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Prof Michele Piccione 32L 4.07

Prof Timothy Besley 32L 3.37

This course is compulsory on the BSc in Econometrics and Mathematical Economics, BSc in Economics and MSc in Economics (2 Year Programme). This course is not available as an outside option nor to General Course students.

Microeconomics I (EC1A1) and either Quantitative Methods (Mathematics) (MA107) or Mathematical Methods (MA100).

Students on the MSc in Economics (2 Year Programme) must have completed Introductory Course in Microeconomic Principles (EC2A0) and be taking either Mathematical Methods (MA100) or Further Mathematical Methods (MA212) alongside.

In this course, we build on the tools learnt in Microeconomics I (EC1A1) to provide an in-depth analysis of microeconomic theory, as well as applications of the tools of microeconomics to concrete economic problems.



The first part of the course explores game theory and considers  a range of applications:

• Extensive Forms and Normal Form games.

• Pure and mixed strategy Nash Equilibria.

• Backward induction and Subgame Perfection.

• Applications: Cournot, Stackelberg, Bertrand with homogeneous and differentiated goods; entry games and limit capacity, bargaining.

• Repeated games – Application: cartel stability

• Games with incomplete information and  belief refinements.

• Applications: Limit Pricing, Auctions, Signalling.



The second part of the course builds on the analysis of demand and supply side in EC1A1 to analyse general equilibrium, market failures and the role of government intervention:

• The Market System as a General Equilibrium – Efficiency anddistribution.

• Living Interdependently – Public goods and externalities; private action and the role of government.

• Behavioural Economics – Markets with behavioural biases; the role of government.

• Political Economy – Effectiveness of government; preference aggregation; constraints on the power of the state.

• Asymmetric Information – Contracts and markets with moral hazard and adverse selection.

• Innovation – product and process innovation; the role of government in supporting innovation.

The course prepares students for third year optional courses.

20 hours of lectures and 10 hours of classes in the MT. 20