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In many economic situations, economic actors
do not have the full knowledge of the
economic environment they are in and/or
the actions taken (or will be taken) by the other
actors. Often some actors have better (or more)
knowledge than others. There are dramatic effects
of these ''information asymmetries'' on the
functioning of the markets and the formation of economic
institutions in the society. This course offers a
coherent framework to think about these
problems. The topics covered include decision making
under uncertainty (expected utility theorem, attitudes
towards risk), adverse selection, signaling, moral hazard,
theory of incentives and contracts, principal-agent
problems, incomplete contracts, mechanism design
as well as many applications such as price discrimination,
efficiency wages and unemployment,
credit markets, entrepreneurship, partnerships, hold-up
problems, property rights, herd behavior and information
cascades, reputation, auctions, matching,
and optimal taxation.
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