MATHEMATICAL ECONOMICS

ECTS Credits: 5
4 h/week

rd

st

3 year 1 semester
Undergraduate
Lectures: 2 h/week
Tutorials: 2 h/week
Contact: Assist. Prof. Dr. Cenk Gke ADA
adascg@istanbul.edu.tr

IZIK3044

Required
English

Office Hours: Monday 14.00-16.00 ; Wednesday 11.00-13.00

Aims and Objectives

The aim is to provide students with additional mathematical tools, enabling them to analyse a larger,
richer, and more interesting set of economic models. The main focus of the course is on methods for
studying game theory and dynamic economic problems.

Course Contents

REVIEW of GAME THEORY: Normal form of game - Nash Equilibrium Extensive form of games and
Perfect Equilibrium Sub game Perfect Equilibrium Folk theorem Mixed strategy.
GAME THEORY at WORK: Bank Run, Efficiency Wage Models, Principle Agent Model, Signalling
Game, Analysing Auctions.
OLIGOPOLY THEORY: Outline Cournot and Bertrand Models of Oligopoly. Which is more Reasonable?
Try to point out the weakness with both models, and their strengths, especially the so-called Bertrand
paradox. Try to find compromises look at Hotelling Models, and Models which try to combine price
and quantity elements.
ECONOMIC DYNAMICS AND INTEGRAL CALCULUS : Dynamics and Integration Indefinite Integrals
Definite Integrals Improper Integrals Some Economic applications of Integral.
CONTINUOUS TIME: FIRST ORDER DIFFERENTIAL EQUATION: First Order Linear Differential Equations
with Constant Coefficient and Constant Term Dynamics of Market Price - First Order Linear
Differential Equations with Variable Coefficient and Variable Term Exact Differential Equations
Non linear Differential Equations of the First Order and First Degree The Phase Diagram Approach
Existing Uniqueness and Stability Problems of Equilibrium and its Applications in some Dynamic
Models.
HIGHER ORDER DIFFERENTIAL EQUATIONS: Second Order Linear Differential Equations with Constant
Coefficients and Constant Term Complex Numbers and Circular Functions A Market Model with
Price Expectations Interaction of Inflation and Unemployment Differential Equations with a
Variable Term Higher Order Linear Differential equations.
SOME ECONOMIC EXAMPLES OF DIFFERENTIAL EQUATIONS: Price Adjustment Model The Keynesian
Cross Model Economic Model of Demand and Supply Price and Firm Entry A Dynamic Model
of Duopoly A Dynamic Version of the IS-LM Model.

Assessment Methods
The course is assessed by (i) - a 1.5-hour final exam weighted 60%, (ii) - one midterm exam, 1 pop up
quizzes, all together weighted 40%.

Prerequisite/ Recommended
Text Book / Recommended Reading
- Thinking Strategically: The Competitive Edge in Business, Politics and Everyday Life, A. Dixit and B.
Nalebuff, Norton Press, 1991 (non-technical and fun).
- Games for Business and Economics, Roy Gardner, John Wiley & Sons, 2003.
- A Primer in Game Theory, Robert Gibbons, Harvester Wheatsheaf, first published 1992.
- Fundamental Methods of Mathematical Economics, Alpha Chiang and Kevin Wainwright, 4th Edition,
McGraw-Hill, 2005.
- Mathematics for Economists, Carl P. Simon and Lawrence Blume, Norton, 1994.
- Essential Mathematics for Economic Analysis, Knut Sydsater, Peter Hammond, and Arne Strm 4th
Edition, Pearson Education, 2012.