Issues in Economic Systems and Institutions
Even relatively unregulated market economies do not operate in a vacuum. Transactions and contracts arise in a specific institutional setting, encompassing the legal and political system, corporate and social structure as well as cultural norms. Many relevant decisions are not mediated through a price system, e.g. allocations within a firm, verdicts delivered by a jury, job references provided by professors, etc. The way these systems and institutions are designed may significantly affect resource allocation and outcomes. The purpose of this course is to examine the linkage between institutions and economic performance. I will focus on developing a theoretical framework to study these issues. The main tool used is game theory, especially games of incomplete information.
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