About three decades lie between the following course on the economics of uncertainty jointly taught at M.I.T. in 1978 and the respective awards of economics Nobel prizes to Eric Maskin (2007, mechanism design) and Peter Diamond (2010, economics of search). Still a solid reading list.
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14.145 Economics of Uncertainty
P. A. Diamond and E. S. Maskin
Fall 1978
Reading List
TEXT
Diamond and Rothschild, UNCERTAINTY IN ECONOMICS, READINGS AND EXERCISES, Academic Press.
REFERENCES
-
- Arrow, ESSAYS IN THE THEORY OF RISK BEARING.
- De Groot, OPTIMAL STATISTICAL DECISIONS.
- Drèze, ALLOCATION UNDER UNCERTAINTY.
- Ferguson, MATHEMATICAL STATISTICS: A DECISION THEORETIC APPROACH.
- Raiffa, DECISION ANALYSIS.
READINGS (* refers to required readings)
I. Individual Choice (Static)
A. Criterion
|
1. |
Tamerin, J. and H. Resik, “Risk taking by individual option–Case Study–cigarette smoking in perspectives on benefit-risk decision making,” National Academy of Engineering, 1972 in Diamond-Rothschild. |
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2. |
Tversky, A. and D. Kahneman, “Judgment under uncertainty: Heuristics and biases,” SCIENCE (September 27, 1974), in Diamond-Rothschild. |
|
3. |
Tversky, A. and D. Kahneman, “Value theory: An analysis of choices under risk.” |
|
4. |
Milnor, “Games Against Nature,” in DECISION PROCESSES, edited by G. Thrall, 1954. |
|
5. |
Maskin, Decision making under ignorance, with implications for social choice, Theory and Decision, forthcoming. |
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6. |
Radner, R. and M. Rothschild, “On the Allocation of Effort,” JOURNAL OF ECONOMIC THEORY (1975). |
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7. |
Kunreuther, H., “Economic Analysis of Low Probability Events.” |
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*8. |
Drèze, J., “Axiomatic Theories of Choice…,” in Drèze, ALLOCATION UNDER UNCERTAINTY. |
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*9. |
Arrow, Chapter 2. |
B. Comparative Statics
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*10. |
Pratt, J., “Risk Aversion in the Small and in the Large,” ECONOMETRICA (January 1964), 122-36, in Diamond and Rothschild. |
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*11. |
Arrow, K., Chapter 3. |
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*12. |
Rothschild, M. and J. Stiglitz, “Increasing Risk: I. A Definition,” JOURNAL OF ECONOMIC THEORY (September 1970), 225-243, in Diamond and Rothschild. |
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*13. |
Rothschild, M. and J. Stiglitz, “Increasing Risk: II. Its Economic Consequences,” JOURNAL OF ECONOMIC THEORY (March 1971), 66-70, 78-80 only. |
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*14. |
Yaari, M., “Some Remarks on Measures of Risk Aversion and on their Uses,” JOURNAL OF ECONOMIC THEORY (October 1969), 315-29, in Diamond and Rothschild. |
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15. |
Dasgupta, P., A. Sen, and D. Starrett, “Notes on the Measurement of Inequality,” JOURNAL OF ECONOMIC THEORY (1973). |
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16. |
Diamond, P. and J. Stiglitz, “Increases in Risk and in Risk Aversion,” JOURNAL OF ECONOMIC THEORY (1974). |
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*17. |
Leland, H., “Saving and Uncertainty: The Precautionary Demand for Saving,” QUARTERLY JOURNAL OF ECONOMICS (August 1968), in Diamond and Rothschild. |
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18. |
Hahn, F., “Savings and Uncertainty,” REVIEW OF ECONOMIC STUDIES (1969). |
II. Equilibrium (Traditional)
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*19. |
Debreu, G., THEORY OF VALUE, Chapter 7, pp. 98-102 in Diamond and Rothschild. |
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*20. |
Arrow, Chapter 4. |
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21. |
Hirshleifer, J., “Investment Decisions under Uncertainty–Choice Theoretic Approaches,” QUARTERLY JOURNAL OF ECONOMICS (November 1965), 509- . |
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22. |
Radner, R., “Competitive Equilibrium Under Uncertainty,” ECONOMETRICA (1968), 31-58, in Diamond and Rothschild. |
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*23. |
Diamond, P., “The role of a stock market in a general equilibrium model with technological uncertainty,” AER (September 1967), 759-776, in Diamond and Rothschild. |
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*24. |
Grossman, S., “A Characterization of the Optimality of Equilibrium in Incomplete Markets,” JET, June, 1977. |
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25. |
Dreze, J., ALLOCATION UNDER UNCERTAINTY, Chapters 4,5,8. |
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26. |
Hart, O., “On the optimality of equilibrium when markets are incomplete,” JOURNAL OF ECONOMIC THEORY (1975). |
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27. |
Leland, H., “Capital asset markets, production, and optimality: A Synthesis,” IMSSS TECHNICAL REPORT. |
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28. |
Gould, “Inventories and Stochastic Demand: Equilibrium Models of the Financial Industry, J. BUSINESS, Jan. 1978, 1-42. |
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29. |
Lucas, Jr., Robert E., “Asset Prices in an Exchange Economy.” |
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30. |
Diamond, “Efficiency with Price Uncertainty,” mimeo. |
III. Adverse Selection: Signalling and Screening
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*31. |
Akerlof, G., “The Market for Lemons: Qualitative Uncertainty and the Market Mechanism,” QUARTERLY JOURNAL OF ECONOMICS (August 1970), 488-500, in Diamond and Rothschild. |
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32. |
Spence, M., “Job Market Signaling,” QUARTERLY JOURNAL OF ECONOMICS (August 1973), in Diamond and Rothschild. |
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*33. |
Spence, M., “Competitive and Optimal Responses to Signals: Analysis of Efficiency and Distribution,” JOURNAL OF ECONOMIC THEORY (March 1974). |
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34. |
Riley, J., “Competitive Signalling,” JOURNAL OF ECONOMIC THEORY (1975). |
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35. |
Riley, J., “Competitive Signalling: Further Remarks.” |
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36. |
Wilson, C., “A Model of Insurance Markets with Asymmetric Information,” JOURNAL OF ECONOMIC THEORY, 1977. |
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*37. |
Rothschild, M. and J. Stiglitz, “Equilibrium in Competitive Insurance Markets,” QUARTERLY JOURNAL OF ECONOMICS (1976), in Diamond and Rothschild. |
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38. |
Stiglitz, J. E., “The Theory of ‘Screening,’ Education, and the Distribution of Income,” AER (1975). |
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39. |
Wilson, C., “The Nature of Equilibrium in Markets with Adverse Selection,” SSRI #7715, 1977. |
IV. Moral Hazard
|
40. |
Pauly, M., “Overinsurance and the Public Provision of Insurance,” QUARTERLY JOURNAL OF ECONOMICS (1974), 44-62 in Diamond and Rothschild. |
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41. |
Shavell, S., “On Moral Hazard and Insurance.” |
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42. |
Spence, M. and R. Zeckhauser, “Insurance, Information and Individual Action,” AER (May 1971), 380-87 in Diamond and Rothschild. |
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43. |
Diamond, P. and J. Mirrlees, “A Model of Social Insurance with Variable Retirement,” M.I.T. Economics Working Paper No. 210. |
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44. |
Mirrlees, J., “Notes on Welfare Economics, Information and Uncertainty,” in Balch, McFadden et al., ESSAYS ON ECONOMIC BEHAVIOR UNDER UNCERTAINTY. |
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*45. |
Spence, M., “Consumer Misperceptions, Product Failure and Producer Liability,” REVIEW OF ECONOMIC STUDIES (1977). |
V. Information
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*46. |
Hirshleifer, J., “The Private and Social Value of Information and the Reward to Inventive Activity,” AER (1971), 561-74, in Diamond and Rothschild. |
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*47. |
Arrow, K., “Uncertainty and the Welfare Economics of Medical Care,” AER (1963), 941-73 (also in Arrow, and in Diamond and Rothschild). |
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48. |
Arrow, K. and A. Fisher, “Preservation, Uncertainty, and Irreversibility,” QUARTERLY JOURNAL OF ECONOMICS (May 1974), 312-19. |
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49. |
Cheung, S., “Transaction Costs, Risk Aversion and the Choice of Contractual Arrangements,” JOURNAL OF LAW AND ECONOMICS (April 1969), 23-42, in Diamond and Rothschild. |
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50. |
Nelson, P., “Advertising as Information,” JOURNAL OF PUBLIC ECONOMICS (July 1974). |
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51. |
Lucas, R., “Expectations and the Neutrality of Money,” JOURNAL OF ECONOMIC THEORY (April 1972). |
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*52. |
Danthine, “Information, Future Prices and Stabilizing Speculation,” JOURNAL OF ECONOMIC THEORY, (Feb. 1978). |
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*53. |
Blackwell and Girschick, THEORY OF GAMES AND STATISTICAL DECISIONS (last chapter). |
VI. Individual Choice (Sequential)
|
54. |
De Groot, OPTIMAL STATISTICAL DECISIONS, Chapters 12-14. |
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55. |
Kohn, M. and S. Shavell, “The Theory of Search,” JOURNAL OF ECONOMIC THEORY (October 1974), 93-123. |
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56. |
Rothschild, M., “A Two-Armed Bandit Theory of Market Pricing,” JOURNAL OF ECONOMIC THEORY (1974). |
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*57. |
Rothschild, M., “Searching for the Lowest Price When the Distribution is Unknown,” JOURNAL OF POLITICAL ECONOMY (July 1974), in Diamond and Rothschild. |
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58. |
Lippman, S. and J. McCall, “The Economics of Job Search: A Survey,” ECONOMIC INQUIRY. |
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59. |
Axell, B., “Prices under Imperfect Information, A Theory of Search Market Equilibrium.” |
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60. |
Wilde, L., “Labor Market Equilibrium under Nonsequential Search,” JET, 1977. |
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*61. |
Weitzman, M., “A Basic Result in the Theory of Optimal Search,” M.I.T. Working Paper, 373-93. |
VII. Equilibrium with Search
|
62. |
Pratt, J., D. Wise, and R. Zeckhauser, “Price Variation in Almost Competitive Market.” |
|
63. |
Rothschild, M., “Models of Market Organization with Imperfect Information,” JOURNAL OF POLITICAL ECONOMY (November 1973), 1283-1308, in Diamond and Rothschild. |
|
64. |
Salop, S. and J. Stiglitz, “Bargains and Ripoff,” REVIEW OF ECONOMIC STUDIES (1977). |
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65. |
Lucas, R. and G. Prescott, “Equilibrium Search and Unemployment,” JOURNAL OF ECONOMIC THEORY (February 1974), 188-200, in Diamond and Rothschild. |
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*66. |
Butters, G., “Equilibrium Distributions of Prices and Advertising,” REVIEW OF ECONOMIC STUDIES (1977), in Diamond and Rothschild. |
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67. |
Diamond P., “Welfare Analysis of Imperfect Information Equilibria,” BELL JOURNAL, Spring 1978. |
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68. |
Salop, S., “The Noisy Monopolist,” REVIEW OF ECONOMIC STUDIES (1977). |
|
69. |
Mortensen, D., “Job Matching Under Imperfect Information.” |
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*70. |
Diamond and Maskin, “Search, Liquidated Damages, and Breach of Contract,” M.I.T. Working Paper. |
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*71. |
Diamond and Maskin, “Search Effort and Breach of Contract,” M.I.T. Working Paper. |
Source: Duke University. David M. Rubinstein Rare Book and Manuscript Library. Economists’ Papers Archives. Peter Diamond papers. Box 4, Folder “Teaching Material.”
Image Sources: Peter A. Diamond (Credit: Donna Coveny/MIT, 2003) in “An Interview with Peter Diamond” in Macroeconomic Dynamics (2007) p. 544. Eric S. Maskin (1980). From the MIT Museum Museum website’s Biographical/Subject Files Collection .