Managerial Economics applies economics and decision sciences to solve management problems and to determine optimal courses of action for decision makers. This course provides an introduction to powerful tools and approaches for managerial decision-making.

In particular, the course will cover the fundamentals of economic and game-theoretical analysis as it applies to managerial decision-making problems. Game Theory is a structured way of analyzing strategic interactive situations.  It is basic to the understanding of market competition among large firms, the designing of incentive contracts, bidding at auctions, bargaining, and other similar problems central to economics and business. The course covers different types of games and solution concepts. It is organized around applications: markets, negotiations, cooperation, coordination, auctions, etc.

On successful completion of the course, you should be able to:

• - demonstrate a basic understanding of game theoretical tools and solution concepts,
• - analyse strategic managerial decision situations and the incentives of actors therein, and to derive predictions about likely economic behavior,
• - evaluate and analyse data of actual decisions made in strategic situations, and derive conclusions,
• - present and discuss findings from that strategic analysis and evaluation of actual decisions, and
• - work collaboratively to complete a task.

Full attendance at all meetings is expected. Many relevant concepts, examples and applications will be discussed which may not be included on the lecture slides.If you cannot attend a lecture or meeting due to exceptional/unforeseeable circumstances, please contact the lecturer.
Exceptionals/unforseeable circumstances are sickness, accidents, death of a close relative, and similar events. Please inform the lecturer as soon as possible and provide a doctor's note in the case of sickness. Job related circumstances are not a valid reason to not attend class.
If you should have a course collision, which occurred before or after registration, please contact us immediately and the lecturer will decide each individual case.

Through making decisions in classroom experiments, at the end of each meeting, you will experience many different managerial decision situations first hand. This trains your empathy, strategic thinking, and social interaction skills.

After the lecture, descriptions of the situations (experimental instructions), anonymized data sets containing the decisions of participants, and a number of questions on each experiment will be posted online. The questions guide you in the analysis of the situations and data. Analysing the situations and your own decisions with formal and informal tools lets you practise logical thinking, sharpens your economic intuition, and improves your knowledge about managerial and economic behaviour. Analysis can be done individually or in groups of up to 3 people.

At the beginning of each class, a number of students will be (more or less randomly) selected to present their analysis. Presentations are individual (and individually marked), each student is expected to be able to present on each question. Presenting your results in class improves your structuring and communication skills.

Presentations are followed by (moderated) group discussions involving all students in class. You will learn from each other and train your argumentation and discussion skills.

Necessary game theoretical background will be provided to you in lecture form. Lecture slides will be posted online after class. Understanding the economic theory will give you more insight into strategic behaviour, and improve your analytical skills.

Assignments, oral presentations and participation in group discussions (20%)

Assignments will be given in each class. At the beginning of each class, several students will be asked to analyse the strategic situations they experienced at the end of the last class, and to discuss the actual behaviour of students based on collected decision data. This is followed by a group discussion. Marking is done continuously based on content and style of presentation and discussion.

Additionally, students are expected to write a short blog post after each class on real-world examples of the discussed strategic situations.

Written assignments (2 x 15%)

Two assignments will be marked in written form. This will be announced by the lecturer when giving out the assignment.

Final exam (50%)

The final exam will cover the entire course. The exam will include some questions which test pure knowledge, and other questions which require to apply knowledge to new situations, very similar to the regular homework assignments. In particular, students will be provided with a description of a strategic situation, and a summary of decision data collected in an experiment on this situation. Students will be asked to summarise the essential strategic properties of the situation, to describe the individual incentives of players, to make predictions about behaviour based on justified assumptions, to compare those predictions with the decision data and to discuss potential discrepancies.  Marking in the final exam will be based on proficiency in applying game-theoretic tools, as well as logic and justification of arguments.

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Resources available to students consist of:

- Classroom experiment instructions – will be provided in each class

- Collected decision data – will be provided online after experiments

- Lecture slides – will be provided online after class

There is no prescribed/required textbook, because pricing for textbooks is outrageous and all the necessary information can also be found online in various forms. However, the textbook that comes closest to this course in terms of content and level is:

Avinash K. Dixit, Susan Skeath, and David Reiley, Games of Strategy. 3rd edition. W.W. Norton and Company, 2010. http://www.amazon.com/dp/0393117510/ You can use any version of this textbook. The paperback of the 3rd edition seems to be currently the cheapest.

Other suggested books include:

- Charles A. Holt: Market, Games & Strategic Behavior. Addison Wesley, 2006. http://www.amazon.com/dp/0321419316/

- Avinash K. Dixit and Barry J. Nalebuff: Thinking Strategically: The Competitive Edge in Business, Politics, and Everyday Life. W. W. Norton & Company, 1993. http://www.amazon.com/dp/0393310353/

- Adam C. Brandenburger and Barry J. Nalebuff: Co-Opetition : A Revolution Mindset That Combines Competition and Cooperation : The Game Theory Strategy That's Changing the Game of Business. Doubleday Business, 1994. http://www.amazon.com/dp/0385479506/

- Tim Harford: The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor--and Why You Can Never Buy a Decent Used Car! Random House, 2007. http://www.amazon.com/dp/0345494016/