Managerial Economics:ECO 5023

Managerial Economics:ECO 5023

UTSA EMBA Program

Spring 2010

Keith Phillips

978-1409 (O), 872-9686 ©

Office Hours

Since I work off campus I will be available after class and also available by appointment, phone and e-mail. Do not hesitate to call or e-mail me. If you need further help we can meet either at my office downtown or on campus.

Text

We will be using three books. The first is a customized text by McGraw Hill/Irwin. The ISBN number for the book is 978-0-390-81831-7. The other two are Managerial Economics: A Problem Solving Approach by Luke Froeb and Brian McCann and Restoring Financial Stability: How to Repair a Failed Financial System,edited by Viral Acharya and Matthew Richardson.

Course Background and Description

To be consistent with the UTSA EMBA Mission, the economics course continues to change. The mission statement clearly states that the program should prepare students “to be responsible strategic level business leaders in the emerging complex and ever-changing world.” Courses should thus be applied to the decision making process of business leaders.

Traditional microeconomics studies the decisions by firms and the overall outcomes to society under different market structures. It includes a study of how equilibrium prices and outputs are determined and if these are efficient from a societal point of view. The problem with using traditional microeconomics in teaching this course is that much of it is not applied to the decision making process of business leaders.

This semester I will be taking a different approach. The Froeb and McCann book uses a problem solving approach to teach microeconomic concepts. It looks at common mistakes made by firms and asks: Who made the bad decision? Did the decision maker have enough information to make a good decision? And did he or she have the incentive to do so? Finding the answers to these questions will lead us to discover and use basic economic principles to make better decisions in the future. The book also focuses on a growing field in microeconomics that is being utilized in business strategy – game theory. This field looks at how people make decisions when confronted with various alternatives and with different degrees of information about their environment and the decisions of others. The prisoner’s dilemma that we will study is an example of how the outcome that has the greatest total reward is often not the most likely outcome. Game theory can help businesses understand how customers and employees are most likely to respond to different incentives.

It is also clear that the business cycle plays an important role in the sales and profits of almost all firms and thus a good understanding of the macro economy should be an important component of the class. Given my 25 years as an economist for the Federal Reserve Bank of Dallas and my research into the measurement and forecasting of business cycles, this part of the course is a natural fit for me. The readings in the McGraw-Hill/Irwin book cover some of the basics in macroeconomics as well as some interesting policy issues such as the minimum wage.

While the causes of and cures for the recent financial crisis are still being debated, the readings the Acharya and Richardson book provide a good summary of the important issues that have arisen from the crisis. Taking a closer look at this crisis will give us an opportunity to apply basic economic tools to recent events.

I will supplement the readings with timely articles from Federal Reserve publications and other sources.

Course Goals

• Know what conditions characterize competitive outcomes and efficient allocations of resources. Evaluate need for market intervention, identify winners and losers and summarize costs and benefits.
• Learn to use economic models to think critically about everyday problems.
• Apply strategic thinking (game theory) to decision-making and know how to use it to analyze firm and individual choices.
• Understand the economic, ethical and social issues surrounding policies such as the minimum wage and free trade.
• Understand the economic, ethical and social issues surrounding corporate charitable giving, sports stadiums and Wal-Mart.
• Know what drives economic growth in the long-run and how governments address short-run fluctuations in output through fiscal and monetary policy.
• Understand how opening up to international trade affects the macroeconomy in the short- and long-run.
• Understand and be able to communicate to others the complex role of the Federal Reserve in today’s economy.
• Learn, grow and have fun!

The course goals listed above support the following EMBA Learning Goals:

• Graduates should be analytical and synthetic thinkers knowledgeable about the basic functions of business and their interrelationships, value creation, and markets.
• Graduates should be reflective, imaginative, open minded and introspective learners.
• Graduates should be good communicators sensitive to the value of diversity and interpersonally effective in teams.

Grading

Class Participation/Leadership 5%

Reflection papers/homework20%

Microeconomics/Game Theory paper25%

Fed Challenge Group Project25%

Final Exam25%

Course Schedule

I have included a tentative schedule. The questions for the position papers will be given in the class prior to the class that the paper is due. In general the position papers will be “Give an example of how the subject that we discussed applies to your company or industry.”