ECONOMICS OF RISK AND AGENT BEHAVIOUR

This is a core course that completes the advanced study of economics within the DABS Master by providing knowledge and competences to deal with complex issues of choices under uncertainty and risky environment as developed in Economics. It has two parts: the first part provides a graduate-level introduction to approaches to risk and the role of strategic interaction. The second part deals with the relevant knowledge behaviour of agents, household finance and the role of information for individuals and firms, by providing examples in several domains that make use of big data.

a. Knowledge and understanding:
a.1) Ability to understand models of decision under uncertainty and markets
a.2) Ability to discern different approaches to risk with big data
a.3) Ability to conceptualise and apply strategic choices of economic agents.
a.4) Ability to understand formal models of information and the impact
a.5) Ability to conceptualise the role of information in economics

b) Applying knowledge and understanding:
b.1) Ability to become familiar with different kinds of models of economies under risk.
b.2) Ability to apply models for strategic interactions.
b.3) Ability to apply and find solutions under uncertainty.
b.4) Ability to apply and find solutions with asymmetric information

c) Making judgements
c.1) Ability to judge and discuss trade-offs in markets with risk.
c.2) Ability to judge and discuss trade-offs in strategic choices.
c.3) Ability to judge and discuss trade-offs in the context of markets affected by asymmetric information.

d) Lifelong learning skills
d.1) Master complex problems with risk.
d.2) Master assumptions of economic problems with big data
d.3) Ability to make use of new tools and adapt competences.

This course places the emphasis on economic issues which deal with risk and information. There are no formal prerequisites, but successful completion of standard undergraduate course in microeconomics and basic knowledge of optimisation and probability is highly recommended.

Decision making under uncertainty.
The expected utility model, risk aversion, risk premium, the structure and value of information.
How to insure against risks.
The role of information in economics: using big data.
Markets with symmetric information and asymmetric information. Adverse selection and moral hazard.
Elements of Household finance

The course is based on case studies: a presentation of the lectures will be provided on slides at the dedicated moodle platform, however elements of the course content are also in:

Giacomo Bonanno, The Economics of Uncertainty and Insurance, University of California, Davis, ISBN: 9781796685015, http://www.econ.ucdavis.edu/faculty/bonanno/
Hugh Gravelle, Ray Rees, Microeconomics, 3rd Edition2004, Financial Times Press, Chapters: 17-20

Grading is based on the work done during the years (homeworks and study groups) and on a final written exam. In particular for those who intend to develop a "mini-project", with a written report of approximately 8 pages, the final grade will result from the weighted average of the exam grade (70%) and the project grade (30%). For those who do not intend to develop the mini-project the grade is entirely that of the exam.
For the written assignment of the exam, this is made up of 4 or 5 questions based on the topics covered in class and constructed with increasing difficulty: each question can guarantee a minimum score if the first 40% (or the first 35%) of the question is completed. So if the student, on average, answers the first 40% of all the questions he certainly has a passing score of 18/30. Students who complete 100% of all questions receive 30 points cum laude. Grades between 18 and 30 depend on which part of the questions are validly completed. The questions report the scores divided into sub-scores for greater transparency.

The course is strongly based on practical experience and case studies. Lectures will support the organization of the material

English

Grading is based on the work done during the years (homeworks and study groups) and on a final written exam

written