Microeconomics

The profitability and growth of business firms is increasingly dependent upon the development and astute deployment of intangible (knowledge) assets. Wealth creation in an open world economy depends critically on technological innovation. This in turn involves developing, owning, and astutely orchestrating knowledge assets and intellectual property. This is what is meant by dynamic capabilities. The value‐enhancing skills required in management are gravitating away from the administrative towards the entrepreneurial. The determinants of a firm's innovative capacity are rooted in organizational design, incentives, human resources, internal culture, and external linkages. Profiting from innovation is always a challenge, requiring the right business model, integration strategy, and organizational form. Licensing is one of many ways to capture value from innovation, but is generally not the most profitable, except when intellectual property rights are secure. Imitators are prolific and the survival and prosperity of the innovator requires the astute orchestration of intellectual property rights, and complementary assets. Managers designing market entry strategies must also be mindful of the evolution of standards.

This book develops managerial principles and illustrates the interplay of these ideas. Technology‐licensing and cross‐licensing experiences are also presented—focusing in particular on semiconductor and the (float) glass industry.

This book provides a compendium to the empirical work investigating the hypotheses generated by recent banking theory. Since the publication of the The Microeconomics of Banking by Xavier Freixas and Jean Charles Rochet, work in empirical banking has further blossomed, not only in sheer volume but also in the variety of questions being tackled, datasets becoming available, and methodologies being introduced. This book follows the structure in Freixas and Rochet’s book and arranges the relevant methodologies, applications, and results according to each of their original chapters in order to have a coherent synthesis between available theory and supporting empirics. Each chapter contains a modest introduction (where possible and appropriate), a concise methodology section with one or more relevant methodologies, and several illustrative applications. In a “muscular” results section the authors summarize the main robust and seminal findings in the literature that are in the text, and provide the details of many other studies in figures and tables.

Covers a standard range of topics in microeconomics theory. These include decision theory, strategic and extensive form games, the economics of information, bargaining, principal agent problems, cooperative games, and evolutionary game theory. Coverage is at the level of a graduate course in microeconomic theory.

This book presents microeconomics as an evolving science, interacting with mathematics, psychology, and other disciplines and offering solutions to a growing range of practical problems. It gives extensive and innovative coverage of recent research in cognitive psychology and behavioral economics. This research not only documents behavior inconsistent with some elements of traditional theory, but also advances positive theories with superior predictive power. The research covered includes studies of loss aversion, reference-dependent preferences, the context and framing of choice, hyperbolic discounting and inconsistent intertemporal choice, predictable errors in updating probabilities, nonlinear weighting of probabilities, and prospect theory. Covering results from behavioral and experimental economics along with traditional microeconomic doctrine involves re-balancing three key components of economics: issues, theory, and data. In comparison to traditional texts, this book places more emphasis on experimental data, both when they support received theory and when they reveal anomalies. Thus the book covers both feed-lot experiments that generate conventionally shaped isoquants and choice experiments that cast doubt on the predictive value of expected utility theory. This text offers many opportunities to apply high-school algebra in an economic context and to develop basic skills in linear programming and risk modeling. Through footnotes and parenthetical remarks, it also encourages readers to make good use of any calculus they know. Exercises appear where appropriate in the text; solutions and supplemental problems are collected at the ends of chapters.

This book attempts to create an evolutionary theory of fairness. Sharing food is commonplace in the animal kingdom because it insures animals that share against hunger. Anthropologists report that hunter-gatherer societies which survived into the 20th century shared on a very egalitarian basis. What can such information tell us about the sense of fairness with which modern man is born? Using game theory as a basic tool, the book argues that fairness norms should be seen as a device for selecting an efficient equilibrium in the human game of life. Evolutionary arguments are then used to argue that the deep structure of this device resembles the original position formulated by John Rawls in his Theory of Justice. Such an evolutionary framework allows problems over welfare comparison and norm enforcement to be tackled in a manner that resolves the long debate between utilitarianism and egalitarianism.

In this book, the editors and a team of distinguished international contributors analyse the nature of organizational capabilities, studying how organizations do things, use their knowledge base, and diffuse that knowledge in competitive environment. Offering both theoretical analysis and detailed evidence from a variety of individual firms and sectors, this book presents insights into the relationship between organizational structures and organizational capabilities, the patterns of accumulation of technical knowledge, and the management of competence‐building in changing markets.

Custom is an integral part of the institutional matrix of modern economies. Market processes hinge crucially on custom, which in turn affect these processes. The book proposes a theory of custom that emphasizes the motivational force that arises from the individual's striving for coherence and justification. It depicts custom as comprising habitual, cognitive, and emotional aspects and explains that market transactions rely on customary entitlements and obligations. The motivational force of custom emerges from a preference for regularity and a desire for coherence that tie cognition, emotion, and action together. The view is applied to the theory of property, the theory of the law, the theory of the firm, and the problem of the division of labour and the conditions under which that division of labour is better organized by the firm or by the market.

This book provides an introduction to game theory that seeks to answer all three questions: what is game theory about? How do I apply game theory? Why is game theory right? The topics covered include utility theory, backward induction, minimax theory, imperfect competition, repeated games, Bayesian decision theory, refinements of Nash equilibrium, Harsanyi's theory of incomplete information, bargaining theory, applications to ethics, coalition formation, mechanism design, and auction theory. Topics such as bargaining and imperfect competition are covered in a great amount of detail.

This book seeks to provide a better understanding of the state, the law, social norms, and the role of policy advise. It subscribes to the discipline of positive political economy, but also looks at the social situations that lie beyond economics and politics. It is divided into the five parts. Part I presents a primer on game theory. Part II raises the argument than an economy or market is embedded in a social setting, with all its attendant norms, institutions, and beliefs. Part III explores the idea of “the state” and laws. Part IV discusses selected topics on welfare economics. Part V argues that human beings do not use their rationality calculus over all available actions but only over a subset of them.

Ideally, individual risk‐taking decisions and government risk policies should be based on a rational balancing of risk and cost. Unfortunately, private decisions are subject to a number of biases including overestimation of small probabilities and alarmist responses to ambiguous risks. Hazard warnings can potentially be effective, but are not always ideal, as the people now overestimate the risks of smoking. Labour market estimates of the value of life can provide a rational reference point for benefit‐cost tests of risk regulations. The pressures exerted by irrational public responses to risk often lead to regulations that impose inordinately high costs per life saved. Excessive regulation potentially makes society worse off from a health and safety standpoint as shown by the risk–risk analysis methodology developed in this book. Similarly, liability rules and social insurance systems also should be structured to reflect an efficient balancing of risk and cost.