Assignment: Managerial Economy
Learning Objective
o Describe how goals, constraints, incentives, and market rivalry affect economic decisions.
o Analyze demand, supply, equilibrium prices, and price elasticities as a quantitative tool to forecast changes in revenues.
o Evaluate alternative ways of measuring the productivity of inputs and the role of the manager in the production process.
o Assess the economic trade-offs associated with obtaining inputs through spot exchange, contract, or vertical integration.
o Investigate the conditions under which a firm operates as perfectly competitive, monopolistically competitive, or a monopoly.
o Explain how beliefs and strategic interaction shape optimal decisions in oligopoly environments.
o Identify examples of networks and network externalities, and determine the number of connections possible in a star network with n users.
o Evaluate and present the economic basis for limit pricing, and identify the conditions under which a firm can profit from such a strategy.
Analyze a competitive situation or industry practice in a 4 to 6 page, APA formatted written paper. You should choose a topic early on in this course. All papers must be strategy papers, meaning they must be about firms. However, there is a great deal of flexibility in the choice of topic.
Step I
First, choose an industry, based on interest in the industry. Examples of industries range from advertising to zoos, and include digital watches, private jets, diapers, over-the-counter cold and flu formulas, photographic film, automobiles, airlines, football, romance novels, dating services, banana production, or pre-stressed concrete, computer printers, pagers, business schools, used cars sold over the web, movie theaters.
Step II
Having chosen the industry, you will need a question or issue on which to focus. Such questions could be broad (What strategies are most likely to sustain profitability?) or narrow (Should firm X build a new plant? Where?). Good questions encourage you to think strategically, and thus should include the likely responses of rival firms to any hypothetical actions. Plan to include your question in the topic proposal. A different approach is to choose a story about the behavior of a firm from a newspaper or other source, and research this story. For example, the defense contractor Lockheed-Martin announced a friendly takeover of Northrop-Grumman, and then later dropped the plan after the Department of Justice filed an antitrust complaint. This story contains a dozen potential paper topics. How is the defense industry organized? Why did they want to merge? Why did the DOJ want to block the merger? Choose a topic in which you are interested rather than one that looks easy. Topics that look easy can be treacherous and unpleasant if they are boring.
Step III
Develop your written response. An important aspect of business communication is the elimination of the extraneous. Supporting exhibits are not counted in the page total. Using a few well-chosen exhibits is a better strategy than many irrelevant exhibits. It is important to provide references for facts you rely on in the analysis. The paper's focus should be on analysis, with industry description provided to support that analysis. A common mistake is too much description, too little analysis. Do not choose a situation from a case reading from this or another class. Do not revise a paper you wrote for another course as a project without discussing it with me -- it would have to be a new paper to be approved. This project is intended for you to perform hands-on strategic analysis. If you were handed a project to analyze a strategic situation by the CEO of your company, what would you hand back?
When you have collected a great deal of information and begun to rough out your topic, run through this list of tools and ensure that either they are used well, or aren't relevant.
o Five Forces
- Entry barriers, rivalry usually, but not always, the most significant
o Complements
o Differentiation
- Is one dimension enough?
o Cooperation
o Pricing
o Market segmentation
o Rivalry
o First mover advantages and disadvantages
Format your assignment according to the following formatting requirements:
o The answer should be typed, using Times New Roman font (size 12), double spaced, with one-inch margins on all sides.
o The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
o Also include a reference page. The Citations and references must follow APA format. The reference page is not included in the required page length.