9781118041581

Things to Come 19

Chapters 12 and 13 extend the core study of management decisions by

incorporating risk and uncertainty. Managerial success, whether measured by

a particular firm’s long-run profitability or by the international competitive-

ness of our nation’s businesses as a whole, increasingly depends on making

decisions involving risk and uncertainty. Managers must strive to envision the

future outcomes of today’s decisions, measure and weigh competing risks, and

determine which risks are acceptable. Chapter 12 shows how decision trees can

be used to structure decisions in high-risk environments. Chapter 13 examines

the value of acquiring information about relevant risks prior to making impor-

tant decisions. Chapters 14, 15, and 16 present thorough analyses of four top-

ics that are on the cutting edge of managerial economics and are of increasing

importance to managers: asymmetric information, organizational design, nego-

tiation, and competitive bidding.

FIGURE 1.2

Topics in Managerial

Economics

This flow chart shows

the relationship

among the main topics

in managerial econom-

ics: decisions of the

firm, market structure,

decisions under uncer-

tainty, and govern-

ment decisions.

Demand Analysis

and Forecasting

(Chapters 3 and 4)

Cost Analysis

(Chapters 5 and 6)

Competitive Analysis

and Market Structure

(Game Theory)

(Chapters 7, 8, 9, and 10)

Decision Making

under Uncertainty

(Chapters 12 and 13)

Special Topics:

Asymmetric Information,

Negotiation, and

Competitive Bidding

(Chapters 14, 15, and 16)

Government

Decisions:

Public Goods and

Regulation

(Benefit-Cost Analysis)

(Chapter 11)

The Firm

(Profit Analysis)

(Chapters 2, 3, and 17)

Regulation

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