Microeconomics II: Market Imperfections and Strategic Interaction, Group B-C2

Market economics are inspired by the idea of decentralized decision making: Each individual pursues independently its own goals, but an "invisible hand" in the market interaction ensures an overall desirable outcome. Students will learn, how this "invisible hand" works in competitive markets and why and in which respect the outcome is socially optimal. While perfect competition is useful as a rigorous foundation for why often it is the case that transactions are best organized via markets, in reality there are many deviations from this benchmark case. We discuss the most important ones, namely (1) market power (using the core instrument of (micro-) economics, namely game theory, (3) externalities and public goods, and (3) asymmetric information,