BSc International Business, Finance and Economics with Industrial/Professional Experience / Course details

Year of entry: 2020

Course unit details:
Managerial Economics II

Unit code ECON31000
Credit rating 20
Unit level Level 3
Teaching period(s) Full year
Offered by Economics
Available as a free choice unit? Yes

Overview

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.

Pre/co-requisites

Unit title Unit code Requirement type Description
Managerial Economics I ECON20001 Pre-Requisite Compulsory
Pre-requisites: ECON20001

ECON20001

Aims

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

Learning outcomes

At the end of this course students should be able to:

  1. Understand the role of strategic variables such as prices, quantities and advertising outlays as part of firms’ profit maximizing decisions.
  2. 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.
  3. 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.

Syllabus

Semester 1:

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

 

Semester 2:

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.

Intellectual skills

(i) problem-solving skills; (ii) synthesise and evaluate data.

Practical skills

(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.

Assessment methods

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

Feedback methods

  • 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.
     

Recommended reading

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)

Study hours

Independent study hours
Independent study 0

Teaching staff

Staff member Role
Michal Krol Unit coordinator
Carlo Reggiani Unit coordinator

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