Welcome to …
ADVANCED BUSINESS ECONOMICS (26158)
1. Introduction
Build on Microeconomics
Cohesive module of inter-related topics
Encourage ‘economic thinking’
Emphasise the need for good thorough research
Robust and intuitive
Module Handbook
1. Introduction
NB list of material moved to the Generic Module Handbook
2. Key Contacts
4. Teaching sessions
Key Contacts
Dr Mike Reynolds
Wharfe 229
[email protected]
01482 463539
Dr Steve Trotter
Wharfe 220
[email protected]
01482 463061
Teaching Sessions
Lectures
Thursday 11.15 Larkin LTE
Friday 12.15 Wilberforce LT31
Tutorials (weeks 3,5,7,9,11,12)
Tuesday 9.15 Wilberforce LR30
Thursday 9.15 Foss R1
Module Handbook (continued)
6. Study programme
7,11. Assessment
Two essays (2 × 20% of final mark) Due in: 17 November, 9 December
2-hour unseen examination in January 2011 exam period (60%)
Competition as a benchmark (ST)
Maintaining and promoting competition (1) (ST)
Maintaining and promoting competition (2) (MR)
Short-run Firm Interaction (MR)
General Equilibrium (MR)
Imitating Competition (ST)
Game Theory (ST)
Risk and Uncertainty (ST)
Asymmetric Information (ST)
11. Module specification, as available on http://www.courses.hull.ac.uk
16. Reading and resources
Start from later chapters of Besanko and Braeutigam – other references to follow
13. Module review
Module was new last year, and has changed somewhat this year
Feedback welcome
2. Competition as a benchmark
Pareto Optimality
“An allocation is Pareto-optimal (or Pareto-efficient) if it is not possible to reallocate resources so as to make one person better off without making at least one person worse off”
OR (production) “... not possible to reallocate inputs so as to produce more of one output without producing less of at least one other output”
Pareto Optimality
Distinguish three types of efficiency:
Exchange efficiency (consumption)
Input efficiency (production)
Substitution efficiency (general)
Two Fundamental Theorems of Welfare Economics
First Fundamental Theorem
A general competitive equilibrium is Pareto-optimal
Second Fundamental Theorem
Any Pareto-optimal allocation can be attained as a general competitive equilibrium through an appropriate initial endowment of resources
The ‘Invisible Hand’
“By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”