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Managerial Economics: Applications, Strategies and Tactics 13th Edition by James R. McGuigan (Author), R. Charles Moyer (Author), Frederick H.deB. Harris (Author) EBOOK PDF Instant Download
Table of Content
Preface xix
About the Authors xxiii
PART I INTRODUCTION
1 Introduction and Goals of the Firm 2 (26)
Chapter Preview 2 (1)
Managerial Challenge: How to Achieve 2 (2)
Sustainability: Southern Company Electric
Power Generation
What Is Managerial Economics? 4 (1)
The Decision-Making Model 5 (1)
The Responsibilities of Management 5 (1)
What Went Right/What Went Wrong: Saturn 6 (1)
Corporation
Moral Hazard in Teams 6 (2)
The Role of Profits 8 (1)
Risk-Bearing Theory of Profit 8 (1)
Temporary Disequilibrium Theory of Profit 9 (1)
Monopoly Theory of Profit 9 (1)
Innovation Theory of Profit 9 (1)
Managerial Efficiency Theory of Profit 9 (1)
Objective of the Firm 9 (1)
The Shareholder Wealth-Maximization Model 10 (1)
of the Firm
Separation of Ownership and Control: The 11 (1)
Principal-Agent Problem
Divergent Objectives and Agency Conflict 11 (2)
Agency Problem 13 (2)
Implications of Shareholder Wealth 15 (1)
Maximization
What Went Right/What Went Wrong: Eli 15 (2)
Lilly Depressed by Loss of Prozac Patent
Caveats to Maximizing Shareholder Value 17 (2)
Residual Claimants 19 (1)
Goals in the Public Sector and 19 (1)
Not-for-Profit Enterprises
Not-for-Profit Objectives 20 (1)
The Efficiency Objective in 20 (1)
Not-for-Profit Organizations
Summary 21 (1)
Exercises 22 (1)
Case Exercise: Designing a Managerial 23 (1)
Incentives Contract
Case Exercise: Shareholder Value of 24 (4)
Renewable Energy from Wind Power at Hydro
Co.: Is RE < C?
2 Fundamental Economic Concepts 28 (35)
Chapter Preview 28 (1)
Managerial Challenge: Why Charge $25 per 28 (1)
Bag on Airline Flights?
Demand and Supply: A Review 29 (2)
The Diamond-Water Paradox and the 31 (1)
Marginal Revolution
Marginal Utility and Incremental Cost 32 (1)
Simultaneously Determine Equilibrium
Market Price
Individual and Market Demand Curves 33 (1)
The Demand Function 34 (2)
Import-Export Traded Goods 36 (1)
Individual and Market Supply Curves 37 (1)
Equilibrium Market Price of Gasoline 38 (5)
Marginal Analysis 43 (1)
Total, Marginal, and Average Relationships 44 (4)
The Net Present Value Concept 48 (1)
Determining the Net Present Value of an 48 (2)
Investment
Sources of Positive Net Present Value 50 (1)
Projects
Risk and the NPV Rule 51 (1)
Meaning and Measurement of Risk 52 (1)
Probability Distributions 52 (1)
Expected Values 53 (1)
Standard Deviation: An Absolute Measure 54 (1)
of Risk
Normal Probability Distribution 54 (2)
Coefficient of Variation: A Relative 56 (1)
Measure of Risk
What Went Right/What Went Wrong: 56 (1)
Long-Term Capital Management (LTCM)
Risk and Required Return 57 (2)
Summary 59 (1)
Exercises 59 (2)
Case Exercise: Revenue Management at 61 (2)
American Airlines
PART II DEMAND AND FORECASTING 63 (170)
3 Demand Analysis 64 (35)
Chapter Preview 64 (1)
Managerial Challenge: Health Care Reform 64 (2)
and Cigarette Taxes
Demand Relationships 66 (1)
The Demand Schedule Defined 66 (1)
Constrained Utility Maximization and 67 (4)
Consumer Behavior
What Went Right/What Went Wrong: Chevy 71 (1)
Volt
The Price Elasticity of Demand 72 (1)
Price Elasticity Defined 73 (3)
Interpreting the Price Elasticity: The 76 (6)
Relationship between the Price Elasticity
and Sales Revenue
The Importance of Elasticity-Revenue 82 (2)
Relationships
Factors Affecting the Price Elasticity of 84 (2)
Demand
International Perspectives: Free Trade 86 (1)
and the Price Elasticity of Demand:
Nestle Yogurt
The Income Elasticity of Demand 87 (1)
Income Elasticity Defined 87 (3)
Cross Elasticity of Demand 90 (1)
Cross Price Elasticity Defined 90 (1)
Interpreting the Cross Price Elasticity 90 (1)
Antitrust and Cross Price Elasticities 90 (2)
An Empirical Illustration of Price, 92 (1)
Income, and Cross Elasticities
The Combined Effect of Demand Elasticities 92 (1)
Summary 93 (1)
Exercises 94 (3)
Case Exercise: Polo Golf Shirt Pricing 97 (2)
4 Estimating Demand 99 (40)
Chapter Preview 99 (1)
Managerial Challenge: Demand for 99 (1)
Whitman’s Chocolate Samplers
Statistical Estimation of the Demand 100 (1)
Function
Specification of the Model 101 (2)
A Simple Linear Regression Model 103 (1)
Assumptions Underlying the Simple Linear 104 (1)
Regression Model
Estimating the Population Regression 105 (3)
Coefficients
Using the Regression Equation to Make 108 (2)
Predictions
Inferences about the Population 110 (3)
Regression Coefficients
Correlation Coefficient 113 (1)
The Analysis of Variance 114 (2)
Multiple Linear Regression Model 116 (1)
Use of Computer Programs 116 (1)
Estimating the Population Regression 116 (1)
Coefficients
Using the Regression Model to Make 116 (1)
Forecasts
Inferences about the Population 117 (2)
Regression Coefficients
The Analysis of Variance 119 (1)
Summary 120 (1)
Exercises 120 (4)
Case Exercise: Soft Drink Demand 124 (3)
Estimation
4A Problems in Applying the Linear 127 (1)
Regression Model
Introduction 127 (1)
Autocorrelation 127 (2)
Heteroscedasticity 129 (1)
Specification and Measurement Errors 130 (1)
Multicollinearity 131 (1)
Simultaneous Equation Relationships and 131 (3)
the Identification Problem
Nonlinear Regression Models 134 (1)
Semilogarithmic Transformation 134 (1)
Double-Log Transformation 134 (1)
Reciprocal Transformation 135 (1)
Polynomial Transformation 135 (1)
Summary 136 (1)
Exercises 136 (3)
5 Business and Economic Forecasting 139 (37)
Chapter Preview 139 (1)
Managerial Challenge: Excess Fiber Optic 139 (2)
Capacity at Global Crossing Inc.
The Significance of Forecasting 141 (1)
Selecting a Forecasting Technique 141 (1)
Hierarchy of Forecasts 141 (1)
Criteria Used to Select a Forecasting 142 (1)
Technique
Evaluating the Accuracy of Forecasting 142 (1)
Models
What Went Right/What Went Wrong: Crocs 142 (1)
Shoes
Alternative Forecasting Techniques 143 (1)
Deterministic Trend Analysis 143 (1)
Components of a Time Series 143 (1)
Some Elementary Time-Series Models 144 (1)
Secular Trends 145 (3)
Seasonal Variations 148 (2)
Smoothing Techniques 150 (1)
Moving Averages 151 (2)
First-Order Exponential Smoothing 153 (3)
Barometric Techniques 156 (1)
Leading, Lagging, and Coincident 156 (1)
Indicators
Survey and Opinion-Polling Techniques 157 (1)
Forecasting Macroeconomic Activity 158 (1)
Sales Forecasting 159 (1)
Econometric Models 159 (1)
Advantages of Econometric Forecasting 159 (1)
Techniques
Single-Equation Models 159 (2)
Multi-Equation Models 161 (1)
Consensus Forecasts: Livingston and Blue 162 (1)
Chip Forecaster Surveys
Stochastic Time-Series Analysis 163 (3)
Forecasting with Input-Output Tables 166 (1)
International Perspectives: Long-Term 166 (1)
Sales Forecasting by General Motors in
Overseas Markets
Summary 167 (1)
Exercises 167 (4)
Case Exercise: Cruise Ship Arrivals in 171 (1)
Alaska
Case Exercise: Lumber Price Forecast 172 (1)
Case Exercise: Forecasting in the Global 173 (3)
Financial Crisis
6 Managing in the Global Economy 176 (57)
Chapter Preview 176 (1)
Managerial Challenge: Financial Crisis 176 (3)
Slows U.S. Household Consumption and
Crushes Business Investment: Can Exports
to China Provide a Recovery?
Introduction 179 (1)
What Went Right/What Went Wrong: Export 180 (1)
Market Pricing at Toyota
Import-Export Sales and Exchange Rates 180 (1)
Foreign Exchange Risk 180 (2)
International Perspectives: Collapse of 182 (2)
Export and Domestic Sales at Cummins
Engine
Outsourcing 184 (2)
China Trade Blossoms 186 (2)
China Today 188 (2)
The Market for U.S. Dollars as Foreign 190 (1)
Exchange
Import-Export Flows and Transaction 190 (2)
Demand for a Currency
The Equilibrium Price of the U.S. Dollar 192 (1)
Speculative Demand, Government Transfers, 192 (1)
and Coordinated Intervention
Short-Term Exchange Rate Fluctuations 193 (1)
Determinants of Long-Run Trends in 193 (1)
Exchange Rates
The Role of Real Growth Rates 194 (2)
The Role of Real Interest Rates 196 (1)
The Role of Expected Inflation 197 (1)
Purchasing Power Parity 198 (1)
PPP Offers a Better Yardstick of 199 (1)
Comparative Size of Business Activity
What Went Right/What Went Wrong: Big Box 200 (1)
U.S. Retailers in China
Relative Purchasing Power Parity 201 (1)
Qualifications of PPP 202 (1)
The Appropriate Use of PPP: An Overview 202 (1)
What Went Right/What Went Wrong: GM, 203 (1)
Toyota, and the Celica GT-S Coupe
Trade-Weighted Exchange Rate Index 204 (3)
International Trade: A Managerial 207 (1)
Perspective
Shares of World Trade and Regional 207 (3)
Trading Blocs
Comparative Advantage and Free Trade 210 (2)
Import Controls and Protective Tariffs 212 (2)
The Case for Strategic Trade Policy 214 (2)
Increasing Returns 216 (1)
Network Externalities 216 (1)
Free Trade Areas: The European Union and 217 (1)
NAFTA
Optimal Currency Areas 218 (1)
Intraregional Trade 219 (1)
Mobility of Labor 219 (1)
Correlated Macroeconomic Shocks 219 (1)
Largest U.S. Trading Partners: The Role 220 (2)
of NAFTA
A Comparison of the EU and NAFTA 222 (1)
Gray Markets, Knockoffs, and Parallel 223 (1)
Importing
What Went Right/What Went Wrong: Ford 224 (1)
Motor Co. and Exide Batteries: Are
Country Managers Here to Stay?
Perspectives on the U.S. Trade Deficit 225 (2)
Summary 227 (1)
Exercises 228 (1)
Case Exercise: Predicting the Long-Term 229 (1)
Trends in Value of the U.S. Dollar and
the Euro
Case Exercise: Elaborate the Debate on 229 (2)
NAFTA
6A Foreign Exchange Risk Management 230 (1)
International Perspectives: Toyota and 231 (2)
Honda Buy U.S. Assembly Capacity
PART III PRODUCTION AND COST 233 (98)
7 Production Economics 234 (46)
Chapter Preview 234 (1)
Managerial Challenge: Green Power 234 (2)
Initiatives Examined: What Went Wrong in
California’s Deregulation of Electricity?
The Production Function 236 (1)
Fixed and Variable Inputs 237 (2)
Production Functions with One Variable 239 (1)
Input
Marginal and Average Product Functions 239 (1)
The Law of Diminishing Marginal Returns 240 (1)
What Went Right/What Went Wrong: Factory 241 (1)
Bottlenecks at a Boeing Assembly Plant
Increasing Returns with Network Effects 241 (2)
Producing Information Services under 243 (1)
Increasing Returns
The Relationship between Total, Marginal, 244 (2)
and Average Product
Determining the Optimal Use of the 246 (1)
Variable Input
Marginal Revenue Product 247 (1)
Marginal Factor Cost 247 (1)
Optimal Input Level 247 (1)
Production with Multiple Variable Inputs 248 (1)
Production (Output Constant) Isoquants 248 (2)
The Marginal Rate of Technical 250 (2)
Substitution
Determining the Optimal Combination of 252 (1)
Inputs
Isocost Lines 253 (1)
Minimizing Cost Subject to an Output 254 (1)
Constraint
A Fixed Proportions Optimal Production 255 (1)
Process
Production Processes and Process Rays 256 (1)
Measuring the Efficiency of a Production 257 (1)
Process
Returns to Scale 258 (1)
Measuring Returns to Scale 259 (1)
Increasing and Decreasing Returns to Scale 260 (1)
The Cobb-Douglas Production Function 260 (1)
Empirical Studies of the Cobb-Douglas 261 (1)
Production Function in Manufacturing
A Cross-Sectional Analysis of U.S. 261 (3)
Manufacturing Industries
Summary 264 (1)
Exercises 265 (3)
Case Exercise: The Production Function 268 (2)
for Wilson Company
7A Production Economics of Renewable 270 (1)
and Exhaustible Natural Resources,
Advanced Material
Renewable Resources 270 (4)
Exhaustible Natural Resources 274 (5)
Exercises 279 (1)
8 Cost Analysis 280 (25)
Chapter Preview 280 (1)
Managerial Challenge: Can a Leaner 280 (1)
General Motors Compete Effectively?
The Meaning and Measurement of Cost 281 (1)
Accounting versus Economic Costs 281 (1)
Three Contrasts between Accounting and 282 (4)
Economic Costs
Short-Run Cost and Product Functions 286 (1)
Average and Marginal Cost Functions 286 (5)
Long-Run Cost Functions 291 (1)
Optimal Capacity Utilization: Three 291 (1)
Concepts
Economies and Diseconomies of Scale 292 (1)
The Percentage of Learning 293 (3)
Diseconomies of Scale 296 (1)
The Overall Effects of Scale Economies 296 (1)
and Diseconomies
International Perspectives: How Japanese 297 (2)
Companies Deal with the Problems of Size
Summary 299 (1)
Exercises 300 (2)
Case Exercise: Cost Analysis of Patio 302 (2)
Furniture
Case Exercise: Profit Margins on the 304 (1)
Amazon Kindle
9 Applications of Cost Theory 305 (26)
Chapter Preview 305 (1)
Managerial Challenge: How Exactly Have 305 (1)
Computerization and Information
Technology Lowered Costs at Chevron,
Timken, and Merck?
Estimating Cost Functions 306 (1)
Issues in Cost Definition and Measurement 307 (1)
Controlling for Other Variables 307 (1)
The Form of the Empirical Cost-Output 308 (1)
Relationship
What Went Right/What Went Wrong: Boeing: 309 (1)
The Rising Marginal Cost of Wide-Bodies
Statistical Estimation of Short-Run Cost 310 (1)
Functions
Statistical Estimation of Long-Run Cost 311 (1)
Functions
Determining the Optimal Scale of an 311 (3)
Operation
Economies of Scale versus Economies of 314 (1)
Scope
Engineering Cost Techniques 314 (2)
The Survivor Technique 316 (1)
A Cautionary Tale 317 (1)
Break-Even Analysis 317 (1)
Graphical Method 318 (1)
Algebraic Method 318 (3)
Some Limitations of Break-Even Analysis 321 (1)
Doing a Break-Even versus a Contribution 321 (2)
Analysis
A Limitation of Contribution Analysis 323 (1)
Operating Leverage 323 (2)
Inherent Business Risk 325 (1)
Summary 325 (1)
Exercises 326 (1)
Case Exercise: Cost Functions 327 (1)
Case Exercise: Charter Airline Operating 328 (3)
Decisions
PART IV PRICING AND OUTPUT DECISIONS: 331 (216)
STRATEGY AND TACTICS
10 Prices, Output, and Strategy: Pure and 332 (50)
Monopolistic Competition
Chapter Preview 332 (1)
Managerial Challenge: Resurrecting Apple 332 (1)
in the Tablet World
Introduction 333 (1)
Competitive Strategy 334 (1)
What Went Right/What Went Wrong: Xerox 335 (1)
Generic Types of Strategies 336 (1)
Product Differentiation Strategy 336 (1)
Cost-Based Strategy 336 (1)
Information Technology Strategy 337 (2)
The Relevant Market Concept 339 (1)
Porter’s Five Forces Strategic Framework 339 (1)
The Threat of Substitutes 340 (1)
The Threat of Entry 341 (3)
The Power of Buyers and Suppliers 344 (1)
The Intensity of Rivalrous Tactics 345 (4)
The Myth of Market Share 349 (1)
A Continuum of Market Structures 349 (1)
Pure Competition 350 (1)
Monopoly 351 (1)
Monopolistic Competition 352 (1)
Oligopoly 352 (1)
Price-Output Determination under Pure 353 (1)
Competition
Short Run 353 (3)
Profit Maximization under Pure 356 (1)
Competition (Short Run): Adobe Corporation
Long Run 357 (3)
Price-Output Determination under 360 (1)
Monopolistic Competition
What Went Right/What Went Wrong: The 361 (1)
Dynamics of Competition at Amazon.com
Short Run 361 (1)
Long Run 361 (2)
Selling and Promotional Expenses 363 (1)
Determining the Optimal Level of Selling 364 (1)
and Promotional Outlays
Optimal Advertising Intensity 365 (1)
The Net Value of Advertising 366 (1)
Competitive Markets under Asymmetric 367 (1)
Information
Incomplete versus Asymmetric Information 367 (1)
Search Goods versus Experience Goods 368 (1)
Adverse Selection and the Notorious Firm 368 (2)
Insuring and Lending under Asymmetric 370 (1)
Information: Another Lemons Market
Solutions to the Adverse Selection Problem 371 (1)
Mutual Reliance: Hostage Mechanisms 371 (1)
Support Asymmetric Information Exchange
Brand-Name Reputations as Hostages 372 (2)
Price Premiums with Non-Redeployable 374 (2)
Assets
Summary 376 (1)
Exercises 377 (2)
Case Exercise: Netflix and Redbox Compete 379 (1)
for Movie Rentals
Case Exercise: Saving Sony Music 380 (2)
11 Price and Output Determination: Monopoly 382 (27)
and Dominant Firms
Chapter Preview 382 (1)
Managerial Challenge: Dominant 382 (1)
Microprocessor Company Intel Adapts to
Next Trend
Monopoly Defined 383 (1)
Sources of Market Power for a Monopolist 383 (1)
Increasing Returns from Network Effects 384 (3)
What Went Right/What Went Wrong: Pilot 387 (1)
Error at Palm
Price and Output Determination for a 388 (1)
Monopolist
Spreadsheet Approach: Profit versus 388 (1)
Revenue Maximization for Polo Golf Shirts
Graphical Approach 389 (1)
Algebraic Approach 390 (1)
The Importance of the Price Elasticity of 391 (2)
Demand
The Optimal Markup, Contribution Margin, 393 (2)
and Contribution Margin Percentage
Gross Profit Margins 395 (1)
Components of the Margin 395 (1)
Monopolists and Capacity Investments 396 (1)
Limit Pricing 397 (1)
Using Limit Pricing to Hamper the Sales 398 (1)
of Generic Drugs
Regulated Monopolies 399 (1)
Electric Power Companies 400 (1)
What Went Right/What Went Wrong: The 400 (1)
Public Service Company of New Mexico
Natural Gas Companies 401 (1)
The Economic Rationale for Regulation 401 (1)
Natural Monopoly Argument 401 (2)
Summary 403 (1)
Exercises 403 (4)
Case Exercise: Differential Pricing of 407 (2)
Pharmaceuticals: The HIV/AIDS Crisis
12 Price and Output Determination: Oligopoly 409 (35)
Chapter Preview 409 (1)
Managerial Challenge: Google’s Android 409 (2)
and Apple’s iPhone Displace Nokia in
Smart phones?
Oligopolistic Market Structures 411 (1)
Oligopoly in the United States: Relative 411 (5)
Market Shares
Interdependencies in Oligopolistic 416 (1)
Industries
The Cournot Model 416 (2)
Cartels and Other Forms of Collusion 418 (2)
Factors Affecting the Likelihood of 420 (1)
Successful Collusion
Cartel Profit Maximization and the 421 (2)
Allocation of Restricted Output
International Perspectives: The OPEC 423 (5)
Cartel
Cartel Analysis: Algebraic Approach 428 (2)
Price Leadership 430 (1)
Barometric Price Leadership 430 (1)
Dominant Firm Price Leadership 431 (3)
The Kinked Demand Curve Model 434 (1)
Avoiding Price Wars 435 (3)
What Went Right/What Went Wrong: 438 (2)
Good-Better-Best Product Strategy at
Marriott Corporation and Kodak
Summary 440 (1)
Exercises 441 (2)
Case Exercise: Web-Based Satellite Phones 443 (1)
Displace Motorola’s Mobile Phone
13 Best-Practice Tactics: Game Theory 444 (56)
Chapter Preview 444 (1)
Managerial Challenge: Large-Scale Entry 444 (2)
Deterrence of Low-Cost Discounters:
Southwest Airline/AirTran
Oligopolistic Rivalry and Game Theory 446 (1)
What Went Right/What Went Wrong: 446 (1)
Nintendo’s Wii U
A Conceptual Framework for Game Theory 447 (1)
Analysis
Components of a Game 448 (2)
Cooperative and Noncooperative Games 450 (1)
Other Types of Games 450 (1)
Analyzing Simultaneous Games 451 (1)
The Prisoner’s Dilemma 451 (2)
Dominant Strategy and Nash Equilibrium 453 (3)
Strategy Defined
The Escape from Prisoner’s Dilemma 456 (1)
Multiperiod Punishment and Reward Schemes 456 (1)
in Repeated Play Games
Unraveling and the Chain Store Paradox 457 (2)
Mutual Forbearance and Cooperation in 459 (1)
Repeated Prisoner’s Dilemma Games
Bayesian Reputation Effects 460 (1)
Winning Strategies in Evolutionary 460 (2)
Computer Tournaments: Tit for Tat
Price-Matching Guarantees 462 (2)
Industry Standards as Coordination Devices 464 (1)
Analyzing Sequential Games 465 (1)
A Sequential Coordination Game 466 (2)
Subgame Perfect Equilibrium in Sequential 468 (1)
Games
Business Rivalry as a Self-Enforcing 469 (1)
Sequential Game
First-Mover and Fast-Second Advantages 470 (2)
Credible Threats and Commitments 472 (1)
Mechanisms for Establishing Credibility 473 (2)
Replacement Guarantees 475 (1)
Hostages Support the Credibility of 476 (1)
Commitments
Credible Commitments of Durable Goods 477 (1)
Monopolists
Planned Obsolescence 478 (1)
Post-Purchase Discounting Risk 479 (2)
Lease Prices Reflect Anticipated Risks 481 (1)
Summary 481 (1)
Exercises 482 (5)
Case Exercise: International 487 (2)
Perspectives: The Superjumbo Dilemma
13A Entry Deterrence and Accommodation 489 (1)
Games
Excess Capacity as a Credible Threat 489 (1)
Precommitments Using Non-Redeployable 489 (3)
Assets
Customer Sorting Rules 492 (1)
A Role for Sunk Costs in Decision Making 493 (1)
Perfectly Contestable Markets 494 (1)
Brinkmanship and Wars of Attrition 495 (2)
Tactical Insights about Slippery Slopes 497 (1)
Summary 498 (1)
Exercises 499 (1)
14 Pricing Techniques and Analysis 500 (47)
Chapter Preview 500 (1)
Managerial Challenge: Pricing the Chevy 500 (1)
Volt
A Conceptual Framework for Proactive, 501 (3)
Systematic-Analytical, Value-Based Pricing
Optimal Differential Price Levels 504 (1)
Graphical Approach 505 (1)
Algebraic Approach 506 (1)
Multiple-Product Pricing Decision 507 (1)
Differential Pricing and the Price 508 (5)
Elasticity of Demand
Differential Pricing in Target Market 513 (1)
Segments
Direct Segmentation with “Fences” 514 (2)
Optimal Two-Part Tariffs 516 (1)
What Went Right/What Went Wrong: 516 (2)
Unlimited Data at Verizon Wireless
Couponing 518 (1)
What Went Right/What Went Wrong: Two-Part 518 (1)
Pricing at Disney World
What Went Right/What Went Wrong: 519 (1)
Price-Sensitive Customers Redeem
Bundling 519 (3)
Price Discrimination 522 (2)
Pricing in Practice 524 (1)
Product Life Cycle Framework 524 (2)
Full-Cost Pricing versus Incremental 526 (2)
Contribution Analysis
Pricing on the Internet 528 (3)
Summary 531 (1)
Exercises 532 (4)
14A The Practice of Revenue Management 535 (1)
A Cross-Functional Systems Management 536 (2)
Process
Sources of Sustainable Price Premiums 538 (1)
Revenue Management Decisions, Advanced 538 (1)
Material
Proactive Price Discrimination 539 (1)
Capacity Reallocation 540 (3)
Optimal Overbooking 543 (3)
Summary 546 (1)
Exercises 546 (1)
PART V ORGANIZATIONAL ARCHITECTURE AND 547
REGULATION
15 Contracting, Governance, and 548 (63)
Organizational Form
Chapter Preview 548 (1)
Managerial Challenge: Controlling the 548 (1)
Vertical: Ultimate TV versus Google TV
Introduction 549 (1)
The Role of Contracting in Cooperative 549 (2)
Games
Vertical Requirements Contracts 551 (1)
The Function of Commercial Contracts 552 (3)
Incomplete Information, Incomplete 555 (1)
Contracting, and Post-Contractual
Opportunism
Corporate Governance and the Problem of 555 (2)
Moral Hazard
What Went Right/What Went Wrong: 557 (1)
Forecasting the Great Recession with
Workouts and Rollovers
The Need for Governance Mechanisms 558 (1)
What Went Right/What Went Wrong: Moral 559 (1)
Hazard and Holdup at Enron and WorldCom
The Principal-Agent Model 559 (1)
The Efficiency of Alternative Hiring 559 (2)
Arrangements
Creative Ingenuity and the Moral Hazard 561 (2)
Problem in Managerial Contracting
Formalizing the Principal-Agent Problem 563 (1)
Screening and Sorting Managerial Talent 564 (1)
with Optimal Incentives Contracts
What Went Right/What Went Wrong: Why Have 565 (2)
Restricted Stock Grants Replaced
Executive Stock Options at Microsoft?
Choosing the Efficient Organizational Form 567 (3)
What Went Right/What Went Wrong: Cable 570 (1)
Allies Refuse to Adopt Microsoft’s WebTV
as an Industry Standard
International Perspectives: Economies of 571 (1)
Scale and International Joint Ventures in
Chip Making
Prospect Theory Motivates Full-Line 572 (2)
Forcing
Vertical Integration 574 (3)
What Went Right/What Went Wrong: Dell 577 (1)
Replaces Vertical Integration with
Virtual Integration
The Dissolution of Assets in a Partnership 577 (2)
Summary 579 (1)
Exercises 580 (1)
Case Exercise: Borders Books and 581 (1)
Amazon.com Decide to Do Business Together
Case Exercise: Designing a Managerial 582 (1)
Incentive Contract
Case Exercise: The Division of Investment 582 (1)
Banking Fees in a Syndicate
15A Auction Design and Information 583 (1)
Economics
Optimal Mechanism Design 583 (1)
Queue Service Rules 583 (1)
First-Come, First-Served versus 584 (1)
Last-Come, First-Served
Stratified Lotteries for Concerts 585 (1)
Auctions 586 (1)
Types of Auctions 586 (1)
Winner’s Curse in Asymmetric Information 587 (2)
Bidding Games
Information Revelation in Common-Value 589 (1)
Auctions
Bayesian Strategy with Open Bidding Design 590 (2)
Strategic Underbidding in Private-Value 592 (2)
Auctions
Second-Highest Sealed-Bid Auctions: A 594 (2)
Revelation Mechanism
Revenue Equivalence of Alternative 596 (2)
Auction Types
Contractual Approaches to Asymmetric 598 (2)
Information in Online Auctions
Incentive-Compatible Revelation Mechanisms 600 (1)
Cost Revelation in Joint Ventures and 600 (1)
Partnerships
Cost Overruns with Simple Profit-Sharing 601 (2)
Partnerships
Clarke-Groves Incentive-Compatible 603 (1)
Revelation Mechanism
An Optimal Incentives Contract 603 (1)
International Perspectives: Joint Venture 604 (1)
in Memory Chips: IBM, Siemens, and Toshiba
Implementation of IC Contracts 605 (1)
International Perspectives: Whirlpool’s 606 (1)
Joint Venture in Appliances Improves upon
Maytag’s Outright Purchase of Hoover
Summary 607 (1)
Exercises 608 (1)
Case Exercise: Spectrum Auction 609 (1)
Case Exercise: Debugging Computer 610 (1)
Software: Versioning at Intel
16 Government Regulation 611 (37)
Chapter Preview 611 (1)
Managerial Challenge: Cap and Trade, 611 (1)
Deregulation, and the Coase Theorem
The Regulation of Market Structure and 612 (1)
Conduct
Market Performance 613 (1)
Market Conduct 613 (1)
Contestable Markets 614 (1)
Antitrust Statutes and Their Regulatory 615 (1)
Enforcement
The Sherman Act (1890) 615 (1)
The Clayton Act (1914) 615 (1)
The Robinson-Patman Act (1936) 616 (1)
The Hart-Scott-Rodino Antitrust 617 (1)
Improvement Act (1976)
Antitrust Prohibition of Selected 618 (1)
Business Decisions
Collusion: Price Fixing 618 (2)
Mergers That Substantially Lessen 620 (1)
Competition
Merger Guidelines (2010) 621 (1)
Monopolization 621 (2)
Wholesale Price Discrimination 623 (1)
Refusals to Deal 624 (1)
Resale Price Maintenance Agreements 624 (1)
Command and Control Regulatory 625 (2)
Constraints: An Economic Analysis
The Deregulation Movement 627 (1)
What Went Right/What Went Wrong: The Need 627 (1)
for a Regulated Clearinghouse to Control
Counterparty Risk at AIG
Regulation of Externalities 628 (1)
Coasian Bargaining for Reciprocal 629 (1)
Externalities
Qualifications of the Coase Theorem 630 (1)
Impediments to Bargaining 631 (1)
Resolution of Externalities by Regulatory 632 (1)
Directive
Resolution of Externalities by Taxes and 633 (2)
Subsidies
Resolution of Externalities by Sale of 635 (1)
Pollution Rights: Cap and Trade
Governmental Protection of Business 635 (1)
Licensing and Permitting 635 (1)
Patents 636 (1)
The Optimal Deployment Decision: To 636 (1)
License or Not
Pros and Cons of Patent Protection and 637 (1)
Licensure of Trade Secrets
What Went Right/What Went Wrong: Delayed 638 (2)
Release at Aventis
What Went Right/What Went Wrong: 640 (1)
Technology Licenses Cost Palm Its Lead in
PDAs
What Went Right/What Went Wrong: 641 (1)
Motorola: What They Didn’t Know Hurt Them
Conclusion on Licensing 641 (1)
Summary 642 (1)
Exercises 643 (2)
Case Exercise: Do Luxury Good 645 (1)
Manufacturers Have a Legitimate Interest
in Minimum Resale Price Maintenance:
Leegin v. Kay’s Kloset?
Case Exercise: Microsoft Tying 646 (1)
Arrangements
Case Exercise: Music Recording Industry 647 (1)
Blocked from Consolidating
17 Long-Term Investment Analysis 648
Chapter Preview 648 (1)
Managerial Challenge: Industrial 648 (1)
Renaissance in America: Insourcing of GE
Appliances
The Nature of Capital Expenditure 649 (1)
Decisions
A Basic Framework for Capital Budgeting 650 (1)
The Capital Budgeting Process 650 (1)
Generating Capital Investment Projects 651 (1)
Estimating Cash Flows 651 (2)
Evaluating and Choosing the Investment 653 (3)
Projects to Implement
Estimating the Firm’s Cost of Capital 656 (1)
Cost of Debt Capital 657 (1)
Cost of Internal Equity Capital 657 (2)
Cost of External Equity Capital 659 (1)
Weighted Cost of Capital 659 (1)
Cost-Benefit Analysis 660 (1)
Accept-Reject Decisions 661 (1)
Program-Level Analysis 662 (1)
Steps in Cost-Benefit Analysis 662 (2)
Objectives and Constraints in 664 (1)
Cost-Benefit Analysis
Analysis and Valuation of Benefits and 665 (1)
Costs
Direct Benefits 665 (1)
Direct Costs 665 (1)
Indirect Costs or Benefits and Intangibles 665 (1)
The Appropriate Rate of Discount 666 (1)
Cost-Effectiveness Analysis 667 (1)
Least-Cost Studies 667 (1)
Objective-Level Studies 668 (1)
Summary 668 (1)
Exercises 669 (3)
Case Exercise: Industrial Development Tax 672 (1)
Relief and Incentives
Case Exercise: Multigenerational Effects 673
of Ozone Depletion and Greenhouse Gases
Appendices
A The Time Value of Money 1 (1)
B Differential Calculus Techniques in 1 (1)
Management
C Tables 1 (1)
D Check Answers to Selected 1 (1)
End-of-Chapter Exercises
Glossary 1 (1)
Index
