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Tables of Contents for Managerial Economics and Business Strategy Domestic
Chapter/Section Title
Page #
Page Count
The Fundamentals of Managerial Economics
1
32
Headline: Amcott Loses $3.5 Million; Manager Fired
1
1
Introduction
1
3
The Manager
3
1
Economics
3
1
Managerial Economics Defined
4
1
The Economics of Effective Management
4
4
Identify Goals and Constraints
4
1
Recognize the Nature and Importance of Profits
5
1
Economic Versus Accounting Profits
5
2
The Role of Profits
7
1
Understand Incentives
8
2
Understand Markets
10
2
Consumer--Producer Rivalry
10
1
Consumer--Consumer Rivalry
11
1
Producer--Producer Rivalry
11
1
Government and the Market
12
1
Recognize the Time Value of Money
12
6
Present Value Analysis
12
3
The Value of the Firm
15
3
Use Marginal Analysis
18
6
Discrete Decisions
18
3
Continuous Decisions
21
2
Incremental Decisions
23
1
Learning Managerial Economics
24
1
Answering the Headline
25
1
Key Terms and Concepts
26
1
Problems
26
4
Selected Readings
30
1
Appendix: The Calculus of Maximizing Net Benefits
31
2
Inside Business 1--1: What Are the Goals of Firms?
7
2
Inside Business 1--2: Profits and the Computer Industry
9
4
Inside Business 1--3: The Five Forces Model: The Link Between Strategic Management and Managerial Economics
13
3
Inside Business 1--4: Joining the Jet Set
16
17
Market Forces: Demand and Supply
33
36
Headline: Samsung and Hyundai Electronics to Cut Chip Production
33
1
Introduction
33
1
Demand
34
9
Demand Shifters
35
1
Income
36
1
Prices of Related Goods
36
2
Advertising and Consumer Tastes
38
1
Population
38
1
Consumer Expectations
39
1
Other Factors
39
1
The Demand Function
39
2
Consumer Surplus
41
2
Supply
43
7
Supply Shifters
44
1
Input Prices
44
1
Technology or Government Regulations
44
1
Number of Firms
45
1
Substitutes in Production
45
1
Taxes
45
1
Producer Expectations
46
1
The Supply Function
47
2
Producer Surplus
49
1
Market Equilibrium
50
2
Price Restrictions and Market Equilibrium
52
5
Price Ceilings
52
4
Price Floors
56
1
Comparative Statics
57
6
Changes in Demand
58
2
Changes in Supply
60
1
Simultaneous Shifts in Supply and Demand
61
2
Answering the Headline
63
1
Summary
64
1
Key Terms and Concepts
64
1
Problems
65
3
Selected Readings
68
1
Inside Business 2--1: Asahi Breweries Ltd. and the Asian Recession
37
8
Inside Business 2--2: NAFTA and the Supply Curve
45
14
Inside Business 2--3: Changes in Indonesian Incomes and the Market for Clone PCs
59
10
Quantitative Demand Analysis
69
44
Headline: Winners of Wireless Auction to Pay $7 Billion
69
1
Introduction
70
1
Elasticities of Demand
70
1
Own Price Elasticity
71
10
Elasticity and Total Revenue
72
3
Factors Affecting the Own Price Elasticity
75
1
Available Substitutes
75
3
Time
78
1
Expenditure Share
78
1
Marginal Revenue and the Own Price Elasticity of Demand
79
2
Cross-Price Elasticity
81
3
Income Elasticity
84
2
Other Elasticities
86
1
Obtaining Elasticities from Demand Functions
87
6
Elasticities for Linear Demand Functions
87
2
Elasticities for Nonlinear Demand Functions
89
4
Regression Analysis
93
10
Evaluating the Statistical Significance of Estimated Coefficients
96
1
Confidence Intervals
96
1
The t-Statistic
97
1
Evaluating the Overall Fit of the Regression Line
98
1
The R-Square
98
1
The F-Statistic
99
1
Nonlinear and Multiple Regressions
100
1
Nonlinear Regressions
100
1
Multiple Regression
101
2
Answering the Headline
103
2
Summary
105
1
Key Terms and Concepts
105
1
Problems
106
6
Selected Readings
112
1
Inside Business 3--1: Calculating and Using the Arc Elasticity: An Application to the Housing Market
76
3
Inside Business 3--2: GM's Pricing Strategy for the Saturn
79
4
Inside Business 3--3: Using Cross-Price Elasticities to Improve New Car Sales in the Wake of Increasing Gasoline Prices
83
30
The Theory of Individual Behavior
113
39
Headline: Packaging Firm Uses Overtime Pay to Overcome Labor Shortage
113
1
Introduction
113
1
Consumer Behavior
114
3
Constraints
117
7
The Budget Constraint
117
5
Changes in Income
122
1
Changes in Prices
123
1
Consumer Equilibrium
124
2
Comparative Statics
126
6
Price Changes and Consumer Behavior
126
1
Income Changes and Consumer Behavior
127
2
Substitution and Income Effects
129
3
Applications of Indifference Curve Analysis
132
10
Choices by Consumers
132
1
Buy One, Get One Free
132
2
Cash Gifts, In-Kind Gifts, and Gift Certificates
134
4
Choices by Workers and Managers
138
1
A Simplified Model of Income-Leisure Choice
138
1
The Decisions of Managers
139
3
The Relationship Between Indifference Curve Analysis and Demand Curves
142
2
Individual Demand
142
1
Market Demand
143
1
Answering the Headline
144
1
Summary
145
1
Key Terms and Concepts
146
1
Problems
146
3
Selected Readings
149
1
Appendix: A Calculus Approach to Individual Behavior
150
2
Inside Business 4--1: Indifference Curves and Risk Preferences
119
11
Inside Business 4--2: Price Changes and Inventory Management for Multiproduct Firms
130
2
Inside Business 4--3: Income Effects and the Business Cycle
132
2
Inside Business 4--4: Are AT&T Wireless Customers In for a Busy Signal?
134
18
The Production Process and Costs
152
49
Headline: GM and UAW Butt Heads over jobs
152
1
Introduction
153
1
The Production Function
153
22
Short-Run Versus Long-Run Decisions
153
2
Measures of Productivity
155
1
Total Product
156
1
Average Product
156
1
Marginal Product
157
2
The Role of the Manager in the Production Process
159
1
Produce on the Production Function
159
1
Use the Right Level of Inputs
159
3
Algebraic Forms of Production Functions
162
1
Algebraic Measures of Productivity
163
2
Isoquants
165
3
Isocosts
168
3
Cost Minimization
171
2
Optimal Input Substitution
173
2
The Cost Function
175
13
Short-Run Costs
176
2
Average and Marginal Costs
178
2
Relations Among Costs
180
2
Fixed and Sunk Costs
182
1
Algebraic Forms of Cost Functions
183
1
Long-Run Costs
184
2
Economies of Scale
186
1
A Reminder: Economic Costs Versus Accounting Costs
187
1
Multiple-Output Cost Functions
188
3
Economies of Scope
188
1
Cost Complementarity
188
3
Answering the Headline
191
1
Summary
191
1
Key Terms and Concepts
192
1
Problems
192
5
Selected Readings
197
1
Appendix: The Calculus of Production and Costs
198
3
Inside Business 5--1: Where Does Technology Come From?
154
15
Inside Business 5--2: A Cobb-Douglas Production Function for Water Desalination
169
7
Inside Business 5--3: Fringe Benefits and Input Substitution
176
25
The Organization of the Firm
201
36
Headline: Incentives at Saturn: Will a New Kind of Car Company Continue to Roll?
201
1
Introduction
202
1
Methods of Procuring Inputs
203
2
Purchase the Inputs Using Spot Exchange
203
1
Acquire Inputs Under a Contract
204
1
Produce the Inputs Internally
204
1
Transaction Costs
205
5
Types of Specialized Investments
206
1
Site Specificity
206
1
Physical-Asset Specificity
206
1
Dedicated Assets
207
1
Human Capital
207
1
Implications of Specialized Investments
207
1
Costly Bargaining
207
1
Underinvestment
208
1
Opportunism and the ``Hold-Up Problem''
208
2
Optimal Input Procurement
210
8
Spot Exchange
210
1
Contracts
211
4
Vertical Integration
215
1
The Economic Trade-Off
216
2
Managerial Compensation and the Principal-Agent Problem
218
3
Forces That Discipline Managers
221
3
Incentive Contracts
221
1
External Incentives
222
1
Reputation
222
1
Takeovers
223
1
The Manager-Worker Principal-Agent Problem
224
4
Solutions to the Manager-Worker Principal-Agent Problem
224
1
Profit Sharing
224
1
Revenue Sharing
224
2
Piece Rates
226
1
Time Clocks and Spot Checks
227
1
Answering the Headline
228
1
Summary
228
1
Key Terms and Concepts
229
1
Problems
229
3
Selected Readings
232
1
Appendix: An Indifference Curve Approach to Managerial Incentives
233
4
Inside Business 6--1: The Cost of Using an Inefficient Method of Procuring Inputs
209
6
Inside Business 6--2: Factors Affecting the Length of Coal and Natural-Gas Contracts
215
4
Inside Business 6--3: The Evolution of Input Decisions in The Automobile Industry
219
4
Inside Business 6--4: Compensation in Fast Food Restaurants
223
2
Inside Business 6--5: What are Profits Worth to CEO's?
225
1
Inside Business 6--6: Incentive Based Contracts for School Superintendents
226
11
The Nature of Industry
237
31
Headline: Microsoft Puts Halt to Merger Plans
237
1
Introduction
237
1
Market Structure
238
12
Firm Size
238
1
Industry Concentration
239
1
Measures of Industry Concentration
240
1
The Concentration of U.S. Industry
241
2
Limitations of Concentration Measures
243
1
Global Markets
243
1
National, Regional, and Local Markets
243
1
Industry Definitions and Product Classes
243
1
Technology
244
2
Demand and Market Conditions
246
2
Potential for Entry
248
2
Conduct
250
6
Pricing Behavior
250
2
Integration and Merger Activity
252
1
Vertical Integration
252
1
Horizontal Integration
252
1
Conglomerate Mergers
253
1
Trends in Mergers, Takeovers, and Acquisitions
253
2
Research and Development
255
1
Advertising
256
1
Performance
256
2
Profits
256
1
Social Welfare
256
2
The Structure-Conduct-Performance Paradigm
258
1
The Causal View
258
1
The Feedback Critique
258
1
Overview of the Remainder of the Book
259
3
Perfect Competition
259
1
Monopoly
259
1
Monopolistic Competition
260
1
Oligopoly
260
2
Answering the Headline
262
1
Summary
262
1
Key Terms and Concepts
263
1
Problems
263
2
Selected Readings
265
1
Appendix: Data Sources for Managers
266
2
Inside Business 7--1: The North American Industry Classification System (NAICS)
245
4
Inside Business 7--2: The Elasticity of Demand at the Firm and Market Levels
249
5
Inside Business 7--3: The Language of Corporate Takeovers
254
6
Inside Business 7--4: The Evolution of Market Structure in the Computer Industry
260
8
Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets
268
51
Headline: No Profits, No Cake for Japanese VCR Makers
268
1
Introduction
268
1
Perfect Competition
268
14
Demand at the Market and the Firm
270
1
Short-Run Output Decisions
270
1
Maximizing Profits
271
4
Minimizing Losses
275
1
Short-Run Operating Losses
275
1
The Decision to Shut Down
276
2
The Short-Run Firm and Industry Supply Curves
278
1
Long-Run Decisions
279
3
Monopoly
282
19
Monopoly Power
282
2
Sources of Monopoly Power
284
1
Economies of Scale
284
1
Economies of Scope
285
1
Cost Complementarity
286
1
Patents and Other Legal Barriers
287
1
Maximizing Profits
288
1
Marginal Revenue
288
5
The Output Decision
293
4
The Absence of a Supply Curve
297
1
Multiplant Decisions
297
2
Implications of Entry Barriers
299
2
Monopolistic Competition
301
6
Conditions for Monopolistic Competition
301
1
Profit Maximization
301
3
Long-Run Equilibrium
304
2
Implications of Product Differentiation
306
1
Optimal Advertising Decisions
307
2
Answering the Headline
309
1
Summary
310
1
Key Terms and Concepts
310
1
Problems
310
5
Selected Readings
315
1
Appendix: The Calculus of Profit Maximization
316
1
Appendix: The Algebra of Perfectly Competitive Supply Functions
317
2
Inside Business 8--1: Competition in the Poultry Market
282
4
Inside Business 8--2: Minimum Efficient Scale and Monopoly Power
286
3
Inside Business 8--3: Factors That Affect Technological Progress
289
30
Basic Oligopoly Models
319
39
Headline: Crude Oil Prices Fall, but Consumers in Some Areas See No Relief at the Pump
319
1
Introduction
319
1
Conditions for Oligopoly
320
1
The Role of Beliefs and Strategic Interaction
320
2
Profit Maximization in Four Oligopoly Settings
322
21
Sweezy Oligopoly
322
2
Cournot Oligopoly
324
1
Reaction Functions and Equilibrium
324
7
Isoprofit Curves
331
3
Changes in Marginal Costs
334
1
Collusion
335
1
Stackelberg Oligopoly
336
6
Bertrand Oligopoly
342
1
Comparing Oligopoly Models
343
5
Cournot
345
1
Stackelberg
346
1
Bertrand
346
1
Collusion
346
2
Contestable Markets
348
1
Answering the Headline
349
1
Summary
350
1
Key Terms and Concepts
351
1
Problems
351
4
Selected Readings
355
1
Appendix: Differentiated-Product Bertrand Oligopoly
356
2
Inside Business 9--1: Using Experiments to Understand Oligopoly Behavior
329
11
Inside Business 9--2: Stackelberg Oligopoly and International Trade
340
4
Inside Business 9--3: Managerial Compensation in Bertrand and Cournot Oligopoly
344
3
Inside Business 9--4: Using a Spreadsheet to Calculate Cournot, Stackelberg, and Collusive Outcomes
347
11
Game Theory: Inside Oligopoly
358
44
Headline: Airline Seeks Government Regulation of Carry-On Baggage
358
1
Introduction
359
1
Overview of Games and Strategic Thinking
359
1
Simultaneous-Move, One-Short Games
360
12
Theory
360
4
Applications of One-Shot Games
364
1
Pricing Decisions
364
1
Advertising and Quality Decisions
365
2
Coordination Decisions
367
1
Monitoring Employees
368
2
Nash Bargaining
370
2
Infinitely Repeated Games
372
8
Theory
372
1
Review of Present Value
372
1
Supporting Collusion with Trigger Strategies
373
3
Factors Affecting Collusion in Pricing Games
376
1
Number of Firms
376
1
Firm Size
376
1
History of the Market
377
1
Punishment Mechanisms
378
1
An Application of Infinitely Repeated Games to Product Quality
378
2
Finitely Repeated Games
380
6
Games with an Uncertain Final Period
380
3
Repeated Games with a Known Final Period: The End-of-Period Problem
383
2
Applications of the End-of-Period Problem
385
1
Resignations and Quits
385
1
The ``Snake-Oil'' Salesman
386
1
Multistage Games
386
8
Theory
386
3
Applications of Multistage Games
389
1
The Entry Game
389
1
Innovation
390
1
Sequential Bargaining
391
3
Answering the Headline
394
1
Summary
395
1
Key Terms and Concepts
395
1
Problems
396
5
Selected Readings
401
1
Inside Business 10--1: Coordinating Activities: How Hard Is It?
368
9
Inside Business 10--2: Trigger Strategies in the Waste Industry
377
2
Inside Business 10--3: Collusion on NASDAQ?
379
23
Pricing Strategies for Firms with Market Power
402
37
Headline: Mickey Mouse Lets You Ride ``For Free'' at Disney World
402
1
Introduction
402
1
Basic Pricing Strategies
403
6
Review of the Basic Rule of Profit Maximization
403
1
A Simple Pricing Rule for Monopoly and Monopolistic Competition
404
3
A Simple Pricing Rule for Cournot Oligopoly
407
2
Strategies That Yield Even Greater Profits
409
23
Extracting Surplus from Consumers
410
1
Price Discrimination
410
5
Two-Part Pricing
415
3
Block Pricing
418
2
Commodity Bundling
420
2
Pricing Strategies for Special Cost and Demand Structures
422
1
Peak-Load Pricing
423
1
Cross Subsidies
424
1
Transfer Pricing
425
2
Pricing Strategies in Markets with Intense Price Competition
427
1
Price Matching
427
3
Inducing Brand Loyalty
430
1
Randomized Pricing
430
2
Answering the Headline
432
1
Summary
433
1
Key Terms and Concepts
433
1
Problems
433
5
Selected Readings
438
1
Inside Business 11--1: Pricing Markups as Rules of Thumb
405
24
Inside Business 11--2: The Prevalence of Price-Matching Policies and Other Low-Price Guarantees
429
2
Inside Business 11--3: Randomized Pricing in the Airline Industry
431
8
The Economics of Information
439
40
Headline: Firm Chickens Out in the FCC Spectrum Auction
439
1
Introduction
439
1
The Mean and the Variance
440
3
Uncertainty and Consumer Behavior
443
7
Risk Aversion
443
1
Managerial Decisions with Risk-Averse Consumers
444
1
Product Quality
444
1
Chain Stores
445
2
Insurance
447
1
Consumer Search
447
3
Uncertainty and the Firm
450
5
Risk Aversion
450
3
Producer Search
453
1
Profit-Maximization
454
1
Uncertainty and the Market
455
7
Asymmetric Information
455
2
Adverse Selection
457
1
Moral Hazard
458
1
Signaling and Screening
459
3
Auctions
462
12
Types of Auctions
463
1
English Auctions
463
1
First Price, Sealed-Bid Auction
463
1
Second-Price, Sealed-Bid Auction
464
1
Dutch Auction
464
1
Information Structures
464
1
Independent Private Values
465
1
Correlated Value Estimates
465
1
Optimal Bidding Strategies for Risk-Neutral Bidders
466
1
Strategies for Independent Private Values Auctions
466
3
Strategies for Correlated Values Auctions
469
2
Expected Revenues in Alternative Types of Auctions
471
3
Answering the Headline
474
1
Summary
474
1
Key Terms and Concepts
475
1
Problems
475
3
Selected Readings
478
1
Inside Business 12--1: The Likelihood of Business Failure
445
1
Inside Business 12--2: Risk Aversion and the Value of Selling the Firm: The St. Petersburg Paradox
446
7
Inside Business 12--3: Searching for Workers
453
19
Inside Business 12--4: Auctions with risk-Averse Bidders
472
1
Inside Business 12--5: Uncertainty and Real Estate Foreclosure Sales
473
6
A Manager's Guide to Government in the Marketplace
479
36
Headline: Justice Department Settles Price-Fixing Case Involving Eight Major Airlines
479
1
Introduction
479
1
Market Failure
480
22
Market Power
480
1
Antitrust Policy
481
4
Price Regulation
485
3
Externalities
488
2
The Clean Air Act
490
3
Public Goods
493
5
Incomplete Information
498
1
Rules Against Insider Trading
498
1
Certification
499
1
Truth in Lending
500
1
Truth in Advertising
500
1
Enforcing Contracts
501
1
Rent Seeking
502
2
Government Policy and International Markets
504
6
Quotas
504
2
Tariffs
506
1
Lump-Sum Tariffs
507
1
Excise Tariffs
507
3
Answering the Headline
510
1
Summary
510
1
Key Terms and Concepts
511
1
Problems
511
3
Selected Readings
514
1
Inside Business 13--1: False Advertisements
501
8
Inside Business 13--2: Motorcycle Tariffs
509
6
Appendix A Answers to Selected End-of-Chapter Problems
515
9
Appendix B Additional Readings and References
524
19
Name Index
543
6
General Index
549