Economics of Business 2: Regulation and Business Strategy

Economics of Business 2: Regulation and Business Strategy

Year: 2018-2019
Course code: ECON4008
Course credits: 15
Taught: Semester 2
Course co-ordinator: Hisayuki Yoshimoto
Entry requirements: Normally admission to an honours programme in Economics.
Available to visiting students:Yes
Contact from more information: Gillian Weir

Course description

This course aims to present and discuss the economic theory of the regulation of natural monopolies, and to explain and analyse the economist's approach to business strategy.  By the end of the course, students should be able to explain the implications of natural monopoly and why monopolies may be subject to regulation; analyse alternative models of regulation and regulatory mechanisms; show how uncertainty and multi-product firms affect regulation and how problems can be addressed through surplus subsidy schemes; explain the business economist's approach to business strategy, and how it relates to transaction cost and resource-based approaches; explain and analyse the key components of business strategy and explain how corporate success may be measured and sustained; demonstrate an ability to construct a focussed argument based on coherent general principles in respect of a particular and specific problems/set of circumstances; and generate logical arguments from information about specific complex problems.

Learning and teaching methods

20 hours of lectures (10 x 2 hours), Monday, 10.00 am-12.00 noon, and 5 1-hour tutorials (held fortnightly at varying times).

Course texts

Main Textbook:

Train, K. E. (1991), Optimal Regulation: The Economic Theory of Natural Monopoly, MIT Press

Further suggested reading includes:

  • Laffont, Jean-Jacques and David Mortimort (2002), “The Theory of Incentives: The Principal-Agent Model,” Princeton University Press.
  • Macho-Stadler, Inés, and J. David Pérez-Castrillo (2001), “An Introduction to the Economics of Information: Incentives and Contracts (Second Edition),” Oxford University Press.
  • Milgrom, Paul and James E. Roberts (1992), “Economics, Organization & Management,” Prentice Hall.
  • Van Zandt, Timothy (2006), “Introduction to the Economics of Uncertainty and Information,” Available online:
  • Salanie, Bernard (2005), “The Economics of Contracts (Second Edition),” MIT Press.
  • Besanko, David, David Dranove, Scott Schaefer, and Mark Shanley (2009), “Economics of Strategy (Fifth Edition): International Student Version,” John Wiley & Sons.
  • Viscusi, Kip W., Joseph E. Harrington Jr., and John M. Vernon (2005), “Economics of Regulation and Antitrust (Fourth Edition),” MIT Press.



A 1-hour in-course exam (30%)
A 2-hour degree exam (April/May) (70%)