Microeconomics Syllabus, Spring 2015 (undergrad)

It is here.

Family-owned conglomerates in developing countries

This is a very good book by Avinash Dixit. I like a lot the discussion on institutions, auctions, insurance, and price discrimination. Do not miss the farther-reading section. 

This is one bit where Dixit explains family-owned conglomerates in developing countries from the perspective of transaction costs:

The transaction cost perspective also helps explain large conglomerates we find in many less-developed countries. There are often family owned, and span things with little in common: textiles, chemicals, cars, beverages, hotels, information technology services, and more. A rationale con be found in the effective legal system of these countries. Formal contract enforcement is unreliable; business dealings are governed by reputation and relationships. If your company has accumulated profits but the best new investments are in some other line of business, you cannot lend out the capital to an unconnected firm and hope for honest return on your investment. Instead you bring that activity under the umbrella of your own family firm, where relational aspects are stronger. The conglomerate need not create any synergies or conventional efficiencies in production. Instead it reduces governance costs.

Rare microeconomic claim of the day

. . . apparently, only 11 percent of GDP is produced under conditions of rising marginal cost." (102)

From a Steve Keen's review of Alan Blinder´s Asking about Prices: A New Approach to Understanding Price Stickiness.

He and his team of economics PhD students conducted face to face interviews with Presidents, CEOs and senior managers of 200 firms. The firms surveyed represented 7.1% of the USA's GDP, so what was found was statistically robust: what these firms reported was representative of US industry as a whole. As Blinder put it, "we interviewed an astounding 10 to 15 per cent of the target population-a large fraction by any standard." (68)

The research was used to explain the macroeconomic phenomenon that interests Blinder of "sticky prices". Economic theory implies that price adjustments should dominate market responses, but prices are notoriously inflexible, at least in the downward direction. Blinder's macroeconomics presumes this, but he wanted to know the microeconomics of why. His survey was designed to test 18 different theories as to why this might be so, and the results did let him distinguish between them. But the key surprise for Blinder and his team was the extent to which economic reality did not look at all like the models that economists assume are true.

Curso: Principios de Microeconomía en Marginal Revolution University (Spanish)

Principios de Microeconomía: 

Este curso introductorio es en español y está dirigido a personas que desean entender los conceptos básicos de microeconomía, un área de la economía que estudia, entre otras cosas, cómo los individuos (consumidores y productores) se comportan.

Primero explicaremos el lado de la demanda y cómo ésta responde a cambios en los precios. Luego explicaremos cómo los individuos toman decisiones de consumo, y la manera en que cambios en el ingreso afecta esas decisiones. También explicamos la oferta, constituida por productores o firmas, los costos que enfrentan en el proceso de producción, y por qué los costos son importantes para la decisión de producción. 

Una parte importante de la clase es explicar las diferentes estructuras de mercado y la manera en la que los precios de equilibrio se determinan en cada una de ellas. También miraremos los efectos que la regulación del gobierno, en la forma de controles de precios, tienen sobre precios de equilibrio, y el bienestar de consumidores y productores.

Puedes ver los 25 videos de la clase aquí. También recomiendo que veas el video de Tyler Cowen llamado "Flip the classroom," esta en inglés, y da una buena idea de cómo puedes usar estos videos. 

Esperamos que este curso te sea de utilidad. 

Agradezco a Tyler y Alex por incluir este curso en su plataforma educativa. 

Homework

In this article, the authors describe a field experiment in the classroom where principles of microeconomics students are randomly assigned into homework-required and not-required groups. The authors find that homework plays an important role in student learning, especially so for students who initially perform poorly in the course. Students in the homework-required group have higher retention rates, higher test scores (5 to 6 percent), more good grades (Bs), and lower failure rates. The authors also study the relationship between endogenous homework submission and test performance using instrumental variable estimation and find that homework submission has a large positive effect on test performance.

Source. Draft. 

"Mental budgeting" (Ref.: Gasoline)

Using aggregate data from the Energy Information Administration covering the period 1990-2009, as well as data on households’ purchases of gasoline from a large grocery retailer over the period 2006-9, Justine Hastings and Jesse Shapiro find that when gasoline prices rise, consumers substitute to lower octane gasoline. A $1 increase in the price of a gallon of gasoline increases a typical household’s propensity to purchase regular gasoline by 1.4 percentage points.

Source: NBER. The paper is here [the abstract in the paper is different from the description above, done by the NBER]. 

The key point however is the theme of "mental budgeting," the authors conclude:

A significant body of experimental and laboratory evidence shows that households maintain separate mental budgets for different categories. In contrast to standard utility models, mental budgeting predicts excess sensitivity to small income shocks induced by category-level price changes.

We test for this form of excess sensitivity in rich panel data on household gasoline purchases. Households substitute from higher to lower octane levels when gasoline prices rise. The substitution we observe cannot be explained by income effects, compositional changes, or changes in the price differences between grades.

[In a different issue, it is interesting that the NBER has to rewrite some of the abstracts, and probably most of them].

Retailers, more staff, more sales

The big challenge for any retailer is to make sure that the people coming into the store actually buy stuff, and research suggests that not scrimping on payroll is crucial. In a study published at the Wharton School, Marshall Fisher, Jayanth Krishnan, and Serguei Netessine looked at detailed sales data from a retailer with more than five hundred stores, and found that every dollar in additional payroll led to somewhere between four and twenty-eight dollars in new sales. Stores that were understaffed to begin with benefitted more, stores that were close to fully staffed benefitted less, but, in all cases, spending more on workers led to higher sales. A study last year of a big apparel chain found that increasing the number of people working in stores led to a significant increase in sales at those stores.

That is from the new Surowiecki's article in the New Yorker.  

He explains why:

The reasons for this aren’t hard to divine. As Fisher, Krishnan, and Netessine show, customers’ needs are pretty simple: they want to be able to find products, and helpful salespeople, easily; and they want to avoid long checkout lines. For a well-staffed store, that’s no problem, but if you don’t have enough people on the floor, or if they aren’t well trained, customers can easily lose patience. One of the biggest problems retailers have is what is called a “phantom stock-out.” That’s when a product is in the store but can’t be found. Worker-friendly retailers with more employees have fewer phantom stock-outs, which leads to more sales. And happy workers tend to stick around, which saves the costs associated with employee turnover, like hiring and training.

There is more worth reading.