ECON5301 Markets and Frictions - 2019

Term 2
6 Units of Credit
On Campus
The course outline is not available for current semester. To view outlines from other year and/or semesters visit the archives

1. Course Details

Summary of Course

This is a course in intermediate to advanced microeconomics. It builds on Microeconomics 2 and studies the equilibrium and efficiency properties of markets that do not fully meet the conditions of perfectionsuch as no frictions, complete information, etc. Topics will include a selection from the following: the interaction between different markets (general equilibrium theory), markets with search frictions or capacity constraints, bargaining, externalities, public goods, asymmetric information and social choice. The course provides students with advanced tools and models of microeconomic analysis, allowing for a deeper understanding of the functioning of real-world markets.

Teaching Times and Locations

Please note that teaching times and locations are subject to change. Students are strongly advised to refer to the Class Timetable website for the most up-to-date teaching times and locations.

View course timetable

Course Policies & Support

Course Aims and Relationship to Other Courses

This course is offered as a third year option in the economics stream in the BCom and BEc degrees. This course builds on basic theories and knowledge learnt in ECON2101 (Microeconomics 2). A familiarity with the material in ECON2112 (Game Theory & Business Strategy) is also useful. It is one of four advanced microeconomics courses offered in the third year. The other three are ECON3121 (Managerial Economics), ECON3107 (Economics of Finance) and ECON3123 (Organisational Economics).

The emphasis of this course is on the theoretical foundations of economic analysis. It is likely to be of greater interest to students contemplating further studies, and especially research, in economics, and of less interest to those who want to learn economics as a practical or business tool, although the material is highly relevant for business.

2. Staff Contact Details

Position Title Name Email Location Phone Consultation Times
Lecturer-in-charge    Gautam BoseRoom 467, UNSW Business School9385 3318TBC

Communication with staff​

You should feel free to contact the staff about any academic matter. We prefer that enquiries about the subject material be made at lectures or tutorials or during consultation times. We will not enter into extensive discussion of course subject material in emails.

Email correspondence on administrative matters (e.g. advising inability to attend lectures) will be responded to within 48 hours, but not over weekends. Please note that the lecturer has no advance notice of the date and time of the final exam, nor discretion to change this date for individual students.

3. Learning and Teaching Activities

Approach to Learning and Teaching in the Course

​This course will explore the relation between market processes and economic efficiency. Students are encouraged to think about concepts rather than merely memorise results. The subject matter is viewed from different angles to enable students to gain a deeper understanding of the issues. Note that this course is primarily theoretical, and is likely to appeal to students who are interested in the conceptual foundations of economic theory. Mathematical formulations are integral to the material and are used throughout the course as well as in the assessments.

Learning Activities and Teaching Strategies

The examinable content of the course is defined by the references given in the Lecture Schedule, the content of Lectures, and the content of the Tutorial Program.

This course is being redesigned for 2019. The experience of previous semesters may not be a good indicator of the best strategies to perform well in this course. However, attending lectures, following up on numerical examples, and doing homework actively are likely to be important for achieving even a modest grade in this course.


The purpose of lectures is to provide a logical structure for the topics that make up the course; to emphasize the important concepts and methods of each topic, and to provide relevant examples to which the concepts and methods are applied. Students should refer to the assigned readings for further details and be sure to attempt the tutorial exercises.


Tutorials are an integral part of the subject. The object of the tutorials is to discuss various approaches to, and issues associated with the assigned exercises and topics covered in the course.

5. Course Resources

The website for this course is on UNSW Moodle.

Text Resources:

Reading material will be regularly posted on Moodle, and should be treated as text.


There is no single textbook that covers all the material. We will use small sections from the following two textbooks during the first half of the course:

  • Varian, H. R., Intermediate Microeconomics: A Modern Approach, Seventh or later edition, W. W. Norton & Company.
  • Varian, H. R. (1992): Microeconomic Analysis. Third edition (or later), W. W. Norton & Company.

Copies of both texts will be available in the Library.

Some of the material is also covered in the free e-book that is linked on your course website:

  • McAfee, P., Lewis, T. R., & Dale, D. J. (2008). Introduction to Economic Analysis, v2. 1.

There will be additional text material and readings prescribed for many of the lectures. These will be made available on Moodle.

Lecture notes and tutorial exercises will be available on Moodle.

6. Course Evaluation & Development

Feedback is regularly sought from students and continual improvements are made based on this feedback. At the end of this course, you will be asked to complete the myExperience survey, which provides a key source of student evaluative feedback. Your input into this quality enhancement process is extremely valuable in assisting us to meet the needs of our students and provide an effective and enriching learning experience. The results of all surveys are carefully considered and do lead to action towards enhancing educational quality.

​The School of Economics strives to be responsive to student feedback. If you would like more information on how the design of this course and changes made to it over time have taken students’ needs and preferences into account, please contact the Director of Education at the School of Economics.

​This course has been extensively redeveloped to suit the level of the class and to orient it to recent developments in microeconomic theory. Feedback from students will be extremely welcome, and will inform further development of the course.

7. Course Schedule

Note: for more information on the UNSW academic calendar and key dates including study period, exam, supplementary exam and result release, please visit:
Week Activity Topic Assessment/Other
Week 1: 3 JuneLectures 1 & 2

Lecture 1: Introduction. Admin matters.

Equilibrium, efficiency, inefficiency. A simple 2-market example of general equilibrium.


Lecture 2: Recap of consumer theory.

Preferences, utility, budget constraint. Utility maximisation, demand curves, demand curves with endowment constraints.

Homework 1 available; Due on Monday week 3.

Week 2: 10 JuneLecture 2

Lecture 1: No lecture. Jun 10 is a public holiday.


Lecture 2: The two-person exchange model in diagrams. Edgeworth box, contract curve, core, Offer curves, competitive equilibrium.


Worked examples on consumer optimisation and demand.

Week 3: 17 JuneLectures 1 & 2

Lecture 1: General equilibrium in the exchange economy. Excess demand curves, Walras’ Law, Brouwer’s fixed point theorem. Existence of equilibrium.


Lecture 2: Efficiency and competitive equilibrium. Two theorems of welfare economics. Monopoly in the Edgeworth box.

Homework 1 due in Lecture on Monday. Homework 2 available by end of the week--Due on Monday week 5.


Two-person Exchange model

Week 4: 24 JuneLectures 1 & 2

Lecture 1: The Edgeworth approach. Coalitions, blocking, core. Replication. Equal treatment in the core. Shrinking of the core, limit results.


Lecture 2: General equilibrium with production. Decentralisation by prices: Robinson Crusoe. A two-person economy. [General equilibrium and efficiency in diagrams].


General equilibrium and efficiency.

Week 5: 1 JulyLecture 1

Lecture 1: Spillovers and wipe-up.


Lecture 2 will not meet.

Homework 2 due in Lecture Monday.


Coalitions and the core.

Mid-Session Exam

Mid-Session Exam

Saturday July 6 at 10am

Rex Vowels Theatre (K-F17-LG3)

Week 6: 8 JulyLectures 1 & 2

Lecture 1: Search, multiple equilibria and coordination failure. The Diamond Paradox.


Lecture 2: Search: optimal stopping rules. Marriage markets.

Homework 3 available by the end of the week. Due in week 8.


No tutorials

Week 7: 15 JulyLectures 1 & 2

Lecture 1: Search matching and unemployment: The labour market.


Lecture 2: More search and matching.



Week 8: 22 JulyLectures 1 & 2

Lecture 1: Public Economics.


Lecture 2: Public Economics (cont'd).

Homework 3 due in Lecture 1. Homework 4 available by the end of the week. Due in week 10.


Labour market equilibrium

Week 9: 29 JulyLectures 1 & 2

Lecture 1: Moral Hazard, incentive contracts. Shirking, efficiency wages and unemployment.


Lecture 2: Adverse selection and signalling.


Labour markets

Week 10: 5 AugustLecture 1

No scheduled material

[Lecture will meet only if there is outstanding material from previous weeks still remaining to be covered.]

Homework 4 due in tutorial.


Asymmetric information

Homework 4 due in tutorial.

8. Policies and Support

Information about UNSW Business School protocols, University policies, student responsibilities and education quality and support.

Program Learning Outcomes

The Business School places knowledge and capabilities at the core of its curriculum via seven Program Learning Outcomes (PLOs). These PLOs are systematically embedded and developed across the duration of all coursework programs in the Business School.

PLOs embody the knowledge, skills and capabilities that are taught, practised and assessed within each Business School program. They articulate what you should know and be able to do upon successful completion of your degree.

Upon graduation, you should have a high level of specialised business knowledge and capacity for responsible business thinking, underpinned by ethical professional practice. You should be able to harness, manage and communicate business information effectively and work collaboratively with others. You should be an experienced problem-solver and critical thinker, with a global perspective, cultural competence and the potential for innovative leadership.

All UNSW programs and courses are designed to assess the attainment of program and/or course level learning outcomes, as required by the UNSW Assessment Design Procedure. It is important that you become familiar with the Business School PLOs, as they constitute the framework which informs and shapes the components and assessments of the courses within your program of study.

PLO 1: Business knowledge

Students will make informed and effective selection and application of knowledge in a discipline or profession, in the contexts of local and global business.

PLO 2: Problem solving

Students will define and address business problems, and propose effective evidence-based solutions, through the application of rigorous analysis and critical thinking.

PLO 3: Business communication

Students will harness, manage and communicate business information effectively using multiple forms of communication across different channels.

PLO 4: Teamwork

Students will interact and collaborate effectively with others to achieve a common business purpose or fulfil a common business project, and reflect critically on the process and the outcomes.

PLO 5: Responsible business practice

Students will develop and be committed to responsible business thinking and approaches, which are underpinned by ethical professional practice and sustainability considerations.

PLO 6: Global and cultural competence

Students will be aware of business systems in the wider world and actively committed to recognise and respect the cultural norms, beliefs and values of others, and will apply this knowledge to interact, communicate and work effectively in diverse environments.

PLO 7: Leadership development

Students will develop the capacity to take initiative, encourage forward thinking and bring about innovation, while effectively influencing others to achieve desired results.

These PLOs relate to undergraduate and postgraduate coursework programs.  Separate PLOs for honours and postgraduate research programs are included under 'Related Documents'.

Business School course outlines provide detailed information for students on how the course learning outcomes, learning activities, and assessment/s contribute to the development of Program Learning Outcomes.



UNSW Graduate Capabilities

The Business School PLOs also incorporate UNSW graduate capabilities, a set of generic abilities and skills that all students are expected to achieve by graduation. These capabilities articulate the University’s institutional values, as well as future employer expectations.

UNSW Graduate CapabilitiesBusiness School PLOs
Scholars capable of independent and collaborative enquiry, rigorous in their analysis, critique and reflection, and able to innovate by applying their knowledge and skills to the solution of novel as well as routine problems.
  • PLO 1: Business knowledge
  • PLO 2: Problem solving
  • PLO 3: Business communication
  • PLO 4: Teamwork
  • PLO 7: Leadership development

Entrepreneurial leaders capable of initiating and embracing innovation and change, as well as engaging and enabling others to contribute to change
  • PLO 1: Business knowledge
  • PLO 2: Problem solving
  • PLO 3: Business communication
  • PLO 4: Teamwork
  • PLO 6: Global and cultural competence
  • PLO 7: Leadership development

Professionals capable of ethical, self-directed practice and independent lifelong learning
  • PLO 1: Business knowledge
  • PLO 2: Problem solving
  • PLO 3: Business communication
  • PLO 5: Responsible business practice

Global citizens who are culturally adept and capable of respecting diversity and acting in a socially just and responsible way.
  • PLO 1: Business knowledge
  • PLO 2: Problem solving
  • PLO 3: Business communication
  • PLO 4: Teamwork
  • PLO 5: Responsible business practice
  • PLO 6: Global and cultural competence

While our programs are designed to provide coverage of all PLOs and graduate capabilities, they also provide you with a great deal of choice and flexibility.  The Business School strongly advises you to choose a range of courses that assist your development against the seven PLOs and four graduate capabilities, and to keep a record of your achievements as part of your portfolio. You can use a portfolio as evidence in employment applications as well as a reference for work or further study. For support with selecting your courses contact the UNSW Business School Student Centre.

Academic Integrity and Plagiarism

Academic Integrity is honest and responsible scholarship. This form of ethical scholarship is highly valued at UNSW. Terms like Academic Integrity, misconduct, referencing, conventions, plagiarism, academic practices, citations and evidence based learning are all considered basic concepts that successful university students understand. Learning how to communicate original ideas, refer sources, work independently, and report results accurately and honestly are skills that you will be able to carry beyond your studies.

The definition of academic misconduct is broad. It covers practices such as cheating, copying and using another person’s work without appropriate acknowledgement. Incidents of academic misconduct may have serious consequences for students.


UNSW regards plagiarism as a form of academic misconduct. UNSW has very strict rules regarding plagiarism. Plagiarism at UNSW is using the words or ideas of others and passing them off as your own. All Schools in the Business School have a Student Ethics Officer who will investigate incidents of plagiarism and may result in a student’s name being placed on the Plagiarism and Student Misconduct Registers.

Below are examples of plagiarism including self-plagiarism:

Copying: Using the same or very similar words to the original text or idea without acknowledging the source or using quotation marks. This includes copying materials, ideas or concepts from a book, article, report or other written document, presentation, composition, artwork, design, drawing, circuitry, computer program or software, website, internet, other electronic resource, or another person's assignment, without appropriate acknowledgement of authorship.

Inappropriate Paraphrasing: Changing a few words and phrases while mostly retaining the original structure and/or progression of ideas of the original, and information without acknowledgement. This also applies in presentations where someone paraphrases another’s ideas or words without credit and to piecing together quotes and paraphrases into a new whole, without appropriate referencing.

Collusion: Presenting work as independent work when it has been produced in whole or part in collusion with other people. Collusion includes:

  • Students providing their work to another student before the due date, or for the purpose of them plagiarising at any time
  • Paying another person to perform an academic task and passing it off as your own
  • Stealing or acquiring another person’s academic work and copying it
  • Offering to complete another person’s work or seeking payment for completing academic work

Collusion should not be confused with academic collaboration (i.e., shared contribution towards a group task).

Inappropriate Citation: Citing sources which have not been read, without acknowledging the 'secondary' source from which knowledge of them has been obtained.

Self-Plagiarism: ‘Self-plagiarism’ occurs where an author republishes their own previously written work and presents it as new findings without referencing the earlier work, either in its entirety or partially. Self-plagiarism is also referred to as 'recycling', 'duplication', or 'multiple submissions of research findings' without disclosure. In the student context, self-plagiarism includes re-using parts of, or all of, a body of work that has already been submitted for assessment without proper citation.

To see if you understand plagiarism, do this short quiz:


The University also regards cheating as a form of academic misconduct. Cheating is knowingly submitting the work of others as their own and includes contract cheating (work produced by an external agent or third party that is submitted under the pretences of being a student’s original piece of work). Cheating is not acceptable at UNSW.

If you need to revise or clarify any terms associated with academic integrity you should explore the 'Working with Academic Integrity' self-paced lessons available at:

For UNSW policies, penalties, and information to help you avoid plagiarism see: as well as the guidelines in the online ELISE tutorials for all new UNSW students: For information on student conduct see:

For information on how to acknowledge your sources and reference correctly, see: If you are unsure what referencing style to use in this course, you should ask the lecturer in charge.

Student Responsibilities and Conduct

Students are expected to be familiar with and adhere to university policies in relation to class attendance and general conduct and behaviour, including maintaining a safe, respectful environment; and to understand their obligations in relation to workload, assessment and keeping informed.

Information and policies on these topics can be found on the 'Managing your Program' website.


It is expected that you will spend at least ten to twelve hours per week studying for a course except for Summer Term courses which have a minimum weekly workload of twenty to twenty four hours. This time should be made up of reading, research, working on exercises and problems, online activities and attending classes. In periods where you need to complete assignments or prepare for examinations, the workload may be greater. Over-commitment has been a cause of failure for many students. You should take the required workload into account when planning how to balance study with employment and other activities.

We strongly encourage you to connect with your Moodle course websites in the first week of semester. Local and international research indicates that students who engage early and often with their course website are more likely to pass their course.

View more information on expected workload


Your regular and punctual attendance at lectures and seminars or in online learning activities is expected in this course. The Business School reserves the right to refuse final assessment to those students who attend less than 80% of scheduled classes where attendance and participation is required as part of the learning process (e.g., tutorials, flipped classroom sessions, seminars, labs, etc.).

View more information on attendance

General Conduct and Behaviour

You are expected to conduct yourself with consideration and respect for the needs of your fellow students and teaching staff. Conduct which unduly disrupts or interferes with a class, such as ringing or talking on mobile phones, is not acceptable and students may be asked to leave the class.

View more information on student conduct

Health and Safety

UNSW Policy requires each person to work safely and responsibly, in order to avoid personal injury and to protect the safety of others.

View more information on Health and Safety

Keeping Informed

You should take note of all announcements made in lectures, tutorials or on the course web site. From time to time, the University will send important announcements to your university e-mail address without providing you with a paper copy. You will be deemed to have received this information. It is also your responsibility to keep the University informed of all changes to your contact details.

Student Support and Resources

The University and the Business School provide a wide range of support services and resources for students, including:

Business School EQS Consultation Program
The Consultation Program offers academic writing, literacy and numeracy consultations, study skills, exam preparation for Business students. Services include workshops, online resources, individual and group consultations.
Level 1, Room 1035, Quadrangle Building.
02 9385 4508

Communication Resources
The Business School Communication and Academic Support programs provide online modules, communication workshops and additional online resources to assist you in developing your academic writing.

Business School Student Centre
The Business School Student Centre provides advice and direction on all aspects of admission, enrolment and graduation.
Level 1, Room 1028 in the Quadrangle Building
02 9385 3189

UNSW Learning Centre
The UNSW Learning Centre provides academic skills support services, including workshops and resources, for all UNSW students. See their website for details.
Lower Ground Floor, North Wing Chancellery Building.
02 9385 2060

Educational Support Service
Educational Support Advisors work with all students to promote the development of skills needed to succeed at university, whilst also providing personal support throughout the process. Check their website to request an appointment or to register in the Academic Success Program.
John Goodsell Building, Ground Floor.
02 9385 4734

Library services and facilities for students
The UNSW Library offers a range of collections, services and facilities both on-campus and online.
Main Library, F21.
02 9385 2650

Moodle eLearning Support
Moodle is the University’s learning management system. You should ensure that you log into Moodle regularly.
02 9385 3331

UNSW IT provides support and services for students such as password access, email services, wireless services and technical support.
UNSW Library Annexe (Ground floor).
02 9385 1333

Disability Support Services
UNSW Disability Support Services provides assistance to students who are trying to manage the demands of university as well as a health condition, learning disability or who have personal circumstances that are having an impact on their studies. Disability Advisers can arrange to put in place services and educational adjustments to make things more manageable so that students are able to complete their course requirements. To receive educational adjustments for disability support, students must first register with Disability Services.
Ground Floor, John Goodsell Building.
02 9385 4734

UNSW Counselling and Psychological Services
Provides support and services if you need help with your personal life, getting your academic life back on track or just want to know how to stay safe, including free, confidential counselling.
Level 2, East Wing, Quadrangle Building.
02 9385 5418

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