• Demonstrating the knowledge on the main problems that the decision makers face and explaining the challenges of the decision making under uncertainty;
• Calculating demand elasticity, analyzing and understanding firm demand function and the impact of demand changes on firm market clearing price and quantity;
• Calculating firm marginal costs, marginal product and the optimal production quantity;
• Applying basic knowledge in game theory to firm interactions;
• Demonstrating the knowledge on the asymmetric information, adverse selection and moral hazard and explaining how they impact market transactions and the decisions within an organization.

Aim of the course
The main objective of this course is to introduce the students to a variety of problems faced by managers of modern corporations, and to equip them with microeconomic principles, elements of game theory and quantitative tools that will help them make better decisions in a future managerial role.

Contents
The course represents a continuation of the microeconomic part of the course on Principles of Economics. We will start with a short introduction to the theory and the goal of the firm, and efficient decision making. We will continue with the analysis and estimation of the consumer demand, the estimation of cost functions, production and optimal pricing decisions (in perfect competition, oligopolistic competition and oligopoly). The first part of the course will conclude with a class on choices under uncertainty and cognitive limitations in the decision making. The second part of the course will deal with information asymmetry, adverse selection and moral hazard, and their impact on individuals’ motivation, the bargaining and transactions among them both on the market (arms-length transaction) and within an organization.

Topics covered:
1. Introduction to the firm and economic way of thinking and decision making.
2. Analysis and estimation of the consumer demand.
3. Production and costs.
4. Pricing in the different market structures with elements of game theory.
5. Decision making under uncertainty.
6. Asymmetric information, adverse selection and moral hazard, principal-agent relationship.
7. Remedies to the principal-agent relationship, incentives and organization.