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date: 25 February 2021

(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 hedge funds, 496, 500
activist shareholders, 486
activity systems, 263, 269, 275
added value, 263, 264, 271
Adobe, 12
adaptability, 459–60
adaptation, 456, 458–60, 462, 468
adoption externalities. See network, effects
advantage, competitive. See competitive advantage
adverse selection, 8, 483
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
relationships, 19, 150, 376, 398
theorists, 194
theory, 345, 398, 419
airlines, 44
algorithm, 212, 218–19, 221, 225
alignment, 263, 275
Allais paradox, 168–69
allocation of, decision-making, decision-making authority, 374, 379
Amazon, 12
ambiguity, 171. See also uncertainty
ambiguity effect, 186
anchoring, 187
endowed, 185, 187–88, 192
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
authorities, agents, enforcers, 55–56, 321, 445
policy, policy analysis, 12–13, 321
enforcement. See regulation law:
agency guidelines on, 540–43
Clayton Act, 538–39
court decisions, 538–39
recommendations for managers, 554–55
relevant market concept of, 540–41
treatment of mergers in, 14, 425, 427, 429, 440, 537–55
(p. 608) market power in, 48–53. See also market power
network industries, considerations for, 320
Apple, 12, 278, 284, 288, 290–91, 298n2
appropriability, 289, 291, 293
arm’s-length, 449, 460
asbestos, 529–32
assets:
common, joint ownership of, 449–50
high-risk/high-return, 163–64
intangible, 11, 279–82, 287, 289, 297, 327, 333
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
specialized, 452. See also transaction specific assets
strategic, 331
asset specificity, 452, 455–56, 463–64. See also transaction specific assets
asset ownership, 455–57
Aston group, University of, 378
attribute, 209, 214–16
auctions, 7, 44–45, 57–58, 550–52
bundling with, 211
combinatorial, 7, 108–26
procurement, 551
reverse English, 552
unilateral price effects in, 550–52
backward induction, 218, 221
bandwagon effect, in network industry, 255
banking, 44, 46, 48
bargaining, 454–56, 465, 553–54
bargaining power, 163
barriers to entry, entry barriers, 8, 36–37, 40, 43, 264, 268, 275
absence of, 140
and entry/exit strategies, 356
fixed cost as, 264, 268
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:
conjoint experiment, 253
estimation, 218
rule, 136
updating, learning, 136, 207
Bayesian-Nash equilibria, 8, 129, 135
common value shock to demand, 136
game theory and, 129–30
private value shock to cost, 136–38
behavioral economics, 8–9, 25, 180, 193, 194n2
and neoclassical economics, 25
sense of fairness, 25
behavioral finance, 180, 193, 194n2
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
blockholders, 495–96, 499, 505
block sales, 495
board of directors, 496–98
audit committee, 498
committees, 498, 505
compensation committee, 498
composition, 494, 497, 498
finance committee, 498
investment committee, 498
nominating committee, 498
size, 497
booking limit, 212–13
born-globals, 341–42
bounded rationality, 11, 261, 264–65, 275, 332, 337, 342
bounded reliability, 332, 337, 342
brand, brands:
(p. 609) differentiated, 302
compatibility, 302
management, managers, 239, 242, 257n
pricing (BP), 10, 237–39, 241–52, 256n, 257n
switching, 213, 219, 234
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:
business ethics and managerial economics, 22–23
ecosystem, 185
history, 347–48, 373
model. See model, business
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
buyers, 41, 44, 56
Cadbury Report, 502
cannibalization, 208, 242–43, 254
cap on incentive, 410–14
capabilities, 278–80, 282, 290–92, 298n3
ordinary, 286, 292
capacities, 173
capital structure, 15
historical studies of, 486
theories of, 475
Carbon Disclosure Project, 573–74
category management, managers, 239, 252, 257n
category pricing (CP), 10, 237–39, 243–50, 252, 256n, 257n
causal ambiguity, 185–86, 192–93
cellophane, 51, 59
cellophane fallacy. See cellophane
Census of Fatal Occupational Injuries, 521
centrality bias, 409
centralization of decision-making, 380, 387
channel:
bilateral-monopoly, 237, 244, 246–47
coordinated, 256n
decentralized, 237–38, 240, 244–45, 248–50, 256, 256n
distribution, 253, 255
multibrand, 237
multichannel, 256
one brand, 237
structure, 236, 247–48, 255
two brands, 246
vertical-Nash, 244–46, 248–49
vertically-integrated, 237–38, 241–45, 247–49, 256n, 257n
uncoordinated, 257n
civil regulation, 561, 568, 575
Climate Challenge Program, 565
clinical studies, 486
clout, 216
Coase theorem, 183
collusion. See price-fixing
comarketing, 331
Combinatorial Auction Design (CAD), 112
Combinatorial Clock Auction (CCA), 118
computational burden of, 119
efficiency of, 119
Combinatorial English Auction, 114
Commission de la Santé et de la Sécurité du Travail, 528
commitment, 427, 445
credible, 244, 461–62
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 risk factors, 501
downside risk factor, 501
(p. 610) liquidity risk factor, 501
takeover risk factor, 501
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
two-v. one-way, 12, 309
compensating wage differentials, 513–14, 524, 527, 529–30, 533. See also hedonic equilibrium; value of a statistical injury; value of a statistical life
compensation plans, 13. See also pay for performance
employees, 13, 15
executives, 13
competition, 210, 219–25, 228–34
Bertrand, 38, 42, 55, 57, 437, 444
Cournot, 39, 42–43, 56, 425, 439
imperfect, 34–35, 46, 52, 55
inter-brand, 244
monopolistic, 34–35, 46, 52, 55
perfect, 33, 41
price, 238, 244, 248
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
complementarities, 282–83, 286, 297
complementary value, 110, 115, 117
economic environments with, 110
industrial emissions, 117
spectrum licenses, 115
complements, 237, 254. See also assets, complementary
computational burden, 112–13, 116, 119–21
bidding complexity, 112–13
collusion, 117, 121
jump bidding, 117
myopic bidding, 120–21
price feedback, 113
computers, 309, 465
ability to process sophisticated pricing models, 10, 225
distribution system for, at Dell, 290
early days of personal, 317
market for tablet, 291, 302
onboard use in trucking, 465
operating systems for, 51, 312
personal computers, 317, 321
concentration. See seller concentration
conflict, between debtholders and stockholders, 481
conjoint analysis, 10, 203, 213–17, 228–33, 235
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
extract, capture, 9, 204, 206, 210, 439
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
imperfect, incomplete, as reason for vertical integration, 424–25, 430
incentive, 407, 411, 418
(p. 611) incomplete v. complete, 451, 454, 457, 460–61, 464–65
optimal, 162
preference for riskier, 186
property rights theory of the firm, 440– 41n2, 450–52
relational, 267, 272–73
and switching costs, 310
theory, 262
trucking and freight in auctions, 113–14, 122
tying, 433–34
contracting:
costs, and capital structure, 481–82
declining impatience and time inconsistency in, 162, 176
and entry deterrence, 434–35
imperfect, incomplete, as reason for vertical integration, 424–25, 430
relational, 415, 419–20
and transaction costs verifying contingencies, 266
controllability, 404
controllable risk, 401–10, 415–16, 418
co-opetition, 354
coordinated effects, 48–49
coordination, 105
copyright, 55
corporate control, 15
market for, 491, 505, 509
corporate environmentalism, 15, 16, 559–77
altruistic motives for, 559–60, 568–69
and awards and rankings, 573
and civil regulation, 560–61, 567–71, 575
and corporate financial performance, 571–73
and corporate reputation, 569, 577
in developing countries, 564–65
and environmental disclosure, 571, 573
and government regulation, 560, 564, 567, 574–75
and greenwash, 571, 573
to influence regulatory enforcement, 560, 566, 574–75
and information provision, 566
and market forces, 560–64, 574
and minimum quality standards, 570
and NGOs, 567–71
and the Porter hypothesis, 562, 574
and product labeling, 562, 570–71
to shape legislation, 567
to shape regulations, 566
to signal costs, 560, 567
as symbolic action, 573
and voluntary agreements, 564–66
corporate finance, 14
market timing theory, 14
pecking order theory, 14
trade-offtheory, 14
corporate financial performance (CFP), 571
corporate governance, 14–15, 22
and firm performance, 491–509
index, 498, 500
mechanisms, 491, 494, 499
and motivation in firm, 389n9
provisions, 499, 502
regulation, 491, 501, 505–6
corporate social performance (CSP), 571
corporate social responsibility. See corporate environmentalism
cospecialization, 282–83, 291
cost:
inventory holding, 247, 256
marginal, 242, 251
per-unit, 240
promotional, 252
sharing, 252
cost accounting, and:
economic analysis, 67
variance analysis, 66
cost change index, and:
activity index, 71
cost efficiency index, 71
input price index, 71
technical change index, 71
cost change indicator, and:
activity effect, 72
cost efficiency effect, 72
price effect, 71
quantity effect, 71
technology effect, 72
cost frontier analysis, 70–74
cost of debt, 481–82
cost variance analysis, and:
fixed proportions, 69, 72
(p. 612) price variance, 69
productivity variance, 69
sales activity variance, 69
costs of financial distress, 479
cotton dust standard, 527, 534n7
country-specific advantage, 321, 328–29, 332–33, 339–40, 344
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
Cournot-Bertrand oligopoly models:
multistage models, 132–35
one-stage models, 130–32
creativity, 416
credible commitment. See commitment, credible
critical mass, 12, 307
critical ratio, 213
crowding out, 363
Current Population Survey (CPS), 521
customized promotion, 218, 219, 235
damaged goods, 208
deadweight loss, 425–26, 433–34, 444
debt, 14
benefits of, 479–81
debt-to-value ratios, 476
decision support system, 219, 229
declining marginal costs, signaling mechanism for product quality and, 144–45
defense firms, 486
degrading of performance measure, 406
Delaware corporate law, 501
delayering, 13, 373, 379–80, 382
delegation, 375
demand, 237–45, 251–56, 257n
aggregate, 238, 241
augmentation, 242–44
base (or base level), 241, 243, 247–48, 250
estimating models of, 225
intercept, 237, 241–43
linear, 244–45, 250
system, 240, 257n
demand elasticity. See elasticity of demand
Department of Defense, US, 158
depression babies, 166
Descending Price Combinatorial Auction (DCPA), 120
computational burden of, 120
efficiency of, 121
diagonal merger, 430–31, 443
differentiated network MNE, 333–34
differentiation:
brand, 236, 241, 243, 247, 251–52
product, 237, 254, 437
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
discriminatory access, 433, 439, 443
disruption, supply chain:
response to, 104
disruptive innovations. See innovation, disruptive
disruptive risk in supply chain, 7, 90–92, 106
distance, dimensions of, 332
distortion, 401–8, 410, 418
dividends, 480
dominant firm, 40–41
donor behavior 358–59; 362–64
double marginalization, 238, 244, 248, 424–25, 428, 432
du Pont, 51, 59, 88, 477
dual-class stock, 494, 504
duopoly, 273–74, 437
durable goods, 433, 439
dynamic capabilities. See capabilities, dynamic
(p. 613) dynamic pricing, 206, 217–19, 221, 230–33
dynamic programming, 4, 218, 225, 229
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:
as barrier to entry, 36, 43
and complementarities, 115
and concentration levels, 57n45
contrasted with management of intangible assets, 280
and Demsetz’s explanation of “Why do firms exist?”, 452–53, 460
econometric estimation of, 67
loss of, as trade off for product distinctiveness, 54, 55n15
as regional strategy for MNE, 335
with scope economies as cause for conglomerate nonprofit organizations, 355
at Wal-Mart, 268
ecosystem, 282–84, 286, 288–89
education and health care, 68, 84
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
emerging economy multinationals, 339, 342–45
emotions, 194n6
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
endowment effect, 183, 192
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
fee, 205–6, 209
mode, 330–32
workplace safety, 15
environmental:
disclosure, 571, 573
management systems, 573
regulation, 565
environmentally friendly products, 562, 570, 574
equity, issues, 14, 485
ethical investing, 563
event studies, 106, 488n13, 572–74, 576–77
exclusive dealing, 433–36, 444nn28, 31, 32
exit and entry for nonprofits, 356–59, 364
expectations, 180, 185, 192
expected utility, 155, 163, 172
Choquet, 173–74
maxmin, 174
rank-dependent, 169
second-order, 175
subjective, 172
experience curve, 217, 221
experimental economics, 8, 9
exploitation, 182, 194n3
bias, 181, 192, 194n4
exploration, 182, 194n3
external debt, 483–84
external equity, 483–84
extremeness aversion, 183, 192
facilities:
reliable, 92
unreliable, 92
familiarity effect, 190–91, 193
family firms, 491, 503–4
favoritism, 409
feedback, 180
availability of, 182
financial exposure problem, 110–11, 115, 122
(p. 614) financial fraud, 502–3
financial institutions, 83
financial performance, differences in, 261–64, 266
financing deficits, 484
firm allocation, 449–53, 458, 460
firm-specific advantage, 327–29, 333–34, 338–39
first best outcome, adverse selection model of vertically separated firms, 147–48
Five Forces analysis/framework, 264, 283, 354, 361–62, 562, 574
floor on incentive, 412
foreclosure, 425–26, 429–30, 432, 437, 440, 442, 444
framework, dynamic capabilities, 279, 285, 291, 297
framework, profiting from innovation, 290–91, 298n8
franchising:
empirical tests of, 467
franchising v. corporate ownership, 461–62
fraudulent reporting, 503
free cash flow, 480
frequency reward, 220, 231
frequently purchased consumer goods (FPCGS), 236–39, 245–46, 253, 257
full-requirements contract, 433, 443
fundamental attribution error, 189
G-index, 499
game theoretic, 219, 222
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
gaming of an incentive system, 403, 405, 412
generic strategies, 269
GM/Fisher Body, 455, 463
goldbricking, 412
governance, 344, 346, 453–54
choices of, 325, 329
internal, 326, 333–36
forms/mechanisms/modes/options of, 327–28, 336–37, 341
global, 345
macrolevel, 346
green:
company rankings, Newsweek, 572
consumerism, 562
investing. See ethical investing
greenwash, 560, 571, 573
group incentives, 419
growth opportunities, 486
hazard information, 513–14, 526–27, 529–30. See also hazard warnings
advantages, 530
compensating wage differentials, 529
counterproductive, 530, 532
impact on quits, 529
hazard warnings, 526–27, 530, 532
Health and Retirement Study, 165–66
hedge fund, 486
hedonic equilibrium, 514–20, 527
acceptance wage function, 518–19
firm safety decisions, 515–16
hedonic wage function, 519–22, 524
offer wage function, 516–17
worker safety decisions, 517–19
Herfindahl-Hirschman index (HHI), 39, 43, 57–58, 539–40
heterogeneity, 205, 209, 218–19, 228, 230–31
heuristics and biases, 180, 193
HHIs. See Herfindahl-Hirschman index
hidden quality theory, 355
Hierarchical Package Bidding (HPB), 116
computational burden of, 116
hierarchy, 13
hierarchy, knowledge, pyramidal, 374–76, 379, 382, 386–87
high growth firms, 482, 484
hindsight bias, 409
horizontal, 16
unilateral effects, 16
vertical, 13, 14
holdup. See opportunism (holdup)
(p. 615) Horizontal Merger Guidelines. See merger guidelines
hospitals, 57
Hotelling, applied to nonprofits, 355–56
human capital, 451, 455, 463–64
firm-specific, 377, 385–86, 388, 451, 455, 463–64
human resource management practices (HRMPs), 374, 378, 380–82, 388–90
importance weight, 215
incentive, incentives, 217, 220, 229
high-powered v. low-powered, 460–61, 467
incentive system, 449–62, 465–68
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
industrial organization 10–11, 31–32, 53–54, 56, 262, 271–72
industries:
bread, 540
hospitals, 553–54
ice cream, 540, 544–45
paper, 549–50
software, 550–52
influence costs, 409
information:
asymmetries, 479–81, 484
and communication costs, 375
and communication technology (ICT), 332, 387
goods, 207
overload, 530, 575
technology, 212, 219
theory, 8, 9
basic principles, 129–30
incomplete information in oligopoly models, 135–38
transmission, delays, leaks, 375
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 complementary products and services, 289, 292
and corporate environmentalism, 560, 562, 567
and corporate governance, 498
disruptive, 290
-driven companies, 11, 278
and exploitation bias, 182
financial, 162
and growth of firm, 278–83
and internalization theory, 334–36, 344
in network industries, 319
opportunities, sources of, 11, 182
and organizational design, 385, 387–88
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
institutional:
investors, 495, 496
ownership, 499
insurance, 166
intangible assets, 11
intangibles. See assets, intangible
integration:
costs v. benefits, 452, 456–58, 466
vertical integration, 450–52, 454–55, 461–62, 464–67
intellectual property (IP), 55, 267, 273, 279, 282, 284, 287, 289
appropriability and protection of, 293–97, 298n11
interest tax shields, 484
internal organization, 455, 458, 463–64, 468
internalization theory, 12, 325–27, 346
new/contemporary, 326, 329, 339–40, 346
Internet service providers (ISPs), 315–16
intrinsic motivation, 418
investor protection rules, 501, 506
irrelevance proposition, 478
ISO 14001 certification, 563
job design, 415–16
joint venture, 443
know-how, 279–82, 291, 296
knowledge, intensity, hierarchy, 385
large shareholders, 495–96
lean organization, 388
lemons car market, 138–45
leniency bias, 409
leniency programs, 56
Lerner index, 33, 35–39, 41, 43, 54–57, 227
leveraged recapitalizations, 480
leveraging hypothesis. See monopoly leveraging hypothesis
liability. See tort liability
liability of foreignness, 327, 335
limits to firm size, 453
location advantage, 328
lock-in, 12, 310
long run, 427, 432, 437
long-short portfolio, 499, 501
loss aversion, 167
loyalty program, 218, 231, 232
Lucas critique, 220, 228, 235
M-form, 334, 344, 347, 376
machine learning, 217
make-or-buy decision, 13–14, 450, 452, 454, 460–61, 468. See also mergers, vertical
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
managerial entrenchment, 493
index, 499
managerial implications, 238, 251–52
managers:
market for, 494
monitoring of, 495–501
managers, entrepreneurial, 278–79, 286, 297, 298n2
Manhattan metric, 92
manipulability (manipulation), 403, 405–14, 416, 418
manufacturer/retailer, 222–23
marginal cost, 203–7, 210, 217, 224, 227
product quality reputation and, 140–41
marginal revenue, 204, 224
market, winner-take-all, 285, 288
market allocation, 449–52
market efficiency, weak-form, 498
market for ideas, 272
market frictions, 479
market imperfections, 261, 265–69
information, as an example of, 266–67, 268–69
market power, as an example of, 266–67, 268
transaction costs, as an example of, 266–67
market segmentation. See price discrimination
(p. 617) market shares, 539–40
market structure, 261, 264
market timing theory, 475, 479, 484–85
market-to-book ratios, 485
Markov perfect, 221
Mastercharge, 51, 59
menu pricing, 206
merger guidelines, 48–51, 57–58
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
coordinated effects of, 48–49, 542–43
efficiencies from, 49–50, 53, 58, 543–44, 546–47, 552, 554
in the homogeneous products context, 549–50
horizontal, 48–51, 537–55
product repositioning from, 547–48
recommendations for managers, 554–55
simulation of, 546
unilateral effects from, 48–50, 541–42, 544–55
vertical, 537, 554
metanational form, 334
Microsoft, 12, 51, 59
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
analytical, 236, 254
business, 278–83, 286–89, 291
decentralized, 237
decentralized-distribution, 237
direct-to-consumers, 237, 238, 241
vertical-Nash, 238, 244
vertically-integrated, 237
Modigliani and Miller’s proposition, i, ii, 478
monopolist. See monopoly
monopolistic firm, vertical structure of, 146–48
monopolization, 48, 51–53
monopoly (monopolist), 33, 35–37, 39–40, 42, 46, 48, 53, 55, 57
monopoly leveraging hypothesis, 431–34, 436
monopsony, 54, 56–57
moral hazard, 8, 436
moral hazard model, vertical structure of firms and, 148–50
multinational enterprises (MNE), 12, 325–47
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
multitask incentives, 402, 408, 410, 415–16
naïve diversification, 190, 193
Nash equilibrium, 210, 220–22, 226
game theory and, 129–30
one-stage Cournot-Bertrand oligopoly models, 131–32
static oligopoly models, 130–38
National Institute for Occupational Safety and Health (NIOSH), 514, 526, 529–30
natural gas star program, 565
natural monopolist, 432, 443
negligence, 524, 531
NEIOs. See new empirical industrial organization
network:
antitrust, 320
demand, 305
effects (externalities), 305, 308
industries, 302
network externalities, 223–24, 255
network industries, 12
neutrality, 426
new empirical industrial organization (NEIO), 46–47, 50, 53, 58
new managerial economics:
convergence to mainstream, 23
definition of, 19
prospective research
(p. 618) NGOs, 561, 567–71
as adversaries, 568
as allies, 568
credibility of, 570
noncooperative game theory:
basic principles, 129–30
static oligopoly models, 130–38
nondistribution constraint, 356–57
non-governmental organizations. See NGOs
nonlinear pricing, contracts, 205–9, 436, 443–44
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
beliefs, 180, 192
decision making, 180, 192
preferences, 180–81, 192
numeric performance measure, 398–409, 411–13, 415–16
Occupational Safety and Health Administration (OSHA), 513–14, 521, 526–28, 531
cotton dust standard, 527, 534n7
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 decisions, 374–76, 380, 386
operating leases, 487
operational excellence, 263
opportunism (holdup), 450, 453–55, 460, 462, 464, 467
optimal positioning, 254
optimization problem. See set-packing problem
organizational economics, 10, 13
outsourcing, 280, 284, 291, 293
overconfidence, 185–86
ownership:
forms and incentives, 355
rights, 457, 466
Oxford Handbook on Pricing Management, 9
Panel Study of Income Dynamics (PSID), 166
Panzar-Rosse approach, 46
partial integration, 426, 428–30
partition dependence, 191
patent, 36, 55, 282–84, 287, 289, 293–97, 298n11
pay for performance, 13
pay-performance relationship, 398–99, 411–12, 418
pecking order theory, 475, 479, 483–84
performance, 189
evaluation, 399, 412, 415, 417–18
measurement frontier, 407–18
personalized pricing, 203, 218–19
personnel economics, 20–21
pharmaceuticals, 57
plant closure decision, 549–50
policy dimensions, 236
brand (BP), 237, 244, 247
category (CP), 237, 250, 252
pricing, 237, 241, 244, 248–51
product line, 256n
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:
(p. 619) and critical elasticity, 49
cross-price elasticity, 220–21, 232–33
estimating using conjoint analysis, 213
and market power, 47
own-price elasticity, 204–5, 213–15, 220, 224, 229, 234
and performing SSNIP test, 49
price elasticity tools, 213–14
as related to HHI, 39
as related to Lerner Index, 54n8, 204
price expectation, 219
price optimization, 218–20, 225
price response, 213, 218–19
prices:
ascending clock, 118
descending clock, 120
item feedback, 115
package feedback, 113
price sensitive, 212–13
price squeeze, 431
price-fixing, 32, 40, 48, 52–53, 56, 59
price-to-earnings ratios (PE), 485
pricing externalities, 424–25, 429, 436, 440, 444
pricing schedules, signaling mechanism for product quality and, 144–45
pricing strategies for the nonprofit, 359–62
principal-agent models, 15
prisoner’s dilemma, 56, 210, 220, 237, 249–50, 252–55
private equity transactions, 480
private information, private value shock to cost and, 136–38
private label, 254
private politics. See civil regulation
probability:
disruption, 94–97
estimates of, 92
misestimated, 92
scenarios, 92
probability transformation function, 169–70
product:
adoption, 254, 256n
boycotts, 569–70
categories, 236, 239–40, 247, 257n
category, 236–38, 242, 244, 246, 248, 254
complementary, 257n
differentiation among nonprofits, 357–60
labeling, 562, 570
promotion, 236–37, 239–41, 250–52, 254, 256, 257n
brand-differentiating, 238
variants, 236, 238–39, 247, 253–54, 257n
volume, 102
product liability, 514, 530–33
product line pricing, 208–9, 216, 229
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
promotion-based incentives, 400, 409, 412
properties of numeric performance measures, 400–401, 406
property, intellectual. See intellectual property
property rights, 440, 454, 456–58, 462, 464–68
prospect theory, 164, 169–71
cumulative prospect theory, 169–71
protection limit, 212
psychology, 218, 221
public float, 503, 506
public voluntary programs, 565
effectiveness of, 565–66
purchase history, 218–19, 228, 233
quality. See product quality
quantity discounts, 207, 256
quantity forcing, adverse selection model of vertically separated firms, 148
quasi-fixed costs, 315
(p. 620) quasi-hyperbolic discounting, consumer, preferences, 160–62, 176
quasi-linear utility. See utility, quasi-linear
quasi-rents, 428–29, 454–56, 465, 467
appropriable, 441, 452, 454–55
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
railroads, 41, 44, 486
rare event, probability of, 90
ratchet effect, 414
rational behavior, 9
rational choice theory, 190, 192
rebates, 161–62
recombination capability, 333–34
reference dependence 164–65, 167–68
reference price, 218, 221, 226, 230–31, 235
regionalization, 335–36, 341–42
regulation, 15, 47, 68, 83, 425, 427, 429, 430, 432, 440–43, 445
regulatory preemption, 560, 564, 566, 574–75
relative performance evaluation, 408
rent seeking, 452, 454–56, 463
representative consumer, 237, 240–41, 251, 254
reputation, 16, 267–68
product quality maintenance using, 139–41
research and development (R&D), 37, 278, 281, 292
reserves:
centralizing, 100
cost of, 100, 102
pooling, 97, 98, 101
tailoring, 99
resource allocation, 188, 190–91, 194
resource allocation design (RAD), 116
computational burden of, 116
resource based view, 185
resources and capabilities, 184–87
retail price maintenance (RPM), adverse selection model of vertically separated firms, 148
retained earnings, 483
returns, increasing, 279, 283–85
revenue management, 206, 212–13, 219, 231, 234
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 attitudes, 156, 163–64
context dependence, 166–68
measurement, 165–66
stability, 166–67
risk-risk tradeoff s, 533
road construction, 44–45
SAA. See simultaneous ascending auction
Sarbanes-Oxley Act, 497, 502–3
internal controls, 502–3, 506
related party transactions, 502
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
SEC Form 13D, 486
second-best theory, 432–36, 441
seizing (of opportunities), 285–88, 297
self-control, 161–62
seller concentration, 43
sensing (of opportunities), 285–88, 297
set-packing problem, 111
shareholder rights, 498–501
short run, 427–30
signaling:
devices, 8, 129
efficiency of, 115
(p. 621) enabling buyer collusion in auctions, 117
financial exposure problem in, 115
firm’s expectations about cash flows, 480
implications for strategy, 267
as mechanism revealing product quality and, 141–45
model, 22, 151
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
small but significant and nontransitory increase in price (SSNIP), 48–49, 52, 59, 442
social network effects, 256
social preferences, 194n6
software:
operating systems, 303
piracy, 316
supporting services, 308
word processors, 303
SOVs. See structural organizational variables
span of control, 373–74, 376, 379, 382, 385
specialized investments, 451
SSNIP test. See small but significant and nontransitory increase in price Stackelberg, 222–23, 226
equilibrium
multistage Cournot-Bertrand oligopoly models, 135–38
private value shock to cost and, 137–38
leader, 244, 253, 256
standards, 12, 283–84, 298n10
compatibility, 303–4
early introduction, 304
licensing, 304
new versus old, 319
stochastic cost frontiers, 6, 81–82, 87
stock repurchase, 479, 485
strategy, 3
and business competition, 10–12
competitive, 3. See also sustainability of competitive strategy
and modern managerial economics, 6, 8–9
strategic behavior, 115, 117, 120–21
bid signaling, 117, 121
consumer, 213, 228, 229, 232
study of, in new managerial economics, 20–23
strategic decisions, decision making, 6, 9–19, 134, 179–82, 188, 192–94, 272, 305, 329, 375, 380, 382, 386. See also business strategy
strategic management, 11, 262–65, 271–72
resource-based view of, 261, 264–65
schools in, 264–65
value-based, 265
strict liability, 513–14, 524, 531–32
structural model, 207, 209, 213, 219–20, 224, 229–30
structural organizational variables (SOVs), 374, 379, 381–82
structure-conduct-performance (S-C-P) paradigm, 39, 42–43
subjective evaluation, 399–400, 405, 408–11, 415–17, 419
substitutes, substitutability, substitution, 237, 239–41, 244, 252, 254, 257n, 426–27, 430–31
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
supervisor incentives, 409, 419
supply chain, 7
design, 89–106
flexibility, 103
fragility, 93
network as a chain, 98
node failure, 99
responsiveness, 103
unmanaged risk, 90
supranormal profits, 261, 265–66, 268, 272
sustainability of competitive advantage, 270
switching costs, 12, 267, 285, 298, 310–11
Taconic Capital, 486
takeover, 499
bids, 500, 501
(p. 622) tangibility of assets, 482
target debt ratios, 482, 484
targeted pricing, 218, 229
tariffs:
one-part, 238, 240
two-part, 205–7, 238, 252
usage sensitive, 207
taxes, 479, 482–83
capital gains, 480
corporate, 479–80
personal, 479–80
technology, disruptive, 274. See also innovation, disruptive
theories of the firm:
adaptation theory, 456, 458–60, 462, 468
empirical tests of
adaptation theory, 462
nested tests, 466–67
property rights theory, 464–66
transaction cost theory, 463–64
neoclassical theory, 449, 451–54, 457
property rights theory, 454, 456–58, 464–65
transaction cost theory, 450, 454–56
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
Tobin’s q, 45–46, 493–98, 501, 504, 574
tort law, 15–16
tort liability, 530–32
asbestos, 530–32
negligence, 524, 531
products, 514, 530–33
worker injuries, 513–16, 523–24, 530–32
total expected cost, 93–95
trade-off s, 215
strategic. 264
theory, 475, 479–83
trademarks, 55
transaction cost economics, 325–26, 328–29, 336–37, 345–46
transaction costs, 266–67, 273, 450, 452, 458, 460
transaction specific assets, 450–51, 454–56, 459, 462–68
transport, 83
trapped capital, 364
TSC. See two-sided combinatorial auction
two-part tariff. See tariffs
two-sided combinatorial auction (TSC), 117
two-sided markets, 10, 203, 223–24
tying, 431–34, 443–44
naked tie, 433
tie-in, 433, 444
tie-out, 443–44
UK (United Kingdom) firms, 483
uncertain standards, 562
uncertainty, 8, 171
uncertainty aversion, 173–75
uncontrollable risk, 401–11, 413, 415–17
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
(p. 623) international competitiveness, 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
US Environmental Protection Agency (EPA), 520, 523, 531
usage sensitive tariffs. See tariffs
utility, 8, 240, 255
function, 240, 251, 254
marginal, 255
quasi-linear, 237, 240
valuation multiples, 500
value capture, 263, 266, 269–71
value of a statistical injury (VSI), 519–20, 523
value of a statistical life (VSL), 519–23
estimates of, 520–23
segmented labor markets, 522
variation by type of worker, 521–23
as a way to value safety improvements, 519–20, 523
value of mortality risk, 520
value pricing, 221–22
variable proportions, 426–28, 441
versioning, 206, 208–9, 219
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
vertical-Nash:
channel, 245, 246, 248–49
game, 238, 244–45
model, 238, 244
stability, 244
vertical separation, 427, 432
Visa, 51, 59
volatility of earnings, 482
voluntary agreements, 564–66
vulnerability, 216
warranties, signaling mechanism for product quality and, 145
welfare, 205, 209, 224
wholesale price, 238, 240, 243
willingness-to-pay, 263, 265–66
willingness-to-sell, 263, 265–66
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
yield management, 212, 519. See also price discrimination