Economics of Asymmetric Information

This course aims at familiarizing students with the analysis of asymmetric information and its economic effects. The course studies the role of asymmetric information in specific economic markets: product, labor, insurance, and capital markets. It shows how and why outcomes in these markets crucially depend on the underlying information structure of the market participants. The course discusses the appropriate equilibrium concepts (rational equilibrium, perfect Bayesian equilibrium), the different type of market outcome (separation, pooling, hybrid), the Pareto inefficiencies that are due to asymmetric information, and the analytical complications of multiple equilibria.