MW24.5 - Lecture Quantitative Economics III - Master Program in Economics
In the module we explore quantitative and mathematical methods of economic theory. We develop a framework to analyse and design transparent and competitive mechanisms for allocating goods, services, or resources. Such a framework can help designing fair and efficient mechanisms for resource allocation and conservation. While we concentrate on the theoretical properties of these mechanisms, understanding these properties is necessary to understand environmental markets and trading, e.g. emissions trading systems or renewable energy certificate markets. The mechanisms could be used to encourage renewable energy deployment, to contribute to sustainable energy transitions, to manage resources in a sustainable way and to ensure fair access to resources.- Audience:
- The lecture is targeted at advanced Master students.
Students should be familiar with Game Theory, Calculus and Probability. - Motivation:
- Auctions belong to the oldest and perhaps most robust economic institutions. Today, auctions control the allocation of carbon emmissions, the provision and the distribution of green as well as not so green energy, transport services, communication licences, etc. Auctions help us to understand how prices for these and other goods are determined and how information is aggregated with the help of decentral institutions. For theorists and for experimental economists alike, auctions provide a crucial framework to study economic behaviour.
- Topics:
- Standard types of auctions, efficiency and revenue in the case of private values, risk aversion, experimental evidence, auctions with interdependent valuations, winner's curse, common values.
- Online teaching:
- The module will be offered online.
This is a course with a more technical topic. For this course the online format offers benefits for learning that we miss in a traditional lecture room. Online videos allow you to follow your own learning speed. You can (and you should) pause your video, slow down or fast forward according to your individual learning speed. Weekly online homeworks give you regular feedback and help you to engage with the material. Online discussions and exercises provide and enhance interaction.
As a result, the online format gives you a much better learning experience and more room to interact. For this course, students are clearly more successful with online teaching than students with traditional teaching. In the past, with traditional classroom teaching, about 25% of the students failed the course. Now, with on-line teaching, fewer than 5% of the students fail.
- Lecture + Exercises:
- During the term you will in each week obtain a new set of videos. You can choose when (and how often) you watch these videos. These videos will remain available until the end of the term. I recommend to follow a routine: Watch the weekly videos on always the same day at always the same time.
- Homework:
- Each week you submit a brief homework (see the Moodle-page of the course). The homework counts for the final grade (1/3).
- Discussion board + Online Meeting:
- Please use the discussion board in Moodle.
Details for discussion board and online meeting are provided in Moodle. Before you join the meeting, you should have already watched the videos and tried to solve the homework.
- Exam:
- 14.02.2025, 08:30
The final grade is 2/3 the result of a final exam and 1/3 the weekly homework. I assume that, pursuant to the »Prüfungsordnung«, the weekly homework and the take home exam constitute a single partial exam. I.e., points in the homework and points in the final exam will be added to determine your grade.
You can write the exam at home - provided you have a good connection to the internet. If you prefer to write at the FSU Jena and if you need a room, please let us know.
Preparing for the exam: During the term you should solve the problems from the weekly homework. During the last weeks of the term, you will find in Moodle “extra questions”. This is a quiz, similar in style to the exam, that you can take as often as you want. Each time you take this quiz you get a new collection of problems. When you submit these extra questions, you will get immediate feedback. You can work on these extra questions to get more routine for your exam. Points scored in this quiz don't contribute to your final grade.
- Prerequisites:
- Game theory (e.g. as covered in BW24.2), Calculus, Probability.
- Literature:
-
- Krishna, Vijay, 2002. Auction Theory, Academic Press (this is the main text for this course).
- Cassidy R., 1967. Auctions and Auctioneering, Berkeley: University of California press.
- Kagel, J. H., 1995. Auctions: A Survey of Experimental Research, in The Handbook of Experimental Economics, J. H. Kagel and A. E. Roth (eds). Princeton: Princeton University Press.
- Kagel, J. H. and D. Levin, 2002. Bidding in Common Value Auctions: A Survey of Experimental Research, in Common-Value Auctions and the Winner's Curse, Princeton University Press.
- Klemperer P., (Ed.), 2000. The Economic Theory of Auctions, Edward Elgar Publishing.
- Klemperer, P., 1999. Auction Theory: A guide to the Literature, Journal of Economic Surveys, 13: 227-260. CEPR
- Klemperer, P., 2000. Why every economist should learn some auction theory. invited paper from the Econometric Society World Congress. CEPR
- McAfee, R.P., and J. McMillan, 1987. "Auctions and Bidding," Journal of Economic Literature, 25:699-738. Jstor
- Wilson, R., 1992. "Strategic Analysis of Auctions," in R.J. Aumann and S. Hart, Handbook of Game Theory with Economic Applications, Vol. 1. Amsterdam: Elsevier Science Publishers. Paper
- Outline:
-
Topic Lecture Exercise 1. Introduction. 13.10.2025 20.10.2025 2. Terminology and definitions. 20.10.2025 27.10.2025 3. Equilibrium concepts. 27.10.2025 03.11.2025 4. Symmetric private values. 03.11.2025 10.11.2025 5. Revision: Random variables. 10.11.2025 17.11.2025 6. Revision: Jointly distributed random variables. 17.11.2025 24.11.2025 7. Order Statistics. 24.11.2025 01.12.2025 8. Bidding equilibria in the first-price auction. 01.12.2025 08.12.2025 9. Reserve prices. 08.12.2025 15.12.2025 10. Entry fees. 15.12.2025 05.01.2026 11. Revenue equivalence. 05.01.2026 12.01.2026 12. Risk aversion. 12.01.2026 19.01.2026 13. Interdependent values. 19.01.2026 26.01.2026 14. Summary, exercises, discussion board. 26.01.2026 02.02.2026 15. Summary, exercises, discussion board, Q+A. 02.02.2026 09.02.2026