Managerial Economics ECO 6655 Summer 2011 TTH 10:30 12:40 PM, Wallace 349 Instructor: Jennings Byrd, Ph.D Office Location: 17-A McCartha Email: wjbyrd@troy.edu Office Telephone: 334.808.6205 Office Hours: First Term W 12:30 3:30 Second Term MW 10:30 12:30 I am usually available for about an hour after class as well and by appointment Prerequisites BUS 5503 and BUS 5505 or Principles of Microeconomics and Statistics equivalents. While math courses such as algebra and calculus are not a prerequisite for this course, we will be making extensive use of algebra and calculus. Math is essential for a great deal of economic analysis, in particular, the type of analysis encountered in managerial economics. I will devote a fair amount of time in each lecture (where needed) explaining the math behind the concept/principle/theory. Description A study of the decision-making process of business firms in the resource allocation process. Both the functioning of markets and the decisions of firms in a variety of market structures are considered. Various theories of the firm are used to study the optimal decision-making rules for business firms under conditions of uncertainty. Objectives On completion of the course, the student should be able to: 1. Apply microeconomic models to real-world managerial problems using basic calculus techniques, as well as statistics and/or linear programming as appropriate. Use function maximization, minimization, and optimization to determine optimal price and production levels for a firm. 2. Synthesize price theory, optimization, and elasticity concepts to solve managerial problems within the four market structures. 3. Apply demand theory and estimation to managerial decision-making. 4. Apply cost theory and estimation to product pricing and production levels. 5. Demonstrate familiarity with the literature on microeconomics. 6. Explain the concept, applications, and implications of competitive advantage, including the importance of aligning core products with core competencies and core values.
Purpose To provide strong familiarity with the theories and quantitative techniques of managerial economics, i.e., applied microeconomic analysis. In particular, these theories and techniques will be used to show how optimal economic solutions are reached by managers who operate firms in various market environments. The aspects of economics which are relevant to the managerial decision-making processes are stressed. The basic techniques of calculus will be applied when solving various problems. Textbook Hirschey, M. (2009 or current). Managerial Economics. Mason, OH: South-Western/Cengage Learning. Course Web: http://troy.blackboard.com/webapps/portal/frameset.jsp The course web page will serve as the materials intermediary. All homework assignments will be posted on blackboard. I may also post answer sheets or other supplemental material here as well. Supplements I will spend some time during the course explaining how to use Excel to conduct statistical analysis. However, you may also use R or some other statistical package to conduct statistical analysis if you so desire. If you choose to use a statistical package, besides Excel, please inform me prior to your use; this will allow me to check the accuracy of your work. In addition, I will want all printouts of your results including any code you programmed. Exams There will be two exams given during the semester, one midterm covering selected chapters and a final exam. The midterm will count 20% towards your final grade with the final exam worth 20%. These exams will consist of short answer questions that will test you on the theory and empirical analysis discussed in class. You will be given one hour and fifteen minutes to complete the midterm. You will have an entire class period to take the final exam. Short answer questions from homework assignments will serve as a good guideline as to the style of questions I will ask on the exams. Quizzes Two quizzes will be assigned during the term. They will cover multiple chapters, but will not be as comprehensive as an exam. They will be short answer and will reflect lecture notes and
homework assignments. Each quiz is equally weighted. I will allow approximately 45 minutes for the completion of each quiz. Homework Homework assignments will be given during the term. They may consist of short answer questions, excel files, or end of chapter questions. I may ask for some combination of the three. Homework will typically be assigned at the end of each chapter, excluding chapters 1 and 6. It will be due the next lecture at the start of class after it has been assigned unless I state otherwise. Each of these homework assignments is equally weighted. One homework assignment, from the chapter on demand estimation, will be assigned a higher percentage of your grade than other homework assignments. This is because I will ask you to run a regression and interpret the results. Data will be provided. Some may be well behaved other will not. If you wish to use your own data set provide it to me so I may check your work. See the last page of the syllabus for more details. Note, the homework, while it may seem challenging, is there for you to practice and learn. Grading Policy Grade Distribution A 90 100 Homework (problems) 30% B 80 89 Homework (estimation) 10% C 70 79 Quizzes (2) 20% D 60 69 Midterm (Ch. 4, 5, 7) 20% F 0 59 Final (Ch. 8-14) 20% Attendance It is expected that you attend every lecture. I do not formally take attendance nor do I consider it in determination of your grade. However, as an MBA student you should exhibit professionalism and the responsibility that goes along with it. In addition, you should arrive on time and prepared for every class. Coming to class late is disrespectful to me and to other students. If you are running late because of work, spouse, child, etc. send me an email to let me know. Academic Dishonesty Cheating and plagiarism are very serious. I will not tolerate any form of cheating. If you are caught cheating you will receive an automatic F for the course and may face further academic action.
Additional Services AMERICANS WITH DISABILITIES ACT: Troy University supports Section 504 of the Rehabilitation Act of 1973 and the Americans with Disabilities Act of 1990, whiich insure that postsecondary students with disabilities have equal access to all academic programs, physical access to all buildings, facilities and events, and are not discriminated against on the basis of disability. Eligible students, with appropriate documentation, will be provided equal opportunity to demonstrate their academic skills and potential through the provision of academic adaptations and reasonable accommodations. Students with disabilities, or those who suspect they have a disability, must register with the Disability Services Coordinator in order to receive accommodations. Students currently registered with the Disability Services Office are required to present their Disability Services Accommodation Letter to each faculty member at the beginning of each term. If you have any questions, contact the Office of Adaptive Needs Program (Eldridge Hall), or call 670-3220/3221. Cell Phones and Other Electronic Devices Turn your cell phone off or put it on vibrate prior to entering the classroom. Texting or accessing your Facebook page is extremely rude and disrespectful to me and to other students. If you feel the need to constantly access your phone then do not expect me to answer any questions about material you missed. Computers are an acceptable form of note taking as well. However, as this class is more analytical in nature (i.e. lots o math) it will be difficult for you to efficiently put equations and problems into your computer. This means that you are likely accessing the internet or working on some other project. In this case, see my rule about answering questions above. Chapter Outline Part 1: OVERVIEW OF MANAGERIAL ECONOMICS. 1. Nature and Scope of Managerial Economics 2. Economic Optimization 3. Demand and Supply Part 2: DEMAND ANALYSIS AND ESTIMATION. 4. Demand Analysis 5. Demand Estimation 6. Forecasting
Part 3: PRODUCTION AND COMPETITIVE MARKETS. 7. Production Analysis and Compensation Policy 8. Cost Analysis and Estimation 10. Competitive Markets 11. Performance and Strategy in Competitive Markets Part 4: IMPERFECT COMPETITION. 12. Monopoly and Monopsony 13. Monopolistic Competition and Oligopoly 14. Game Theory and Competitive Strategy The schedule below is tentative. Ideally, I would like to move at this pace to ensure there is in depth coverage of material. However, I prefer quality over quantity, i.e. I prefer you fully understand a handful of topics rather than barely understand all topics. Tentative Schedule Week Lecture Topic/Chapter 1 1 Introduction, Chapter 1 1 2 Chapter 2 2 3 Chapter 2/appendix (optional) Chapter 3 2 4 Chapter 3/4 3 5 Quiz (Ch. 2-3) Chapter 4 3 6 Chapter 5, stat tutorial 4 7 stat tutorial, Chapter 7 4 8 Chapter 7/Review 5 9 Midterm (Ch. 4,5,7) 5 10 Chapter 8 6 11 Chapter 10 6 12 Chapter 11 7 13 Quiz (Ch. 8,10, 11) Chapter 12 7 14 Chapter 12/13 8 15 Chapter 13/14/6 8 16 Final (Ch. 8-14) Additional Details on Estimation Homework This homework is centered on regression analysis. Data will be provided to each student. If you would like to use your own data, confer with me first. The objective is for you to analyze data using OLS and interpret the results. The homework should be no more the 3 pages with tables included.
Items to include in homework 1. Statement of the problem at hand a. What are you trying to model b. What type of model will you use (linear model, log-linear, log-log, etc.) 2. A table of descriptive statistics of the data (to include the mean, standard deviation, minimum and maximum values) 3. Regression output from Excel or another statistical package 4. Interpretation of results a. Overall fit (R-square, F-test, etc.) b. Individual significance (t-test, p-values, etc.) c. Economic interpretation (if the regression includes price and quantity data then mention the elasticities, etc.) d. Brief summary (any additional items you may want to include additional analysis such as consumer surplus will be given extra credit if it is correct)