ECO2101: Advanced Microeconomic Theory II

Winter 2017

I will post slides for each class by the morning of the day of the class. The compact versions are best for printing, the complete ones best for viewing on a screen.

In each lecture I will present versions of the main models and results for the topic. The sources of these models and results are listed under the heading "Core material". In some cases, earlier work that I will not discuss provided foundations; this work is listed under the heading "Foundations". The papers listed under the heading "Recent work" are the ones from which you can choose to write the reports required for the evaluation.

Week 1 (January 9)

Collective choice with known preferences
Topics
Two alternatives: majority rule and May's theorem. Three of more alternatives: nonexistence of collective choice rule with desirable properties.
References

• Core material
• May, Kenneth O., "A set of independent necessary and sufficient conditions for simple majority decision", Econometrica, 20 (1952), 680–684
• Moulin, Hervé, Axioms of cooperative decision making, Cambridge University Press, Cambridge, 1988, Sections 9.1, 9.2, and 11.1
• Dasgupta, Partha and Maskin, Eric S., "On the robustness of majority rule", Journal of the European Economic Association, 6 (2008), 949–973
• Further reading
• Austen-Smith, David and Banks, Jeffrey S., Positive political theory I, University of Michigan Press, Ann Arbor, 1999
• Moulin, Hervé, Axioms of cooperative decision making, Cambridge University Press, Cambridge, 1988
• Foundations
• Arrow, Kenneth J., Social choice and individual values (Second edition), Yale University Press, New Haven, Connecticut, 1963
• Recent paper
• Krishna, Vijay and Morgan, John, "Majority rule and utilitarian welfare", American Economic Journal: Microeconomics, 7 (2015), 339–375

Week 2 (January 16)

Strategic voting
Topics
Single-peaked and single-crossing preferences. Multidimensional alternatives. Strategy-proofness of collective choice rules. Costless voting: Nash equilibrium and weak domination. Costly voting: pure Nash equilibria.
References

• Core material
• Austen-Smith, David and Banks, Jeffrey S., Positive political theory I, University of Michigan Press, Ann Arbor, 1999 (Discusses single-peaked preferences in Section 4.1 and order-restricted preferences (closely related to preferences satisfying the single-crossing property) in Section 4.5. The presentation is very formal.)
• Persson, Torsten and Tabellini, Guido, Political economics, MIT Press, Cambridge, Massachusetts, 2000, Sections 2.1 and 2.2 (single-peaked preferences and the single-crossing property)
• Gans, Joshua S. and Smart, Michael, "Majority voting with single-crossing preferences", Journal of Public Economics, 59 (1996), 219–237 (single-crossing property)
• Enelow, James M. and Hinich, Melvin J., The spatial theory of voting, Cambridge University Press, Cambridge, 1984, Chapter 3 (multidimensional alternatives)
• Mueller, Dennis C., Public Choice III, Cambridge University Press, Cambridge, 2003, Sections 5.1–5.5
• Moulin, Hervé, Axioms of cooperative decision making, Cambridge University Press, Cambridge, 1988, Section 10.2
• Palfrey, Thomas R. and Rosenthal, Howard, "A strategic calculus of voting", Public Choice, 41 (1983), 7–53
• Foundations
• Black, Duncan, The theory of committees and elections, Cambridge University Press, Cambridge, 1958
• Further reading
• Spenkuch, Jörg L., "(Ir)rational voters?", Unpublished paper, 2015 (empirical)
• Recent papers
• Bouton, Laurent, "A theory of strategic voting in runoff elections", American Economic Review, 103 (2013), 1248–1288
• Bouton, Laurent and Gratton, Gabriele, "Majority runoff elections: strategic voting and Duverger’s hypothesis", Theoretical Economics, 10 (2015), 283–314
• Fisher, Stephen D. and Myatt, David P., "Strategic voting in plurality rule elections", Unpublished paper, 2016
• Myatt, David P., "On the theory of strategic voting", Review of Economic Studies, 74 (2007), 255–281
• Martinelli, César, "Simple plurality versus plurality runoff with privately informed voters", Social Choice and Welfare, 19 (2002), 901–919

Week 3 (January 23)

Voting
Topics
Costly voting: models with individual uncertainty and aggregate uncertainty. Turnout. Group-based model. Ethical voters.
References

• Core material
• Palfrey, Thomas R. and Rosenthal, Howard, "Voter participation and strategic uncertainty", American Political Science Review, 79 (1985), 62–78
• Chamberlain, Gary and Rothschild, Michael, "A note on the probability of casting a decisive vote", Journal of Economic Theory, 25 (1981), 152–162
• Myatt, David P., "A theory of voter turnout", Unpublished paper, 2015
• Foundations
• Good, I. J. and Mayer, Lawrence S., "Estimating the efficacy of a vote", Behavioral Science, 20 (1975), 25–33
• Further reading
• Ledyard, John O., "The paradox of voting and candidate competition: a general equilibrium analysis", in Essays in contemporary fields of economics, eds. Horwich, George and Quirk, James P., Purdue University Press, West Lafayette, Indiana, 1981, 54–80
• Myerson, Roger B., "Population uncertainty and Poisson games", International Journal of Game Theory, 27 (1998), 375–392, Section 7
• Abramson, Paul R. and Aldrich, John H. and Paolino, Phil and Rohde, David W., "'Sophisticated' voting in the 1988 presidential primaries", American Political Science Review, 86 (1992), 55–69 (empirical)
• Kawai, Kei and Watanabe, Yasutora, "Inferring strategic voting", American Economic Review, 103 (2013), 624–662 (empirical)
• Blais, André, To vote or not to vote?, University of Pittsburgh Press, Pittsburgh, 2000
• Downs, Anthony, An economic theory of democracy, Harper and Row, New York, 1957
• Riker, William H. and Ordeshook, Peter C., "A theory of the calculus of voting", American Political Science Review, 62 (1969), 25–42
• Ferejohn, John A. and Fiorina, Morris P., "The paradox of not voting: a decision theoretic analysis", American Political Science Review, 68 (1974), 525–536
• Ujhelyi, Gergely and Chatterjee, Somdeep and Szabó, Andrea, "'None of the above' votes in India and the consumption utility of voting", Unpublished paper, 2016 (empirical)
• Recent papers
• Pogorelskiy, Kirill, "Correlated equilibria in voter turnout games", Unpublished paper, 2015 (job market paper, 2014)
• Börgers, Tilman, "Costly voting", American Economic Review, 94 (2004), 57–66
• Krasa, Stefan and Polborn, Mattias K., "Is mandatory voting better than voluntary voting?", Games and Economic Behavior, 66 (2009), 275–291
• Krishna, Vijay and Morgan, John, "Voluntary voting: costs and benefits", Journal of Economic Theory, 147 (2012), 2083–2123
• Cho, Seok-Ju, "Voting equilibria under proportional representation", American Political Science Review, 108 (2014), 281–296

Week 4 (January 30)

Voting: Group-based model. Ethical voters. Voting with asymmetric information.
References

• Core material
• Shachar, Ron and Nalebuff, Barry, "Follow the leader: theory and evidence on political participation", American Economic Review, 89 (1999), 525–547 (mainly empirical; theory in Section III)
• Feddersen, Timothy J. and Sandroni, Alvaro, "A theory of participation in elections", American Economic Review, 96 (2006), 1271–1282 (considers an example)
• Feddersen, Timothy J. and Sandroni, Alvaro, "The calculus of ethical voting", International Journal of Game Theory, 35 (2006), 1–25 (shows existence and uniqueness in general model)
• Feddersen, Timothy J. and Pesendorfer, Wolfgang, "The swing voter's curse", American Economic Review, 86 (1996), 408–424
• Osborne, Martin J. and Turner, Matthew A., "Cost benefit analyses versus referenda", Journal of Political Economy, 118 (2010), 156–187
• Further reading
• Morton, Rebecca B., "A group majority voting model of public good provision", Social Choice and Welfare, 4 (1987), 117–131
• Uhlaner, Carole J., "Rational turnout: the neglected role of groups", American Journal of Political Science, 33 (1989), 390–422
• Morton, Rebecca B., "Groups in rational turnout models", American Journal of Political Science, 35 (1991), 758–776
• Filer, John E. and Kenny, Lawrence W. and Morton, Rebecca B., "Redistribution, income, and voting", American Journal of Political Science, 37 (1993), 63–87
• Feddersen, Timothy J., "Rational choice theory and the paradox of not voting", Journal of Economic Perspectives, 18 (2004), 99–112
• Herrera, Helios and Martinelli, César, "Group formation and voter participation", Theoretical Economics, 1 (2006), 461–487
• Coate, Stephen and Conlin, Michael, "A group rule-utilitarian approach to voter turnout: theory and evidence", American Economic Review, 94 (2004), 1476–1504 (empirical)
• Levine, David K. and Palfrey, Thomas R., "The paradox of voter participation? A laboratory study", American Political Science Review, 101 (2007), 143–158 (experimental evidence)
• Feddersen, Timothy J. and Pesendorfer, Wolfgang, "Voting behavior and informative aggregation in elections with private information", Econometrica, 65 (1997), 1029–1058
• Feddersen, Timothy J. and Pesendorfer, Wolfgang, "Abstention in elections with asymmetric information and diverse preferences", American Political Science Review, 93 (1999), 381–398
• Recent papers
• Levine, David K. and Mattozzi, Andrea, "Voter participation with collusive parties", Unpublished paper, 2016
• Goertz, Johanna M. M. and Maniquet, François, "On the informational efficiency of simple scoring rules", Journal of Economic Theory, 146 (2011), 1464–1480
• Martinelli, César, "Would rational voters acquire costly information?", Journal of Economic Theory, 129 (2006), 225–251
• Herrera, Helios and Morelli, Massimo and Nunnari, Salvatore, "Turnout across democracies", American Journal of Political Science, (2016), 607–624
• Herrera, Helios and Morelli, Massimo and Palfrey, Thomas R., "Turnout and power sharing", Economic Journal, 124 (2014), F131–F162
• Herrera, Helios and Llorente-Saguer, Aniol and McMurray, Joseph C., "The marginal voter's curse", Unpublished paper, 2016
• McMurray, Joseph C., "Aggregating information by voting: the wisdom of the experts versus the wisdom of the masses", Review of Economic Studies, 80 (2013), 277–312

Week 5 (February 6)

Electoral competition
Topics
One-dimensional issue. Multidimensional issues. Candidates uncertain of citizens' preferences.
References

• Core material
• Davis, Otto A. and DeGroot, Morris H. and Hinich, Melvin J., "Social preference orderings and majority rule", Econometrica, 40 (1972), 147–157
• Calvert, Randall L., "Robustness of the multidimensional voting model: candidate motivations, uncertainty, and convergence", American Journal of Political Science, 29 (1985), 69–95
• Duggan, John, "A survey of equilibrium analysis in spatial models of elections", Unpublished paper, University of Rochester, 2014
• Roemer, John E., Political competition, Harvard University Press, Cambridge, Massachusetts, 2001, Section 5.3
• Foundations
• Hotelling, Harold, "Stability in competition", Economic Journal, 39 (1929), 41–57 (pp. 54–55)
• Downs, Anthony, An economic theory of democracy, Harper and Row, New York, 1957 (PhD thesis)
• Wittman, Donald, "Candidates with policy preferences: a dynamic model", Journal of Economic Theory, 14 (1977), 180–189
• Further reading
• Roemer, John E., "Political-economic equilibrium when parties represent constituents: The unidimensional case", Social Choice and Welfare, 14 (1997), 479–502
• Gerber, Elisabeth R. and Lewis, Jeffrey B., "Beyond the median: voter preferences, district heterogeneity, and political representation", Journal of Political Economy, 112 (2004), 1364–1383 (empirical)
• Recent papers
• Bernhardt, Dan and Duggan, John and Squintani, Francesco, "Electoral competition with privately-informed candidates", Games and Economic Behavior, 58 (2007), 1–29
• McMurray, Joseph C., "Polarization and pandering in a spatial model of common-value elections", Unpublished paper, 2016
• Kartik, Navin and Van Weelden, Richard and Wolton, Stephane, "Electoral ambiguity and political representation", Unpublished paper, 2016
• Ogden, Benjamin G., "The imperfect beliefs voting model", Unpublished paper, 2016 (job market paper)

Week 6 (February 13)

Electoral competition
Topics
Ideological candidates. Three or more candidates. Electing a legislature. Citizen-candidates. Dynamics.
References

• Core material
• Wittman, Donald, "Candidates with policy preferences: a dynamic model", Journal of Economic Theory, 14 (1977), 180–189
• Calvert, Randall L., "Robustness of the multidimensional voting model: candidate motivations, uncertainty, and convergence", American Journal of Political Science, 29 (1985), 69–95
• Duggan, John, "A survey of equilibrium analysis in spatial models of elections", Unpublished paper, University of Rochester, 2014
• Roemer, John E., Political competition, Harvard University Press, Cambridge, Massachusetts, 2001, Section 5.3
• Osborne, Martin J., "Candidate positioning and entry in a political competition", Games and Economic Behavior, 5 (1993), 133–151
• Osborne, Martin J. and Slivinski, Al, "A model of political competition with citizen-candidates", Quarterly Journal of Economics, 111 (1996), 65–96
• Besley, Timothy and Coate, Stephen, "An economic model of representative democracy", Quarterly Journal of Economics, 112 (1997), 85–114
• Further reading
• Austen-Smith, David, "Two-party competition with many constituencies", Mathematical Social Sciences, 7 (1984), 177–198
• Roemer, John E., Political competition, Harvard University Press, Cambridge, Massachusetts, 2001
• Roemer, John E., "Political-economic equilibrium when parties represent constituents: The unidimensional case", Social Choice and Welfare, 14 (1997), 479–502
• Brusco, Sandro and Dziubi\'nski, Marcin and Roy, Jaideep, "The Hotelling–Downs model with runoff voting", Games and Economic Behavior, 74 (2012), 447–469
• Fujiwara, Thomas, "A regression discontinuity test of strategic voting and Duverger's law", Quarterly Journal of Political Science, 6 (2011), 197–233 (empirical)
• Recent papers
• Buisseret, Peter, "Electoral competition with entry under non-majoritarian run-off rules", Unpublished paper, 2016
• Solow, Benjamin, "Aggregate uncertainty in runoff elections", Unpublished paper, 2016 (job market paper)
• Forand, Jean Guillaume, "Two-party competition with persistent policies", Journal of Economic Theory, 152 (2014), 64–91 (job market paper)
• Gul, Faruk and Pesendorfer, Wolfgang, "Policy competition in real-time", Unpublished paper, 2016
• Grosser, Jens and Palfrey, Thomas R., "Candidate entry and political polarization: an antimedian voter theorem", American Journal of Political Science, 58 (2014), 127–143

Week 7 (February 27)

Redistributive politics
References

• Core material
• Meltzer, Allan H. and Richard, Scott F., "A rational theory of the size of government", Journal of Political Economy, 89 (1981), 914–927
• Lindbeck, Assar and Weibull, Jörgen W., "Balanced-budget redistribution as the outcome of political competition", Public Choice, 52 (1987), 273–297
• Further reading
• Romer, Thomas, "Individual welfare, majority voting, and the properties of a linear income tax", Journal of Public Economics, 4 (1975), 163–185
• Roberts, Kevin W. S., "Voting over income tax schedules", Journal of Public Economics, 8 (1977), 329–340
• Roemer, John E., "The democratic political economy of progressive income taxation", Econometrica, 67 (1999), 1–19
• Bénabou, Roland, "Unequal societies: income distribution and the social contract", American Economic Review, 90 (2000), 96–129
• Roemer, John E., "Why the poor do not expropriate the rich: an old argument in new garb", Journal of Public Economics, 70 (1998), 399–424
• Campante, Filipe R., "Redistribution in a model of voting and campaign contributions", Journal of Public Economics, 95 (2011), 646–656
• Austen-Smith, David, "Redistributing income under proportional representation", Journal of Political Economy, 108 (2000), 1235–1269
• Iversen, Torben and Soskice, David, "Electoral institutions and the politics of coalitions: why some democracies redistribute more than others", American Political Science Review, 100 (2006), 165–181
• Dixit, Avinash and Londregan, John, "Ideology, tactics, and efficiency in redistributive politics", Quarterly Journal of Economics, 113 (1998), 497–529
• Londregan, John, "Political Income Distribution", in The Oxford Handbook of Political Economy, eds. Weingast, Barry R. and Wittman, Donald A., Oxford University Press, Oxford, 2006, 84–101
• Johansson, Eva, "Intergovernmental grants as a tactical instrument: empirical evidence from Swedish municipalities", Journal of Public Economics, 87 (2003), 883–915 (empirical)
• Ansolabehere, Stephen and Snyder, James M., "Party control of state government and the distribution of public expenditures", Scandinavian Journal of Economics, 108 (2006), 547–569 (empirical)
• Recent papers
• Feddersen, Timothy J. and Gul, Faruk, "Polarization and income inequality: a dynamic model of unequal democracy", Unpublished paper, 2013
• Vlaicu, Razvan, "Inequality, participation, and polarization", Unpublished paper, 2016

Week 8 (March 6)

Campaign finance
References

• Core material
• Grossman, Gene M. and Helpman, Elhanan, "Electoral competition and special interest politics", Review of Economic Studies, 63 (1996), 265–286
• Wittman, Donald, "How pressure groups activate voters and move candidates closer to the median", Economic Journal, 119 (2009), 1324–1343
• Prat, Andrea, "Campaign advertising and voter welfare", Review of Economic Studies, 69 (2002), 999–1017
• Further reading
• Coate, Stephen, "Pareto-improving campaign finance policy", American Economic Review, 94 (2004), 628–655
• Coate, Stephen, "Political competition with campaign contributions and informative advertising", Journal of the European Economic Association, 2 (2004), 772–804
• Ashworth, Scott, "Campaign finance and voter welfare with entrenched incumbents", American Political Science Review, 100 (2006), 55–68
• DellaVigna, Stefano and Gentzkow, Matthew, "Persuasion: empirical evidence", Annual Review of Economics, 2 (2010), 643–669, section 2.2 (empirical)
• Spenkuch, Jörg L. and Toniatti, David, "Political advertising and election outcomes", Unpublished paper, 2016 (empirical)
• Recent papers
• Snyder, James M. and Ting, Michael M., "Interest groups and the electoral control of politicians", Journal of Public Economics, 92 (2008), 482–500
• Carter, Jennifer and Patty, John W., "Valence and campaigns", American Journal of Political Science, 59 (2015), 825–840
• Li, Hao and Li, Wei, "Misinformation", International Economic Review, 54 (2013), 253–277

Week 9 (March 13)

Dynamic models: political agency
References

• Core material
• Duggan, John and Martinelli, César, "The political economy of dynamic elections: a survey and some new results", Unpublished paper (shorter version to appear in Journal of Economic Literature), 2015
• Maskin, Eric S. and Tirole, Jean, "The politician and the judge: accountability in government", American Economic Review, 94 (2004), 1034–1054
• Precursors
• Barro, Robert J., "The control of politicians: an economic model", Public Choice, 14 (1973), 19–42
• Ferejohn, John A., "Incumbent performance and electoral control", Public Choice, 50 (1986),
• Further reading
• Banks, Jeffrey S. and Sundaram, Rangarajan K., "Optimal retention in agency problems", Journal of Economic Theory, 82 (1998), 293–323
• Bernhardt, Dan and Dubey, Sangita and Hughson, Eric, "Term limits and pork barrel politics", Journal of Public Economics, 88 (2004), 2383–2422
• Besley, Timothy, Principled agents?, Oxford University Press, Oxford, 2006, Chapters 3 and 4
• Besley, Timothy and Case, Anne, "Does economic accountability affect economic policy choice? Evidence from gubernatorial term limits", Quarterly Journal of Economics, 110 (1995), 769–798 (empirical)
• Recent papers
• Bernhardt, Dan and Campuzano, Larissa and Squintani, Francesco and Câmara, Odilon, "On the benefits of party competition", Games and Economic Behavior, 66 (2009), 685–707
• Bernhardt, Dan and Câmara, Odilon and Squintani, Francesco, "Competence and ideology", Review of Economic Studies, 78 (2011), 487–522
• Van Weelden, Richard, "Candidates, credibility, and re-election incentives", Review of Economic Studies, 80 (2013), 1622–1651 (job market paper)
• Duggan, John, "Term limits and bounds on policy responsiveness in dynamic elections", Unpublished paper, 2016
• Kartik, Navin and Van Weelden, Richard, "Reputation, term limits, and incumbency (dis)advantage", Unpublished paper, 2016
• Bils, Peter and Duggan, John and John, Gleason, "Lobbying and policy extremism in repeated elections", Unpublished paper, 2016
• Acemoglu, Daron and Egorov, Georgy and Sonin, Konstantin, "A political theory of populism", Quarterly Journal of Economics, 128 (2013), 771–805

Week 10 (March 20)

Legislative bargaining and vote buying
References

• Core material
• Baron, David P. and Ferejohn, John A., "Bargaining in legislatures", American Political Science Review, 83 (1989), 1181–1206
• Eraslan, Hülya, "Uniqueness of stationary equilibrium payoffs in the Baron–Ferejohn model", Journal of Economic Theory, 103 (2002), 11–30
• Groseclose, Tim and Snyder, James M., "Buying supermajorities", American Political Science Review, 90 (1996), 303–315
• Dekel, Eddie and Jackson, Matthew O. and Wolinsky, Asher, "Vote buying: general elections", Journal of Political Economy, 116 (2008), 351–380
• Dekel, Eddie and Jackson, Matthew O. and Wolinsky, Asher, "Vote buying: legislatures and lobbying", Quarterly Journal of Political Science, 4 (2009), 103–128
• Further reading
• Banks, Jeffrey S. and Duggan, John, "A bargaining model of collective choice", American Political Science Review, 94 (2000), 73–88
• Cho, Seok-ju and Duggan, John, "Bargaining foundations of the median voter theorem", Journal of Economic Theory, 144 (2009), 851–868
• Recent papers
• Ali, S. Nageeb and Bernheim, B. Douglas and Fan, Xiaochen, "Predictability and power in legislative bargaining", Unpublished paper, 2014
• Baron, David P. and Bowen, T. Renee, "Dynamic coalitions", Unpublished paper, 2015
• Hanusch, Marek and Keefer, Philip and Vlaicu, Razvan, "Vote buying or campaign promises? Electoral strategies when party credibility is limited", Unpublished paper, 2016

Week 11 (March 27)

Franchise extension and regime change
References

• Core material
• Acemoglu, Daron and Robinson, James A., "Why did the West extend the franchise? Democracy, inequality, and growth in historical perspective", Quarterly Journal of Economics, 115 (2000), 1167–1199
• Lizzeri, Alessandro and Persico, Nicola, "Why did the elites extend the suffrage? Democracy and the scope of government, with an application to Britain's 'Age of Reform'", Quarterly Journal of Economics, 119 (2004), 707–765
• Fearon, James D., "Self-enforcing democracy", Quarterly Journal of Economics, 126 (2011), 1661–1708
• Further reading
• Acemoglu, Daron and Robinson, James A., "A theory of political transitions", American Economic Review, 91 (2001), 938–963
• Bourguignon, François and Verdier, Thierry, "Oligarchy, democracy, inequality, and growth", Journal of Development Economics, 62 (2000), 285–313
• Przeworski, Adam, "Conquered or granted? A history of suffrage extensions", British Journal of Political Science, 39 (2009), 291–321
• Recent papers
• Acemoglu, Daron and Egorov, Georgy and Sonin, Konstantin, "Political economy in a changing world", Journal of Political Economy, 123 (2015), 1038–1086
• Barberà, Salvador and Jackson, Matthew O., "A model of protests, revolution, and information", Unpublished paper, 2016