BAEcon Economics and Philosophy

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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.

ECON20001 Managerial Economics 1 OR ECON20501 Microeconomic Analysis 3 OR ECON20021 Microeconomics 3 OR ECON30501 Microeconomic Analysis 3 OR ECON30021 Microeconomics 3

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:

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.

Indicative syllabus

Game Theory

• Static games and Nash equilibrium, 
• Sequential games and subgame perfect Nash equilibrium. 
 

Markets and Strategies

• Monopoly and perfect competition, 
• Cournot, Stackelberg, and Bertrand competition.
 

Mergers

• Horizontal mergers, 
• Vertical mergers.
 

Collusion

• Cartels and tacit collusion,
• Sustainability of collusion.

Competition with Differentiated Products

• Horizontal differentiation 
• Vertical differentiation          

Synchronous activities (such as Lectures or Review and Q&A sessions, and tutorials), and guided self-study

(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.

(i) apply skills of analysis and interpretation; (ii) manage time and work to deadlines.

Summative Assessment (assessment that contributes to your grade):

• Group Assignment 20%
• Exam 80%

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 through the course unit's Blackboard Page.

• 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

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)

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