BA 511 Applied Microeconomics




Contact Information
Dr. Brian Goff/414 Grise Hall
Phone: 745-3855 / Email:
Office Hours: 9-11 MW 
(I am in my office or on campus most days from around 9-4)

Managerial Economics & Organizational Architecture (BSZ -5th edition; Available via Kindle for ipad, mac, or pc)
(Not Required) From the Ballfield to the Boardroom: Management Lessons from Sports (2006) by Goff 
Drafts of Chapters:  1-Sports & Business; 2-Fundamentals; 3-Markets; 4-People; 5-Information; 6-Games; 7-Innovation/Change; 8-Meddling; 9-Leading                                               
Posted links

Team Assignments  (2)                         40% 
Individual Presentations (1)                  15%   
Reading Summaries/Quizzes                15%
Final Exam                                            30%

Team Assignments/Presentations:  Each assignment provides its own instructions/questions.  You should seek additional sources of information where appropriate.  The assignments are made well in advance, and they are a team effort, so I expect high quality work.  Your work should specifically and directly address the topics/questions provided and emphasize material from our readings and classroom discussions.  The overall grading criteria is based on i) how well you integrate the main economic concepts into the assignment; and ii) how well you convey these ideas to an audience of your peers.  You may inject related views, studies, and opinions of your team or others, but you should not go off on tangents and pet issues.    Grades: Excellent (95%-100%); Good (90%-95%); Satisfactory (80%-90%); Unsatisfactory (<80%)

Individual Presentations:  I will assign topics with brief readings for students to present to class in a 10 minute (max) presentation.  Links are provided as a starting point, but you are encouraged to research and bring in additional information or detail Most, if not all, links are to Chicago Graduate School of Business "Capital Ideas"; these are usually based on more detailed research papers/programs that can be explored.   Grades: Excellent (95%-100%); Good (90%-95%); Satisfactory (80%-90%); Unsatisfactory (<80%)

Reading & Mini Case/Study Summaries:  The readings are intended to acquaint you with topics for discussion as well as to provide coverage of topics for which class time does not permit discussion.  For each separate required reading write a 1 page (or less) single-spaced summary explaining the key points in a way that would be useful for your colleagues.  On additional page(s), list bulleted implications/issues/lessons raised in 2 separate mini-cases/applications/boxes discussed in the text (2-4 bullets for each case/application).   These are due at the beginning of class and should be emailed to me via a Word attachment (for the file name, please place your name first.)     Grades: 100% (No major problems); 50% (Lack of coverage; inattention to format, grammar, ...); 0% (same as 50% but more issues). 

Reading Quizzes:  There will be a short, multiple choice quiz each week over the required readings.  These will range from 5-10 questions and cover main topics of the readings in a broad way.  These reading quiz grades will be adjusted (if needed) so that the highest grade is at least a 95.  The quiz grades will be averaged with the reading/mini-case summaries. 

Final Exam:  Short answer/multiple choice exam over the in-class discussion topics

Last day to drop course with a "W" or change from credit to audit is listed on WKU's Academic Calendar.  Any students requiring special consideration under the provisions of the ADA should register with the ADA Compliance Office first and then consult with me as soon as possible.

Attendance/Missed Assignments
The combination of students with job responsibilities and a course which only meets once every two weeks can present problems. The policy below attempts to strike a balance of accommodation while maintaining legitimate standards. Under special circumstances and with my approval discussed in advance, one class meetings may be missed.  Absence from more than two full sessions (or equivalent) may result in a student being dropped from the course regardless of the reason.

Weather Policy
If we miss a class session due to inclement weather, I will substitute a blog format  for our classroom time.


COURSE OUTLINE & LINKS (Subject to Changes so Check Back)

Objectives: To highlight key economic insights for managing with an emphasis on cases and studies illustrating these insights

Class 1 (Jan 18) Class Administration, Macroeconomics and Managers I
Reading:      Indicators of Financial Stress      Stock Crashes and Depressions  (Background NBER Working Paper)   
1. Class Administration/Econ & Management Education    MacroFinance PPT 1 

2. Macro World Views: Supply, Demand, and Both:  SD blog   Econbrowser blog   Cochrane blog   
3. Key Indicators of Market Risks 
        -- Macrofinance and risk  Cochrane AFA Presidential Address 
        -- Information embedded in financial market spreads
        -- Yield Curve and Recession Risks
        -- Asset Price/Financial Stress Risks
        -- Inflation Risks    

Supplemental Resources:    (Macro Finance PPTx )  Cochrane on Efficient Markets Today;    CGSB -- Cochrane on Long Run Behavior of Stocks;  
KC Fed -- KCFSISTL Fed – Inflation Ahead? Goff PowerPoint on 2008 Financial Crisis U.S. Recessions and expansions; “Living” yield curve   
State & National Business Cycles; Shiller P-E DataAsset Return Info/Rent PriceRay Fair Stock Market Valuation Site; Fair: Events That Shook the Market; Dallas Fed on Real Estate Prices

Class 2 (Feb 1) Macroeconomics and Managers II

Reading:    CGSB Bass Japan Video    Fed's Monetary Policy Rule   
1. Individual Assignment/Presentations:   CGSB: Bubbles, Systemic Risk, and Tech Booms

2. Fed and Rates:  Macro Finance PPT 2
    -- Fisher Equation, Taylor Rule, and Phillips Curve:  Layperson's Guide to the Phillips' Curve  
3. Worldwide and US Fiscal Challenges
    -- Europe: Hamilton blog on Europe 
    -- Japan: Hamilton blog on Japan   
    -- US:  Hamilton blog on US  Hamilton blog on US II         

Supplemental Resources:  Demographics & Stock Prices (Siegel View Milken View)     Soberlook on Japan  Soberlook on Japan II    Hubbard on Regaining Fiscal Balance

Class 3 (Feb 15) Products and Demand

Reading: BSZ Ch. 8; BB Chapter 3-Markets 
1.  Econ 101: Microecon Insights to Managing  Chapman University President 
2.  Observations on Products, Markets, Commoditzation  Product Strategy PPT  Microsoft Jenkins  Apple's New Normal       
3.  Individual Assignments/Presentations:  CGSB-Geography of Brands  (also available here)  (related article)      CGSB Secrets of Shopping  CGSB Rebranding 
4.  Latent Demand and Product Strategy: Vegas, NASCAR

Next Class:  Team Assignment 1 -- Latent Demand and Product Strategy

Supplemental Resources: Soft Drink Map   BB-Epigrams  BB-Chapter 1 ExcerptGoff BB3-Markets   Kodak-Rochester DeclineRise of Consumption Equality   Porter's 5 Forces 
                                            WSJ Apple & Microsoft    How GM Lost Its Way; CGSB Learning by Using      GCSB Bet on "the Horse

Class 4 (Mar 1) Managing Implicit Costs Tradeoffs
Reading: BSZ Chapter 5;   BB Chapter 2-Fundamentals      
1. Team Assignment/Presentations 1 +  Disney
2. Some Basic Ideas about Costs:  Managing Costs PPT  
3. Implicit Costs and Tradeoffs: 

Supplemental Resources: Goff BB2-Fundamentals   CGSB Impact of Innovations  Slate 4th Downs;   

Class 5 (Mar 15)
  Perspectives on OA

Reading: BSZ Chapters 10, 11, 15

1. Individual Assignments/Presentations:     CGSB How to Pay Employees  +   CGSB Improving Incentive Pay 
2. Overview of OA (Rochester Approach)   OA Powerpoint 
3. Observations about Incentives and People
4. Managerial Roles: Coordinating OA; Steve Wynn; Economics of "24"-- Rules v. Discretion

Supplemental Resources:   Goff BB4--People   Froeb Ch. 21   CGSB Colleague Networks  (related article)      CGSB Important CEO Skills   Koch Industries MBM; HBS--Jensen on Decision Rights     

Class 6 (March 29) Innovation, Change, Strategic Games
Reading:  BSZ Chapter 9   BB6-Games  BB7-Innovation/Change 

1. Individual Assignments/Presentations:  CGSB Business Relationships     CGSB Innovation as a Process
Overview of Managing Innovation and Change :     CGSB Innovation & Perceptions  
Games at Work and Play: PPT on Strategic Games        Boeing-Airbus    UAW-VW     TW-Comcast  

Supplemental Resources:  
GCSB-Gaming in VC Contracts     CGSB – Ebay Strategic Bidding   Bazerman: planning for surprise            Hawken Crime Research    PPT on Strategic Games  


Class  7  (April 12) Pricing

BSZ Chapter 4, 7
1. Individual Assignment/Presentation:   CGSB Spend Less on Gifts        CGSB-Levitt on Bagel Demand  
2. Pricing Topics:  Pricing PPT 
-- Making Sense of Supply and Demand:  Gasoline Prices
-- Price Discrimination
--Misc Topics:
-- Pricing with Time in Mind:  How Shopping Malls Got It Wrong
-- Fixed Costs and Pricing:  Cable Bundling (to a point)  
-- Pricing as Product Attribute:  AT&T

Next Week:  Team Assignment 2 -- Deconstructing Organizational Failures

Supplemental Resources:         Bundling and Programming Sports Economist       NYU Nakamura Study 1 2   CGSB – High Demand, not High Prices WSJ Pricing Graphic


Class 8  (April 26)

1. Team Assignment/Presentation 2
2. Final Exam



Team Assignment 1: "Latent Demand" and Product Strategy 
Each team will be select a company/market to analyze.  Suggestions include DisneyWorld, Southwest Airlines, Whole Foods
(In many cases these situations/companies have interesting organizational cultures;  that is not the focus of this case except as it relates to product attributes, consumer demand, consumer, experience, -- not as an organizational discussion per se)
Note:  You may use a different company and source(s) if you so desire with my approval (no retreads of prior assignments done by you or others)

Generate a PowerPoint presentation that addresses the following issues:

1. A (very) brief background/history of the company
2. Draw a cost-quality perceptual map of firms in the industry when the company emerged as a major competitive force

3. Discuss the "latent demand" aspect of the firm's strategy and success (that is particular attention to underlying changes in population, income, preferences, complementary technologies ...) 
4. Discuss more recent developments in these industries (competition, commoditization, ...).  Is the company's strategy evolving? Would the perceptual map look different now than at it's emergence?

Your presentation should be less 15 minutes (not counting discussion).  You should print your slides to hand-in along with a brief (1-2 page summary/bullets) of your main points.   


Team Assignment 2:  Desconstructing Organizational Failures Through Lens of OA 

Select either one of the Space Shuttle Disasters (Columbia or Challenger), the Storm King Mountain Disaster,

Generate a PowerPoint presentation that addresses the following issues:

1. Provide a brief introduction/overview of the facts of the case (a little engineering info ok, but this is an OA assignment) 
2. What were the key decision rights assignments? 
3. What were the incentives weighing on key decision makers? Did they have sufficient procedures/discretion? 
     (remember, cost is not an unethical incentive)
4. What information did key decision makers have?  What processes determined the flow of information?
5. What changes to various OA elements might have averted the disaster?
6. What is the nature of the objective and embedded tradeoffs?  Are some tasks (such as these) likely to fail (lead to bad disasters from both human and public relations viewpoints) based on the chosen objective and implicit tradeoffs? 

Your presentation should be less than 15 minutes.  

Below, I have provided links to useful information sources, but you may incorporate information from other sources also.  Remember, this is an assignment about organizational design and decisions -- not engineering, not deep ethical discussions, or personal axes.  Some of the sites that consider the decision making delve into moralistic/ethical discussions.  The analysis of ethical decisions may be useful to the extent they deal with our OA focus.  

1. Enron:  BSZ (509-514);   HBS – Enron Innovation Corrupted;  Wharton – Games Enron Played); Crininalizaing Agency Costs;  HBS Why Good Audits Go Bad;   WSJ Jenkins on Fastow/Enron

2. Columbia/Challenger:
Columbia:  NOVA Space Shuttle Columbia Disaster DVDNASA Investigation Report and Report Synopsis;   
Challenger:   NASA History Site particulary useful are some of the non-NASA links such as "A Failure in Decision Support Systems"

3. Storm King Mountain:  A&E "Fire on the Mountain" DVD; CNN/Fortune article;   Storm King Lessons;



Individual Presentations


#1 Bubbles and Rational Revolutions  (Class 2)


#2 Geography of Brands  (Class 3)


#3 Secrets of Shopping (Class 3)

#4 Rebranding (Class 3)


Team Presentations (Class 4)


#5 How to Pay Employees + Improving Incentive Pay (Class 5)


#6 Business Relationships (Class 6)


#7 Innovation as a Process (Class 6)


#8 Spend Less on Gifts (Class 7)


#9 Bagel Demand (Class 7)


Team Presentations (Class 8)













Team Assignment x: Tradeoffs
Discuss an important managerial tradeoff from a business case (from your own experience or others) involving an implicit cost.

Generate a PowerPoint presentation that addresses the following issues:

1. Provide a brief background to the case
2. Explain the nature of the tradeoff (details; whether it is objectives related, cost-related ...)
3. Discuss how the tradeoff is being managed, or, if not being managed, suggestions on how it could be or managed better

Your presentation should be less than 10 minutes.



Team Assignment x: You Become the Instructor 

Your team is charged with passing along to next year's pMBA cohort 1-3 insights for managing from this course.     Select and present cases/applications that illustrate these insights.  The cases/applications may be mentioned in the book, on the webite, or  based on another source.   (You can expand on a single insight using one or more cases/applications or present up to 3 separate insights).  Remember, some of the topics in the course have useful insights outside of economics;  our emphasis is on the econ-related insights.    

Generate a PowerPoint presentation highlighting these insights. 
The presentation must not exceed a 10 minute time limit.  A short summary should accompany the slides to be turned in.  There will be a Q&A period after each presentation. 
















Disney People Economics

Disney prides itself on its committment to customer satisfaction and peoople management among other things -- so much so that the Disney Institute is a management training/consulting vehicle to communicate their practices to other companies and managers.  Using the resources linked below as well as resources from your own investigation, answer the following items  (note:  please avoid "resources" that are little more than rants from former employees; useful resources take an analytical or factual approach).

1. Discuss the points of emphasis of Disney's "people management" with our discussions.  Where is there overlap and where are there different points of emphasis? 
2. Someone has suggested that Disney's extensive training and indoctrination in the Disney traditions and related items may be as important as a screening/filtering device as it is actual training.  Can you make sense of this statement in terms of our discussions?
3. Although using the same selection and training methods, the buy-in across the full range of employees at Disneyland (CA) is not as high as at Walt Disney World (FL)  (this is just my own subjective perception).   What factors might be behind this and what might this indicate for the application of Disney's practices to other businesses and industries?




Team Assignment: Applications of Econ 101
Drawing from your own work experiences:

1. Explain a case where the costs/benefits of a decision were difficult to determine or incorrectly determined because the accounting system in use matched the cost/benefit to the wrong unit/decision;
2.  Explain a case where the managers pushed an idea/initiative, that while useful to a point, so far as to make the tradeoff/costs assoicated with it almost certainly larger than the benefits gained;
3. Explain a case of a very important implicit cost (inlcuding lost opportunity) of a decision, that is, one where there is no explicit accounting expense associated with the decision;
4. Explain a case where a cost sunk (or at least fixed for the decision under consideration) influenced the decision makers.

Your discussion should be less than or equal to 3 typed, single-spaced pages (12 point font). 





Background: NW Airlines;   AR Highway Dept;  HBS – Op Failures and Problem Solving  HBS-Bazerman goal setting and incentive problems  HBS--Not as Ethical As We Think;

Games & decision making
Game Theory in the Movies;  Goff PPT on Games  

Law of one price-arbitrage; Law of Large numbers (intro only);
KCFSI data
Partnership Split Example;

The Enron and related Arthur Andersen cases have been widely discussed from many angles with all sorts of laws/regulations considered and adopted to try to eliminate or reduce such outcomes.   On this assignment, you should stay focused on the OA-related issues. From the sources listed below and others of your choosing, address the following items.

1. Provide a brief introduction t
2. Discuss specific ways that some/all of BSZ's "3 legs" of OA that might have been adjusted that might have kept the failure at Arthur Andersen from occuring while maintaining profitability for key units of the firm.
3. While Enron's CEOs drew much of the media attention, Andrew Fastow, the CFO, was probably the highest level executive involved in specifics of Enron's actitivies.  What were his characteristics that were attractive to Enron or any firm?  How might BSZ's OA elements be adjusted to better deal with a creative but not-very-principled CFO?  If we suppose that Fastow (or someone like him) is just too unscrupulous to be CFO, what screens/filters might a Board/CEO adopt to reduce the chances of such a person rising to this person while not excluding creative, highly motivated individuals? 

Your discussion should be less than or equal to 3 typed, single-spaced pages (12 point font). 

Southwest Airlines Dartmouth Case provides some background and details on the company but is a lot about org culture and more recent developments. 

U.S. District Court Opinion in Whole Foods Case (especially pp. 23-67)
, although written with respect to the antitrust issues regarding Whole Foods purchase of Wild Oats, presents some insteresting observations and unusual "insider" views of WF's strategy as well as on the structure of the supermarket industry. 

MIT Sloan Sports Analytics Conference;

Resources:  Disney Institute Site especially  People Management & PDF   Case Studies; Videos;   Creativity

3. Politics & Managing (Powerpoint)
4. Data and Decisions  (Powerpoint)

Challenger Powerpoint
Is CEO Pay Really Inefficient   HBS-Overlooking Ethical Issues (NYU Full Article);
Accenture – Networks & Information;

Changes in Markets PPTNFL, MLB, and NASCAR
Las Vegas & Latent Demand
; Whole Foods; IBM; Xerox, GM
Market Supply-Demand Examples + CSD & Geography PPT
Nakamura Price Variability Tables Part 1;   Part 2;   Nakamura NBER Digest Summary
STLFed—Gasoline price movements;