Mechanism Design

Course content

Mechanism design explores institutions in environments with asymmetric information. While game theory explores how players act in a given environment, mechanism design takes a dual approach and asks instead how we should design the environment to induce the desirable behavior. Real-world applications include, among others, market design, organization of social choice and voting mechanisms, design of regulations and institutional design in general.

 

The course can roughly be split in two parts:

  • Part 1 introduces the students to the classic results and methods of mechanism design. We introduce classical mechanisms and discuss their strengths and weaknesses. We then look at mechanisms that are optimal in some special cases, such as trade, social choice, and matching problems.
  • Part 2 explores the world beyond the models described in the first part. In particular, we look at cases when agents' information is correlated, at mechanism design in dynamic settings, at mechanism design without money, and conclude with information design.

 

The course is based on selected chapters from the textbooks by Börgers, and by Roth and Sotomayor, as well as on recent surveys.

Education

MSc programme in Economics – elective course

 

The PhD Programme in Economics at the Department of Economics:

  • The course is an elective course with research module. PhD students must contact the study administration AND the lecturer in order to register for the research module and write the research assignment.
  • The course is a part of the admission requirements for the 5+3 PhD Programme. Please consult the 5+3 PhD admission requirements.
Learning outcome

After completing the course the student is expected to be able to:

 

Knowledge:

  • Account for the fundamental ideas behind and approaches to mechanism design.
  • Define main trade-offs arising in information extraction problems.
  • Identify the limitations of existing approaches to mechanism design.
  • Explain and discuss key theoretical concepts from academic articles, as well as discuss their interpretation

 

Skills:

  • Set up policy, trade, and management issues as mechanism design problems.
  • Propose mechanisms that induce the desired outcomes in various environments.
  • Analyze the drawbacks of existing institutions and suggest alternatives or identify reasons why none are available.

 

Competencies:

  • Apply the most relevant theoretical apparatus to analyze case-based problems.
  • Applicate reasoning by using the analytical framework of mechanism design in real-world institutions, proposed policies, and market strategies

 

Mostly lectures covering the syllabus with a view towards accomplishing the course goals. Supplemented by problem sets.

Restrictions due to Coronavirus:
The teaching in this course may be changed to be taught either fully or partly online due to COVID-19. For further information, please see the course room on Absalon (for enrolled students).

Textbooks:

  1. Börgers, Tilman. An introduction to the theory of mechanism design. Oxford University Press, 2015.
  2. Roth, A., & Sotomayor, M. (1990). Two-Sided Matching: A Study in Game-Theoretic Modeling and Analysis (Econometric Society Monographs). Cambridge: Cambridge University Press. doi:10.1017/​CCOL052139015X

 

The first (1) textbook is not required, but recommended for the students to have. The second (2) textbook should NOT be purchased; all relevant material will be provided in lectures.

 

Academic surveys:

  • Bergemann, D., & Välimäki, J. (2019). Dynamic Mechanism Design: An Introduction. Journal of Economic Literature, 57 (2): 235-74. doi: 10.1257/jel.20180892
  • Bergemann, D., & Morris, S. (2019). Information Design: A Unified Perspective. Journal of Economic Literature, 57 (1): 44-95. doi: 10.1257/jel.20181489

The surveys can be accessed via KU library.

 

Additional academic papers will be assigned throughout the course.

The course is highly theoretical, relying on the students’ knowledge of basic mathematics and game theory tools.

The students are expected to have a good grasp on the material from the mathematics courses in the Bachelor program of Economics as "Mathematics A", "Mathematics B" and "Probability Theory and Statistics", and be able to solve maximization problems, work with probability distributions, calculate conditional expectations etc.

It is strongly recommended to have followed "Microeconomics III" at the Study of Economics, University of Copenhagen or a similar course, prior to taking this course. The students are expected to be familiar with Bayes-Nash Equilibrium and Perfect Bayesian Equilibrium solution concepts, and to be able to find equilibria in basic games of incomplete information with minimal guidance.

Having followed Advanced Game Theory could be helpful.

Schedule:
3 hours of lectures every week from week 36 to 50 (except week 42).

Schema:
The overall schema for the Master can be seen at KUnet:
MSc in Economics => "Courses and teaching" => "Planning and overview" => "Your timetable"

Timetable and venue:
To see the time and location of lectures please press the link under "Timetable"/​"Se skema" at the right side of this page (E means Autumn).

You can find the similar information partly in English at
https:/​/​skema.ku.dk/​ku2122/​uk/​module.htm
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-E21; [Name of course]””
-Select Report Type: “List – Weekdays”
-Select Period: “Efterår/Autumn”
Press: “ View Timetable”

Please be aware:
- It is the students´s own responsibility to continuously update themselves about their studies, their teaching, their schedule, their exams etc. through the curriculum of the study programme, the study pages at KUnet, student messages, the course description, the Digital Exam portal, Absalon, the personal schema at KUnet and myUCPH app etc.

Written
Oral
Individual
Collective

 

The lecturer gives collective oral feedback during lectures, individual oral feedback upon request, and individual written feedback on the problem set.

 

Office hours: Tuesdays 14:00-15:00.

ECTS
7,5 ECTS
Type of assessment
Written assignment, 24 hours
individual take-home exam. It is not allowed to collaborate on the assignment with anyone.

The exam assignment is in English and must be answered in English.
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Aid

All aids allowed at the written exams.

 

For further information about allowed aids for the re-examination, please go to the section "Re-exam".

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Marking scale
7-point grading scale
Censorship form
No external censorship
at the written exams.
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Criteria for exam assessment

Students are assessed on the extent to which they master the learning outcome for the course.

 

In order to obtain the top grade, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material and can make use of the knowledge, skills and competencies listed in the learning outcomes.

 

In order to obtain the passing grade “02”, the student must in a satisfactory way be able to demonstrate a minimal acceptable level of  the knowledge, skills and competencies listed in the learning outcomes.

Single subject courses (day)

  • Category
  • Hours
  • Lectures
  • 42
  • Preparation
  • 140
  • Exam
  • 24
  • English
  • 206