1 Syllabus for: Econ E-1600 Economics of Business Submitted to: Margaret Andrews Associate Dean for Management Programs Harvard University Division of Continuing Education Submitted by: Bob Wayland November 19, 2008 Revised July 19, 2009 Revised November 13, 20092Econ E-1600, Economics of Business Instructor: Bob Wayland Abstract This course introduces a set of economic concepts and frameworks that can be applied to many of the major concerns of corporate management. These include the economic perspective on the nature and organization of the firm, the role of information and transactions costs in internal and external markets, the scale and scope of the firm, contracting, and the firm’s relationships with customers and suppliers. Prerequisites Students should have completed a college-level microeconomics course such as Economics E10A. The exposition of some economic concepts involves algebra, graphical analysis, and a modest amount of calculus. Graduate students in particular should be able to deal with the moderate amount of calculus used in a few readings. Strong English reading and comprehension skills are necessary. The articles chosen as readings are generally well written and edited but due to journal space limitations are often fairly dense. Professional articles typically require several readings to comprehend fully their content. Course Objective The course is intended to increase a student’s ability to apply economic reasoning and tools to business management and to provide a general foundation in the economics of business that will support critical thinking about business issues. The course will be useful to students pursuing a career in business management and managers who are interested in exploring management roles beyond administration and supervision. The course is not intended for people who are unfamiliar with basic economics or mathematical analysis. This course complements but does not emphasize the decision-support tools and techniques offered in a managerial economics course. Instead, it provides an economic framework for thinking about the firm and its environment that can guide the application of decision-support methods. Syllabus Contents • Econ E1600 Class Schedule, Topics, and Readings • Required Readings • Other Texts Used or Referenced in Class Notes • Business Problems and Economic Thinking • Grading and Graduate Student Requirements • Contact Information • Office Hours • Classroom Expectations3Econ E1600 Class Schedule, Topics, and Readings We will meet every Tuesday from January 26, 2010 to May 11, 2009 (except March 16th) at 7:35-9:35 PM in the Northwest Science Building, room B101.1 The readings and lecture topics for each session are shown in the table below. There may be some modifications during the term as the pace and the interests of the class become better known. Full citations for the readings and ways to access them are in the next section, Required Readings. 1 This is the location information as of this writing. Be sure to double check before the first class. Class Date1 26-Jan2 2-Feb3 9-Feb4 16-Feb5 23-Feb62-Mar79-Mar8 16-Mar9 23-Mar10 30-Mar11 6-Apr12 13-Apr13 20-Apr14 27-Apr15 4-May16 11-MayInformation, horse trading, and economic scienceHyper rational vs bounded rationality, culture, decision making and learning within the firmCustomer search and information theoryLancaster 1966Multi-attribute goods, differentiation, idiosyncratic customer relationships, and equityStigler 1961,Spring BreakMarket and contract failure, externalities, Simon 1955, Simon 1991Relationships, contracts, governance, and idiosyncratic relations. Supplier relationships and equityFinal ExamHandoutKlepper 1996, Prahalad and Hamel 1990MidtermControl, defense, and incentive programs for the firmAlchian & Demsetz 1972, Stigler 1951Gibbons 1998, Kerr 1975Hirshleifer 1956, Williamson 1981Internal resource markets within the firm, organization structure, transfer prices,More on evolutionary selection pressures on firms and the product life cycle (PLC) framework, the core competency theoryUncertainty, evolutionary pressures and firm selection and survival,More on the nature of the firm; cooperation, division of labor, and vertical integration, ReviewWilliamson 1979Topic(s)Akerlof 1970, 2003Coase 1960,ReadingsCourse introduction, economics and business management, origin and nature of firmsAlchian 1950, Nelson and Winter 2002Class note 1 on iSite, Coase 19374Required Readings Our approach will be to explore leading economic articles about the economics of business. Most of the value of this course derives from exposure to the thoughts of leading economists about the nature of the firm, its interactions with its environment, and its relationships with people and other organizations. A few samples from the management literature may also be discussed. This approach will give you an appreciation for the background and context of the issues. The class notes posted on the course iSite will cover the essential aspects of the articles and bridge some of the topics. A course pack containing the required readings will be available from University Readers (http://www.universityreaders.com/) probably for less than $100. They provide limited electronic access while your hardcopy is on its way so that you won’t fall behind in your reading. Some students like to hold off buying until they have sampled the course. You still have to do the early readings. It is my understanding that as a registered student you have access to the Harvard Libraries e-resources, in particular JSTOR, which enables you to read and to download these articles. This requires more time but less expense than buying the course pack. You must observe the copyright laws and rules. This is an economics course and we do not believe that copyrighted materials yearn to be free. No textbook will be required. If you feel more comfortable with a companion text; Michael R. Baye, Managerial Economics and Business Strategy, 6th edition, McGraw Hill International Edition, 2009 is a general overview of some of the topics we will cover and is available on-line for about $80.00. Used previous editions of that book are much less expensive and just as useful for our purposes. Any other recent managerial economics book to which you have access is probably fine as well. Access to a good college introductory microeconomics text is helpful, especially if you