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, 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. 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 basic 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 The remainder of this syllabus is organized into sections: • 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 Expectations3 Econ E1600 Class Schedule, Topics, and Readings We will meet every Tuesday from September 1 to December 15, 2009 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. * The case discussion may be moved if the scheduled time is needed for review. 1 This is the location information as of this writing. Be sure to double check before the first class. Class Date11-Sep28-Sep3 15-Sep4 22-Sep5 29-Sep6 6-Oct7 13-Oct8 20-Oct9 27-Oct10 3-Nov11 10-Nov12 17-Nov13 24-Nov14 1-Dec15 8-Dec16 15-DecReviewWilliamson 1979Topic(s)Akerlof 1970, 2003Coase 1960,ReadingsCourse introduction, economics and business management, origin and nature of firmsLincoln Electric (HBS Case, 376-028)*Alchian 1950, Nelson and Winter 2002Class note 1 on iSite, Coase 1937Klepper 1996, Prahalad and Hamel 1990Principal-agent problem, asymmetric information, and incentivesControl, 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, Simon 1955, Simon 1991Relationships, contracts, governance, and idiosyncratic relations. Supplier relationships and equityInformation, 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,Final ExamMidtermMarket and contract failure, externalities, Handout4Required Readings Our approach will be to explore leading economic articles in each area. 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 will 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