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THE UNIVERSITY OF CHICAGO

Economics 30501
Topics in Economic Theory

P. Reny
422 SHFE
Office Hours: By appointment

This course is intended to introduce you to various topics in economic theory. There is no textbook.
There will be a take-home midterm (Feb. 7-9) and a take-home final exam (March 13-15), each
worth 50% of your grade.

TOPICS

1. Mechanism Design under Quasi-Linear Preferences (8 lectures)


(i) Incentive Compatibility and the Revelation Principle
(ii) Uniqueness of the VCG mechanism
(iii) Dominant and Bayesian Equivalence
(iv) Dynamics
2. Matching with contracts (4-5 lectures)
(i) One to one matching to share risk
(ii) Many to many matching with contracts
3. Existence of Nash Equilibrium (4-5 lectures)
(i) Discontinuous Games
(ii) Continuous Bayesian Games—Monotone Pure strategy Equilibria
(iii) Principal-Agent problem: moral hazard, adverse selection and infinite types and actions
4. Extensive Form Games (4 lectures)
(i) Consistent Assessment in finite games
(ii) Sequential Equilibrium with infinite actions and signals

READINGS (Most of these are in JSTOR.)

Readings marked with an asterisk (*) are either articles that are particularly closely related to
some of the material from class, or are books that are particularly useful for the topic.

1.
Border, K. (1991): “Implementation of Reduced Form Auctions: A Geometric Approach,”
Econometrica 59(4), 1175-1187.

Border, K. (2007): “Reduced Form Auctions Revisited,” Economic Theory 31(1), 167-181.

Eso, P. and B. Szentes (2007): “Optimal Information Disclosure in Auctions and the Handicap

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Auction,” Review of Economic Studies, 74, 705-731.

Gale, D. (1957): “A Theorem on Flows in Networks,” Pacific Journal of Mathematics 7, 1073-


1082.

Gutmann, S., Kemperman, J.H.B., Reeds, J.A., and Shepp, L.A. (1991): “Existence of
Probability Measures with Given Marginals,” The Annals of Probability 19 (4), 1781-1797.

Hart, S. and Reny, P.J. (2015): “Implementation of Reduced Form Auctions: A Simple Approach
and a New Characterization,” Economic Theory Bulletin, 3, 1–8.

Jehiel, P., Moldovanu, B. and Stacchetti, E. (1999): “Multidimensional Mechanism Design for
Auctions with Externalities,” Journal of Economic Theory 85(2), 258-294.

Jehiel, P., and B. Moldovanu (2001): “Efficient Design with Interdependent Valuations,”
Econometrica, 69, 1237-1260.

Kellerer, H.G. (1961): “Funktionen und Produktr¨aume mit Vorgegebenen Marginal-


Funktionen,” Mathematische Annalen 144, 323-344.

*Krishna, V. and M. Perry: “Efficient Mechanism Design,” mimeo, Penn State University,
https://sites.google.com/site/vjkrishna/Efficient Mechanism Design.pdf.

Laffont,J.-J. and Laffont (1977): "Characterization of Satisfactory Mechanisms for Revelation of


Preferences for Public Goods, " Econometrica, 45, 427-438.

Li, Hao, and Xianwen Shi (2017): “Discriminatory Information Disclosure,” American
Economic Review 107(11), November 2017, 3363-3385.

Lorenz, G.G. (1949): “A Problem of Plane Measure,” American Journal


of Mathematics 71, 417-426.

*Manelli, A. and D. Vincent (2010): “Bayesian and Dominant Strategy Implementation in the
Independent, Private Values Model,” Econometrica 78(6), 1905-1939.

*Moldovanu, B., A. Gershkov, and X. Shi (2011): “Bayesian and Dominant Strategy
Implementation Revisited, mimeo, University of Bonn.

*Myerson, R.: “Optimal Auction Design,” Mathematics of Operation Research, 1981, 6, 58-73.

Myerson, R. B., and M. Satterthwaite (1983): “Efficient Mechanism for Bilateral Trading,”
Journal of Economic Theory 28, 265-81.

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Pavan, A., I. Segal, and J. Toikka (2012): “Dynamic Mechanism Design,” mimeo,
Northwestermn University, http://faculty.wcas.northwestern.edu/~apa522/DMD-revised-
final.pdf.

*Rockafellar, R. T. (1970): Convex Analysis, Princeton University Press.

Ryser, H.J. (1957): “Combinatorial Properties of Matrices of Zeros and Ones,” Canadian
Journal of Mathematics 9, 371-377.

Strassen, V. (1965): “The Existence of Probability Measures with Given Marginals,”


Mathematical Statistics 36, 423-439.

Villani, C. (2003): Topics in Optimal Transportation, American Mathematical Society: Graduate


Studies in Mathematics Vol. 58, Providence, Rhode Island.

2.
Birkhoff, G. (1967): Lattice Theory. American Mathematical Society, Providence, RI.

*Blair, Charles (1988): “The Lattice Structure of the Set of Stable Matchings with Multiple
Partners,” Mathematics of Operations Research, 13, 619-628.

*Chiappori, P. A., and P. J. Reny (2016): “Matching to Share Risk,” Theoretical Economics, 11,
227–251.

*D. Gale and L. S. Shapley: "College Admissions and the Stability of Marriage", American
Mathematical Monthly 69, 9-14, 1962.

Dubins, L., and Freedman, D. (1981). Machiavelli and the Gale-Shapley algorithm. The
American Mathematical Monthly, 88(7), 485–494.

Gul, F. and E. Stacchetti (1999): “Walrasian Equilibrium with Gross Substitutes,” Journal of
Economic Theory, 1999, 87, 9-124.

Hatfield, J. and P. Milgrom (2005) “Matching with Contracts,” American Economic Review 95,
913-935.

*Kelso-Crawford (1982), “Job Matching, Coalition Formation, and Gross Substitutes,”


Econometrica, 50, 1483-1504.

Roth, A. E. (1984). The evolution of the labor market for medical interns and residents: A case
study in game theory. Journal of Political Economy, 92, 991–1016.

Roth, Alvin E. "The College Admissions Problem Is Not Equivalent to the Marriage Problem."

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Journal of Economic Theory, 1985a, 36, pp. 277-88.

____. "Conflict and Coincidence of Interest in Job Matching: Some New Results and Open
Questions." Mathematics of Operations Research, 1985b, 10, pp. 379-89.

____. "The Economics of Matching: Stability and Incentives." Mathematics of Operations


Research, 1982, 7, pp. 617-28.

____. "A Natural Experiment in the Organization of Entry-Level Labor Markets: Regional
Markets for New Physicians and Surgeons in the United Kingdom." American Economic Review,
1991, 81(3), pp. 415-40.

____. "On the Allocation of Residents to Rural Hospitals: A General Property of Two-Sided
Matching Markets." Econometrica, 1986, 54, pp. 425-27.

____. "Stability and Polarization of Interests in Job Matching." Econometrica, 1984, 52, pp. 47-
57.

Roth, Alvin E. and Peranson, Elliott. "The Redesign of the Matching Market for American
Physicians: Some Engineering Aspects of Economic Design." American Economic Review,
1999, 89, pp. 748-80.

*Roth, Alvin E. and Sotomayor, Marilda. Two-Sided Matching: A Study in Game-Theoretic


Modeling and Analysis. Cambridge: Cambridge University Press, 1990.

3.
*Athey (2001): "Single Crossing Properties and the Existence of Pure Strategy Equilibria in
Games of Incomplete Information," Econometrica, 69, 861-889.

Baye, M. R., G. Tian, and J. Zhou (1993): "Characterizations of the Existence of Equilibria in
Games with Discontinuous and Non-quasiconcave Payoffs," Review of Economic Studies, 60,
935-948.

*Dasgupta, P. and E. Maskin (1986): "The Existence of Equilibrium in Discontinuous Economic


Games, I: Theory," Review of Economic Studies 53, 1-26.

Eilenberg, S., and D. Montgomery (1946): "Fixed point Theorems for Multi-Valued
Transformations," American Journal of Mathematics, 68, 214-222.

Hotelling, H. (1929): "The Stability of Competition," Economic Journal 39, 41-57.

*McAdams, D. (2003): "Isotone Equilibrium in Games of Incomplete Information,"


Econometrica, 71, 1191-1214.

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McAdams, D. (2006): "Monotone Equilibrium in Multi-Unit Auctions," Review of Economic
Studies, 73, 1039-1056.

Mertens, J. F. (1986): "The Minmax Theorem for U.S.C.-U.S.C. Payoff Functions," International
Journal of Game Theory 15, 237-250.

*Milgrom, P. and R. Weber (1985): "Distributional Strategies for Games with Incomplete
Information," Mathematics of Operations Research, 10, 1985, 619-32.*

Pitchik, C. (1982): "Equilibria of a Two-Person Non-Zerosum Noisy Game of Timing,"


International Journal of Game Theory, 10, 207-221.

*Reny, P. (1999): “On the Existence of Pure and Mixed Strategy Nash Equilibria in
Discontinuous Games,” Econometrica, 67, 1029-1056.

*Reny, P. (2011): “On the Existence of Monotone Pure-Strategy Equilibria in Bayesian Games,
Econometrica, 79, 499-553

Simon, L. (1987): "Games with Discontinuous Payoffs," Review of Economic Studies," 54, 569-
597.

*Simon, L. and W. Zame (1990): "Discontinuous Games and Endogenous Sharing Rules,"
Econometrica 58, 861-872.*

Sion, M. (1958): "On General Minimax Theorems," Pacific Journal of Mathematics, 8, 171-176.

Van Zandt, T. and X. Vives (2007): "Monotone Equilibria in Bayesian Games of Strategic
Complementarities," Journal of Economic Theory, 134, 339-360.

4.
Aumann, R.J., Subjectivity and correlation in randomized strategies, Journal of Mathematical
Economics, 1 (1974), 67-96.

Battigalli, P., Structural consistency and strategic independence in extensive games, Richerche
Economiche, 48 (1994a), 357-376.

_________, Strategic independence and perfect bayesian equilibria, mimeo, Department of


Economics, Princeton University (1994b).

*Blume, L., A. Brandenburger and E. Dekel, Lexicographic probabilities and choice under
uncertainty, Econometrica 59 (1991), 61-79.

__________ and W.R. Zame (1989): The algebraic geometry of perfect and sequential
equilibrium, Econometrica 62 (1994), 783-794.

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*Fudenberg, D. and J. Tirole, Perfect bayesian equilibrium and sequential equilibrium, Journal
of Economic Theory, 53 (1991), 236-260.

Hammond, P. J., Elementary non-archimedean representations of probability for decision theory


and Games," in P. Humphreys (ed.) Patrick Suppes: Scientific Philosopher, vol. 1, Probability
and Probabilistic Causality, Kluwer Academic Publishers (1994), ch. 2, 25-59.

*Kreps, D. and G. Ramey, Structural consistency, consistency, and sequential rationality,


Econometrica, 55 (1987), 1331-1348.

*Kreps, D. and R. Wilson, Sequential equilibria, Econometrica, 50 (1982), 863-894.*

*Kohlberg, E. and Reny P. (1997): “Independence on Relative Probability Spaces and Consistent
Assessments in Game Trees,” Journal of Economic Theory, 2, 280-313.*

Kuhn, H. (1953), Extensive games and the problem of information, in Contributions to the
Theory of Games 2 (1953), Princeton: Princeton University Press, 193-216.

Myerson, R.B., Multistage games with communication, Econometrica, 54 (1986), 323-358.

Rényi, A. (1955): “On a new axiomatic theory of probability,” Acta Mathematica Academiae
Scientiarum Hungaricae, 6, 285-335.

_______, On conditional probability spaces generated by a dimensionally ordered set of


measures, Theory of Probability and its Applications, 1 (1956), 61-71.

Selten, R. (1975): “Reexamination of the perfectness concept for equilibrium points in extensive
games," International Journal of Game Theory, 4, 25-55.

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