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Mata KuliahEkonomi Manajerial
Dosen:
Sahang Sapta AS., S.Sos., M.Si
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PART IV
Market, Pricing, & Competition
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Section I
The Market, Pricing, andCompetition Among Firms
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Market Equilibrium
P
Q
D
S
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Perfect Competition Market
Many Sellers and Buyers
Homogenous goods (identical)
The availability of Substitution
Low Barriers to Entry
Price is determined by the marketmechanism
Sellers & Buyers are Price Takers
Normal profit in the Long-Run
Perfect Information about the Market
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Perfect Competition Marketcont.
P
Q
P0 D
Q1Q0
AC
MC
=AR=MRD =AR=MR
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Perfect Competition Marketcont.
Market Efficiency
Global Competition and InternationalTrade
The Efficiency of Free Trade
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Monopoly Market
Single seller and many buyers
No substitution
Unique product
High barriers to entry
The rights of monopoly (or patent rights)
The seller is price makerEconomic profit (super profit)
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Monopoly Marketcont.Perfect Monopoly Curve
P
Q
S=D
P1
P0
Q0
S=D
Q0
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Monopoly Marketcont.Real World Monopolists Curve
P
Q
D
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Oligopoly Market
Some Sellers and many buyers
Availability of substitution
High barriers to entry
The seller is price maker
Economic profit
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Oligopoly Marketcont.
P
Q
D
D1
AC
MC
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Oligopoly Marketcont.
Conscious parallelism
Price Leadership Model
Barometric Price Leader
The Low-Cost Price Leader
Price Leadership with Price Differentials
The Dominant-firm price leader
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Oligopoly Marketcont.
PRICING FOR LONGER TERMOBJECTIVES
Sales maximization with a minimum profit
targetLimit pricing to deter entry
Deterring entry of a low cost firm
Contestable marketSatisfying: achieving target as a
managerial objective
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Pricing Decision in Practice
Pricing with incomplete information
Markup pricing
Pricing in established market
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Others Pricing Practices
Price FixingPrice Discrimination
Predatory Pricing
Resale Price Maintenance
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New Product Pricing
Price Skimming
Penetration Pricing
Determining Price & Quality Jointly
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Competitive Bids and PriceQuotes
Types of Competitive Bids and PriceQuotes
Incremental Cost, IncrementalRevenues and The Optimal Bid Price
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Competitive Bids and Price Quotescont.
Definition
Competitive bidding occurs in any marketwhere a number of sellers compete for asingle buyer
Example:
Government projectsSuppliers with single buyer
The winners curse concept
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Competitive Bids and Price Quotescont.
Fixed price bids
Cost-plus-fee bids
Incentives bids
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Competitive Bids and Price Quotescont.
Incremental cost
Incremental Revenues
The Optimal Bid Price
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PART V
Topics in Managerial Economics
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Topics in Managerial Economics
Advertising & Promotional DecisionProduct Quality & Competitive Strategy
Capital Budgeting & Investment Decision
Game Theory
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Advertising & Promotional Decision
The role of advertising and promotionaldecision in the equilibrium
Uncertainty in Advertising
Predictability & Probability
Advertising as an investment
Advertising to raise barriers to entry
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Product Quality & Competitive Strategy
Michael Porter
Generic Strategy
Cost-Leadership
Differentiation
Focus
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Capital Budgeting & Investment Decision
The definition
Capital budgeting is the decision makingprocess with whether or not the firmshould invest funds in the purchase ofassets or other resources in an attempt tomake profits, and how to chose among
competing uses of funds (or investmentprojects)
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Capital Budgeting & Investment Decisioncont.
Investment project may be to replace orexpand existing plant and equipment, todiversify the firms activities, to amount a
major advertising campaign, and so on. Ingeneral investment projects will involve;revenue generation, cost reduction, or
some combination of the two.
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Capital Budgeting & Investment Decisioncont.
Focus on programs or projects
The models
Discounted cash flow (DCF Model)
NPV
IRR
Profitability index
Payback period
Average rate of return
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Capital Budgeting & Investment Decisioncont.
CAPM
APT
Portfolio Theory
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Discounted Cash Flow Model
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Discounted Cash Flow Modelcont. where
DPVis the discounted present value of the future cashflow (FV), or FVadjusted for the delay in receipt;
FVis the nominal value of a cash flow amount in a futureperiod;
iis the interest rate, which reflects the cost of tying upcapital and may also allow for the risk that the paymentmay not be received in full;
dis the discount rate, which is i/(1+i), i.e. the interest rate
expressed as a deduction at the beginning of the yearinstead of an addition at the end of the year;
nis the time in years before the future cash flow occurs.
Where multiple cash flows in multiple time periods arediscounted, it is necessary to sum them as follows:
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Discounted Cash Flow Modelcont.
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Internal Rate of Return
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Internal Rate of Returncont.
Decision criterion
If the IRR is greater than the cost ofcapital, accept the project.
If the IRR is less than the cost of capital,reject the project.
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Internal Rate of Returncont.
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Payback Period
Payback periodin capital budgetingrefers to the period of time required for thereturn on an investment to "repay" the sum
of the original investment.For example, a $1000 investment which
returned $500 per year would have a twoyear payback period.
The time value of money is not taken intoaccount.
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Payback Period
Payback period intuitively measures how longsomething takes to "pay for itself."
All else being equal, shorter payback periods
are preferable to longer payback periods. Payback period is widely used because of its
ease of use despite the recognized limitationsdescribed below.
it does not account for the time value of money,risk, financing or other important considerations,such as the opportunity cost.
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Capital Asset Pricing Model
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Capital Asset Pricing Modelcont.
where:
E(Ri) is the expected return on the capital asset
Rf is the risk-free rate of interest such as interest arisingfrom government bonds
i(the beta) is the sensitivity of the expected excessasset returns to the expected excess market returns, oralso ,
E(Rm) is the expected return of the market
E(Rm)Rf is sometimes known as the market premium(the difference between the expected market rate ofreturn and the risk-free rate of return).
E(Ri)Rf is also known as the risk premium
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Arbitrage Pricing Theory
where
ajis a constant for assetj
Fkis a systematic factor
bjkis the sensitivity of thejth asset to
factor k, also called factor loading,jand is the risky asset's idiosyncratic
random shock with mean zero.
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Portfolio Theory
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Corporate Financing
Banking and Corporation
Other Debt Instrument
Capital Market
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Section II
Other Models and QuantitativeApproach in Managerial
Economics
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Other Models and QuantitativeApproach in Managerial
Economics
Sensitivity AnalysisGame Theory
The Application of Statistical Models in
Managerial Decision Making
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Sensitivity Analysis
Sensitivity analysis (SA)is the study ofhow the uncertainty in the output of amodel (numerical or otherwise) can be
apportioned to different sources ofuncertainty in the model input.
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Game Theory
Game theory adalah cabang dariMatematika dan diterapkan pada IlmuPengambilan Keputusan yang melibatkan
multiple player.Game theory juga sangat berguna dalam
Ilmu Manajemen Stratejik.
John Von Neumann, Frederick V Hayek,John Forbes Nash, Robert Aumann
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Game Theory
Prisoners Dilemma
Jika tidak ada yangmengaku =>
hukuman 1 tahun Jika mengaku maka
hukuman 5 thn
Jika tidak mengakutapi diketahui berbuatsalah 10 thn
Bad Guy 2
BadGuy
1
Cooperative
Defect
Cooperative
-1, -1 -1, 10
Defect -10, -1 -5, -5
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Game Environments
Players planned decisions are called strategies. Payoffs to players are the profits or losses
resulting from strategies.Order of play is important:
Simultaneous-move game: each player makes decisions withknowledge of other players decisions.
Sequential-move game: one player observes its rivals moveprior to selecting a strategy.
Frequency of rival interaction
One-shot game: game is played once. Repeated game: game is played more than once; either a finite
or infinite number of interactions.
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Simultaneous-Move, One-ShotGames: Normal Form Game
A Normal Form Game consists of:
Set of players i {1, 2, n} where nis a finitenumber.
Each players strategy set or feasible actionsconsist of a finite number of strategies.Player 1s strategies are S1={a, b, c, }.
Player 2s strategies are S2={A, B, C, }.
Payoffs.Player 1s payoff: 1(a,B) = 11.
Player 2s payoff: 2(b,C) = 12.
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A Normal Form Game
Strategy A B C
a
b
c
Player 2
Player1 12,11 11,12 14,13
11,10 10,11 12,12
10,15 10,13 13,14
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Normal Form Game:Scenario Analysis
Suppose 1 thinks 2 will choose A.
Strategy A B C
a
bc
Player 2
Player1 12,11 11,12 14,13
11,10 10,11 12,1210,15 10,13 13,14
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Normal Form Game:Scenario Analysis
Then 1 should choose a.
Player 1s best response to A is a.
Strategy A B C
a
b
c
Player 2
Player1 12,11 11,12 14,13
11,10 10,11 12,12
10,15 10,13 13,14
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Normal Form Game:Scenario Analysis
Suppose 1 thinks 2 will choose B.
Strategy A B C
a
bc
Player 2
Player1 12,11 11,12 14,13
11,10 10,11 12,1210,15 10,13 13,14
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Normal Form Game:Scenario Analysis
Then 1 should choose a.
Player 1s best response to B is a.
Strategy A B C
a
b
c
Player 2
Playe
r1 12,11 11,12 14,13
11,10 10,11 12,12
10,15 10,13 13,14
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Normal Form GameScenario Analysis
Similarly, if 1 thinks 2 will choose C.
Player 1s best response to C is a.
Strategy A B C
a
bc
Player 2
Play
er1 12,11 11,12 14,13
11,10 10,11 12,12
10,15 10,13 13,14
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Dominant Strategy
Regardless of whether Player 2 chooses A,B, or C, Player 1 is better off choosing a!
a is Player 1s Dominant Strategy!
Strategy A B C
ab
c
Player 2
Player1 12,11 11,12 14,13
11,10 10,11 12,12
10,15 10,13 13,14
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Dominant Strategy in aSimultaneous-Move,One-Shot GameA dominant strategy is a strategy resulting in the
highest payoff regardless of the opponents
action. If a is a dominant strategy for Player 1 in the
previous game, then:
1(a,A) > 1(b,A) 1(c,A);
1(a,B) > 1(b,B) 1(c,B);
and 1(a,C) > 1(b,C) 1(c,C).
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Putting Yourself in your Rivals
Shoes
What should player 2 do?
2 has no dominant strategy!
But 2 should reason that 1 will play a.
Therefore 2 should choose C.
Strategy A B C
a
b
c
Player 2
Player1 12,11 11,12 14,13
11,10 10,11 12,12
10,15 10,13 13,14
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The Outcome
This outcome is called a Nash equilibrium:a is player 1s best response to C.
C is player 2s best response to a.
Strategy A B C
a
b
c
Player 2
Player1 12,11 11,12 14,13
11,10 10,11 12,12
10,15 10,13 13,14
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The Application of StatisticalModel in Managerial Decision
Making
Variance and Standard Deviation
Regression Model
Time Series Analysis
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Variance & Standard Deviation
Population Variance
i
N
i
X
N 1
2 1
222 11
ii XN
XN
Population Standard Deviation
22 1
i
XN
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Regression Model
Model Regresi adalah model statistikuntuk melihat pengaruh antar variabel
The model
Y = b0 + b1X1 + e
Koefisien determinasi
Probability of F-statistics -> p-value
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Regression Modelcont
Multivariate Regression Model
The Model
Y = b0 + b1X1 + b2X2 + + bnXn + e
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Time Series Analysis
Time Series as a natural phenomenon
Time series analysis
The model
tttt exbby 110
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The End
Thank You