Economics of Leadership

Upon completion of the course, students shall be able to:

• use microeconomic theory and game theory to analyse information and motivation problems in different types of institutions.
• explain the importance of asymmetric information for the effectiveness of an institution.
• explain how risk and uncertainty associated with decision-making can be analysed.
• explain the difference between “hidden action” problems and “hidden characteristics” problems, and explain how to work to solve the respective problems.
• analyse how contracts, or different ways of organising a business, can be used to handle incentive problems in companies.
• analyse the problems with public goods and how incentives can be used to clarify individual actors’ valuation of these goods.
• explain how being able to pair different actors with each other, so called matching, and how the existence of networks can affect an efficient allocation of resources.
• explain how pricing and property rights affect an efficient allocation of resources.
• discuss the importance of cultural differences in the design of institutions and incentives.
  

The course deals with analytical models and tools that are used to understand and solve leadership problems in different types of institutions. Institution in this context covers various types of organised activities, both companies and public administration, where motivation and information are needed to coordinate the activities of individual actors. The course is based on microeconomic theory and utilises game theory to solve practical problems. A brief introduction to these areas is given and then applied to analyse incentive problems that may arise in different types of organised activities.

Assignments and seminars (3 credits) and a written exam (4.5 credits).

The course comprises lectures, seminars and mathematical exercises.

The Swedish grades U–VG.

Assignments U-G.
The written exam will determine the final grade.

Replaces NA3009.