BSc International Business, Finance and Economics with Industrial/Professional Experience
Year of entry: 2020
Course unit details:
Managerial Economics II
|Unit level||Level 3|
|Teaching period(s)||Full year|
|Available as a free choice unit?||Yes|
The aim of this course is to apply economic and game theory concepts and analytical tools to the strategic management decisions of private firms in a relevant business context.
At the end of this course students should be able to: (i) understand the role of strategic variables such as prices, quantities and advertising outlays as part of firms’ profit maximizing decisions; (ii) use analytical tools and game-theoretic solution concepts to recommend an optimal decision to a firm and predict the outcome of its interaction with the competitors; (iii) understand how mergers, collusion, entry deterrence and product differentiation can be used by one or more market participants to affect the outcome of a strategic interaction.
|Unit title||Unit code||Requirement type||Description|
|Managerial Economics I||ECON20001||Pre-Requisite||Compulsory|
The aim of this course is to apply economic and game theory concepts and analytical tools to the strategic management decisions of private firms in a relevant business context
At the end of this course students should be able to:
- Understand the role of strategic variables such as prices, quantities and advertising outlays as part of firms’ profit maximizing decisions.
- Use analytical tools and game-theoretic solution concepts to recommend an optimal decision to a firm and predict the outcome of its interaction with the competitors.
- Understand how mergers, collusion, entry deterrence and product differentiation can be used by one or more market participants to affect the outcome of a strategic interaction.
Game Theory Concepts - Strategic interaction, Min-max Equilibrium, Nash Equilibrium
Strategies and Markets - Competition, Market Power, Oligopoly
Mergers - Mergers activity, Mergers Game-Theoretic Paradoxes, Vertical Mergers
Collusion - Cartels and tacit collusion, Sustainability of Collusion
Pricing - Personalized Pricing, Menu Pricing, Group Pricing, Behaviour-based Price Discrimination, Bundling
Game Theory Concepts
- Sub-game Perfect Nash Equilibrium; Backward and Forward Induction
- Competition with Differentiated Products
- Hotelling Model of Horizontal Differentiation: location-only vs. location-then-price
- Spatial Price Discrimination
- Vertical Product Differentiation
- The Role of Advertising
Teaching and learning methods
Lectures, tutorial classes and exercise classes.
(i) problem-solving skills; (ii) synthesise and evaluate data.
(i) independently locate and assess relevant literature, (ii) to draw on these to develop understanding and to construct arguments.
Transferable skills and personal qualities
(i) apply skills of analysis and interpretation; (ii) manage time and work to deadlines.
10% S1 2 x online assignments
10% S2 2 x online assignments
37.5% S1 Exam
37.5% S2 Exam
2.5% S1 2 x group projects
2.5% S2 2 x group projects
- Use the 10 minute break during/following lectures to ask questions to lecturers.
- During term time, book a slot in the weekly office hour of the Lecturer and Tutors.
- Attend the optional Support Hours at the end of semester.
- In tutorials, you obtain group/individual feedback on the submitted assignments, group projects and any individual work you did on the tutorial exercises.
- Semester 1: Post a question on the discussion board.
- Semester 2: Send your attempted answers to past exam questions to the Lecturer to receive individual feedback.
There is no compulsory textbook that covers all the topics in the module. More details will be provided in the first lecture. However, selected chapters from the following textbook are going to be particularly useful:
Belleflamme P. and Peitz M. (2010), “Industrial Organization: Markets and Strategies”, Cambridge University Press. (ISBN:9780521862998
Students may also find parts of the following books useful as supplementary reading:
Fisher T., Prentice D. and R. Waschik (2010), “Managerial Economics: A Game Theoretic Approach”, Routledge
Shy O. (1996), “Industrial Organization: Theory and Applications”, MIT Press
Dixit A., D.H. Reiley and S. Skeath (2009), “Games of strategy”, Norton
Carlton D.W. and Perloff J.M. (2005), “Modern Industrial Organization”, Pearson/Addison Wesley
Church J.D. and R. Ware (2000), “Industrial Organization: A Strategic Approach”, McGraw-Hill (downloadable for free online and on BB9)
|Independent study hours|
|Michal Krol||Unit coordinator|
|Carlo Reggiani||Unit coordinator|