Alexander Westkamp
office hour: thursday, 10:00–11:00 (Anmeldung erbeten)
awest@uni-bonn.de
Konrad Mierendorff office hour: Monday, 11:30–12:30 mierendorff@uni-bonn.de
Social Choice and Mechanism Design - Summer Term 2010 Preliminary Syllabus
This course introduces students to the ideas and concepts of social choice and mechanism design theory. Time permitting, we will cover (some parts of) matching theory, market design and multi-objects auctions in the third part of the course.
Prerequisites: advanced microeconomics for master students, game theory for Diplom students.
Lectures: Tuesday and Wednesday 8:30-10:00 HS N
Exercises: We will regularly post exercise sheets. You will be asked to present your solutions in class.
Grading:Grades will be based solely on performance in one final exam (closed book). A voluntary midterm exam will be offered (most likely end of May), but performance will not count towards the course grade.
Topics: We will cover the following topics. The details for the last part of the course will be added once it is clear how much time remains.
Part I: Classical Social Choice Theory (Alex) 1. The basic social choice model
2. Arrow’s impossibility theorem
3. Social Choice with two alternatives: May’s Theorem 4. Single-Peaked Preferences: The median voter theorem 5. Social Choice functions and strategyproofness
6. Dictatorship: The Gibbard-Satterthwaite Theorem 7. Two alternatives
8. Single-Peaked Preferences
Part II: Classical Mechanism Design Theory (Konrad) some auction theory will be covered in the exercises.
1. The mechanism design problem and the revelation principle
2. Dominant strategy implementation and implementation in Bayes-Nash equili- brium
3. Quasi-linear environments
4. Efficiency: Vickrey-Clarke-Groves-mechanisms 5. Payoff Equivalence
6. Efficiency and Budget Balance: Expected externality mechanism,
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7. Participation constraints: impossibility of efficient trade with two-sided asym- metric information (Myerson-Satterthwaite theorem)
8. Optimal mechanism design: Revenue maximizing single-object auction 9. (optional) Principal-agent-problems (monopolistic screening, regulation) Part III: Multi-unit auctions, Matching and Multi-Object auctions (Alex, Konrad)
1. Multi-unit auctions: Vickrey auctions, uniform-price auctions, demand reduc- tion (Konrad)
2. Matching and School Choice (Alex) 3. Generalized Matching Models (Alex) 4. Multi-object auctions (Konrad)
Literature: For parts I and II the general reference is Mas-Colell, Whinston, Green, 1995, Microeconomic Theory”, Oxford University Press. We will cover most of Chapters 21 and 23 in class. For further (and in most cases optional) reading we recommend the following (the list for Part III is still preliminary).
• Part I:
1. Herve Moulin, Axioms of cooperative decision making (1988), Cambridge uni- versity press (Econometric society monograph)
An excellent book on cooperative decision making. Chapters 9-11 deal with topics covered in this class.
2. David Austen-Smith, Jeffrey S. Banks, Positive Political Theory I (2000), Mi- chigan University Press
This book is a (very) rigorous introduction to social choice theory from a political theory perspective. Only some parts of Chapters 1-4 will be covered in class.
3. David Austen-Smith, Jeffrey S. Banks, Positive Political Theory II (2005), Michigan University Press
Complementary to PPT I, this book is mostly concerned with game theoretic models of voting. Only parts of chapters 2 and 3 deal with topics covered in class.
• Part II: Supplementary reading for students interested in auction theory.
1. Vijay Krishna, Auction Theory (2009, 2nd Edition), Academic Press
This is the standard textbook for auction theory. You can also use the first edition.
2. Paul Milgrom, Putting auction theory to work (2004), Cambridge university press More advanced than Krishna.
• Part III: For multi-unit and multi-object auctions: see Part II For matching models
1. Al Roth, Marilda Sotomayor, Two-sided matching (1990), Cambridge univer- sity press (Econometric Society Monograph)
2. Utku Unver, Tayfun Sonmez, Matching, allocation, and the exchange of indi- visible resources (2009), to appear in Handbook of Social Economics (available online from Utku Unver’s website)
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