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E8112: Topics in Mathematical Economics: Logistical Information

This document provides logistical information and an overview for the course E8112: Topics in Mathematical Economics. The course will be held on Tuesdays and Thursdays from 11:15 am to 12:30 pm in Spring 2010. It will use duality as a framework to cover applications of game theory, contract theory, and mechanism design. Students will complete two problem sets and a take-home final exam, with grades based on homework and exam performance. Readings will include academic articles and lecture notes. Tentative topics include linear programming, correlated equilibrium, mechanism design, contract theory, and robust mechanisms.

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NIlesh Bhagat
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33 views5 pages

E8112: Topics in Mathematical Economics: Logistical Information

This document provides logistical information and an overview for the course E8112: Topics in Mathematical Economics. The course will be held on Tuesdays and Thursdays from 11:15 am to 12:30 pm in Spring 2010. It will use duality as a framework to cover applications of game theory, contract theory, and mechanism design. Students will complete two problem sets and a take-home final exam, with grades based on homework and exam performance. Readings will include academic articles and lecture notes. Tentative topics include linear programming, correlated equilibrium, mechanism design, contract theory, and robust mechanisms.

Uploaded by

NIlesh Bhagat
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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E8112: Topics in Mathematical Economics

Logistical Information
Classes: Tues. and Thurs., 11:15 am. 12:30 pm., Spring 2010 (1st half), 4-168.
Instructor: David Rahman ([email protected], econ.umn.edu/dmr).
Office hours: Wednesday, 1:00 2:30 pm. or by appointment, 4-147 Hanson Hall.
Prerequisites: First-year graduate economics, basic real analysis.

Course Description
The purpose of this course is to provide students with tools and topics that will help
them find ideas for their dissertations at the frontier of research in economic theory.
As regards tools, this course will use duality as a methodological thread to connect the
material presented. As for topics, the course will begin with well-known applications
of duality in game theory, followed by increasingly recent work in contract theory and
mechanism design, to end with open questions.

Assessment
Final exam: Take-home distributed on the last day of class.
Homework: Two problem sets distributed in class on weeks 3 and 5.
Grading: A students overall grade will be a weighted average of homework and final.

Reading
The course will rely mainly on articles and lecture notes for its content. The following
textbooks are recommended reading.
Gale, D., The Theory of Linear Economic Models, University of Chicago Press, 1960.
Myerson, R., Game Theory: Analysis of Conflict, Harvard University Press, 1991.
Rockafellar, R. T., Convex Analysis, Princeton University Press, 1970.
Topkis, D., Supermodularity and Complementarity, Princeton University Press, 1998.
Vohra, R. V., Advanced Mathematical Economics, Routledge, 2005.
The following textbooks are tangentially related and may be useful in the future.
Korte, B., and J. Vygen, Combinatorial Optimization, Springer, 2000.
Murota, K., Discrete Convex Analysis, SIAM, 2003.
1

Tentative Outline
Below is an outline of the course content with articles assigned for reading.
1. Linear Programming. The Theorem of the Alternative, weak and strong
duality, the Minimax Theorem for two-person zero-sum games.
Read : Vohra (2005, Charpter 4); Rockafellar (1970, 5, 16 and 24).
2. Correlated Equilibrium. Definition, examples, a revelation principle, proof
of existence.
Read : Aumann (1974, 1987); Myerson (1997); Hart and Schmeidler (1989).
Supplement: Nau and McCardle (1990); Nau et al. (2003); Hart (2005).
3. Mechanism Design I. Rochets Theorem, surplus-extracting mechanisms.
Dominant-strategy versus Bayesian incentives.
Read : Rochet (1987); Cremer and McLean (1988); dAspremont et al.
(2004); Neeman (2004).
Supplement: Cremer and McLean (1985); Heifetz and Neeman (2006);
Kosenok and Severinov (2008).
4. Contract Theory I. Literature review, basic problems, budget balance, nearlyefficient partnerships.
Read : Alchian and Demsetz (1972); Holmstrom (1982); Legros and Matthews
(1993).
Supplement: Legros and Matsushima (1991); Strausz (1997).
5. Contract Theory II. Detection and enforcement, attribution, exact versus
virtual enforcement.
Read : Rahman (2008); Rahman and Obara (2010).
Supplement: dAspremont and Gerard-Varet (1998).
6. Mechanism Design II. Standard one-dimensional problems.
Read : Mirrlees (1971); Myerson (1981).
Supplement: Mirrlees (1999).

7. Mechanism Design III. VCG mechanisms, Roberts Theorem, Revenue Equivalence.


Read : Mas-Colell et al. (1995, Chapter 23); Lavi et al. (2007); Heydenreich
et al. (2009).
8. Mechanism Design IV. Robust mechanisms, monotonicity, efficiency.
Read : Bergemann and Morris (2005); Bikhchandani et al. (2006); Monderer (2007); Jehiel and Moldovanu (2001); Jehiel et al. (2006, 2007).

References
Alchian, A. and H. Demsetz (1972): Production, Information Costs, and Economic Organization, American Economic Review, 62, 777795.
Aumann, R. (1974): Subjectivity and Correlation in Randomized Strategies,
Journal of Mathematical Economics, 1, 6796.
(1987): Correlated Equilibrium as an Expression of Bayesian Rationality,
Econometrica, 55, 118.
Bergemann, D. and S. Morris (2005): Robust Mechanism Design, Econometrica, 73.
Bikhchandani, S., S. Chatterji, A. Sen, R. Lavi, A. Mualem, and
N. Nisan (2006): Weak Monotonicity Characterizes Deterministic DominantStrategy Implementation, Econometrica, 74, 11091132.
Cremer, J. and R. McLean (1985): Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist when Demands are Interdependent, Econometrica, 53, 345361.
(1988): Full Extraction of the Surplus in Bayesian and Dominant Strategy
Auctions, Econometrica, 56, 12471257.
rard-Varet (2004): Balanced
dAspremont, C., J. Cremer, and L.-A. Ge
Bayesian Mechanisms, Journal of Economic Theory, 115, 385396.
rard-Varet (1998): Linear Inequality Methods
dAspremont, C. and L.-A. Ge
to Enforce Partnerships under Uncertainty: An Overview, Games and Economic
Behavior, 25, 311336.
3

Hart, S. (2005): Adaptive Heuristics, Econometrica, 73, 14011430.


Hart, S. and D. Schmeidler (1989): Existence of Correlated Equilibria, Mathematics of Operations Research, 14, 1825.
Heifetz, A. and Z. Neeman (2006): On the Generic (Im)Possibility of Full
Surplus Extraction in Mechanism Design, Econometrica, 74, 213233.
ller, M. Uetz, and R. Vohra (2009): CharacteriHeydenreich, B., R. Mu
zation of Revenue Equivalence, Econometrica, 77, 307316.
m, B. (1982): Moral Hazard in Teams, Bell Journal of Economics, 13,
Holmstro
324340.
Jehiel, P. and B. Moldovanu (2001): Efficient Design with Interdependent
Valuations, Econometrica, 69, 12371259.
Jehiel, P., M. M. ter Vehn, and B. Moldovanu (2007): Ex Post Implementation and Preference Aggregation via Potentials, Economic Theory, 37, 469490.
Jehiel, P., M. M. ter Vehn, B. Moldovanu, and W. R. Zame (2006): The
Limits of Ex Post Implementation, Econometrica, 74, 585610.
Kosenok, G. and S. Severinov (2008): Individually Rational, Balanced-Budget
Bayesian Mechanisms and the Allocation of Surplus, Journal of Economic Theory,
140, 126261.
Lavi, R., A. Mualem, and N. Nisan (2007): Two Simplified Proofs of Roberts
Theorem, Mimeo.
Legros, P. and H. Matsushima (1991): Efficiency in Partnerships, Journal of
Economic Theory, 55, 296322.
Legros, P. and S. Matthews (1993): Efficient and Nearly Efficient Partnerships, Review of Economic Studies, 60, 599611.
Mas-Colell, A., M. D. Whinston, and J. R. Green (1995): Microeconomic
Theory, Oxford University Press.
Mirrlees, J. A. (1971): An Exploration in the Theory of Optimum Income Taxation, Review of Economic Studies, 38, 175208.
(1999): The Theory of Moral Hazard and Unobservable Behavior: Part I,
Review of Economic Studies, 66, 321.
4

Monderer, D. (2007): Monotonicity and Implementability, Mimeo.


Myerson, R. (1981): Optimal Auction Design, Mathematics of Operations Research, 6, 5873.
(1997): Dual Reduction and Elementary Games, Games and Economic
Behavior, 21, 183202.
Nau, R. F., S. Gomez-Canovas, and P. Hansen (2003): On the Geometry of
Nash Equilibria and Correlated Equilibria, International Journal of Game Theory,
32, 443453.
Nau, R. F. and K. F. McCardle (1990): Coherent Behavior in Noncooperative
Games, Journal of Economic Theory, 50, 424444.
Neeman, Z. (2004): The Relevance of Private Information in Mechanism Design,
Journal of Economic Theory, 117, 5577.
Rahman, D. (2008): But Who Will Monitor the Monitor? Mimeo.
Rahman, D. and I. Obara (2010): Mediated Partnerships, Econometrica, to
appear.
Rochet, J. C. (1987): A Necessary and Sufficient Condition for Rationalizability
in a Quasi-Linear Context, Journal of Mathematical Economics, 16, 191200.
Rockafellar, R. T. (1970): Convex Analysis, Princeton, New Jersey: Princeton
University Press.
Strausz, R. (1997): Delegation of Monitoring in a Principal-Agent Relationship,
Review of Economic Studies, 64, 337357.
Vohra, R. V. (2005): Advanced Mathematical Economics, Routledge.

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