BU606-Topic 4 - Economics of Strategy-23

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School
Toronto Metropolitan University **We aren't endorsed by this school
Course
BUSINESS 606
Subject
Economics
Date
Nov 9, 2023
Pages
59
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Part-time Waterloo 2023 BU606 (Economics) Topic 4: Economics of Strategy 1 of 59 Topic 4: Economics of Strategy Week Topic Readings* 8 - Nov 2 Slides 2-16 Firm boundaries BDSS: Ch. 2, 3 MyLS: GM/Ford, Disney-Pixar 9 - Nov 9 Slides 17-29 Contracting BDSS: Ch. 4 (pp. 124-145) MyLS: Vertical relations, Car Dealerships, Beer Distribution, Pepsi/Coke (pp. 93-108) 10 - Nov 16 Slides 30-46 Market structure, Oligopoly, Strategic Commitment, Entry Deterring Strategies BDSS: Economics Primer BDSS: Ch. 5 (pp. 155-163, 170-181) BDSS: Ch. 6 (pp. 191-195, 204-210) BDSS: Ch. 7 (pp. 214-224) 11 - Nov 23 Slides 47-59 Collusion, Sustainable Competitive Advantage, Endogenous Sunk Costs, Innovation & Market Structure BDSS: Ch. 7 (pp. 225-241) BDSS: Ch. 11 (pp. 353-366, 370-373) MyLS: Book Retail, Beer, Pharmaceutical 12 - Nov 30 Group Country Project Presentations 13 - Dec 7 Final Exam * BDSS : Besanko, Dranove, Shanley, Schaeffer MyLS : Posted on MyLS
Part-time Waterloo 2023 BU606 (Economics) Topic 4: Economics of Strategy 2 of 59 Production related economies of scale Spreading of fixed costs such as... ...plant and equipment costs ...distribution and sales force (e.g. Pharma Mergers) Properties of processing units are such that... ...output is volume -related whereas costs are surface area-related (e.g. steel) Cube-square rule : Surface area does not need to be doubled in order to double volume. Specialisation of variable inputs via the ... division of labour improves productivity but is only worth it if output is high enough to fully employ the specialized inputs (e.g. production lines)
Part-time Waterloo 2023 BU606 (Economics) Topic 4: Economics of Strategy 3 of 59 Economies of scope, Learning and Diseconomies of scale Economies of scope arise when a single technology can be used to produce many products and the fixed cost of using the technology is reduced with each application e.g. Aircraft manufacturing, Online commerce ... means its cheaper to add additional goods if other related goods are already produced i.e. C ( q 1 ,q 2 ) C ( q 1 , 0) < C (0 ,q 2 )] Learning curve refers to the lower costs or higher quality due to know-how generated by accumulated output. ... is prevalent when turnover is limited ... implies that it may pay to expand and forego current profits to earn higher profits later on (e.g. Amazon) Diseconomies of scale arise due to ...↑ labour costs (unions, transportation pay) ...↑ agency and influence costs ... bureaucracy , ↓information flows ...Irreproducible factors of production
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