Published Nov 22, 2022
This course explores the many ways in which the assumptions of the perfectly competitive model are violated in the real world, and the consequences of these market failures for consumers and firms. The course examines potential government intervention to "fix" the failures as well as the limits of government intervention. Topics include monopoly/monopsony, externalities, the tragedy of the commons, public goods, asymmetric information, and incomplete information.
Prereq: ECON 391
We acknowledge that we are living and working on the traditional territory of the Attawandaron (also known as Neutral), Anishinaabe and Haudenosaunee peoples. The University of Waterloo is situated on the Haldimand Tract, the land promised to the Six Nations that includes ten kilometres on each side of the Grand River.
To learn more about the history of land transfers and outstanding debts in this region, consult Land Rights: A Global Solution for the Six Nations of the Grand River (Six Nations Lands and Resources Department, Ohsweken, ON)
https://www.sixnations.ca/LandsResources/SNLands-GlobalSolutions-FINALyr2020.pdf
| use models to analyze market failures in real economies |
| discuss the insights and limitations of the market failure paradigm |
Week | Date | Lecture Topic | |
|---|---|---|---|
1 | Jan 9 Jan 11 | 1.Introduction to Course and Review of Basic Models: Firm and Household Choice, Market Equilibrium | |
2 | Jan 16 Jan 18 | 2. Review of Basic Models: First Welfare Theorem and Planner’s Problem | |
Part 1: Asserting Rights and Assigning Responsibilities | |||
3 | Jan 23 Jan 25 | 3. Introduction to Externalities 4. Production Externalities - Pollution | |
Assignment 1 due February 1st | |||
4 | Jan 30 Feb 1 | 5.Consumption Externalities – Charity 6.Critical Concerns: Corrupting Practices (Michael Sandel) | |
5 | Feb 6 Feb 8 | 7.Production Externalities – Common Property Resources 8.Critical Concerns – Self-Governance and Communication (Elinor Ostrom) | |
6 | Feb 13 Feb 15 | Wrap-up and Review Midterm 1 | |
7 | Feb 20 and 22 | No classes – Reading Week | |
Part 2: Designing Mechanisms to Overcome Information Asymmetries | |||
8 | Feb 27 Mar 1 | 9.Public Goods – Market Inefficiency and Planner’s Criterion 10. Preference Revelation and Incentives | |
Policy Position Paper Due Friday, March 3rd | |||
9 | Mar 6 Mar 8 | 10. Preference Revelation and Incentives 11. Critical Concerns: Civic Responsibility (Michael Sandel) | |
10 | Mar 13 Mar 15 | 12. Review of choice with uncertainty: Insurance 13. Asymmetric Information in Insurance Markets | |
Assignment 2 due March 20 | |||
11 | Mar 20 Mar 22 | 13. Asymmetric Information in Insurance Markets (continued) Wrap-up and Review | |
12 | Mar 27 Mar 29 | Midterm 2 Policy Forum – group presentations | |
13 | Apr 3 Apr 5 | Policy Forum – group presentations Policy Forum – class discussion of results | |
Final Reflection Paper Due Monday, April 17th | |||
| Title / Name | Notes / Comments | Required |
|---|---|---|
| Donald Campbell, Incentives: Motivation and the Economics of Information 3rd edition | Yes |
Copies of the textbook can be purchased from the WStore (UW bookstore) or from online booksellers. I have place one copy on reserve at the Dana Porter Library (1 day loan period).
| Component | Value |
|---|---|
| Assignments (Feb 1 and Mar 20) | 10% |
| Midterm 1 (Feb 15) | 25% |
| Midterm 2 (Mar 27) | 25% |
| Policy Project - Position Paper | 10% |
| Policy Project - Presentation and Participation | 10% |
| Final Reflection Paper (Apr 17) | 20% |
There will be two assignments over the course of the term. Each will count for 5% of the final grade. The assignments will be posted on LEARN, and hand-written answers are due in class. Due dates February 1st and March 20th. Without a prior arrangement with the instructor, no late assignments will be accepted.
The midterm exams will be held in class on February 15 and March 27th. They will test students’ proficiency with the material covered in the lectures, assignments and supplementary reading.
Each student will join a policy discussion, from a list of issues provided. Examples are urban housing affordability and waitlists for public healthcare. Students will self-enroll in one of the policy groups/topics. Sub-groups (of 3-4 members) will be formed to represent several stake-holder groups related to the policy discussion. Each sub-group must complete two tasks,
The students whose policy issue is not under discussion will act as a wider citizen body who will respond through a survey about the policy discussion and the effectiveness of the portrayal of different stake-holder groups.
Students will reflect on the value of the market failure paradigm for understanding societal problems by describing
Reference to policy examples arising in the policy debates are welcome, but descriptions of these should be quite limited. The aim in this paper is to
analytically reflect
on the analyses developed in the course. The essay should be approximately 750 words (3 double-spaced pages) in length.
It is due by submission to the Learn dropbox by 11:59pm on Monday, April 17th.
Text matching software (Turnitin) will be used to screen assignments in this course. This is being done to verify that use of all material and sources in assignments is documented. In the first week of the term, details will be provided about the arrangements for the use of Turnitin and alternatives in this course. See Administrative Policy below for more information and links.
All of us need a support system. The faculty and staff in Arts encourage students to seek out mental health support if they are needed.
On Campus
Due to COVID-19 and campus closures, services are available only online or by phone.
Off campus, 24/7
Full details can be found online on the Faculty of Arts website
Download UWaterloo and regional mental health resources (PDF)
Download the WatSafe app to your phone to quickly access mental health support information.
Academic integrity: In order to maintain a culture of academic integrity, members of the University of Waterloo community are expected to promote honesty, trust, fairness, respect and responsibility. [Check the Office of Academic Integrity for more information.]
Grievance: A student who believes that a decision affecting some aspect of their university life has been unfair or unreasonable may have grounds for initiating a grievance. Read Policy 70, Student Petitions and Grievances, Section 4. When in doubt, please be certain to contact the department’s administrative assistant who will provide further assistance.
Discipline: A student is expected to know what constitutes academic integrity to avoid committing an academic offence, and to take responsibility for their actions. [Check the Office of Academic Integrity for more information.] A student who is unsure whether an action constitutes an offence, or who needs help in learning how to avoid offences (e.g., plagiarism, cheating) or about “rules” for group work/collaboration should seek guidance from the course instructor, academic advisor, or the undergraduate associate dean. For information on categories of offences and types of penalties, students should refer to Policy 71, Student Discipline. For typical penalties, check Guidelines for the Assessment of Penalties.
Appeals: A decision made or penalty imposed under Policy 70, Student Petitions and Grievances (other than a petition) or Policy 71, Student Discipline may be appealed if there is a ground. A student who believes they have a ground for an appeal should refer to Policy 72, Student Appeals.
Note for students with disabilities: AccessAbility Services, located in Needles Hall, Room 1401, collaborates with all academic departments to arrange appropriate accommodations for students with disabilities without compromising the academic integrity of the curriculum. If you require academic accommodations to lessen the impact of your disability, please register with AccessAbility Services at the beginning of each academic term.
Turnitin.com: Text matching software (Turnitin®) may be used to screen assignments in this course. Turnitin® is used to verify that all materials and sources in assignments are documented. Students' submissions are stored on a U.S. server, therefore students must be given an alternative (e.g., scaffolded assignment or annotated bibliography), if they are concerned about their privacy and/or security. Students will be given due notice, in the first week of the term and/or at the time assignment details are provided, about arrangements and alternatives for the use of Turnitin in this course.
It is the responsibility of the student to notify the instructor if they, in the first week of term or at the time assignment details are provided, wish to submit alternate assignment.