ECON 302

Solve and interpret standard models of consumer behavior

• Explain the concept of lotteries (I)
• Identify situations involving uncertain outcomes as choice under uncertainty and use lotteries to describe them (I)
• Use expected utility functions to describe preferences under uncertainty (I)
• Define, calculate, and explain certainly equivalent and risk premium (I)
• Define and explain the meaning of risk-averse, risk-neutral and risk-loving preferences (I)
• Explain why risk-averse individuals buy insurance, and calculate the optimal level of insurance for different premia (I)
• Draw analogy between consumer choice in product space (certainty model) and consumer choice in state space (uncertainty model) (I)
• Explain the role of preferences in consumer choices (D)

Solve and interpret standard models of market interaction

• Compute monopoly prices and output  (I)
• Link monopoly pricing with demand elasticity (I)
• Informally explain the concept and purpose of price discrimination (I)
• Identify and differentiate price discrimination strategies (perfect, direct, indirect) (I)
• Formulate, solve and intepret the Cournot and Bertrand models of oligopoly (I)
• Explain the role of prices in the economy (D)
• Compute and interpret consumer surplus (D)
• Define oligopoly (D)
• Define monopoly and state the different sources of monopoly (D)

Identify and analyze market failures, externalities and public goods

• Compare market and optimal allocations under externalities, and identify policies to improve market allocations (I)
• Explain the potential role of property rights in adressing externalities (Coase theorem), and identify limitations of this approach (I)
• Identify public goods in analytic and real-world situations (I)
• Calculate equilibrium and optimal amounts of public good in a simple model with voluntary contributions and identify policies to improve market allocation (I)
• Describe and explain the free rider problem and the tragedy of the commons (I)                                                                                                                                                                
• State the definition of Pareto efficiency (D)
• Find Pareto efficient allocations (D)
• Identify consumption and production externalities (D)
• State the properties of public and private goods (D)                                                                                                                                                                                                              

Use game theory to analyze strategic interactions

• Identify elements of static and dynamic games of complete information, and distinguish between these classes of games  (I)
• State and apply definitions of basic game theoretic terms, such as actions and strategies, for both static and dynamic games of complete information (I)
• Find the normal-form game associated with both static and dynamic strategic interactions with a finite number of actions  (I)
• Define the iterated elimination of (strictly) dominated strategies, Nash equilibrium and subgame-perfect equilibrium, and explain the motivation for these solution concepts  (I)
• Solve static games and normal-form games using the iterated elimination of dominated strategies and pure-strategy Nash equilibrium  (I)
• Give examples of games where a pure-strategy Nash equilibrium does not exist  (I)
• Solve for mixed-strategy Nash equilibria in simple normal-form games  (I)
• State the extensive-form game associated with sequential strategic interactions with a finite number of actions  (I)
• Solve for subgame-perfect equilibria in games of perfect information (using backward induction) and simple finitely and infinitely repeated games  (I)
• Give an example of the importance of commitment in sequential play  (I)
• Explain the difference in equilibrium sets of the finitely repeated and infinitely repeated prisoner's dilemma  (I)
• Define concepts of adverse selection, signaling and moral hazard  (I)
• State prominent examples of adverse selection, signaling and moral hazard, and identify these phenomena in analytic and real-world situations  (I)
• Solve for equilibrium prices in simple adverse selection models, and explain welfare implications  (I)
• Determine the necessary cost of signaling for the existence of a separating equilibrium in a simple signaling model  (I)
• Determine the necessary amount of monetary incentives to avoid moral hazard in a simple hidden action model  (I)

Critically evaluate assumptions in economic/econometric models

• Explain the role of assumptions in economic models (D)

Compare and critically evaluate economic arguments

• Use a model to evaluate the validity of an economic argument (D)
• Identify the key assumptions and empirical claims in an economic argument (D)

Formulate written economic arguments evaluating or supporting a position

• Write a brief paragraph (e.g., on an exam) that explains or applies economic concepts (D)

Present economic arguments by means of graphs, charts and tables

• Use graphs to illustrate the welfare effects of monopoly and externalities (I)

Apply economics to everyday situations

• Analyze business decisions in a non-competitive environment (monopoly and oligopoly) (D)
• Formally model the decision-making of participants in a real-world situation (D)
• Describe the incentives facing participants in a real-world situation (D)

Use economics to evaluate specific policies

• Analyze the welfare effects of specific policies (D)

Evaluate current events using tools of economics

• Evaluate current events as they relate to the general course content (D)