Uncertainty and Information (ECON 0706/3215)

The economics of uncertainty and information has permeated virtually every field in economics. In this course, we develop the basic tools that are used in the study of behavior under uncertainty, and introduce some standard models of incomplete and asymmetric information. This course may be regarded as an advanced course in microeconomic theory. Students must have completed the intermediate level Microeconomic Theory course as a prerequisite.

Fluency in elementary optimization techniques and probability modeling is important for doing well in this course. Though I will try to reduce the level of formalism, a clear understanding of the economics of uncertainty and information requires the use of mathematics. Students should be prepared to work extensively with models.

Since the School also offers a course on Games and Decisions, I will select materials that are usually not covered in standard game theory courses. (For similar reasons, issues related to asset pricing and other finance applications will be relegated to other courses offered by the School.) When game theoretic reasoning is involved, it will be introduced at a non-technical level. Students do not have to possess prior knowledge of game theory before taking this course.

To the extent that we have a textbook for this course, it is Bernard Salanie's The Economics of Contracts, 2d. ed. Those who wish to explore more topics and find alternative presentations of some models may also read Wolfstetter, Topics in Microeconomics. Economic and Financial Decisions under Risk, by Eeckhoudt, Collier and Schelsinger, is a useful resource particularly for the beginning one-third of this course. In addition, articles in the reading list are an integral part of this course. Your coursework assessments will depend on:

My office is at KKL-1014. Office hours are 4:00-6:00 pm on Fridays, or by appointment. I can also be reached by e-mail at wsuen@econ.hku.hk.

I have set up a discussion forum in Moodle. Students are encouraged to ask and answer questions and to discuss topics related to this course in the forum. Involvement in the activities of this forum will count as part of class participation.

Some of the course materials are available in our course web site at http://www.sef.hku.hk/~wsuen/teaching/uncertainty. Fragments of the lecture notes will be prepared and posted on our site, though I will not put the complete set on-line. A more long-winded version of the course syllabus is also available in this site. Browse our course news every once in a while for the latest ground-breaking news that may affect the rest of your life.

January 11, 2017