Managerial Economics







　

Instructor:　 Professor Chien-fu Jeff Lin
　

Introduction:

Managerial Economics is concerned with resource-allocation, strategic decisions, and tactical decisions that are made by analysts, managers, and consultants in the private, public, and not-for-profit sectors of the economy. Managerial economic techniques seek to achieve the objectives of the organization in the most efficient manner, while considering both explicit and implicit constraints on achieving the objective(s). The book is organized  around the twin themes of product-line rivalry and shareholder wealth maximization for private sector enterprises. In addition, the theme of managerial efficiency provides a common basis for making resource-allocation decisions in all enterprises.  The major emphasis is to provide the analytical tools and managerial insights  essential to the analysis and solution of those problems that have significant economic consequences, both for the firm and society at large. Effective decision making requires an understanding of the constraints (limitations)  imposed on the decision maker by the business environment. To accomplish this, major issues associated with government regulation of the firm, as well as implicit constraints on the actions of private and public sector enterprises, are  examined throughout the text and in two dedicated chapters. These issues include a consideration of the externalities associated with economic decisions.
Supplement：class material ，powerpoint 。　
Textbook for this course
　
 
　 　
Managerial Economics: Applications, Strategy, and Tactics, nineth Edition (2002)
By 
James R. McGuigan, JRM Investments 
R. Charles Moyer, Wake Forest University 
Frederick H.B. Harris, Wake Forest University 
Published by South-Western College Publishing 
ISBN/ISSN: 0-324-05881-0 
Price: US $83.75 
Price: Canada $103.95 
　 
　


　
　

About the author
 

James R. McGuigan
James R. McGuigan owns and operates his own numismatic investment firm.Prior to this activity, he was Associate Professor of Finance and Business Economics in the School of Business Administration atWayne State University. He also taught at the University of Pittsburgh and Point ParkCollege.

McGuigan received his undergraduate degree from Carnegie-Mellon University. He earned an MBA at the Graduate School of Business at theUniversity of Chicago, and his Ph.D from the University of Pittsburgh. In addition to his interests in financial management, he has co-authored books in managerial economics, including Managerial Economics with R. Charles Moyer. His research articles on options have been published in the Journal ofFinancial and Quantitative Analysis.

R. Charles Moyer R. Charles Moyer holds the Integon Chair in Finance in the Babcock Graduate School of Management at Wake Forest University. Previously, he was Professor of Finance and Chairman of the Department of Finance at Texas
Tech University. Professor Moyer has also taught at the University of Houston, Lehigh University, and the University of New Mexico. He has also spent a year at the Federal Reserve Bank of Cleveland.

Moyer earned his BA in Economics from Howard University, and his MBA and Ph.D in Business from the University of Pittsburgh. In addition to this text, Moyer has also co-authored Managerial Economics, and Financial Management with Lotus 1-2-3. He has been published in many leading journals, including Financial Management, Journal of Financial and Quantitative Analysis, Journal of Finance, Financial Review, Journal of Financial Research, International Journal of Forecasting, Journal of Economics and Business, Journal of Industrial Organizations, and many others.

 Frederick H. deB. Harris Frederick H. deB. Harris is the McKinnon Professor of Managerial Economics and Finance at the Babcock Graduate School of Management, Wake Forest University. His specialties are pricing tactics and capacity planning, two topics that ideally integrate functions traditionally ascribed to marketing, operations, and finance. Professor Harris has taught integrative managerial economics, marketing, and finance courses in three business schools in the U.S. and Europe.

Professor Harris has published widely in financial and economics journals including the Review of Economics and Statistics, Journal of Financial and Quantitative Analysis, Journal of Banking and Finance, Southern Economics Journal, Journal of Industrial Economics, and Managerial and Decision Economics. From 1988-93, Professor Harris served on the Board of Associate Editors of the Journal of Industrial Economics. His current research focuses on the application of capacity-constrained pricing models to specialist and electronic trading systems for stocks. In addition, he often benchmarks the pricing, order processing, and capacity planning functions of large companies against state-of-the-art techniques in yield management and writes about his findings in journals like Marketing Management and the Journal of Operations Management.
　


Some comments about this book.
　

The philosophy that guides this text is well presented in the first chapter.... Initially giving the student this clarity regarding the importance of economic analysis and decisions and their impact on shareholder's wealth is vital to the establishment of the significance of the course and its application in today's business environment.
.........................................Linda Y. de la Vina, University of Texas at San Antonio
The MMH book offers 1) breadth of coverage to suit many different audiences, 2) expanded presentation of asymmetric information and economic decisions and strategies, and 3) a wealth of examples from sports cartels to international joint ventures. Students come back after a few weeks and report that now they understand the issues involved in newspaper stories of price fixing cases or pricing strategies like tit-for-tat.
......................................Richard D. Marcus, University of Wisconsin, Milwaukee
The Managerial Challenges, examples, and international perspective make not only the reading of each chapter enjoyable and interesting, but also gives real business examples of topics covered in each chapter.
..................................................Paul M. Hayashi, University of Texas at Arlington
 Features of the book.
 
          Unique Features

             Theory-In-Context Approach: This is the most
          applied text on the market. Theoretical concepts are
          consistently motivated by real-world situational
          scenarios and are explained within the context of
          real-world business applications. The book contains
          more managerially-oriented features, examples, and
          cases than any other text.

             Contemporary Approach: This edition
          emphasizes the most current topics in microeconomic
          thinking, including organizational economics,
          game-theoretic tactics, auction economics, strategy,
          and information economics. This coverage is balanced
          with the traditional neoclassical micro theory.

             International Treatment: The authors demonstrate
          the importance of understanding the global economic
          environment as it relates to managerial efficiency and
          shareholder wealth maximization. "International
          Perspectives" apply managerial economics concepts
          to problems managers face in an increasingly global
          economy. Expanded coverage of the Euro, NAFTA,
          trade deficits, exchange rates, and import controls has been added to the
          International chapter.

             Quantitative Flexibility: Important analytical concepts are presented using
          including tabular, graphical, and algebraic analysis. This makes difficult material
          more accessible and helps students learn in a format most comfortable for them.
          When using basic differential calculus, at least one alternative mode of analysis is
          provided.

             Cases: Many chapters include short case exercises that extend the concepts and
          tools developed in the text and provide in-depth opportunities for problem analysis.

             Internet Features: "Internet Margin Notes" provide on-line examples to support
          the concepts in each chapter. End-of-chapter "Internet Exercises" help students
          solve problems using data and information found at specific Web sites.
 
 
 
 

          New Features

             Organizational Economics Coverage: This edition now provides extensive
          coverage of organizational economics, including a new Chapter 15, "Organizational
          Form, Governance, and Mechanism Design."

             Game Theory Coverage: Game theory treatment is expanded to include more
          real-world exercises on game-theoretic tactics.

             Demonstrates Negative Outcomes: New "What Went Right?/What Went
          Wrong?" features show how managerial economics insights can be used to avoid
          corporate mistakes and critically evaluate good and bad decisions and their effects.

 Table of Contents
PART I: INTRODUCTION.
1. Introduction and Goals of the Firm.
2. Fundamental Economic Concepts.
PART II: DEMAND AND FORECASTING.
3. Demand Analysis.
Appendix 3A. Indifference Curve Analysis of Demand.
4. Estimation of Demand.
Appendix 4A. Nonlinear Regression Models.
5 Business and Economic Forecasting.
6. Exchange Rates and International Trade: Managing Exports.
PART III: PRODUCTION AND COST.
7. Production Economics.
Appendix 7A. Maximization of Production Output Subject to a Cost Constraint.
8. Cost Analysis.
Appendix 8A. The Cobb-Douglas Production Function and The Long-Run Cost Function.
9. Applications of Cost Theory.
Appendix 9A. The Learning Curve.
PART IV: PRICING AND OUTPUT DECISIONS: STRATEGY AND TACTICS.
10. Prices, Output, and Strategy: Pure and Monopolistic Competition.
11. Competitive Markets Under Asymmetric Information.
12. Price and Output Determination: Monopoly and Dominant Firms.
13. Price and Output Determination: Oligopoly.
14. Game-Theoretic Rivalry: Best Practice Tactics. Appendix
14A. Capacity Planning and Pricing: Case Study of Piedmont Airlines and People Express.
15. Organizational Form, Governance, and Mechanism Design.
16. Pricing Techniques and Analysis.
Appendix 16A. Revenue Management.
17. Government Regulation.
Appendix 17A. Economic Externalities and Market Failure.
PART V: LONG-TERM INVESTMENT DESCISIONS AND RISK MANAGEMENT.
18. Long- Term Investment Analysis. WEBCHAPTERS (Available on text Web site only).
Web Chapter A. Optimization Techniques.
Web Chapter A Appendix. Constrained Optimization and Lagrangian Multiplier Techniques. Web Chapter B. Linear Programming Applications.
APPENDIX
A. THE TIME VALUE OF MONEY. APPENDIX
B. TABLES. CHECK ANSWERS TO SELECTED END-OF-CHAPTER EXERCISES. INDEX.
　
A survey of managerial economics and business economics courses in a wide range of universities has led to a broad consensus on topic coverage in some areas, but a wide diversity of coverage in other areas. In organizing the book, we have recognized the differences existing in various curricula. The broad topic coverage provided in the text gives instructors a great deal of flexibility in designating a course suited to the needs of their students and the demands of their curricula.

Part I of the book provides an overview of managerial economics and introduces key economic concepts and tools. In these introductory chapters, the goal of the enterprise (shareholder wealth maximization) is established, the decision-making process and philosophy of optimization are introduced, the role of profit is discussed, and the relationship between managerial economics and other areas of business and economic analysis is developed. In addition, this section introduces the fundamental economic concepts of marginal analysis, net present value, risk, risk versus return analysis, and classical optimization.

Part II examines the areas of demand analysis and forecasting techniques in domestic and export markets. Part III deals with production and cost analysis, and Part IV focuses on price determination and capacity choice in theory and practice. The strategic framework of Michael Porter and the new tactical insights from business games are highlighted. The extent of, rationale for, and consequences of government regulation also are covered in Part IV. Part V includes a coverage of capital budgeting, cost-benefit analysis, and risk analysis and management.
 

 Some adages related to Economics
"The Age of Chivalry is gone; that of sophisters, economists, and calculators has succeeded." -Edmund Burke
"All models are wrong, but some are useful." -G. Box
"Knowledge is the only instrument of production that is not subject to diminishing returns." -J.M. Clack
"You can make even a parrot into a learned political economist-all he must learn are the two words "supply" and "demand." -Anonymous
"Of all monopolies, that of opinion is the worst." -G.J. Stigler
"The world will always be governed by self-interest. We should not try to stop this, we should try to make the self-interest of cads a little more coincident with that of decent people." -S. Butler