Managerial Economics: Theory, Applications, and Cases,9780393976779

Managerial Economics: Theory, Applications, and Cases

by ; ; ; ;
Edition: 5th
ISBN13: 9780393976779
ISBN10: 0393976777
Format: Hardcover
Pub. Date: 2002-01-01
Publisher(s): W W Norton & Co Inc
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Table of Contents

Preface xix
Part One Introduction 1(80)
Introduction to Managerial Economics
3(34)
Boeing's Struggle to Retain Market Leadership
4(1)
The Disney Corporation: Expansion of the Magic Kingdom
5(1)
In What Size Production Runs Should Toyota Produce Its Cars?
6(1)
Relationships of Managerial Economics to Other Disciplines
6(2)
The Basic Process of Decision Making
8(2)
The Theory of the Firm
10(2)
The Role of Constraints
12(1)
What Are Profits?
12(2)
Reasons for the Existence of Profit
14(1)
Organizational Factors and ``Satisficing''
15(1)
Analyzing Managerial Decisions: Shell Gains by Giving Safe-Driving Advice
16(1)
Managerial Interests and the Principal-Agent Problem
16(1)
Demand and Supply: A First Look
17(3)
Analyzing Managerial Decisions: How Disney Dealt with the Principal-Agent Problem
18(2)
The Demand Side of a Market
20(1)
The Supply Side of a Market
21(2)
Equilibrium Price
23(1)
Actual Price
24(1)
What If the Demand Curve Shifts?
25(2)
What If the Supply Curve Shifts?
27(1)
How russia Glutted the Aluminum Market: A Case Study
28(2)
Concepts in Context: Problems in the Potato Market
29(1)
Summary
30(1)
Problems
31(6)
Optimization Techniques
37(44)
Functional Relationships
38(2)
Marginal Analysis
40(2)
Relationships between Total, Marginal, and Average Values
42(3)
The Concept of a Derivative
45(4)
How to Find a Derivative
49(9)
Concepts in Context: The Allocation of the TANG Brand Advertising Budget
54(4)
Using Derivatives to Solve Maximization and Minimization Problems
58(4)
Marginal-Cost Equals Marginal Revenue and the Calculus of Optimization
62(4)
Analyzing Managerial Decisions: The Optimal Size of a Nursing Home
63(2)
Concepts in Context: An Alleged Blunder in the Stealth Bomber's Design
65(1)
Partial Differentiation and the Maximization of Multivariable Functions
66(2)
Analyzing Managerial Decisions: The Effects of Advertising on the Sales of TANG
67(1)
Constrained Optimization
68(3)
Lagrangian Multipliers
71(3)
Consultant's Corner: Planning to Meet Peak Engineering Requirements
73(1)
Comparing Incremental Costs with Incremental Revenues
74(2)
Summary
76(1)
Problems
77(4)
Part Two Demand and Forecasting 81(152)
Demand Theory
83(40)
Introduction
83(1)
The Market Demand Curve
84(4)
Industry and Firm Demand Functions
88(2)
The Price Elasticity of Demand
90(2)
Point and Are Elasticities
92(1)
Using the Demand Function to Calculate the Price Elasticity of Demand
93(3)
Concepts in Context: For Demand in Russia
94(2)
Price Elasticity and Total Money Expenditure
96(2)
Total Revenue, Marginal Revenue, and Price Elasticity
98(4)
Analyzing Managerial Decisions: The Demand for Newsprint
100(2)
Using Price Elasticity of Demand: Application to Philips Morris
102(1)
Using Price Elasticity of Demand: Public Transit
102(1)
Determinants of the Price Elasticity of Demand
102(3)
Uses of the Price Elasticity of Demand
105(1)
Price Elasticity and Pricing Policy
106(1)
The Income Elasticity of Demand
107(2)
Using the Demand Function to Calculate the Income Elasticity of Demand
109(1)
Cross Elasticities of Demand
110(3)
Consultant's Corner: Estimating the Demand for Rail Passenger Business by Amtrak
111(2)
The Advertising Elasticity of Demand
113(1)
The Constant-Elasticity Demand Function
113(3)
Analyzing Managerial Decisions: Price Cutting at the London times
115(1)
Summary
116(1)
Problems
117(6)
Consumer Behavior and Rational Choice
123(26)
Indifference Curves
124(2)
The Marginal Rate of Substitution
126(2)
The Concept of Utility
128(1)
The Budget Line
128(3)
The Equilibrium Market Basket
131(3)
Concepts in Context: Effect of a Time Constraint on Consumer Behavior
133(1)
Maximizing Utility: A Closer Look
134(1)
Corner Solutions
135(1)
Representing the Process of Rational Choice
136(1)
Deriving the Individual Demand Curve
137(2)
Deriving the Market Demand Curve
139(1)
Consumer Surplus
140(2)
Summary
142(2)
Consultant's Corner: The Trade-off between Risk and Return
143(1)
Problems
144(5)
Estimating Demand Functions
149(48)
The Identification Problem
150(3)
Consumer Interviews
153(1)
Market Experiments
154(1)
L'eggs: A Market Experiment
154(1)
Regression Analysis
155(2)
Simple Regression Model
157(1)
Sample Regression Line
158(2)
Method of Least Squares
160(3)
Coefficient of Determination
163(2)
Multiple Regression
165(3)
Consultants Corner: Marketing Plans at the Stafford Company
166(2)
Software Packages and Computer Printouts
168(3)
Concepts in context: How the Japanese Motorcycle Makers Used the Coefficient of Determination
170(1)
Interpreting the Computer Printout
171(7)
Concepts in Context: Color Balance and Shelf-Life Performance of Polaroid Film
173(1)
Analyzing Managerial Decisions: How Good Are Ward's Projections of Auto Output?
174(4)
Multicollinearity
178(1)
Serial Correlation
179(2)
Further Analysis of the Residuals
181(1)
Summary
182(4)
Analyzing Managerial Decisions: How Fed Economists Forecast Auto Output
184(2)
Problems
186(6)
Appendix: The Coefficient of Determination and the Concept of Explained Variation
192(5)
Business and Economic Forecasting
197(36)
Survey Techniques
198(1)
Taking Apart a Time Series
199(3)
How to Estimate a Linear Trend
202(2)
How to Estimage a Nonlinear Trend
204(1)
Seasonal Variation
205(1)
Calculation of Seasonal Variation
206(3)
Analyzing Managerial Decisions: Forecasting the Demand for Blood Tests
208(1)
Cyclical Variation
209(3)
Elementary Forecasting Techniques
212(2)
How Leading Indicators Are Used
214(3)
Consultant's Corner: Deciding Whether to Finance the Purchase of an Oil Field
216(1)
How Econometric Models Are Used
217(1)
Analyzing Managerial Decisions: Forecasting Shipments of Cement by CEMCO
218(1)
John Hancock and Timberland: A Case Study
218(1)
The Purvere Corporation: A Numerical Example
219(2)
``Study Your Residuals''
221(1)
Summary
222(1)
Problems
223(4)
Appendix: Exponential Somoothing and Forecasting
227(6)
Managerial Economics in Context: How to Forecast the Sales of Paper, According to McKinsey
230(3)
Part Three Production and Coast 233(138)
Production Theory
235(54)
The Production Function with One Variable Input
236(6)
Analyzing Managerial Decisions: Shaquille O'Neal Goes to Los Angeless
241(1)
The Law of Diminishing Marginal Returens
242(1)
The Optimal Level of Utilization of an Input
242(2)
The Rondo Corporation: A Numerical Example
244(2)
Analyzing Managerial Decisions: How to Determine the Optimal Horsepower for an Oil Pipeline
245(1)
The Production Function with Two Variable Inputs
246(3)
Analyzing Managerial Decisions: How Nucor Stays on the Production Function
248(1)
Isoquants
249(2)
The Marginal Rate of Technical Substitution
251(3)
The Optimal Combination of Inputs
254(3)
The Beiswanger Company: A Numerical Example
257(2)
The Miller Company: Another Numerical Example
259(1)
Optimal Lot Size
260(4)
What Toyota Taught the World
264(2)
Returns to Scale
266(2)
Consultant's Corner: Choosing the Size of an Oil Tanker
267(1)
The Output Elasticity
268(1)
How Firms Obtain Information About the Production Function: Competitive Benchmarkeing at Xerox
269(1)
Measurement of Production Functions
270(2)
Three Types of Statistical Analysis
272(1)
The Telephone Industry in Canada: A Case Study
273(1)
Poultry Production in the United States: Another Case Study
274(3)
Summary
277(1)
Problems
278(6)
Appendix: Lagrangian Multipliers and Optimal Input Combinations
284(5)
Technological Change and Industrial Innovation
289(32)
Technological Change
290(1)
Labor Productivity
291(1)
Total Factor Productivity
292(2)
Using Total Factor Productivity to Truck Factory Performance
294(2)
Research and Development: A Learning Process
296(1)
Parallel Development Efforts
297(2)
What Makes for Success?
299(1)
Concepts in Context: Parallel Development Efforts at IBM
300(1)
Project Selection
300(1)
Innovation
301(1)
Time-Cost Trade-offs
302(2)
The Learning Curve
304(2)
Analyzing Managerial Decisions: The Time-Cost Trade-off Function for Airliners
306(1)
Applications of the Learning Curve
306(2)
Henry Ford's Model T and Douglas Aircraft's DC-9
308(1)
Diffusion Models
308(5)
Consultant's Corner: How Robots Spread in Japan and the United States
312(1)
Forecasting the Rate of Diffusion of Numericall Controlled Machine Tools
313(2)
Analyzing Managerial Decisions: The Development and Introduction of Canon's Personal Copier
314(1)
Summary
315(1)
Problems
316(5)
The Analysis of Costs
321(50)
Introduction
321(1)
Opportunity Costs
322(1)
Concepts in Context: How Harley-Davidson Has Reduced Costs
323(1)
Short-Run Cost Functions
323(3)
Average and Marginal Costs
326(6)
Analyzing Managerial Decisions: The Effects of Output on the cost of Producing Aircraft
331(1)
Long-Run Cost Functions
332(4)
The Crosby Corporation: A Numerical Example
336(2)
Analyzing Managerial Decisions: Should We Continue to Make Autos from Steel?
337(1)
Economies of Scale in Nursing Homes
338(3)
Measurement of Short-Run Cost Functions: The Choice of a Mathematical Form
341(1)
Nature and Limitations of Available Data
342(3)
Key Steps in the Estimation Process
345(1)
A Hostiery Mill's Short-Run Cost Functions
346(2)
A Transportation Firm's Short-Run Cost Functions
348(2)
Long-Run Statistical Cost Estimation
350(2)
The Long-Run Average Cost Function for Electric Power: A Case Study
352(1)
The Survivor Technique
353(2)
The Importance of Flexibility
355(1)
Economies of Scope
355(3)
Concepts in Context: Economies of Scope in Advertising Agencies
357(1)
Break-Even Analysis
358(2)
Algebraic Break-Even Analysis
360(1)
Consultant's Corner: Mr. Martin Gets Chewed Out by the Boss
361(1)
Profit Contribution Analysis
361(1)
Summary
362(1)
Problems
363(4)
Appendix: Break-Even Analysis and Operating Leverage
367(4)
Part Four Market Structure, Strategic Behavior, and Pricing 371(152)
Perfect Competition, Monopoly, and Monopolistic Competition
373(54)
Market Structure
373(2)
Market Price Under Perfect Competition
375(2)
Shifts in Supply and Demand Curves
377(1)
The Output Decision of a Perfectly Competitive Firm
378(3)
Setting Marginal Cost Equal to Price
381(4)
Consultant's Corner: Forecasting the Price of Salmon
384(1)
Producer Surplus in the Short Run
385(2)
Long-Run Equilibrium of the Firm
387(3)
The Long-Run Adjustment Process: A Constant-Cost Industry
390(1)
The Long-Run Adjustment Process: An Increasing-Cost Industry
391(2)
How a Perfectly Competitive Economy Allocates Resources
393(1)
Price and Output Decisions under Monopoly
394(4)
The Newspaper Industry in Detroit
398(1)
The Raleigh Company: A Numerical Example
399(3)
Analyzing Managerial Decisions: Franchiser versus Franchisee?
400(1)
Concepts in Context: Using Patents to Maintain Market Power
401(1)
Two-Part Tariffs
402(1)
Bunding
402(6)
Concepts in Context: Verizon Local Calling Plans
403(5)
Monopolistic Competition
408(1)
Price and Output Decisions under Monopolistic Competition
409(2)
Advertising Expenditures: A Simple Rule
411(3)
Using Graphs to Help Determine Advertising Expenditure
414(1)
Advertising, the Price Elasticity of Demand, and Brand Loyality: The Case of the Retail Coffee Market
415(2)
Summary
417(1)
Problems
418(5)
Appendix: Allocation of Output among Plants
423(4)
Oligopoly
427(20)
The Emergence of Oligopolistic Industries
428(2)
Maturity and Decline of Oligopolistic Industries
430(1)
Collusive Agreements
430(2)
The Breakdown of Collusive Aggreements
432(1)
Dissension in the OPEC Oil Cartel
433(2)
Concepts in Context: Cartels Come in Many Shapes and Sizes
434(1)
Price Leadership
435(2)
Analyzing Managerial Decisions: Price Cuts for Breakfast
437(1)
Ajax, Inc.: A Numerical Example
437(2)
Analyzing Managerial Decisions: Cranberries: Where 34 Percent of the Market Producers Are Price Takers
438(1)
Summary
439(1)
Problems
440(7)
Game Theory
447(30)
Two-Person Games
448(1)
Nash Equilibrium
449(2)
Carpenter Company and Hanover Corporation: A Numerical Example
451(4)
The Prisoner's Dilemma
455(1)
Does Cheating Pay?
456(1)
A More Sophisticated Analysis
457(1)
Most-Favored-Customer Clauses
458(2)
The Thrust and Parry of Oligopolistic Rivalry
460(1)
The Importance of Commitment
461(2)
Consultant's Corner: Using a Price Announcement to Preempt a market
462(1)
When Is a Threat Credible?
463(2)
The Importance of Entry
465(1)
The Deterrence of Entry
465(3)
Analyzing Managerial Decisions: Difficulties in Formulating Effective Contracts
467(1)
Du Pont's Attempt to Deter Entry into the Titanium Dioxide Industry
468(1)
Advertising to Resist Entry: Maxwell House Versus Folders
468(1)
Preemptive Strategies: The Case of Wall-Mart Stores
469(1)
Representing Games with Game Trees
470(2)
Summary
472(1)
Problems
473(4)
Pricing Techniques
477(46)
Cost-Plus Pricing
478(1)
Cost-Plus Pricing at Computron, Inc.: A Case Study
479(1)
Cost-Plus Pricing at Internet Companies and Government-Regulated Industries
480(1)
Does Cost-Plus Pricing Maximize Profit?
481(2)
The Clawson Corporation: A Numerical Example
483(1)
The Multiple-Product Firm: demand Interrelationships
483(3)
Analyzing Managerial Decisions: Pricing Steaks at the Palm Restaurant
484(2)
Pricing of Joint Productions: Fixed Proportions
486(2)
The Avtech Company: A Numerical Example
488(2)
Output of Joint Products: Variable Proportions
490(2)
Price Discrimination
492(2)
Airline Travel: A Case Study
494(1)
Price Discrimination: A Pharmaceutical Example
495(2)
The Different Types of Price Discrimination
497(5)
Using Coupons and Rebates for Price Discrimination
502(1)
Tying at IBM, Xerox, and Microsoft
503(2)
Transfer Pricing
505(4)
Concepts in Context: Why Do Women Pay More?
505(1)
Analyzing Managerial Decisions: Yield Management at American Airlines
506(3)
Transfer Pricing: A Perfectly Competitive Market for the Transferred Product
509(1)
Transfer Pricing in Practice Around the World
510(1)
Concepts in Context: Japan's Tax Man Leans on Foreign Firms
510(1)
The Orion Corporation: A Numerical Example
511(4)
Consultant's Corner: Setting Some Strife Over a Pricing Formula
513(2)
Summary
515(1)
Problems
516(7)
Managerial Economics in Context: A Rocky Road for Caterpillar Tractor
520(3)
Part Five Risk, Uncertainty, and Incentives 523(112)
Risk Analysis
525(40)
Risk and Probability
526(1)
Probability Distributions and Expertac Values
527(1)
Comparisons of Expected Profit
528(1)
How to Construct a Decision Tree
529(2)
Should Tomco Oil Corporation Drill a Well?
531(3)
Concepts in Context: Bidding for the SS Kuniang
534(1)
The Expected Value of Perfect Information
534(2)
Evaluating an Investment in a New Chemical Plant: A Case Study
536(2)
Consultant's Corner: Choosing Areas for Research Regarding Pollutions Costs
537(1)
Measuring Attitudes Toward Risk: The Utility Approach
538(1)
Constructing a Utility Function
538(4)
Analyzing Managerial Decisions: Should Maxwell House Have Increased Its Price?
540(2)
Using a Utility Function
542(1)
Attitudes Toward Risk: Three Types
543(2)
The Standard Deviation and coefficient of Variation: Measures of Risk
545(3)
Analyzing Managerial Decisions: Deciding Whether to Buy an Option on a New Flight-Safety System
548(1)
Adjusting the Valuation Model for Risk
548(3)
Certainty Equivalence and the Market for Insurance
551(1)
The Use of Risk-Adjusted Discount Rates
552(1)
Simulation Techniques
553(3)
Application of the Maximin rule
556(3)
Concepts in Context: Using Simulation Techniques in the Computer Industry
557(2)
Summary
559(1)
Problems
560(5)
Auctions
565(27)
A Short History of Auctions
567(1)
Types of Auction Mechanisms
568(1)
Auction Mechanism and Revenue Generation
569(2)
Bidding Strategies
571(6)
Analyzing Managerial Decisions: Auction Design at Freemarkets, Inc.
574(3)
Strategies for Sellers
577(2)
Value of Information
579(9)
Analyzing Managerial Decisions: The Use of Sophisticated Pricing within an Auction Format
582(4)
Analyzing Managerial Decisions: The Winner's Curse in Bidding for Oil Rights
586(2)
Summary
588(1)
Problems
588(4)
Managing Incentives: Principal-Agent Problems and Moral Hazard
592(43)
Principal-Agent Problems
593(5)
A Simple Model of the Principal-Agent Problem with No Risk
598(10)
The Principal-Agent Problem: Output Is Risky and Efforts Is Not Observable
608(4)
Illustration: Running the Family Farm
612(7)
Concepts in Context: Call Options
617(2)
Insurance and Moral Hazard
619(1)
Analyzing Managerical Decisions: Do Directors Act on Behalf of Shareholders or Managers?
620(1)
Principal-Agent Problems Between Shareholders and Creditors
620(6)
Product Liability and the Sofety of Consumer Goods
626(3)
Mangerial Economics in Context: The Composition of CEO Pay
628(1)
Summary
629(2)
Problems
631(4)
Part Six Government-Business Relations and the Global Economy 635
Government and Business
637(42)
Competition Versus Monopoly
638(1)
Regulation of Monopoly
639(4)
Analyzing Managerial Decisions: The Social Cost of Monopoly
642(1)
The Trenton Gas Company: A Numerical Example
643(1)
The Lone Star Gas Company: A Case Study
644(1)
Effects of Regulation on Efficiency
645(1)
Consultant's Corner: A Dispute Over a Requested Gas Rate Increase
646(1)
The Concentration of Economic Power
646(2)
The Sherman Act
648(1)
The Clayton Act, the Robinson-Patman Act, and the Federal Trade Commission Act
649(2)
The Interpretation of the Antitrust Laws
651(1)
Antitrust Policy During the 1960s and 1970s
652(1)
Antitrust Policy during the 1980s and 1990s
653(1)
Du Point's Titanium Dioxide Pigments: A Case Study
654(1)
The Patent System
655(2)
Patents and the Rate of Innovation
657(1)
Regulation of Environmental Pollution
658(1)
External Economies and Diseconomies
659(1)
The Genesis of the Pollution Problem
659(1)
The Optimal Level of Pollution Control
660(3)
Forms of Government Regulation
663(2)
Effects of Regulation-Induced Cost Increase on Price and Output
665(4)
Concepts in Context: Buying and Selling the Right to Emit Nitrogen Oxides
666(2)
Analyzing Managerial Decisions: Auctioning Off Spectrum Rights: Australia and the United States
668(1)
Public Goods
669(1)
Concepts in Context: Entrance Fees to National Parks
670(1)
Summary
670(2)
Problems
672(7)
Managerial Economics: Taking a Global View
679
Foreign Trade
680(2)
Comparative Advantage
682(2)
Changes in Comparative Advantage
684(1)
Using Demand and Supply curves to Determine Which Country Will Export a Product
685(2)
Analyzing the Gains from Trade
687(3)
Exchange Rates
690(3)
Determinants of Exchange Rates
693(2)
Tariffs and Quotas
695(1)
The Effects of a Quota: The Case of the Wilton Company's Product
696(1)
Concepts in Context: Sweetening with Corn, Not Sugar
697(1)
The Presence of Protectionism
697(2)
Concepts in context: Why Bridgestone Paid $2.6 Billion for Firestone
698(1)
Strategic Trade Policy
699(1)
Airbus Vversus Boeing: Strategic Trade Policy in Action
700(2)
International Trade disputes
702(2)
Analyzing Managerial Decisions: Is Airbous Playing by the Rules?
703(1)
Making Direct Investments Abroad
704(1)
Establishing a Plant Abroad: Time-Cost Trade-offs
704(2)
Channels of International Technology Transfer
706(2)
Analyzing Managerial Decisions: Seagram Makes Vodka in Ukraine
707(1)
Choice Among Transfer Channels
708(1)
Consultant's Corner: Reorganizing a Firm's Global R and D Network
709(1)
Strategic Alliances
709(2)
Summary
711(1)
Problems
712
Managerial Economics in Context: NAFTA: A Historic Agreement
713
Appendix A Discounting and Present Values A-1(1)
Present Value of a Series of Payments
A-3(1)
The Use of Periods Other Than a Year
A-5(1)
Determining the Internal Rate of Return
A-6(1)
Appendix B The Normal, t, and F Distributions A-9(1)
Brief Ansers to Odd-Numbered End-of-Chapter Questions and Problems
A-14(1)
Brief Answers to ``Consultant's Corner''
A-47(1)
Brief Answers to ``Managerial Economics in Context''
A-54(1)
Appendix Tables
A-57(1)
Photo Credits
A-73(1)
Index
A-75

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