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Microeconomics for MBAs : The Economic Way of Thinking for Managers

ISBN: 9780521859813 | 0521859816
Format: Hardcover
Publisher: Cambridge University Press
Pub. Date: 2/13/2006

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SummaryTable of Contents
This is the first textbook in microeconomics written exclusively for MBA students. Throughout the book, McKenzie and Lee infuse students with the economic way of thinking in the context of a host of problems that MBA students, as future managers of real-world firms, will find relevant to their career goals.
Dwight R. Lee is Professor of Economics and Ramsey Chair of Private Enterprise in the Terry College of Business at the University of Georgia. Richard B. McKenzie is the Gerken Professor of Enterprise and Society... MORE
Prefacexvii
List of abbreviations and acnonyms
xxv
Microeconomics: a way of thinking about business
1(47)
... MORE
Part I Theory and public policy applications
4(28)
The emergence of a market
4(2)
The economic problem
6(3)
The scope of economics
9(1)
Developing and using economic theories
10(2)
Microeconomics and macroeconomics
12(3)
Private property rights and the Prisoner's Dilemma game
15(8)
Communal property rights
23(5)
Perspective: The Tragedy of the Anticommons
28(4)
Part II Organizational economics and management
32(16)
How incentives count in business
32(1)
Tying pay to performance
32(4)
The role of incentives in firm successes and failures
36(1)
Why incentives are important
37(4)
The bottom line
41(1)
Review questions
42(1)
Appendix: ``I, Pencil''
42(6)
Competitive product markets and firm decisions
48(51)
Part I Theory and public policy applications
49(29)
The competitive market process
49(2)
Supply and demand: a market model
51(1)
The elements of demand
52(5)
The elements of supply
57(3)
Market equilibrium
60(3)
Price ceilings and price floors
63(2)
The efficiency of the competitive market model
65(2)
Nonprice competition
67(3)
Competition in the short run and the long run
70(2)
Shortcomings of competitive markets
72(2)
Perspective: Why Queues?
74(4)
Part II Organizational economics and management
78(21)
Overpaying and underpaying workers
78(1)
Henry Ford's ``overpayment''
78(5)
Overpayments to prevent misuse of firm resources
83(1)
When workers should not accept overpayments
84(1)
The overpayment/underpayment connection
85(1)
Mandatory retirement
86(3)
The role of employers' ``credible commitments''
89(2)
Breaking commitments
91(4)
The abolition of mandatory retirement
95(1)
The bottom line
96(1)
Review questions
97(2)
Principles of rational behavior in society and business
99(35)
Part I Theory and public policy applications
99(20)
Rationality: a basis for exploring human behavior
99(1)
The acting individual
100(1)
Rational behavior
100(1)
Rational decisions in a constrained environment
101(5)
The effects of time and risk on costs and benefits
106(2)
What rational behavior does not mean
108(1)
Disincentives in poverty relief
109(2)
Perspective: Maslow's Hierarchy of Needs and Demand
111(8)
Part II Organizational economics and management
119(15)
The last-period problem
119(1)
Problems with the end of contracts
120(1)
Solutions to the last-period problem
121(7)
The keiretsu as a solution to the last-period problem
128(2)
The role of markets in solving last-period problems
130(1)
Problems as a source of profits
131(1)
The bottom line
132(1)
Review questions
133(1)
The logic of group behavior in business and elsewhere
134(38)
Part II Theory and public policy applications
135(17)
Common-interest theory of group behavior
135(2)
The economic theory of group behavior
137(11)
Perspective: Management snooping
148(4)
Part II Organizational economics and management
152(20)
The value of tough bosses
152(1)
Take this job and...
152(2)
Games workers play
154(3)
Actual tough bosses
157(4)
The role of the residual claimant
161(4)
Risk taking, risk aversion, and firm ownership
165(4)
Optimal shirking
169(1)
The bottom line
169(1)
Review questions
170(2)
Government controls: how management incentives are affected
172(47)
Part I Theory and public policy applications
172(33)
Who pays the tax?
172(3)
Price and rent controls
175(4)
Minimum wages
179(10)
Pollution controls: external costs and benefits
189(14)
Perspective: The Problem of Spam: for Spammers as Well as Spammees
203(2)
Part II Organizational economics and management
205(14)
How honesty pays in business
205(1)
The role of honesty in business
206(2)
Games of trust
208(3)
The role of ``hostages'' in business
211(3)
Moral hazards and adverse selection
214(1)
The bottom line
215(1)
Review questions
216(1)
Appendix: key econometric findings
217(2)
Reasons for firms and incentives
219(43)
Part I Theory and public policy applications
220(31)
Firms and market efficiency
220(3)
Reasons for firms
223(8)
Changes in organizational costs
231(2)
Overcoming the large-numbers, Prisoner's Dilemma problems
233(3)
Make-or-buy decisions
236(8)
The franchise decision
244(4)
Perspective: Evolutionary Foundations of Cooperation
248(3)
Part II Organizational economics and management
251(11)
Fringe benefits, incentives, and profits
251(2)
Workers as profit centers
253(1)
Optimum fringe benefits
254(1)
Fringe benefits provided by large and small firms
255(2)
The bottom line
257(1)
Review questions
258(1)
Appendix
259(3)
Consumer choice and demand in traditional and network markets
262(52)
Part I Theory and public policy applications
263(29)
Predicting consumer demand
263(1)
Rational consumption: the concept of marginal utility
263(5)
From individual demand to market demand
268(2)
Elasticity: consumer's responsiveness to price changes
270(6)
Applications of the concept of elasticity
276(1)
Determinants of the price elasticity of demand
277(2)
Changes in demand
279(1)
Normal and inferior goods
280(2)
Substitutes and complementary goods
282(1)
Lagged demands and network effects
283(2)
Rational addiction
285(3)
Network effects
288(1)
Objections to demand theory
289(1)
Scarcity, abundance, and economic value
289(1)
Perspective: Software Networks
290(2)
Part II Organizational economics and management
292(22)
Covering relocation costs of new hires
292(1)
Covering the added housing costs of new hires
293(3)
The logic of not fully compensating new hires for their added housing costs
296(1)
A few qualifications
297(1)
The bottom line
298(1)
Review questions
299(1)
Appendix A: indifference curves and budget lines
300(8)
Appendix B: common concerns relating to the law of demand
308(6)
Production costs and business decisions
314(33)
Part I Theory and public policy applications
315(18)
Various cost conceptions
315(4)
The special significance of marginal cost
319(4)
The cost-benefit trade-off
323(3)
The production function
326(2)
Price and marginal cost: producing to maximize profits
328(3)
From individual supply to market supply
331(1)
Perspective: A Reason for Corporations: Cost Savings
332(1)
Part II Organizational economics and management
333(14)
Cutting health insurance costs
333(1)
The national ``healthcare crisis'' and market forces
334(3)
Business solutions for the healthcare crisis
337(4)
Problems with MSAs
341(2)
Business experience with MSAs
343(1)
The bottom line
344(1)
Review questions
345(2)
Production costs in the short run and long run
347(34)
Part I Theory and public policy applications
348(16)
Fixed, variable, and total costs in the short run
348(2)
Marginal and average costs in the short run
350(3)
Marginal and average costs in the long run
353(2)
Long-run average and marginal cost curves
355(1)
Industry differences in average cost
356(3)
Shifts in the average and marginal cost curves
359(1)
The very long run
359(2)
Perspective: The Myth of the First-Mover Advantage
361(3)
Part II Organizational economics and management
364(17)
Firms' debt/equity structures and executive incentives
364(1)
Debt and equity as alternative investment vehicles
365(3)
Past failed incentives in the S&L industry
368(6)
Firm maturity and indebtedness
374(1)
The bottom-line consequences of firms' financial structures
374(1)
The bottom line
375(1)
Review questions
376(1)
Appendix: Choosing the most efficient resource combination: isoquant and isocost curves
377(4)
Firm production under idealized competitive conditions
381(42)
Part I Theory and public policy applications
382(27)
The four market structures
382(3)
The perfect competitor's production decision
385(3)
Maximizing short-run profits
388(2)
Minimizing short-run losses
390(2)
Producing over the long run
392(4)
Marginal benefit vs. marginal cost
396(2)
The efficiency of perfect competition: a critique
398(4)
Price takers and price searchers
402(1)
Perspective: The Innovator's Dilemma
403(6)
Part II Organizational economics and management
409(14)
The value of teams
409(1)
Team production
409(4)
Team size
413(1)
Paying teams
414(2)
Experimental evidence on the effectiveness of team pay
416(2)
The bottom line
418(2)
Review questions
420(1)
Appendix: contestable markets
421(2)
Monopoly power and firm pricing decisions
423(53)
Part I Theory and public policy applications
424(34)
The origins of monopoly
424(2)
The limits of monopoly power
426(3)
Equating marginal cost with marginal revenue
429(4)
Short-run profits and losses
433(2)
Production over the long run
435(2)
The comparative inefficiency of monopoly
437(2)
Price discrimination
439(6)
Applications of monopoly theory
445(3)
The total cost of monopoly
448(2)
Durable goods monopoly
450(1)
The Microsoft monopoly
451(3)
Perspective: The QWERTY Keyboard: A Case of Lock In?
454(4)
Part II Organizational Economics and Management
458(18)
Profits from creative pricing
458(1)
Price discrimination in practice
459(6)
Cartel cheating
465(2)
Advantages of frequent-flyer programs
467(2)
The bottom line
469(1)
Review questions
470(2)
Appendix: marginal revenue curve: a graphical derivation
472(4)
Firm strategy under imperfectly competitive market conditions
476(50)
Part I Theory and public policy applications
477(26)
Monopolistic competition
477(1)
Monopolistic competition in the short run
478(1)
Monopolistic competition in the long run
479(1)
Oligopoly
480(4)
The oligopolist in the long run
484(1)
Cartels: incentives to collude and to cheat
484(3)
Cartels and the Nash equilibrium
487(2)
Government regulation of cartels
489(1)
The case of the natural monopoly
490(5)
The public interest theory of monopoly regulation
495(2)
Perspective: The Value of ``Mistreating'' Customers
497(6)
Part II Organizational economics and management
503(23)
``Hostile'' takeovers as a check on managerial monopolies
503(1)
Reasons for takeovers
504(1)
The market for corporate control
505(3)
The efficiency of takeovers
508(7)
Takeover defenses
515(4)
The bottom line
519(1)
Review questions
520(1)
Appendix: antitrust laws in the United States
521(5)
Competitive and monopsonistic labor markets
526(41)
Part I Theory and public policy applications
527(19)
The demand for and supply of labor
527(6)
Why wage rates differ
533(5)
Monopsonistic labor markets
538(7)
Perspective: Monopsony and the Minimum Wage
545(1)
Part II Organizational economics and management
546(21)
Paying for performance
546(1)
The ``right'' pay
547(4)
Piece-rate pay and worker risk
551(3)
Lincoln Electric's pay system
554(1)
When managers can change the rate of piece-rate pay
555(1)
Two-part pay systems
556(1)
Why incentive pay equals higher pay
557(2)
Honest dealing
559(2)
Incentives in the Irvine Company rental contracts
561(3)
The bottom line
564(1)
Review questions
565(2)
Problems in collective decision making
567(36)
Part I Theory and public policy applications
568(24)
The central tendency of a two-party system
568(3)
The economics of the voting rule
571(1)
The inefficiencies of democracy
572(7)
The economics and politics of business regulation
579(4)
The efficiency of competition among governments
583(1)
The economics of government bureaucracy
584(3)
Making bureaucracy more competitive
587(2)
Perspective: The Mathematics of Voting and Political Ignorance
589(3)
Part II Organizational economics and management applications
592(11)
Why professors have tenure and business people don't
592(1)
The nature of tenure
593(1)
The costs and benefits of tenure to universities, professors, and students
593(2)
Worker-managed universities and academic politics
595(3)
Why business people don't have tenure
598(1)
Tenure as a tournament
599(1)
The bottom line
600(1)
Review questions
601(2)
International trade and finance
603(48)
Part I Theory and public policy applications
605(37)
International trade in goods
605(22)
International finance
627(11)
Perspective: Bastiat's Satirical Case for Free Trade: ``A Petition''
638(4)
Part II Organizational economics and management
642(9)
The consequences of ``quicksilver capital'' for business and government
642(2)
Capital mobility and business competitiveness
644(1)
Capital mobility and government competitiveness
644(3)
The downside of capital mobility
647(2)
The bottom line
649(1)
Review questions
649(2)
References651(17)
Index668

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