Econ 204B  Advanced Microeconomics II // Prof. Dan Friedman
Announcements
Solutions to the final exam are now posted...
Advanced Microeconomic Theory II, the second quarter of the Ph.D. microeconomics sequence, covers the fundamentals of information and decision theory, game theory and imperfect competition. There will be biweekly problem sets, an inclass midterm and an inclass final.
Students should own (or have regular access to) the principal text, Microeconomic Theory by MasColell, Whinston and Green (Oxford, 1995, ISBN=0195073401, denoted MWG below). They also should have at least occasional access to two secondary texts: The Analytics of Uncertainty and Information, by Hirshleifer and Riley (Cambridge University Press, 1992, denoted HR below) for information and decision theory, and Strategy: An Introduction to Game Theory, Second Edition by J. Watson (WW Norton, 2008, ISBN13=9780393929348 denoted W08 below) for game theory. It will be useful on occasion to consult the alternative texts: A Course in Microeconomic Theory by David M. Kreps (Princeton University Press, 1990) and Microeconomic Analysis, 3rd Edition, by Hal R. Varian (Norton, 1992). All these books will be on reserve in the Science Library.
Lecture notes and supplemental readings will be posted below. Each student is expected to help prepare the answer key to one problem set, which then will also be posted below.
The class meets Tu Th 8:00 – 9:35am in 169 JBE.
Section meets Wed 3:30  4:30pm in 499 Engineering 2.
Office hours are W 1:303:30pm in 417 Engineering 2, and by appointment.
Due Dates Final exam remotely administered 8am Thurs Nov 19.
DRC accommodations. UC Santa Cruz is committed to creating an academic environment that supports its diverse student body. If you are a student with a disability who requires accommodations to achieve equal access in this course, please submit your Accommodation Authorization Letter from the Disability Resource Center (DRC) to me privately during my office hours or by appointment, preferably within the first two weeks of the quarter.
Readings // // ch01 // Ch07EvGs // mtpp // ps3 // duffy+feltovich // krepsGs // akps4 // akps1 // RCs // ak4FinPPs // sosd // Ch03 // ch10 // All // ch08 // ch02 // mtAK20 // ppFin20 // akFinal // ff97 // ps2AK // PS4 // mtppAK // 10Treas // MTcs20 // ch 12 // ps2 // ch05 // syl20 // ps1 // Notes06 // FO12 // bss // akps3a // RevPrin // neExist // Ch04 // Final // Ch09 //

Answer key for Final Exam // Posted on March 21, 2020
Many thanks to Weinan! Dan's comments are added using sticky notes.
  download

Final Exam // Posted on March 21, 2020
The final exam offered 9am  noon, Thursday March 19.
  download

answer key for final practice problems // Posted on March 18, 2020
Handwritten solutions to practice problems.
  download

Answer Key for PS 4 // Posted on March 14, 2020
Thanks to Roberto, Pedro and Thinkling!
  download

Notes: chapter 12 // Posted on March 9, 2020
Notes on Principal/Agent problem and related matters.
  download

practice problems for final exam // Posted on March 9, 2020
Try the problems on the first 2 pages with a time limit of 3 hrs. Then try the other two problems, and improve your answers to the previous problems. Solutions to be posted March 17.
  download

Notes #10 // Posted on March 3, 2020
Lecture notes on adverse selection, updated (thanks to Vivian!).
  download

Notes #11 // Posted on March 3, 2020
Notes on signalling and screening models.
  download

Answer Key PS 3 // Posted on Feb. 29, 2020
Answer key to PS 3. Thanks to Mariana, Ian and Hamid!
  download

Notes on imperfect competition, slightly updated // Posted on Feb. 24, 2020
Ch 09 of notes, for lectures Feb 25  27.
  download

Problem Set 4 // Posted on Feb. 24, 2020
This problem set is much longer than the previous one, so an early start will be helpful. The due date is corrected to March 10. Don't forget to give credit to classmates (or other resources) for help.
  download

Notes on cooperative game theory // Posted on Feb. 18, 2020
Chapter 8 of the notes file...not recently checked..
  download

evGames application to international trade // Posted on Feb. 17, 2020
This paper by Dan F and KC Fung was one of the first substantive economic applications of Evolutionary Game Theory. Not required reading, but skimming it may give you some ideas.
  download

Evolutionary Games Notes // Posted on Feb. 17, 2020
Updated notes for Dan's 2/18/20 lecture on Evolutionary Games. An erroneous bullet point from the previous version is dropped, and the conjectured error on 2x2 classifications seems not to exist.
  download

Midterm 2020 answer key // Posted on Feb. 16, 2020
Thanks to Weinan, Aiden and Rolly!
  download

Problem Set #3 // Posted on Feb. 13, 2020
Due in class Tuesday Feb 25. Due to the short turnaround, this PS is shorter than PS #4 will be.
  download

Notes intstallment #6 // Posted on Feb. 13, 2020
Notes on repeated games
  download

answer key for MT practice problems // Posted on Feb. 9, 2020
answer key of MT practice problems (actual MT exam from 2017). It seems that the payoffs assumed in the answer key for problem 4b are not quite those given in the problem; apologies for that.
  download

Official Cheat sheet // Posted on Feb. 8, 2020
Thanks to Thinkling!
  download

Answer Key PS2 // Posted on Feb. 7, 2020
Thanks to Bhavyaa, Ken, and Qianping!
  download

Thinkling thoughts on SOSD // Posted on Feb. 5, 2020
Thinkling wrote up some nice points about representing means geometrically on a cdf diagram (as an area) and the implications for less conventional examples of second degree stochastic dominance.
  download

MT practice problems // Posted on Feb. 4, 2020
Practice under timed conditions solving these actual problems from a previous year's midterm exam. Solutions will be posted Sunday Feb 9.
  download

Notes Ch 05 // Posted on Feb. 2, 2020
DF + MMcG notes on solving EFGs.
  download

Ten Treasures plus ten empirical NE counterexamples // Posted on Jan. 30, 2020
This article (later published in the AER) by Holt and Goeree gives examples where NE does a good job of predicting actual behavior, and other examples where it does not. Warning: some of the examples are carefully selected to make QRE look good.
  download

Answer Key to PS 1 // Posted on Jan. 28, 2020
Thanks to Gagandeep, Vivian and Thinkling! Corrections now included.
  download

Proof that Nash Equilibrium exists in finite NFGs. // Posted on Jan. 27, 2020
Streamlined, selfcontained proof by Adam Brandenberger. Note that it works for many sorts of games that are not finite. Here is a challenge: find a game that has no NE even in mixed strategies. Easier: what can we say about the payoff function of such a game?
  download

Notes #4 // Posted on Jan. 27, 2020
Notes on Nash equilibrium and related solution concepts for Normal Form Games, updated (thanks to Hamid!).
  download

Kreps' Games // Posted on Jan. 23, 2020
Examples and counterexamples from Kreps.
  download

Problem Set #2 // Posted on Jan. 21, 2020
Due in class February 4
  download

Notes #3 // Posted on Jan. 21, 2020
Chapter 3 of Notes for this chapter, by DF and MMcG.
  download

Bayes spreadsheet // Posted on Jan. 14, 2020
An excel template for doing repetitive Bayesian calculations.
  download

Notes #2 // Posted on Jan. 14, 2020
Notes on Bayesian decision theory
  download

Notes #1. Risky Choice // Posted on Jan. 8, 2020
The current version corrects dozens of notational glitches and typos. Please let Dan know if you see any more that he missed (bonus points can be earned that way!).
  download

Problem Set #1 // Posted on Jan. 2, 2020
First problem set, due in class Tues Jan 21. Warning: some of these problems are challenging, so you are advised to try them right after relevant lectures.
  download

syllabus // Posted on Jan. 2, 2020
The updated course syllabus.
  download

duffy and feltovich paper on correlated equilibrium // Posted on Feb. 16, 2014
introduction may be worth a look...
  download

Continuous Dilemma paper // Posted on Feb. 11, 2014
Students interested in repeated game theory and applications may find the introduction and concluding discussion of this paper worth reading. The math appendix is not for everyone, but does touch on epsilon equilibria and begins to formalize some new intuition.
The paper won the Exeter Prize for the best paper published anywhere in 2012 on decision theory, behavioral or experimental economics.
  download