Managerial Economics - Content Outline

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  1. Introduction and Basic Concepts                                      
    • The firm                      
    • Froeb and McCain                  
      • Making decisions at the margin        
      • Ignoring sunk costs
    • Nature of costs and measuring costs                              
      • Explicit versus implicit costs
    • Accounting profit vs. economic profit.                           
      • Computing economic profit
    • Compute present value of a future amount               
    • Optimizing techniques                          
    • Adhere to the NABE Code of Ethics                

                                                     

  2. Supply and Production                                         
    • Organization of production                 
    • The role of transaction costs in determining the vertical boundaries of the firm                         
      • Boundaries of the firm and transaction costs,            
      • Getting the make vs. buy decision wrong    
      • Topics in the supply chain    
        • Domestic vs. foreign: trade vs. FDI
        • Vertical vs. horizontal international choice
    • Long run average costs                         
    • Minimum Efficient Scale                      
    • Economies of scope and the factors that contribute to it                      

                                                     

  3. Estimating Cost Functions and Production Functions                                               
    • Short run costs                         
    • Functional Forms                    
    • Estimating cost functions                     
    • Estimating the efficient plant size in an industry                        
    • Learning Curve                         
    • Break-even analysis                               
      • Principles of break-even analysis             
      • Resolving measuring issues        
      • Contribution margin      
      • Operating leverage        

         

  4. Financing the Firm                                  
    • Long run investment decision and capital budgeting                               
      • Measuring the cost of capital             
      • Capital structure of the firm – WACC              
      • Project finance – cash flows, cost of capital, NPV, IRR, and payback criteria  
    • Risk and Uncertainty in Decision-Making                      
      • Defining and measuring risk               
      • Utility theory and risk aversion         
      • Adjusting asset valuations for risk   
      • Making investment decisions under uncertainty      

                                                       

  5. Analysis of Demand                                               
    • Price elasticity of demand                   
      • Using direct estimation        
      • Using a linear demand function        
      • Using a log-linear demand function
      • Using a logit model 
      • Using the mltinomial logit model      
    • Individual estimates and aggregating demand                           
    • Other elasticities                     
      • Cross-price
      • Income        
    • Advertising elasticity of demand                      
    • Measuring key demand factors/data sources                            
      • Internal price data collection/tracking promotions   
      • Competitor price/volume data         
      • Survey data/consumer research      
      • Seasonality and “events”    
    • Demand forecasting – quantitative techniques                         
      • Regression models – single equation             
    • Demand forecasting – qualitative techniques                            

                                                     

  6. Pricing                                          
    • Pricing basics                             
      • Price-taking in perfect competition 
      • Price-setting in less than perfectly competitive markets       
      • Cost-plus pricing      
    • Complex pricing issues                         
      • Commonly-owned substitutes         
      • Commonly-owned complements    
      • Yield management 
      • Promotional pricing
    • Efficient pricing: assumptions and examples                               
      • Fundamentals          
      • Perfect price discrimination
      • Customer segmentation pricing       
      • Two-part tariff/multi-part pricing     
    • Legal issues around pricing                 
      • Resale price maintenance   
      • Predatory pricing/dumping
    • Pricing within the firm: transfer pricing                          

                                                     

  7. Market Structure and Strategic Behavior                                      
    • Defining the relevant product and geographical markets for good or service                               
    • Assessing a market’s structure and competitiveness of an industry                 
      • Concepts and measurements           
        • Concentration measures
        • Scale economies and entry conditions
    • Decision Tree                            
      • Analyzing choices through decision trees     
    • Applying game theory models to business situations                              
      • Technical concepts 
        • dominant strategy

           

  8. Regulation                                 
  • Externality and the difference between private and social benefits and costs                             
  • Correcting the misallocation of resources that comes from externalities.                      
  • Antitrust                     
  • Regulatory review process of a proposed merger                    
  • Restraints of trade                 
  • Other Regulation                    
    • Public utility regulation         
  • Executive Order 12866     
  • Analyzing regulation

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