Managerial Economics: (Econ 207)
International Business School
Brandeis University
(Fall 2014)
Instructor: Nader
Class Time: Tuesday & Thursday phone:781 736 5325
3:30-4:50pm
Location: Pollack Fine Art Building room 001
Office Hours: Tuesdays: 10:30-11:30 (Heller Building room 361)
Thursdays: 5:00-5:50 (IBS Building, Sachar115)
(Other times: by appointment).
Teaching Assistant:
Alexis Ziqi Jin () , office hour Tuesday 5pm-6pm.
LailaBatool (), office hour Thursday 2pm-3pm.
(Meeting with TAs in other times: by appointment.)
Course Description and Objectives: Managerial Economics helps business students apply basic microeconomic concepts to business and management decision-making. The key concepts that are covered in managerial economics are very similar to microeconomics. These include consumer behavior, properties of market demand, firm’s production decisions, properties of market supply, market structures, government interventions in the markets and finally optimal pricing strategy under various market conditions such as monopoly and oligopoly. What differentiates managerial economics from microeconomics is that the former is more applied and it is problem-solving oriented. It uses the tools of microeconomics to solve actual business decisions that managers are confronted with in the business world.
The methodology of applied microeconomics is relevant to for-profit firms, non-profit organizations, and government regulation. They apply to financial as well as non-financial firms.
Learning of basic concepts is complemented with related case studies with examples of real world business decisions.
Learning Objectives: Studentsshould be able to use basic economic tools to analyze practical economic questions such as the following:
● Howfirms make decisions concerning price and supply of theirproducts
● Howconsumers choose which goods to buy and how many of those goods
● Howfirms solve cost problems
● Howmonopolistic and monopolistic competitive firms make pricing and supplydecisions
● Howperfectly competitive firms make pricing and supply decisions
- How Oligopolistic firms make price and supply decisions
- How governments intervene in markets and what are the consequences of these interventions for business decisions
- How do businesses (Corporations) interfere in politics to serve their own interests
● How businesses do good for society while performing well for shareholders
Required Texts
Managerial Economics in a Global Economy (Dominick Salvatore)
Grading
Two case studies (20% )
Two Homework Sets (10%)
Three Quizzes (10%, 10%, 10%, Total 30%)
Final Exam (35%)
Attendance & Participation (5%)
Assigned work
Case Studies: Case studies will have individual and group components.Students will be assigned to four person teams for case study projects. The teams are expected to apply the tools and methods of microeconomics to analyze the assigned cases and prepare a joint report. The length of the report should be between four to eight pages and its written text must be between 3000 to 4000 words. All members of each team will receive the same grade for the group component based on the quality of their joint report.
Homework: Will be similar to the questions at the end of each chapter and examples that will be discussed in class.
Quizzes: Each quiz will be 30 to 40 minutes long and will cover chapters that have been discussed in the previous four weeks.
Final Exam: The final exam will be a combination of quantitative problems similar to the assigned homework problems and some conceptual-analytical questions.
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Topics:
Week 1. A) Nature of Managerial economics, B) Theory of the Firm, C) Demand – Quantitative Demand Theory
Read: Chapter 1, 2
Week 2. Buyer’s Decisions: Choice – Theory of Individual Behavior
Read: Chapter 4 , Some segments of Chapter 5
Week 3. Costs of Producing and Distributing a Product
Read: Chapter 7, 8
Week 4. Perfect Competition – Theory and Practice
Read: Chapter 9
Quiz one: Thursday October 2nd
Week 5. Industry Analysis – Monopolistic, Oligopolistic and Monopolistically Competitive Firms
Read: Chapter 9
Weeks 6 and 7. Pricing strategies under monopoly (Price discrimination strategies, Multiproduct pricing, Product life cycle, Price Mark up and Elasticity, Two-Part pricing, Peak-load pricing, block pricing)
Read: Chapter 10, parts of chapter 12
Week 8. Game Theory and its applications in business decisions.
Read: Chapter 11
Week 9. Pricing Strategy under Oligopoly Markets (Price Matching, Low Price Guarantees, Randomized pricing).
Read: Chapter 12
Quiz two: Tuesday November 4th
Week 10. Asymmetric information (Moral Hazards, Signaling, Screening, Auctions, Winner’s Curse
Read: Chapter 14
Week 11. Advanced Pricing Strategies (Transfer Pricing, Commodity Bundling, Two-part Tariffs)
Read: Chapter 12
Week 12. Economic Role of Government in Market capitalism (Anti-trust policies, Price Regulation, Externalities, Public Goods, Rent Seeking)
Read: Chapter 13
Week 13. Risk Analysis, Measuring Risk, Utility Theory and Risk Aversion
Read: Chapter 14
Quiz three: December 2nd
Week 14: Review, Final Exam
DISABILITY
If you are a student with a documented disability on record at Brandeis University and wish to have a reasonable accommodation made for you in this class, please see me immediately.
ACADEMIC INTEGRITY
You are expected to be familiar with and to follow the University’s policies on academic integrity (see Instances of alleged dishonesty will be forwarded to the Office of Campus Life for possible referral to the Student Judicial System. Potential sanctions include failure in the course and suspension from the University.
Price Forecast for Gold and Crude Oil (after week 6)
Students are required to participate in weekly Price forecast for Gold or Crude Oil markets. Every Thursday Students submit their price forecast for the price of gold or oil by end of business day on next Wednesday. Students have the option of contributing a quarter (25 cents) to participate in the forecast contest. The money that is collected each week will go to the student with best forecast (the forecast with smallest deviation from the actual price of each commodity on Wednesday. The goal of this assignment is to encourage you to think about various factors that affect he supply and demand for these basic commodities with are traded globally. The actual prices for Gold and Crude Oil (WTI) will be the price reported on financial page of Yahoo at 4 pm every Wednesday.
Useful Online sources
1) Microeconomics for Managers (Professor Richard Mckenzie)
2) Managerial Economics: A Problem Solving Approach(Nick Wilkinson)
3) Three detailed case studies in Applied Microeconomics