With two distinct objectives, this text's approach to managerial economics takes models from recent economics research and applies the research to the internal structure of a firm. After teaching basic applied economics, the authors look inside the firm and apply this analysis to management decision making. Authors Brickley, Smith, and Zimmerman contend that organizational architecture consists of three aspects of corporate organization: the assignment of decision rights within the company; methods of rewarding individuals; the structure of systems to evaluate the performance of both individuals and business units. These three components can be likened to a stool with three legs. If one of the legs is shorter, the stool is out of balance. These three elements must be in balance in the organization as well.Motivating example in Chapter 1--The Collapse of Enron: Enron's bankruptcy filing in the end of 2001 was the most spectacular business failure ever seen. What caused the downfall of this once-prosperous company? Chapter 1 examines Enron's fundamentally flawed organizational design to show the problems that resulted in the company's demise.Economics of Strategy: Creating and Capturing Value: This chapter (8) is unique among managerial economics texts. It addresses the fundamental question of how firms capture value, what industries they should compete in, and how they should compete. It is particularly useful to business students and managers.Economics of Strategy: Game Theory : The chapter (9) on Game Theory is both theoretically sound and replete with realistic examples. Virtually all the game theory discussions are framed in managerial terms and the game theory tools are explicitly used to understand business problems. This is a topic all modern applied economics texts include and will be popular with instructors.Brand-new Chapter 18--"Choosing the Legal Form of Organization": The legal form of organization is a policy choice. For example, nonprofit hospitals sometimes change to for-profit organizations (and vice versa), mutual companies become stock companies, franchised units become company-owned units and so on. This chapter presents an economic analysis of the legal form of organization.Extended case study on Arthur Anderson: The extensive examples throughout the book have dozens of recent business applications, such as an in-depth extended case study in the end of Part 3 on Arthur Andersen that provides a format for integrative discussion.Improved website: The book website will include brand-new experiential activities, online auctions, in-class games, multiple-choice and fill-in-the-blank exercises, teaching tips, and links to additional case studies.