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Updated A.Y. 2016-2017

The course deals with the application of microeconomic tools to business decision making. It concentrates on how managers make economic decisions by allocating the scarce resources at their disposal. To make good decisions, a manager must understand the behavior of other decision makers, such as consumers, workers, other managers, and governments. In this course, we examine decision making by such participants in the economy, and we show how economic analysis helps understand the complex interaction among the various economic actors.


  • Firm organization
    •  Firm ownership and governance
    • Owners’ and managers’ incentive
    • Make or buy
    • Profit maximization
  • Market Structure
    • Perfect competition
    • Monopoly
    • Oligopoly
    • Monopolistic competition
  • Markets with perfectly competitive firms
    • Short run and long run equilibrium
    • Competition and social welfare
      • Consumer surplus
      • Producer surplus
      • Total welfare
  • Monopoly
    • Market power
    • Welfare effects of market power
    • Determinants of market power
      • Legal barriers
      • Product differentiation and advertising
      • Network externalities
  • Pricing decisions when firms have market power
    • Price discrimination
    • Non-linear price
    • Bundling
    • Peak vs. off-peak pricing
  • Oligopoly and monopolistic competition
    • Cournot competition
    • Bertrand competition
    • Monopolistic competition
  • Strategic interaction: Static games
    • Elements of a game
    • Rational decision making
    • Nash equilibria
    • Games with imperfect information
    • Bargaining
  • Strategic interaction: Dynamic games
    • Collusion and folk theorem
    • Sequential games: credible threats and promises
    • Entry deterrence
  • Transactions with asymmetric information
    • Adverse selection
    • Moral hazard
    • Optimal contracts
    • Monitoring

Teaching methods
Lessons will be a combination of frontal lectures, case studies, and interactive class discussions

Main References
Jeffrey M. Perloff and James A. Brander, Managerial Economics and Strategy, Pearson, Chapters 7-13 and 15


Exam Rules

1. The exam is only written. It is evaluated in X out of 30. The score performed in one of the calls is valid until September 2017.
2. Excellent answers are those which represent an appropriate mix between theory and practice (i.e. business examples). Theoretical connections among the different topics are also very welcome.
3. Students can decide to reject a grade when not satisfied.
4. Only students registered through the Delphi System will be allowed to sit the exam in ordinary calls.