UNDERSTANDING FIRMS AND MARKETS
B01.1303.03
This syllabus will be updated for Fall 2000.
| Professor Richard Sylla of: MEC 8-65 ph: 998-0869 em: rsylla@stern.nyu.edu oh: Mon 3-5:30 & by app't |
TA: Mr. Justin Ziegler of: ph: em: jmz208@stern.nyu.edu oh: |
-- Marginal analysis, incentives, and opportunity cost (all as derivatives of the maximizing process), and elasticities as a measuring device
-- Strategic thinking (e.g., look forward and reason back; search for dominant and dominated strategies)
-- The concept of equilibrium
-- The presence or absence of market power, and its consequences
-- The presence or absence of information, and its consequences
Also, an historical perspective will be provided in a number of areas.
Texts and other materials:
The materials for this course have been assembled into four "coursepacks," which are available in
the NYU professional bookstore. The coursepacks draw heavily from four texts and also include material from other
texts/books and cases. The four coursepacks were compiled by Wiley Custom Services (WCS), Pearson Custom
Publishing (PCP), ITP Custom Courseware-Southwestern (ITP), and the NYU Book Store (NYU).
The four major books/texts:
Besanko, Dranove, & Shanley, The Economics of Strategy (John Wiley, 1996) (BDS)
Chandler, McCraw, & Tedlow, Management Past and Present (South-Western, 1996) (CMT)
Hansen & Mowen, Management Accounting, 5th ed. (South-Western, 1999) (HM)
Png, Managerial Economics (Blackwell, 1998) (P)
The additional books/texts:
Bierman & Fernandez, Game Theory with Applications (Addison-Wesley, 1993) (BF)
Brandenberger & Nalebuff, Co-opetition (Doubleday, 1996) (BN)
Brickley, Smith, & Zimmerman, Managerial Economics and Organizational Architecture (Irwin, 1997) (BSZ)
Cooper & Kaplan, The Design of Cost Management Systems (Prentice-Hall, 1998) (CK)
Dixit & Nalebuff, Thinking Strategically (Norton, 1991) (DN)
Milgrom & Roberts, Economics, Organization, & Management (Prentice Hall, 1992) (MR)
Pindyck & Rubinfeld, Microeconomics, 4th edn. (Prentice Hall, 1997) (PR)
The cases:
AMAX (Casenet, South-Western)
Beauregard Textiles (HBS)
Cambridge Software (HBS)
Cetus Computer Corp. (Casenet, South-Western)
International Diamond Cartel (Kennedy School)
Course outline:
Week 1: Introduction and review of basic concepts; the importance of an understanding of firms and markets
for business executives and good business decisions; some examples of decisions gone awry when basic economics/strategic
concepts were neglected.
WCS: pp. 1-37 [BDS, Primer chapter (pp. 1-37)]
PCP: pp. 2-10, 12-14, 16-25 [BSZ, pp. 18-26, 32-34, 88-97]
pp. 27-54 [BF, chs. 1 (pp. 7-19), 4 (pp. 67-80)]
Week 2: An historical perspective; the importance of the business context/environment and technology; understanding scale, scope, and vertical integration; the sizes of firms explored in a number of dimensions; what are the strategic advantages of size? what are the limitations of size? an introduction to cost accounting from an historical example
WCS: pp. 41-99, 173-216 [BDS, chs. 1 (pp. 41-68), 2 (pp. 69-99), and 5 (pp. 173-216)]
ITP: pp. 1-32 [CMT, cases 8 (pp. 2-20 - 2-37), 14 (pp. 3-32 - 3-42)]
NYU Casepack: pp. 1-6 [AMAX Corp.]
Group project #1 assigned
Week 3: Cost determination for products and strategies in manufacturing, service, and retail industries; do we need accuracy in their determination? various concepts of product costs; classification of business activities and their cost drivers [Note: Classes during weeks 3 & 4 will meet in double-sized blocks, in a larger classroom.]
Review WCS: pp. 2-15
ITP: pp. 33-90 [HM, ch. 2 (pp. 30-61), ch. 4 (pp. 104-125 only)]
Week 4: Accumulation of costs to activities; activity based costing (ABC) systems; overheads and timely application of overhead costs; effects of approximating product costs on competition; use of ABC analysis for cost reduction and operational efficiency enhancement
PCP: pp. 57-67 [CK, pp. 355-365]
ITP: pp. 91-148 [HM, ch. 4 (133-153), ch. 7 (238-272)]
Managerial costing assignment
Week 5: Monopoly, and the dominant firm; how does monopoly arise? what are its consequences? who gains, who loses? what strategies can monopolies employ to maintain or enhance their market power? what strategies can customers or potential entrants use to counteract a monopoly? some historical examples
Review WCS: pp. 16-25
PCP: pp. 70-108 [P, ch. 8 (pp. 250-288)]
pp. 110-111 [PR, pp. 462-463]
pp. 112-120 [BN, pp. 72-80]
ITP: pp. 149-199 [CMT, cases 10 (pp. 2-52 - 2-69), 11 (pp. 2-70 - 2-72 only), 15 (pp. 3-43 - 3-63), and 23 (pp. 5-5 - 5-11 only)]
NYU Casepack: pp. 7-28 [International Diamond Cartel]
Week 6: Pricing with market power: price discrimination, market segmentation; how can enterprises enhance profits through strategically designed pricing systems? what are the market/strategic conditions that enhance or undercut market segmentation?
PCP: pp. 123-164 [P, ch. 9 (pp. 289-330)]
NYU Casepack: pp. 29-32 [Cambridge Software]
Week 7: Review; mid-term exam
Week 8: Perfect competition, and monopolistic competition; conditions in commodity markets with lots
of producers; product differentiation and its consequences; what strategy options are available?
Review WCS: pp. 25-29
PCP: pp. 167-208 [P, ch. 5 (pp. 135-176)]
pp. 210-211 [BSZ, pp. 126-127]
Week 9: Oligopoly; what happens in markets with a small number of sellers? what are the strategic issues?
Review WCS: pp. 30-35
PCP: pp. 215-254 [P, ch. 10 (pp. 331-370)]
pp. 255-273, 275-302 [BF, chs. 5 (pp. 81-99) and 11 (pp. 187-214)]
pp. 303-306 [DN, pp. 81-84]
NYU Casepack: pp. 33-36 [Beauregard Textiles]
Group project #2 assigned
Week 10: Uncertainty, and asymmetric information: agency, moral hazard, adverse selection, etc.; how do market outcomes change in the presence/absence of uncertainty and/or asymmetric information? what are the strategic responses of buyers? of sellers?
Review WCS: pp. 32-34
PCP: pp. 309-342, 343-374, 375-379 [P, chs. 12 (pp. 407-440), 13 (pp. 441-472), and pp. 485-489]
Week 11: Input markets (I): Labor/personnel; what are important characteristics of labor markets? why? what are the strategic responses to asymmetric information problems in these markets? some historical perspectives
PCP: pp. 383-414 [PR, ch. 14 (pp. 513-544)]
pp. 416-447 [MR, ch. 10 (pp. 326-357)]
ITP: pp. 201-233 [CMT, cases 6 (pp. 1-79 - 1-88 only), 20 (pp. 4-52 - 4-55 only), 21 (pp. 4-67 - 4-71), and 22 (pp. 4-78 - 4-87)]
NYU Casepack: pp. 37-40 [Cetus Computer Corp.]
Week 12: Input markets (II): Capital; the concept of time-value and discounting; what are the characteristics of these markets? why? what are the strategic responses to asymmetric information in these markets?
Review WCS: pp. 35-37
PCP: pp. 451-465 [PR, pp. 545-559]
pp. 467-476 [L.J. White, "Financial Services in the U.S.: The Next Decade"]
Week 13: Externalities and public goods; why they arise; the private and social problems; strategic responses;
the importance of intellectual property
PCP: pp. 478-512, 513-528 [P, ch. 11 (pp. 372-406) and pp. 489-504]
Week 14: Review and conclusion
Week 15: Final exam (Monday, 12/20: 1:00-3:00)
Grading information:
Final grades for the course will be determined on the basis of the following components and weights:
Mid-term exam (in 7th week): 25%
Final exam: 35%
Group project #1 (AMAX Corp. case) (assigned in 2nd week, due a week later): 10%
Individual managerial costing assignment (assigned in 4th week, due a week later): 10%
Group project #2 (Beauregard Textiles case) (assigned in 9th week, due a week later): 10%
Individual homeworks (assigned 5-6 times during course): 10% (in aggregate)
Individual Assignments:
Managerial costing assignment (4th week)
Homeworks (throughout the course)
Group Projects:
AMAX Corp. case (2nd week)
Beauregard Textile case (9th week)