**Managerial Economics: Theory, Applications, and Cases 8th Edition by W. Bruce Allen, ISBN-13: 978-0393124491**

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- Publisher: W. W. Norton & Company; Eighth edition (September 15, 2012)
- Language: English
- 912 pages
- ISBN-10: 0393124495
- ISBN-13: 978-0393124491

**Thoroughly updated to reflect the post-crisis, global, and digital economy.**

Modernized for the 21st century, the Eighth Edition emphasizes strategic thinking by managers and includes over 50 new case studies on events that prepare students for today’s changing economy.

**Table of Contents:**

Part 1: The Need for a Guide

Chapter 1: Introduction

The Theory of the Firm

What is Profit?

Reasons for the Existence of Profit

Managerial Interests and the Principal–Agent Problem

Demand and Supply: A First Look

The Demand Side of a Market

The Supply Side of a Market

Equilibrium Price

Actual Price

What If the Demand Curve Shifts?

What If the Supply Curve Shifts?

Summary

Problems

Excel Exercise: Demand, Supply, and Market Equilibrium

Part 2: The Nature of Markets

Chapter 2: Demand Theory

The Market Demand Curve

Industry and Firm Demand Functions

The Own-Price Elasticity of Demand

Point and Arc Elasticities

Using the Demand Function to Calculate the Price Elasticity of Demand

The Effect of Price Elasticity on the Firm’s Revenue

Funding Public Transit

Determinants of the Own-Price Elasticity of Demand

The Strategic Use of the Price Elasticity of Demand

Total Revenue, Marginal Revenue, and Price Elasticity

The Income Elasticity of Demand

Cross-Price Elasticities of Demand

The Advertising Elasticity of Demand

The Constant-Elasticity and Unitary Elastic Demand Functions

Summary

Problems

Chapter 3: Consumer Behavior and Rational Choice

Indifference Curves

The Marginal Rate of Substitution

The Concept of Utility

The Budget Line

The Equilibrium Market Bundle

Maximizing Utility: A Closer Look

Corner Solutions

How Managers Can Strategically Influence Consumer Choices

Deriving the Individual Demand Curve

Deriving the Market Demand Curve

Consumer Surplus

Summary

Problems

Chapter 4: Estimating Demand Functions

The Identification Problem

Consumer Interviews

Market Experiments

Regression Analysis

Simple Regression Model

Sample Regression Line

Method of Least Squares

Coefficient of Determination

Multiple Regression

Software Packages and Computer Printouts

Interpreting the Output of Statistical Software

Multicollinearity

Serial Correlation

Further Analysis of the Residuals

Summary

Problems

Appendix: The Coefficient of Determination and the Concept of Explained Variation

Part 3: Production and Cost

Chapter 5: Production Theory

The Production Function with One Variable Input

The Law of Diminishing Marginal Returns

The Production Function with Two Variable Inputs

Isoquants

The Marginal Rate of Technical Substitution

The Optimal Combination of Inputs

Corner Solutions

Returns to Scale

The Output Elasticity

Estimations of Production Functions

Summary

Problems

Appendix: Lagrangian Multipliers and Optimal Input Combinations

Chapter 6: The Analysis of Costs

Opportunity Costs

Short-Run Cost Functions

Average and Marginal Costs

Long-Run Cost Functions

Managerial Use of Scale Economies

Managerial Use of Scope Economies

Transactions Costs Can Take Many Forms

Network Economies

Managerial Use of Break-Even Analysis

Profit Contribution Analysis

Summary

Problems

Excel Exercise: Production and Cost

Appendix A: Break-Even Analysis and Operating Leverage

Appendix B: Measurement of Short-Run Cost Functions: The Choice of a Mathematical Form

Part 4: Market Structure and Simple Pricing Strategies

Chapter 7: Perfect Competition

Market Structure

Market Price in Perfect Competition

Shifts in Supply and Demand Curves

The Output Decision of a Perfectly Competitive Firm

Setting the Marginal Cost Equal to the Price

Another Way of Viewing the Price Equals Marginal Cost Profit-Maximizing Rule

Producer Surplus in the Short Run

Long-Run Equilibrium of the Firm

The Long-Run Adjustment Process: A Constant-Cost Industry

The Long-Run Adjustment Process: An Increasing-Cost Industry

How a Perfectly Competitive Economy Allocates Resources

Summary

Problems

Excel Exercise: Perfect Competition

Chapter 8: Monopoly and Monopolistic Competition

Pricing and Output Decisions in Monopoly

Cost-Plus Pricing

Cost-Plus Pricing at Therma-Stent

Cost-Plus Pricing at Internet Companies and Government-Regulated Industries

Can Cost-Plus Pricing Maximize Profit?

The Multiple-Product Firm: Demand Interrelationships

Pricing of Joint Products: Fixed Proportions

Output of Joint Products: Variable Proportions

Monopsony

Monopolistic Competition

Advertising Expenditures: A Simple Rule

Using Graphs to Help Determine Advertising Expenditure

Advertising, Price Elasticity, and Brand Equity: Evidence on Managerial Behavior

Summary

Problems

Excel Exercise: Simple Monopoly

Appendix: Allocation of Output Among Plants

Part 5: Sophisticated Market Pricing

Chapter 9: Managerial Use of Price Discrimination

Motivation for Price Discrimination

Price Discrimination

Using Coupons and Rebates for Price Discrimination

Peak Load Pricing

Two-Part Tariffs

Summary

Problems

Excel Exercise: Perfect Price Discrimination

Excel Exercise: Third-Degree Price Discrimination

Appendix: Two-Part Tariff with Intersecting Demands

Chapter 10: Bundling and Intrafirm Pricing

The Mechanics of Bundling

When to Unbundle

Bundling as a Preemptive Entry Strategy

Tying at IBM, Xerox, and Microsoft

Transfer Pricing

Transfer Pricing: A Perfectly Competitive Market fo the Upstream Product

The Global Use of Transfer Pricing

Summary

Problems

Excel Exercise: Transfer Pricing

Part 6: The Strategic World of Managers

Chapter 11: Oligopoly

Cooperative Behavior

The Breakdown of Collusive Agreements

Price Leadership

Possible Behavior in Markets with Few Rivals

Duopolists and Price Competition with Differentiated Products

The Sticky Pricing of Managers

Summary

Problems

Excel Exercise: Dominant Firm Price Leader

Excel Exercise: Cournot

Excel Exercise: Stackelberg

Chapter 12: Game Theory

Making Strategy and Game Theory

Strategy Basics

Visual Representation

Solution Concepts

Equilibria

Dominant Strategies

The Nash Equilibrium

Strategic Foresight: The Use of Backward Induction

Repeated Games

Incomplete Information Games

Reputation Building

Coordination Games

Strictly Competitive Games

Summary

Problems

Excel Exercise: Game Theory

Chapter 13: Auctions

A Short History of Auctions

Types of Auction Mechanisms

Auction Mechanism and Revenue Generation

Bidding Strategies

Strategies for Sellers

Value of Information

Risk Aversion

Number of Bidders

Winner’s Curse

Concerns in Auction Design

Summary

Problems

Excel Exercise: Auctions

Part 7: Risk, Uncertainty, and Incentives

Chapter 14: Risk Analysis

Risk and Probability

Probability Distributions and Expected Values

Comparisons of Expected Profit

Road Map to Decision

The Expected Value of Perfect Information

Measuring Attitudes Toward Risk: The Utility Approach

Attitudes Toward Risk: Three Types

The Standard Deviation and Coefficient of Variation: Measures of Risk

Adjusting the Valuation Model for Risk

Certainty Equivalence and the Market for Insurance

Summary

Problems

Excel Exercise: Expected Utility

Chapter 15: Principal–Agent Issues and Managerial Compensatoin

Principal–Agent Issues

The Diverging Paths of Owners and Managers

The Principal–Agent Situation

The Effect of Risk, Information, and Compensation on Principal–Agent Issues

Resolving the Incentive Conflict When Output Is Risky and Effort Is Not Observable

Some Refinements to Managerial Compensation

Principal–Agent in Other Contexts

Product Liability and the Safety of Consumer Goods

Summary

Problems

Excel Exercise: Moral Hazard

Chapter 16: Adverse Selection

The Market for “Lemons”

Adverse Selection in Automobile Insurance

The Market for Annuities

Resolving Adverse Selection Through Self-Selection

Using Education as a Signal: Adverse Selection in the Job Market

Using Warranties as Signals: Adverse Selection in the Product Market

Summary

Problems

Excel Exercise: Adverse Selection

Part 8: Government Actions and Managerial Behavior

Chapter 17: Government and **Business**

Competition Versus Monopoly

Regulation of Monopoly

The One Star Gas Company: A Pseudo-Case Study

Effects of Regulation on Efficiency

The Concentration of Economic Power

The Sherman Act

The Clayton Act, the Robinson-Patman Act, and the Federal Trade Commission Act

Interpretation of the Antitrust Laws

The Patent System

Trade and Trade Policy

Government Price Ceilings and Price Floors

The Welfare Impacts of Taxes

Regulation of Environmental Pollution

Public Goods

Summary

Problems

Excel Exercise: Externalities

Chapter 18: Optimization Techniques

Functional Relationships

Marginal Analysis

Relationships Among Total, Marginal, and Average Values

The Concept of a Derivative

How to Find a Derivative

Using Derivatives to Solve Maximization and Minimization Problems

Marginal Cost Equals Marginal Revenue and the Calculus of Optimization

Partial Differentiation and the Maximization of Multivariable Functions

Constrained Optimization

Lagrangian Multipliers

Comparing Incremental Costs with Incremental Revenues

Summary

Problems

Appendix A: Technological Change and Industrial Innovation

Technological Change

Labor Productivity

Total Factor Productivity

Using Total Factor Productivity to Track Factory Performance

Research and Development: A Learning Process

Parallel Development Efforts

What Makes for Success?

Project Selection

Innovation

Time-Cost Trade-Offs

The Learning Curve

Applications of the Learning Curve

Henry Ford’s Model T and Douglas Aircraft’s DC-9

Diffusion Models

Forecasting the Rate of Diffusion of Numerically Controlled Machine Tools

Summary

Problems

Appendix B: Business and Economic Forecasting

Survey Techniques

Taking Apart a Time Series

How to Estimate a Linear Trend

How to Estimate a Nonlinear Trend

Seasonal Variation

Calculation of Seasonal Variation

Cyclical Variation

Elementary Forecasting Techniques

How Leading Indicators are Used

How Econometric Models are Used

The Purvere Corporation: A Numerical Example

“Study Your Residuals”

Summary

Problems

Appendix: Exponential Smoothing and Forecasting

Appendix C: Discounting and Present Values

Present Value of a Series of Payments

The Use of Periods Other Than a Year

Determining the Internal Rate of Return

Appendix D: Answers to Select End-Of-Chapter Problems

Appendix E: Tables

Index

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