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2013/2014  BA-HA_E180  Applied Microeconomics for Firms

English Title
Applied Microeconomics for Firms

Course information
Language English
Exam ECTS 7.5 ECTS
Type Elective
Level Bachelor
Duration One Semester
Course period Autumn
Changes in course schedule may occur
Wednesday 8.00-10.35 week 36-41, 43-48
Time Table Please see course schedule at e-Campus
Study board
Study Board for BSc in Economics and Business Administration
Course coordinator
  • Marcus Asplund - Department of Economics (ECON)
Administration: Ida Lyngby - il.eco@cbs.dk
Main academic disciplines
  • Statistics and mathematics
  • Economics, macro economics and managerial economics
Last updated on 22-03-2013
Learning objectives
Upon the end of the course, the student will be able to:
  • Understand how economic principles can be practically applied to decision making within the firm.
  • Forecast both qualitatively and quantitatively the effects of changes in demand and cost conditions both for an industry and an individual firm.
  • Analyze the cost structure of a firm and decide on costs factors that are relevant for economic decisions.
  • Obtain the demand curve for an individual product using real world data and basic statistical and econometric methods.
  • Decide on the optimal price for an individual product using real world data and estimated demand curves.
  • Evaluate the possibilities and limitations of alternative pricing strategies such as group pricing, bundling, versioning, penetration pricing, and quantity discounts.
  • Understand the tradeoffs involved in the choice between in-house production and outsourcing.
  • Evaluate the attractiveness of alternative vertical arrangements between seller and buyer such as exclusive dealerships, exclusive territories, licensing, and franchising.
  • Understand the fundamental issues in bidding for contracts and products.
Course prerequisites
The course assumes familiarity with basic microeconomics and statistical concepts, as well as standard econometric estimation (e.g. least squares regression).
Examination
4-hour written sit-in exam:
Examination form Written sit-in exam
Individual or group exam Individual
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Winter Term and December/January
Aids allowed to bring to the exam Closed Book: no aids
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
Course content and structure
This is a course in applied microeconomics that that focuses on decision making within the firm. It shows how economic principles taught in introductory microeconomic courses can be applied to general problems that may face anyone in a management position. The course emphasizes real world cases and scenarios and aims at bridging the gap between theory and practice.
 
The main topics of the course are: putting the perfectly competitive market framework into use, cost and demand analysis, pricing strategy, make or buy decisions, and strategic issues in auctions and procurement.
 
One of the fundamental parts of an introductory microeconomics course is the analysis of perfectly competitive markets. In this course, it is illustrated how the insights from such exercise can be used even if the market in question is not “perfectly competitive”, how to estimate actual supply and demand functions, and how to use these to forecast the future development of prices and firm profits.
 
It is crucial for a firm to understand its cost structure, and assess the cost factors are relevant for a particular decision. In this course the aim is to learn how to classify costs and how to estimate cost functions, and to use these in actual production and pricing decisions.
 
Every product has a demand curve – it is just a question of finding, and making use of, it. The course covers methods of obtaining estimates of demand curves from various sources of data. Using estimates of demand and costs, the focus is on getting the pricing of the product right. Here we also cover pricing for firms that sell several different products, and examine the feasibility of changing the pricing structure to extract additional value. In particular, the focus is on how to apply various forms of price discrimination such as group pricing, bundling, versioning, penetration pricing, and quantity discounts.
 
Over the last few decades there has been a general trend to outsource the production of various inputs to other firms. However, the “make or buy” decision is not straightforward and here we examine some of the trade-offs. Related to this is how a firm should deal contractually with its suppliers and buyers, and the course covers the use of business strategies such as licensing, exclusive contracts, and franchising.
 
As firms are relying more on markets and other firms in obtaining inputs and selling outputs, the use of bidding and “auctions” has become far more prevalent than it used to be. In this course, both the “sellers’” and “buyers’” strategies are discussed in both auction (where a seller wants to obtain a high price) and procurement (where a buyer wants to get a low price) settings.
 
 
The course´s development of personal competences
During the course, students will develop the skills necessary to use microeconomic principles to make economically sound managerial decisions. The student will learn how to analyse real world data and apply the results in practice. By being exposed to multiple industries and topics the student should have an improved understanding for the use of theory in situations he/she might encounter in the future.
Teaching methods
Lectures and (voluntary) exercises using real world data.
Student workload
SAT 225 hours
Expected literature
Michael Baye, Managerial Economics & Business Strategy, most recent edition. Mc-Graw Hill Higher Education.
Last updated on 22-03-2013