Managerial Economics
Economics 500
Spring, 2007
Instructor’s Class Schedule:
ECON 255: EM & 4T
ECON 500: EW
Prerequisites:
Graduate standing,
Economics 211, 252 or 255, and Quantitative Business Analysis 282.
Course Description:
Economic theories of
competition and their application to strategic management of both for-profit
and not-for-profit organizations.
Course
Objective and Goals
Overall Course Objective:
To apply economic analysis
to strategic business decision making.
Learning Outcome Objectives:
The successful student will be able to:
1. explain
the basics of game theory and apply elements of game theory to enable a manager
to anticipate the most likely reactions of rivals to various courses of action
the manager might take.
2. explain
the role of costs, particularly transactions costs and agency costs, in shaping
the vertical and horizontal boundaries between an organization and its
partners.
3. explain
the roles of internal industry rivalry, buyer power, supplier power, entry
conditions and competition from substitute products in shaping the external
environment of an organization and the range of rival reactions to an
organization's actions.
4. analyze an industry in terms
of Porter’s five forces: 1) competition from other firms in the industry
(internal rivalry), 2) competition from substitutes outside of the industry, 3)
competition that may arise from new entrants into the industry, 4) threats due
to the seller power of suppliers to the industry and 5) threats due to the
buying power of customers (monopsony power).
5. explain how an
organization positions itself to compete, pursuing its competitive advantage,
and how the organization changes over time in response to new opportunities and
changes in costs.
6. explain
alternative pricing, quality and bundling strategies, the competitive
conditions that limit their use, the conditions that suggest their use, and why
they lead to higher profits.
Course
Requirements and Method of Evaluation
Course Requirements:
1. Attendance at all class
meetings.
2. Text readings as in Course
Outline, as well as articles, handouts, and materials on reserve in the
library.
3. Students must answer
questions in class on the assigned material.
4. Students must participate
in class discussions.
5. Students must have
knowledge of basic principles of economics and statistics.
6. A group project (report)
analyzing an industry must be completed and turned in.
7. Economics Primer, Midterm
and Final Examinations must be taken.
Required Text:
Economics
of Strategy, 3rd ed.(2004). David Besanko, David Dranove, Mark Shanley, and Scott Schaefer.
John Wiley and Sons (Hoboken, NJ).
ISBN: 0-471-21213-X
Exams: There will be three exams, a
primer exam, a midterm and a final. The primer exam, midterm and final exams
will be essay-type exams, with some short "define, identify or
explain" questions and some more involved essay questions. The final is
not comprehensive.
Primer exam: You are required to have
taken either Economics 211 or 255 before taking this course. Therefore,
students in Economics 500 must know material from these courses. Students
often do brain dumps when they take final exams. However, the material we
will work on in Economics 500 presumes you are very familiar with economic
principles. To assure that students are
familiar with economic principles, students will be given an exam over the
Primer chapter of the Economics 500 text.
Group Project--Industry Analysis: You
will perform an analysis of an industry. See chapter 10 of the text on
this. Also, Michael Porter has a very good section in his book, Competitive
Strategy (New York: Free Press, 1980), on industry analysis that you
should find very helpful. We will concentrate on analyzing sub-industries
within the oil and gas exploration and production industry (the various oil and
gas service industries). Another question we will explore as a class is
"why are the tasks performed by various oil and gas service firms NOT
vertically integrated within the major oil and gas firms?" The product of
the project is to be in the form of a written report, with an executive summary
and a memo of transmittal. Details on
this assignment will be on Blackboard later on.
Your team will make a brief oral (with powerpoint) presentation (not a reading) of your report
at the end of the term.
Breakdown of possible
points for the course and the grading scale:
Course Points Grading
Scale
Attendance:
Attendance is required as per University
policy.
Make-up Policy:
Make-up exams will be given for those who
have valid excuses. Unless you can give proof that you have been abducted
by aliens or have been in a coma, you must get in touch with me and schedule
the make-up exam no later than the end of the first working day (4:30 pm MTWRF)
following the regularly scheduled exam. If I am not in, make sure
you leave a message on my voicemail, or send me an email. You must schedule the
make-up exam for a time either during regular office hours. Do not wait
to talk to me about a missed exam. If you do not get in touch with me
by the day following of the missed exam, you forfeit that exam (make a zero on
that exam).
Disability Assistance:
If you have a documented disability that
requires assistance, you will need to register with the Office of Disability
Services for coordination of your academic accommodations. The Office of
Disability Services is located in Peltier Hall, Room
100A. The phone number is (985) 448-4430 (TDD 449-7002).
Class Rules:
There are two simple rules for this class:
(1) Don’t be rude, and
(2) Don’t distract from the lecture, discussion or other class activity.
Here are some things that would be considered
distracting or rude and are not allowed:
- Eating in the classroom—before, during or
after class.
- Packing your things away before class is over and
you have been dismissed.
- Reading newspapers, magazines, textbooks,
workbooks, or novels during class.
- Using a laptop with audible, clicking keys (if
your neighbor can hear it, it is too loud!
- Having a "Walkman" or other personal
entertainment device out.
- Talking, whispering, and note passing during
class. Leaving early (unless you have permission or suddenly become ill).
- Working on class assignments for other classes or
studying for other classes during our class period.
- Ringing cell phones or pagers.
- Using tobacco products.
- Sleeping in class (this behavior is particularly
distracting and quite rude).
- Taking notes in your text in class by
highlighting.
- While flipping through pages to find a passage in
the text that supports what is being said in lecture is both distracting
and rude, the primary reason for this rule is to encourage you to think
about what is being said during class so that you will engage in active
learning, and you will be in a position to engage in meaningful
discussion. If you are preoccupied with searching a textbook, it will be
virtually impossible for you to benefit from the lecture/discussion going
on at the same time. Hint: Read the book before class and highlight
material that you recall from the lecture after class. Have your economics
text out only when I am directing your attention to the text or when you
are asking questions about your reading that you did not understand. Do
bring your book to class, however. Just do not use your text to take notes
during class.
- Any
other behavior that would reasonably be considered distracting or rude is
also a violation of this rule.
A few guidelines for out-of-class interaction
with your professor:
- Do not come to my office a few minutes before
class.
- Do not come to me before class with some paper
that I am supposed to sign, including drop slips. I do not sign papers
before class.
- Do not ask me "Is this going to be on the
test?" On its face, this
seems like a reasonable question. This question tells your professor that
the only things you think are worth knowing from his class are those items
on the exams. Exams do not cover all of the
course, but only sample your knowledge. If you set your sights on learning
the subject instead of getting good grades, the grades will take care of
themselves.
- Do not ask "Did I miss anything important
yesterday?" or "Am I going to miss anything important
tomorrow?" These questions tell your professor that you expect the
answer to be "no." If a professor were not going to cover
anything important, he would stay in his office that class period and
dismiss class.
Disclaimer: This is a syllabus, a plan, not a
contract, and should not be interpreted in any way as a contract.
Course Outline
Topic
|
Text--Readings
|
|
Basic Economic Concepts
|
Primer
|
|
Primer Exam
Horizontal Boundaries of
the Firm: Economies of Scale and Scope
|
Ch. 2
|
|
Diversification and
Economies of Scope
|
Ch. 5
|
|
Competitors and Competition
|
Ch. 6
|
|
Strategic Commitment
|
Ch. 7
|
|
Pricing Rivalry
|
Ch. 8
|
|
Entry and Exit
|
Ch. 9
|
|
Midterm Exam
Class after Midterm:
Industry Analysis
|
Primer, Ch.2, Chs. 5-9
Ch. 10
|
|
Transactions Costs of
Market Exchange and Vertical Boundaries
|
Ch. 3
|
|
Organizing Vertical
Boundaries: Vertical Integration and Alternatives
|
Ch. 4
|
|
Strategies for Pricing with
Market Power
|
P&R* 11
|
|
Strategic Positioning for
Competitive Advantage
|
Ch. 11
|
|
Sustaining Competitive
Advantage
|
Ch. 12
|
|
Industry Analysis Due / Origins of Competitive Advantage
|
Ch. 13
|
|
Final Exam
|
Chs. 10, 3-4, 11-13, P&R Ch.11
|
|
Presentations
|
|
* P&R denotes Chapter from Pindyck and Rubinfeld, Microeconomics,
6th ed. (Prentice-Hall:2005).
Academic Honesty Policy:
Cheating and Plagiarism
CHEATING
A. On Exams:
1. During an exam
a. wearing a hat or cap
b. looking on another exam or letting
someone see your answers.
c. any communication between (among)
students.
d. looking
at notes, books, cheat sheets, etc., during the exam unless the instructor
informs you that the exam is open book or open notes in advance, or allows a
formula or "cheat" sheet.
e. taking a
copy of the exam out of the room without specific authorization to do so, that
is, if the instructor doesn't specifically say one way or another if you may
take a copy of the exam. Taking a copy of the exam would constitute cheating.
f. not reporting any cheating you
observe.
g. having anything written on
clothing, skin, etc., that would give the student an advantage.
2. Not during an exam.
a. asking a fellow student who has
previously taken an exam anything about the exam other than is it difficult or
long.
b. stealing, receiving, or copying any
unauthorized copy of the exam.
c. not reporting any cheating you
observe which includes not reporting someone who tells you of another's
cheating but does not report.
d. any planning with another to steal
an exam even if the plans are not carried out.
B. On
other assignments:
1. Copying
any answer to assigned questions or problems constitutes cheating unless the
project is a group project, and then only from members of your group.
2. Asking or
answering any questions concerning the assignment other than the instructor or
the instructor's assistant with the exception of the question: When is it
due?
3. Allowing someone access to your assignment answers or
gaining access to another's assignment answers. It is acceptable to
photocopy someone's assignment questions as long as there are no answers.
4. Getting
someone else to do any computation or computer work for you or doing it for
another, including having someone else do the statistics for you for a paper.
C. Any bribe or threat or hint of an
attempt at bribe or threat will be considered cheating,
including something like
the following:
1. I will do anything for an A (or B or C etc.) or
2. What can I
do to get a better grade? It is acceptable to ask the instructor what you need
to work on to improve your performance. Giving unfair aid is as serious as
receiving it. Knowing about others cheating without reporting it to the
instructor or the instructor's department chairman is also cheating. This does
not mean that you cannot seek help from another to understand a concept or
even how to work a problem similar to the one you cannot see how to work.
Also, though collaboration on assignments is cheating, I wish to encourage you
to study together, discuss paper topics, etc.
Penalty
for infractions of cheating rules is an F in the course and a recommendation
for dismissal from the university.
10 Easy Ways to Get Caught Cheating
Top 10 Consequences of Cheating
PLAGIARISM
A. Copying any assignment or
any part of an assignment by someone else without giving that person credit.
This is particularly relevant to any out-of-class assignment in this class.
Also, do not talk to others that would give them special clues to solve some
puzzle in an assignment.
B. Letting or asking anyone to
copy a paper.
C. Having someone else write papers for you. It is allowable for someone else
to type your paper for you, but typists, even when paid, should be
acknowledged.
D. Any comments from another
person on your paper's topic should be properly acknowledged.
E. Knowledge of someone handing
in work not their own.
F. Copying word for word or
even almost word for word constitutes plagiarism without identifying the words
as a quotation.
G. Paraphrasing without
citation.
H. Copy another's ideas without
citation
Penalty for infractions of the
plagiarism rules is an F in the course and a recommendation for dismissal from
the university.
10 Easy Ways to Get Caught Cheating
Top 10 Consequences of
Cheating