Markets and Competition

2nd Term – January/February 2019

Instructor: Fátima Barros

Short Biography:

Fátima Barros is Associate Professor at CATÓLICA-LISBON School of Business & Economics. From May 2012 to
August 2017 she was President of ANACOM- Autoridade Nacional de Comunicações, the Portuguese regulatory
authority for electronic communications and postal services. In 2015 she was Chair of BEREC - Board of European
Regulators for Electronic Communications and Vice-Chair in 2014 and 2016.
Fátima Barros obtained a PhD in Economics from the Catholic University of Louvain (Belgium) and London School of
Economics (UK) and a BA in Economics from the Catholic University of Portugal. From October 2004 till May 2012
Fátima Barros was the Dean of CATÓLICA-LISBON and Associate Dean in the period 2001-2004. From 1998 to 2001
she led the Car Distribution Research Center at CATÓLICA-LISBON. She also coordinated several Executive Education
Programs for the Car Distribution Sector and for Economics of Regulation and Competition. She has published several
scientific articles in leading journals like European Economic Review, International Journal of Industrial Organization and
Journal of Economics and Management Strategy. Her research interests are in industrial organization, strategy,
competition policy and regulation.
As Dean of CATOLICA-LISBON Fátima Barros was member of the Board of EFMD-European Foundation for
Management Development (Belgium), member of the EQUIS Accreditation Committee (Belgium), member of the Board
of AACSB and member of the AACSB Maintenance Accreditation Committee (USA). She was also member of the
Durham Business School’s Advisory Board (UK), member of the Audencia Management School’s Board (France),
member of the Advisory Board of HEC Lausanne, University of Lausanne, (Switzerland) and member of the Board of
Trustees of Fundação Don Cabral (Brazil). Currently she is member of the International Advisory Board of ESCP-Europe
in France.

In 2011 she was appointed President of the Special Committee for the Privatization of EDP. Currently she is Non-
Executive Director of Banco BPI/Grupo Caixabank, BRISA Concessão Rodoviária, Supervisory Board of Warta (Poland)
and Fundação Francisco Manuel dos Santos; she is also member of the Committee on Corporate Governance and
Corporate Responsibility, at Jerónimo Martins SGPS.

Contacts: fbb@ucp.pt, Office hours: to be announced

COURSE AIMS

Markets and Competition is a business economics course that focuses on the application of economic principles to key
management decisions within firms. It provides guidance to increase value creation within organizations, and allows a
better understanding of the external business environment in which firms operate. A primary purpose of the course is to
develop tools useful in other MBA subjects: Economics is a key foundation for much of what is taught in courses like
Finance, Marketing and Strategy. Business Economics is fundamentally a way of thinking about problems, issues and
decisions that managers face in each of the functional areas of their organization.

The course is divided into two parts. In the first part it covers traditional topics in microeconomics focusing on the
market forces and the firm’s production process. In the second part the course focuses on the interactions among
market players with an emphasis on the firm's strategic decisions.

LEARNING OBJECTIVES
On completion of this course a student should be able to:

A. Knowledge and Understanding:

 Understand the basic microeconomics concepts for managerial decisions making.

B. Subject-Specific Skills:

 Understand the basic mechanism for firm’s production and pricing decisions
 Understand the functioning of different types of market structures
 Analyse the strategic interactions among the firms in the market
 Compute the market equilibrium solution and apply the Nash equilibrium concept.

C. General Skills:

 Understand the economic environment in which a firm operates and how to think strategically within it.

TEACHING AND LEARNING METHODS

In each class a new topic is introduced and discussed. Practical examples and cases are presented to illustrate the
theoretical approach.
Students are expected to participate actively in the class discussions and to solve the exercises that are assigned in
each session as homework. In the beginning of each lecture the homework problems will be solved in the class.

ASSESSMENT

Grading will be based on the midterm exam, final exam and problem sets according to the following weightings:
 Activity Percentage
Problem Sets (group work) 30 %
Mid Term Exam 30 %
Final Exam 40%

COURSE CONTENT
List the main topics covered in the course:
Topics Readings
Introduction - Baye (2013), chap 2.
1 Market Forces: Demand and Supply

2 Demand Function and Elasticity - Baye (2013), chap 3.

3 The Production Process and Costs - Baye (2013), chap. 5.

4 The Nature of Industry - Baye (2013), chap. 7.

Managing in Competitive and Monopolistic - Baye (2013), chap. 8

5 Markets
Mid-Term Exam
Managing with Strategic Interactions: Oligopoly - Baye (2013), chap. 8 (294-300) and
6 Models chap. 9.

7 Product Differentiation - Baye (2013), chap. 7.

8 Games and Strategic Behavior. - Baye (2013), chap. 10.

9 Pricing Strategies with Market Power - Baye (2013), chap. 11

10 Strategic Entry Barriers Baye (2013), chap.13

- Besanko et. al (2017), chap.10
Final Exam
 BIBLIOGRAPHY

Required Textbook:

- BAYE,M.R. and J. PRINCE (2017), “Managerial Economics and Business Strategy”, 9th Edition, McGraw Hill

Other useful readings:

- BESANKO, DRANOVE, SHANLEY and SCHAEFER (2017), “Economics of Strategy”, 7th Edition, Wiley.

- ALLEN, WEIGELT, DOHERTY & MANSFIELD, (2013) “Managerial Economics”, 8th Edition, Norton.

RESOURCES

Other materials, such as slides for the lectures, cases for discussion in class, problem sets will be available in the course
site.

GENERAL REMARKS

Policy on Problem Sets, Mid-Term and Final Exams

 2 Problem Sets will be handed out during the term. Group work with up to 4 students in each group.
Students may discuss problem sets and work out solutions together, however: ALL identical write-ups on problem
sets will be given "0" credit.

 Problem sets are designed to help you learn how to apply the material presented in lectures. Make sure you try all
of the exercises in the problem sets yourself and understand the solutions in detail -- the final exam will contain
problems very similar to homework problems.

 Handwritten solutions are fine, as long as they are legible and neat.

 In fairness to students who complete assignments on time, late homework sets will not be accepted. You may
turn in assignments during the lecture on the day they are due.

 Mid-Term and Final Exams: With the exception of a single formula sheet that is permitted, the exam is closed
book and notes.
Student Conduct

 Please try to sit in the same seat in every lecture and display a legible name card at all times.
 Minimizing Disruptions: All smartphones, laptop computers (except if used for slides display or to write notes)
and other devices should be turned off during class.
 Being Prepared for Class: You should be ready to discuss any assigned readings and to answer any assigned
questions for each day's class.