ECONOMICS FOR BUSINESS
Updated A.Y. 2015-2016
Microeconomics for business
The course provides a basic overview of fundamental microeconomic questions in the contemporary economic debate. It is divided in two parts: the first one proposes some basic game theoretical tools to analyze relevant firms’ decisions in production economies. The second part investigates how information influences economic decisions and outcomes, with particular attention to the financial aspects of firm’s activities. Topics include moral hazard and adverse selection in static frameworks. Each model’s result will be discussed in the light of relevant economic examples.
Strategic decision: Game Theory (Gibbons)
- Normal form games: Nash equilibrium
- Application 1: Cournot Oligopoly
- Application 2: Bertrand duopoly with imperfect substitutes
- Application 3: Bertrand duopoly with a homogeneous good
- Mixed strategy equilibria.
- Extensive form games: Subgame Perfect Nash Equilibrium
- Application 1: Stackelberg oligopoly
- Application 2: Diamond-Dybvig economy
- Application 3: Entry games
- Subgame Perfect Nash Equilibrium in mixed strategies
Monopoly pricing (Tirole)
- Linear demand derived from individual preferences
- Monopoly with a linear tariff: positive and normative analysis
- Alternative pricing rules for firms with market power: linear, two-part and non-linear tariffs.
- Price discrimination by a monopolist: the case of homogeneous consumers and symmetric information
- Price discrimination by a monopolist: the case of heterogenoues consumers and symmetric information
- Price discrimination by a monopolist: the case of asymmetric information
- Introduction to Principal-Agent models
Gibbons R., (1992) “A primer in Game Theory”, Harvester Wheatsheaf.
Tirole, J. (1997) "The Theory of Industrial Organization", MIT Press.
Salaniè B., (2005) "The Economics of Contratcs. A primer", MIT Press.
Preston McAfee (2006), Lectures on pricing, California Institute of Technology, freely downloadable.
Dixit A. and Nalebuff B., (1991) Thinking Strategically: The Competitive Edge in Business, Politics and Everyday Life, Norton.
Van Zandt T. (2012), Firms Prices and Markets, freely downloadable online.
Additional supplementary readings will be indicated as the course goes on. The course instructor will provide indications to download articles, and pdf of the article whenever possible.
As a general reference for any prerequisite in microeconomics: Varian H. (2010) Intermediate Microeconomics, 8° edition, W. W. Norton & Company.
The final exam is a written. It is a unique exam for Economics of Business. There will be a pre-exam at the end of the modules of Macroeconomics and Microeconomics.