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School of Social Sciences

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BAEcon Economics
Learn how the social sciences can help you to understand today's world.

BAEcon Economics / Course details

Year of entry: 2018

Course unit details:
Managerial Economics II

Unit code ECON31000
Credit rating 20
Unit level Level 3
Teaching period(s) Full year
Offered by Economics
Available as a free choice unit? Yes

Overview

See course Blackboard pages.

Pre/co-requisites

Unit title Unit code Requirement type Description
Managerial Economics I ECON20000 Pre-Requisite Compulsory
Pre-requisites: ECON20000

Aims

The aim of this course is to apply economic and game theory concepts and analytical tools to the strategic management decisions of private firms in a relevant business context.

Learning outcomes

At the end of this course students should be able to:

  1. Understand the role of strategic variables such as prices, quantities and advertising outlays as part of firms’ profit maximizing decisions.
  2. Use analytical tools and game-theoretic solution concepts to recommend an optimal decision to a firm and predict the outcome of its interaction with the competitors.
  3. Understand how mergers, collusion, entry deterrence and product differentiation can be used by one or more market participants to affect the outcome of a strategic interaction.

Syllabus

Semester 1:

  • Game Theory Concepts: Strategic interaction, Min-max Equilibrium, Nash Equilibrium.
  • Strategies and Markets: Competition, Market Power, Oligopoly.
  • Mergers: Mergers activity, Mergers Game-Theoretic Paradoxes, Vertical Mergers.
  • Collusion: Cartels and tacit collusion, Sustainability of Collusion.
  • Pricing: Personalized Pricing, Menu Pricing, Group Pricing, Behaviour-based Price Discrimination,  Bundling.

 

Semester 2:

  • Game Theory Concepts: Sub-game Perfect Nash Equilibrium; Backward and Forward Induction.
  • Competition with Differentiated Products: Hotelling Model of Horizontal Differentiation: location-only vs. location-then-price; Spatial Price Discrimination; Vertical Product Differentiation; The Role of Advertising.
  • Entry Deterrence.

Teaching and learning methods

Lectures, tutorial classes and exercise classes.

Employability skills

Analytical skills
Apply skills of analysis and interpretation.
Problem solving
Research
Independently locate and assess relevant literature and draw on these to develop understanding and to construct arguments.
Other
Applying theoretical knowledge to real-world business case studies and problems. Manage time and work to deadlines.

Assessment methods

During each semester there are the following assessments:

  • 2 problem-solving assignments (each counts for 10% of the semester mark), submitted electronically via Blackboard.
  • 2 group projects, conducted during the tutorials (each counts for 2.5% of the semester mark).
  • 1 exam (comprising an analytical part and a structured essay), counts for 75% of semester mark).

The final mark is the average of the Semester 1 and Semester 2 marks.
 

Feedback methods

  • Use the 10 minute break during/following lectures to ask questions to lecturers.
  • During term time, book a slot in the weekly office hour of the Lecturer and Tutors.
  • Attend the optional Support Hours at the end of semester.
  • In tutorials, you obtain group/individual feedback on the submitted assignments, group projects and any individual work you did on the tutorial exercises.
  • Semester 1: Post a question as an ‘annotation’ to slides (as instructed in class) or on the discussion board.
  • Semester 2: Send your attempted answers to past exam questions to the Lecturer to receive individual feedback.
     

Recommended reading

There is no compulsory textbook that covers all the topics in the module. More details will be provided in the first lecture. However, selected chapters from the following textbook are going to be particularly useful:

  • Belleflamme P. and Peitz M. (2010), “Industrial Organization: Markets and Strategies”, Cambridge University Press. (ISBN:9780521862998

Students may also find parts of the following books useful as supplementary reading:

  • Fisher T., Prentice D. and R. Waschik (2010), “Managerial Economics: A Game Theoretic Approach”, Routledge
  • Shy O. (1996), “Industrial Organization: Theory and Applications”, MIT Press
  • Dixit A., D.H. Reiley and S. Skeath (2009), “Games of strategy”, Norton
  • Carlton D.W. and Perloff J.M. (2005), “Modern Industrial Organization”, Pearson/Addison Wesley
  • Church J.D. and R. Ware (2000), “Industrial Organization: A Strategic Approach”, McGraw-Hill (downloadable for free online and on BB9)
     

Study hours

Scheduled activity hours
Assessment written exam 3
Lectures 28
Practical classes & workshops 4
Tutorials 5
Independent study hours
Independent study 160

Teaching staff

Staff member Role
Michal Krol Unit coordinator
Carlo Reggiani Unit coordinator

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