Applied Microeconomics

obligatory courses

The aim of this course is to present a new approach to microeconomics analysis, which is based on experimental and computational methods.

The aim of this course is to present a new approach to microeconomics analysis, which is based on experimental and computational methods. By combining these methods, one can test economic theory and analyse real-life economic problems more efficiently. It is a first step towards the full introduction of complexity in microeconomic analysis. During the course, the selected microeconomic issues will be presented. Each class is divided into two parts: during the first part, the students participate in experiments, or conduct a simulation; during the second part, the economic theory will be questioned/examined based on previously obtained results. The lecturer will introduce practical implications as well as theoretical and practical IT tools that allow for repeating experiments, simulations and analysis.

In education, science curiosity should be an important motivating factor for gaining knowledge and self-development. However, this type of curiosity erodes with age and it is increasingly difficult to awake it among students. Chalk and talk approach could completely discourage students from further exploration of theoretical models, and this is particularly true for microeconomics. On the other hand, microeconomics has incredible potential to create science curiosity, as its models directly relate to the observed economic behaviour of people. We need, however, the stimulus that will trigger the curiosity. Such an incentive could be a natural desire to know thyself.

On the lecture, the ad hock research will be used to create the science curiosity on the basis of self-curiosity. Prior to lectures, the students participate in the online research, being passive subjects of the research. Before this survey/experiment, they should not have any knowledge on the issue. Shortly after the survey, they are informed that the results of the study will be used to analyze microeconomic models, and they are encouraged to try to answer the questions whether their decisions or answers were consistent with economic theory, optimal or efficient, and how those decisions could affect the welfare of the others. In this way, the teacher creates an information gap among students, a sense of deprivation - the unsatisfied need for knowledge on the decisions taken. There appears the "science curiosity that can be addressed during the lectures and/or explored by students themselves.

Topic 1 Overview of the course;

• Introduction to experimental and computational microeconomics

• Introduction to R-CRAN, MAXIMA, NetLogo

Topic 2 Marshall vs Chamberlain and Robinson worlds

• Free market vs perfect competition

• Monopoly power

• Oligopolistic competition

Topic 2 Rationality

• Standard Social Scientific Models (SSSMs)

• Behaviourist critic

• Ecological rationality by Vernon Smith

Topic 3 Consumer choice

• Interporal choice and procrastination

• Uncertainty and risk; risk perception and risk aversion

Topic 3 Social interaction

• Standard Social Scientific Models (SSSMs) and General Equilibrium Model

• Common well-being vs Own well-being; Social Utility function

Passing the intermediate microeconomic course is required for this course. We assume that students' knowledge is on this level. We are not going to focus on the microeconomic theory. Students can base their understanding of theory on basic Varians' textbooks:

• Varian, H. R. (2014). Intermediate Microeconomics: A Modern Approach: Ninth International Student Edition. WW Norton & Company.

• Hal, R. V. (2016). Microeconomic analysis. WW Norton & Company

Supplementary readings:

• Kreps D., (1990) A Course in Microeconomic Theory, Princeton University Press, Princeton, New Jersey

• Chiang A. C. (1984), Fundamental Methods of Mathematical Economics, McGraw-Hill

• Papers provided by lecturers.

The learning outcomes of the course are as follows:

- Students are familiar R- CRAN computational environment

- Students are able to use different data sets to conduct their own research

- Students gain and process data independently

- Students are capable of working in groups and co-operating with others

- Students have the experience of conducting research projects

- Students are able to formulate their own point of view and express it in the discussion

- Students express their research curiosity and openness towards economic phenomena

K_W01, K_U03

The assignment will consist of three parts:

• Written exam (open everything: books, laptops, …..) exam (up to 50 points)

• Individual project (up to 25 points)

• Activity on the lectures/Moodle forum (up to 25 points)