Course info
ECON0029: Economics of Information (21/22)
Lecturer: Deniz Kattwinkel (d.kattwinkel@ucl.ac.uk) Time: Term 1, Monday
4pm-6pm Aims: In many economic transactions, involved parties have
different information about important characteristics that affect the value
of trade. In this course, we will study how agents deal with this
information asymmetry by designing incentives and embedding them in
contracts. We will also study the effects of information asymmetry on the
prevailing market equilibrium. We will discuss applications from labour
markets (in particular compensations schemes of managers and CEOs),
corporate finance (in particular rationing in credit markets) and the
provision of health insurance. The course analyses incentive schemes that
are used in situations of Moral Hazard (e.g. non-verifiable effort of an
employee or customer of an insurance company), as well as menus of
contracts and product lines that are used in the presence of Adverse
Selection (e.g. when different customers select different contracts or
products based on their preferences). A central theme of the course is that
asymmetric information can lead to inefficiencies and market failure. We
analyse how agents can overcome these inefficiencies and discuss the
consequences of government interventions that aim to improve on the market
outcome. The core content of the course is theoretical. The theoretical
observations will be applied to specific settings and compared to empirical
data on incentive schemes and menus of contracts used in practice. Finally
empirical tests are discussed that can be used to identify Moral Hazard and
Adverse Selection in insurance markets. Suitable for: 3rd year Economics
(L100), Phil/Econ (VL51), Math/Econ (G1L1/G1LC) and Econ/Stats (LG13)
students. Please contact the lecturer if you are unsure if this course is
suitable for you. Prerequisites: ECON0013 (formerly ECON2001):
Microeconomics, ECON0019 (formerly: ECON2007): Quantitative Economics and
Econometrics. Assessment: The material covered in the lectures will be
evaluated in a 100% Online remote exam in Term 3. The exam is mainly
problem based. A sample exam will be posted in the course webpage.
Course contacts
Tutor
GB
Course Administrator
RB
SC
JC
Ad
EG
JH
PM