Prof John Sutton and Prof David De-Meza

This course is compulsory on the MSc in Management and Economics. This course is available on the MPhil/ PhD in Management. This course is not available as an outside option.

A graduate course in microeconomic analysis, geared towards those parts of the subject that are of primary importance in the Management area. The first section focuses on competition between firms, using standard game theoretic models. This leads to a general treatment of market competition by reference to the concept of firms' capabilities. The next section traces the basis of firms' capabilities to the set of elements of know-how possessed by the individuals comprising the firm, and by the mode of internal organization of those individuals. The analysis draws on the several strands in the modern literature on the theory of the firm. The final section of the course deals with the link between strategy and structure, and with the formulation of strategies in environments characterized by complexity and uncertainty.

The course syllabus covers Walrasian Equilibrium: Supply and Demand. Beyond the Walrasian model: Nash Equilibrium. Applications of Nash Equilibrium: options and bargaining. General approaches to the analysis of competition in oligopolistic markets. Applications in Industrial Organisations. The concept of capabilities. The roots of firms' capabilities : individuals and their collective know-how. The internal organization of firms. Contract theoretic approaches to the theory of the firm. The Chandlerian nexus: from strategy to structure.

20 hours of lectures and 20 hours of seminars in the MT. 20 hours of lectures and 20 hours of seminars in the LT.

A weekly seminar devoted to problem sets. A weekly seminar devoted to case studies.

Milgrom and Roberts, Economics, Organization and Management; Sutton, Sunk Costs and Market Structure

Exam (100%, duration: 3 hours) in the main exam period.