Managerial and Engineering Economics
This course will introduce students to the fundamentals of engineering and managerial economics. The course emphasizes the application of economic frameworks to understand how technology markets evolve and what strategies allow firms to capture value from innovation. The aim of the course is to develop a rigorous foundation in the relevant economic models that students can use to manage innovation in high-technology organizations. The course is oriented around developing answers to three key questions: (1) How should managers of technology firms evaluate potential strategies or projects when the outcome of innovation is uncertain? To address this question, the course introduces cost-benefit models for determining project value and how to use these models to make managerial decisions. (2) How do market characteristics shape the optimal pricing decisions of the firm? This part of the course provides economic models that translate the competitive dynamics of markets into the return-based measures required for optimal decision-making. (3) How do market characteristics shape a firm's ability to capture value from innovation? The final part of the course extends the frameworks in the second module to model value capture when firms invest in the development of breakthrough innovations. We will cover a number of different game theoretical models of innovation competition, bargaining, and pricing of platform and information products.