Managerial Economics And Organizational Architecture 2nd Ed.

Description: This approach to managerial economics takes models from contemporary economics research and applies this research to the internal structure of the firm. After teaching basic applied economics, the authors look inside the firm and apply this analysis to management decision making. The general model used for this application is organizational architecture. Organizational architecture consists of three aspects of corporate organization: the assignment of decision rights within the company; methods of rewarding individuals; and the structure of systems to evaluate the performance of both individuals and business units. These three components can be likened to a stool with three legs. If one of the legs is shorter, the stool is out of balance. These three elements must be in balance in the organization as well. The basic economic tools of analysis should help the manager design organizations that motivate individuals to make choices that will increase firm value.


Contents: Part 1 Basic concepts: introduction; the economists view of behaviour; markets, organizations and the role of knowledge. Part 2 Managerial economics: demand; production and cost; market structure; pricing with market power; economics of strategy - creating and capturing value; economics of strategy - game theory; incentive conflicts and contracts. Part 3 Designing organizational architecture: organizational architecture; decision rights - the level of empowerment; decision rights - bundling tasks into jobs and subunits; attractive and retaining qualified employees; incentive compensation; individual performance evaluation; divisional performance evaluation. Part 4 Applications of organizational architecture: vertical integration and outsourcing; leadership - motivating change within organizations; understanding the business environment - the economics of regulation; ethics and organizational architecture; organizational architectures and the process of management innovation.