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(p. 607) Subject Index
(p. 607) Subject Index
33/50 Program, 574–75
abnormal return, 499–502
above-average effect, 186
acceptance wage function, 518–19
access denial, 431
accounting and economic cost, difference between, 24
activist shareholders, 486
Adobe, 12
adaptability, 459–60
adoption externalities. See network, effects
advantage, competitive. See competitive advantage
adverse selection model, vertical firm structure, 146–48
advertising, 43, 250–52
campaign, 251
co-op, 252
signaling mechanism for product quality and, 143–45
agency:
costs, 148, 150, 375–76, 383–84, 386, 389, 479–80, 482, 499, 501
Delaware law effect on, 501
of debt, 483
of free cash flow, 486
leverage mitigates the, 482
models:
in accounting, 151
of adverse selection, vertical structure of firms and, 146–48
exclusive versus common, 436
in pay for performance, 417
problems, 5, 13, 15, 386, 423, 486, 491–93, 505
contracting with managers to reduce, 495
with family firms, 503
theorists, 194
airlines, 44
Allais paradox, 168–69
Amazon, 12
ambiguity effect, 186
antitakeover laws, 498
antitakeover provisions (ATPs), 498, 500, 505
bylaw amendments, 499
classified boards, 498
fair price provisions, 498
golden parachutes, 499
poison pills, 498
staggered boards, 499
supermajority requirements, 499
antitrust, 6, 16, 23, 32, 48–57, 425
asbestos, 529–32
assets:
common, joint ownership of, 449–50
high-risk/high-return, 163–64
investment in, and extremeness aversion, 184
knowledge-based, 325–26
relationship specific. See transaction specific assets
replacement costs of, and Tobin’s q, 45. See also Tobin’s q
strategic, 331
asset ownership, 455–57
Aston group, University of, 378
auctions, 7, 44–45, 57–58, 550–52
bundling with, 211
procurement, 551
reverse English, 552
unilateral price effects in, 550–52
bandwagon effect, in network industry, 255
bargaining power, 163
barriers to entry, entry barriers, 8, 36–37, 40, 43, 264, 268, 275
absence of, 140
and entry/exit strategies, 356
in Porter’s Five Forces analysis, 354
to secure market power, 129
and Tobin’s q, 245
trade-offs as, 264
base salary, 398
Bayesian-Nash equilibria, 8, 129, 135
common value shock to demand, 136
game theory and, 129–30
private value shock to cost, 136–38
Bellman principle of optimality, 221
benchmarking, 84
Bertrand competition. See competition, Bertrand
Bertrand equilibrium, model, 546
incomplete information about product quality and, 138–45
multistage Cournot-Bertrand oligopoly models, 135–38
one-stage Cournot-Bertrand oligopoly models, 131–32
private value shock to cost, 136–38
block sales, 495
board of directors, 496–98
audit committee, 498
compensation committee, 498
finance committee, 498
investment committee, 498
nominating committee, 498
size, 497
booking limit, 212–13
born-globals, 341–42
brand, brands:
compatibility, 302
brand pricing (BP). See brand, brands, pricing (BP)
bundling, 206, 209–11, 315–16
Hennart’s approach, 340
Internet browsers, 320
in matching incentives and job design, 415
mixed bundling, 210
model, 331–32
business decision making, 23
business strategy, 10, 17. See also strategic decisions, decision making
and behavioral models, 180
contrasted with business model, 288
corporate environmentalism as, 576
economics of, 11
evolution of research and teaching on, 10
firm growth, 283
and new managerial economics, 23
taxonomy, multistage Cournot-Bertrand oligopoly models, 134–35
Cadbury Report, 502
cap on incentive, 410–14
capacities, 173
Carbon Disclosure Project, 573–74
cellophane fallacy. See cellophane
Census of Fatal Occupational Injuries, 521
centrality bias, 409
Climate Challenge Program, 565
clinical studies, 486
clout, 216
Coase theorem, 183
collusion. See price-fixing
comarketing, 331
Combinatorial Auction Design (CAD), 112
Combinatorial English Auction, 114
Commission de la Santé et de la Sécurité du Travail, 528
commitment, 427, 445
and entry deterrence, 434–39. See also entry, deterrence
and incentives and entrepreneurial theories, 461–62
MNEs, 332
vertical mergers, role in, 436–39
common value shock to demand, incomplete information in oligopoly models and, 135–36
compatibility:
automatic teller machines, 301
backward, 304
choice of, 311–15
components, 308
definition of, 302
competitive advantage, 6, 11, 262, 264, 266, 268–69, 273, 275, 279–81, 283, 286, 290, 295
brands, as a source of, 269
economies of scale, as a source of, 268
information asymmetry, as a source of, 268
in the nonprofit sector, 364–66
competition neglect, 188
complementary value, 110, 115, 117
economic environments with, 110
industrial emissions, 117
spectrum licenses, 115
computational burden, 112–13, 116, 119–21
bidding complexity, 112–13
jump bidding, 117
myopic bidding, 120–21
price feedback, 113
computers, 309, 465
distribution system for, at Dell, 290
early days of personal, 317
onboard use in trucking, 465
concentration. See seller concentration
conflict, between debtholders and stockholders, 481
conspiracy. See price-fixing
constrained optimization in vertically separated firms:
adverse selection model, 147–48
moral hazard model, 147–48
Consumer Product Safety Commission, 531
consumer self-selection, 206–9, 213, 219
new product introduced by manufacturers, 253
self-selection constraint, 208
consumer surplus, consumers’ surplus, 54, 204–7, 210, 237, 244, 248–49, 254
accurately expressing with line integrals, 443
with exclusive agreements, 435
in market foreclosure, 430
with menu pricing, 206
second-degree price discrimination, 205
with simple uniform pricing, 204
with two-part pricing, 205
with tying, 433
containment, 97
Continental Airlines, 487
contingency factors, role of, 383
contract, contracts:
as barrier to entry by Southwest Airlines, 265
equilibrium, 438
exclusive dealing, 434
optimal, 162
preference for riskier, 186
and switching costs, 310
theory, 262
tying, 433–34
contracting:
costs, and capital structure, 481–82
and entry deterrence, 434–35
and transaction costs verifying contingencies, 266
controllability, 404
co-opetition, 354
coordinated effects, 48–49
coordination, 105
copyright, 55
corporate environmentalism, 15, 16, 559–77
and awards and rankings, 573
and corporate financial performance, 571–73
in developing countries, 564–65
and information provision, 566
and minimum quality standards, 570
and NGOs, 567–71
to shape legislation, 567
to shape regulations, 566
as symbolic action, 573
and voluntary agreements, 564–66
corporate financial performance (CFP), 571
corporate social performance (CSP), 571
corporate social responsibility. See corporate environmentalism
cost accounting, and:
economic analysis, 67
activity index, 71
cost efficiency index, 71
input price index, 71
activity effect, 72
cost efficiency effect, 72
price effect, 71
quantity effect, 71
cost of debt, 481–82
cost variance analysis, and:
productivity variance, 69
sales activity variance, 69
costs of financial distress, 479
Cournot competition. See competition, Cournot
Cournot equilibrium:
incomplete information about product quality and, 138–45
multistage Cournot-Bertrand oligopoly models, 135–38
one-stage Cournot-Bertrand oligopoly models, 131–32
private value shock to cost, 136–38
CR4. See seller concentration
creativity, 416
credible commitment. See commitment, credible
critical ratio, 213
crowding out, 363
Current Population Survey (CPS), 521
damaged goods, 208
declining marginal costs, signaling mechanism for product quality and, 144–45
defense firms, 486
degrading of performance measure, 406
Delaware corporate law, 501
delegation, 375
demand elasticity. See elasticity of demand
Department of Defense, US, 158
depression babies, 166
differentiated network MNE, 333–34
digital convergence, 315
direct demand function facing firm, one-stage Cournot-Bertrand oligopoly models, 131–32
discounting:
exponential, 155
discount factor, 157
discount rate, 157–58
hyperbolic, 159–60
saving and consumption, 156–58
discretionary accruals, 503
disruption, supply chain:
response to, 104
disruptive innovations. See innovation, disruptive
distance, dimensions of, 332
dividends, 480
dominant firm, 40–41
dynamic capabilities. See capabilities, dynamic
earned income strategies for nonprofits, 361
earnings management, 503
econometric estimation, 47–50
economic v. accounting cost, 24
Economics of Strategy 10
economies of scale:
and complementarities, 115
contrasted with management of intangible assets, 280
econometric estimation of, 67
as regional strategy for MNE, 335
with scope economies as cause for conglomerate nonprofit organizations, 355
at Wal-Mart, 268
educational investment, signaling mechanism for product quality and, 141–45
efficient frontier, 99–100
elasticity-based price optimization, 225
elasticity of demand. See price elasticity of demand
Ellsberg problem/paradox, 171–75
empirical evidence:
capital structure, generally, 485–86
market timing theory, 485
pecking order theory, 484
trade-off theory, 482–83
empirical techniques, 81–82
Data Envelopment Analysis (DEA), 81–82
Stochastic Frontier Analysis (SFA), 81–82
employee selection, 417
Energy Star program, 565
entrepreneurial managerss. See managers, entrepreneurial
entry, 31, 49–50, 55. See also barriers to entry
barriers. See barriers to entry
costs, determining in the nonprofit sector, 358–59
deterrence, 434–36. See also commitment, and entry deterrence
environmental, 15
mode, 330–32
workplace safety, 15
ethical investing, 563
expected utility, 155, 163, 172
Choquet, 173–74
maxmin, 174
rank-dependent, 169
second-order, 175
subjective, 172
external debt, 483–84
external equity, 483–84
favoritism, 409
financial institutions, 83
financing deficits, 484
first best outcome, adverse selection model of vertically separated firms, 147–48
floor on incentive, 412
franchising:
empirical tests of, 467
franchising v. corporate ownership, 461–62
fraudulent reporting, 503
free cash flow, 480
fundamental attribution error, 189
G-index, 499
game theory, 8–10, 56
basic principles, 129–30
incomplete information in oligopoly models, 135–38
multistage Cournot-Bertrand oligopoly models, 135–38
noncooperative, 8
one-stage Cournot-Bertrand oligopoly models, 130–32
generic strategies, 269
goldbricking, 412
green:
company rankings, Newsweek, 572
consumerism, 562
investing. See ethical investing
products. See environmentally friendly products
group incentives, 419
growth opportunities, 486
hazard information, 513–14, 526–27, 529–30. See also hazard warnings
advantages, 530
compensating wage differentials, 529
impact on quits, 529
Health and Retirement Study, 165–66
hedge fund, 486
hedonic equilibrium, 514–20, 527
acceptance wage function, 518–19
firm safety decisions, 515–16
offer wage function, 516–17
worker safety decisions, 517–19
HHIs. See Herfindahl-Hirschman index
hidden quality theory, 355
hierarchy, 13
holdup. See opportunism (holdup)
(p. 615)
Horizontal Merger Guidelines. See merger guidelines
hospitals, 57
Hotelling, applied to nonprofits, 355–56
importance weight, 215
incentive, incentives, 217, 220, 229
incentive compatibility constraints:
adverse selection model of vertically separated firms, 147–48
signaling mechanism for product quality and, 142–45
income effect, 237
incomplete information:
adverse selection model, 146–48
moral hazard model, 149–50
oligopoly model incorporation of, 135–38
about product quality, 138–45
vertically separated firms structure and, 145–50
increasing returns. See returns, increasing
individual rationality constraint, adverse selection model of vertically separated firms, 147–48
influence costs, 409
informational costs, adverse selection model of vertically separated firms, 147–48
informativeness principle, 408
innovation:
business model, 282
competitive advantage by cost-reducing, 271
and corporate governance, 498
disruptive, 290
and exploitation bias, 182
financial, 162
and growth of firm, 278–83
in network industries, 319
motivating, 416
product/process, 289
protection of, 293–97
and strategic opportunities, 267
stylized treatment of, 283
systemic, 292
innovative work practices (IWPs):
inside ownership, 492–95
inside view, 188
insurance, 166
intangible assets, 11
intangibles. See assets, intangible
integration:
interest tax shields, 484
Internet service providers (ISPs), 315–16
intrinsic motivation, 418
IO. See industrial organization
irrelevance proposition, 478
ISO 14001 certification, 563
job design, 415–16
joint venture, 443
knowledge, intensity, hierarchy, 385
large shareholders, 495–96
lean organization, 388
lemons car market, 138–45
leniency bias, 409
leniency programs, 56
leveraged recapitalizations, 480
leveraging hypothesis. See monopoly leveraging hypothesis
liability. See tort liability
limits to firm size, 453
location advantage, 328
loss aversion, 167
machine learning, 217
managerial economics:
areas of, 20
as applied by consulting firms, 24
base studies, relevance of, 21
behavioral economics approach, 25–26
business ethics, 22
business philanthropy, 22–23
and decision economics, trends in, 20–22
experimental economics approach, 25
game theory, impact of, 21
international focus, 24–25
in leading MBA programs, 20
modern trends and “new” managerial economics, 20–22
recent developments, 20
strategic analysis, 23
use of case studies in teaching, 21
Manhattan metric, 92
manufacturer/retailer, 222–23
market allocation, 449–52
market efficiency, weak-form, 498
market for ideas, 272
market frictions, 479
market segmentation. See price discrimination
market-to-book ratios, 485
Markov perfect, 221
menu pricing, 206
mergers, 13, 16, 32, 48–51, 53
agency guidelines on, 540–43
in the bargaining context, 553–54
in the bidding context, 550–52
in the consumer product context, 544–49
in the homogeneous products context, 549–50
product repositioning from, 547–48
recommendations for managers, 554–55
simulation of, 546
metanational form, 334
milking of reputation, product quality and, 140–41
Mine Safety and Health Administration (MSHA), 528
mispriced securities, 484
model (and models), 238, 240, 245–47, 251
agent-based, 254
aggregate-level, 255
decentralized, 237
decentralized-distribution, 237
vertically-integrated, 237
monopolist. See monopoly
monopolistic firm, vertical structure of, 146–48
moral hazard model, vertical structure of firms and, 148–50
multinationality-performance relationship, 337–38
multipart pricing scheme, 206–9
multiple revenue streams of the nonprofit, 361–63
multistage Cournot-Bertrand oligopoly models, 135–38
Nash equilibrium, 210, 220–22, 226
game theory and, 129–30
one-stage Cournot-Bertrand oligopoly models, 131–32
static oligopoly models, 130–38
natural gas star program, 565
NEIOs. See new empirical industrial organization
network industries, 12
neutrality, 426
nondistribution constraint, 356–57
non-governmental organizations. See NGOs
non-market strategy, 576
nonprofit organizations/sector, 12
entrepreneurs, 356
objective function of, 355–56
pricing strategies. See pricing strategies for nonprofits
revenue sources for. See revenue sources for nonprofits
subsidization in nonprofits, 360–61
non-standard behavioral models:
assumptions, 180
Occupational Safety and Health Administration (OSHA), 513–14, 521, 526–28, 531
fines, 528
impact on safety, 528
types of standards, 526
offer wage function, 516–17
oligopoly, 8, 35, 37, 41–42, 44, 49
incomplete information in, 135–38
multistage Cournot and Bertrand models, 132–35
one-stage Cournot and Bertrand models, 130–32
static models of, 130–38
opera, 358
operating leases, 487
operational excellence, 263
optimal positioning, 254
optimization problem. See set-packing problem
overconfidence, 185–86
Oxford Handbook on Pricing Management, 9
Panel Study of Income Dynamics (PSID), 166
Panzar-Rosse approach, 46
partition dependence, 191
personnel economics, 20–21
pharmaceuticals, 57
plant closure decision, 549–50
Porter’s five forces:
applied to the nonprofit sector, 354
Porter hypothesis. See Five Forces analysis/ framework
price discrimination, 9, 10, 55, 58, 203–9, 212
first-degree price discrimination, 204
market segmentation, 316
in nonprofits, 360
second-degree price discrimination, 204–6
third-degree price discrimination, 205
price elasticity of demand:
estimating using conjoint analysis, 213
and market power, 47
and performing SSNIP test, 49
price elasticity tools, 213–14
as related to HHI, 39
price expectation, 219
price sensitive, 212–13
price squeeze, 431
price-to-earnings ratios (PE), 485
pricing schedules, signaling mechanism for product quality and, 144–45
pricing strategies for the nonprofit, 359–62
principal-agent models, 15
private equity transactions, 480
private information, private value shock to cost and, 136–38
private label, 254
private politics. See civil regulation
probability transformation function, 169–70
product quality, 319
incomplete information about, 138–45
reputation as mechanism for maintenance of, 139–41
signaling mechanism for revealing, 141–45
productivity change, and:
cost change, 67
cost frontier, 72
unit cost change, 74–75
unit cost frontier, 76
unit labor cost, 80
profit change indicator, and:
cost efficiency effect, 73
input price effect, 73
output price effect, 73
profit activity effect, 73
technology effect, 73
Profiting From Innovation (PFI) framework, 290–91. See also innovation
property, intellectual. See intellectual property
protection limit, 212
quality. See product quality
quantity forcing, adverse selection model of vertically separated firms, 148
quasi-fixed costs, 315
quasi-linear utility. See utility, quasi-linear
quasi-rents, 428–29, 454–56, 465, 467
flow, stream, 450–52
from specialized assets, 452
of sunk investments, 457
of transaction specific investments, 465
R&D. See research and development
RAD. See resource allocation design
Rabin calibration theorem, 164
rare event, probability of, 90
ratchet effect, 414
rational behavior, 9
rebates, 161–62
recombination capability, 333–34
relative performance evaluation, 408
resource based view, 185
resources and capabilities, 184–87
retail price maintenance (RPM), adverse selection model of vertically separated firms, 148
retained earnings, 483
revenue sources for nonprofits, 361–63
ring. See supply chain, network as a chain
risk, 8
containment. See containment
currency, 89
demand, 100
design strategies for, 90
disruptive, 90
forecast, 101
level of, 102
pooling. See pooling
recurrent, 90
unmanaged supply chain, 90
risk-risk tradeoff s, 533
road construction, 44–45
SAA. See simultaneous ascending auction
S-C-P paradigm. See structure-conduct-performance paradigm
scale, economies of. See economies of scale
scanner data, 46
scope, economies of, 406–7
sealed-bid combinatorial auction, 112
search, 163
self-control, 161–62
seller concentration, 43
set-packing problem, 111
shareholder rights, 498–501
short run, 427–30
signaling:
efficiency of, 115
financial exposure problem in, 115
firm’s expectations about cash flows, 480
implications for strategy, 267
as mechanism revealing product quality and, 141–45
and raising rivals’ cost, 567
simultaneous ascending auction (SAA), 115
willingness to pay more in auction, 116
single monopoly profit theorem, 426
Skype, 12
slotting fees, 254
social network effects, 256
SOVs. See structural organizational variables
specialized investments, 451
SSNIP test. See small but significant and nontransitory increase in price Stackelberg, 222–23, 226
standards, 12, 283–84,
298n10
compatibility, 303–4
early introduction, 304
licensing, 304
new versus old, 319
strategy, 3
and business competition, 10–12
competitive, 3. See also sustainability of competitive strategy
sunk costs, 374, 427–29, 432, 442
of capacity in raising rivals’ cost in vertical merger, 428–29
of entry, 425
sunk investments, 566
superadditivity, 173
supermarkets, 46
supply chain, 7
design, 89–106
flexibility, 103
fragility, 93
network as a chain, 98
node failure, 99
responsiveness, 103
unmanaged risk, 90
sustainability of competitive advantage, 270
Taconic Capital, 486
technology, disruptive, 274. See also innovation, disruptive
theories of the firm:
threshold, 411–13
threshold problem, 116
time:
deployment, 105
design, 105
detection, 105
inconsistency, 160–62
and hyperbolic discounting, 161–62
naïve agents, 161–62
self-control problems, 161–62
sophisticated agents, 161–62
response, 104
tort law, 15–16
total expected cost, 93–95
trademarks, 55
transport, 83
trapped capital, 364
TSC. See two-sided combinatorial auction
two-part tariff. See tariffs
two-sided combinatorial auction (TSC), 117
UK (United Kingdom) firms, 483
uncertain standards, 562
uncertainty aversion, 173–75
underinvestment problem, 481
uniform price, 204
unilateral effects. See mergers, unilateral effects from
unit cost change index, and:
cost efficiency change, 75
efficient unit cost change, 75
input price change, 75
reciprocal productivity change, 75
technology change, 76
unit cost change indicator:
and cost efficiency effect, 76
decomposition by individual input quantities and prices, 77–78
and price effect, 76
and productivity effect, 76
and size effect, 76
and technology effect, 76
unit cost frontier analysis, 74–78
unit labor cost analysis, 79–81, and:
capital deepening, 80
exchange rates, 80
labor’s cost share, 79
labor productivity, 79
multifactor productivity, 80
technical efficiency, 80
unit cost, 79
United Airlines, 487
United Continental Holdings, 487
upward pricing pressure (UPP), 50
US Department of Transportation (DOT), 523
usage sensitive tariffs. See tariffs
valuation multiples, 500
value of a statistical life (VSL), 519–23
estimates of, 520–23
segmented labor markets, 522
variation by type of worker, 521–23
value of mortality risk, 520
value pricing, 221–22
vertical firm structure, vertical integration, 13, 14. See also make-or-buy decisions; mergers
adverse selection model, 146–48
incomplete information and, 145–50
moral hazard model, 148–50
volatility of earnings, 482
voluntary agreements, 564–66
vulnerability, 216
warranties, signaling mechanism for product quality and, 145
winner-determining algorithm. See set-packing problem
winner-take-all market. See market, winner-take-all
WordPerfect, 12
workers’ compensation insurance, 513–16, 520–21, 523–25, 530–32,
534n3
coverage of asbestos-related diseases, 531
experience-rating of premiums, 525
impact on safety, 524–25
reporting effect, 525
workplace safety, 15
yes man, 409
