Paper Topic:

Managerial Economics

An assessment of how managerial economics can be used to assess price wars in rival markets and how organizations should go about it

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Introduction

The proper and effective management of organizations usually calls for the effective assessment and evaluation of the managerial economics surrounding the running and functioning of a business (Perloff 2008 ,

br 200 . This essay seeks to evaluate the use of managerial economics in business decision making through comparing market share maximization with shareholder value maximization , assessing the price wars aspect with

regard to its rationale , economics and modalities , and also using the game theory in assessing price war reactions in markets that are influenced by oligopoly

A . Management Decisions : comparing market share and shareholder value

One of the best ways of comparing shareholder value maximization and market share maximization is comparing the concepts of the Marris and Baumol business models

The Marris model

The Marris model is a shareholder satisfaction oriented model that suggests that the growth of a corporate entity can be influenced through maintenance of the dividend-to-profit retention ratio at an optimum level so that the shareholders of the corporate entity can be satisfied (Hirschey 2000 ,

. 198 . This situation would however mean that the corporate entity cannot retain a high level of profit , primarily because it creates a scenario where the corporate body is cash-rich and also ripe for a takeover (Perloff 2008 ,

. 231 . Additionally , it is imperative that it be understood that the level of control of the...

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