14.147
Topics in Economic Theory
Advanced subject on topics of current research interest. First half emphasizes information in dynamic games. Second half focuses on learning and some of the associated probability theory, including proofs of some of the theorems used in the first half.
Fall 2009 · Topics in Game Theory
This course is an advanced topics course on market and mechanism design. We will study existing or new market institutions, understand their properties, and think about whether they can be re-engineered or improved. Topics discussed include mechanism design, auction theory, one-sided matching in house allocation, two-sided matching, stochastic matching mechanisms, student assignment, and school choice.
Readings
- Milgrom, Paul. Putting Auction Theory to Work . Cambridge, United Kingdom: Cambridge University Press, 2004. ISBN: 9780521536721.
- Roth, Alvin, and Marilda Sotomayor. Two-Sided Matching: A Study in Game-Theoretic Modeling and Analysis . Cambridge, United Kingdom: Cambridge University Press, 1992. ISBN: 9780521437882.
- [Milgrom] = Milgrom, Paul. Putting Auction Theory to Work . Cambridge, United Kingdom: Cambridge University Press, 2004. ISBN: 9780521536721.
- [Roth and Sotomayor] = Roth, Alvin, and Marilda Sotomayor. Two-Sided Matching: A Study in Game-Theoretic Modeling and Analysis . Cambridge, United Kingdom: Cambridge University Press, 1992. ISBN: 9780521437882.
- Klemperer, Paul. Auctions: Theory and Practice . Princeton, NJ: Princeton University Press, 2004. ISBN: 9780691119250.
- Krishna, Vijay. Auction Theory . 2nd ed. Burlington, MA: Academic Press, 2009. ISBN: 9780123745071.
- Moulin, Hervé. Axioms of Cooperative Decision Making . New York, NY: Cambridge University Press, 1991. ISBN: 9780521424585.
- Shiller, Robert. Macro Markets: Creating Institutions for Managing Society’s Largest Economic Risks . New York, NY: Oxford University Press, 1998. ISBN: 9780198294184.
- Coase, Ronald. “The Federal Communications Commission.” Journal of Law and Economics 2 (October 1959): 1-40.
- ———. “The Problem of Social Cost.” Journal of Law and Economics 3 (October 1960): 1-44.
- Elster, Jon. Local Justice: How Institutions Allocate Scarce Goods and Necessary Burdens . New York, NY: Russell Sage Foundation, 1993. ISBN: 9780871542328.
- Klemperer, Paul. “Why Every Economist Should Learn Some Auction Theory.” Chapter 2 in Advances in Economics and Econometrics: Theory and Practice, Eighth World Congress . Vol. 1. Edited by Mathias Dewatripont, Lars Peter Hansen, and Stephen J. Turnovsky. New York, NY: Cambridge University Press, 2003, pp. 25-55. ISBN: 9780521524117.
- [Milgrom] “Getting to Work,” “Vickrey-Clarke-Groves Mechanisms,” and “The Envelope Theorem and Payoff Equivalence,” chapters 1 to 3, pp. 1-97.
- Vickrey, William. “Counterspeculation, Auctions, and Competitive Sealed Tenders.” Journal of Finance 16, no. 1 (March 1961): 8-37.
- [Milgrom] “Bidding Equilibrium and Revenue Differences,” and “Interdependence of Types and Values,” chapters 4 to 5, pp. 98-207.
- Myerson, Roger. “Optimal Auction Design.” Mathematics of Operations Research 6, no. 1 (February 1981): 58-73.
- Chen, Chia-Hui. “One-to-Many Negotiation Between a Seller and Asymmetric Buyers.” PhD diss., Massachusetts Institute of Technology, April 2009.
- Roth, Alvin E., Tayfun Sönmez, and M. Utku Ünver. “Kidney Exchange.” Quarterly Journal of Economics 119, no. 2 (May 2004): 457-488.
- [Roth and Sotomayor] “Stable Matchings,” “The Structure of the Set of Stable Matchings,” “Strategic Questions,” and “The College Admissions Model and the Labor Market for Medical Interns,” chapters 2 to 5, pp. 17-170.
- Abdulkadiroğlu, Atila, Parag Pathak, Alvin E. Roth, and Tayfun Sönmez. “Changing the Boston School Choice Mechanism: Strategy-Proofness as Equal Access.” Mimeograph, Department of Economics, Duke University, 2006.
- Krishna, Vijay. Auction Theory . 2nd ed. Burlington, MA: Academic Press, 2009. ISBN: 9780123745071.
- Harrison, Glenn. “Theory and Misbehavior in First-Price Auctions.” American Economic Review 79, no. 4 (September 1989): 749-762.
- ———. “Nonparametric Approaches to Auctions.” Chapter 60 in Handbook of Econometrics . Vol. 6A. Edited by James J. Heckman and Edward Leamer. Amsterdam, The Netherlands: North Holland, 2005, pp. 3847-3965. ISBN: 9780444506313.
- Segal, Ilya, Alessandro Pavan, and Juuso Toikka. “Dynamic Mechanism Design: Revenue Equivalence, Profit Maximization, and Information Disclosure.” Mimeograph, Northwestern University, May 2008.
- Kojima, Fuhito, Parag Pathak, and Alvin E. Roth. “Stability and Incentives in Matching with Couples.” Mimeograph, Stanford University, 2009.
- Segal, Ilya. “Communication in Economic Mechanisms.” Chapter 6 in Advances in Economics and Econometrics: Theory and Applications, Ninth World Congress . Vol. 1. Edited by Richard Blundell, Whitney K. Newey, and Torsten Persson. New York, NY: Cambridge University Press, 2006, pp. 222-268. ISBN: 9780521692083.
- Acharya, Viral, and Alberto Bisin. “Centralized versus Over the Counter Markets.” Working paper, New York University, May 2009.
- Cabrales, Antonio, Antoni Calvo-Armengol, and Matthew Jackson. “La Crema: Fire Insurance in a Village Economy of Modern Day Europe.” Journal of Political Economy 111, no. 2 (2003): 425-458.
Spring 2005 · Topics in Game Theory
Topics
- Bargaining with Heterogeneous Beliefs
- Unawareness
Readings
- Bargaining with Complete Information
- Theory, Based on the Works of Rubinstein, Binmore, and Merlo and Wilson
- Rubinstein, A. “Perfect Equilibrium in a Bargaining Model.” Econometrica 50, no. 1 (1982): 97-110.
- Binmore, Ken. “Perfect Equilibria in Bargaining Models.” In The Economics of Bargaining . Edited by K. Binmore and P. Dasgupta. Oxford, UK: Basil Blackwell, 1987, pp. 77-105. ISBN: 0631142541.
- Merlo, A., and C. Wilson. “A Stochastic Model of Sequential Bargaining with Complete Information.” Econometrica 63, no. 2 (1995): 371-399.
- Bargaining with Complete Information (cont.)
- Applications and Extensions
- Bulow, J., and K. Rogoff. “A constant recontracting model of sovereign debt.” Journal of Political Economy 97, no. 1 (1989): 155-78.
- Baron, D., and J. Ferejohn. “Bargaining in legislatures.” American Political Science Review 89 (1989): 1181-1206.
- Merlo, A. “Bargaining over Governments in a Stochastic Environment.” Journal of Political Economy 105 (February 1997): 101-131.
- Diermeier, D., H. Eraslan, and A. Merlo. “A Structural Model of Government Formation.” Econometrica 71 (2003): 27-70.
- Perry, M., and L. Samuelson. “Open vs. Closed Door Negotiations.” RAND Journal of Economics 25 (1994): 348-359.
- Cai, H. “Bargaining on behalf of a constituency.” Journal of Economic Theory 92 (2000): 234-273.
- Stole, L., and J. Zwiebel. “Intra-Firm Bargaining under Non-Binding Contracts.” The Review of Economic Studies 63, no. 3 (1996).
- Yildiz, M. “Walrasian bargaining.” Games and Economic Behavior 45 (2003).
- Li, D. “Bargaining with History-Dependent Preferences.” Econometric Society 2004 North American Summer Meetings 516, Econometric Society.
- Tyson, C. “Iterative Dominance and Sequential Bargaining.” Economics Papers 2004-W23, Economics Group, Nuffield College, University of Oxford, 2004.
- Hart, O., and J.H. Moore. “Agreeing Now to Agree Later: Contracts that Rule Out but do not Rule In.” STICERD - Theoretical Economics Paper Series /2004/472, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE, 2004.
- Bernheim, B., A. Rangel, and L. Rayo. “The Power of the Last Word in Legislative Policy Making.” Econometrica (2004). (forthcoming)
- Bargaining with Incomplete Information
- Based on: Kennan, J., and R. Wilson. “Bargaining with private information.” Journal of Economic Literature 31, no. 1 (1993): 45-104.
- One-sided Asymmetric Information
- Admati, A., and M. Perry. “Strategic delay in bargaining.” Review of Economic Studies 54, no. 3 (1987): 345-364.
- Gul, F., H. Sonnenchein, and R. Wilson. “Foundations of dynamic monopoly and the Coase conjecture.” Journal of Economic Theory 39 (1986): 155-190.
- Bargaining with Incomplete Information (cont.)
- Two-sided Asymmetric Information
- Cramton, P. “Bargaining with incomplete information: an infinite horizon model with two sided asymmetric information.” Review of Economic Studies 51 (1984): 579-593.
- ———. “Strategic delay in bargaining with two-sided uncertainty.” Review of Economic Studies 59 (1992): 205-225.
- Abreu, D., and F. Gul. “Bargaining and Reputation,” Econometrica 68, no. 1 (2000): 85-117.
- Feinberg, Y., and A. Skrzypacz. “Uncertainty about uncertainty and delay in bargaining.” Econometrica 73, no. 1 (2005): 69-71.
- Applications
- Spier, K. “The Dynamics of Pretrial Negotiation.” Review of Economic Studies 59, no. 1 (1992): 93-108.
- Gul, F. “Unobservable Investment and the Hold-Up Problem.” Econometrica 69, no. 2 (2001): 343-376.
- Heifetz, A., and E. Segev. “Escalation and delay in long international conflicts.” The School of Economics, Tel Aviv University, 2002.
- Empirical and Experimental Studies
- Cramton, P., and J. Tracy. “Strikes and holdouts in wage bargaining: Theory and data.” American Economic Review 82, no. 1 (March 1992): 100-121.
- Roth, A., J. Murnighan, and F. Schoumaker. “The Deadline Effect in Bargaining: Some Experimental Evidence.” American Economic Review 78, no. 4 (1988): 806-823.
- Bargaining with Heterogeneous Beliefs
- Yildiz, M. “Bargaining without a common prior - An immediate agreement theorem.” Econometrica 71, no. 3 (2003): 793-811.
- ———. “Waiting to persuade.” Quarterly Journal of Economics 119, no. 1 (2004): 223-248.
- Ali, S. Nageeb. “Multilateral Bargaining with Subjective Biases: Waiting To Settle.” Journal of Economic Theory (April 4, 2005). (forthcoming)
- Watanabe, Yasutora. “Learning and bargaining in dispute resolution: Theory and evidence from medical malpractice litigation.” 2005 Meeting Papers 440, Society for Economic Dynamics, 2005.
- Higher-order Uncertainty
- Carlsson, Hans, and Eric van Damme. “Global Games and Equilibrium Selection.” Econometrica 61, no. 5 (1993): 989-1018.
- Frankel, D., S. Morris, and A. Pauzner. “Equilibrium selection in global games with strategic complementarities.” Journal of Economic Theory 108, no. 1 (2003): 1-44.
- Battigalli, P., and M. Siniscalchi. “Rationalization and Incomplete Information.” Advances in Theoretical Economics 3, no. 1 (2003). (Article 3)
- ———. 2004. “Dense Types.” Faculty working paper, August 2005.
- Weinstein, J.,and M. Yildiz. “Finite-order implications of any equilibrium.” Levine’s Working Paper Archive 122247000000000065, UCLA Department of Economics, 2004.
- Yildiz, M. “Rationalizability on universal type space.” Faculty working paper, Department of Economics, Massachusetts Institute of Technology, 2004.
- Angeletos, G., C. Hellwig, and A. Pavan. “Information Dynamics and Equilibrium Multiplicity in Global Games of Regime Change.” NBER Working Papers 11017, National Bureau of Economic Research, Inc., 2004.
- Higher-order Uncertainty (cont.)
- Morris, S., and H.S. Shin. “Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks.” American Economic Review 88, no. 3 (1998): 587-597.
- ———. “Global Games - Theory and Applications.” In Advances in Economics and Econometrics . Edited by M. Dewatripont, L. Hansen, and S. Turnovsky. Cambridge, UK: Cambridge University Press, 2003, 56-114. ISBN: 0521524113.
- ———. “Rethinking Multiple Equilibria in Macroeconomics.” NBER Macroeconomics Annual (2000): 139-161.
- ———. “Coordination Risk and the Price of Debt.” European Economic Review 48 (2004): 133-153.
- ———. “Liquidity Black Holes.” Review of Finance 8, no. 1 (2004): 1-18.
- Frankel, D., and A. Pauzner. “Resolving Indeterminacy in Dynamic Settings: The Role of Shocks.” Quarterly Journal of Economics 115, no. 1 (2000): 285-304.
- Goldstein, I., and A. Pauzner. “Contagion of Self-Fulfilling Financial Crises due to Diversification of Investment Portfolios.” Journal of Economic Theory 119, no. 1 (2004): 151-183.
- Angeletos, G., C. Hellwig, and A. Pavan. “Coordination and Policy Traps (Signaling in a Global Coordination Game).” NBER Working Papers 9767, National Bureau of Economic Research, Inc., 2003.
- Angeletos, G., and I. Werning. “Crises and Prices.” NBER Working Papers 11015, National Bureau of Economic Research, Inc., 2004.
- Corsetti, G., B. Guimaraes, and N. Roubini. “International Lending of Last Resort and Moral Hazard: A Model of IMF’s Catalytic Finance.” NBER Working Papers 10125, National Bureau of Economic Research, Inc., 2004.
- Dasgupta, A. “Coordination, Learning and Delay.” FMG Discussion Papers dp435, Financial Markets Group, 2002.
- Neeman, Z. “The Relevance of Private Information in Mechanism Design.” Journal of Economic Theory 117, no. 1 (2004): 55-77.
- Heifetz, A., and Z. Neeman. “On the Generic Infeasibility of Full Surplus Extraction in Mechanism Design.” Working paper, 2003.
- Edmond, C.. “Information and the Limits to Autocracy.” Working paper, Department of Economics, UCLA, 2003.
- Dekel, E., Lipman, B. L., and A. Rustichini. “Standard State-Space Models Preclude Unawareness.” Econometrica 66, no. 1 (1998): 159-174.
- ———. “Recent Developments in Modelling Unforseen Contingencies.” European Economic Review 42 (1998): 523-542.
- Li, J. “Unawareness.” Working paper, Department of Economics, University of Pennsylvania, August 2004.
- Modica, S., and A. Rustichini. “Unawareness and partitional information structures.” Games and Economic Behavior 27, no. 2 (1999): 265-298.
- Feinberg, Y. “Subjective Reasoning - Games with Unawareness.” Stanford Graduate Business School, Research Paper Series, Paper no. 1875, November 2004.
- Fagin, R., and J. Y. Halpern. “Belief, awareness, and limited reasoning.” Artificial Intelligence 34, no. 1 (1987): 39-76.
- Halpern, J. Y. “Alternative Semantics for Unawareness.” Games and Economic Behavior 37, no. 2 (2001): 321-339.
- Heifetz, A., Meier, M., and B. C. Schipper. “Interactive Unawareness.” Discussion Papers 52, SFB/TR 15 Governance and the Efficiency of Economic Systems, University of Mannheim, 2004.
- Modica, S., and A. Rustichini. “Awareness and partitional information structures.” Theory and Decision 37, no. 1 (1994): 107-124.
Prerequisites & course information
Prereq: 14.126 G (Fall) 4-0-8 units
Sources
- Course catalogue ↗2026–2027
- MIT OpenCourseWare ↗Fall 2009
- MIT OCW syllabus ↗
- MIT OCW readings ↗
- MIT OpenCourseWare ↗Spring 2005
- MIT OCW readings ↗
- MIT OCW syllabus ↗
- MIT OCW calendar ↗
- Historical MIT OpenCourseWare offering. Named reading entries and schedule topics are automatically extracted from the linked source pages.
- Historical MIT OpenCourseWare offering. Named reading entries and schedule topics are automatically extracted from the linked source pages.