Advanced Microeconomics I

CEU – Economics Department – Fall 2011

Instructor: Andrea Canidio


Office: Nador 11, #406

Office hours: by appointment

Teaching assistant: Marta Bisztray,

Course webpage:


Please, join the class' Facebook group. All the communications regarding the class should go through the Facebook group, except for appointment requests.


The course is devoted to the discussion of special topics in economics of information, welfare theory, contract theory and organizational economics. These fields seek to understand organizations, institutions and relationships between individuals when there are differences in personal objectives.


During the course students will be asked to solve the problems. They can handle the solution

in written or electronic form.  Problems will count at most 20% of the grade, and can be worked out in groups. There will be a final exam which counts for at least 70% of the grade. Around 50% of the questions in the final exam will be taken from the problem sets assigned in class. Finally, depending on the class size and on the availability of time, students may be asked to present the solutions to their problem set in class.


During the course we will use the following textbooks:

Mas-Collel, Andreu, Michael D. Whinston, and Jerry R. Green, Microeconomic Theory, New York: Oxford Univ. Press, 1995. (MWG)

Bolton, Patrick and Mathias Dewatripont, Contract Theory, Cambridge, Mass. MIT Press, 2005. (BD)

MWG should be purchased by anybody planning to do advanced research in economics. BD  should be purchased by anybody planning to do research in microeconomics. Finally, students should be familiar with some classical papers in the field:

Holmstrom, Bengt, Moral Hazard and Observability, The Bell Journal of Economics, 1979,  10 (1),74–91.

Rothschild, Michael and Joseph Stiglitz, Equilibrium in Competitive Insurance Markets: An essay on the Economics of Imperfect Information, Quarterly Journal of Economics, 1976, 90(4), 629–649.

Spence, Michael, Job Market Signalling, The Quarterly Journal of Economics, 1973, 87 (3), 355–374.

Stiglitz, Joseph E., The Contribution of the Economics of Information to Twentieth Century Economics, Quarterly Journal of Economics, November 2000, pp. 1441–1478.

Course Prerequisites

Students should have completed a master level sequence in Microeconomics. In particular, I expect students to be familiar with game theory (MWG 7,8,9) and competitive equilibrium in exchange economies (MWG 15,16). Attending the course 'topics in game theory' held during the Fall and tought by Adam Szeidl is highly recommended.


  1. Theory of  Second Best. (Lipsey, Richard and Kelvin Lancaster, The General Theory of Second Best, The Review of Economic Studies, 1956-1957, 24 (1), 11-32.)
  2. General Equilibrium under Imperfect Information. (MWG 19.H, MWG 13.A,B)
  3. Hidden Information: Screening. (MWG 13.D; BD 2.1-2)
  4. Hidden Information: Signalling. (MWG 13.C; BD 3.1)
  5. Hidden Action: Moral Hazard and Principal Agent. (MWG 14; BD 4.1-4)
  6. Dynamic Adverse Selection problems: commitment and renegotiation.

NB. This syllabus will be updated. You are advised to check for the most recent version in the course website.