Industrial Economic Analysis

Microeconomic analysis of consumer behavior; cost of production and competitive supply; analysis of competitive markets; pricing with market power; monopolistic competition and oligopoly; government interventions and welfare analysis; partial and general equilibria, market failures, externalities, game theoretic concepts. Using mathemematics to solve microeconomic problems.

Position and function within the study program: The course is compulsory in the 3. year of the MTIØT program. The course shall contribute to fulfilling learning objective 2.3 in the detailed list of learning objectives for MTIØT, where broad and sound basic knowledge in administrative and economic areas are demanded. The course will provide knowledge to understand theory, models, methods, and concepts within microeconomics and game theory to explain and predict the behavior of consumers, producers and other economic agents (such as governments) that participate in and influence markets and market outcomes (prices and quantities). By the end of the course, the students should be able to use theory and quantitative methods from microeconomics and game theory to: 1. explain, analyze and predict consumer behavior under conditions of certainty and uncertainty (under different risk attitudes) and implications for individual and market demand for goods; 2. calculate the minimal cost input factor quantities for a firm and optimal selling prices, supply quantities and resulting profits of firms in different market structures (including perfect competition and various forms of imperfect competition, like monopolies, oligopolies, and monopolistic competition); 3. analyze the interaction between consumers and firms, apply the concept of market equilibrium and calculate welfare measures such as consumer surplus and social welfare; 4. perform supply and demand analysis in input factor markets with varying market structures; 5. discuss and describe various forms of market failures and analyze and predict consequences for the market equilibria and social welfare; 6. discuss and explain the role of the government in the economy, and analyze and predict the effect of government measures (policies, taxes, etc.) on market prices and quantities, social welfare, and economic efficiency; 7. explain strategic behavior of market participants, such as cartelization and other forms of cooperative and noncooperative collaborative behavior, and apply concepts such as dominating strategies to determine Nash Equilibria in small games; 8. Use general equilibrium analysis to explain and analyze markets for different goods simultaneously, and explain the consequences of government measures and international trade on the market equilibrium and social welfare. The course shall stimulate, facilitate and contribute to: - the development of economic intuition; - the ability to distil the important (economic) characteristics from a case description; - the ability to translate a case description into a logical, meaningful quantitative problem that can be solved numerically, and which solution provides specific decision support addressing the problem(s) sketched in the case description. - the ability to use economic concepts and quantitative methods to support economic decision making and giving sound strategic advice to firms operating in the real world.

Lectures and weekly exercises. Some guest lectures. Exercises will be evaluated and a minimum number of points must be gathered to qualify for the exam.