The utility of empirical learning in economics is conditioned by theory and method. Historically, these threads have been pursued with considerable separation. With the emergence of micro-level data, theory of agent level behavior and choices has been reconsidered to direct empirical study of data characterizing discrete and discontinuous choice by households and producers.  From a methods perspective,  as micro-level data has increasingly become available, the limits of models that predict only conditional means or averages have been increasingly recognized.  What we want is to explain individual variation!  Why do people make different choices? We have the data, but how can we use it to learn about the determinants of heterogeneity ~ differences across agents in the economy?

Standard linear, parametric estimation methods are seriously limited in their ability to explain variation in behavior in such micro-level data sets. In many cases, resulting estimates are biased, inefficient, and difficult to interpret conditional mean responses. While these may be of interest to some, they are based on equally-weighted parameter estimation and provide little guidance with respect features of processes that may drive performance of systems of interest.

In place of such aggregate or average methods, a variety of new methods have been developed. In this course, we will study those methods, broadly labeled as microeconometrics, a subfield that encompasses a new economic theory and variety of estimation, computational, and simulation methods.In the this theory course, we will focus on microeconomic theory to motivate empirical modeling of micro-level data as well as on econometric theory needed to consider empirical learning based on such data.  We will consider parametric and some nonparametric approaches. 

The goal of this course is to provide graduate students with exposure to and ability to use and develop extensions of microeconomic theory to consider micro-level choices.  After all, consumers only choose one product from a set, producers produce a finite set of products, not a continuum!  We will also consider the implications of these characteristics for determination of market level prices.  We will reconsider what exactly price is, when each transaction may have a different price!

How will we learn?  A combination of traditional lecture, active student led discussion of readings, and preparation of assignments will provide a basis for learning. 

This course is paired with Microeconometric Applications (5957) and is essential to it. 

While neoclassical microeconomics focuses on the "typical" or "representative" consumer or producer, and commoditized product microeconometrics tackles reality by focusing on specific consumers, producers, and differentiated products.  Students will learn to appreciate the shortcomings of the former approaches and need for new approaches.  They will also find comfort in learning that byaugmenting microeconomic theory with several intuitive extensions, we can in fact tackle reality! Students will demonstrate their learning achievement through papers.  Successful students should be able to think through and layout theories of choice for problems such as: Which house is best to buy, in which neighborhood, and at what time? What product attributes should be bundled in a product?  Which set of product variations should be produced and supplied in which markets?

Lectures will attempt to layout key points and integrate them.  

Readings will be used to provide further details and examples of theory developed to describe particular choice problems. 

Short papers will be used to structure review of material and extension of concepts into new settings. 

Student progress and achievement will be assessed through the evaluation 2-3 short papers.  

This is a graduate course in economics and applied methods.  Students should have strong knowledge of graduate level microeconomic theory as well as in econometric theory for linear models.  Good knowledge of statistics will also be assumed.  

Microeconomic theory

Linear econometric theory

Multivariate calculus

Matrix algebra

Office hours will be 

Tuesday 13h-15h

Limited other appointment times will be set as needed.