Fall 2016 BGMT FNAN 603 – 001
Economics for Successful Firm Management
Syllabus
Last 3:04 AM 12/31/2016
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Online address of this syllabus:
http://somfin.gmu.edu/courses/msm603/
Outline
- Class meetings
- Course Description
- Reading materials
- Exams and Grading
- Briefing memo
- Class schedule
- Honor Code
Meeting Schedule
Class: Mon 9:00am - 12:35pm, Founders Hall 118
Office hours: by appointment, but typically after class
Course Description and Objectives
The objective of this course is to enable students to develop a clear understanding of economic theory and be able to apply the techniques used in business organizations in solving problems related to decision-making in strategic environments.
Learning objectives include:
Understanding of how goals, constraints, incentives, and market rivalry affect economic decisions;
The ability to apply present value analysis to make investment decisions and determine the value of assets and firms;
The ability to use supply and demand analysis as a qualitative forecasting tool to determine equilibrium market outcomes;
Understanding the factors that underlie both the demand and supply functions in order to be able to analyze consumer and producer behavior;
The ability to calculate and interpret elasticities and their applications to business decisions;
To acquire a framework for understanding the nature of the firm as an integrated whole, as opposed to a loosely connected set of functional departments;
The ability to choose appropriate measures of the firm’s optimal use of resources;
Understanding the structure-conduct-performance paradigm and how the nature of industry is affected by market structure;
The ability to understand market structures and how they affect business decisions under perfect competition, monopolistic competition, oligopoly and monopoly;
The ability to analyze data using statistics to make sound business decisions;
I will request your feedback periodically to reassess the list of topics above and adjust it if necessary. Any course feedback on how you think the course is evolving (including constructive criticism and suggestions) and potential additional topics to discuss in class will always be welcome.
Michael Baye and Jeff Prince, Managerial Economics and Business Strategy, 8th ed., McGraw-Hill Irwin, 2013
I may include additional materials from time to time for class discussions. The slides will be posted on before each class, but may change afterwards depending on the actual content that was covered and discussed during class. Although not covered in class, the following two books provides excellent perspectives on the organization of firms and corporate strategies.
Henry Hansmann. The Ownership of Enterprise, Harvard University Press, 2009.
Adam Brandenburger and Barry Nalebuff. Co-opetition, Crown Business, 2011.
The final grade will be based on a midterm exam, a final exam, a briefing memo, and class participation. The grade allocation is:
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Midterm
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30%
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Final exam
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50%
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Briefing memo
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10%
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Class participation
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10%
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The midterm and final exam will test your understanding of the central ideas of the course. The core concepts will be emphasized in lecture and will often be explored in class discussion. It will require you to demonstrate your understanding of the key theories and concepts and your ability to apply them to problems. The final exam will be comprehensive. There will be no make-up exams. I'll also assign homework problems after each lecture and post solutions later. Although not required to hand in, working on these problems are key to obtaining good grades in exams.
The purpose of the briefing memo is to give you an opportunity to apply tools of economic analysis in thinking about interesting problems or situations you identify. Doing this will increase your understanding of key concepts of managerial economics and how they can be applied analyzing real-world situations.
Topics can be drawn from your own profession, or from periodicals covering business and economic topics (e.g. Wall Street Journal, The Economist, Forbes, Business Week, and Fortune, etc.). The memo should focus
on the contribution economic analysis can make for managers who are seeking
to understand a problem or reach a decision. A suggested format (to be updated) is following:
Describe the industry and firm that you study (referred to as your industry/firm hereafter), including what are the main goals and constraints for your firm or any particular stakeholders in the firm
In order to achieve the goal, whose incentives needs to be considered? Pay particular attention to (if any) "hidden" players.
Conduct a five-force analysis of the industry
Describe a unique business practice of your firm and clearly explain what economic concepts or tools explain the practice
Describe in detail how compensations within your firm/industry is designed to best provide incentives. Can you identify some inefficiencies in your firm/industry and how would you improve on it?
Identify factors unique to your industry that shifts demand or supply
What type of product(s) or service(s) does your firm provide? Are they normal or inferior goods? What are the substitutes or complements to your product(s) or service(s)? Any implications of how the firm should conduct the business?
Does your industry/firm feature asymmetric information? If so describe how does it affect the business, either positively or negatively. Anything you can do to make favor yourself?
What is the competitive environment of your firm/industry? How does your firm create market power?
The memo should not exceed 2 pages (single-spaced), exclusive of tables, graphs, etc. Please include detailed citations for any sources.
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Week
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Date
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Materials
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Topics
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1
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Oct 31
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slides
homework: Chapter 1: 1, 3, 6, 10, 13, 14, 16, 21, 23; Chapter 6: 24, 27
HW solution
Derivative Explained
Derivative rules
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Course introduction.
Opportunity cost, marginal analysis,
and incentives.
- Baye,
Chapter 1
- Baye,
Chapter 6
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2
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Nov 7
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slides
homework: Chapter 2: 1, 6, 8, 14, 16, 20, 23; Chapter 3: 2, 6, 11, 17, 19, 20
HW solution
Housing Data
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Supply, demand, and markets.
- Baye,
Chapter 2
Quantitative demand analysis.
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Baye, Chapter 3
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3
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Nov 14
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slides
homework: Chapter 4: 1, 2, 7, 9, 12, 17; Chapter 12: 1, 3, 4, 13, 15, 21, 23
HW solution
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Consumer Behavior.
- Baye,
Chapter 4
Uncertainty and asymmetric information.
- Baye, Chapter 12
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4
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Nov 21 |
slides
homework: Chapter 5: 1, 2, 5, 6, 7, 10, 11, 12, 13, 16, 17, 18, 20, 22
HW solution
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Production and Costs.
- Baye, Chapter 5
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5
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Nov 28
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slides
homework: Chapter 7: 1, 3, 4, 5, 8, 9, 12, 13, 18, 23
HW solution
http://www.census.gov/cgi-bin/sssd/naics/naicsrch?chart=2012
Financial Data
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Understanding
the Industry.
- Baye,
Chapter 7
The Five Forces Framework.
- Michael Porter, The Five Competitive
Forces that Shape Strategy http://bcove.me/fm4ouivf
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6
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Dec 5
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Mid-term
exam
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7
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Dec 12
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slides
homework: Chapter 8: 1, 3, 6, 7, 10, 11, 13, 14, 16, 17
HW solution
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Competitive and Monopolistic Markets.
- Baye,
Chapter 8
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8
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Dec 19 |
slides
homework: Chapter 9: 1, 2, 3, 5, 6, 8, 9, 10, 17, 23
HW solution
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Oligopoly Markets.
- Baye,
Chapter 9
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9
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Jan 9
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slides
homework: Chapter 11: 2, 3, 4, 5, 7, 9, 10, 12, 13, 14, 15, 17, 18, 19, 20, 22, 23
HW solution
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Pricing
Strategies.
- Baye,
Chapter 11
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10
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Jan 16
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Online Review; briefing memo due before class
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11
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Jan 24 (Tuesday)
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Final exam; 1:30pm-4:30pm Founders Hall 210
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In case of unforeseen disruptions such as inclement weather or campus closure, etc., we will have online sessions in lieu of the class meeting.
By registering for this class, students agree to abide by the honor code, which describes the standards of conduct, academic violations, and the treatment of academic offenses. The Honor Code states that all students "pledge not to cheat, plagiarize, steal, or lie in matters related to academic work." Visit http://oai.gmu.edu/the-mason-honor-code-2/ to read more about the GMU academic integrity code. The Business School policy on honor code violations in presented at the end of this document.
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School of Business Recommendations for Honor Code
Violations
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Type of Violation
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First Offense
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Second Offense
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Plagiarism
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- 1. Failure to cite/attribute
sources
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An F in the class; referral to the Writing Center; and
Academic Integrity Seminar completion
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An F in the class; referral to the Writing Center;
Academic Integrity Seminar completion; termination from the School of
Business; and at least one semester suspension or expulsion
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- 2. Representing
someone else’s work as the student’s own (e.g., copying and pasting)
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An F in the class; referral to the Writing Center; and
Academic Integrity Seminar completion
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An F in the class; referral to the Writing Center;
Academic Integrity Seminar completion; termination from the School of
Business; and at least one semester suspension or expulsion
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Cheating
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- 1. On a minor
assignment (e.g., homework, quizzes)
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An F in the class; and Academic Integrity Seminar
completion
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An F in the class, Academic Integrity Seminar completion;
termination from the School of Business; and at least one semester suspension
or expulsion
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- 2. Cheating on a major
assignment or exam, submitting course work from another course as
original work
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An F in the class; and Academic Integrity Seminar
completion, and at least one semester suspension
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An F in the class, Academic Integrity Seminar completion;
termination from the School of Business; and at least one semester suspension
or expulsion
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Lying (e.g., providing fraudulent excuse documents,
falsifying data)
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An F in the class; and Academic Integrity Seminar
completion, and at least one semester suspension
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An F in the class; Academic Integrity Seminar completion;
termination from the School of Business; and at least one semester suspension
or expulsion
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Egregious Violation (e.g., stealing an exam; submitting coursework
from another class as original work across multiple courses; lying to an
employer about academic performance, false identification or posing as
another, in person or online)
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An F in the class, Academic Integrity Seminar completion;
termination from the School of Business; and at least one year suspension
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An F in the class; Academic Integrity Seminar completion;
termination from the School of Business; and expulsion
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* This syllabus is subject to
change to best fit the needs of the class.
