1. Semester: II
2. Number of Credits: 4

This is a one-semester course taught over 48 one-hour sessions. The course is divided into four modules of 12 sessions each. The method of instruction will be exclusively lectures.  The objective is to introduce students to advanced themes in modern microeconomics. Several of the assumptions made in Microeconomics 1 will be relaxed. These include a) allowing for strategic interaction, (module 1) b) allowing for asymmetric, incomplete and imperfect information, (module 2) c) relaxing the assumption of the competitive economy (module 3) d) allowing for bounded rationality, transactions costs , imperfectly specified property rights (module 4).

Module 1: Strategic Behaviour
Specification of a game, normal form and extensive form games, information sets, solution concepts including Nash equilibria, subgame perfection and other refinements, repeated games, elements of cooperative game theory and bargaining games

Module 2: Asymmetric Information
Moral Hazard and Adverse Selection, signaling and screening, principal- agent models, optimal contracts, bargaining and auctions.

Module 3: Industrial Organisation and Market Structures
Cournot, Bertrand and Stackelberg models (one-shot as well as repeated), Dixit-Stiglitz model,   monopoly and deadweight loss, first, second and third degree price discrimination,  public utility pricing, games of entry deterrence, credit and the age of the firm: The Diamond model, regulation of competition.

Module 4: The Microeconomics of Institutions
Neoclassical and non neoclassical approaches, contestable markets, Transactions costs, bounded rationality, asset specificity, institutions as minimisers of transactions costs, new approaches to modeling the firm, property rights,  power, gender, law and economics.

Special Note
Modules  2 and 3 can be done from a game theory perspective,  in which case, 1,2 and 3 form a continuum. On the other hand, it is possible to do module 2 separately, borrowing from game theory, but mainly using a constrained optimisation and reaction curves framework. Module 3 uses Game Theory from module 1 and Information from module 2, with the exception of the material dealing with monopoly, where there is no strategic interaction. However, second degree price discrimination can still be dealt with as a revelation mechanism. By power in module 4 is meant a specific constellation of property rights. “Gender” here does not denote a biological category, but a situation where the standard assumption of equally empowered, rational atomistic individuals taking  decisions might be inappropriate from an analytical point of view. Property rights and transactions costs become crucial here. Given the existence of transactions costs, it is still possible (as in the microeconomics of slavery) to think of “contracts” between agents, but these contracts will no longer have the optimal properties that contracts in a general equilibrium economy will have. Module 4 should be taught/learnt through case studies.

1.	Samuel Bowles, 2004,  Microeconomics: Behavior, Institutions and Evolution, Princeton: Princeton
	University Press
2.	Thráinn Eggertsson, 1990, Economics of Institutions, Cambridge: Cambridge University Press
3.	Eric Rasmusen, 2007, Games and Information, Oxford: Blackwell Publishing
4.	Jean Tirole, 1988, The Theory of Industrial Organisation, Massachusetts: The MIT Press

1.	Alston, L.J., Eggertsson, T., North, D., 1996, Empirical Studies in the Economics of Institutions,
	Cambridge: Cambridge University Press
2.	Herbert Gintis, 2000, Game Theory Evolving, Princeton: Princeton University Press