The aim of this course is to provide students with the tools from intermediate microeconomics, game theory, and industrial organisation that they need to make sound managerial decisions.
Trang 1International Programme on Business Administration
Erasmus University BAP 56 - MICROECONOMICS AND MARKETS
Microeconomics is the branch of economics that deals with the activities of the individual units of the economy The traditional domain of microeconomics is the marketplace where the focus is on the behaviour of consumers and firms and the interaction between the two under different assumptions about the market structure (perfect competition, monopoly etc.) The aim of this course is to provide students with the tools from intermediate microeconomics, game theory, and industrial organisation that they need to make sound managerial decisions More in detail, the objective of this series of lectures is to develop a fundamental understanding of the
economic model of individual and market behaviour The course will provide
indications of how this model is used to gain theoretical insights about the working of the economy and the effects of economic policy; and how it is used to derive testable predictions that a manager could use in order to take effective and efficient decisions
In the course special emphasis is given to market structure and the environment in which firms operate
Coordinator: prof Dr Maarten C.W Janssen
Instructors: Dr Jose-Luis Moraga, Dr Emanuela Sciubba, Drs Ewa Mendys, Drs.
Rob van der Noll, Prof dr ing F.A.J van den Bosch and others to be announced
Format of the Course: weekly lectures (2 hours, weeks: 49, 50, 51, 2, 3, 4, 5, 6, 7, 8)
and weekly practicums (in 4 groups, 2 hours, weeks: 49, 50, 51, 2, 3, 4, 5, 6, 7, 8)
Exam: Multiple choice test in week TO BE ADDED
Course Assessment: Fully determined by the final exam
Web-site for the Course: Please check the following web-site regularly, as
announcements and course materials will be posted there by instructors
http://bassie.fbk.eur.nl/courses/BAP56/
Essential Readings
The textbook for this course is:
• Michael R Baye: "Managerial Economics and Business Strategy", Mc-Graw Hill Higher Education, 2000 (3rd edition)
In addition, the following readings constitute course material:
Trang 2• Stigler, G.J (1961): "The Economics of Information", Journal of Political
Economy 69, 213-225.
• Janssen, M and J L Moraga (2000): "Pricing, Consumer Search and the Size of Internet Markets" Tinbergen Institute Discussion Paper TI 2000-042/1 (Non-technical summary available from
http://www2.tinbinst.nl/~moraga/search-summary.pdf)
• McAfee, R P and McMillan, J (1996): "Competition and Game Theory",
Journal of Marketing Research 33(3), 263-8.
• Porter, M.E (1991): "Towards a dynamic theory of Strategy", Strategic
Management Journal 12, 95- 117.
This article complements chapter 6 and 7 and addresses issues raised in chapter 12 and 13
• van den Bosch, F.A.J., H.W Volberda, M de Boer (1999): "Coevolution of firm absorptive capacity and knowledge environment: organizational forms and
combinative capabilities", Organization Science 10(5), 551-568.
This article complements chapter 6 by addressing a knowledge-based theory of the firm and combines firm and industry levels of analysis As knowledge is activated
by information, this paper is also related to chapter 12
• van den Bosch, F.A.J and A.P de Man (1994): "Government’s Impact on the
Business Environment and Strategic Management", Journal of General
Management 19(3), 50-59.
This article illustrates chapter 13
The following case-studies will be discussed:
• Bundling: Harvard Business School case study 9-191-177
• Starbuck Corporation: p c.160-c.175 in: Hill & Jones (1998)
• Transformation at Harley-Davidson, p 325-341, in: Hill & Jones (1998)
• Amazon.com, p c.107-c.122, in: Hill & Jones (1998)
Overview of Lectures
Market Forces: Supply and Demand; and Quantitative Demand Analysis
After a brief introduction on microeconomics and markets, this lecture covers the essentials of supply and demand, including demonstration problems that help the students work through the theory Price ceilings and price floors, as well as own-price elasticity, income elasticity and cross-price elasticity are also covered
Trang 3Readings: Baye, chapters 1 (complementary), 2 (essential) and 3 (pp 69-87 essential;
pp 88-112 complementary)
The Theory of Individual Behaviour
This lecture provides a basic model of individual behaviour that enables the manager
to understand the impact of various managerial decisions on the actions of consumers The underlying assumptions of consumer theory help to obtain a better understanding
of demand theory
Readings: Baye, chapter 4.
The Production Process and Costs
This lecture provides the basic tehory of production and costs We cover isoquants, isocosts, the short-run versus the long-run, average product, marginal product, value
of marginal product and the profit maximising input usage A graphical presentation
of cost curves is also provided, together with a discussion of the theory of economies
of scale
Readings: Baye, chapter 5.
Perfect competitive markets, monopolies and monopolistically competitive markets This lecture discusses the optimal decisions of managers in three paradigmatical frameworks: (i) perfect competition, (ii) monopoly, and (iii) monopolistic
competition Understanding these market structures is a crucial step to be prepared to manage a firm that operates in virtually any environment
Readings: Baye, chapter 8 and Stigler (1961)
Game Theory
In this lecture we will develop general tools that help managers to make decisions in oligopolisitic markets, including what prices to charge, how much and what type of advertising to use, what markets to enter etc The basic tool we will use to analyze such questions is game theory This tool can be further employed to analyze decisions within the firm, such as wage bargaining
Readings: Baye, chapter 10 and McAfee, McMillan (1996)
Oligopoly
This lecture builds upon the previous session to answer a variety of questions related
to managers' decision making In particular, it addreses selection of prices, quantities, price discrimination, group pricing, bundling and versioning, and price matching policies
Readings: Baye, chapters 9 and 11 and Janssen, Moraga (1999)
Lecture 7 (Monday 29th January – Prof dr ing F.A.J van den Bosch)
The organization of the firm
Readings: Baye, chapter 6 and Van den Bosch, Volberda & De Boer (1999)
Lecture 8 (Monday 5th February – Prof dr ing F.A.J van den Bosch)
Trang 4The nature of industry
Readings: Baye, chapter 7 and Porter (1991)
The Economies of Information
Reading: Baye, chapter 12 (excluding p 462-474) and Van den Bosch, Volberda, De
Boer (1999)
A Manager’s Guide to Government in the market place
Readings: Baye, chapter 13 and Van den Bosch & De Man (1994)
Overview of Practicums
Market Forces: Supply and Demand; and Quantitative Demand Analysis
Selected problems from Baye, chapter 3
The Theory of Individual Behaviour
Selected problems from Baye, chapter 4
The Production Process and Costs
Selected problems from Baye, chapter 5
Perfect competitive markets, monopolies and monopolistically competitive markets Selected problems from Baye, chapter 8
Case study: Bundling
Game Theory
Selected problems from Baye, chapter 10
Oligopoly
Selected problems from Baye, chapters 9 and 11
Case study: Bundling
The organization of the firm
Selected problems from Baye, chapter 6
Case study: Starbucks Corporation
Trang 5The nature of industry
Selected problem from Baye, chapter 7
Case study: Transformation of Harley-Davidson
The Economies of Information
Selected problems from Baye, chapter 12, related to p.439-461
Case study: Amazon.com
A Manager’s Guide to Government in the market place
Selected problem from Baye, chapter 13
Example of multiple choice questions