Economía III (BBA60003)

General information

Type:	BAS	Curs:	2	Period:	S semester
ECTS Credits:	6 ECTS

Teaching Staff:

Group	Teacher	Department	Language
Sec: A	Anna Laborda Coronil	Economía, Finanzas y Contabilidad	CAT

Group	Teacher	Department	Language
Sec: B	Anna Laborda Coronil	Economía, Finanzas y Contabilidad	ESP

Group	Teacher	Department	Language
Sec: C	Anna Laborda Coronil	Economía, Finanzas y Contabilidad	CAT

Workload distribution for the Industrial Organisation block:
Lectures: 22.5 hours
Participatory sessions: 7.5 hours
Independent study: that corresponding to the number of hours/credit

Workload distribution for the International Economics block:
Lectures: 21 hours
Participatory sessions: 6 hours
Independent study: that corresponding to the number of hours/credit

The Economics III course is part of the Economics component of the undergraduate degree programme and thus makes the following contributions along with the Department's other courses:

1) Develop students' analytical skills, mental agility and critical outlook with regard to a company's problems and economic relationships with its environment.

2) Provide the highest level of professional training and the necessary information for future executives or managers.

Upon successfully completing this course students will:

1) Have acquired the necessary knowledge and tools to analyse and interpret reality from an economic perspective;
2) Have studied the principal subjects of Industrial Organisations and International Economics and seen how the discipline's theoretical models enable us to analyse these; students will also have analysed real case studies in these fields;
3) Be capable of critically developing different approaches, decisions and microeconomic and macroeconomic policies, while bearing in mind issues related to social responsibility. They will also have learnt to apply Games Theory to analyse the strategic actions companies carry out in competitive environments.

Based on these global aims, we will develop a a series of specific objectives during the course regarding a number of competencies:

A. Introduce reference frameworks, theories and tools accompanied by the key information for their use in the analysis of scenarios/case studies and the proposal of measures/solutions for their improvement.
B. Facilitate the definition of concepts, theories and/or models; recognise the general relevance of the aforementioned concepts for the analysis of scenarios/case studies and the proposal of solutions and/or research.
C. Promote the integration and structuring of the knowledge acquired in this course through specific assignments designed for this purpose.
D. Promote a critical attitude in the analysis of reality and during discussions with other students.

7. Comprehension of the complexity of the local and global contexts

4. Conveying information and/or knowledge

1. Market Power I. Imperfect competition - static view: The difference between price and quantity competition in Cournot¿s and Bertrand¿s models when making simultaneous decisions in time. Language is important because this topic will serve to introduce Games Theory. We will also discuss the different solutions both models provide in terms of equilibrium and well-being. We will emphasise the differences in applying these models in both homogenous and highly differentiated settings. II. Imperfect competition - dynamic view: In this section we will focus on sequential decision models which give place to the rise of market leaders (Stackelberg). We will examine different versions (1 follower, more than one follower, free entry, etc.) until reaching monopolistic competition.

2. Sources of Market Power I. Product differentiation: Horizontal (Hotelling) and vertical (¿quality choice¿). II. Advertising strategies: cross-effects between advertising and demand. Advertising and competition: persuasive vs. informative advertising. III. Consumer inertia: the impact of search costs and consumer choice on company strategy.

3. Pricing Policies and Market Segmentation I. Review of second and third-degree discrimination: the role of obstacles. II. Practices depending on the type of consumer: two-part fees, flat fees, discounts, demand points. III. Intertemporal price discrimination: differences depending on if the good is durable or not, if demand is uncertain or not and if the capacity is flexible or not. IV. Bundling: differences with respect to the ¿menu¿; between pure and mixed bundling; extensions; bundling as a means to intensify competition.

4. Product Quality and Information I. Asymmetric information: asymmetric information and the corresponding problem. The difference between a hidden-action problem and a hidden-feature problem. Markers, concept; types of markers (price, advertising, examples from other markets such as jobs and studies). II. Other tools to reduce information asymmetry (I): Guarantees/warranties: on what types of products? In what situations? Do they work in an oligopolistic setting? Relation between guarantees and internal investment in quality assurance (possible case: the new car market) III. Other tools to reduce information asymmetry (II): Branding: building reputation based on quality. Umbrella branding or how to extend reputation to other company products.

5. Competitive Strategies I. Cartels and tacit collusion: What¿s a cartel? Tacit collusion and its instability. Conditions that favour cartel stability. The fight against collusion and the difficulty in detecting it. II. Strategic entry barriers: investments in productive capacity and others that affect costs; strategies that affect demand variables (brand proliferation, change costs, etc.). III. Strategic commitments and credibility: the advantages of reducing the number of choices. The strategy of burning one¿s boats. Commitments that increase/reduce company aggressiveness.

6. Introduction to Exchange Rates I. ER essentials. II. ER in practice. II. FX market. IV. Arbitrage.

7. Exchange Rates I: Monetary Approach (Long-Run) I. Law of one price and purchasing power parity II. The money market: What is money?; central banks' conventional and unconventional monetary policies. III. Monetary and exchange rate regimes.

8. Exchange Rates II: Asset Approach (Short-Run) I. Uncovered interest parity condition and the FX market.

9. ER III: Unifying the Short and Long-Run Theories I. Overshooting. II: Fixed exchange rate regimes. III. Trilemma.

10. National and International Accounts I. BoP accounting. II. The current account. III: Net international investment position. IV: Net foreign asset position and current account imbalances

11. Output, Exchange Rate and Macroeconomic Policy (I) I. Demand in the Open Economy. II. Goods-market equilibrium. III. Goods and FOREX equilibria: IS curve. IV. Money market equilibria: LM Curve V. Short-run IS-LM-FX model of an open economy. VI. Stabilisation policy: Case study Bolivia, Chile and US

ASSESSMENT BREAKDOWN

Short Bibliography:

Industrial Organisation block:
For this component we will follow the basic lines found in:
- Belleflamme&Peitz Industrial Organization Markets and Strategies, Cambridge Univ. Press, 2010 (The level of this text may make it impossible to use as the textbook for this block. In this case, faculty will refer to material posted on the Moodle platform as well as other texts which are more approachable, including the following:
- Pyndick & Rubinfeld, Microeconomía. Intermedia, Prentice Hall (version in English available).
- Dixit & Nalebuff, Pensar estratégicamente, Antoni Bosch, ed. (version in English available)
- Tarziján & Paredes Organización industrial para la estrategia empresarial, Prentice-Hall.)
We should highlight here that students are responsible for checking Moodle on a regular basis to stay abreast of any changes or new material, downloading them as necessary. This material in no way aims to be exhaustive; they will have to be complemented with class notes.

International Economics block:
Feenstra, R. and A. Taylor (2009) International Macroeconomics, New York: Worth Publishers.
Additional bibliography or material:
Faculty will provide additional readings (academic or journalistic articles) for each topic. In addition, these are other textbooks students might find useful:
- Krugman, Obstfeld and Melitz (2011), 9th edition, International Economics: Theory and Policy, Pearson.
- Obstfeld, M. and K. Rogoff (1996) Foundations of International Macroeconomics, Cambridge: MIT Press.

Lastly:
We will post the syllabus, problem sets and solutions, lecture notes and additional readings online via the Moodle platform. You should check the website frequently for new updates. YOU ARE RESPONSIBLE for downloading all class materials, handouts, and readings for a session.

The website also contains a discussion board, where faculty will occasionally post messages with answers to frequently asked questions or send email notifications. Note also that the lecture notes posted on the website are meant to be a supplement to the notes you take in class, and that they are a very poor substitute for class attendance.

Group	Teacher	Department
Sec: A	Anna Laborda Coronil	Economía, Finanzas y Contabilidad

Group	Teacher	Department
Sec: B	Anna Laborda Coronil	Economía, Finanzas y Contabilidad

Group	Teacher	Department
Sec: C	Anna Laborda Coronil	Economía, Finanzas y Contabilidad