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Essay / Research Paper Abstract
This 7 page paper looks at four economic models that are useful in terms of managerial decision making. The paper gives an outline and explains the use of each model. Includes are game theory, breakeven analysis, elasticity of demand and profit maximization. The bibliography cites 2 sources.
Page Count:
7 pages (~225 words per page)
File: TS14_TEmanecc.rtf
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Unformatted sample text from the term paper:
courses of action will have. For example a football team may feel that they can benefit from increased ticket sales if they lower prices, but from past experience known
that if they lower the prices of a particular type of ticket there may be a 70% chance of it sparking a mini price war, but there is also a
30% chance that it will not do this, and then they may gain the additional sales (Nellis and Parker, 2000). Therefore the relevant probabilities may be seen a 0.7 and
0.3 respectively. The problem is that although there may be predictions made with some level of certainty, there is always a level of uncertainty as there are many other influencing
factors on both the industry as well as the rivals and their reactions (Nellis and Parker, 2000). It is this problem that
has led economists to develop a mathematical technique that is better known as game theory. This is a theory that will not work in all cases, for example
where there is free competition and the would be no need to consider game theory in a monopoly, therefore it is in an oligopoly that game theory is suited.
Game theory is a model that tries to identify the most effective and profitable moves a team may be able to make in
reaction to the market conditions and how other companies are behaving. Game theory gives us a matrix that we can use to analysis
the interaction of the two companies and how their decision will influence the results of both companies actions (see figure 1). For example, we can consider choices of high or
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