Managerial Economics & Organizational Architecture 7th Edition (International Edition)

Cover
Title Page
Copyright Page
Dedication
Preface
Acknowledgments
Contents in Brief
Contents
Part 1: Basic Concepts
	Chapter 1: Introduction
		Managerial Economics and Organizational Architecture
			Organizational Architecture
			Economic Analysis
		Economic Darwinism
			Survival of the Fittest
			Economic Darwinism and Benchmarking
		Purpose of the Book
			Our Approach to Organizations
	Chapter 2: Economists’ View of Behavior
		Economic Behavior: An Overview
			Economic Choice
			Marginal Analysis
			Opportunity Costs
			Creativity of Individuals
		Graphical Tools
			Individual Objectives
			Indifference Curves
			Opportunities and Constraints
			Individual Choice
			Changes in Choice
		Motivating Honesty at Wells Fargo
		Managerial Implications
		Alternative Models of Behavior
			Only-Money-Matters Model
			Happy-Is-Productive Model
			Good-Citizen Model
			Product-of-the-Environment Model
		Which Model Should Managers Use?
		Behavioral Economics
		Decision Making under Uncertainty
			Expected Value
			Variability
			Risk Aversion
			Certainty Equivalent and Risk Premium
			Risk Aversion and Compensation
		Summary
		Appendix A: Consumer Choice
		Appendix B: Inter-Temporal Decisions and the Fisher Separation Theorem
	Chapter 3: Exchange and Markets
		Goals of Economic Systems
		Property Rights and Exchange in a Market Economy
			Dimensions of Property Rights
			Gains from Trade
		Basics of Supply and Demand
			The Price Mechanism
			Shifts in Curves versus Movements along Curves
			Using Supply and Demand Analysis for Qualitative Forecasts
			Linear Supply and Demand
		Supply and Demand—Extended Analysis
			Price versus Quantity Adjustments
			Short-Run versus Long-Run Effects
			Industry Cost Increases and Price Adjustments
		Prices as Social Coordinators
			Efficient Exchange and Production
			Measuring the Gains from Trade
			Government Intervention
			Externalities and the Coase Theorem
		Markets versus Central Planning
			General versus Specific Knowledge
			Knowledge Creation
			Specific Knowledge and the Economic System
			Incentives in Markets
		Contracting Costs and Existence of Firms
			Contracting Costs in Markets
			Contracting Costs within Firms
		Managerial Decisions
		Summary
		Appendix: Shareholder Value and Market Efficiency
Part 2: Managerial Economics
	Chapter 4: Demand
		Demand Functions
		Demand Curves
			Law of Demand
			Elasticity of Demand
			Linear Demand Curves
		Other Factors That Influence Demand
			Prices of Related Products
			Income
			Other Variables
		Industry versus Firm Demand
		Network Effects
		Product Attributes
		Product Life Cycles
		Demand Estimation
			Interviews
			Price Experimentation
			Statistical Analysis
			Implications
		Summary
		Appendix: Demand
	Chapter 5: Production and Cost
		Production Functions
			Returns to Scale
			Returns to a Factor
		Choice of Inputs
			Production Isoquants
			Isocost Lines
			Cost Minimization
			Changes in Input Prices
		Costs
			Cost Curves
			Short Run versus Long Run
			Minimum Efficient Scale
			Economies and Diseconomies of Scale
			Learning Curves
			Economies of Scope
		Profit Maximization
		Factor Demand Curves
		Cost Estimation
		Summary
		Appendix: The Factor-Balance Equation
	Chapter 6: Market Structure
		Markets
		Competitive Markets
			Firm Supply
			Competitive Equilibrium
		Barriers to Entry
			Incumbent Reactions
			Incumbent Advantages
			Exit Costs
		Monopoly
		Monopolistic Competition
		Oligopoly
			Nash Equilibrium
			Output Competition
			Price Competition
			Empirical Evidence
			Cooperation and the Prisoners’ Dilemma
		Summary
	Chapter 7: Pricing with Market Power
		Pricing Objective
		Benchmark Case: Single Price per Unit
			Profit Maximization
			Estimating the Profit-Maximizing Price
			Potential for Higher Profits
		Homogeneous Consumer Demands
			Block Pricing
			Two-Part Tariffs
		Price Discrimination—Heterogeneous Consumer Demands
			Exploiting Information about Individual Demands
			Using Information about the Distribution of Demands
		Bundling
		Other Concerns
			Multiperiod Considerations
			Strategic Interaction
			Legal Issues
		Implementing a Pricing Strategy
		Summary
	Chapter 8: Economics of Strategy: Creating and Capturing Value
		Strategy
		Value Creation
			Production and Producer Transaction Costs
			Consumer Transaction Costs
			Other Ways to Increase Demand
			New Products and Services
			Cooperating to Increase Value
			Converting Organizational Knowledge into Value
			Opportunities to Create Value
		Capturing Value
			Market Power
			Superior Factors of Production
			A Partial Explanation for Walmart’s Success
			All Good Things Must End
		Economics of Diversification
			Benefits of Diversification
			Costs of Diversification
			Management Implications
		Strategy Formulation
			Understanding Resources and Capabilities
			Understanding the Environment
			Combining Environmental and Internal Analyses
			Strategy and Organizational Architecture
			Can All Firms Capture Value?
		Summary
	Chapter 9: Economics of Strategy: Game Theory
		Game Theory
		Simultaneous-Move, Nonrepeated Interaction
			Analyzing the Payoffs
			Dominant Strategies
			Nash Equilibrium Revisited
			Competition versus Coordination
			Mixed Strategies
			Managerial Implications
		Sequential Interactions
			First-Mover Advantage
			Strategic Moves
			Managerial Implications
		Repeated Strategic Interaction
		Strategic Interaction and Organizational Architecture
		Summary
		Appendix: Repeated Interaction and the Teammates’ Dilemma
	Chapter 10: Incentive Conflicts and Contracts
		Firms
		Incentive Conflicts within Firms
			Owner-Manager Conflicts
			Other Conflicts
		Controlling Incentive Problems through Contracts
			Costless Contracting
			Costly Contracting and Asymmetric Information
			Postcontractual Information Problems
			Precontractual Information Problems
		Implicit Contracts and Reputational Concerns
		Incentives to Economize on Contracting Costs
		Summary
Part 3: Designing Organizational Architecture
	Chapter 11: Organizational Architecture
		The Fundamental Problem
			Architecture of Markets
			Architecture within Firms
		Architectural Determinants
			Changing Architecture
			Interdependencies and Complementarities within the Organization
		Corporate Culture
		When Management Chooses an Inappropriate Architecture
		Managerial Implications
			Evaluating Management Advice
			Benchmarking
		Summary
	Chapter 12: Decision Rights: The Level of Empowerment
		Assigning Tasks and Decision Rights
		Centralization versus Decentralization
			Benefits of Decentralization
			Costs of Decentralization
			Illustrating the Trade-offs
			Management Implications
		Lateral Decision-Right Assignment
		Assigning Decision Rights to Teams
			Benefits of Team Decision Making
			Costs of Team Decision Making
			Management Implications
		Decision Management and Control
		Decision-Right Assignment and Knowledge Creation
		Influence Costs
		Summary
		Appendix: Collective Decision Making
	Chapter 13: Decision Rights: Bundling Tasks into Jobs and Subunits
		Bundling Tasks into Jobs
			Specialized versus Broad Task Assignment
			Productive Bundling of Tasks
		Bundling of Jobs into Subunits
			Grouping Jobs by Function
			Grouping Jobs by Product or Geography
			Trade-offs between Functional and Product or Geographic Subunits
			Environment, Strategy, and Architecture
			Matrix Organizations
			Mixed Designs
			Network Organizations
			Organizing within Subunits
		Recent Trends in Assignments of Decision Rights
		Summary
		Appendix: Battle of the Functional Managers
	Chapter 14: Attracting and Retaining Qualified Employees
		Contracting Objectives
		The Level of Pay
			The Basic Competitive Model
			Human Capital
			Compensating Differentials
			Costly Information about Market Wage Rates
		Internal Labor Markets
			Reasons for Long-Term Employment Relationships
			Costs of Internal Labor Markets
		Pay in Internal Labor Markets
			Careers and Lifetime Pay
			Influence Costs
		The Salary–Fringe Benefit Mix
			Employee Preferences
			Employer Considerations
			The Salary–Fringe Benefit Choice
		Summary
	Chapter 15: Incentive Compensation
		The Basic Incentive Problem
			Incentives from Ownership
			Optimal Risk Sharing
		Effective Incentive Contracts
			Principal-Agent Model
			Informativeness Principle
			Group Incentive Pay
			Multitasking
			Forms of Incentive Pay
			Incentive Compensation and Information Revelation
			Selection Effects of Incentive Contracts
		Does Incentive Pay Work?
		Summary
		Appendix: Multitasking Theory
	Chapter 16: Individual Performance Evaluation
		Setting Performance Benchmarks
			Time and Motion Studies
			Past Performance and the Ratchet Effect
		Measurement Costs
		Opportunism
			Gaming
			Horizon Problem
		Relative Performance Evaluation
			Within-Firm Performance
			Across-Firm Performance
		Subjective Performance Evaluation
			Multitasking and Unbalanced Effort
			Subjective Evaluation Methods
			Problems with Subjective Performance Evaluations
		Combining Objective and Subjective Performance Measures
		Team Performance
			Team Production
			Evaluating Teams
			Government Regulation of Labor Markets
		Summary
		Appendix: Optimal Weights in a Relative Performance Contract
	Chapter 17: Divisional Performance Evaluation
		Measuring Divisional Performance
			Cost Centers
			Expense Centers
			Revenue Centers
			Profit Centers
			Investment Centers
		Transfer Pricing
			Economics of Transfer Pricing
			Common Transfer-Pricing Methods
			Reorganization: The Solution If All Else Fails
		Internal Accounting System and Performance Evaluation
			Uses of the Accounting System
			Trade-offs between Decision Management and Decision Control
		Summary
		Capstone Case Study on Organizational Architecture: Arthur Andersen LLP
Part 4: Applications of Organizational Architecture
	Chapter 18: Corporate Governance
		Publicly Traded Corporations
			Corporate Form of Organization
			Stock Exchanges
			Stock Ownership Patterns
			Governance Objectives
		Separation of Ownership and Control
			Incentive Issues
			Survival of Corporations
			Benefits of Publicly Traded Corporations
		Top-Level Architecture in US Corporations
			Sources of Decision Rights
			Shareholders
			Board of Directors
			Top Management
			External Monitors
		International Corporate Governance
		Market Forces
		Sarbanes-Oxley Act of 2002
		Corporate Governance: An Historical Perspective
		Summary
		Appendix: Choosing among the Legal Forms of Organization
	Chapter 19: Vertical Integration and Outsourcing
		Vertical Chain of Production
		Benefits of Buying in Competitive Markets
		Reasons for Nonmarket Transactions
			Contracting Costs
			Market Power
			Taxes and Regulation
			Other Considerations
		Vertical Integration versus Long-Term Contracts
			Incomplete Contracting
			Ownership and Investment Incentives
			Specific Assets and Vertical Integration
			Asset Ownership
			Other Reasons
			Continuum of Choice
		Contract Duration
		Contracting with Distributors
			Free-Rider Problems
			Double Markups
			Regulatory Issues
		Trends in Outsourcing
		Summary
		Appendix: Ownership Rights and Investment Incentives
	Web Chapter 20: Leadership: Motivating Change within Organizations
		Leadership
			Vision Setting
			Motivation
		Decision Making within Firms
			Incentive Problems and Organizational Politics
			Understanding Attitudes toward Change
		Changing Organizational Architecture
		Proposal Design
			Maintaining Flexibility
			Commitment
			Distributional Consequences
		Marketing a Proposal
			Careful Analysis and Groundwork
			Relying on Reputation
			Emphasizing a Crisis
		Organizational Power
			Sources of Power
			Tying the Proposal to Another Initiative
			Coalitions and Logrolling
			Is Organizational Power Bad?
		The Use of Symbols
		Summary
		Appendix: Strategic Value of Commitment and Crisis
	Chapter 21: Understanding the Business Environment: The Economics of Regulation
		Importance of Regulation to Managers
		Economic Motives for Government Intervention
			Defining and Enforcing Property Rights
			Redressing Market Failures
			Redistributing Wealth
		Economic Theory of Regulation
			Demand for Regulation: Special Interests
			Supply of Regulation: Politicians
			Market for Regulation
			Deadweight Losses, Transaction Costs, and Wealth Transfers
		Managerial Implications
			Restricting Entry and Limiting Substitutes
			Forming Coalitions
			On Business Participation in the Political Process
		Summary
	Chapter 22: Ethics and Organizational Architecture
		Ethics and Choices
		Corporate Mission: Ethics and Policy Setting
			Ethics
			Value Maximization
			Corporate Social Responsibility
			Economists’ View of Social Responsibility
			Corporate Policy Setting
			Mechanisms for Encouraging Ethical Behavior
		Contracting Costs: Ethics and Policy Implementation
		Codes of Ethics
			Altering Preferences
			Education
			Corporate Culture
		Summary
	Web Chapter 23: Organizational Architecture and the Process of Management Innovation
		Management Innovations
		The Demand for Management Innovations
			The Rise of TQM
			Other Innovations
		Why Management Innovations Often Fail
			Marketing
			Underestimating Costs of Change
			Failure to Consider Other Legs of the Stool
		Managing Changes in Organizational Architecture
		Summary
Index
Web Glossary