Course Description

Economics is the study of the allocation of scarce resources. Because all decisions are essentially about the allocation of scarce resources, economics is in fact the study of decision making and problem solving in general. Thus many of the techniques we will study will be used in other business classes and disciplines. For example, CAP-M and Black-Scholes from finance, executive compensation in organizational behavior, and price elasticities used in marketing are all derived from economic theory. Because economics is so useful across a wide variety of business problems, many investment banks, consulting firms, and tech firms such as Google and Microsoft now have in-house economics departments. Because in general these very fundamental decisions are made by higher level executives, economics becomes critically important for CEOs and other senior executives. This is one reason why economics is the most common major among Fortune 500 CEOs.

General Information

Course Meetings: Section 55: Tuesday and Thursday from 1:15 pm to 3:15 pm in Aresty 103 (the Storer auditorium). Section 57: Tuesday and Thursday from 3:30 pm to 5:30 pm also in Aresty 103 (Storer).

Office: Room 521B, Jenkins School of Business.

Office hours: Wednesdays from 1-5 (Dave is almost always available to meet during business hours, but try to come during office hours if you can). You can login to virtual office hours via Blackboard.

Contacts: Dave can be contacted via phone (8x3725) or email (dkelly@miami.edu).

Web Site/Blackboard: At Blackboard, I will post notes, homeworks, quizzes, grades, solution sets, review sheets, and other materials, as well as a continuously updated syllabus. Much of the material can also be downloaded from my personal website (http://moya.bus.miami.edu/~dkelly/teach/eco685/index.html).

Final Exam: Thursday, October 1, section 55 is from 1:15 pm to 3:15 pm and section 57 is from 3:30 pm to 5:30 pm. The final takes place in Aresty 103/Storer for in-person students and remote students will access the final exam live at the same time.

Prerequisites

Textbooks

Allen, W. Bruce, Keith Weigelt, Neil A. Doherty, and Edwin Mansfield, Managerial Economics (8th Edition). W. W. Norton & Co., New York, 2012.

The 7th edition is also OK.

Allen, W. Bruce, Keith Weigelt, Neil A. Doherty, and Edwin Mansfield, Managerial Economics (7th Edition). W. W. Norton & Co., New York, 2009.

The textbook is not required. In class I will give some advice as to whether or not to purchase the book.

Grades

• 3 Homeworks 25% (due dates: August 27, September 10, September 24)
• First Quiz (September 3) 25%
• Second Quiz (September 17) 25%
• Final Quiz (October 1) 25%

Additional Notes

• Attendence (remote or in-person) is required and very important for this class. All exam material comes from class notes, and not all class notes are available in the book. Dave will provide detailed notes and record all lectures, which include some in-class examples not in the notes. Smart students will attend every class and take detailed notes on the in-class examples, and will therefore find that the homeworks and quizzes are straightforward. Of course, if you experiencing Covid like symptoms, please stay home. You can always attend remotely or view the recorded lecture.
• There is a homework or quiz due every Thursday. Each homework is worth 8.3%, about a letter grade. I prefer homeworks to be submitted via email, but in person is OK too. If submitting by email, please submit a Word Document or pdf, avoid huge jpeg/picture files. The homework email must be sent (or the homework placed on my desk) by the time class starts. Showing up 20 minutes late because you didn't finish the homework on time is not acceptable. Dave recognizes that sometimes emergencies occur ( showing Covid symptoms counts as an emergency ), in which case a student can be excused from turning in a homework. In this case, the final will be weighted more. Students must let Dave know in advance if they are unable to turn in a homework on time. Finally, the homeworks sometimes demonstrate how the concepts used in class are applied in the "real world." Because the real world is complicated, the homeworks can be long. Do not wait until the last minute to start the homeworks.
• The three quizzes are September 3, September 17, and October 1. Now is the time to mark your calandars. As with the homeworks, if there is an emergency or you are experiencing Covid symptoms and cannot take the quiz, the final will be weighted more. Students must let me know in advance if there is an emergency.
• Covid notes: please follow all university regulations with respect to Covid. Be responsible and do your part for the good of everyone.
• Computers and Ipads are not allowed in class. 99% of what you need to write down in your notes is either math or graphs. Most definitions, etc. are in the notes Dave provides.
• Phones, texting, portable games, X-boxes, Wiis, etc. are not allowed, as seeing students text breaks Dave's mental flow. WARNING: Dave can see you text even when done in the back of class or under the table.
• With six week courses, it is important to keep up. Missing one class is equivalent to missing a week's worth of undergraduate classes.
• What they say about Dave on Rate My Professor:
  • "Can be an a-- if you procrastinate."
  • "God help you if you don't go to class."

Course Outline

1. Introduction (chapter 1, August 18).
1. What is Economics and what is managerial economics?
2. Thinking like an economist.
3. Managerial decisions studied in this course.
4. Principles of managerial economics.
5. An overview of theory of the firm.
1. Value of the firm.
2. Economic and accounting Profits.
3. Objective of the firm: profit maximization.
4. Profit maximization, ethics, and welfare.
2. Production and Cost Theory: How much to produce and what inputs to use.
1. Production Theory (Chapter 4:7th edition, chapter 5:8th edition, August 18 - August 25).
1. The production function and it's properties.
2. Optimal input use.
3. Marginal rate of technical substitution.
4. Optimal input use with multiple inputs.
5. HOMEWORK 1 DUE AUGUST 27.
6. Mergers and returns to scale.
7. Measuring production functions.
2. Cost Analysis (Chapter 5:7th edition, chapter 6:8th edition, August 27 - September 3).
1. Fixed, average, and marginal costs: short run.
2. Sunk costs.
3. Optimal production in competitive markets.
FIRST QUIZ, SEPTEMBER 3.
4. Average costs: long run.
3. Pricing.
1. Demand curves (Chapter 2, September 8).
1. Price elasticity.
2. Income elasticity.
3. Estimating Demand.
4. HOMEWORK 2, DUE SEPTEMBER 10.
2. Setting the price to maximize profits (Chapter 6, September 10).
3. Pricing Techniques (Chapters 7-9:7th edition, chapter 8-10:8th edition, September 10 - September 17).
1. Perfect Competition.
2. Cost plus pricing.
3. Monopoly pricing.
4. SECOND QUIZ, SEPTEMBER 17.
5. Price discrimination.
6. Upcharging.
4. Business strategy and game theory.
1. Static games and basic definitions (chapter 11:7th edition, chapter 12:8th edition, September 17-24).
1. Dominant Strategies.
2. Nash Equilibria.
3. Mixed Strategies.
4. Applications.
1. Price wars.
2. Coordination/Anti-Coordination: How to segment a market.
3. Prisoner's Dilemmas: price wars, collusion, cartels, cheating.
4. Price matching offers.
5. Blue light specials.
6. Anti-Coordination: high price/high inventory and low price/low inventory.
5. HOMEWORK 3 DUE SEPTEMBER 24.
2. Dynamic Games (Chapter 11:7th edition, chapter 12:8th edition, September 24-26).
1. Nash Equilibria and Sub-Game Perfection.
2. Credible and non-credible threats.
3. First mover advantage.
4. Pre-emption strategies.
5. Applications.
1. Market entry and segmentation.
2. Deterring market entry.

LEARNING OBJECTIVES.

Homeworks, quizzes, review sheets, and solutions.

Study Materials.

Class notes.

Case Studies and Examples.

Up to Dave Kelly's homepage

Interesting web sites for Eco 685 students.

National Association for Business Economists.
The Economist.
The Economist.com argues that economics is valuable for MBAs since economics has more compelling and realistic theories business administration than other disciplines.
Cool Economics