School of Economics  
                                                                    Academic Year 2015-16 
                                                                               Term 1 
                 !                               
                 COURSE CODE & COURSE TITLE 
                 Instructor Name          : Massimiliano Landi 
                 Email                    : landim@smu.edu.sg 
                 Tel                      :   6 8 28 0872 
                 Office                   : 0437 SOE 
                       
                 PREREQUISITES 
                 Intermediate Microeconomics B 
                 Intermediate Mathematics for Economics 
                 These prerequisites apply to exchange students too who therefore should approach me before the 
                 bidding process starts should they need any clarification on the level and rigor of this course. Past 
                 experience shows this class is considered very hard by most exchange students.
                 COURSE DESCRIPTION 
                 Advanced microeconomics continues the path started in Intermediate Microeconomics B: to provide 
                 the  building  blocks  that  allow  students  to  get  a  deep  understanding  of  economic  issues  and  to 
                 progress with comfort in their upper level Economics courses. Students planning to enroll in Industrial 
                 Organization, the Economics of Asymmetries of Information, among the others, would find this course 
                 particularly beneficial to them. 
                 Throughout the semester, students will be exposed to more advanced topics in Economic theory which 
                 include Mechanism Design, General Equilibrium (without and with uncertainty) and Search. Students 
                 will be exposed to both theoretical models and applications to real life so as to deepen their 
                 understandings of the basic Economic principles. In particular, students will be exposed to examples 
                 related to contracts for managers, insurance schemes, auctions, portfolio management, rationing in the 
                 credit market, resale markets, and on the job search, among the others. This course is intense in 
                 problem solving. 
                 LEARNING OBJECTIVES 
                 By the end of this course, students will have increased and deepened their understanding of economic 
                 modelling and have enlarged the set of technical skills that will allow them to move onto upper level 
                 courses with confidence and satisfaction. Students will be equipped with a set of technical skills that will 
                 come handy if they decide to pursue further studies as they will also learn how to write and solve 
                 mathematical models of abstract logical thinking. 
                 In addition, students will be equipped with a method to tackle effectively problem solving. Developing 
                 such skills is beneficial to all, and in particular to those with a more practical approach. 
                 By the end of this course, therefore, students will be equipped with tools and knowledge that fits their 
                 needs for further economic courses and for their future jobs.  
                 ASSESSMENT METHODS 
                 Class Participation      : 10% 
                 Mid-term Test            : 40% 
                 Final Examination        : 50% 
                 Total                    : 100% 
                                                                    !1
        Participation is graded quite informally: students are participating whenever they return the homework 
        assignments on time and, when coming to class, they contribute to the learning experience. This 
        mostly requires that students behave politely and follow the simple norms of conduct spelled below 
        (see Class Sessions and Expectations) and to participate in a lecture notes sharing activity.  
        The midterm is a 2 hour exam that covers the Moral Hazard and Adverse Selection.  
        The final is a 3 hour exam that covers the part on Auctions and Search. 
        Both  midterm  and  final  requires  problem  solving.  The  homework  assignment  provides  a  good 
        example of the type of questions asked at the exams. Both midterm and final are closed book exams. 
        Calculators and any other electronic devices are not allowed. 
        ACADEMIC INTEGRITY 
        All acts of academic dishonesty (including, but not limited to, plagiarism, cheating, fabrication, 
        facilitation of acts of academic dishonesty by others, unauthorized possession of exam questions, or 
        tampering with the academic work of other students) are serious offences.  
        All work (whether oral or written) submitted for purposes of assessment must be the student’s own 
        work. Penalties for violation of the policy range from zero marks for the component assessment to 
        expulsion, depending on the nature of the offense.  
        When in doubt, students should consult the instructors of the course. Details on the SMU Code of 
        Academic Integrity may be accessed at http://www.smuscd.org/resources.html.  
          
        CLASS SESSIONS AND EXPECTATIONS 
        Class sessions are three hours per week. Each session consists of a detailed explanation of the 
        models discussed throughout the course and their applications. Time will also be devoted to go 
        through crucial steps of the homework assignments. 
        This  course  is  laptop  free.  Students  are  expected  to  spend  most  of  their  time  taking  notes  and 
        discussing about the material covered in class. 
        Students are expected to come to class on time and to behave politely throughout the lecture. Eating 
        and drinking is allowed only during class breaks. 
        Finally, students are expected to be motivated and focused, able to work independently but also to 
        contribute to the classroom environment. Students should not expect to be spoon fed. The emphasis 
        in this course is on the learning process and not on the memorization of few formulas. In addition, 
        there is no text book for this course (see below). Students who like a completely packaged and fully 
        serviced course will find this format difficult to digest. 
        RECOMMENDED TEXT AND READINGS 
        There  is  no  text  book.  The  following  list  of  readings  is  available  in  the  Library  Course 
        Reserve, and will constitute the main bibliographical source. Students can borrow a copy of 
        these books and make photocopies of the relevant chapters for personal use. Students are 
        not expected to read all the chapters from all the books. This list is sufficiently rich so that 
        students can eventually find the reference that fits their style and needs the best. Books 
        marked with an asterisk are for the intrepid. In addition I will provide some notes during the 
        semester to complement the material. Taking good notes during lectures remains the best 
        way to learn.
        To review the basics of Microeconomics:
        McAfee  “Introduction  to  Economic  Analysis”  (MF)  –  the  creative  commons  introduction  to 
        Microeconomics. Permanent link: http://www.mcafee.cc/Introecon/IEA2009.pdf 
        *MasColell, Whinston and Green (1995). “Microeconomic Theory”. Oxford University Press (MWG) 
                              !2
                  General reference the whole course 
                  Campbell “Incentives. Motivation and the Economics of Information”. Cambridge University Press. 
                  (DC) 
                  Mechanism Design: 
                      a.   Moral Hazard and Adverse Selection 
                  Macho-Stadler  and  Perez  Castrillo  “An  Introduction  to  the  Economics  of  Information”  Oxford 
                  University Press (MSPC) 
                      b.   Auctions: 
                  *Salanie “The Economics of Contracts” MIT Press (S) 
                  *Krishna “Auction Theory” Academic Press (K) 
                  Menezes and Monteiro “An Introduction to Auction Theory” Oxford University Press (MM) 
                  Search 
                  McAfee “Introduction to Economic Analysis” (MF) 
                                                                       !3
                WEEKLY LESSON PLAN 
                        Week                                 Topic                             Readings
                 1    5 Jan 15, Mon   Introduction to the course: Rules of the game.       MF Ch 5 
                                      Kuhn-Tucker conditions and expected utility          DC Ch 2 
                 2                    Mechanism Design: Moral hazard part 1                MSPC Ch 2, 3 
                                                                                           S Ch 1, 5
                 3                    Mechanism Design: Moral hazard part 2                MSPC Ch 2, 3 
                                      Homework 1                                           S Ch 1, 5
                 4                    Mechanism Design: Moral hazard part 3 and Adverse    MSPC Ch 2, 3 
                                      selection part 1                                     S Ch 1, 5
                 5                    Mechanism Design: Adverse selection part 2           MSPC Ch 4 
                                      Homework 2                                           S Ch 2
                                      Mechanism Design: Adverse selection part 3           K Ch 2, 4 
                 6                                                                         MM Ch 3 
                                                                                           DC Ch 6
                                      Mechanism Design: Auctions part 1                    K Ch 2, 4 
                 7                    Midterm                                              MM Ch 3 
                                                                                           DC Ch 6
                 8                                                   Recess
                 9                    Mechanism Design: Auctions part 2                    MWG Ch 15, 16 
                                      Mechanism Design: Auctions part 3                    MWG Ch 15, 16 
                 10                   Homework 3 
                 11                   Search part 1                                        DD Ch 8, 10 
                                                                                           DC Ch 10
                 12                   Search part 2                                        DD Ch 8, 10 
                                                                                           DC Ch 10
                                      Search part 3 
                 13                   Homework 4                                           DC Ch 10
                 14                                               Revision Week
                 15                                              Final Examination
                                                             !4