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BAEcon Economics and Finance / Course details

Year of entry: 2021

Course unit details:
Business Economics II

Unit code ECON30821
Credit rating 20
Unit level Level 3
Teaching period(s) Semester 1
Offered by Economics
Available as a free choice unit? Yes

Overview

Aims

The course will provide students with the economic tools required to study the role of information and market design. The course will discuss how markets design works distinguishing between those that involve price settings and those that operate instead without prices. In the discussion a big role will be played by information asymmetries and how institutions can mitigate the consequences they can produce.

The primary goal of the course is to show how simple economic tools can be used to shed light on policy maker decisions – a valuable skill for careers in both the public and private sectors, and in research. We discuss applications of market design problem to kidney exchange, school choice, tax policy and competition.

Intended Learning Outcomes

At the end of this course, students should be able to demonstrate their understanding of (i) the role of information and what type of inefficiencies (and the lack of) can generate; (ii)market design in environments that operates both with and without money.

 

Pre/co-requisites

Unit title Unit code Requirement type Description
ECON20342 Pre-Requisite Compulsory
ECON20352 Pre-Requisite Compulsory
Managerial Economics I ECON20001 Co-Requisite Compulsory
Introductory Mathematics ECON10061 Pre-Requisite Compulsory
Adv Maths - BAEcon & BSc Econ ECON10071 Pre-Requisite Compulsory
ECON10001 Pre-Requisite Compulsory
(ECON20342 or ECON20352 or ECON20000) AND (ECON10061 or ECON10001 orECON10071)

(ECON20342 or ECON20352 or ECON20000) AND (ECON10061 or ECON10001 or ECON10071)

Aims

The course will provide students with the economic tools required to study the role of information and market design. The course will discuss how markets design works distinguishing between those that involve price settings and those that operate instead without prices. In the discussion a big role will be played by information asymmetries and how institutions can mitigate the consequences they can produce.

The primary goal of the course is to show how simple economic tools can be used to shed light on policy maker decisions – a valuable skill for careers in both the public and private sectors, and in research. We discuss applications of market design problem to kidney exchange, school choice, tax policy and competition.

 

Learning outcomes

At the end of this course, students should be able to demonstrate their understanding of (i) the role of information and what type of inefficiencies (and the lack of) can generate; (ii)market design in environments that operates both with and without money.

 

Syllabus

Topic 1. Market Design (AN)

Market design seeks to translate economic theory and analysis into practical solutions to real-world problems.  We focus on the rules’ design for the efficient and fair allocation of items without using prices; in particular, we discuss school choice problems, studying different mechanisms to assign students to schools or universities, and clearinghouses for kidney exchange, looking at ways to increase the number of kidney transplants for patients with end stage renal disease.

Lecture 1: One-sided matching: basic theory

Lecture 2:  Application: Kidney exchange 

Lecture 3:  School choice: basic theory and recent developments

Topic 2. Consumer level data, pricing and targeting (CR)

This topic considers information in the shape of consumer level data as the input for targeted offers and price discrimination. First, we dig into the economic effects of firms having access to consumer level data. Second, we analyse how data brokers obtain and share data, and sell them to firms. Third, we ask whether privacy is also a competition issue.

Lecture 1: The Economics of Data

Lecture 2: Consumer level data and market competition

Lecture 3: Data based business models, platforms and welfare

 

Topic 3. Information (AI)

This topic looks at problems which arise from asymmetric information both in the form of moral hazard and adverse selection. First, situations where a firm is a better-informed party respect to consumers (such as the market for “lemons”). Then we will discuss in detail asymmetries in information in the credit market and the relative empirical findings.

Lecture 1: Asymmetries in Information for Consumers: the Market for Lemons

Lecture 2: Asymmetries in Information in the Credit Markets 1

Lecture 3: Asymmetries in Information in the Credit Markets 2

Topic 4. Taxation (MW)

This topic considers the effects of taxation on decision-making by the firm. We focus on partial equilibrium effects; i.e. it is assumed that the prices paid by the firm are unaffected by the imposition of the tax. The main part of the topic concentrates on corporate profit tax, examining the links between investment and the cost of capital. The topic also discusses strategies used by firms to evade taxes such as profit shifting.

Lecture 1: Taxes and the firm

Lecture 2: Taxation and investment

Lecture 3: Tax incidence

Teaching and learning methods

Lectures and exercise classes.

Employability skills

Analytical skills
Synthesis and analysis of data and information.
Problem solving
Problem solving, Problem posing
Research
Planning, conducting and reporting on research
Other
Practical skills: Using library, electronic and online resources; Using reporting skills Transferable skills: Information Retrieval, Numeracy, Literacy, Computer Literacy, Time Management, Applying Subject Knowledge, Improving own Learning Other attributes: Listening; Stress Tolerance, Self-confidence, Independence, Self-management, Adaptability, Self-awareness

Assessment methods

40% Group Presentation

60% Exam

 

Feedback methods

  • Formative Assessment (assessment that does not contribute to your grade) and other feedback opportunities

    • Mock Exam

    Students can also receive further feedback from tutorials, office hours, revision sessions, discussion boards etc.

Recommended reading

Topic 1

Alvin E Roth,. "What have we learned from market design?" Hahn Lecture, Economic Journal, 118 (March), 2008, 285–310.

Alvin E. Roth and Marilda Sotomayor (1990) Two-Sided Matching: A Study in Game-Theoretic Modeling and Analysis, Econometric Society Monograph Series, Cambridge University Press. (Chapters 1,2,4,5)

Alvin E Roth, Tayfun Sönmez and M. Utku Ünver. 2004. "Kidney Exchange." Quarterly Journal of Economics, 119(2), 457-88.

Atila Abdulkadiroglu 2011 “School Choice” in Handbook of Market Design, edited by Zvika

Neeman, Muriel Niederle, Alvin E. Roth and Nir Vulkan.

Tayfun Sonmez and M. Utku Unver (2011) Matching, Allocation, and Exchange of Discrete

Resources, J. Benhabib, A. Bisin, and M. Jackson (eds.), Handbook of Social Economics, Vol. 1A. The Netherlands: North-Holland, 781-852 (a copy of the working paper version is available on Utku’s web-site: www2.bc.edu/ unver

 

Topic 2

Acquisti, A., Taylor, C. and Wagman, L., 2016. The economics of privacy. Journal of Economic Literature54(2), pp.442-92.

Belleflamme, P. and Peitz, M., 2015. Industrial organization: markets and strategies. Cambridge University Press. Part IV: Pricing strategies and market segmentation.

Belleflamme, P. and Vergote, W., 2018. The intricate tale of demand and supply of personal data. Concurrences2018.

Bergemann, D. and Bonatti, A., 2019. Markets for information: An introduction. Annual Review of Economics11, pp.85-107.

De Corniere, A. and Taylor, G., 2020. Data and Competition: a General Framework with Applications to Mergers, Market Structure, and Privacy Policy.

Montes R, Sand-Zantman W, Valletti T., 2019. The value of personal information in online markets with endogenous privacy. Management Science. 65(3):1342-62.

Topic 3

J.J. Laffont and D. Martimort “The Theory of Incentives: the Principal-Agent Model”, Princeton University Press, 2002.

Topic 4

Salanié, B, 2011. The economics of taxation. MIT Press, ISBN: 9780262016346.

Further readings will be indicated on the module Blackboard website.

 

Study hours

Independent study hours
Independent study 0

Teaching staff

Staff member Role
Alessia Isopi Unit coordinator
Antonio Nicolo Unit coordinator

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