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School of Social Sciences

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BAEcon Economics
Learn how the social sciences can help you to understand today's world.

BAEcon Economics

Year of entry: 2018

Course unit details:
Microeconomics III

Unit code ECON30600
Credit rating 20
Unit level Level 3
Teaching period(s) Full year
Offered by Economics
Available as a free choice unit? Yes


See course Blackboard pages.


Unit title Unit code Requirement type Description
Microeconomics IIA ECON20351 Pre-Requisite Compulsory
Microeconomics IIB ECON20352 Pre-Requisite Compulsory
ECON10001 Pre-Requisite Compulsory
Advanced Mathematics ECON10071 Pre-Requisite Compulsory
Further Mathematics ECON20281 Pre-Requisite Compulsory
Pre-requisites: ECON20351 & ECON20352 AND EITHER (ECON10001 or ECON10071 or ECON20281)

In addition to ECON20351 and ECON20352, students must also have taken at least one of the following to be able to take this course unit (compulsory Pre-Requisite):

  • ECON10001 or
  • ECON10071 or
  • ECON20281


This course aims to introduce students to microeconomic theories at an advanced level.

Learning outcomes

At the end of this course students will be able to demonstrate their understanding of:

  1. Asymmetric information.
  2. Adverse selection.
  3. Moral hazard.
  4. Screening and signalling.
  5. Individuals’ optimal choice of insurance coverage.
  6. The experimental evidence against Expected Utility Theory and possible explanations for the contradictions.
  7. How different types of auctions operate.
  8. The proposition that the private provision of a pure public good will typically not be optimal. 


Semester 1:

The principal aim of this part of the course is to introduce students to some of asymmetric information and the key issues that arise in modern contract theory. The objective is that after this part of the course students will have a good undergraduate understanding of (i) asymmetric information, (ii) adverse selection and moral hazard, (iii) screening and signalling. Various examples will be used to illustrate the main ideas.


Semester 2:

The principal aim of this part of the course is to introduce students to some of the key topics of advanced microeconomics. The objective is that after this part of the course students will have a good undergraduate understanding of (i) Further topics on Risk and Uncertainty (ii) Public Goods, and (iii) Auction Theory. Various examples will be used to illustrate the main ideas.

Teaching and learning methods

Lectures, tutorial classes and exercise classes.

Employability skills

Analytical skills
Abstract reasoning. Numerical reasoning. Applying knowledge to unfamiliar problems.
Problem solving
Written communication
Using words, mathematics, and diagrams to explain, solve problems, and make arguments. Producing documents with text, mathematics, and diagrams. Academic writing.

Assessment methods

Semester 1:

  • Coursework: 30% of Semester 1 grade. Structure: Answer all parts.
  • Exam: 70% of Semester 1 grade. Structure: Answer one question from a choice of two.

Semester 2:

  • Exam. 100% of Semester 2 grade. Structure: Two essays from a choice of four.


The semesters carry equal weight. In terms of the overall grade (for the year), the following weights are used:

  • 15% weight Semester 1 coursework.
  • 35% weight on Semester 1 examination.
  • 50% weight on Semester 2 examination.

Feedback methods

  • Semester 1: Revision pack of questions and revision lecture.
  • Semester 2: You can prepare an essay to garner feedback in advance of assessment.

In semester 1 it is expected that students prepare solutions to the exercise classes in advance. This way feedback can be given where necessary during the sessions. Please make use of classes, the times before and after lectures, office hours, supports hours, the Blackboard forum, and make email contact with the lecturers and tutors if you require help with the material.

Recommended reading

Semester 1:

The main textbook is:

  • Information Economics by Urs Birchler and Monika Butler (Routledge, 2007, ISBN 978-0-415-37345-6) Chapters 3, 13, 7, 14, 15 and 16.

The lecture notes are enhanced, drawing mainly from:

  • Microeconomic Theory by Mas-Collel, Whinston and Green (1995).



Semester 2:

The readings listed under each topic are in general those that can be useful in understanding the material covered in the lectures. The articles indicated by (*) are secondary readings that could either be useful as background reading or contain more advanced material for those who want to pursue a certain topic further.

Further Topics on Risk and Uncertainty

  • Gravelle, H. and R. Rees, 2004, Microeconomics, 3rd Edition, Prentice Hall.  Chapter 17, sections A-E, and Chapter 19, section B.
  • T. Biswas, 1997, Decision-Making under Uncertainty, MacMillan Press, 3-14, 30-34, 54-59.
  • M. Friedman and L. J. Savage, 1948, The Utility Analysis of Choices Involving Risk, Journal of Political Economy 56, 279-304.
  • M. J. Machina, 1987, Choice under Uncertainty: Problems Solved and Unsolved, Journal of economic Perspectives 1(1), 121-132. (The rest of the paper is recommended for anyone who are interested in related issues.)
  • Starmer, C., 2000, “Developments in Non-Expected Utility Theory: The Hunt for a Descriptive Theory of Choice under Risk”, Journal of Economic Literature, 38(2) pp 332-82.
  • (*) Mas-Colell, A, M. Whinston and J. Green, Microeconomic Theory, Oxford Univ. Press. Chap. 6, sections 6.B and 6.E.

Public Goods

  • Samuelson, P., 1955, Diagrammatic exposition of a theory of public expenditure, Review of Economics and Statistics, 37, 350-356.
  • J. Cullis and Jones, P., 1998, Public Finance and Public Choice, Oxford Univ. Press. Chap. 3.
  • Atkinson A. and Stiglitz J., 1988, Lectures on Public Economics, McGraw Hill. Lecture 16.
  • (*) Oakland, W., 1987, Theory of public goods, in Auerbach, A. and M. Feldstein (eds), Handbook of Public Economics, vol 2, North-Holland.

Auction Theory

  • McAfee, R. and J. McMillan, 1987, Auctions and bidding, Journal of Economic Literature, June, 25, pp. 699-738.
  • Milgrom, P., 1989, Auctions and bidding: a primer, Journal of Economic Perspectives, Summer, 3(3), 3-22.
  • Klemperer, P., 1999, A guide to auction theory, Journal of Economic Surveys, 13(3), 227-286.
  • Wolfstetter, E., 1996, Auctions: an introduction, Journal of Economic Surveys, 10(4), 367-420.
  • M.H. Rothkopf, T.J. Teisberg and E.P. Kahn, 1990, Why are Vickrey auctions rare? Journal of Political Economy, 98(1), 94-109.

Study hours

Scheduled activity hours
Assessment written exam 2.5
Lectures 30
Practical classes & workshops 7
Tutorials 5
Independent study hours
Independent study 155.5

Teaching staff

Staff member Role
W Chiu Unit coordinator
Craig Webb Unit coordinator

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