JEB064 - Political Economics
| Credit: | 5 |
|---|---|
| Credit ETCS: | 5 |
| Hours weekly: | 2/0 |
| Status: | Bachelors - All Bachelors - alternative A English Semester - winter |
| Obligatory courses: | |
| Recommended courses: | JEB004 - Economics II |
| Course supervisors: | PhDr. Martin Gregor PhD, ČEZ Chair |
| Teachers: | PhDr. Martin Gregor PhD, ČEZ Chair |
| Assistants: | |
| Schedule: | Wednesday 15:30-16:50, Room 314 |
| Announcements: | |
| Literature: | McCarty, N., Meirowitz, A. 2007, Political Game Theory, Cambridge University Press. Rasmusen, E. 2007, Games and information: An introduction to game theory, 4th edition, Blackwell. Mueller, D. 2003, Public Choice III, Cambridge University Press. |
| Description: | This course introduces into economics of politics as a unifying approach for the joint study of economic and political decision-making. It covers key topics in game theory: normal-form games, extensive-form games, Bayesian games, dynamic games of incomplete information, and bargaining. A vast range of applications is offered for each concept; among others, voting, budgeting, policy reforms, state aid, interest group behavior and international negotiations. The course is useful to economists who want to study strategic incentives of key players (firms, interest groups, and politicians) to understand policy making in public finance, international economics, and finance. |
| Content: | 1. Economic approach to politics: preliminaries. Utility theory. Utility representations on continuous choice spaces. Spatial preferences. Applications: a) Voting on redistribution b) Voting over the public debt; overlapping generations c) Sequential budgeting in the Parliament: spending cap given by the Budget committee 2. Collective choice. Preference aggregation rules. Condorcet winner. Arrow’s impossibility theorem. Core and efficiency. Emptiness of majority core. Strategic behavior (manipulation) in choice functions. 3. Games in the normal form. Dominance. Pure strategy Nash equilibria. Mixed strategy Nash equilibria. Applications: a) Hotelling model of political competition (two-party competition) b) Interest group contributions, rent-seeking and contests of interest groups c) Tragedy of budgetary commons and the role of party system fragmentation. Procedural fiscal rules d) Reform inertia: electoral risk and simultaneous choice of policy platforms 4. Games in the extensive form. Perfect and imperfect information. Dynamic games of complete but imperfect information. Backward induction. Single-deviation principle. Subgame-perfect equilibrium. Applications: a) State aid, bailouts; asymmetric lobbying by sunset industries b) Agenda control and voting cycles c) Power transitions d) Coalition formation 5. Bayesian games. Types. Bayesian Nash equilibria. Information aggregation. Applications: a) War of attrition b) Jury voting c) Campaigns with uncertain candidates’ characteristics d) Prediction markets. Predictions through economic voting 6. Dynamic games of incomplete information. Rational (Bayesian) learning. Signals and signaling games. Perfect Bayesian equilibria. Applications: a) Entry deterrence in elections b) Informational lobbying 7. Bargaining. Axiomatic approach: Nash bargaining solution. Non-cooperative bargaining. Majority-rule bargaining under a closed rule. Baron-Ferejohn model under an open rule. Applications: a) Coalitional bargaining and the budget deficit b) Veto bargaining c) Crisis bargaining and reforms |
| Seminar: | Questions and comments are more than welcomed throughout the lecture. Only course website at IES webpage (http://ies.fsv.cuni.cz/en/syllab/JEB064) will be updated. I’ll use email client in SIS UK for brief announcements. Do let me know if, for some reason, your email is not there. Off the lecture, respect official office hours (Tuesday 13-15). |
| Examination dates: | Final 1: Thursday January 14, 12:00-15:00, Room 206 Final 2: Monday February 8, 12:00-15:00, Room 314 Final 3: Tuesday February 16, 9:00-12:00, Room 314 |
| Course requirements: | Homeworks (3-4 problem sets): 40% Final exam (3 hours, written exam): 60% The exam focuses on problem sets solving and interpretation of the readings. Refreshements allowed. |
| Downloadable: | 00 Introduction (final version) 01 Majority (final version) 02 Lobbying 03 Budget 04 Reform 05 State aid Exam 1: solution Homework 1 Homework 1: solution Homework 2 Homework 2: solution Homework 3 Homework 3: solution Results (final, 16 Feb) Summary: key topics Syllabus (30 Sept) Workbook (Dec 29) |