ECON 600 – Economics of Organizations and Management
University of St. Thomas
Mondays:
Tuesdays:
Thursdays:
Fall 2004
Minneapolis
Section 21
St. Paul
Section 5
Mall of America Section 86
Professor:
Office Hours:
Office:
Mailbox:
Telephone:
E-mail:
Instant Messaging:
Terrance Murphy Hall 446
Roach Center LL01
Metropolitan Learning Alliance
6:00-9:00pm
6:00-9:00pm
6:00-9:00pm
Dr. John A. Spry
Mondays 1-4 and by appointment
TMH 343A
TMH #343
office (651) 962-4689
jaspry@stthomas.edu
JohnASpry on AOL Instant Messenger
Course Description
A. Overview
This course focuses on the application of microeconomic tools and concepts to business decision-making. The
course will provide knowledge, and some level of mastery, of a variety of tools and techniques used to solve
management problems. Concepts covered include: optimal marginal decision-making; demand estimation;
production and cost; markets and organizations; optimal pricing strategies; asymmetric information and game
theory; and use of incentives and contracts to resolve principal-agent conflicts. We will study how managers can
lead their firms to make good decisions by controlling 1) the assignment of decision rights within the firm, 2) the
means of rewarding individuals and units, and 3) the structure of systems to evaluate performance.
B. Prerequisites
Rudimentary knowledge of economic theory. This can be satisfied by completing MBEC 500 or an introductory
undergraduate economics course. A principles of economics text is available upon request if you wish to brush up
on these skills. Also you are expected to have a basic knowledge of statistics.
C. Textbooks and other materials:
Required:
 Brickley, Smith, Zimmerman, Managerial economics and organizational architecture,3rd ed.
 Lewis, Michael, Moneyball: the art of winning an unfair game. (Available in paperback)
 Coursepack for MBEC 601 – Spry, Fall 2004
Blackboard Website: We will use a Blackboard website for this course. You may access the site through
www.stthomas.edu (click on “My UST blackboard portal”). Announcements, class materials, web links, and
(confidential) grades will be posted on the course website. You should check the site regularly for announcements.
Help: UST New User Web Page http://www.stthomas.edu/new
Help desk: 651 962-6230
Recommended:
 Business periodical of your choice such as The Wall Street Journal, The Economist, Business Week, etc.
Optional:
 Study guide for Brickley, Smith, Zimmerman, Managerial economics and organizational architecture.
D. Classroom sessions
Classroom sessions will be a mix of lecture, demonstrations, discussion, and small group work. Class participation
is an important component of learning in this course. Class members are expected to complete the assigned reading
and suggested exercises/case questions prior to each class session; good class preparation will result in a richer
discussion. Attendance is important because of the exchange of knowledge and insights through discussion & other
group activities. Though I realize that illness or business travel may take prevent you from having perfect
attendance, please note that St. Thomas’ MBA policy states that missing more than two class sessions is excessive.
In this course excessive absence will affect your grade.
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E. Grading, major assignments, final project, and exam
Your grade will be based on four assignments, a written project, and a final exam. There are a total of 400 possible
points. The relative weights are:
4 Assignments
200 points (50 points each)
Competitive Strategy and
Organizational Architecture Project
100 points
Final Exam
100 points

4 Assignments will be posted on Blackboard. Some parts of these assignments are computational and
some are written analyses. Each assignment is worth 50 points.

The Competitive Strategy and Organizational Architecture Project is a confidential evaluation of the
market structure, competitive strategy, and the organizational architecture of your company (or one of its
units) – or any organization with which you are familiar. This project will include an industry analysis of a
major market in which your company/unit is a player. If your company/unit is positioned in several distinct
major markets, please consult the professor for guidance on which of these to analyze. These projects are
designed to apply and integrate multiple course topics. They will involve some library/database/web
research, especially to investigate & document the industry structure. A sample analysis will be available.
I would strongly recommend consulting with a reference librarian at Keffer library early in the semester for
help designing a research strategy and for advice on specific source materials.
The Final Exam is open book. A list of required concepts and past exams are on Blackboard.

The grading distribution is typically as follows; the average grade tends to be around 3.5 (A=4.0):
Above 94% of total points
90-94%
87-under 90%
83-under 87%
80-under 83%
77-under 80%
A
AB+
B
BC+
and so forth
Criteria for an A grade
 Shows superior understanding of course concepts
 Demonstrates outstanding ability in using course concepts to analyze business problems
 Uses clear, concise communication
Grades ranging from B to A- reflect satisfactory to very good work at the graduate level but indicate room for
improvement (by varying degrees, in accordance with the grade) in one or more of the above criteria.
F. Instructor biography: John Spry is an Assistant Professor at the University of St. Thomas. He earned his B.S.
in economics at Ohio State University, and his M.A. and Ph.D. in economics at the University of Rochester. He has
been a member of the faculty at Rutgers University, and was a visiting professor at Brandeis University and Ball
State University. He has authored several publications in scholarly journals, has made frequent conference
presentations, and has served as a reviewer for academic journals. His current areas of research are state and local
public finance, outsourcing of services on toll roads, the economics of state lotteries, and applied non-parametric
econometrics.
G. Accommodations:
Students with disabilities who may need accommodations in this class are encouraged to contact the Enhancement
Program - Disability Services at 651-962-6315 as soon as possible.
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Specific course objectives:
Upon completion of the course, you should be able to:
 Explain the importance of models to help understand complex management situations.
 Identify determinants of demand for a product and give a basic evaluation of a statistically
estimated demand function.
 Calculate elasticities of demand and use the concept to inform pricing decisions.
 Develop a fundamental knowledge of marginal analysis and apply it to obtain objectives (e.g.
maximize profit).
 Define and give examples of various cost concepts and measures (sunk cost, opportunity cost,
marginal and average cost, fixed cost, economies of scale, scope, and learning), and explain
their relevance in managerial decision making.
 Use productivity and resource price information to inform decisions about changes in
employment of resources, including the optimal mix of inputs.
 Explain the four archetypal market structures and the influence of market structure on pricing
and profitability.
 Describe examples of price discrimination and explain why it may be profitable.
 Apply basic game theory to explain and predict strategic behavior in various types of business
interactions.
 Identify methods by which, and limits to which, a firm may be able to "create and capture
value."
 Perform an industry analysis using Michael Porter’s "five-forces" approach.
 Employ concepts of transactions costs and contracts to explain why firms exist and to explain
interaction within firms.
 Describe and give examples of links between incentive conflicts, agency problems, and the
effectiveness of organizations.
 Use an economic approach to evaluate the costs and benefits of popular managerial practices,
including empowerment, team decision making, and pay for performance.
 Explain the fundamentals of labor markets (both external and internal) and how they
influence compensation levels and practices.
 Explain the significance of transfer pricing and other divisional incentives on firm value.
 Perform an evaluation of a company's organizational architecture (decision
rights/compensation/evaluation system).
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Tentative Course Outline
Date
Topic
Sept. 9, 13, 14
1. Introduction: Incentives
and Marginal Analysis
Sept. 16, 20, 21
2. Markets and Information
Sept. 23, 27, 28
3. Demand
Sept. 30, Oct. 4,5 4. Production and Cost
Assign. 1 Due
Oct. 7, 11, 12
5. Market Structure and
Competitive Strategy
Oct. 14, 18, 19
Assign. 2 Due
6. Strategic Pricing
Oct. 21, 25, 26
7. Applied Game Theory
Oct. 28, Nov. 1,2 8. Incentive Conflicts
Assign. 3 Due
Nov. 4, 8, 9
9. Organizational
Architecture and Ethics
Nov. 11, 15, 16 10. Decision Rights
Assign. 4 Due
Nov. 18, 22, 23 11. Labor Markets
Draft of Final
Project Due
Nov. 29,30 Dec.2 12. Incentive Compensation
Dec. 6, 7, 9
Final Project
Due
13. Performance Evaluation
and Transfer Pricing
Reading Assignment
“Managerial Economics” = Brickley, Smith, Zimmerman text
Managerial Economics Chapters 1-2
 Interwest Healthcare Case, p. 37
Coursepack: The Dismal Science? Hardly?, WSJ
The Beane-ing of Life, CSFB
Who’s on First, The New Republic
Michael Lewis, WSJ
Managerial Economics Chapter 3
Moneyball
Coursepack: Lincoln Electric (A) and (B)
Navy Turns Into Auctioneer, WSJ
Its Just a Game, NYT
Managerial Economics Chapter 4
Moneyball
Handout: Estimating Demand Using Excel
Managerial Economics Chapter 5
MoneyBall
Managerial Economics Chapters 6 and 8
Coursepack: Going for the Gold, WSJ
Pineapple Acid Test, WSJ
Note on the Structural Analysis of Industries
Managerial Economics Chapter 7
Coursepack: Myth of Market Share, WSJ
The Power of Smart Pricing, Business Week
Shellshock, NYP
The Usual Decorous Waltz, NYT
Managerial Economics Chapter 9
 Holland Sweetener versus Monsanto, p.245.
Managerial Economics Chapter 10 and 18 (pp. 503-513)
 eBay.com, p. 275.
Managerial Economics Chapters 11 and 21
Coursepack: Nordstrom
Giving Until it Hurts, WSJ
Recycling Corporate Responsibility, WSJ
Managerial Economics Chapters 12 and 13
 Medford University, p. 325
Managerial Economics Chapter 14
Safelite Auto Glass (A)
Managerial Economics Chapter 15
Coursepack: Safelite Auto Glass (B)
Managerial Economics Chapters 16 and 17
 Arthur Anderson LLP
Dec. 13, 14, 16
Final Exam
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