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Chapter 14 considers the implications of asymmetric information—the
case in which an agent on one side of a transaction has superior information
to his counterpart on the other side. Asymmetric information presents a bar-
rier to efficient transactions whether in markets or within firms. In turn, a
firm’s organizational design aims to minimize the costs posed by asymmet-
ric information.
Negotiation, bargaining, and dispute resolution play important roles in
many managerial situations. Chapter 15 explores the economic factors that
create opportunities for mutually beneficial agreements. It also takes a game-
theoretic approach to analyzing negotiation strategies under imperfect infor-
mation. Chapter 16 considers an important application of decision making
under uncertainty: competitive bidding. In an auction setting, a single seller
seeks to obtain the highest price from competing buyers. Alternatively, in the
procurement context, a single buyer solicits bids from potential suppliers. The
focus is on two main questions: How should firms determine their bidding
strategies? In turn, how can the auctioning party design the competitive bid-
ding system for maximum advantage?
The final chapter considers decisions involving economic constraints.
Chapter 17 takes up linear programming, a method for determining optimal
decisions in the presence of specific resource constraints. The linear pro-
gramming approach can be applied in a host of settings: production prob-
lems, marketing plans, and transportation schemes, to name a few.c12DecisionMakingunderUncertainty.qxd 9/29/11 1:34 PM Page 498