BUSA 6160 Managerial Economics Spring 2010 Course Outline

Dr. Philip Szmedra 326 BHP Building phone: 229-931-2107 email: pszmedra@canes.gsw.edu Office Hours: M-F, 2:30PM 3:30PM, or by appointment. Web site: http://itc.gsw.edu/faculty/pszmedra ___________________________________________________________________________ 1. General Content This course is designed to provide the graduate level student with the necessary tools to apply fundamental economic concepts to managerial and administrative decision making. It is an application of microeconomics which focuses on topics that are of the greatest interest to managers; specifically the relationships between firms, consumers, producers, and the economic environment in which they operate. Such an approach provides the necessary foundations for courses in areas such as Finance, Management, and Marketing. 2. What the student is assumed to know upon entering the course. The prerequisite for this course is the successful completion of ECON 2106 Principles of Microeconomics or its equivalent as well as a course in college algebra. In addition an introductory course in calculus or pre-calculus would be beneficial to the student but is not a requirement. 3. Textbook The required textbook Michael Baye, Managerial Economics and Business Strategy, 7th Edition, 2010. ISBN: 978-0-07-337596-0, Publishers: McGraw-Hill/Irwin. Book website: http://www.mhhe.com/baye7e/ 4. Course Objectives and Learning Outcomes The objectives of BUSA 6160 are to enable students to understand and apply economic theories and techniques used in business organizations in solving problems related to decision-making in strategic environments. The specific learning objectives include: The understanding of how goals, constraints, incentives, and market rivalry affect economic decisions; The ability to apply present value analysis to make investment decisions and determine the value of assets and firms; The ability to use supply and demand analysis as a qualitative forecasting tool to determine equilibrium market outcomes; Be able to apply regression analysis to estimate demand functions; Understand the factors that underlie both the demand and supply functions in order to be able to analyze consumer and producer behavior; The ability to choose appropriate measures of the firms optimal use of resources; Understanding the structure-conduct-performance paradigm and how the nature of industry is affected by market structure; The ability to identify conditions under which a firm operates in monopolistic, oligopolistic, and monopolistically competitive markets to determine optimal pricing, output, and profit conditions; The ability to use Game Theory to formulate decisions in strategic business environments; The ability to identify strategies to manage risk and uncertainty including diversifications and optimal search strategies; Understand the role government can play when markets fail.

4. Course Content 1. INTRODUCTION TO MANAGERIAL ECONOMICS Introduction to Economic Behavior Definition of Firms, Markets and Resources Opportunity Cost Time value of Money Marginal Analysis Reading: Chapter 1 2. DEMAND, SUPPLY and the MARKET MECHANISM Basics of Supply and Demand Partial Equilibrium Market Elasticity Consumer Surplus and Producer Surplus Predicting Changes in Market Conditions Regression Analysis Consumer Behavior and Utility Theory Reading: Chapters 2, 3, 4 3. PRODUCTION Production Functions Isoquants Law of Diminishing Returns Returns to Scale Cost of Production Input Procurement The Principal-Agent Problem Reading: Chapters 5, 6 4. THE NATURE OF INDUSTRY The Structure-Conduct-Performance Paradigm Perfect Competition, Monopoly and Monopolistic Competition Oligopoly Reading: Chapters 7, 8, 9. 5. GAME THEORY Overview of Game Theory Prisoners dilemma Nash Equilibrium Pricing Strategies Reading: Chapters 10, 11 6. THE ECONOMICS OF INFORMATION Overview Risk and Uncertainty Adverse selection Moral hazard Akerlofs Lemon Principal Auction Markets Reading: Chapter 12 7. GOVERNMENT INTERVENTION WHEN MARKETS FAIL Price floors and ceilings (e.g. wage controls, price supports) Quotas

 Taxes Rationing Property rights, Externalities, Public Goods. Reading: Chapter 14 5. Case Presentations Your ability to make reflective, fact-based management judgments in the world of business will depend on the analytical tools at your disposal and your exposure to various real world situations in which those tools can be applied. To develop those analytic abilities effectively we will be using the case study method during the second half of the semester. Beginning on March 17 and then at every succeeding class meeting one team of students will present an in-depth analysis of an assigned case study. The framework of the presentation will be based on case questions that accompany each case found on my website. These questions will launch the group into an in- depth analysis of the company cited including pertinent corporate activities or characteristics that have contributed to the issues described in the case. The Harvard Business School (HBS) uses the case study method of learning to great effect. Here is the HBS take on the case method: When students are presented with a case, they place themselves in the role of the decision maker as they read through the situation and identify the problem they are faced with. The next step is to perform the necessary analysisexamining the causes and considering alternative courses of actions to come to a set of recommendations. To get the most out of cases, students read and reflect on the case, and then meet in learning teams before class to "warm up" and discuss their findings with other classmates. In classunder the questioning and guidance of the professorstudents probe underlying issues, compare different alternatives, and finally, suggest courses of action in light of the organization's objectives. Please go to this HBS web address and familiarize yourself with the case learning method: http://www.hbs.edu/mba/academics/howthecasemethodworks.html The class has been divided into five person groups for the purpose of case presentations. Each group will present one case study during the semester from the list included on my website. The case presentations will count ten percent of the final grade. The presentations will be a minimum of 60 minutes in length with each group member responsible for a portion of the presentation. The case presentations will take place during the second half of the class meeting. The case presentation will be evaluated based upon the quality of the analysis provided, including expansion of the facts presented to related firms and industries, inclusion of economic concepts that have been covered during the semester, successfully answering the questions posed accompanying each case, and the effective use of technology.

6. Class Work Schedule Date 1/13/2010 1/20 1/27 2/3 2/10 2/17 2/24 3/3 Spring Break 3/17 3/24 3/31 4/7 4/14 4/21 4/28 Chapter Baye 7th Chapter 1 Chapter 2 3rd World Presentation Chapter 3 Chapter 4 Chapter 5 Chapter 6 Mid-term Exam Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Chapter 14 7. Pg. 258; #2, 5, 6, 12, 13, 15, 18, 21 8. Pg. 303; #3, 5, 8, 12, 13, 16, 17, 21 9. Pg. 342; #2, 4, 7, 13, 17, 20, 22 10. Pg. 386; #2, 7, 12, 15, 17, 21 11. Pg. 425; #4, 11, 14, 15, 18, 20, 22 12. Pg. 466; #1, 4, 7, 12, 15, 19, 21, 23 13. Pg. 538; #4, 6, 8, 15, 19, 21, 23 A B C D E F G Problem Sets 1. Pg. 27; #3, 12, 14, 15, 16, 21, 23 2. Pg. 67; #6, 14, 16, 17, 23 3rd World Presentation 3. Pg. 110; #11, 16, 19, 20 4. Pg. 147; #2, 7, 15, 21 5. Pg. 191; #5, 6, 13, 14, 15, 21 6. Pg. 227; #2, 4, 19, 21, 23 Group Presentation

7. COURSE ASSESSMENT A. Components I. Continuous Assessment: Problem sets Case presentations Mid-term examination II. Final Examination: 30% 10% 30% 30%

Problem Sets: Problem sets will be assigned beginning week one. The problem sets will exercise your analytical abilities and skills and will concentrate on developing both your quantitative and qualitative decision-making abilities. Problem sets are due the evening class meets. For example, problem set #1 is due at our second class meeting. You may work together on problem sets. The maximum number of students working together in a problem set study group is three. Problem sets must be word processed. I wont accept anything handwritten. Everyone in the group receives the same score.

A problem set will be assigned every week of the semester except during the week of the midterm examination. Problem sets can be done and submitted to me at anytime during the week they are assigned. I wont accept problem sets after the class meeting in which they are due. No exceptions! Examinations: There will be a mid-term and final examination. The examinations will be comprised of a combination of objective and subjective questions. The only legitimate reason for failing to appear at an examination is illness. I will allow you to take a makeup exam only after presenting to me a medical doctors excuse explaining your illness or the illness of someone in your immediate family. I will not give a makeup exam under any other circumstance. Class Participation: I strongly encourage you to initiate and participate in class discussion. Class participation will affect your final grade at the margin. What exactly does that mean? It means that if you are borderline at the final grading, I will grade up if you have actively participated in class discussion. The overall mark for the course is the aggregate of the assessment elements. Attendance: Lecture attendance is strongly recommended but not required. This isnt high school. However, I can advise you that there is a strong correlation between class attendance and overall performance. I realize that graduate students lead amazingly complicated lives. Nevertheless I encourage you to attend lectures. When absence is excessive on any particular day, those students that do attend will be rewarded with extra credit that will be recorded in their problem set score file. Come to class! Rules of Conduct: 1. When you arrive in class your mobile phone will be switched off including the vibration mode if your phone has one. 2. Once you arrive in class you will remain in the class until dismissed at the end of class. The class will take a relaxation break after approximately the first meeting hour. You may attend to your cell phone, smoking, or other issues during that time. 3. Finally, I do not tolerate students sleeping in class, students having their head down on their desks, looking at or texting on cell phones, or any other type of inattentive or disruptive behaviour. If I see you sleeping I will clap my hands to wake you. If you doze off again I will ask you to leave the classroom and find a more comfortable place to nap than GSW student seating.

Academic Honesty: All students are expected to abide by the honesty and integrity standards set by the university. Any type of dishonest behaviour will be dealt with severely. The consequences of cheating on an examination, or plagiarism while completing a written assignment will be felt both at the class level through grade penalties and at the university level through disciplinary action. Specifically, one cheating infraction will cause you to receive and F in the course and your case forwarded to the university administration for disciplinary action. Do not cheat! Students with Disabilities: A student requesting classroom accommodations or modifications due to a documented disability must notify me within the first two weeks of the semester. If the student has not already done so, he or she must contact the Office of Student Support Services located in room 304 of Sanford Hall. The phone number is 229-931-2294. Dr. Philip Szmedra Associate Professor of Economics School of Business Administration Georgia Southwestern State University Spring Semester 2010