TOPICS IN MICROECONOMICS - 2020/1
Module code: ECO3038
This module looks at developments in microeconomic theory in relation to the role of information in the economy. It studies models of the basic issues contract theory and asymmetric information (moral hazard and adverse selection) and extends these to dynamic versions of these modules. The module considers some of the applications of these models (e.g. insurance, labour market contracts). Presentation of the material involves mathematical tools that have been taught in FHEQ Levels 4 and 5 (algebra, calculus, constrained and unconstrained optimisation) and econometrics taught in FHEQ Level 5.
NURMIKKO-METSOLA Sanna (Economics)
Number of Credits: 15
ECTS Credits: 7.5
Framework: FHEQ Level 6
JACs code: L120
Module cap (Maximum number of students): N/A
Prerequisites / Co-requisites
Economics and Mathematics students: ECO2051 (Intermediate Microeconomics 2) is a pre-requisite for this module
Indicative content includes:
- Baseline principal-agent model
- Moral hazard models
- Adverse selection models
- Risk aversion
- Applications: investment finance and insurance markets; estimating the welfare loss from adverse selection
|Assessment type||Unit of assessment||Weighting|
|School-timetabled exam/test||30 MINUTES CLASS TEST IN WEEK 5 - MULTIPLE CHOICE TEST||10|
|School-timetabled exam/test||1 HOUR CLASS TEST IN WEEK 11 - SHORT ANSWER TEST||20|
|Examination||2 HOUR EXAMINATION||70|
The assessment strategy is designed to provide students with the opportunity to demonstrate
Understanding of developments in the economics of asymmetric information. Students who complete the module successfully will have demonstrated an ability to answer analytical questions on economic problems involving incomplete information, using a mixture of maths, diagrams and written and verbal reasoning. They will have had the opportunity to demonstrate an understanding of all the topics in the module.
Thus, the summative assessment for this module consists of:
- Two class tests and a final exam.
- Test 1 consists of 10 multiple choice questions (held in week 5, covering material taught in Weeks 1-4, 30 mins). Test 2 will involve answering three short questions (held in Week 11, covering material taught in Weeks 5-9, 60 mins). Class tests are worth 30% combined.
- A two-hour long final exam (70%). This will consist of two sections. Section A will ask students to answer three short questions. Section B will ask students to answer one long question.
Formative assessment and feedback
Students receive verbal feedback on questions asked during lectures and five question sheets (with solutions) are distributed during the module. After each class test, written feedback is provided, consisting of a complete set of answers; questions that caused particular problems are covered in class. Office hours provide further opportunities for individual feedback.
- demonstrate how standard economic models and results are altered by the introduction of asymmetric information
- help students to appreciate how many real-world phenomena can be rationalised with the aid of asymmetric information models
- demonstrate the difficulty and value of empirical research that aims to test asymmetric information contract models
- provide students with tools that help them to evaluate standard economic models
|001||Set out and explain the basics of the principal-agent problems||KC|
|002||Apply these ‘basics' to moral hazard, adverse selection settings||KC|
|003||Explain how various real world outcomes (such as insurance deductibles, warranties and performance pay) can be rationalised in a principal-agent setting||KC|
|004||Examine some implications of and testing for asymmetric information||KC|
C - Cognitive/analytical
K - Subject knowledge
T - Transferable skills
P - Professional/Practical skills
Overall student workload
Independent Study Hours: 123
Lecture Hours: 22
Tutorial Hours: 5
Methods of Teaching / Learning
The learning and teaching strategy is designed to:
- enhance skills in economic thinking and written and verbal presentation
- appreciate the complexities of choice under uncertainty and asymmetric information, weighing theory and practice
The learning and teaching methods include:
- 2 hour lectures x 11 weeks
- 1 hour tutorials for further discussion and exercise solving x 5 weeks
Indicated Lecture Hours (which may also include seminars, tutorials, workshops and other contact time) are approximate and may include in-class tests where one or more of these are an assessment on the module. In-class tests are scheduled/organised separately to taught content and will be published on to student personal timetables, where they apply to taken modules, as soon as they are finalised by central administration. This will usually be after the initial publication of the teaching timetable for the relevant semester.
Please note that the information detailed within this record is accurate at the time of publishing and may be subject to change. This record contains information for the most up to date version of the programme / module for the 2020/1 academic year.