Index 759Organizational design, 593–616. See
alsoAsymmetric information
Airbus’s dysfunctional
organization, 597–598
boundaries of the firm, 595–596
coordination through teams and,
599–600
coordination via transfer prices,
600–601
corporate control market and, 612
corporate governance reforms
and, 612–613
decentralization and, 598–599
decision-making responsibilities
and, 596–601
DHL Worldwide Express and, 601
disclosure requirements and, 611
external enforcement of
managerial duties and, 611–612
failures and, 615–616
financial incentives and, 613–615
group performance evaluation
and, 607–608
individual performance evaluation
and, 606–607
information technology and,
608–609
integration or franchising, 605–606
limiting top management power
and, 610–613
monitoring and rewarding
performance, 602–605
nature of firm and, 594–595
outsourcing and, 596
ownership and control separation
and, 609–616
shareholder empowerment
and, 612
vertical integration and, 596
Output elasticity, 199
Outside directors, 613
Outsourcing, 596
Overconfidence, 518–519, 557
Overhead, sensitivity analysis and, 50
Overoptimism, 518–519
Ovitz, Michael, 5–6, 643
Ownership
limiting top management power,
610–613
separation of control and, 609–616P
Panasonic, 453
Paramount Pictures, 412
Patent conflict, 635–636
Patent system, 324, 465–466
Pay-for-performance systems,
614–615
Payoff frontier, 632
Payoff tables, 402–411
Pennzoil, 654–656
Perfect competition
competitive equilibrium and,
289–295
four conditions of, 289
international trade and, 306–309
Internet and, 303–305
market efficiency and, 295–305
price and output under, 291
supply and demand basics and,
285–289
vs.pure monopoly, 326–336
Perfect information, negotiations
and, 649–650
Perfect price discrimination, 102
Perfect substitutes, 207
Perfectly elastic demand, 87, 290
Perfectly inelastic demand,
85–87
Performance
forecasting, 165–166
group evaluation, 607–608
individual evaluation, 606–607
motivating and rewarding,
602–605
Physician incentives, 590
Players, competitive situations and,
398–399
Point elasticities, 85
Political risk, international business
and, 510
Pollution, 455–462
Polynomial functions, 208
Porter, Michael, 305, 351
Positive externalities, promoting,
464–466
Predatory pricing, 450–451
Predictable surprises, 517
Prediction mistakes, overconfidence
and, 557
Price and advertising, 69Price competition
oligopoly and, 366–375
repeated, 422–424
Price-consumption curves, 126–127
Price cutting
boosting sales of related products
and, 375
Kindle and, 375
learning curve and, 374
market demand changes and, 374
market skimming and, 374
strategic price cuts, 375
Price discrimination, 99–103
first-degree or perfect price
discrimination, 102
second-degree price
discrimination, 102–103
third-degree price discrimination,
102
Price elasticity, 83–88
adjustment time and, 88
goods necessity and, 87
income proportion and
purchase, 88
prediction and, 90–91
revenue and marginal revenue
and, 91–94
substitute availability and, 87–88
Price rigidity, oligopoly and, 366–368
Price taker, 289–290
Prices, oligopoly and, 358–360,
368–370
Principal-agent problems, 587–593,
611–613, 626–629
Prior probability, 545
Prisoner’s dilemma, 370–372,
408–410
Private markets, benefits and costs
and, 296–305
Probabilistic models, 11
Probability
assessments and, 636
conditional probabilities, 545
distribution and, 502–503
outcome and, 501–502
prior probability, 545
revisions and, 547–551
Problem definition, decision making
and, 6–7
Procter & Gamble, 254, 453, 510BMIndex.qxd 9/29/11 1:28 PM Page 759