ECON 402

Advanced Topics in Microeconomics
Kevin Wainwright
Office:3689 West Mall
Phone: (604)  291-5499
Summer 2006
Prerequisites: ECON 301, 305 and 331; 60 credit hours.


This is a course in advanced microeconomic theory. Students are introduced to the economics of contracts and imperfect information. Market structures that can be described as imperfectly competitive are often the result of costly measurement or costly enforcement of rights.  These costs lead economic agents to find a variety of structures for carrying out production and exchange. When the activity is between firms this leads to such things as vertical restraints and  franchise agreements. When it is between firms and government (i.e. the public), this leads to various forms of regulation. Within the firm there arises principle agent issues. This course will look at a variety of settings where problems of costly information or costly enforcement arise. Topics covered include:
  1. Contracts and the Coase Theorem
  2. Principle Agent models
  3. Moral Hazard
  4. Adverse Selection and Signaling

Required Texts:


The course grade will be based on a final exam (40%), a midterm exam (30%), some problem sets (10%), and a short paper (20%).

Readings and Handouts:

Homework Lecture Suppliments
when possible, titles are linked to PDF downloadable articles; If not, you have to use the Library
    1. Akerlof, G. The market for lemons: qualitative uncertainty and the market mechanism QJE, 1970
    2. Barzel, Y An alternative approach to the analysis of taxation JPE, 84, 1976
    3. Barzel, Y. & Suen, W. "The Demand for Giffen Goods are Downward Sloping" EJ Vol. 102. July 1992
    4. Barzel, Y Measurement Cost and the Organization of Markets JLE Vol. 25 (Apr 1982) pp 27-48
    5. Barzel, Y. Excess Capacity in Monopolistic Competition, JPE Vol. 78 No. 5 (Sep-Oct 1970) pp 1142-1149
    6. Baumol, William J.Contestable Markets: An Uprising in the Theory of Industry Structure  The American Economic Review, Vol. 72, No. 1. (Mar., 1982), pp. 1-15.
    7. Baumol & Willig, Contestability: Developments since the Book,  Oxford Economic Papers, Vol 38, Supplement: Strategic Behavior and Industrial Competition (Nov 1986) pp 9-36
    8. Cheung, S.N.S. The structure of a contract and the theory of a non-exclusive resource JLE 1970 pp 49-70
    9. Cheung, S.N.S., A Theory of Price Control, JLE (April 1974) pp 53-71
    10. Cheung, S.N.S.The Contractual Nature of the Firm, JLE (April 1983)
    11. Coase, R. "The Problem of Social Cost", JLE, pp1-44 Oct. 1960
    12. Dahlby, B.G. "Adverse selection and Pareto improvements through compulsory insurance" Public Choice (37) 1981
    13. Dixit, Avinash, A Model of Duopoly Suggesting a Theory of Entry Barriers, Bell Journal of Economics, (Spring 1979)
    14. Dixit, Avinash The Role of Investment in Entry-Deterrence   The Economic Journal, Vol. 90, No. 357. (Mar., 1980), pp. 95-106.
    15. Dixit, Avinash, Recent Developments in Oligopoly Theory, AER, Vol. 72 No. 2, Papers and Proceedings (May 1982) pp 12-17
    16. Eaton, B.C., & Lipsey, R., An Economic Theory of Central Places, EJ, Vol 92, No. 365 (Mar. 1982) pp 56-72
    17. Eaton, B.C., & Lipsey, R., Exit Barriers are Entry Barriers: The Durability of Capital as a Barrier to Entry, Bell Journal Vol 11, No 2 (Autumn 1980) pp 721-729
    18. Eaton, B.C., & Lipsey, R., The Theory of Market Pre-emption: The Persistence of Excess Capacity and Monopoly in Growing Spatial Markets, Economica, New Series, Vol 46, No 182 (May 1979) pp 149-158
    19. Eaton, B.C., & Ware, R., A Theory of Market Structure with Sequential entry, Rand Journal, Vol 18, No 1 (Spring 1987) pp 1-16
    20. Eaton & White Distribution of Wealth and Efficiency of Institutions Economic Inquiry Apr 1991
    21. Gallini, Nancy "Intellectual Property: When is it the best incentive system?" Working Paper, U of Tor.
    22. Johnson, R. and Libcap G. Contracting problems and regulation: the case of the fishery AER, Dec. 1982
    23. Klein, B & Leffler, K., The Role of Market Forces in Assuring Contractual Performance, JPE Vol 89, No 4 (Aug. 1981) pp615-641
    24. Klein, B. "Transaction Cost Determinants of "Unfair" Contractual Arrangements" AER (1980)
    25. Kreps, David M; Jose A. Scheinkman,Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes  The Bell Journal of Economics, Vol. 14, No. 2. (Autumn, 1983), pp. 326-337.
    26. Mathewson, F. and Winter, R. "The Economics of Franchise Contracts," The Journal of Law and Economics, Oct. (1985) 503-526
    27. Miyazaki, H. "The Rat Race and internal labor markets" Bell Journal of Economics (vol 8) 1977
    28. Prather Brown, J Toward an economic theory of liability JLS, 1973, p 323-349
    29. Rothchild, M and Stiglitz, J. Equilibrium in competitive insurance markets: an essay on the economics of imperfect information QJE, 90, 1976
    30. Singh Nirvikar; Vives, Xavier Price and Quantity Competition in a Differentiated Duopoly   The RAND Journal of Economics, Vol. 15, No. 4. (Winter, 1984), pp. 546-554.
    31. Spence, M. Job Market Signaling, QJE, Vol 87, No 3 (Aug 1973) pp 355-374
    32. Wainwright, K. Dual organizational structures of franchise contracts discussion paper
    33. Wainwright, K. Environmental Regulation, Asymmetric Information, and Moral Hazard discussion paper

    1. Katz & Shapiro How to License Intangible Property  The Quarterly Journal of Economics, Vol. 101, No. 3. (Aug., 1986), pp. 567-590.