The economic analysis is a basic prerequisite to describe and evaluate social systems. The microeconomic theory analyses these issues starting at the level of individual decisions and their interaction.

The lectures in basic- and advanced studies of the Bachelor and Master programs concentrate on this topic at the appropriate level.

Microeconomics 1analyses the behavior of individual households and firms and focuses on the economic equlibrium in competitive and monopolistic markets as well as allocative efficiency.

Based on Microeconomics 1, Microeconomics 2 studies the causes and effects of imperfect markets and market failure and dedicates full attention to the question whether and how the induced deadweight loss can be reduced.

Price Theory looks into the details of individual decisions and the allocation of resources by market forces. It also analyses price formation on imperfect markets and focuses on the disclosure of information via equilibrium prices.

Introduction to Game Theory gives a review of strategic behavior, i.e. individual behavior in situations, in which an individuals` success in making choices depends on the choices of others. Complexity and problems of individual decisions are discussed by means of everyday examples. The conflict between individual and collective rationality is one of the important aspects of game theory.

Decision Theory is one of the compulsory modules of the Master program. Decision theory analyses the process of decision making under uncertainty and interrogates the impacts of imperfect information on strategic decisions. This lecture addresses the issues of signaling and screening on the labor-, insurance- and credit markets among other subjects.

New Developments in Microeconomics discusses the key concepts of scientific methodology and approaches by means of the newest research findings.

Microeconomics and in particular Game Theory provide a strong methodological basis not only for economic analysis, but also for many other fields, for example decision-making in firms as well as describing and evaluating political decisions.

Mastering the language of economics

Microeconomics I deals with fundamental terms and definitions of consumer theory and production theory as well as welfare analyses of competitive and monopolistic markets.

In the course of this lecture, students need to be able to identify these terms. They should try to explain the terms and to find real-world examples in order to apply economic theory.

Mastering the methods of economics

In the course of this lecture we analyse simple decision problems and find equilibria. Basic mathematical methods e.g. derivation, power calculus and solving systems of equations, are presupposed.

We developed our own online-learning-assistant, JACK, as a support tool. Students can practice and master the concepts using step-by-step tutorials. Advanced exercises are used to test student knowledge. JACK gives helpful feedback, concerning students learning progress.

Understanding key theories

Students should be able to apply and comment on the key theories of the subject, like consumer theory (consumer decision, intertemporal consumer choice, individual labour supply), production theory (cost minimization and profit maximization), market equilibrium and welfare theory.

In addition to the lecture, all students have access to short videos, lecture scripts and literature excerpts. The students' progress can be assessed using clarification questions.

Application of the theory to unknown problems

Using the aforementioned methods, students need to be able to apply this theoretical knowledge to new problems. These questions are slight variations on the questions previously discussed in the lessons accompanying this lecture. This course aims to prepare the students for future problems concerning their studies in general as well as the operational and scientific practice.

Summary

o   Professional expertise: Language, theories, interpretations, application/implementation

o   Methodical expertise: Application of the language, analysis of the models, interpretation of tables and charts, creating tables and charts

o   Self-competence: time management, identification of one's own deficits, finding solutions to resolve these deficits, literary studies

o   Social competence: discussing the solutions as well as one's own problems, critical analyses, creating and organizing study groups, discussions on Moodle or on Facebook

The substantial models of interactive decisions will be presented based on the fundamentals of decision making in certain and uncertain environments. Furthermore substantial concepts of equilibria in markets of asymmetrical information will be discussed.

Learning Targets

The analysis of individual decision making is the basis of economic theory. Specifically the examination and analysis of questions like “How do individuals make decisions?”, “How are decisions coordinated?” and “What useful information can be collected out of these decisions? (for example regarding the person’s preferences, their information or the person’s decision-making-scope)” are part of the analysis of individual decision making.

The insights of decision theory are fundamental elements of economic modelling and useful tools in everyday life as well as professional practice. This knowledge helps adopting a structured approach to decision making as well as predicting the decisions of others. Equally important, decision theory gives tools to reveal preferences and design economic interaction.

Outline

1.     Introduction

2.     Individual Decision Making

3.     General Equilibrium

4.     Collective Decision Making

5.     Interactive Decision Theory

6.     Bayesian Games

Literature

o    Binmore, Rational Decisions, Princeton 2011

o    Jehle & Reny, Advanced Microeconomic Theory, Prentice Hall 2011