Microeconomics of Markets and Policy

The course departs from the basic case of perfectly competitive markets. The course then proceeds by illustrating case by case how deviations from any of the conditions of perfect competition typically leads to market imperfections and failures , i.e. economic inefficiency and thus societally ineffective outcomes. The course analyses courses of action that market parties, regulators, and the public sector can take to combat these market failures and to improve efficiency. Basics of strategic behavior is presented as well as how it features in (i) various forms of market power, (ii) incomplete and asymmetric information, (iii) provision of public goods, (iv) in interactions with extenal effects such as pollution or CO2 emissions. Students learn to analyse this by means of (i) simple theoretical models, and (ii) corresponding interactived decision making experiments where the students themselves act as market participants. The students also get to analyse the connection between the thus generated data and the theoretical predictions expressed in the simple models.