Firms and Markets: Syllabus (Fall 2013)

Transcription

1 1 Firms and Markets Professor Robin Lee Office: KMC Firms and Markets: Syllabus (Fall 2013) Course Description The goal of this course is to give you some insight into how markets work. The first part of the course studies decision making by consumers and firms and concludes with a fundamental result in economics: a set of conditions under which markets function efficiently. In the second part of the course, we focus on situations when, for one reason or another, markets don t work efficiently. We will emphasize the importance of strategic behavior, and provide a framework for thinking about and analyzing these situations through the use of game theory. Microeconomics (as the topic of this course is frequently referred to) is an important component of an MBA program. First, microeconomics focuses on specific dimensions of optimal firm decision making, such as pricing and entry and exit. Second, the formal economics perspective on business plays an important role in other areas of MBA study, such as finance or marketing. Finally, by studying public policy towards market failures, microeconomics highlights important factors that influence any firm s strategy. Some of the key concepts we will introduce include economic incentives, marginal analysis, opportunity cost (which costs matter), market efficiency (what does it mean for a market to work), strategic behavior (how to predict and respond to your rivals decisions), and asymmetric information (what happens when others know something you do not). Our experience with students in prior years is that much of this is intuitive. But much is not, and our hope is that the combination of theoretical structure and practical examples will be useful in the years to come. It will not make you successful on its own, but it might give you the edge in circumstances when it matters. Prerequisites You are expected to be comfortable with basic algebra and calculus, including systems of equations, logarithms and NPV calculations, and derivatives.

2 2 Course Materials Lecture notes (in this coursebrick): These review the theory relevant to most classes. In a few pages, they outline and explain the conceptual issues for the day, define terms, give examples, and (where it makes sense) work through numerical problems. They are intended to complement the lectures rather than substitute for them. Textbook: There is no required textbook for this course. However, if you would like to consult a reference text, I recommend Michael Baye s Managerial Economics and Business Strategy (McGraw-Hill, 8 th or earlier editions are all fine), which is available in the bookstore or online. There is also a study guide to accompany the text. Many students indicate that they find this book helpful, though I leave it up to you to decide what is best. As a secondary reference, I also want to draw your attention to Managerial Economics by Samuelson and Marks (Wiley, any edition; the 7 th is the most recent). This is a good auxiliary text for the course it is a little more advanced in some parts, but is a little more comprehensive and is sensible on how to take concepts to data. Slides: The slides are a forecast of where the class will head, but if the discussion moves in another interesting direction we will generally let it run its own course. Also, I will amend the slides from time-to-time to keep the course up-to-date with current research and events. I will post the most up-to-date slides online. I will also endeavor to post copies of all the board-work I do in class. With the exception of the textbooks, all of this material will be handed out the first day of class and/or posted on NYU Classes. Deliverables, Expectations and Grades There are various deliverables in the course that are designed to develop different skills: Class participation. It is important to integrate what you learn and be able to express it effectively. Moreover, there is a great deal of collective insight and experience in the class and we all benefit from sharing it. It will be based on such measures as the quality (not quantity) of your contributions, attendance, punctuality, and whether you are doing the problem sets, in addition to your overall citizenship in class. Individual problem sets. Problem sets emphasize quantitative applications of the principles and tools developed in class. They will not be graded, but will be marked with a check/check +/check -. Making a bona fide attempt at problem sets will contribute to your participation grade; failure to submit or make a reasonable attempt may be penalized. Most of the problems are quantitative; some require a qualitative answer (the latter typically refer to mini-cases that my colleagues and I have written over the years) and for these there may be no definitive right or wrong: understanding the issues is key. You should also note that the problem sets will help you prepare for the exams.

3 3 Group Work: Working with classmates will be an important component of the course, as there is a lot we can learn from each other s different experiences and perspectives. Group work will include a combination of the following: o (2) Projects: Generally more complex and realistic quantitative assignments that use and extend the principles and tools developed in class. o (1) Presentation: Every group will be asked to make a presentation to the class on a topic selected from a list of relevant themes. The goal is to apply economic principles to real-world situations and to hone your communication skills. The content is more qualitative than assignments and projects. Exams: There will be two in- class exams, one in the middle and the other close to the end of the course. Generally they will be three or four problems, similar to the practice exams that will be distributed later in the semester. Exams will be equally weighted. o At the beginning of the course, I will give the class the option of having the first exam be partially redemptive: i.e., less weight will be given to the first exam and more weight on the second exam if that increases your grade. The reason for doing this is that this course will move fast and I am sensitive to cater to students who need a little time to get their head around what economics is about. Ultimately I care about what you know at the end of the course: this grading scheme is consistent with that concern. All deliverables that are submitted (i.e., problem sets and group projects) are due at the start of class and will not be accepted after that time. If you there is a risk you will be late or absent, you may have a classmate submit it on your behalf, or submit it via to the teaching assistant. All deadlines are provided on the outline and calendar attached to this syllabus so you can plan accordingly. ***Please show your work for deliverables*** Simply writing down answers without indicating how you obtained them will not be sufficient for full marks. (Use your judgment: you do not need to show all mathematical calculations; e.g., indicating the formulas used and where the values you plugged in came from is typically sufficient). Your grade for the course will be based on all of these deliverables, weighted as follows: Problem Sets (6) Check (+/-) Class Participation 10% Group projects (2) 10% each Group presentation 10% In-class exams (2) 30% each (or 15%/45%) Your performance in terms of problem sets will serve as a tiebreaker if you are on the border between two grades. Class participation is primarily a means of distinguishing between good and bad citizens, where the distinction relies primarily on factors such as attendance, timeliness, and non-disruptive behavior; occasionally, class participation may be used to reward students whose in class comments are especially insightful or valuable. Note: quantity does not compensate for quality.

4 4 Final grades will follow the School s guideline for core courses: no more than 35% of the class will receive an A / A grade. This guideline was instituted in response to student concerns that different sections of a course might be graded by different standards. Exams and re-grading You are responsible for checking the exam dates and avoid any conflict with other commitments. Exams will not be re-administered on other dates. During exams, you are not allowed to consult class notes, books, or any other material. However, you may consult one handwritten 8.5 x11 page of notes (single-sided for the first exam, double-sided for the second). Questions about grading must be made in writing and no more than a week after the exams are returned. Honor Code The Stern community believes that honesty and integrity are necessary for rewarding academic and professional experiences. These qualities form the basis for the strong trust among members of the academic community (students, faculty, and administrators) that is essential for excellence in education. The Honor Code requires that each student act with integrity in all academic activities and endeavor to hold his or her peers to the same standard. In this course, you may discuss assignments with anyone, but any written work submitted for a grade should be your own. On in-class exams, you may bring in and consult one piece of paper with anything on it you like, but your answers should be entirely your own work. Additional information is available at Assistance with Disabilities If you have a qualified disability and will require academic accommodation during this course, please contact the Moses Center for Students with Disabilities (CSD, ) and provide me with a letter from them verifying your registration and outlining the accommodations they recommend. If you will need to take an exam at the CSD, you must submit a completed Exam Accommodations Form to them at least one week prior to the scheduled exam time to be guaranteed accommodation. Help There are times when a little help can get you past an obstacle. If you are stuck, send me an (rslee@stern.nyu.edu) and I will be happy to either respond via or schedule an appointment with you. Announcements regarding the course will be made on NYU Classes and/or . Besides administrative issues, I may post clarifications on the class material (arising out of our discussion in class or following from a fellow student s questions).

5 5 Firms and Markets Outline and Calendar Professor Robin Lee Firms and Markets: Outline and Calendar (Fall 2013, COR1-GB ) DATE TENTATIVE PLAN FOR CLASS DELIVERABLES (Exams, problem sets, group-work) 1. Sep 3 (Tu) Introduction to Class Intro to Demand and Supply Sep 5 (Th) NO CLASS 2. Sep 10 Overview of Competitive Markets 3. Sep 12 Demand I: Demand Curve, Consumer surplus PS#1 due at the start of class. 4. Sep 17 Demand II: Elasticity, Issues with Demand Estimation 5. Sep 19 Costs and Supply I: Economic Costs 6. Sep 24 Costs and Supply II: The Supply Curve PS#2 due at start of class. 7. Sep 26 Competitive Markets & Perfect Competition

6 6 DATE TENTATIVE PLAN FOR CLASS DELIVERABLES (Exams, problem sets, group-work) 8. Oct 1 Market Power & Monopoly Introduction to Pricing Group Project 1 due (Cinemex) at start of class. 9. Oct 3 Market Power & Policy PS#3 due at start of class 10. Oct 8 Advanced Pricing: Segmentation, Versioning, and Bundling. 11. Oct 10 Review PS#4 due at start of class Take practice midterm before class (come with questions) 12. Oct 15 EXAM #1 (in class) Same format as the practice exams (3 or 4 problems, largely quantitative). You may consult one page of notes (a standard-size piece of paper, single sided, handwritten, with anything on it you like) and a calculator. 13. Oct 17 Auctions 14. Oct 22 Game Theory I: Introduction to Strategic Thinking 15. Oct 24 Game Theory II: Sequential Games 16. Oct 29 Strategic Price Competition 17. Oct 31 Cooperation PS#5 due at the start of class.

7 7 DATE TENTATIVE PLAN FOR CLASS DELIVERABLES (Exams, problem sets, group-work) 18. Nov 5 Asymmetric Information I: Overview, Moral Hazard 19. Nov 7 Asymmetric Information II: Adverse Selection Group Project 2 (Newspapers) due at the start of class. 20. Nov 12 Commitment, Entry/Exit Group Presentation #(1) 21. Nov 14 Externalities, Public Goods PS#6 due at the start of class. Group Presentation #(2) 22. Nov 19 Advanced Topics Group Presentations #(3, 4) 23. Nov 21 Review Take practice midterm before class (come with questions) Group Presentation #(5) Nov 26, Dec 3 NO CLASSES (Thanksgiving Break) EXAM #2 Same format as the practice exams (3 or 4 problems, largely quantitative). You may consult one page of notes (a standard-size piece of paper, double sided, handwritten, with anything on it you like) and a calculator. 25. Dec 5 Group Presentations Group Presentations #(6, 7, 8, 9) 26. Dec 10 Group Presentations Wrap-up Group Presentations #(10, 11, 12)