Applied Microeconomic for Business
Professor Richard K. Green
Office: 507 Funger
Office Hours: 1-3 Tuesday or by Appointment
This is a course in the application of microeconomic theory to academic business disciplines. As such, it is not a traditional graduate microeconomics course, such as Economics 301. All business disciplines—even management and marketing—contain some economic theory in their literatures. For example, papers in marketing are often applications of industrial organization theory, and papers in management often deal with principal-agency and asymmetric information issues.
The class will contain four requirements: two exams (25 percent each), an 8-10 page critical review paper (30 percent), and a 15 minute presentation, such as one would give at an academic meeting (20 percent).
Texts: (*)-ed readings are required.
1. Introduction to Economic Analysis, by R. Preston McAfee, (an open source principles text downloadable from http://www.introecon.com/). (*)
2. Game Theory for Applied Economists, by Robert Gibbons, Princeton University Press (1992, paperback). ISBN 0-691-00395-5. (*)
3. Identification Problems in the Social Sciences, by Charles F. Manski, Harvard University Press, (1995, paperback). ISBN 0-674-44284-9.(*)
Week 1: Introduction to Optimization and the Robinson Crusoe Economy
Week 2: Optimization and Theory of the Firm
McAfee Chapter 4 and 6
Griliches, Zvi and Jacques Mairesse (1995) Production Functions: The Search for
Identication, NBER Working Paper No.w5067.
Week 3: Industrial Organization I
Borenstein, Severin, Hubs and High Fares: Dominance and Market Power in
Week 4: Theory of the Consumer
McAfee Chapter 5
Laurits R. Christensen; Dale W. Jorgenson; Lawrence J. Lau, Transcendental Logarithmic Utility Functions, The American Economic Review, Vol. 65, No. 3. (Jun., 1975), pp. 367-383
Week 5 Industrial Organization II
Zettelmeyer, Florian, Fiona Scott Morton, and Jorge Silva-Risso (2005) Cowboys
or Cowards: Why are Internet Car Prices Lower?
The Quarterly Journal of Economics, Vol. 84, No. 3. (Aug., 1970), pp. 488-500
Week 6 Topics in Game Theory I
Gibbons Chapter 1
McAfee Chapter 7
Week 7 Exam I
Week 8 Topics in Game Theory II
Gibbons Chapter 2
Shapley, L. S. and M. Shubik (1972) The Assignment Game I: The Core, Interna-
tional Journal of Game Theory, 1: 111-130.
Week 9 Adverse Selection
Gibbons Chapters 3 and 4.
Week 10 Moral Hazard
Week 11 Identification I
James J. Heckman (2000) Causal Parameters and Policy Analysis In Economics:
A Twentieth Century Retrospective, The Quarterly Journal of Economics, 115(1),
Week 12 Identification II
Week 13 Student Presentations of Applied Microeconomic Papers (choose from list)
Week 14 Exam II
Papers to choose from for presentation
Avery, Christopher, Mark Glickman, Caroline Hoxby and Andrew Metrick, A Revealed Preference Ranking of US Colleges and Universities, Working Paper.
Borenstein, Severin and Andrea Shepard (1996) Dynamic Pricing in Retail Gasoline
Markets, Rand Journal of Economics, 27(Autumn): 429-51.
Donohue, J.J. and Steven Levitt, The Impact of Legalized Abortion on Crime." Quarterly Journal of Economics, 2001, 116(2), pp. 379-420.
Gandal, Neil, M. Kende and Rafael Rob (2000) The Dynamics of Technological
Adoption in Hardware/Software Systems: The Case of Compact Disk Players, Rand
Journal of Economics, 31(1): 43-61.
Graddy, K. (1995) Testing for Imperfect Competition at the
Rand Journal of Economics, 26 (Spring): 75-92.
Green RK and MJ White, Measuring the Benefits of Homeowning: Effects on Children, Journal of Urban Economics,
Krugman, Paul, Scale Economies, Product Differentiation, and the Pattern of Trade
The American Economic Review, Vol. 70, No. 5. (Dec., 1980), pp. 950-959.
Mankiw, G and D Weil, The Baby Boom, the Baby Bust and the Housing Market, Regional Science and Urban Economics