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The Economics of Uncertainty and Asymmetric Information

  • 7.5 credits

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.

  • Course structure

    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.

    Teaching format

    Instruction is given in the form of lectures and prepared calculation exercises.

    Assessment

    The course is examined on the basis of written examinations.

    Examiner

    Autumn 2020:

    Lars Vahtrik

    Course director

    Autumn 2020:

    Mathias Herzing

  • Schedule

    This is a preliminary schedule and is subject to continuous change. For this reason, we do not recommend print-outs. At the start of the course, your institution will advise where you can find your schedule during the course.

    Schedule EC2110 Autumn 2020 

  • Course literature

    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.


    Articles. 

  • More information

    Our recommendation is that you alternate semesters in economics with semesters in other main areas. That way, you will already know if you are eligible when you are applying.


    We recommend the following course of study:


    First semester of economics:
    Economics I, 30 credits


    Second semester of economics:
    Intermediate Microeconomics, 7.5 credits
    Intermediate Macroeconomics, 7.5 credits
    Empirical Methods in Economics I, 1 7.5 credits
    One optional course in economics, 7.5 credits


    Third semester of economics:
    Bachelor's Thesis in Economics, 15 credits 
    Two optional course in economics, 7.5 credits each 


    Always check the prerequisites for the courses you wish to study and plan ahead.

  • Meet us

    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.

    Anna Seim at Frescati. Photo: Tanja Appelberg

    Anna Seim is a researcher and teacher at the Department of Economics

     

    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. 

  • Contact