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The course covers key topics in the economics of information with applications mostly in financial economics. Poslední úprava: Gregor Martin, doc. PhDr., Ph.D. (03.09.2024)
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The aim is to develop tools to study the role of informational frictions in markets and within companies and organizations. The main applications cover equity and debt contracting, credit rationing, investment efficiency, earnings management, accounting conventions, financial market microstructure, currency runs, career concerns, non-linear price screening, disclosures, and strategic communication between corporate boards and top management. Poslední úprava: Gregor Martin, doc. PhDr., Ph.D. (03.09.2024)
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Main books Foucault, T., Pagano, M., Röell, A. (2013). Market Liquidity: Theory, Evidence, and Policy. Oxford University Press. (FPR) Jann, O., Schottmüller, C. (2024). Notes on Information Economics. Mimeo. (JS) Jehle, G. A., Reny, P. (2011). Advanced Microeconomic Theory. Pearson Education. Especially Chapter 8. (JR) Kreps, D. M. (2023). Microeconomic Foundations II: Imperfect Competition, Information, and Strategic Interaction. Princeton University Press. Especially Chapter 20. (DK) 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 Baley, I., Veldkamp, L. (2023). Bayesian Learning. In Handbook of Economic Expectations (pp. 717-748). Elsevier Academic Press. Birchler, U., Bütler, M. (2007). Information Economics. Routledge. Guttman, I., Kadan, O., Kandel, E. (2006). A rational expectations theory of kinks in financial reporting. The Accounting Review, 81(4), 811-848. Milgrom, P. (2008). What the seller won't tell you: Persuasion and disclosure in markets. Journal of Economic Perspectives, 22(2), 115-131. Stiglitz, J. E., Kosenko, A. (2024). The Economics of Information in a World of Disinformation: A Survey Part 1: Indirect Communication (No. w32049). National Bureau of Economic Research. Stiglitz, J. E., Kosenko, A. (2024). The Economics of Information in a World of Disinformation: A Survey Part 2: Direct Communication (No. w32050). National Bureau of Economic Research.
Recent applications Acharya, V. V., DeMarzo, P., Kremer, I. (2011). Endogenous information flows and the clustering of announcements. American Economic Review, 101(7), 2955-2979. Banerjee, S., Szydlowski, M. (2024). Harnessing the overconfidence of the crowd: A theory of SPACs. Journal of Financial Economics, 153, 103787. Davis, J., Gondhi, N. (2024). Learning in Financial Markets: Implications for Debt-Equity Conflicts, The Review of Financial Studies, 37, 1584--1639. Gregor, M., Michaeli, B. (2024). Board Bias, Information, and Investment Efficiency. Review of Accounting Studies, forthcoming. Kanodia, C., Sapra, H. (2016). A real effects perspective to accounting measurement and disclosure: Implications and insights for future research. Journal of Accounting Research, 54(2), 623-676. Section 3. Poslední úprava: Gregor Martin, doc. PhDr., Ph.D. (24.09.2024)
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Lectures, Seminars, Assignments, Exams Poslední úprava: Gregor Martin, doc. PhDr., Ph.D. (03.09.2024)
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Assignments (pass/fail) 20%
Midterm 30%
Final Exam 50%
Poslední úprava: Gregor Martin, doc. PhDr., Ph.D. (14.10.2024)
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I Foundations of Information Information and Knowledge Bayesian Updating Gaussian Information Information Properties: MLRP and FOSD Comparing Information: The Blackwell Order Merging of Beliefs and Disagreement AL 1-4, 6 BB 3, 4
II How to Solve Games with Incomplete Information? Complete and Incomplete Information Perfect and Imperfect Information Bayesian Nash Equilibria Perfect Bayesian Equilibria JS 2.2 JR 7 Application: Career concerns (Holmstrom, 1999) Application: Coordination (Morris and Shin, 2002)
II Asymmetric Information in Markets: Adverse Selection Market Breakdown/Unraveling (Akerlof, 1970) Underinsurance in Simple Insurance Markets JS 3
Adverse Selection in Corporate Finance: Securities Design Equity and debt contracting Investment Efficiency Capital Structure (Pecking-order Hypothesis) Seasoned Equity Offerings JT 6 Application: SPACs vs Equity Contracting (Banerjee and Szydlowski, 2024)
Adverse Selection in Financial Markets: Market Microstructure Noise Traders (Glosten and Milgrom, 1985) FPR 3, BB 7 Market Depth (Kyle, 1985) FPR 4
III Asymmetric Information in Markets: Signaling and Screening Unverifiable Costly Messages: Signaling Warranties vs Installation Packages and Training JS 4.3
Signaling in Corporate Finance Dividends (Bhattacharya, 1979) Capital structure (Myers, 1984) JT 6
Signaling in Financial Markets: Financial Reporting Linear and Non-linear Equilibria JT 7 Application: Earnings management (Guttman, Kadan and Kandel, 2006)
Monopolistic Screening with Non-linear Prices JS 5.2
IV Asymmetric Information and Contracting: Moral Hazard Credit Rationing and Moral Hazard JT 3 Application: Real Effects of Accounting Conventions on Investments (Kanodia and Sapra, 2016)
V Strategic Communication Unverifiable Costless Messages: Cheap Talk Kreps 20.9
Exogenous Verifiable Messages: Disclosure Unraveling Partial disclosure due to cost and endowment uncertainty (Milgrom, 2008) Application: (Ir)relevance of Public News in Financial Markets (Acharya and Kremer, 2011)
VI Information Aggregation, Coordination, and Higher-order Uncertainty Information Aggregation Bayesian Learning in Macroeconomics BV 2-3 Application: Feedback Loops in Financial Markets (Davis and Gondhi, 2024)
Macroeconomic Coordination Games BV 3.2 and 4.6 Global Games
VII Production of Information Information Acquisition AL 5
Endogenous Verifiable Messages: Bayesian Persuasion Information Design AL 8 Application: Corporate Board Conservatism and CEO’s Project Reporting (Gregor and Michaeli, 2024) Poslední úprava: Gregor Martin, doc. PhDr., Ph.D. (03.09.2024)
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No entry requirements for Master students of Economics and Finance. Poslední úprava: Gregor Martin, doc. PhDr., Ph.D. (03.09.2024)
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