Module Identifier EC30610  
Academic Year 2004/2005  
Co-ordinator Mr Roberto Bonilla  
Semester Semester 2  
Pre-Requisite EC30230  
Course delivery Lecture   10 Hours  
  Seminars / Tutorials   4 Hours  
Assessment TypeAssessment Length/DetailsProportion
Semester Exam1.5 Hours  100%
Supplementary Exam1.5 Hours  100%

Learning outcomes

By the end of the module students should have an understanding of:


This module extends the microeconomic analysis of choice covered in EC30230 to consider choice under conditions of uncertainty. We then develop the closely-related issue of asymmetric information and the related problems of market failure, adverse selection and moral hazard. Applications to the financial market are addressed in detail.

Brief description

The module consists of 12 lectures plus 4 classes per student. Classes will be based on the assignments distributed in lectures. The opportunity to write and receive comments on a voluntary, non-assessed essay will also be offered. Essay titles will be distributed during lectures.

In addition to attending lectures and tutorials, it is important that you spend an apporopriate amount of time in private study. Since this module constitutes one sixth of your workload for this semester, and assuming a 36 hour working week, you should expect to spend about 5 hours per week studying for this module, of which only 1.5 hours is formally timetabled.


Choice under Uncertainly
   expected utility
   risk preferences: risk aversion, risk loving, risk neutrlity
   simple application: demand for insurance

Markets with Asymmetric Information
   adverse selection
   market failure
   moral hazard

Uncertainly and asymmetric information in financial markets
   asymmetric information problems in financial markets and protection mechanisms
   applications to corporate finance
   macroeconomic applications

Reading Lists

Nicholson, W (1992) Microeconomic Theory: basic principles and extensions Dryden Press

** Recommended Text
Bebczuk, R (2003) Asymmetric Information in Financial Markets Cambridge University Press
Pindyck, R and D Rubinfeld (1992) Microeconomics Maxwell Macmilland International
Varian Hall (1993) Intermediate Microeconomics W W Norton
** Supplementary Text
Eaton, B C, Eaton D F and W A Douglas (1999) Microeconomics Prentice Hall Canada
Katz, M L and H R Rosen (1998) Microeconomics McGraww-Hill


This module is at CQFW Level 6