Boston University Questrom School of Business

PL730: Economics and Management Decisions, Spring 2023

Information About the Class

Course Objectives

PL730 introduces economic frameworks for business analysis and decision-making. The ideas and skills you learn in this course will be the foundation for core courses in finance, strategy, marketing, and operations, as well as for many other classes (ranging from organizational behavior to information technology to health sector management to sustainability to public policy). Mastering the concepts we introduce will also help you perform better in job interviews and build your career after graduating from Questrom.

The main theme of this course is that successful managers must be concerned with making profits, and profitability depends upon a clear analysis of economic fundamentals: demand, costs, and competition.

In PL730, you will learn to

1. Set optimal prices using data-based models of your customers. Topics include

1. Marginal revenues, marginal costs, and optimization
2. Simple and advanced pricing strategies
3. Profits, surplus, and value creation

2. Build data-based cost models of your operations. Topics include

1. Average, marginal, fixed, and sunk costs
2. The difference between economic costs and accounting costs
3. Economies of scale and economies of capacity utilization

3. Analyze the competitive environment. Topics include

1. Strategies and outcomes in highly competitive markets
2. Strategies and outcomes in less competitive markets
3. Nash equilibrium, prisoner’s dilemma, and adverse selection

This is an applied course for managers, so we emphasize practical applications using examples, simulations, and problem-solving. Behind each of our specific applications are two very powerful analytical frameworks you can use to think through almost any management problem you might encounter.

The first of these frameworks is marginal analysis. This is essentially a way of assessing the costs and benefits of any action to achieve the “optimal” outcome. We introduce marginal analysis in the first half of the course. The second framework is equilibrium analysis.  We introduce this in the second half of the class. Equilibrium analysis is a tool for analyzing the feasibility of strategic choices. As you will see, it is central for predicting the trajectory of highly competitive markets, but we will also use it—in the form of game theory—to understand less competitive markets and settings with uncertain and imperfect information.

Required Materials

• Materials posted on Blackboard.
• A laptop and internet capable of supporting Zoom calls.
• A student subscription to MobLab, a website for economic simulations (details below).  This is the only required material that costs you money: $25.00 per student.  You need to sign up before the first class.

You will notice that there is no required textbook for this class. In place of a standard text, we have written detailed notes and problems that set forth the key material for each class. These readings are shorter, more management-focused, and more interesting than standard managerial economics textbooks. We have tailored them to cover just the material that we think is most important for you to master for important managerial decisions. They are also free to students.

The notes will refer you to valuable supplemental materials. For those who like to learn from videos, we have provided links to some in each of the notes. The notes also contain links to blogs, articles, and other material that allow you to dive deeper into subjects that interest you.^[1]

Performance Evaluation

Your grade will be determined as follows:

It is the policy of the school that for required classes, the total of A and A- grades do not exceed 40% of the class. Grades of C+, C and C- are also legitimate passing grades.

Preparing for Class and Class Etiquette

You will get the most out of class if you do the readings and try the practice problems before class.

Because we will have laptops and phones in the classroom, you may be tempted to surf the web, look at social media or otherwise distract yourself during class.  Distraction is one of the current technological era's core economic and social issues.  Out of respect for your education and for your peers, I ask that you resist this temptation.  Learning to resist distraction is a key professional skill these days.  Allowing yourself to get distracted is unprofessional, and it will significantly diminish the benefits and enjoyment you get from the class.

Class Participation

Class participation is assessed in two ways.  First, we will track your contributions in class.  Secondly, we will assess the quality of your answers to the “exit ticket” questions at the end of each class.  These questions ask you to write briefly about questions raised, key takeaways, or other reflections from class.  Answering these questions is optional, but they are a proven learning tool and a meaningful way to participate in class.   Whether or not you fill out the reflection questions, you must submit an exit ticket form on the day of the class for participation credit. The link to the exit ticket form is here.

Exams

The syllabus gives dates for the midterm, final exams, and related review sessions. The exams are designed to help us assess your mastery of the analytical frameworks. The problems at the end of the readings, as well as other practice problems we distribute, will help you prepare for the exams.  You should also use them to help gauge your progress.

Studying Economics in the time of Covid

We are studying economics during a worldwide pandemic.  Wherever possible, we will use our class time to discuss how economic ideas and reasoning can help you understand the social impact of the virus.  

Effective classes, however, must also be safe classes.  Absent some unexpected biomedical miracle, I will wear a mask during class.  Whether or not you choose to do so, please follow the COVID guidelines that BU issues carefully. The latest information is here.

Some of you may have to miss classes because of Covid or for other reasons.  If you have to miss class, please let me know.  The best way to make up for missed classes is by having classmates take notes for you and watching the class echo capture video.  If you need extra explanations for classes you missed, please contact the TA or the professor.

Accommodations for Special Needs

We support accommodations for students with special needs. Any student who needs or thinks they need academic accommodations must contact the Office of Disability Services and arrange a confidential appointment with a staff member. Accommodation letters must be delivered to me promptly (if possible, at least two weeks before any major examination). Accommodations are not permitted without an official letter of accommodation.

Diversity, Respect, Professionalism

PL730 is about managerial decisions that require the interpretation of facts and evidence.  Good decisions also require a sensitivity to ethics, identity, and culture. We are a very diverse student body, and one of the strengths of a BU education is sharing our varied personal experiences and perspectives—especially as they relate to the course content. Even when we disagree with one another, we have a shared responsibility as classmates and professionals to keep the class environment open to and respectful of diverse experiences and perspectives.  Sexual harassment, on or off campus, is contrary to these values and also violates BU policies.^[2]

Academic Misconduct:

BU School of Management defines academic misconduct as follows:

Academic misconduct is conduct by which a student misrepresents his or her academic accomplishments or impedes other students’ opportunities of being judged fairly for their academic work. Knowingly allowing others to represent your work as their own is as serious an offense as submitting another’s work as your own.

We take academic misconduct seriously and expect students in PL730 to uphold this standard.

MobLab Sign up:  IMPORTANT DO THIS BEFORE FIRST CLASS!!!!

The online simulations we will use in this class are all from a startup called MobLab.  Please sign up and pay the $25.00 in BEFORE the first class.  Instructions for signing up are on Blackboard.  Alternatively, you can browse to www.moblab.com and sign up using your BU email address and the class code: pe3ve3sy3

Help me get to know you

To help me get to know you, can I ask you all to please fill out the Tell Me About Yourself Google form here?  It’s a very quick survey but it really does help me understand who you all are so that I can teach you better.  Also please upload a copy of your CV in the “Please upload your CV here” assignment under “Course Materials”.  

Here are the Zoom and other links you need for PL730.  

Schedule for PL730: Hariri 310, Tuesday 6:30-9:15pm