In many economic situations, economic actors do not have the full knowledge of the economic environment they are in and/or the actions taken (or will be taken) by the other actors. Often some actors have better (or more) knowledge than others. There are dramatic effects of these ''information asymmetries'' on the functioning of the markets and the formation of economic institutions in the society. This course offers a coherent framework to think about these problems. The topics covered include decision making under uncertainty (expected utility theorem, attitudes towards risk), adverse selection, signaling, moral hazard, theory of incentives and contracts, principal-agent problems, incomplete contracts, mechanism design as well as many applications such as price discrimination, efficiency wages and unemployment, credit markets, entrepreneurship, partnerships, hold-up problems, property rights, herd behavior and information cascades, reputation, auctions, matching, and optimal taxation.
