10:30-11:50 M W, 28 Hillhouse, Room 106
Topic: This course covers selected topics in the economics of information and uncertainty. The theme of the course this year is “Mechanism Design and Information”.
The theory of mechanism design as laid out in the seminal contributions of Vickrey (1961) and Hurwicz (1972) analyzes the performance of various institutions in an economy where information is dispersed amongst participating agents. The key underlying idea is that information is similar to other economic goods in the sense that the agents have autonomy over the decisions regarding their information. How information is used depends on the mechanism in place. The
first generation of (positive) results for mechanism design in Clarke (1971), Groves (1973), Green and Laffont (1977) and D’Aspremont and Gerard-Varet (1979) characterized surplus maximizing mechanisms within private values economies. The second step towards a general theory resulted from a change in focus. Rather than start with surplus maximization as the objective, the work of Myerson (1979), Myerson (1981) and Myerson and Satterthwaite (1983) on revenue maximizing mechanisms started with a characterization of all implementable allocation rules. This opened up the
field for a large number of applications ranging from optimal auctions and bilateral trade to regulation and negotiations.
The objective of this course is twofold: First, it is meant to provide an introduction into the main themes and techniques of mechanism design. Second, it is meant to illustrate the central insights of the theoretical work in the context of important economic applications.
Concurrently with this course, there is second economic theory course taught this term, Econ 531b, which takes a decidedly more dynamic perspective and which complements and generalizes many of the present, often static insight, to dynamic environments. All students are encouraged to at least audit both courses simultaneously as there will be nonnegligible and positive externalities.
Course Requirements: This course has five basic requirements. They are: (i) reading the assigned papers before the presentation in class, (ii) solving the problem sets, (iii) presenting one research paper, (iv) writing four referee reports (before the presentation of the papers) and (v) writing a term paper. The assignments will be given biweekly. Class participation, assignments, and the term paper will jointly determine the final grade. The due date for the term paper is Monday, August 5th, 4 p.m. in the mailbox of Professor Dirk Bergemann.
Readings: The current reading list will be completed as the class proceeds.
Syllabus: The complete syllabus for Econ 521b.
1. 1/14 – 1/16 (JV): Auction Theory: Revelation Principle and Revenue Equivalence
2. 1/21 – 1/23 (JV): Optimal Auctions and Interdependent Values
3. 1/28 – 1/30 (DB): Dominant Strategy Incentive Compatibility: Necessary and Sufficient Conditions
Problem Set 2: Dominant Strategy (Due W 2/13/13)
4. 2/4 – 2/6 (DB): Multidimensional Incentive Compatibility
5. 2/11 – 2/13 (DB): Impossibility Results
6. 2/18 – 2/20 (DB): The Value of Information in Strategic Settings
Comparison of Experiments: Chapter 10 of Blackwell and Girshick
7. 2/25 – 2/27 (DB): The Value of Information in Strategic Settings: Applications
Referee Reports (Due W 3/27/13):
7. 3/4 – 3/6 (DB): Information Acquisition and Information Disclosure
7. 3/25 – 3/27 (DB): Markets for Data and Information