Managerial Economics, 6th Edition
September 2009, ©2009
In addition to its inclusion of real-world applications and problems, The 6th Edition has been revised to incorporate up-to-date coverage of international topics and e-commerce. This new edition offers the framework and economics tools necessary to prepare students for better decision-making in a future managerial role.
Seven Examples Of Managerial Decisions.
Six Steps To Decision Making.
Step 1: Define the Problem.
Step 2: Determine the Objective.
Step 3: Explore the Alternatives.
Step 4: Predict the Consequences.
Step 5: Make a Choice.
Step 6: Perform Sensitivity Analysis.
Private And Public Decisions: An Economic View.
Things To Come.
The Aim of This Book.
Section I. Decisions Within Firms.
Chapter 2. Optimal Decisions Using Marginal Analysis.
Siting a Shopping Mall.
A Simple Model Of The Firm.
A Microchip Manufacturer.
Marginal Analysis and Calculus.
Marginal Revenue And Marginal Cost.
Profit Maximization Revisited.
Asking What if.
Appendix To Chapter 2: Calculus And Optimization Techniques.
Special Appendix To Chapter 2: Optimization Using Spreadsheets.
Chapter 3. Demand Analysis And Optimal Pricing.
Determinants Of Demand.
The Demand Function.
The Demand Curve and Shifting Demand.
General Determinants of Demand.
Elasticity Of Demand.
Price Elasticity and Prediction.
Demand Analysis And Optimal Pricing.
Price Elasticity, Revenue, and Marginal Revenue.
Optimal Markup Pricing.
Appendix To Chapter 3: Consumer Preferences And Demand.
Chapter 4. Estimating and Forecasting Demand.
Controlled Market Studies.
Uncontrolled Market Data.
Ordinary Least-Squares Regression.
Interpreting Regression Statistics.
Potential Problems in Regression.
Choosing a Regression Equation.
Fitting a Simple Trend.
Appendix To Chapter 4: Regression Using Spreadsheets.
Special Appendix To Chapter 4: Statistical Tables.
Chapter 5. Production.
Basic Production Concepts.
Production With One Variable Input.
Short-Run and Long-Run Production.
Optimal Use of an Input.
Production In The Long Run.
Returns to Scale.
Measuring Production Functions.
Production with Fixed Proportions.
The Cobb-Douglas Function.
Estimating Production Functions.
Other Production Decisions.
Chapter 6. Cost Analysis.
Opportunity Costs and Economic Profits.
Fixed and Sunk Costs.
Profit Maximization with Limited Capacity: Ordering a Best Seller.
The Cost Of Production.
Returns To Scale And Scope.
Returns to Scale.
Economies of Scope.
Cost Analysis And Optimal Decisions.
A Single Product.
The Shut-Down Rule.
Appendix To Chapter 6: Transfer Pricing.
Special Appendix To Chapter 6: Short-Run And Long-Run Costs.
Section II. Competing Within Markets.
Chapter 7. Perfect Competition.
The Basics Of Supply And Demand.
Decisions of the Competitive Firm.
Private Markets: Benefits and Costs.
Chapter 8. Monopoly.
Barriers to Entry.
Perfect Competition Versus Pure Monopoly.
Chapter 9. Oligopoly.
Concentration And Prices.
A Dominant Firm.
Competition Among Symmetric Firms.
Price Rigidity And Kinked Demand.
Price Wars And The Prisoner's Dilemma.
Other Dimensions Of Competition.
Appendix To Chapter 9: Tying And Bundling.
Chapter 10. Game Theory And Competitive Strategy.
Sizing Up Competitive Situations.
Analyzing Payoff Tables.
Appendix To Chapter 10: Mixed Strategies.
Chapter 11. Regulation, Public Goods, And Benefit-Cost Analysis.
I. Market Failures And Regulation.
Market Failure Due To Monopoly.
Market Failure Due To Externalities.
Subsidizing Positive Externalities.
Market Failure Due To Imperfect Information.
II. Benefit-Cost Analysis And Public Goods Provision.
Public Goods And Efficiency.
The Basics Of Benefit-Cost Analysis.
Applying The Net Benefit Rule.
Efficiency Versus Equity.
Evaluating A Public Project.
Public Investment In A Bridge.
Valuing Benefits And Costs.
Nonmarketed Benefits And Costs.
Section III. Decision-Making Applications.
Chapter 12. Decision Making Under Uncertainty.
Uncertainty, Probability, And Expected Value.
An Oil Drilling Problem.
Features Of The Expected-Value Criterion.
Expected Utility And Risk Aversion.
Chapter 13. The Value Of Information.
The Value Of Information.
The Oil Wildcatter Revisited.
Predicting Credit Risks.
Business Behavior And Decision Pitfalls.
Optimal Sequential Decisions.
The Value Of Additional Alternatives.
Chapter 14. Asymmetric Information And Organizational Design.
Principals, Agents, And Moral Hazard.
The Nature Of The Firm.
The Breadth Of The Firm.
Assigning Decision-Making Responsibilities.
Monitoring And Rewarding Performance.
Separation Of Ownership And Control In The Modern Corporation.
Appendix To Chapter 14: A Principal-Agent Model.
Chapter 15. Bargaining And Negotiation.
The Economic Sources Of Beneficial Agreements.
Differences In Values.
Chapter 16. Actions And Competitive Bidding.
The Advantages Of Auctions.
English And Dutch Auctions.
Common Values And The Winner's Curse.
Expected Auction Revenue.
Chapter 17. Linear Programming.
Graphing The LP Problem.
A Minimization Problem.
Sensitivity Analysis And Shadow Prices.
Changes In The Objective Function.
Formulation And Computer Solution.
For Larger LP Problems.
Answers To Odd-Numbered Questions.
- New Discussions and Analysis of E-Commerce. Examines the economics of information goods, e-commerce, and the Internet. Applications appear throughout the text in Chapter 3 (demand), Chapter 6 (cost), Chapters 7 and 9 (competitive effects), and Chapter 14 (organization of the firm).
- Updated and Expanded Coverage of International Topics and Applications.
- New Application Feature: Business Behavior. The authors provide numerous assessments (based on cutting edge research findings) of real-world decision making behavior, noting the most common pitfalls to avoid.
- Updated applications. Applications and decision-making examples are central to this book. Many have been updated in this edition.
- Revised and Updated End-of-Chapter Problems. These range from basic to advanced problems and also include wide-ranging discussion questions.
- Revamped Organization. Working hard to focus student attention on the most important economic and decision making principles, the text is a slim 17 chapters.
- Extensive decision-making examples. These include:
- Pricing airline seats (Chapter 3)
- Producing auto parts (Chapter 5)
- Choosing between risky research and development projects (Chapter 12)
- Negotiating David Letterman’s contract (Chapter 15)
- Decision Making Under Uncertainty. Managerial success depends on making decisions that involve risk and uncertainty. Chapter 12 shows how decision trees can be used to structure decisions in high-risk environments. Chapter 13 examines the value of acquiring information about relevant risks, including optimal search strategies.
- Game Theory illuminates the firm’s strategic choices. Game-theoretic principles are essential to understanding strategic behavior. An entire chapter (Chapter 10) is devoted to this topic.
- End-of-Chapter Spreadsheet Problems offer a powerful way of portraying economic decisions and finding optimal solutions. Spreadsheet problems are provided in 15 chapters.
- Real-world applications throughout the text.