Ec103c_syllabus - Ec103c Prof. David Sraer Syllabus and...

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Unformatted text preview: Ec103c Prof. David Sraer Syllabus and Administrative Issues ECONOMICS 103C SPRING 2008 Introduction to Mathematical Economics: Contract Theory SYLLABUS (01/14/2008) Contract theory (a.k.a. information economics, incentive theory or organization theory) has been one of the most successful and active research areas in economics, finance, management or corporate law for more than thirty years. This success has been acknowledged by seven Nobel prizes in economics and an astronomic number of papers in leading economics, finance and law journals. This course is an attempt to provide the students with a synthesis of this huge research field. To that end, the course will insist on the formal methodologies used to solve static bilateral contract theory models (i.e. moral hazard, adverse selection and signaling models). It will also introduce more advanced topics such as multilateral and dynamic contracting. There will be a special emphasis on the economic applications of these models, be they in corporate finance, labor economics, organization theory or industrial organization. Class details: COURSE TIME: Monday/Wednesday/Friday, 12 pm, 241 CORY INSTRUCTOR: David Sraer, 589 EVANS, READER: Juan Carlos Suarez Serrato, OFFICE HOURS: Wednesday, 24pm. WEBPAGE: BSPACE TEXTBOOK: Dewatripont and Bolton, CONTRACT THEORY 1st edition, MIT PRESS, 2005. COURSE GRADING: 30% 5 Problem Sets 20% Midterm 1 20% Midterm 2 40% Final Exam The percentages above sum to 110%. The worst 10% of the score will not count toward your grades. For example, if the worst score is on the problem sets, the problem sets will only have 20% of weight. Ec103c Prof. David Sraer Syllabus and Administrative Issues Course Outline: Here is a tentative outline and schedule for the course. I anticipate that there will be drastic changes to this schedule over time. I will update this schedule as time goes by. 1. General introduction and definition of key concepts (01/23) 2. Moral hazard (Ch. 4)(01/25 02/15) Discrete outcome/discrete effort models. Continuous effort. Continuous outcome. Monotonicity conditions. Informativeness Principle. Mirlees Problem. Optimal linear contracting. Application: Insurance design. Corporate Finance. CEO compensation. First Midterm (02/20+02/22) 3. Adverse Selection (Ch. 2)( 02/25 17/03) Linear Pricing. Two part tariffs. Revelation Principle. Optimal non linear pricing. Ntypes model. SpenceMirlees condition. Random Contract. Bunching and ironing. Application: Optimal taxation of income. Adverse selection in Financial Markets. Regulation. 4. Signaling models (Ch. 3) (03/19 04/07) Perfect Bayesian Equilibrium. Spence model of education. Informed principal. Application: Corporate Finance. Second Midterm (04/07+04/09) 5. Multiagent moral hazard (Ch. 8)(04/11 04/23) Moral hazard in teams. Budget breaker. Tournament theory. Supervision and collusion. Application: Auditing. 6. Multitasking (Ch. 6.2)(04/25, 04/28) 7. Dynamic moral hazard and career concerns (Ch. 10)(04/30 05/12) Ec103c Prof. David Sraer Course Rules: Syllabus and Administrative Issues 1. Problem sets are required as an integral part of the course. I will not accept problem sets turned in late. 2. You can and should work on problem sets with other people, so you can learn from others' intuition and others can learn from yours. However, I expect you to write and turn in your own solution to the problem set. 3. More points are assigned to harder questions. Do not get frustrated: it is normal you find the exercises are hard. If you can only get half of an exercise done, just write that part done. This way you can get partial credit. Afterwards, by reading the solution to the problem set, you will pick up the rest. 4. If I have miscounted points on the midterms or final, tell me immediately and I will correct. If you think that I have inappropriately scored an answer, submit a complaint in writing to me. I will then regrade your test from beginning to end. You should keep in mind that this may decrease your final grade. 5. If you are not able to take exams in the normal time because of disability, you have to come and talk to me. You will need to provide some documentation, and we will arrange a suitable accommodation. ...
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This note was uploaded on 08/01/2008 for the course ECON 103C taught by Professor Sraer during the Spring '08 term at University of California, Berkeley.

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