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INFORMATION ECONOMICS

EIB3004 INFORMATION ECONOMICS
3 Credits

Pre-requisite NONE

Learning At the end of the course, students are able to:
Outcomes
1. recognizing the importance of information in economics particularly in
preparation of contracts and utility optimization;
2. determining the role of information in economics;
3. differentiating between problems due to asymmetric information in contracts;
4. analysing methods to solve problems owing to information asymmetry; and
5. creating a synthesis using models of information economics and basic
mathematics.

Synopsis The course will discuss the topics related to information symmetry and
asymmetry, inter-temporal relationships, basic model, symmetric contracts,
optimal payments mechanism, optimal effort level, moral hazard, first order
approach, hidden information, adverse selection, signaling, education as a
signal, equilibrium, analysis of mathematical and analytical problems.

References 1. Macho-Stadler, I and Castrillo, J.D. 2001. An Introduction to the Economics
of Information and Contracts (2nd Edition), Oxford University Press.
2. Milgrom, P. and Roberts, J. 1992. Economics, Organization and
st
3. Management. (1 Edition). Prentice Hall.
4. Hirschleifer, J. and Riley, J.G. 1992. The Analytics of Uncertainty and
st
Information. (1 Edition). Cambridge University Press.
rd
5. Rasmussen, E.2001. Games and Information. (3 Edition). Cambridge MA
and Oxford U.K. Blackwell.

Soft Skills CS: CS1 – CS3
CT: CT1 – CT3
LL: LL1 – LL2

Assessment Continuous Assessment : 40%
Final Examination : 60%

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