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Managerial Economics

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Strategic Management

Part of the book series: Classroom Companion: Business ((CCB))

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Abstract

Managerial economics is a distinctive branch of economics which deals with the economic problems of firms and industries and their relationship with society. There are several basic issues on which the producer will be making decisions such as what commodities it should produce, what should be the output level of each, what type of technology it should adopt, where it should produce the goods, what should be the size of the factory, what price it should charge, how much wages it should be paid, and how much it should be spent on advertisement. All such decisions endeavor to study managerial economics.

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Notes

  1. 1.

    Transaction cost economics (TCE) is the study of how different governance structures (markets, firms, etc.) organize transactions to minimize transaction costs, which are the costs of running the economic system of firms. (Transaction costs are separate from production costs.). Ronald H. Coase, who was the first to introduce the concept of transaction costs, made pathbreaking contributions to this field of economics. Coase was awarded the Nobel Memorial Prize in Economic Sciences in 1991 for his elucidation of the role of transaction costs, property rights, and economic institutions in the structure and functioning of the economy. Subsequently, Williamson became one of the foremost contributors to the operationalization of transaction cost economics. Oliver Williamson (1932–2020) was a US economist, Nobel Prize laureate, and academic, best known as one of the leaders of New Institutional Economics (NIE) and the founder of transaction cost economics (TCE), novel economic frameworks that moved traditional theory beyond an exclusive focus on markets and price theory—and permanently changed how economists, governments, and corporations view non-market institutions and transactions outside the market (see 7 https://www.investopedia.com/terms/o/oliver-e-williamson.asp#:~:text=Williamson%20defined%20Transaction%20Cost%20Economics,are%20separate%20from%20production%20costs.)

  2. 2.

    Creative accounting—The concept of creative accounting presents two understandings. In an interpretation, it is a manipulation itself, with the exclusive purpose of changing the real equity, financial, and/or economic situation of the firm. In another sense is an accounting strategy, resulting from a considerable knowledge of the matter in question, and not a management of the accounts. Such a practice is called, sometimes, result management. Creative accounting is the use of accepted accounting practices (in force) in a flexible and possible way because in the norms there are omissions and/or different possibilities of interpretation, which leads to practices different from those that were supposed to exist (difference between the spirit of the law and the letter of the law).

  3. 3.

    See 7 http://godfreychege.blogspot.com/2014/12/types-nature-of-conflicts-agent-costs.html.

  4. 4.

    Supply chain can often be called Production Chain in different texts.

  5. 5.

    Every description of Williamson’s graphic dynamics is from Besanko et al. [10].

  6. 6.

    English expression that means “up to the limit of the extent of your arms.”

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  1. Institute of Studies for Coopetitiviness (INSEC), São Paulo, SP, Brasil

    Arão Sapiro

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  1. Arão Sapiro
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Correspondence to Arão Sapiro .

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Sapiro, A. (2024). Managerial Economics. In: Strategic Management. Classroom Companion: Business. Springer, Cham. https://doi.org/10.1007/978-3-031-55669-2_2

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