Complete course materials for Business & Industrial Economics in the Management Engineering degree programme at Politecnico di Milano. The document covers: BIE SOCIAL WELFARE, PUBLIC POLICY, CORPORATE POLITICAL ACTIVITY Welfare: collecting gains, learn how to measure the performance of business enterprise by including also customer. Public policy: impact of public policy, when market is not su cient the social aspect. A role of the
Complete course materials for Business & Industrial Economics in the Management Engineering degree programme at Politecnico di Milano. The document covers: BIE SOCIAL WELFARE, PUBLIC POLICY, CORPORATE POLITICAL ACTIVITY Welfare: collecting gains, learn how to measure the performance of business enterprise by including also customer. Public policy: impact of public policy, when market is not su cient the social aspect. A role of the
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BIE SOCIAL WELFARE, PUBLIC POLICY, CORPORATE POLITICAL ACTIVITY Welfare: collecting gains, learn how to measure the performance of business enterprise by including also customer. Public policy: impact of public policy, when market is not su cient the social aspect. A role of the government t to create e ciency that the normal business can produce Meaning of public policy Regulation means obligation, a compulsory measure introduce by government. CPA: where business enter the government and in uence it, economic e ciency; actions to in uence how government decisions are taken, no market strategy, actions outside the market Public policy is the way that government act on business, and business made act government decisions/measure through corporate political activity Sociali welfare: is a traditional microeconomic indicator used to measure the value generated in a market and distributed to its two key stakeholders: the customers and the rms (producers/owners) Business impact on pro t, to create performance (economic and nancial) Secondo type of e ect in the sector level (target customer, economic e ciency, measure with social welfare). It captures the sector-level impact of business activity, not just rm-level performance. Shareholder value: rm goal is to create value for shareholder, creating pro t as remuneration of shareholder. Shareholder and customer, by aggregating the gains received by them we de ne the welfare. The consumer surplus is the net bene t for customers, instead the producer surplus (o variable pro t) is the net bene t for producer Social welfare is represented by Capital W as indicator of the e ciency, and it is represented by the sum of the two gains, gains of customers and gains of producer. Welfare is de ned to capture the value generated, for the rm…
Today’s lesson Today business is increasingly called to demonstrate its impacts on the entire society and the natural environment. Why do we have to take a broader-picture approach? Why? Why do firms have to deal with stakeholders? Why do we have to assess the concept of sustainability in BIE? Who are the stakeholders? Who? Who are the internal and external stakeholders? Who are the primary and secondary stakeholders? What is the link between stakeholders and sustainability? What? What is the definition of sustainability and sustainable development? What instruments can be applied for sustainable development? How do we measure the impact of sustainability? How? 4 The multi-level impacts of business conducts Society level impact, multi level Business activities have cascading impact because it in uences impacts across multiple levels, multiple entities. Impacts has influencing local communities, consequence on the sustainability national economies, and global of society, so impacts in term of ecosystems and viceversa. economic, social and environmental perspective. All these elements depend on each other and understanding their interdependencies is essential for Businesses no longer operate in a contributing to a sustainable world vacuum (vuoto). Their activities where there is economic stability, have cascading, multi-level social well-being, and a safe impacts on corporate pro t, sector environment for all. e ciency, and overall societal and environmental well-being. 5 INTERCONNECTION: "No business is an island." we are in the condition all together, not just limited in national borders but spread everywhere; INTERDEPENDENCE: that led to strength and weaknesses of a business, consequences can also in uence other people. It describes when two or more international…
Example: c2 diminuisce in c2’ (riduzione dei costi), gra co precedente The equilibrium will move and the reaction curve of company 2 will be higher. If I reduce cost, I should improve the quantity, so produce more and increase the pro t, but this will reduce the quantity of the rm 1, so that rm 1 will reduce its pro t. If cost are homogenous, c1=c2, also quantity will be the same q1=q2, and also the pro t. And market price and quantity are in intermediate position in term of quantity between the monopoly and the best competition. Stackelberg model – the second-period subgame In the second period, firm 2 (the follower) maximizes its profit taking the quantity produced by firm 1 as given. For simplicity, homogeneous costs (c1 = c2 = c) are assumed. Here we are supposing that the cost are homogenous. Payoff function π2 q1, q2 = (a – bq1 − bq2) ∙ q2− cq2 = aq2– bq22 − bq1q2 − cq2 of firm 2: Profit maximization 𝜕π2 q1 , q2 0= = a − 2bq2 − bq1 − c condition for firm 2: 𝜕q2 Reaction function a −c 1 q2 = R2(q1) = − q1 for firm 2: 2b 2 Note: the reaction function of firm 2 is exactly the same as in the Cournot model competition. School of Management But when we have more than two rms, oligopoly (n>2) Need to nd the max pro t (pi-greco), with a di erent formula because either needs to contain all the sum of the quantity produce by the other rms, with homogenous costs Cournot model extension – varying N Profit maximization condition for one of the N firms (homogenous costs): Q=aggregate quantity π1 = p Q ∗ q1 − cq1 = [a − b(∑qi)] ∙ q1 – cq1 N q= quantity of a single rm i=1 N 𝜕π1 N see this as q1 + ∑qi maxπ1 = 0 = = a − 2bq1 − b∑qi − c i=2 Il pro tto complessivo diminuisce, sia quello q1 𝜕q1 i=2 1 della singola azienda, sia quello q a −c 1 N 2 (N−1) ∙ q dell’industria, perchè…
disadvantage. These barriers do not depend on the strategic behavior of incumbents. Incumbents simply and "innocently" exploit these pre-existing advantages to maximize their pro ts, without taking speci c, strategic actions to deter potential entrants or raise the barriers further. New entrants if there are no high entry barriers, but the possibility of new entrants to fail and incumbents not. Structural barrier: those disadvantages of the early comers, but advantages for this one who are already there. Four types of Structural Barriers barriers protect incumbents from new entrants: - Cost advantage : incumbents may have already secured the most e cient geographical locations (e.g., close to ports or freight airports) or the control of the most productive natural resources (e.g., oil reserves, mines). Consequently, new entrants are forced to settle for less pro table sites or less e cient resources, bearing systematically higher costs. - Law/ regulation: through exclusionary rights, the number of rm that can operated is set by law; Legal and regulatory frameworks, such as licenses or concessions (e.g., taxi medallions, spectrum licenses, zoned land for industrial development), inherently restrict entry. Entrants often have to bargain with the incumbents who already hold these rights. - Scale economy: the new entrant are smaller and they su er from high cost, because incumbents entered the market earlier, they usually operate at a larger scale, allowing them to enjoy lower average costs. New entrants are inevitably smaller at the beginning, forcing them to face higher average costs than established players. - Product di erentiation: incumbents bene t from an established reputation, strong brand image, and customer loyalty (e.g., traditional "national champions"). These…
Proprio per colpa di questa immensa quasi-rendita, si veri ca l'hold-up: il rischio che Ford sfrutti il fatto che tu sia "in trappola" a causa del tuo investimento speci co. Ford sa che sul mercato guadagneresti solo 4 € a pezzo. Quindi, decide di comportarsi in modo opportunistico e chiede di rinegoziare il contratto ribassando il prezzo, ad esempio, a 8 € (Pc_new). In questo modo Ford aumenterebbe i propri pro tti di 4 milioni di €, e tu saresti costretto ad accettare l'accordo al ribasso (subendo l'hold-up), perché vendere a Ford a 8 € è comunque meglio che vendere al mercato a 4 €. Perché Ford può infrangere i patti? Potresti chiederti perché Ford possa farlo nonostante esista un contratto scritto. La risposta risiede nell'incompletezza dei contratti. Essendo impossibile prevedere ogni evento futuro (razionalità limitata), Ford potrebbe trovare una scusa legittima, sostenendo ad esempio che le condizioni di mercato sono cambiate o che la qualità della tua plastica non rispetta più gli standard. Intentare una causa contro Ford sarebbe estremamente costoso e con un esito altamente incerto, rendendo l'accettazione del ricatto (l'hold-up) la tua unica mossa razionale. fi fi fi
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