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The course develops tools to study informational frictions in markets, companies, and organizations. We cover the key topics in the economics of information (adverse selection, moral hazard, costly signaling, voluntary disclosures, and information design) and introduce their applications mainly in financial economics. Poslední úprava: Gregor Martin, doc. PhDr., Ph.D. (05.12.2025)
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Our leading framework is security contracting; the course explains how information frictions generate investment inefficiencies, credit rationing, pecking-order capital structure, underpricing of assets in IPOs, and negative market responses to seasoned equity offerings. We also cover the basics of financial market microstructure, voluntary disclosures, earnings management, career concerns, monopoly certifications, and persuasion of corporate boards. Poslední úprava: Gregor Martin, doc. PhDr., Ph.D. (05.12.2025)
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Main references Foucault, T., Pagano, M., Röell, A. (2013). Market Liquidity: Theory, Evidence, and Policy. Oxford University Press. (FPR) Jehle, G. A., Reny, P. (2011). Advanced Microeconomic Theory. Pearson Education. Especially Chapter 8. (JR) Liang, A. (2024) Information and Learning in Economic Theory. Available at: https://www.anniehliang.com/lecture-notes (AL) Tirole, J. (2010). The Theory of Corporate Finance. Princeton University Press. Chapters 3 and 6. (JT) Tadelis, S. (2013). Game Theory: An Introduction. Princeton University Press, Chapters 12 and 15. (ST)
Readings Acharya, V. V., DeMarzo, P., Kremer, I. (2011). Endogenous information flows and the clustering of announcements. American Economic Review, 101(7), 2955-2979. Birchler, U., Bütler, M. (2007). Information Economics. Routledge. Dybvig, P. H., Zender, J. F. (1991). Capital structure and dividend irrelevance with asymmetric information. The Review of Financial Studies, 4(1), 201-219. Gregor, M., Michaeli, B. (2025). Board bias, information, and investment efficiency. Review of Accounting Studies, 30(2), 1432-1462. Guttman, I., Kadan, O., Kandel, E. (2006). A rational expectations theory of kinks in financial reporting. The Accounting Review, 81(4), 811-848. Holmström, B. (1999). Managerial incentive problems: A dynamic perspective. The Review of Economic Studies, 66(1), 169-182. Jann, O., Schottmüller, C. (2024). Notes on Information Economics. Mimeo. Kreps, D. M. (2023). Microeconomic Foundations II: Imperfect Competition, Information, and Strategic Interaction. Princeton University Press. Especially Chapter 20. Milgrom, P. (2008). What the seller won't tell you: Persuasion and disclosure in markets. Journal of Economic Perspectives, 22(2), 115-131. Morris, S., Shin, H. S. (2002). Social value of public information. American Economic Review, 92(5), 1521-1534. Poslední úprava: Gregor Martin, doc. PhDr., Ph.D. (05.12.2025)
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Lectures, Tutorials, Assignments, Exams You are allowed to use generative AI tools such as ChatGPT, Copilot, Claude, or similar technologies to improve your learning experience by discussing with the AI the core concepts, applications, and the literature. During the exam, you are of course not allowed to use any tool or application, only a pen. Poslední úprava: Gregor Martin, doc. PhDr., Ph.D. (29.09.2025)
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Content I Games with Complete Information Normal-form Games with Pure Strategies 4 Axioms and Nash Equilibrium Normal-form Games with Mixed Strategies Extensive-form Games ST 3, 5, 6, 7, 8
II Games with Incomplete Information Motivation: Equity Dilution (Dybvig and Zender, 1991) Static Games of Incomplete Information Bayesian Nash Equilibrium Application: Property Sale Dynamic Games of Incomplete Information Perfect Bayesian Equilibrium ST 12, 15 JR 7
III Gaussian Information Bayesian Updating and Additive Signals AL 2 Application: Financial Markets as Beauty Contests (Morris and Shin, 2002)
IV Adverse Selection in Corporate Finance Screening Application: Subordinate Debt (Birchler and Bütler, 2007) Security Design on the Primary Market Investment Efficiency Return Dispersion and Cross-subsidization Seasoned Equity Offerings Unlimited Liability and Collateral Pecking-order Hypothesis JT 6
V Adverse Selection in Financial Markets Bid-Ask Spread Liquidity and Price Discovery FPR 3
VI Signaling in Corporate Finance Security Design with Own Wealth Underpricing in IPOs JT 6
VII Performance Signaling Signaling with Noise Application: Career Concerns (Holmstrom, 1999)
VIII Financial Reporting Earnings Management Nominal and Real Misreporting Real Effects of Accounting on Investments Application: Earnings Targets (Guttman, Kadan, and Kandel, 2006)
IV Disclosures Verifiable Messages Full Disclosure/Unraveling Uncertainty over Information Endowment Monopoly Certificates and Disclosures Application: Irrelevance of Public News in Financial Markets (Acharya, DeMarzo, and Kremer, 2011) Milgrom (2008)
V Moral Hazard Moral Hazard in Corporate Finance Agency Cost Credit Rationing JT 3
VI Information Design Bayes Plausibility AL 2, 8 Application: Precautionary Company Boards (Gregor and Michaeli, 2025) Poslední úprava: Gregor Martin, doc. PhDr., Ph.D. (08.12.2025)
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No entry requirements for Master students of Economics and Finance. Poslední úprava: Gregor Martin, doc. PhDr., Ph.D. (22.09.2025)
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