DRE 7005 Incentives and Contracts in Markets with Search Frictions

APPLIES TO ACADEMIC YEAR 2014/2015

DRE 7005 Incentives and Contracts in Markets with Search Frictions


Responsible for the course
Espen R Moen

Department
Department of Economics

Term
According to study plan

ECTS Credits
6

Language of instruction
English

Introduction
Please note that this course will be revised before it is offered again.

The aim of the course is to give the students an introduction to search theory, particularly in a labor market context, and the interplay between private information and search frictions in the market.


    Learning outcome
    The course aims at taking the students to the research frontier on topics related to incentives in search models

    Prerequisites
    Admission to a PhD Programme is a general requirement for participation in PhD courses at BI Norwegian Business School. The course builds on DRE 4010 Topics in Microeconomics and DRE 7003 Advanced Microeconomics.

    External candidates are kindly asked to attach confirmation of admission to a PhD programme when signing up for a course with the doctoral administration. Other candidates may be allowed to sit in on courses by approval of the courseleader. Sitting in on courses does not permit registration for courses, handing in exams or gaining credits for the course. Course certificates or conformation letters will not be issued for sitting in on courses


    Compulsory reading
    Books:
    Pissarides, Christopher A. 2000. Equilibrium unemployment theory. 2nd ed. MIT press. Selected chapters

    Articles:
    Burdett, K. and Coles, M. 2003. Equilibrium Wage Tenure Contracts. Econometrica. ·71. 1377-1404.
    Burdett, K. and Mortensen, D.T. 1998. Wage Differentials, Employer Size, and Unemployment. International Economic Review. 39. 257-273.
    Guerrieri, V. 2008. Inefficient Unemployment Dynamics under Asymmetric. Journal of Political Economy. 667-708
    Guerrieri, V., Shimer, R., and Wright, R.. 2009. Adverse Selection in Competitive Search Equilibrium. Econometrica. 78. 1823-1862
    Menzio, G. and Moen, E.R.. 2010. Worker Replacement. Journal of Monetary Economics. 57. 623-636
    Moen, E. R., and Rosén, Å. 2004. Does Poaching Distort Training. Review if Economic Studies. 71. 1143-1162.
    Moen, E.R., and and Rosen, Å (2011). 2011. Incentives in Competititve Search Equilibrium. Review of Economic Studies. 733-761
    Moen, E.R., and and Rosen, Å. 2005. Incentive Contracts and Adverse Selection. Scandinavian Journal of Economics. 107. 279-298
    Moen, E.R., and and Rosen, Å. 2011. On-the-job Search and Moral Hazard. Unpublished
    Moen, E.R., and Rosen, Å. 2006. Equilibrium Incentive Contracts and Efficiency Wages. Journal of the European Economic Association. 4. 1165-1192
    Postel-Vinay, R., and Robin, J.M.. 2002. Equilibrium Wage Dispersion with Worker and Firm Hetrogeneity".. Econometrica. 70. 2295-2350


    Recommended reading

    Course outline
    In the first part of the course, the main search models of the labor market, and to some extent the retail market, are discussed. These include the Diamond- Mortensen- Pissarides model and the Burdett- Mortensen model. Then we look at various extensions of the models, with particular emphasis on the interplay between contractual arrangements and search frictions. We analyze wage tenure contracts, search equilibrium with adverse selection and with moral hazard, and optimal human capital investments in the presence of search frictions.
    Course structure:
    The course will we taught in three intensive modules. Each module consists of 2*5 hours (2 days and 5 hours per day).
    Students are required to participate in class – both in discussions and by presenting models/material from the reading lists.

    Computer-based tools


    Learning process and workload
    Workload (6 ECTS)
    Lectures 30 hours
    Specified learning activities (including reading) 75 hours
    Autonomous student learning (including exam preparation) 75 hours
    Total 180 hours


    Examination
    30 hours home exam.
    Graded pass/fail


    Examination code(s)
    DRE 70051 accounts for 100% of the final grade in DRE 7005

    Examination support materials
    All written material

    Re-sit examination
    Re-takes are only possible at the next time a course will be held. When the course evaluation has a separate exam code for each part of the evaluation it is possible to retake parts of the evaluation. Otherwise, the whole course must be re-evaluated when a student wants to retake an exam.

    Additional information
    Honour Code
    Academic honesty and trust are important to all of us as individuals, and represent values that are encouraged and promoted by the honour code system. This is a most significant university tradition. Students are responsible for familiarizing themselves with the ideals of the honour code system, to which the faculty are also deeply committed.

    Any violation of the honour code will be dealt with in accordance with BI’s procedures for cheating. These issues are a serious matter to everyone associated with the programs at BI and are at the heart of the honor code and academic integrity. If you have any questions about your responsibilities under the honour code, please ask.