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ECO 550 – Managerial Economics and Globalization

COURSE DESCRIPTION

This course applies relevant economic theory to develop a framework of analysis and techniques that business managers can use in deciding how to allocate a firm’s scarce resources to achieve its objectives. It uses economic analysis to support business strategy decisions that promote competitiveness in an environment of changing domestic and international market conditions, government regulations, trade policies, and resource availability. The course systematically analyzes how global economic integration affects the production, input sourcing, and pricing decisions of firms operating in different market structures.

INSTRUCTIONAL MATERIALS

Required Resources

Froeb, L. M., McCann, B. T., Shor, M., & Ward, M. R. (2018). Managerial economics: A problem solving approach.

Microsoft Excel (2003 version or newer) [Computer software]. Redmond, Washington.

Supplemental Resources

MBA Primer

Note: The MBA Primer is designed to help students with little or no educational background in business to prepare for the rigors of an MBA program. The MBA Primer is also a useful tool for students who have a business background but might need a refresher. It is a way to help you prepare for the types of activities and concepts that will be covered in an MBA program, so you can feel more comfortable and confident as you progress into higher level courses. Students are emailed an access code for this product when they purchase MBA Primer from the Strayer Bookstore, accessible through iCampus.

Board of Governors of the Federal Reserve System. (2013). General format. Retrieved from http://www.federalreserve.gov

excelcentral.com. Learn Excel 2010 Essential Skills with the Smart Method. (2013). Retrieved from http://www.excelcentral.com/?gclid=CK3zisSC1rkCFcE7OgodLlEA_g

fundamentalfinanace.com. (2013). Excel. Retrieved from http://www.fundamentalfinance.com/excel/

Wall Street Journal (2013). General format. Retrieved from http://online.wsj.com

COURSE LEARNING OUTCOMES

1. Assess how managerial economics is used in business decision making.

2. Apply the concepts of supply and demand to determine the impact of changes in market conditions in the short run and long run, and the economic impact on a company’s operations.

3. Apply business and economic forecasting techniques utilized by managers.

4. Analyze short-run and long-run production and cost functions.

5. Evaluate the profit-maximizing price and output level for given operating costs for monopolies and firms in competitive industries.

6. Propose how differences in demand and elasticity lead managers to develop various pricing strategies.

7. Use technology and information resources to research issues in managerial economics and globalization.

8. Write clearly and concisely about managerial economics using proper writing mechanics.

WEEKLY COURSE SCHEDULE

The standard requirement for a 4.5 credit hour course is for students to spend 13.5 hours in weekly work. This includes preparation, activities, and evaluation regardless of delivery mode.

Week

Preparation, Activities, and Evaluation

Points

1

Preparation

· Reading(s)

· Chapter 1: Introduction: What This Book Is About

· Chapter 2: The One Lesson of Business

· Chapter 3: Benefits, Costs, and Decisions

· Chapter 4: Extent (How Much) Decisions

· Chapter 5: Investment Decisions: Look Ahead and Reason Back

Activities

· Introductions

· Discussion

20

20

2

Preparation

· Reading(s)

· Chapter 6: Simple Pricing

· Chapter 7: Economies of Scale and Scope

Activities

· Discussion

20

3

Preparation

· Reading(s)

· Chapter 8: Understanding Markets and Industry Changes

· Chapter 9: Market Structure and Long-Run Equilibrium

Activities

· Discussion

20

4

Preparation

· Reading(s)

· Chapter 10: Strategy: The Quest to Keep Profit from Eroding

· Chapter 11: Foreign Exchange, Trade, and Bubbles

Activities

· Discussion

20

5

Preparation

· Reading(s)

· Chapter 12: More Realistic and Complex Pricing

· Chapter 13: Direct Price Discrimination

· Chapter 14: Indirect Price Discrimination

Activities

· Discussion

Evaluation

· Problem Set

20

200

6

Preparation

· Reading(s)

· Chapter 15: Strategic Games

· Chapter 16: Bargaining

Activities

· Discussion

20

7

Preparation

· Reading(s)

· Chapter 17: Making Decisions with Uncertainty

· Chapter 18: Auctions

Activities

· Discussion

Evaluation

· Case Study: Use of Game Theory to Maximize Profits

20

250

8

Preparation

· Reading(s)

· Chapter 19: The Problem of Adverse Selection Activities

· Chapter 20: The Problem of Moral Hazard

Activities

· Discussion

20

9

Preparation

· Reading(s)

· Chapter 21: Getting Employees to Work in the Firm’s Best Interests

· Chapter 22: Getting Divisions to Work in the Firm’s Best Interests

Activities

· Discussion

Evaluation

· Assignment: Dealing with Risk, Asymmetric Information, and Incentives

20

310

10

Preparation

· Reading(s)

· Chapter 23: Managing Vertical Relationships

· Chapter 24: You be the Consultant

Activities

· Discussion

20

11

Preparation

· Reading(s): None

Activities

· Discussion

20

GRADING SCALE – GRADUATE

Assignment

Total Points

% of

Grade

Participation: 12 Discussions

240

24%

Problem Set

200

20%

Case Study: Use of Game Theory to Maximize Profits

250

25%

Assignment: Dealing with Risk, Asymmetric Information, and Incentives

310

310%

Totals

1,000

100%

Points

Percentage

Grade

900-1000

90% – 100%

A

800-899

80% – 89%

B

700-799

70% – 79%

C

Below 700

Below 70%

F

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ECO 550 – Managerial Economics and Globalization

© 2018 Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University.

ECO 550 Student Version 1184 (4/2018) Page 1 of 13

Problem Set

Due Week 5 and worth 200 points

You will submit your answers in a Blackboard assessment filling out charts and answering the essays/short answer questions.

Note: There is not an option to upload your assignment, you must use the Blackboard assessment; however, you will be able to copy and paste your answers from a Word document.

Problem 1: Using the Marginal Approach

Suppose your company runs the shuttle business for a hotel to and from the local airport. The costs for different customer loads are:

1 customer: $30

2 customers: $32

3 customers: $35

4 customers: $38

5 customers: $42

6 customers: $48

7 customers: $57

8 customers: $68.

1. What are your marginal costs for each customer load level?

2. If you are compensated $10 per ride, what customer load would you choose?

Problem 2: Elasticity and Pricing

Suppose the number of firms you compete with has recently increased. You estimated that as a result of the increased competition, the demand elasticity has increased from –2 to –3 (i.e., you face more elastic demand). You are currently charging $10 for your product. What is the price that you should charge if demand elasticity is -3?

Problem 3: Price Discrimination

An amusement park, whose customer set is made up of two markets, adults and children, has developed demand schedules as follows:

Price ($)

Quantity

Adults

Children

5

15

20

6

14

18

7

13

16

8

12

14

9

11

12

10

10

10

11

9

8

12

8

6

13

7

4

14

6

2

The marginal operating cost of each unit of quantity is $5. Because marginal cost is a constant, so is average variable cost. Ignore fixed costs. The owners of the amusement part want to maximize profits.

Calculate the price, quantity, and profit if:

1. The amusement park charges a different price in each market.

2. The amusement park charges the same price in the two markets combined.

3. Explain the difference in the profit realized under the two situations.

Problem 4: Bundling

Time Warner could offer the History channel (H) and Showtime (S) individually or as a bundle of both.

Suppose the reservation prices of customers 1 and 2 (the highest prices they are willing to pay) are presented in the boxes below.

The cost to Time Warner is $1 per customer for licensing fees.

Preferences

Showtime

History Channel

Customer 1

9

2

Customer 2

3

8

1. Should Time Warner bundle or sell separately?

2. Should Time Warner bundle if everyone likes Showtime more than the History channel (i.e., preferences are positively correlated).

3. Suppose Time Warner could sell Showtime for $9, and History channel for $8, while making a Showtime-History bundle available for $13. Should it use mixed bundling (i.e., sells products both separately and as a bundle)?

CASE STUDY: USE OF GAME THEORY TO MAXIMIZE PROFITS

Due Week 7 and worth 250 points.

The following article describes the unique boarding process used by Southwest Airlines.

https://mindyourdecisions.com/blog/2013/03/05/southwest-airlines-boarding-and-game-theory/

Use this article and three (3) others to answer the following questions in 5–7 pages:

1. Describe the change in Southwest Airlines’ boarding process.

2. What was Southwest’s main goal introducing the early-bird check-in?

3. Explain how Southwest Airlines used the game theory approach to increase its profits.

a. What is the outcome of the game involving early-bird check-in?

b. Identify what is the passengers’ dominant strategy.

c. Determine why travelers face the Prisoner’s Dilemma with the early-bird check-in process.

4. Analyze the advantages and disadvantages of the early-bird check-in process for Southwest Airlines.

5. Suggest ways in which other companies, or the company you work for, can utilize similar game approach to maximize profits. Note: One of your references should help provide a rationale as to why this is a good approach for this company and needs to have been published within the last 6 months.

Your assignment must follow these formatting requirements:

· Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.

· Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

Points: 250

CASE STUDY: USE OF GAME THEORY TO MAXIMIZE PROFITS

Criteria

Unacceptable

Below 69% F

Fair

70-79% C

Proficient

80-89% B

Exemplary

90-100% A

1. Describe the change in Southwest Airlines’ boarding process.

Weight: 10%

Did not submit or did not address the subject.

Partially describes the change in Southwest Airlines’ boarding process.

Satisfactorily describes the change in Southwest Airlines’ boarding process.

Thoroughly describes the change in Southwest Airlines’ boarding process.

2. Discusses Southwest’s main goal introducing the early-bird check-in

Weight: 15%

Did not submit or did not address the subject.

Partially discusses Southwest’s main goal of introducing the early-bird check-in.

Satisfactorily discusses Southwest’s main goal of introducing the early-bird check-in.

Thoroughly discusses Southwest’s main goal of introducing the early-bird check-in.

3. Explain how Southwest Airlines used the game theory approach to increase its profits.

Weight: 20%

Did not submit or did not address the subject.

Partially explains how Southwest Airlines used the game theory approach to increase its profits.

Satisfactorily explains how Southwest Airlines used the game theory approach to increase its profits.

Thoroughly explains how Southwest Airlines used the game theory approach to increase its profits.

4. Analyze the advantages and disadvantages of the early-bird check-in process for Southwest Airlines.

Weight: 15%

Did not submit or did not address the subject.

Partially analyzes the advantages and disadvantages of the early-bird check-in process for Southwest Airlines.

Satisfactorily analyzes the advantages and disadvantages of the early-bird check-in process for Southwest Airlines.

Thoroughly analyzes the advantages and disadvantages of the early-bird check-in process for Southwest Airlines.

5. Suggest ways in which other companies, or the company you work for, can utilize a similar game theory approach to maximize profits

Weight: 30%

Did not submit or did not address the subject.

Partially suggests ways in which other companies, or the company you work for, can utilize a similar game theory approach to maximize profits.

Satisfactorily suggests ways in which other companies, or the company you work for, can utilize a similar game theory approach to maximize profits.

Thoroughly suggests ways in which other companies, or the company you work for, can utilize a similar game theory approach to maximize profits.

6. Use of at least 3 academic quality references, and one has been published in the last 6 months.

Weight: 5%

Did not submit or did not include citations or references in work.

Used enough references; however, not all were of academic quality, and one has been published in the last 6 months.

Did not use enough references; however, all were of high quality and citations/references were appropriately done, and one has been published in the last 6 months.

Used 3 or more academic quality references and citations were appropriately done, and one has been published in the last 6 months.

7. Clarity, writing mechanics, and formatting requirements

Weight: 5%

Student did not submit the assignment or there are so many errors that work is confusing to read. APA citation not attempted.

Several errors (5–6) in grammar, formatting, and APA citation.

A few errors (3–4) in grammar, formatting, and APA citation but not so much that the reader is confused.

Minimal (0–2) errors in grammar, formatting, and APA citation.

Assignment: Dealing with Risk, Asymmetric Information, and Incentives Due Week 9 and worth 310 points

Earlier in the quarter we discussed Southwest Airlines’ use of game theory to create new strategy. Continue to research Southwest Airlines or a company of your choice and write a six to eight (6–8) page paper in which you:

1. Evaluate a company’s recent (within the last year) actions dealing with risk and uncertainty. Offer advice for improving risk management.

2. Examine an adverse selection problem your company is facing and recommend how it should minimize its negative impact on transactions.

3. Determine the ways your company is dealing with the moral hazard problem and suggest best practices used in the industry to deal with it.

4. Identify a principal-agent problem in your company and evaluate the tools it uses to align incentives and improve profitability.

5. Examine the organizational structure of your company and suggests ways it can be changed to improve the overall profitability.

6. Use at least five (5) quality academic resources in this assignment. Note: One of your references regarding your needs should have been published within the last 6 months. Note: Wikipedia does not qualify as an academic resource.

Your assignment must follow these formatting requirements:

· Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.

· Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

Points: 310

Assignment: Dealing with Risk, Asymmetric Information, and Incentives

Criteria

Unacceptable

Below 60% F

Fair

70-79% C

Proficient

80-89% B

Exemplary

90-100% A

1. Evaluate a company’s recent (within the last year) actions dealing with risk and uncertainty. Offer advice for improving risk management.

Weight: 10%

Did not submit or did not address the subject.

Partially evaluated a company’s recent (within the last year) actions dealing with risk and uncertainty. Offered advice for improving risk management.

Satisfactorily evaluated a company’s recent (within the last year) actions dealing with risk and uncertainty. Offered advice for improving risk management.

Thoroughly evaluated a company’s recent (within the last year) actions dealing with risk and uncertainty. Offered advice for improving risk management.

2 Offer advice for improving risk management.

Weight: 15%

Did not submit or did not address the subject.

Partially offered advice for improving risk management.

Satisfactorily offered advice for improving risk management.

Thoroughly offered advice for improving risk management.

3. Examine an adverse selection problem your company is facing and recommend how it should minimize its negative impact on transactions.

Weight: 15%

Did not submit or did not address the subject.

Partially examined an adverse selection problem your company is facing and recommended how it should minimize its negative impact on transactions.

Satisfactorily examined an adverse selection problem your company is facing and recommended how it should minimize its negative impact on transactions.

Thoroughly examined an adverse selection problem your company is facing and recommended how it should minimize its negative impact on transactions.

4. Determine the ways your company is dealing with the moral hazard problem and suggest best practices used in the industry to deal with it.

Weight: 15%

Did not submit or did not address the subject.

Partially determined the ways your company is dealing with the moral hazard problem and suggested best practices used in the industry to deal with it.

Satisfactorily determined the ways your company is dealing with the moral hazard problem and suggested best practices used in the industry to deal with it.

Thoroughly determined the ways your company is dealing with the moral hazard problem and suggested best practices used in the industry to deal with it.

5. Identify a principal-agent problem in your company and evaluate the tools it uses to align incentives and improve profitability.

Weight: 15%

Did not submit or did not address the subject.

Partially identified a principal-agent problem in your company and evaluated the tools it uses to align incentives and improve profitability.

Satisfactorily identified a principal-agent problem in your company and evaluated the tools it uses to align incentives and improve profitability.

Thoroughly identified a principal-agent problem in your company and evaluated the tools it uses to align incentives and improve profitability.

6. Examine the organizational structure of your company and suggest ways it can be changed to improve the overall profitability.

Weight: 20%

Did not submit or did not address the subject.

Partially examined the organizational structure of your company and suggested ways it can be changed to improve the overall profitability.

Satisfactorily examined the organizational structure of your company and suggested ways it can be changed to improve the overall profitability.

Thoroughly examined the organizational structure of your company and suggested ways it can be changed to improve the overall profitability.

7. Use of at least 5 academic quality references, and

one has been published in the last 6 months.

Weight: 5%

Did not submit or did not include citations or references in work.

Used enough references; however, not all were of academic quality, and one has been published in the last 6 months.

Did not use enough references; however, all were of high quality and citations/references were appropriately done, and one has been published in the last 6 months.

Used 5 or more academic quality references and citations were appropriately done, and one has been published in the last 6 months.

8. Clarity, writing mechanics, and formatting requirements.

Weight: 5%

Student did not submit the assignment or there are so many errors that the work is confusing to read. APA citation not attempted.

Several errors (5–6) in grammar, formatting, and APA citation.

A few errors (3–4) in grammar, formatting, and APA citation, but not so much that the reader is confused.

Minimal (0–2) errors in grammar, formatting, and APA citation.

Expectations

The standard requirement for a 4.5 credit hour course is for students to spend 13.5 hours in weekly work regardless of the delivery mode. One (1) hour of classroom or online course activity and a minimum of two (2) hours of outside study / preparation time per credit hour are built into the design of each weekly Course Guide. Using this formula, Strayer University course design meets applicable regulatory standards. This includes preparation, activities, and evaluation over ten (10) weeks for a total of 135 hours of student work.

On-ground faculty creates its own verbal lectures to present during class time and must hold class for the entire session. Faculty has access to the online course shell materials and is expected to review that material in advance of teaching the course. If available with the course, faculty must use associated software and / or technology learning resources.

On-ground faculty must discuss expectations and / or instructions for completing course work requiring access to software, Internet, or computers with students. Arrangements for campus computer lab time during and / or after class must be considered.

Follow the Strayer University policy for on-ground classroom make-up sessions.

Instructional Materials

Instructional materials are the required or supplemental materials that students need to complete the course successfully. This may include books, articles, Internet digital assets, and / or software selected by the school’s leadership team.

Students need to obtain a copy of the required materials. Supplemental resources are listed but not required. These resources are provided for additional reading material if a student desires more information on the topics. Using APA format, faculty may add books, journal articles, and / or websites to the supplemental materials as resources, but may not change the required materials. Be sure to check Strayer University’s policy on linking to websites and other resources on SU Now.

Strayer University may provide students with the first three (3) chapters of textbooks in eBook format in the Strayer online course shell at no charge. This allows student access to required textbook resources in the event that they have not yet received their textbooks before the first week of class.

Review your online course shell to determine whether digital assets (Internet-based student learning aids/assignments) are built into the course. If there are digital assets for the course, check https://sunow.strayer.edu for the faculty training schedule to learn to use these resources associated with the course.

Faculty instructional materials and information on how to access publisher sites are located on https://sunow.strayer.edu under “Academic Programs,” then “Course Information.”

Student instructional materials can be obtained through the university’s virtual bookstore and can be accessed through iCampus: http://www.strayerbookstore.com. Some courses with digital assets on publisher sites may require the purchase of onetime access codes. Advise students to use caution when purchasing used textbooks as the access codes are invalid after the first use.

Lectures / Scenarios and Discussions

Lecture topics each week align directly to course learning outcomes. Each lecture is supported by weekly discussion topics. Online lectures are available for on-ground students through the online course shell to view as a supplement to their on-ground lectures.

· Online faculty have the option to change the discussion topics set up in their online course shell, unless an “*” is presented before the discussion topic. The point allocation will not change for any topics that can or can’t be changed. Therefore, faculty will not need to adjust the Grade Center on the question that was replaced or modified. In all instances it is imperative that the discussion questions that faculty replace or modify align to the learning outcomes in the given week. Please review the learning outcomes in the given week and make sure that the discussion topics align to the questions. It is encouraged to share new discussion questions with your course lead in order to promote sharing of content with faculty across the sections.

· On-ground faculty may use these same discussion topics as a guide for in-class discussion. Certain discussions are tied to scenarios. At your discretion, you may discuss / demo these scenarios in class or assign them to students for viewing prior to class.

Grade Book Usage

The grade book is set up in your online course shell. The expectation is for the professor to input all weekly grades in the grade book for student review and archiving.

Tests

Tests (quizzes, midterm and final exams, essay exams, lab tests, etc.) are available for student access and completion through the online course shell. Check the online course shell to determine how students are expected to take the tests. Do not change these questions or their point values in any way. This disrupts the automated grade book preset in the online course shell.

· Online students are to complete the test by Sunday midnight the week the test is due.

· On-ground students are to complete the tests after the material is covered and before the next class session.

Assignments

Assignments described in the Course Guide are standardized across all sections of this course and cannot be changed.

Evaluate assignments according to the grading rubric guidelines that establish levels of student performance and accompany the assignment.

· Students should be directed to review the rubric in preparation for completing the assignment, before submitting the assignment, and after you have offered feedback based upon the rubric.

· You must use the grading rubric (when provided) to grade each assignment and provide individual feedback.

Students must be graded individually—no group grading is permitted; however, students may work in groups in the online or on-ground classroom.

Assignments for both online and on-ground students are always submitted through the online course shell. On-ground faculty must inform students on how to submit assignments, whether in paper format or through the online course shell.

Other Course Shell Items

All students (on-ground and online) must complete or submit tests, homework, and assignments in the online course shell.

Reminders

See the Strayer Policies (formerly Syllabus: Part II) link under the Course Home tab in the online course shell for important University notices and services. Read Strayer Policies and then review with students in the first week as part of the Course Expectations and Introductions.

Review the assigned online course shell prior to each upcoming term to identify any changes and important University notices and services. You can access your online course shell at https://bb.strayer.edu.

Check the online course shell to determine whether digital assets (such as publisher provided videos, lectures, flashcards, etc.) are used in the course. If you are unfamiliar with these, go to https://sunow.strayer.edu for information and training.

Your school leadership team is available to answer your course-related questions. Check https://sunow.strayer.edu to determine who has the responsibility for your course.

You may reach the Academics Programs department with your curriculum questions or comments by email to: mailto:Curriculum@Strayer.edu.

To report errors and broken links, and to make suggestions on how to improve course content, initiate the course change process by completing the Course Change form, which is available at https://sunow.strayer.edu. Click on “Academics,” then “Course Change Requests.” There is a blue button with “Request a Course Change” in the middle, left side. Click on that button and a form opens for you to use to report errors.

Resource Center

The Resource Center navigation button contains a vast array of links that may be of interest to students. Tutoring, obtaining transcripts, and career services are some of the many areas in which students may pose questions. You may wish to familiarize yourself with the Resource Center to direct students to this area should questions of a general nature arise in your class.

Resources

Faculty can obtain Technical Support for the following:

· For Blackboard technical questions, Blackboard Technical Support is available 24 hours/7 days per week at (877) 642-2999. When you log into Blackboard, the Help tab has links to chat, self-help tutorials and the technical support helpline.

· For technical questions about your course shell availability, lab components, or access to your Blackboard course through iCampus, contact the Tech Help Center at (877) 642-2999 option 3 or submit a ticket in Strayer 360 at https://sunow.strayer.edu.

· For any technical questions regarding SUNow site, Strayer360, email, or campus labs hardware or software, contact the Strayer IT Help Desk by submitting a ticket in Strayer 360. If you’re unable to access Strayer 360, they can be reached via email at ithelpdesk@strayer.edu or phone at: (866) 610-8123.

An online writing tutoring service is available to all Strayer students through the online course shell found on the navigation bar.

Strayer University Library Resources are available on the navigation bar under “Resource Center” in the online course shell.

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