Course Syllabus

Business Enterprise & Public Policy

A Course in Regulatory Economics

G406 Fall 26

Professor:   Kerem Çakırer

Meeting Times: M-W 12:45pm - 2:00pm in HH3055

Office Hours: MW by appointment (after 2pm)  via Zoom or in office, HH 3080

E-mail: kcakirer@iu.edu (Please write G406 on the subject line)

COURSE DESCRIPTION

The contemporary free market design is incentive based and goal oriented, which is centralized in markets by individual market players. Which firm would not like to exercise market power and maximize gains, when the goal is to maximize profits, if there is a possibility? However, seeking profit maximization can harm overall social welfare and can leave socially nonoptimal economic conditions in the long term. This course is the study of the regulatory economics and its applications to business and real-life encounters. The regulations (and deregulations) we see in the United States are the result of a complicated combination of cost/benefit analyses.  Understanding how these cost/benefit analyses are conducted (i.e., who wins and who loses, and by how much), and the difference between the stated and actual goal of regulation is important not only for government officials, but also for business owners and managers.

We will study the “monopoly power” and the key issues behind the breaking up of “monopoly power,” the allowance of mergers, etc.; the definition of a natural monopoly and industries that are potential environments for natural monopolists; dynamic issues in natural monopoly regulation; concerns for deregulation; price controls and other economic regulations; regulatory economics for utilities and non-storable products.

COURSE GOAL

In this course, we will learn the basic tools of policy making through lectures and we will apply the tools of cost/benefit analyses to free market models. The course focuses on economics of policy making rather than politics. The goal of this course is to maintain a value-based approach to identify and act on market failures in a free market design. The course presupposes no knowledge of industrial organization economics, managerial economics and/or game theory. We will go over the tools one by one and discuss how the policy making can utilize the microeconomic tools. The goal of this course is to enhance the student’s ability to reevaluate the markets from a regulatory policy perspective. The course focuses on Kelley School of Business undergraduate learning goals 1, 3, 5 and 8.

TEXTBOOK:

 We will not follow a textbook, however, the recommended textbook has relevant readings with the course material. The textbook should be available in SPEA Library and Wells Library.

Viscusi, Vernon, and Harrington, Economics of Regulation and Antitrust, MIT Press: Cambridge, MA, 2005. (Recommended)

GRADING

Your overall performance depends on course participation,  in-class quizzes, a midterm, and a cumulative final exam.

Class Participation:

Active participation in all class activities, including discussions, self-assessments, and in-class case studies (conducted in groups), is a fundamental expectation of this course. Consistent engagement in these activities may result in the award of bonus points.

Students are expected to approach this course with dedication and commitment. Regular attendance is crucial for successful learning. Active participation in both in-class and online activities will be recognized and rewarded at the semester's conclusion.

Participation Grade: Participation will constitute 5% of the overall course grade.

• 0% - Less than 40% attendance
• 1% - Less than 50% attendance
• 2% - Limited active participation in class discussions and/or less than 60% attendance
• 3% - Limited active participation in class discussions and/or less than 70% attendance
• 4% - Active participation in class discussions and/or less than 80% attendance
• 5% - Active participation in class discussions and at least 90% attendance

Attendance Policy: Formal attendance checks will not be conducted in every lecture. However, student presence will be indirectly assessed through active engagement in various in-class activities.

In the event that class attendance falls below 60% of the registered students (13 students) on a given day, a formal attendance check will be implemented.

Bonus Opportunities: Students who demonstrate consistent attendance and active participation may be eligible for additional bonus opportunities throughout the semester.

Assessments:

• Quizzes: Four in-class quizzes will be administered throughout the semester to assess student comprehension of key course concepts. A "quiz workout" comprising a set of potential quiz questions will be made available to students one week prior to each quiz, providing an opportunity for practice and preparation. The actual quiz, consisting of a closely related subset of questions from the workout, will be administered in class the following week.
• Midterm Exam: The midterm exam will take place on the Wednesday of the ninth week of classes. It will consist of a combination of multiple-choice and short-answer questions.
• Final Exam: The university-scheduled final exam will be held on during the finals week. 

Academic Integrity: Students are expected to adhere to the highest standards of academic integrity. Any instances of cheating or plagiarism will be dealt with severely.

Grading:

• Participation: 5% (In-Class Activities & Discussions)
• Quizzes: 20% (No Make Up)
• Midterm Exam: 35% (With Bonus Opportunities)
• Final Exam: 40% (With Bonus Opportunities)

Grading Scale and Curve: Individual quiz and exam scores will not be curved. However, a curve will be applied to the final overall course percentage at the semester's end. The target average course score is within the range of 83-88%. The final grade distribution will be adjusted to align with a typical GPA range of 3.3-3.5.

Academic Accommodations: Students requiring academic accommodations for disabilities are encouraged to contact the University's Disability Services Office.

Important Note: Students must inform me of any potential exam conflicts by the end of the third week of the semester (September 14th). No exceptions will be granted for conflicts reported after this deadline.

COURSE PLAN

The plan is tentative which means the schedule depends how fast or slow we will advance on the topics. My goal will not be covering the material quick to finish the lecture but go over the theory with as many examples as we can afford. The outline (which may change during the semester) is the following.

Part I – Introduction to Regulation

1. The Reason(s) to Regulate
   • Understanding the Free Market Mechanism

2. Types of Regulations
3. The Regulation Process
4. A Brief History of Regulation
5. Actual vs Stated Reasons for Regulation         

Part II – Antitrust

6. The Analysis (Industrial Organization Perspective)
7. The Cases of Enforcement and Remedies
8. The Efficiency Arguments

            8.1 Economic Efficiency

            8.2 Technical Analysis

9. Oligopoly Markets

            9.1 Oligopoly Theory (Game Theory)

            9.2 The Case of Collusion

            9.3 The Case of Price Fixing

10. Merger Analysis

                        10.1 Horizontal Mergers

                        10.2 Vertical Mergers

                        10.3 Conglomerate Mergers 

11. Monopolization and Price Discrimination 

Part III – Economic Regulation

11. The Instruments of Regulation
12. The Theory of Regulation
13. The Case of Natural Monopoly
    1. Utility Pricing
    2. Peak – Load Pricing

THE COURSE SCHEDULE

 

APPENDIX

Undergraduate Program Competencies and Student Learning Outcomes (SLOs)

1. An Integrative Point of View

Evaluate and make business decisions taking into account the interdependent relationships among competitive and environmental conditions, organizational resources, and the major functional areas of business.

• SLO 1.1: Identify the relationships between two or more business functions; explain how actions in one functional area affect other functional areas.
• SLO 1.2: Describe how the relationships among the functional areas relate to the goals of the organization.
• SLO 1.3: Use integrative techniques, structures, or frameworks to make business decisions.

2. Ethical Reasoning

Recognize ethical issues, describe various frameworks for ethical reasoning, and discern the tradeoffs and implications of applying various ethical frameworks when making business decisions.

• SLO 2.1: Identify the ethical dimension(s) of a business decision.
• SLO 2.2: Recognize the tradeoffs created by application of competing ethical theories and perspectives.
• SLO 2.3: Formulate and defend a well-supported recommendation for the resolution of an ethical issue.

3. Critical Thinking and Decision Making in Business

Identify and critically evaluate implications of business decisions for organizational stakeholders and the natural environment.

• SLO 3.1: Recognize the implications of a proposed decision from a variety of diverse stakeholder perspectives.
• SLO 3.2: Evaluate the integrity of the supporting evidence and data for a given decision.
• SLO 3.3: Analyze a given decision using critical techniques, structures, or frameworks.

4. Communication and Leadership

Communicate effectively in a wide variety of business settings employing multiple media of communications.

• SLO 4.1: Deliver clear, concise, and audience-centered individual and team presentations.
• SLO 4.2: Write clear, concise, and audience-centered business documents.
• SLO 4.3: Effectively participate in informational and employment interviews.
• SLO 4.4: Articulate one’s unique value proposition to a given audience.

5. Quantitative Analysis and Modeling

Systematically apply tools of quantitative analysis and modeling to make recommendations and business decisions.

• SLO 5.1: Use appropriate technology to solve a given business problem.
• SLO 5.2:Analyze business problems using appropriate mathematical theories and techniques.
• SLO 5.3: Explain the role of technologies in business decision making analysis, or modeling.
• SLO 5.4: Structure logic and frame quantitative analysis to solve business problems.

6. Team Membership and Inclusiveness

Collaborate productively with others, functioning effectively as both members and leaders of teams.

• SLO 6.1: Facilitate team meetings and collaborate effectively in both face-to-face and virtual interactions.
• SLO 6.2: Identify and employ best team practices.
• SLO 6.3: Assess and offer feedback on one’s own effectiveness as well as one’s team members’ effectiveness with respect to productivity and relationship-building in both oral and written formats.
• SLO 6.4: Articulate and analyze the value of inclusivity in a variety of business settings.

7. Cultural Awareness and Global Effectiveness

Become conversant with major economic, social, political, and technological trends and conditions that influence the development of the global economy and demonstrate competence in the cultural, interpersonal and analytical dimensions of international business.

• SLO 7.1: Identify the risks and opportunities associated with determining and implementing optimal global business strategies.
• SLO 7.2: Integrate international, regional, and local non-market forces into strategic decisions of multinational corporations.
• SLO 7.3: Analyze obstacles resulting from cultural differences and recommend leadership approaches that leverage diversity to enhance business performance.
• SLO 7.4: Identify the personal and contrasting attitudes, values, and beliefs that shape business relationships.

ACADEMIC MISCONDUCT:

The vast majority of IU and Kelley students act honestly and with integrity in their personal lives and in class. Indeed, integrity and accountability are fundamental values of the Kelley School of Business undergraduate program. Unfortunately, each year a small group of students deviate from those values and (either intentionally or unintentionally) engage in academic misconduct. Please do not find yourself among that group. 

To avoid academic misconduct, you must know and comply with the responsibilities and duties set forth in the Kelley School of Business Student Honor Code, the Indiana University Code of Student Rights, Responsibilities, and Conduct, and any other Kelley or IU rules and regulations about academic misconduct. In the event you commit an act of academic misconduct, an appropriate sanction will be imposed, and the misconduct will be reported to Indiana University. Sanctions could include a grade of F for the class. 

Note that academic misconduct includes plagiarism, even if unintentional. Be sure to carefully review the definition of plagiarism found in the IU Code. Additionally, sharing (including uploading) past or current quizzes, tests, or homework assignments from this class with each other (unless specifically authorized by assignment, test, or quiz instructions) or via unauthorized sources, including third-party websites such as Chegg, is against course rules and constitutes academic misconduct, even if your intent is not to enhance your performance or grade in this class. Likewise, accessing (including downloading) past or current quizzes, tests, or homework assignments via unauthorized sources, including third party websites such as Chegg, is also against course rules and constitutes academic misconduct.

If I determine that you have committed academic misconduct, I will notify you by meeting with you and explaining the basis for my determination. Then, I will report it to the University, as I am required to do. If you are the subject of a report of misconduct that you believe is inaccurate or if you believe that an imposed sanction is inappropriate, you have a right to appeal the finding of misconduct and/or the sanction. You will be notified by the Dean of Students’ Office of Student Conduct about your appeal rights. 

EARLY ALERT WARNINGS (EAWs):

In this course the I, as the instructor, want to make sure you connect with resources that will help you be successful. If you receive a message through the Student Engagement Roster that asks you to consult with your advisor, please know that the message is sent to both you and your academic advisor, who will follow up and view the feedback from this course.

ACCOMMODATION FOR RELIGIOUS OBSERVANCES:

Students missing class for a religious observance must fill out the accommodation form on the Vice Provost for Faculty and Academic Affairs webpage at least two weeks before your anticipated absence.

ACCESSIBLE EDUCATIONAL SERVICES (AES) AND ACCOMMODATIONS:

Every attempt will be made to provide accessibility measures (accommodations) to students with qualifying medical conditions (e.g., mental health, learning, chronic health, physical, hearing, vision, neurological, etc.), under the Americans with Disabilities Act. You must have established your eligibility for support services through Accessible Educational Services for qualifying medical conditions. Note that services are confidential, may take time to put in place, and are forward moving. Captions and alternate media for print materials may take three or more weeks to get produced. Please contact Accessible Educational Services (AES) at 812-855-7578 as soon as possible if accessibility measures are needed. The office is located on the basement floor of Eigenmann Hall, #001.

MENTAL HEALTH AND STRESS MANAGEMENT AT KELLEY AND IU

As a student, you may experience a range of issues that can cause barriers to learning, such as difficulties with mental health, including increased anxiety (feeling irritable, restless, or overwhelmed), difficulty concentrating or managing your time. Or you may find that you feel sad or “empty,” less interested in activities you once enjoyed; inadequate compared to others; or even hopeless. These mental health concerns could lead to diminished academic performance, drug/alcohol misuse, strained relationships, and/or a reduced ability to participate in daily activities. The moment you experience any of these, we are here to support you. The Kelley School of Business and Indiana University encourage you to reach out. Here are some resources to help:

• If your mental health or stress is affecting this class in particular, reach out to me via e-mail or office hours. I can work with you and direct you to support resources.
• If you are not sure where to start or what you need, meet with Kelley Student Support. With them, you can discuss individual needs/support, organizational consultation, or ideas in the areas of mental health and wellness, women's, and LGBTQ+ initiatives. To sign up for a time to meet, go to https://gokelley.iu.edu/studentsupportsignup.
• Indiana University Counseling and Psychological Services (CAPS) is available to assist you. You can learn more about the broad range of confidential mental health services available on campus via the CAPS website (http://healthcenter.indiana.edu/counseling/). 
• A Care Referral is another easy way to request help with an issue or concern, especially if you do not know which office or department to contact.  You can submit a Care Referral for yourself or another related to academic/administrative, personal, health/wellness, behavioral, or bias issues. File a report at https://go.iu.edu/carereport.   

 

SEXUAL MISCONDUCT & TITLE IX:

IU policy prohibits sexual misconduct in any form, including sexual harassment, sexual assault, stalking, sexual exploitation, and dating and domestic violence. If you have experienced sexual misconduct, or know someone who has, the University can help. If you are seeking help and would like to speak to someone confidentially, you can make an appointment with the IU Sexual Assault Crisis Services at (812) 855-8900, or contact a Confidential Victim Advocate at (812) 856-2469 or cva@indiana.edu.

University policy requires me to share certain information brought to my attention about potential sexual misconduct with the campus Deputy Sexual Misconduct & Title IX Coordinator or the University Sexual Misconduct & Title IX Coordinator. In that event, those individuals will work to ensure that appropriate measures are taken and resources are made available. Protecting student privacy is of utmost concern, and information will only be shared with those that need to know to ensure the University can respond and assist. I encourage you to visit http://stopsexualviolence.iu.edu/index.html to learn more.