firms." Review of Economics Studies, 71, 1089-1118.

· Reinganum, Jennifer F. 1979. "A simple Model of Equilibrium Price Distribution." Journal of Political Economy, 87, 851-858.

Exam 2

Completing Modeling Exercise.

University Policies

Students with Disabilities

If you qualify for accommodations because of a disability, please submit to me a letter from Disability Services in a timely manner so that your needs can be addressed. Disability Services determines accommodations based on documented disabilities. Contact: 303-492-8671, Center for Community N200, and http://www.colorado.edu/disabilityservices.

If you have a temporary medical condition or injury, see guidelines at
http://www.colorado.edu/disabilityservices/go.cgi?select=temporary.html

Religious Observances

Campus policy regarding religious observances requires that faculty make every effort to deal reasonably and fairly with all students who, because of religious obligations, have conflicts with scheduled exams, assignments or required attendance. In this class, Please make your requests to me within the first two weeks of the semester. See full details at http://www.colorado.edu/policies/fac_relig.html

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Students and faculty each have responsibility for maintaining an appropriate learning environment. Those who fail to adhere to such behavioral standards may be subject to discipline. Professional courtesy and sensitivity are especially important with respect to individuals and topics dealing with differences of
race, color, culture, religion, creed, politics, veteran's status, sexual orientation, gender, gender identity and gender expression, age, disability, and nationalities. Class rosters are provided to the instructor with the student's legal name. I will gladly honor your request to address you by an alternate name or gender pronoun. Please advise me of this preference early in the semester so that I may make appropriate changes to my records. See policies at http://www.colorado.edu/policies/classbehavior.html and at
http://www.colorado.edu/studentaffairs/judicialaffairs/code.html#student_code

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