03-09-2014

Course Manual

Period 1
2014/2015

Intermediate Microeconomics,Games and

Behaviour
ECB2VMIE
Drs. L.M. Keijzer
(Course coordinator)
Prof. dr. S. Rosenkranz

Lecturers:
F. Heinicke MSc
Drs. P.D. van der Meer
Drs. L.M. Keijzer
Drs. O. Onemu MSc

Drs. S. Rezaei Khavas MSc

Prof. dr. S .Rosenkranz

Intermediate Microeconomics 2014-2015: Course manual general part

Table of contents
Microeconomics, Games and Behaviour............................................................................3
Position in the curriculum...................................................................................................3
Prerequisites.........................................................................................................................3
Course content......................................................................................................................3
Principles..............................................................................................................................4
Learning objectives..............................................................................................................4
Essential skills......................................................................................................................5
Work format.........................................................................................................................5
Course repeaters...................................................................................................................6
Time table.............................................................................................................................7
Assessment method...............................................................................................................8
Effort requirements..............................................................................................................8
The relationship between the effort requirements and supplementary and
replacement retake examinations............................................................................9
Feedback.............................................................................................................................10
Course materials.................................................................................................................10
Language of instruction.....................................................................................................10
Tasks...................................................................................................................................10

Intermediate Microeconomics 2014-2015: Course manual general part

Intermediate Microeconomics
Code:
Period:
Timeslot:
Level:
Credits:
Course type:
Chair:
Coordinator:
Instructors:

ECB2VMIE
1
A+D
2
7.5 ECTS
Required
Theoretical Microeconomics
Drs. L.M. Keijzer (Linda, L.M.Keijzer@uu.nl)
F. Heinicke MSc (Franziska, F.Heinicke@uu.nl)
Drs. P.D. van der Meer (Peter, P.D.vanderMeer@uu.nl)
Drs. L.M. Keijzer (Linda, L.M.Keijzer@uu.nl)
O. Onemu MSc (Oke, O.Onemu@uu.nl)
S. Rezaei Khavas MSc (Sarah, T.RezaeiKhavas@uu.nl)
Prof. Dr. S. Rosenkranz (Stephanie, S.Rosenkranz@uu.nl)

The instructors can be reached via e-mail: microeconomicsbachelor@uu.nl

All students are strongly advised to visit the courses website regularly for supplementary
information and news. The website can be found at http://uu.blackboard.com/
Position within the curriculum
Required in the bachelor programme in Economics.
Prerequisites
Knowledge assumed: knowledge of microeconomics at the level the course Microeconomics &
Institutions or the course Principles of Microeconomics, and knowledge of mathematics at the
level of the course Mathematics.
Course contents
When does it make sense for a firm to introduce a variable-wage payment scheme? Does the set
of social norms and values one is confronted with increase or decrease ones reactions to changes
in prices? Why do people procrastinate? How do oligopolists react to each other? Is altruism
important in explaining choices in strategic settings? Such questions, where economic decisionmaking is analysed in its institutional and psychological context, will be treated in this course, in
which a profound treatment will be provided of modern microeconomics. Special attention is
paid to strategic interaction (game theory) and the consequences of adding psychologically more
realistic assumptions about behaviour to the mainstream microeconomic model (behavioural
economics).
Students are supposed to have knowledge of microeconomics at the level of the course
Microeconomics & Institutions. The course Intermediate Microeconomics, Games and
Behaviour analyses consumer and producer behaviour more in-depth. Next to this it includes the
analysis of situations where uncertainty, strategically interacting actors (game theory) and
asymmetric information play a role. Also attention will be paid to the way microeconomics, as a
Intermediate Microeconomics 2014-2015: Course manual general part

branch of rational choice theory, can be used as a framework to integrate elements of other
disciplines into the economic approach to make interdisciplinary analyses of social (including
eeconomic) problems.
Principles

Microeconomics forms (together with macroeconomics) the core of (general) economics and
is addressed in all issues with a (general) economic aspect.
The courses Microeconomics & Institutions and Macroeconomics act as the basis for the
(general) economic follow-up courses and demonstrate how these follow-up courses are
connected (vertical integration). Next to this, microeconomics is a formalised variant of a
more general theoretical approach known as rational-choice theory. Rational-choice theory
forms a fertile framework for the integration of (general) economics with (parts of) business
economics and with other disciplines, including in particular geography, history, law,
psychology and social sciences (horizontal integration).
The most important line of approach that is addressed is that of mainstream microeconomics,
or rather the neo-classical price theory and the modern developments that continue to build
upon it. Starting from a number of simplifying assumptions, neo-classical price theory
studies the interactions between supply and demand in markets, and especially goes into the
co-ordinating role of the price mechanism. The modern developments addressed in the course
Intermediate Microeconomics, Games and Behaviour concern, firstly, employing game
theory as an instrument to study the interactions between actors (including oligopolists).
Secondly, they concern - in accordance with the method of decreasing abstraction which
characterises economic science - letting go of several of the above-mentioned simplified
assumptions: in particular the introduction of uncertainty, and asymmetric information (and
studying phenomena such as adverse selection and moral hazard). Thirdly, attention is given
to the opening black box of the company (esp. the principal-agent theory). This acts as an
illustration of the opening of the black box of the government, that of the labour unions,
that of the family/household, etc., such as is now accepted in microeconomics. This also acts
as an illustration of the border that is evaporating between the market and the organisation as
a co-ordination mechanism. Besides, the modern developments in mainstream
microeconomics rightly demonstrate how the outcomes of market processes are dependent on
the institutional context in which markets function and how with these there is a fluid
transition from microeconomics to (neo-)institutional economics. The most distinguishing
difference between these is formed by the assumed exogeneity (in mainstream
microeconomics) and/or the assumed endogeneity (in (neo-) institutional economics, with the
minimisation of transaction costs as the central explanation) of the institutions themselves.
Economics is confronted with two kinds of limits: limits with respect to the field of
application and limits with respect to the economic approach itself. These limits are like
borders between economics on the one hand and other disciplines on the other hand.
Crossing borders with respect to the field of application concerns the export of the economic
approach to new areas that previously were analysed only by other disciplines like sociology,
psychology and criminology. Actually, by occupying these new areas the borders are shifted
outwards. Crossing borders with respect to the economic approach concerns the import of
elements of other disciplines into the economic toolbox. The course explicitly addresses these
export and import elements, which are on the frontier of economic science.

Learning objectives
At the end of the course the student should be able to:

Intermediate Microeconomics 2014-2015: Course manual general part

reason in terms of scarcity, relative prices, income and substitution effects, demand and
supply, markets and market imperfections, including in situations where uncertainty,
interacting actors and asymmetric information play a role;
apply the microeconomic approach to problems that traditionally are studied by other
disciplines;
to understand how microeconomics can be used as a framework to integrate elements of
other disciplines into the economic approach to make interdisciplinary analyses of social
(including economic) problems;
recognise microeconomic aspects in social problems and to analyse these aspects with a
modelling approach (graphically as well as algebraically) (essential skills academic
reasoning and working and problem solving).

Essential skills
The course Intermediate Microeconomics covers two essential skills: academic reasoning and
working and problem solving.
With respect to the skill academic reasoning and working four aspects will be covered:
thinking in theory terms;
asking critical questions;
thinking from different perspectives;
identifying links between problems.
With respect to the skill problem solving four aspects will be covered:
recognising and analysing the problem (what is being asked);
reworking the problem in sub-steps (know how to find the answer);
executing the routine steps/computations (do it);
verifying the results (check/evaluate your results.).
Extensive information on the definitions of these essential skills can be found in the texts on
essential skills, published in a reader by USE.
In the course, the skills will be covered by various problems to be discussed in the tutorials. In
the discussion of the solutions to the problems, the various aspects of the skills will be illustrated.
Of course, not every single problem will cover all aspects of both skills, but in total all aspects
will be sufficiently covered by the material offered in the tutorials. Also, in the examples of the
exams that will be provided through Blackboard the assessment of the skills will be illustrated
Work format
The course Intermediate Microeconomics consists of two cycles of five and four course weeks,
respectively. In the first four (weeks 37, 38, 39 and 40) and three (weeks 42, 43 and 44) weeks of
each cycle there is a two-hour lecture and there are two two-hour tutorials per instruction week.
In addition, there is continuous access to the interactive computer lab. In the fifth course week
(week 41) and fourth course week (week 45) of the respective cycles, there is an exam. In week
41 and 45 there will be no lecture and tutorials. The exam in week 41 captures the material of
the first four course weeks while the exam in week 45 captures all material.

Intermediate Microeconomics 2014-2015: Course manual general part

Beginning in the first course week the assigned material should be studied in
preparation for the instruction.
If you fall behind in reading and exercises in a course such as microeconomics, it becomes much
more difficult to catch up at a later stage.
Participation in the tutorials only makes sense if the material has been studied
beforehand and the tutorial exercises have been done!

Lectures: main concepts, context, discussion of the more demanding parts of the literature.
Tutorials (maximum of about 25 students): to translate into technical terms and analyse (with
the help of insights gained from studying the materials, the lectures, and the interactive
computer lab) issues from the business world and society.
For an overview see the timetable below.

Course repeaters
Students who didnt pass the course with a sufficient grade and have to repeat the course, have to
enter the repeater version of this course.
With respect to the teaching format, this implies that repeaters:
can attend the regular lectures;
can participate in the tutorial for repeaters (Q&A, especially focused on the new material in
this course once a week on Friday afternoon from 13.15-15hrs) if the student is enrolled for
this tutorial;
during the instruction weeks can ask questions by e-mail (microeconomicsbachelor@uu.nl)
about the material to be studied hints to answer these questions will be given within three
working days provided that the student delivered a preliminary answer showing that he/she
has put sufficient effort in attempting to answer the question him/herself;
do NOT have an effort requirement.
With respect to the assessment method, repeaters:
have to participate in the Mid-term Exam;
have to participate in the End-term Exam;
have a possibility for a supplementary or replacement exam (on the normal conditions with
respect to the minimum grade).
NB As a repeater, please make sure that you have available:
(1) The answers to the tutorial questions as presented in the tutorials (from your own notes from a
previous course or from notes of fellow-students);
(2) The notes made by you (or by fellow-students) during the lectures;

Intermediate Microeconomics 2014-2015: Course manual general part

Timetable
Course
week
1

Calen- Topic
dar
week
37
Uncertainty and time

Format Literature/exercises
L

Ch5, Ch.15, article course week 1, Instruction

Ch5, Ch.15. article course week 1, Instruction,

lecture slides, exercises course week 1
Example effort requirement test

ICT
2

38

Strategic interaction I

L
T
ICT

39

40

5
6

Strategic interaction II

41

Ch 12, Ch13 (excluding 13.8), articles course

week 3, Instruction, Extensions to Pindyck &
Rubinfeld,
T
Ch 12, Ch13 (excluding 13.8), articles course
week 3, Instruction, Extensions to Pindyck &
Rubinfeld, exercises, lecture slides
ICT
Effort requirement test course weeks 1 and 2
Information I
Ch 13, Section 13.8, articles course week 4,
L
Instruction, Extensions to Pindyck &
Rubinfeld
T
Ch 13, Section 13.8, articles course week 4,
Instruction, Extensions to Pindyck &
Rubinfeld, exercises, lecture slides
ICT
Effort requirement test course weeks 3 and 4
Mid-term exam on material course weeks 1-4

42

Information II

L
T

43

Social context

ICT
L
T

44

Non-standard preferences

45

Ch17, articles course week 6, Instruction

Ch17, articles course week 6, Instruction,
exercises, lecture slides
Effort requirement test course week 6
Articles course week 7, Instruction

ICT

Articles instruction week 7, Instruction,

lectures slides, exercises
Effort requirement test course weeks 1,2 3,4,6

Articles course week 8, Instruction,

Articles course week 8, Instruction, lecture

slides, exercises
Effort requirement test course weeks 1,2,3,4,6

ICT
9

Ch12, Ch13, Instruction, article course week

2, Extensions to Pindyck & Rubinfeld
Ch12, Ch13, Instruction, exercises, lecture
slides, articles week 2, Extensions to Pindyck
& Rubinfeld
Example effort requirement test

End-term exam on material course weeks 1-4 and 6-8

Intermediate Microeconomics 2014-2015: Course manual general part

Assessment method
The assessment consists of the following components:
Course week 5: mid-term exam on the course material from course weeks 1-4 (40% of the
final grade, multiple choice questions);
Course week 9: final exam on the material from course weeks 1-8 (60% of the final grade;
open questions).
These are closed book exams.
The essential skills academic reasoning and working and problem solving are tested in both
examinations.
NB Please read the remarks on the front page of the exams carefully (see also the example
exams that are on Blackboard), including: Programmable calculators and graphing
calculators are forbidden in the examination room.
Please make sure that at the examination you have a simple pocket calculator available that
next to the common functions enables you to raise x to the power of y.
Effort requirements
In course weeks 3 and 4 and course weeks 6 through 8, a test on the material to be studied in one
or more of the instruction weeks has to be taken. The test will be available via MyLabsPlus on
the first day of the course week concerned. The effort requirement is fulfilled if you score on
average at least 60% over all tests. In course weeks 1 and 2 there will be example tests to practise
with. Please make sure that you log in during the test weeks so that you are sure that you can
indeed log in and do the tests.
NB 1. It goes without saying that, unless explicitly indicated otherwise, all assignments, papers,
etc. that have to be handed in and that have a formal status, like, as in this case, being part
of the effort requirement, should be made on an individual basis.
NB 2. There is no requirement with respect to attending the lectures or the tutorials.
The relationship between the effort requirements and supplementary and replacement
retake examinations
This procedure is based upon the Education and Examinations Regulations of the Bachelors
Programme in Economics 2013-2014:
1. If the student has fulfilled all obligations to perform to the best of his or her ability during
the course, and he or she is nonetheless given a failing mark, but the final mark is at least a
4.0 (not rounded up), he or she will be given a once-only possibility to sit an supplementary
or replacement retake examination.
2. The opportunity to take a supplementary retake examination will only be available to
students who have met the requirements prescribed in section 1 above and have earned a
grade 5 (not rounded up). The maximum grade after a supplementary retake examination is
6.
3. If the student has met the requirements prescribed in section 1 above and has earned a grade
with a minimum of 4 (not rounded up), the student will have the opportunity to take a
replacement retake examination. The replacement retake examination grade earned will be
the new result.

Intermediate Microeconomics 2014-2015: Course manual general part

Concretely, as it applies to the course Intermediate Microeconomics, Games and Behaviour:

1.
At the same time as the final grade for the course is made known, in the case that an
insufficient grade has been awarded, the student has a right to a supplementary or
replacement examination and in the case of right to a supplementary examination it will
be announced over which part of the material the supplementary examination will be.
2. He or she who has a right to take a supplementary examination, has according to the
sections listed above in the Education and Examination Regulations, also the right to take a
replacement examination. At the beginning of the supplementary/replacement examination
the student who has a right to the supplementary examination must indicate whether he or
she chooses to take the supplementary or replacement examination;
3. The supplementary examination covers:
- either the material from instruction weeks 1 and 2,
- or the material from instruction weeks 3 and 4,
- or the material from instruction weeks 6,
- or the material from instruction weeks 7 and 8.
4. In principle (so not without reservation!) the supplementary and replacement examinations
take place in calendar week 5.
PLEASE NOTE:
Due to the guideline of the University Board, from September 2006 onward only students who
have a final grade of at least 4 can do a retake. By a grade of 4 the University Board means a
grade that has not been rounded off, i.e. a 3,51 is not a 4. Also the grade of 5 mentioned above
is the grade before rounding off.
Feedback
Students will receive feedback in the following ways:
Feedback in the tutorials with respect to the exercises prepared at home;
Feedback on MyEconLabPlus with respect to the test prepared for the effort requirements;
Feedback on their answers to the questions of the exams by the fully written-out model
answers (published on Blackboard).
Course materials

Pindyck, R.S. & Rubinfeld, D.L. (2012( 2013)). Microeconomics. 8th edition. Upper
Saddle River, N.J: Prentice Hall; ISBN 9781783651511 CU.UU USE Microecon MLP 2013.
Course manual Intermediate Microeconomics 2014/2015 and other course materials
published on the courses website: http://uu.blackboard.com/ (including reading guides,
instruction, exercises, example exams).
The articles that are referred to in the Instructions (full texts available via UU library
(Omega)).
All material treated in the lectures.
Instruction
Texts on essential skills, published in a reader by USE.

Language of instruction
English

Intermediate Microeconomics 2014-2015: Course manual general part

Tasks
See the instruction on a weekly basis on the courses website.
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Intermediate Microeconomics 2014-2015: Course manual general part

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