Ateneo - UPO

The module of Information Economics aims at presenting, first, basic microeconomics tools for the analysis of financial markets when markets are complete vs incomplete and without vs with uncertainty and/or asymmetric information. Second, to present a variety of microeconomic models that explains the role of capital and financial markets in the economic system. The main topics cover areas related to the analysis of financial markets and credit markets, for example to explain the role of financial intermediation. Math and statistical tools useful for the analysis are introduced whenever needed.

Textbooks
Basic/intermediate level
- Frank, H. “Microeconomics and Behaviour”, McGraw-Hill Higher Education, 2021 (FR).
- Varian, H. R. “Intermediate Microeconomics: A Modern Approach”, Norton, 9th ed. (but any edition works) (V1)
More advanced level
- Kreps, D. M. “A Course in Microeconomics Theory”, Princeton Univ. Press, 1990 (K).
- Varian, H. R. “Microeconomic Analysis”, Norton, 1992 (V2).

Articles
- Diamond, D. W. (1984) “Financial intermediation and delegated monitoring”, Review of Economic Studies, 51, pp.393-414
- Diamond, D. W. and Dybvig P. H. (1983) “Bank runs, deposit insurance and liquidity”, Journal of Political Economy, 91, pp. 401-419.
- Diamond, D. W. (2007) “Banks and liquidity creation: a simple exposition of the Diamond-Dybvig model”, Federal Reserve Bank of Richmond Economic Quarterly, 93
- Diamond, D. W. (1996) “Financial intermediation as delegated monitoring: a simple example”, Federal Reserve Bank of Richmond Economic Quarterly, 82, pp 51-66.
- Rothshild, M. and Stiglitz, J. E. (1976) "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, vol. 90(4), 629-649.
- Stiglitz, J. E. and Weiss, A. (1981). “Credit Rationing in Markets with Imperfect Information,” American Economic Review, vol. 71(3), 393-410.

The module of Economics of Information aims at studying economic models related to finance topics in presence of intertemporal choices, uncertainty, symmetric and asymmetric information.
The main objective of the lectures is to provide the instruments:
1. For the understanding and interpreting economic models and the mechanisms behind them;
2. For the development of positive and normative judgements on economic issues, with logical and analytical rigor;
3. For the development of the skills required to discuss and interpret an economic model, and to apply the acquired knowledge and competencies in the field of finance and financial intermediation.

Microeconomics, Macroeconomics, Math and Statistics.

Lectures, Class discussions and Problem Sets.

Attendance is strongly suggested. Further information can be found at https://www.dir.uniupo.it

Written exam/essay. More details will be available at the webpage of the course (https://www.dir.uniupo.it).

1. Basic Microeconomics tools (V1 ch. 9-10-11-12; FR ch. 6; V2 ch. 11-19-20; K ch. 3-4):
- Consumption choices under complete and symmetric information; the case of complete markets
- Intertemporal choices and the role of financial and capital markets
- Choices under uncertainty, risk aversion and insurance provision
- Intertemporal choices under uncertainty with complete and incomplete financial markets.
2. Asymmetric information and contract theory: moral hazard and adverse selection (V1 ch. 38; FR ch. 6; V2 ch. 25; K ch. 16-17)
3. Insurance markets and adverse selection (Rothshild-Stiglitz Model)
4. Debt contracts with asymmetric information (Diamond Model; Diamond-Dybvig Model)
5. Credit Rationing (Stiglitz-Weiss Model)

Development of learning capabilities and learning skills of economic models in the field of financial intermediation and credit contracts.