Economics of information

General information

Type:	OPT	Curs:	2	Period:	S semester
ECTS Credits:	3 ECTS

Teaching Staff:

Group	Teacher	Department	Language
Year 2	Daniel Sanchez Moscona	Economía, Finanzas y Contabilidad	ENG

Previous Knowledge

Knowledge of basic calculus, probability and random variables is assumed. Taking Intermediate Microeconomics before this course is recommended but, by no means, necessary.

COURSE CONTRIBUTION TO PROGRAM

In other Economics courses, students have examined how individuals make decision under deterministic and full-information scenarios. However, how do individuals decide a portfolio of financial assets whose return is uncertain? How can a firm design contracts to incentivize workers to exert effort, when this information is not accessible to the contractor? How should insurance companies design contracts in the face of different, undistinguishable, types of drivers?
This course offers a brief introduction to the classical models of decision-making under uncertainty and asymmetric information, which are central and fascinating topics in modern economics. This will be done using a theoretical approach that will strengthen students' economic logic and intuition to analyze this problems in practice.

Course Learning Objectives

By the end of this course, students should understand:

- the assumptions and implications behind the model of expected utility,
- the concept of Pareto-efficiency and risk-sharing,
- the role that asymmetric information plays in the writing of contracts
- under which circumstances, asymmetric information implies inefficiencies,
- technical academic literature in theoretical and applied economics.

CONTENT

1. Decision-making under uncertainty
2. Optimal risk-sharing
3. Moral hazard
4. Adverse selection
5. Signalling

1. Decision-making under uncertainty

2. Optimal risk-sharing

3. Moral hazard

4. Adverse selection

5. Signalling

Relation between Activities and Contents

	1	2	3	4	5
Participation
Problem Sets
Final Exam

Methodology

he course will consist of weekly lectures. Students will have to hand in solutions to
some proposed problem sets. These are a fundamental part of the learning process.
The instructor will provide solutions to these problem sets during the lectures.

Description	%
Participation	15
Problem Sets	35
Final Exam	50

Assessment criteria

Class Participation: Students are expected to attend all lectures and to participate
actively in class. A full participation score will be awarded to those students whose
questions and comments are thoughtful and meaningful.

Assignments (problem sets): Students will be expected to hand in solutions to
problem sets that will be proposed throughout the course. These assignments will be done in groups.

Final Exam: Comprehensive exam of all the contents of the course.

Bibliography

Macho-Stadler, I., & Perez-Castrillo, J. D. (1997). An introduction to the economics of information: Incentives and contracts. Oxford: Oxford University Press.

Lecture notes provided by the professor.

Timetable and sections

Group	Teacher	Department
Year 2	Daniel Sanchez Moscona	Economía, Finanzas y Contabilidad

Timetable Year 2

From 2023/2/15 to 2023/5/10:
Each Wednesday from 9:00 to 11:00. (Except: 2023/4/5)

Economics of information (2225.YR.014702.1)