Showing papers on "Managerial economics published in 2018"

Social Norms and the Theory of the Firm: A Foundational Approach

Abstract: For decades, the economic theory of the firm referred to as agency theory has dominated business research and education in the United States. Although agency theory has been influential in accounting, finance, and managerial economics, it lacks informal and nonfinancial controls. Douglas E. Stevens resolves to enhance this theory through the incorporation of social norms. Drawing on historical context related to the firm, the theory of the firm, and social norm theory related to the firm, he demonstrates the importance of social norms in the formation and development of free-market capitalism and the firm. He also describes the latest theoretical, experimental, and archival evidence to exhibit the growing body of research that incorporates social norms into the theory of the firm. These foundations enable Stevens to create a comprehensive roadmap of agency theory that will have strong implications for practice and public policy.

Reflections on the Practical Applicability of Strategic Game Theory to Managerial Incentivation

Abstract: On the one hand, game theory has proven to effectively address a wide range of economic problems. In general, it analyses the impact of incentives of different kinds on human decision making and behaviour. Thereby, it has found mechanisms to effectively induce specific behaviour, like the Groves mechanism. On the other hand, in management accounting the design of effective incentive systems plays a major role. The aim of these incentives is to induce decision makers to act in the interest of their firms. Consequently, the question rises whether and how game theory can inform the design of these incentive systems. The present paper provides an overview over the current findings in game theory regarding such incentive mechanisms and critically evaluates the practical applicability of these findings to the design of incentive systems in the area of management accounting. The paper concludes with an overview of aspects that should be addressed in future research.

Business Decision Making

Abstract: Originally published in 1981. Risk is a problem which all business decision makers have to cope with. The problem is not insurmountable, however, as there now exist well-established techniques for minimising risk and for calculating which of various available options is the optimal one to pursue. This book outlines and discusses these techniques and the theories behind them. Unlike many economic theories which only rarely have any practical applications, the techniques put forward in this book can be used by real businessmen to solve real business problems. The book concentrates on decision-making in two main areas: the allocation of a firm’s resources and the selection of new investments; and the techniques and theories discussed fall into three broad groups: linear programming, decision theory and capital market theory. Intended as an advanced undergraduate textbook for students taking business economics or managerial economics courses, this valuable book will interest specialists and students involved in management studies, microeconomics, strategic planning, operational research, accounting and MBA programmes.

Incorporating Field Trips into the Teaching of Business and Economics: Method and Evaluation

Abstract: Although field trips have been recognized as effective for bridging the gap between theory and practice, instructors rarely step out of the classroom with their students. One reason is that it is unclear how those trips can be efficiently incorporated into the traditional classroom. In this paper, we discuss the motivation, organization and outcomes of field trips in our Managerial Economics and International Business classes. We use cost-benefit analysis to evaluate the pedagogical value of field trips, and suggest that many of the benefits are non-pecuniary. Although the benefits are subjective and difficult to quantify, pre-and-post tests administered to students suggest that field trips improve their knowledge, as well as enable them to apply classroom learning to practical problems. The paper identifies factors that should be considered when planning and organizing field trips in economics and business.

A Critical Approach to Teaching Financial Economics

Abstract: Finance is usually perceived as a set of quantitative techniques aimed at maximising profit and minimising risk. In this respect then, the quality of teaching financial economics is considered to be proportional to the number of techniques students are able to master. This chapter argues that finance can be taught by using a new approach, namely, the Teaching with Historical Perspectives. By using a historical perspective, this approach encourages a deeper understanding of financial theory. The chapter will provide some specific examples to illustrate the above points. The chapter concludes by reflecting on the teaching practice of mainstream finance and suggests that this can provide an opportunity to develop a critical perspective towards financial theory.

Insurmountable Business Problems and Optimal Managerial Decisions: Significance of Elasticity of Demand

Abstract: Managerial economics is the integration of economic tools and techniques with business practice. The concepts of managerial economics provide practical solutions to business problems. The basic aim of any business firm is profit making. The enhancement of sales is the major for making more profits .If the business entrepreneur is capable to predict the cost-output ratio, fixation of price, income of consumer and impact of advertising expenditure, the firm may improve its sales more proportionately. Therefore, to understand the behaviour of sales and to plan their growth, it is necessary to identify the factors that influence the sales and estimate their affect. For this purpose, management should integrate economic concepts with business decision making practice in order to understand and analyse the sales behaviour of the firm. In this process, the concept of elasticity of demand plays the pivotal role, which helps in providing a quantitative value for the responsiveness of the quantity demanded to change in each of the demand determinants. Therefore, this study find that the concepts of elasticity of demand are essential ingredients of optimal managerial decisions in the short run as well as long run plans of the business firm. Keywords: Managerial Economics, Business firm, Decision making, Elasticity of demand, Sales, Profit.