The Economics of Uncertainty and Asymmetric Information
7.5 credits cr.
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This course introduces the economic theory of uncertainty and asymmetric information. It discusses how incentives and optimal choices are affected by uncertainty, and the implications for the design of contracts.
The focus is on various types of informational asymmetries and measures that can be undertaken to deal with these. Topics covered are the principal agent theory, moral hazard, adverse selection, signaling, screening and strategic interaction under uncertainty. Some of the practical applications examined are the analysis of measures to reduce exposure to risk, the supply and demand for insurance, the optimal risk distribution, market equilibrium under uncertainty and contract design.
This is a 7.5 credit course. One week of full-time studies equals 1.5 credits.
The language of instruction is English.
Course material will be available through the learning platform Athena during the course.
Instruction is given in the form of lectures and prepared calculation exercises.
The course is examined on the basis of written examinations.
Examiner and Course director: Lars Vahtrik
ScheduleThe schedule will be available no later than one month before the start of the course. We do not recommend print-outs as changes can occur. At the start of the course, your department will advise where you can find your schedule during the course.
Note that the course literature can be changed up to two months before the start of the course.
Laffont, J.-J., and D. Martimort, The Theory of Incentives. The Principal-Agent Model, latest edition.
Meet our teachers
”You learn to think like an Economist”
Anna Seim is a researcher and teacher at the Department of Economics. She thinks that studying economics provides a general education that is useful in many different contexts.
What is Economics?
– Economics is about understanding the economy of society at large and concepts such as unemployment, inflation, growth but also why firms and households act the way they do and how they respond to economic policy.
– The economy is a very complex system, and to understand it economists use simplified mathematical and statistical models and focus on what we believe is key to a certain question. Economics is therefore often perceived as technical, and it is to some extent, at least when you study at higher levels, but the use of models is also what enables us to address certain questions in a scientific way, instead of just guessing.
Why study Economics at Stockholm University?
– You learn to think like an Economist and obtain a general education in economics that is useful regardless of your future plans.
– I would say that the physical proximity to the Swedish central bank and other government agencies is unique to Stockholm and enables us to regularly organise guest lectures by, say, deputy governors of the Riksbank and former minsters of finance. We are also a highly international department and the opportunity to participate in visitors’ programmes, both as students and as researchers, implies that we are all part of a vivid and inspiring environment.
What type of job do students of economics typically obtain?
– Many of our former students start working at, for instance, government agencies, ministries, the Central bank and the Competition Authority while others become employed in the private sector and start working at firms, banks or other financial institutions. There is a wide range of professions that you can pursue after studying economics.
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