Firms and Markets
Assignments
!
Problem Set 1 (Solutions)
(1)
Demand and Supply basics
For each of the following, use a supply and demand diagram to deduce the impact of the
event on the stated market in terms of both price and quantity.
(a) Event: Cold f

Problem Set 4 (Competition and Cooperation)
(1) The Giant Corporation
You are a small firm in a market which is dominated by Giant Corp. which has 75% of the market.
Your current challenge: to decide whether to expand your capacity. If you dont, you expec

In this document, I will provide a basic overview of a perpetuity and an annuity.
Perpetuity
You are going to receive k dollars every year starting one year from now, forever. The question
we want to answer is What is the present value of the Perpetuity?

Firms and Markets
Supply and Demand
Professor Christopher A. Neilson
Summer 2015
Overview
Questions:
How are market prices determined?
What drives changes in market price?
Concepts:
Demand curve
Supply curve
Equilibrium
Shifts in supply and demand
Ec

Firms and Markets
Consumer Demand Elasticity
Professor Christopher A. Neilson
Summer 2015
Demand elasticity
How sensitive is demand to price, consumer income, or the prices of
competing products?
If I increase my price by 2% next month, how will that af

Firms and Markets
Competitive Markets Review
Professor Christopher A. Neilson
Summer 2015
Outline
Perfect competition
Assumptions?
Dynamics: short-run and long-run analysis
Competitive market equilibrium
Market equilibrium (P*, Q*): intersection of su

Firms & Markets (Fall 2015)
Assignments (Blocks 2&4)
Homework Assignment #1
A. Math review:
1. Linear equations: Solve the following system of linear equations:
x = 10 2 y
y=x+4
2. Quadratic equations
a) Knowing that p>0, determine the solution to the equ

Firms & Markets, Fall 2015
Syllabus, Outline, and Calendar
COR1-GB.1303, Firms and Markets
Prof. Lawrence J. White
Fall 2015
Office: KMEC 7-65
Class sessions: T/Th 9:00-10:20am, KMEC 2-70 (Block 4)
212-998-0880
T/Th 1:30-2:50pm, KMEC 2-65 (Block 2)
Lwhite

Firms & Markets
Blocks 2 & 4
Fall 2015
Lawrence J. White
Review: Basic demand & supply
September 8
1
Overview
Demand
Including elasticities
Supply
Including elasticities
Equilibrium
Changes
in equilibrium
Effects of
Price ceiling
Sales tax
2
Dema

Firms & Markets (Fall 2015)
LJW Class Notes Sept 3
Introduction; key concepts
Major themes:
- The assumption of maximizing, more, for individuals and for enterprises
- Equilibrium in markets and transactions
- The implications of market power and its abse

Firms and Markets
Game Theory
Professor Christopher A. Neilson
Summer 2015
Overview
Context: strategic decision making
Suppose youre in an industry with just a few competitors and are
considering cutting your price.
Do you think your competitors will m

Firms and Markets
Consumer Demand
Professor Christopher A. Neilson
Summer 2015
Overview
Questions:
Where does the demand curve come from?
How sensitive is demand to price?
How important is the pricing of competing products?
Concepts:
Utility functio

Firms and Markets
Asymmetric Information
Professor Christopher A. Neilson
Summer 2015
Overview
Context: You want to reward good performance by a subordinate, but
he has a better idea of what that performance is than you do. What
should you do?
Concepts:

Basic Differentiation Formulas
In the table below,
and
Derivative of a constant
Derivative of constant
multiple
Derivative of sum or
difference
(
)
(
represent differentiable functions of
We could also write
, and could use
the prime notion in the other f

Firms and Markets
Assignments
!
Problem Set 2 (pricing)
(1) MelCos Xamoff
The global pharmaceuticals giant, MelCo, has had great success with Xamoff, and over-thecounter medicine that reduces exam-related anxiety. A patent currently protects Xamoff
from c

Firms and Markets
Assignments
!
Problem Set 0: Math Review Questions
(1) Linear equations
Solve the following system of linear equations:
x = 10 2 y
y=x+4
Answer:
Substituting the second expression into the first one gives us:
x = 10 2 (x+4) = 10 2x 8
3x=

Firms and Markets
Introduction
Professor Christopher Neilson
Summer 2015
Christopher Neilson
Background:
PhD in Economics, Yale University
Undergrad and Business/Economics at University of Chile
3 years at Central Bank of Chile, personal aide/advisor to

Firms and Markets
Price Competition
Professor Christopher A. Neilson
Summer 2015
An experiment
Two firms sell an identical product
Cost of product is $5
There is a single buyer in the market:
Willing to pay up to $10 for the good
Has no brand loyalty

Firms and Markets
Costs
Professor Christopher A. Neilson
Summer 2015
The supply curve
Supply curve: a representation of the relationship between the price of
a good and the quantity supplied.
Price on vertical axis, quantity on
horizontal axis
At any g

Firms and Markets
Monopoly Pricing
Professor Christopher A. Neilson
Summer 2015
Overview
Context:
Market power means firms face a tradeoff between price and quantity:
to sell more, they must charge less.
What price should they set?
Should they simply

Firms and Markets
Cooperation
Professor Christopher A. Neilson
Summer 2015
Electric turbine generators
1950s: three producers of large electric turbine generators in the US
General Electric, Westinghouse, and Allis-Chalmers (AC)
Bids formally solicited

/—‘\/
Journal ofManagemenl
l99l. Vol. 1'). Nu 1.99420
Firm Resources and Sustained
Competitive Advantage
lay Barney
Texas A&M Unitersitr
Understanding sources of sustained competitive advantage has be-
come a major area of research in strategic management