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BAEcon Economics and Finance / Course details

Year of entry: 2021

Course unit details:
Managerial Economics II

Unit code ECON31002
Credit rating 20
Unit level Level 3
Teaching period(s) Semester 2
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 (10cp) ECON20000 Pre-Requisite Compulsory
Managerial Economics I ECON20001 Pre-Requisite Compulsory
Pre-requisites: 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

In response to student feedback requesting more contact time with staff, the Economics DA is offering additional Support Hours to students on all third year modules. These are optional sessions that aim to provide Year-3 students an opportunity to interact with lecturers, ask them directly queries relating to the teaching material or revise topics where students require more support.

Week

Activity

Notes

1

Lecture (2 hours)

 

2

Lecture (2 hours), Exercise Class 1

Intro tutorial

3

Lecture (2 hours)

 

4

Lecture (2 hours) , Exercise Class 2

Group Project 1

5

Lecture (2 hours)

Online Test 1

6

Reading Week

 

7

Lecture (2 hours), Exercise Class 3

 

8

Lecture (2 hours)

 

9

Lecture (2 hours), Exercise Class 4

Group Project 2

10

Lecture (2 hours)

Online Test 2

11

Exercise Class 5

 

12

Optional Support Hours, Exercise Class 6

 

XMAS Break

 

 


Game Theory Concepts

  • Strategic interaction in Business Contexts, Nash Equilibrium, Sub-game Perfect Nash Equilibrium; Backward and Forward Induction

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 Strategies

  • Personalized Pricing, Menu Pricing, Group Pricing,  Bundling, Other forms

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

Optional Topic (bonus track): Entry Deterrence

 

 

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

Summative Assessment (assessment that contributes to your grade)

  • Item 1 (Two Group Projects, class activity, 5%)
  • Item 2 (Two Online Tests, 20%)
  • Item 3 (Final Exam, short written answers/exercises, 75%)

NB: The Group Projects are held during the Exercise Classes in Week 4 and 9.

The criteria used by Economics in the assessment of examinations and coursework can be found on the UG Intranet in your programme handbook (BSc Economics, BA(ECON) Economics and Social Sciences) and will be linked throught the course unit's Blackboard Page.

Feedback methods

  • Formative Assessment (assessment that does not contribute to your grade) and other feedback opportunities

    • Use the 10 minutes 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
    • Post a question on the discussion board
    • Attend the optional Support Hours at the end of semester

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:

Shy O. (1996), “Industrial Organization: Theory and Applications”, MIT Press

Dixit A., D.H. Reiley and S. Skeath (2009), “Games of strategy”, Norton

Fisher T., Prentice D. and R. Waschik (2010), “Managerial Economics: A Game Theoretic Approach”, Routledge

Church J.D. and R. Ware (2000), “Industrial Organization: A Strategic Approach”, McGraw-Hill (downloadable for free online and on BB9)

 

Study hours

Scheduled activity hours
Lectures 18
Tutorials 4
Independent study hours
Independent study 78

Teaching staff

Staff member Role
Leonidas Koutsougeras Unit coordinator

Additional notes

For every 10 course unit credits we expect students to work for around 100 hours. This time generally includes any contact times (online or face to face, recorded and live), but also independent study, work for coursework, and group work. This amount is only a guidance and individual study time will vary

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