BUKD-G 596 Economics for Managers
This course is part of core 1. Managers need to make decisions in complex settings that run the gamut from pricing to mergers and acquisitions to entering and leaving markets. These decisions are made given information that the manager has collected. For example, decisions are often responses to changes in the business environment or to decisions by competitors. In turn, internal decisions will be noticed by competitors and may provoke responses. Managerial economics is the branch of economics that focuses on decision-making in firms. Managers have found that the principles of managerial economics are useful in analyzing problems facing firms and hence are powerful tools that aid decision-making. Our task will be to develop familiarity with these tools and gain the ability to apply them to real and simulated situations.
Economic principles lie behind most business disciplines. For example, price setting, a key decision for a firm and often a marketing function, is based on price theory developed by economists. We will spend considerable time learning techniques useful in setting prices. This is often a complicated problem because the optimal price will depend on cost considerations, demand for the product or service, and the nature of competition. Pricing decisions by competitors will often affect our best pricing strategy. The degrees of vertical and horizontal integration in a firm are other important strategic choices for management and the basic ideas flow from economics. We will study how to evaluate these choices and also investigate how mergers, acquisitions, and divestitures should be valued, since M&A activity is the quickest way to change the degree of horizontal or vertical integration in a firm.