EC341 Mathematical Economics 2

Course Description

Mechanism Design studies games with incomplete information and the effects of information asymmetry. In this course, students will:

1. Asymmetric Information and Adverse Selection: Examine the Lemon’s Market to un- derstand the issues arising from information disparities between parties.

2. Signaling Game: Learn about signaling games where informed players communicate their type or intentions to uninformed players, addressing information asymmetry.

3. Screening Game: Study how uninformed players create menus to prompt informed players to disclose their private information.

4. Mechanism Design Framework: Understand the Revelation Principle—for any outcome in a game with asymmetric information, a direct mechanism exists where players reveal their information truthfully.

5. Applications: Explore the insurance market to see how contracts are designed against adverse selection and delve into auction design to achieve specific objectives like revenue maximization.

Upon completion, students will be equipped with the knowledge and tools to address chal- lenges in games of incomplete information and design effective mechanisms.

Class Hours

Lectures: Tuesdays 10–11 AM and Thursdays 4–5 PM

Office Hours: Wednesdays 9–11 AM by appointment

Seminars: TBD

Reading List

1.  Game Theory: An Introduction by Tadelis, S.

This is the main reference for the course.

2. A Course in Game Theory by Osborne, M.J. and Rubinstein, A.

This is a good reference for prerequisite materials.