MGT 626 – Concepts in Operations, Economics and Strategy

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Summary

The viability of a firm is determined in a critical way by its actions. To find actions that help guarantee its survival and satisfy stakeholder interests, the firm devises a strategy (i.e., a dynamic plan), taking into account competitors’ economics and its own capabilities in the form of its current or anticipated operations. This course is concerned with fundamental concepts at the intersection of operations, economics and strategy, in order to enable the student to engage in model-based research explaining or guiding a firm’s decisions in a competitive environment.

This year, the course provides an overview of classical and nonclassical optimal control applications in operations and economics. The approach is hierarchical. First we discuss single-person decision problems in which a firm or a social planner maximizes an objective function subject to certain constraints. Applications include dynamic pricing, investment, marketing, and the harvesting of renewable resources. Second we introduce games in which several decision makers interact, either in a leader-follower (Stackelberg) setting or in a situation where all players reach their decisions simultaneously. Applications include dynamic oligopolies with open and closed-loop equilibria and capital accumulation games, and the dynamic pricing with a strategic buyer. In the third part of the course, we look at problems, which involve the design of economic mechanisms, applied to screening and optimal auctions. The course uses tools in the economics of uncertainty and information, operations, and fundamental management concepts to teach fundamentals and construct pointers to the frontier of applied research. The goal is to develop an understanding of how a firm can derive a competitive advantage from its operations using economic analysis as much as possible, rather than qualitative arguments.

Contact Details

Instructor

Prof. Thomas A. Weber

Operations, Economics and Strategy (OES)

EPFL-CDM-ODY 3.01

Phone: +41 (0)21 693 01 41

Fax: +41 (0)21 693 00 20

E-Mail: thomas.weber@epfl.ch

Office Hours: Wed 17h – 18h

Administrative Assistance

Ms. Margaret Escandari

EPFL-CDM-ODY 3.17

Phone: +41 (0)21 693 00 39

E-Mail : margaret.escandari@epfl.ch

Course Materials (requires authentication)

< Download Course Notes >

I. Fundamentals: Models (Read Ch. 1 & 2; App. A for review)

1. Description of Dynamic Systems (Feb. 17)

2. Stability Properties (Feb. 19)

II. Optimization: Dynamic Systems (Read Ch. 3)

3. Control Systems (Feb. 21)

4. Optimal Control (Feb. 24)

III. Interaction: Dynamic Games & Design of Mechanisms (Read Ch. 4 & 5)

5. Dynamic Games (Feb. 26)

6. Mechanism Design (Feb. 28)

7. Putting the Tools to Work: “OES Analysis” ; Final Exam (March 10)

Current Problem Sets & Solutions

· Problem Set 1 (Due: Fri, Feb 21) – Solutions

· Problem Set 2 (Due: Wed, Feb 26) – Solutions

· Problem Set 3 (Due: Fri, Mar 7 !!) – Solutions

Exams & Solutions

· Exam (March 10) – Solutions

Useful Links & Resources

· EPFL Library × information about the library and useful starting point to find electronic resources available at EPFL

· Nebis Catalogue × here you can check EPFL’s and other Swiss libraries’ holdings, and order books to the circulation desk

· Inomics × index of Economics conferences (quite comprehensive, but still incomplete)

· JSTOR × download top journal papers in Business, Economics, Statistics; most recent years not available

· Social Science Citation Index × useful to forward-search references to key papers that you identify: after searching the paper, go to its full record, click on the number next to “Times Cited”, then on the following page click on “Total”; the citation index sometimes also contains direct links to databases with pdf-copies of the papers

· Social Science Research Network × large repository of current working papers in the social sciences