Textbook
Managerial Economics, 6th EditionSeptember 2009, ©2009

In addition to its inclusion of realworld applications and problems, The 6^{th} Edition has been revised to incorporate uptodate coverage of international topics and ecommerce. This new edition offers the framework and economics tools necessary to prepare students for better decisionmaking 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.
Marginal Analysis and Calculus.
Marginal Revenue And Marginal Cost.
Marginal Revenue.
Marginal Cost.
Profit Maximization Revisited.
Sensitivity Analysis.
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.
Other Elasticities.
Price Elasticity and Prediction.
Demand Analysis And Optimal Pricing.
Price Elasticity, Revenue, and Marginal Revenue.
Maximizing Revenue.
Optimal Markup Pricing.
Price Discrimination.
Information Goods.
Appendix To Chapter 3: Consumer Preferences And Demand.
Chapter 4. Estimating and Forecasting Demand.
Collecting Data.
Consumer Surveys.
Controlled Market Studies.
Uncontrolled Market Data.
Regression Analysis.
Ordinary LeastSquares Regression.
Interpreting Regression Statistics.
Potential Problems in Regression.
Choosing a Regression Equation.
Forecasting.
TimeSeries Models.
Fitting a Simple Trend.
Barometric Models.
Forecasting Performance.
Final Thoughts.
Appendix To Chapter 4: Regression Using Spreadsheets.
Special Appendix To Chapter 4: Statistical Tables.
Chapter 5. Production.
Basic Production Concepts.
Production Technology.
Production With One Variable Input.
ShortRun and LongRun Production.
Optimal Use of an Input.
Production In The Long Run.
Returns to Scale.
LeastCost Production.
Measuring Production Functions.
Linear Production.
Production with Fixed Proportions.
Polynomial Functions.
The CobbDouglas Function.
Estimating Production Functions.
Other Production Decisions.
Multiple Plants.
Multiple Products.
Chapter 6. Cost Analysis.
Relevant Costs.
Opportunity Costs and Economic Profits.
Fixed and Sunk Costs.
Profit Maximization with Limited Capacity: Ordering a Best Seller.
The Cost Of Production.
ShortRun Costs.
LongRun Costs.
Returns To Scale And Scope.
Returns to Scale.
Economies of Scope.
Cost Analysis And Optimal Decisions.
A Single Product.
The ShutDown Rule.
Multiple Products.
Appendix To Chapter 6: Transfer Pricing.
Special Appendix To Chapter 6: ShortRun And LongRun Costs.
Section II. Competing Within Markets.
Chapter 7. Perfect Competition.
The Basics Of Supply And Demand.
Competitive Equilibrium.
Decisions of the Competitive Firm.
Market Equilibrium.
Market Efficiency.
Private Markets: Benefits and Costs.
International Trade.
Chapter 8. Monopoly.
Pure Monopoly.
Barriers to Entry.
Perfect Competition Versus Pure Monopoly.
Cartels.
Natural Monopolies.
Monopolistic Competition.
Chapter 9. Oligopoly.
Oligopoly.
Industry Concentration.
Concentration And Prices.
Quantity Competition.
A Dominant Firm.
Competition Among Symmetric Firms.
Price Competition.
Price Rigidity And Kinked Demand.
Price Wars And The Prisoner's Dilemma.
Other Dimensions Of Competition.
Advertising.
Strategic Commitments.
Appendix To Chapter 9: Tying And Bundling.
Chapter 10. Game Theory And Competitive Strategy.
Sizing Up Competitive Situations.
Analyzing Payoff Tables.
Equilibrium Strategies.
Competitive Strategy.
Market Entry.
Bargaining.
Sequential Competition.
Repeated Competition.
Appendix To Chapter 10: Mixed Strategies.
Chapter 11. Regulation, Public Goods, And BenefitCost Analysis.
I. Market Failures And Regulation.
Market Failure Due To Monopoly.
Government Responses.
Market Failure Due To Externalities.
Remedying Externalities.
Subsidizing Positive Externalities.
Market Failure Due To Imperfect Information.
II. BenefitCost Analysis And Public Goods Provision.
Public Goods.
Public Goods And Efficiency.
The Basics Of BenefitCost Analysis.
Applying The Net Benefit Rule.
Dollar Values.
Efficiency Versus Equity.
Evaluating A Public Project.
Public Investment In A Bridge.
Valuing Benefits And Costs.
Market Values.
Nonmarketed Benefits And Costs.
Section III. DecisionMaking Applications.
Chapter 12. Decision Making Under Uncertainty.
Uncertainty, Probability, And Expected Value.
Expected Value.
Decision Trees.
An Oil Drilling Problem.
Features Of The ExpectedValue Criterion.
Sequential Decisions.
Risk Aversion.
Expected Utility.
Expected Utility And Risk Aversion.
Chapter 13. The Value Of Information.
The Value Of Information.
The Oil Wildcatter Revisited.
Imperfect Information.
Revising Probabilities.
Bayes Theorem.
Other Applications.
Predicting Credit Risks.
Intuitive Prediction.
Business Behavior And Decision Pitfalls.
Optimal Search.
Optimal Stopping.
Optimal Sequential Decisions.
The Value Of Additional Alternatives.
Simultaneous Search.
Chapter 14. Asymmetric Information And Organizational Design.
Asymetric Information.
Adverse Selection.
Signalling.
Principals, Agents, And Moral Hazard.
Organizational Design.
The Nature Of The Firm.
The Breadth Of The Firm.
Assigning DecisionMaking Responsibilities.
Monitoring And Rewarding Performance.
Separation Of Ownership And Control In The Modern Corporation.
Appendix To Chapter 14: A PrincipalAgent Model.
Chapter 15. Bargaining And Negotiation.
The Economic Sources Of Beneficial Agreements.
Resolving Disputes.
Differences In Values.
Contingent Contracts.
MultipleIssue Negotiations.
Continuous Variablee.
Negotiation Strategy.
Perfect Information.
Imperfect Information.
Chapter 16. Actions And Competitive Bidding.
The Advantages Of Auctions.
Bidder Strategies.
English And Dutch Auctions.
SealedBid Auctions.
Common Values And The Winner's Curse.
Optimal Auctions.
Expected Auction Revenue.
Competitive Procurement.
Chapter 17. Linear Programming.
Linear Programs.
Graphing The LP Problem.
A Minimization Problem.
Sensitivity Analysis And Shadow Prices.
Changes In The Objective Function.
Shadow Prices.
Formulation And Computer Solution.
For Larger LP Problems.
Computer Solutions.
Answers To OddNumbered Questions.
 New Discussions and Analysis of ECommerce. Examines the economics of information goods, ecommerce, 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 realworld decision making behavior, noting the most common pitfalls to avoid.
 Updated applications. Applications and decisionmaking examples are central to this book. Many have been updated in this edition.
 Revised and Updated EndofChapter Problems. These range from basic to advanced problems and also include wideranging 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 decisionmaking 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 highrisk environments. Chapter 13 examines the value of acquiring information about relevant risks, including optimal search strategies.
 Game Theory illuminates the firm’s strategic choices. Gametheoretic principles are essential to understanding strategic behavior. An entire chapter (Chapter 10) is devoted to this topic.
 EndofChapter Spreadsheet Problems offer a powerful way of portraying economic decisions and finding optimal solutions. Spreadsheet problems are provided in 15 chapters.
 Realworld applications throughout the text.
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