Управленческая экономика


Maxim A. Storchevoy, Senior Lecturer

Graduate School of Management, St.Petersburg University



6,0 ECTS, 45 contact hours





Aim of the Course:

The course goals are:


  1. Learning to use marginal analysis in managerial decisions. Finding optimal distribution of resources, optimal prices and quantities.
  2. Learning various market structures with an emphasis on imperfectly competitive markets.
  3. Learning factors and strategies of getting competitive advantage and earning extra profit in imperfectly competitive markets: price discrimination, product differentiation, advertising, R&D, etc.


Upon completion of the course, the student will be able to understand the economic background for making strategic decisions and analyze markets and behavior of market players to support decision-making process in companies.

Course Content:

Topic 1. Introduction to Managerial Economics

Key points:

  • Economics, Management and Managerial Economics
  • Industrial Organization and Strategic Management
  • Value, cost, surplus
  • Opportunity cost and economic profit
  • Individual optimal choice
  • Marginal functions
  • Optimal level of an activity
  • Optimal allocation of a resource


Topic 2. Demand and Costs

Key points:

  • Demand curve
  • Consumer surplus
  • Elasticity of demand
  • Individual and market demand
  • Fixed, sunk, avoidable, and variable costs
  • Economies of scale and scope


Topic 3. Perfect Competition and Monopoly
Key points:

  • Characteristics of perfect competition
  • Supply curve and market equilibrium in short run
  • Supply curve and market equilibrium in long run
  • Monopoly and its origins
  • Positively sloped marginal revenue
  • Maximum profit
  • Efficiency comparisons of competition and monopoly


Topic 4. Price Discrimination

Key points:

  • Uniform versus non-uniform pricing
  • Feasibility of price discrimination
  • Third degree price discrimination
  • Third degree price discrimination for differentiated products
  • First degree price discrimination
  • Two-part tariffs and block pricing
  • Idea and prevalence of volume discounts
  • Second degree price discrimination
  • Incentive compatible pricing schemes


Topic 5. Oligopoly: Prices and Quantities

Key points:

  • Simultaneous (normal) and sequential (extensive) form games
  • Dominant and dominated strategies
  • Nash equilibrium as a solution concept
  • Oligopoly models
  • The simple Cournot model
  • The Bertrand Model
  • Strategic substitutes and complements
  • Simultaneous vs. sequential games
  • Stackelberg model
  • Credibility and credible commitments


Topic 6. Oligopoly: Entry and Exit
Key points:

  • Predatory conduct and credible threats
  • Limit pricing in Stackelberg models
  • Predation pricing in Stackelberg models
  • Extensive form games
  • Subgames in extensive form games and subgame perfection
  • Capacity expansion as a form of credible commitment
  • Predatory pricing
  • Role of contracts in impeding entry into a market


Topic 7. Product Differentiation

Key points:

  • Vertical and horizontal price differentiation
  • Demand for characteristics model
  • Spatial model of product differentiation (Hotelling)
  • Duopoly: choice of price and choice of location
  • Monopoly: choice of number of stores


Topic 8. Bundling and Tie-ins.

Key points:

  • Product quality: demand and cost considerations
  • Product tie-ins and commodity bundling
  • Bundling as a way to price discriminate
  • Pure and mixed bundling
  • Bundling: graphical analysis
  • Tie-in: definition, types and pricing


Topic 9. Network Effects.

Key points:

  • Network effects: definition
  • Demand curve under network effects
  • Two equilibriums
  • Pricing in the new market
  • Battle of standards
  • Excess inertia and excess momentum
  • Compatibility problem


Topic 10. Investments in Advertising and R&D

Key points:

  • Information vs. persuasive advertising
  • Wasteful persuasion
  • Unbranded products
  • Advertising: demand and costs considerations
  • Types of innovations, market structure, and competition in R&D
  • The Schumpeterian hypothesis
  • Competition via innovation


Topic 11. Antitrust Regulation

Key points:

  • Measures of market structure: concentration curves and ratios, Herfindahl index
  • Measures of market power: Lerner index
  • Optimal pricing for natural monopoly
  • Merger and acquisitions regulations
  • Collusion regulation


Teaching Methods:

Lectures, case studies, group work, exercises, home and class discussion and assignments.


Course reading:

  • Church J., R. Ware. Industrial Organization: A Strategic Approach. McGraw-Hill. 2000.
  • Cabral L. Introduction to Industrial Organization. MIT. 2000.
  • Pepall L., D. Richards, G. Norman. Industrial Organization: Contemporary Theory and Empirical Applications. 4th ed. Blackwell Publishing. 2008.
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