Managerial Economics
Professor Euysung Kim
E-Mail: ekim@yonsei.ac.kr
Tel. 2123-4236
Office Hours: TBA
COURSE DESCRIPTION
In today’s information age, the role of managers in corporations, not-for-profit
institutions, and government agencies has become ever more important, and
the need to improve resource use in all types of organization has become much
more visible. This course is designed to provide a solid foundation of
economic theory and methodology necessary for efficient managerial decision
making. The tools developed in this course help students understand the
nature of the managerial decision-making process and the role that economic
analysis plays in that process. We will use a wide variety of case studies and
simple numerical examples to illustrate the application of managerial economics
to a wide variety of practical situations.
TEXTBOOK
The textbook required for this course is: W.G. Samuelson and S.G. Marks,
Managerial Economics, Dryden Press, Fifth Edition. Other supplemental
readings may be assigned from time to time.
GRADING
There will be two midterm examinations, the first counting for 20% of the final
grade and the second counting for 20% of the final grade. A final exam will
count for 40% of the grade. The remaining 20% of the grade will be based on 6
or 7 problem sets and on the results of a case study assignment. Students are
encouraged to work in groups on the problem sets.
CLASS PREPARATION
Your adequate preparation before coming to the lecture will be critical to the
success in this course. You will find it helpful to read ahead the chapters that
are assigned for each lecture. Unexcused absence from the lecture will lower
your grade.
CLASS SCHEDULE
Basic Concept and Demand Analysis
Readings: Chapter 2 – Optimal Decisions Using Marginal Analysis
Chapter 3 – Demand Analysis and Optimal Pricing
Lecture 1
Topics: A Simple Model of the Firm (Chapter 2)
Profit Maximization and Marginal Analysis (Chap 2)
Calculus and Optimization Technique (Appendix to Chapter 2)
Lecture 2
Topic: Determinants of Demand
Elasticity of Demand
Lecture 3
Topics: Demand Analysis and Optimal Pricing (Chap 3)
Class Discussion: Alex Pham, "Cataloguing Who'll Pay What," Washington Post,
September 3, 1992.
John Koten, "Airlines Pushing Fairs Linked to Mileage," The
Wall Street Journal, January 13, 1989.
Midterm Exam I
Production and Cost Analysis
Readings: Chapter 6 – Production
Chapter 7 – Cost Analysis
Lecture 4
Topics: Basic Production Concepts
Production Decisions in the Short-Run
Production Decisions in the Long-Run
Lecture 5
Topics: The Basic Principles of Relevant Costs
The Cost of Production
Cost Analysis and Optimal Decisions
Decisions under Uncertainty and Asymmetric Information
Readings: Chapter 13 – Decision Making Under Uncertainty
Chapter 14 – The Value of Information
Chapter 15 – Asymmetric Information (pp.632-638)
Lecture 6
Topics: Probability and Expected Value
Risk Aversion
Revising Probabilities
Optimal Search
Adverse Selection, Signaling and Moral Hazard.
Competing Within Markets
Readings: Chapter 8 – Perfect Competition
Chapter 9 – Monopoly
Chapter 10 – Oligopoly
Lecture 7
Topics: Market Structure and Firm Behavior
The Theory of Perfect Competition
Class Discussion:
Case Study Assignment
Lecture 8
Topics: Pure Monopoly
Regulation of Natural Monopolies
Lecture 9
Topics: Quantity Competition
Price Competition
Midterm Examination II
Public Goods
Readings: Chapter 12 – Regulation, Public Goods, and Benefit-Cost Analysis
Blinder, "Cleaning up the Environment: Something Cheaper is
Better."Game Theory and Auctions
Lecture 10
Topics: Externality
Saving the Environment- Sometimes Cheaper is Better?
Game Theory and Competitive Strategy
Readings: Chapter 11 – Game Theory and Competitive Strategy
"The Right Game: Use Game Theory to Shape Strategy" by Adam
Brandenburger and Barry Nalebuff (Harvard Business Rev July
1994).
Lecture 11
Topics: Basics of Game Theory
Nash Equilibrium
Repeated Competition
Using the Game Theory to Shape Strategy
Bargaining and Negotiation
Readings: Chapter 16 – Bargaining and Negotiation
Chapter 17 – Auctions and Competitive Bidding
Lecture 12: Bargaining and Negotiation
Topics: The Economic Sources of Beneficial Agreements
Negotiation Strategy
Simulation
Seal-Bid Auctions
English Auctions
Final Exam
This is a closed book exam. You may use a calculator.