ECON5301 Markets and Frictions - 2020

Subject Code
Study Level
Commencing Term
Term 2
Total Units of Credit (UOC)
Delivery Mode
On Campus
The course outline is not available for current term. To view outlines from other year and/or terms visit the archives

1. Course Details

Summary of Course

This is a course in intermediate to advanced microeconomics. It builds on ECON 2101 Microeconomics 2 and studies the equilibrium and efficiency properties of markets that do not fully meet the conditions of perfection, such as no frictions, complete information, and so on. Topics will include a selection from the following: the interaction between different markets (general equilibrium theory), markets with search frictions or capacity constraints, auctions, 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 part of the Graduate Certificate in Economics. 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.

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-chargeAProfGautam BoseRoom 467, UNSW Business School9385 3318Monday and Wednesday 3-4pm & by appointment

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 via emails.

Email correspondence on administrative matters (e.g., advising of an 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.

Student Enrolment Requests

Students can vary their own enrolment (including switching lecture streams or tutorials) via myUNSW until the end of Week 1. In general, most other student enrolment requests should be directed to The Nucleus: Student Hub (formerly Student Central). These include enrolment in full courses or tutorials, course timetable clashes, waiving prerequisites for any course, transfer-of-credit (international exchange, transfer to UNSW, cross-institutional study, etc.), or any other request which requires a decision about equivalence of courses and late enrolment for any course. Where appropriate, the request will be passed to the School Office for approval before processing. Note that enrolment changes are rarely considered after Week 2 classes have taken place.

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 was redesigned for 2019, and is being redesigned again for the extraordinary situation in 2020. The experience of students in prior semesters may not be a good indicator of the best strategies to perform well in this course. However, attending lectures, following 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 emphasise 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.

The main content of the lectures will be pre-recorded. We will meet live during the scheduled lecture period to further discuss and elaborate on this material.


Tutorials are an integral part of the subject, and will be held live. The objective of the tutorials is to discuss various approaches to the assigned exercises and topics covered in the course, and deal with associated issues.


We will make sure that the opportunity for live (synchronous) contact with course staff is available to students during specified times, including scheduled lecture and tutorial times. Students are strongly encouraged to avail themselves of these opportunities and become familiar with the staff.

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 you would treat assigned textbook readings.


There is no single textbook that covers all the material. The LIC will post handouts that cover most of the material in the course, and also provide links to lecture notes and slides from other scholars.

The following book covers a large part of the material, and is available at the bookshop:

  • Varian, H. R., Intermediate Microeconomics: A Modern Approach, Seventh or later edition, W. W. Norton & Company.
For the first few weeks, we will refer to the introductory chapter from the following text:
  • Hildenbrand and Kirman, Introduction to equilibrium analysis, North-Holland, 1976.
The book is out of print, but the relevant chapter will be made available to you on Moodle.

Students may also consult the more advanced text (available in the library):
  • Varian, H. R. (1992): Microeconomic Analysis. Third edition (or later), W. W. Norton & Company.

Some of the material is covered in the following 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 in 2019 to suit the level of the class and to orient it to recent developments in microeconomic theory. Feedback from students is always extremely welcome, and will inform further development of the course.

Many students in 2019 expressed a desire for greater online coverage of material and greater availability of recorded lectures. This year we have put all material online.

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: 1 JuneLectures 1A & 1B

Lecture 1A: Introduction. Admin matters.

Lecture 1B: Recap of consumer theory. Preferences, utility, budget constraint. Utility maximisation, demand curves, demand curves with endowment constraints.

Varian Chapters 2-5, 9.


No tutorials this week

Homework 1 available end of the week; will be due on Monday of Week 3.

Week 2: 8 JuneLectures 2A & 2B

Lecture 2A & 2B: The two-person exchange model in diagrams. Edgeworth box, competitive equilibrium.

Efficiency. Two theorems of welfare economics.

Coalitions, blocking, core. Replication. Shrinking of the core to the set of competitive equilibria.

Varian, Chapter on "Exchange" (Chapter 31 or 32, depending on your edition).


Hildenbrand and Kirman: Chapter 1.


Worked examples on consumer optimisation and demand.

Week 3: 15 JuneLectures 3A & 3B

Lecture 3A: Consumer surplus, producer surplus, efficiency in partial equilibrium.

Lecture 3B: Market intervention.

Varian Chapters 14, 16, 23 (Industry supply), and handouts.



Two-person Exchange model

Homework 1 due on Monday at noon (12 pm).

Homework 2 available by the end of the week; will be due on Monday of Week 5.

Week 4: 22 JuneLectures 4A and 4B

Lecture 4A: Auctions---second-price, first-price and all-pay auctions. Revenue equivalence.

Lecture 4B: Contests and rent-seeking. Patent races, tournaments, lobbying.



Efficiency and surplus.

Week 5: 29 JuneLectures 5A & 5B

Lecture 5A: Externalities, property rights, Coase theorem.

Lecture 5B: Peer effects and other applications.

Varian Chapter 34 (Externalities).

Coase, R. H. (1960). The Problem of Social Cost. Journal of Law and Economics, 3, 1-44.




Auctions and contests.

Homework 2 due on Monday at noon (12 PM).





No tutorials

Homework 3 available by the end of the week; will be due on Monday of Week 8.

Week 7: 13 JulyLectures 7A & 7B

Lecture 7A: Public goods. Samuelson rule. Lindahl prices. The free rider problem.

Lecture 7B: The Tragedy of the Commons. Lighthouses.

Varian Chapter 36 (Public Goods).

Additional readings posted on Moodle



Week 8: 20 JulyLectures 8A & 8B

Lecture 8A: Search. The Diamond Paradox. Optimal stopping rules. Price dispersion.

Lecture 8B: Matching and Marriage markets. (Multiple equilibria and coordination failure if time permits.)

Course handouts on Moodle


Public goods.

Homework 3 due on Monday at noon (12 PM).

Homework 4 available by the end of the week; will be due on Monday of Week 10.

Week 9: 27 JulyLectures 9A & 9B

Lecture 9A: Matching as a cooperative game. The assignment game. Gale-Shapley. Deferred acceptance.

Lecture 9B: The "market" for organ transplants.

Course handouts on Moodle

Shapley and Roth Nobel lectures


Search and matching

Week 10: 3 AugustNo lectures

Wrap-up and preparation for Final Exam

Homework 4 due on Monday at noon (12 PM).

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 & Careers Hub
The UNSW Learning & Careers Hub provides academic skills and careers support services—including workshops, individual consultations and a range of online resources—for all UNSW students. See their website for details.
Lower Ground Floor, North Wing Chancellery Building.
02 9385 2060

Student Support Advisors
Student 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.
John Goodsell Building, Ground Floor.
02 9385 4734

International Student Support
The International Student Experience Unit (ISEU) is the first point of contact for international students. ISEU staff are always here to help with personalised advice and information about all aspects of university life and life in Australia.
Advisors can support you with your student visa, health and wellbeing, making friends, accommodation and academic performance.
02 9385 4734

Equitable Learning Services
Equitable Learning Services (formerly Disability Support Services) is a free and confidential service that provides practical support to ensure that your health condition doesn't adversely affect your studies. Register with the service to receive educational adjustments.
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

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