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Preface: Teaching Students to Solve Problems | |
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Problem Solving and Decision Making | |
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Introduction: What this Book is About | |
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Using Economics to Solve Problems | |
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Problem Solving Principles | |
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Test Yourself | |
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Ethics and Economics | |
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Economics in Job Interviews | |
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Summary & Homework Problems | |
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End Notes | |
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The One Lesson of Business | |
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Capitalism and Wealth | |
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Does the Government Create Wealth? | |
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Why Economics is Useful to Business | |
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Wealth Creation in Organizations | |
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Summary & Homework Problems | |
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End Notes | |
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Benefits, Costs, and Decisions | |
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Background: Variable, Fixed, and Total Costs | |
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Background: Accounting Versus Economic Profit | |
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Costs are What You Give Up | |
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Sunk-Cost Fallacy | |
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Hidden-Cost Fallacy | |
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A Final Warning | |
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Summary & Homework Problems | |
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End Notes | |
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Extent (How Much) Decisions | |
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Background: Average and Marginal Costs | |
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Marginal Analysis | |
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Incentive Pay | |
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Tie Pay to Performance Measures that Reflect Effort | |
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Is Incentive Pay Unfair? | |
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Summary & Homework Problems | |
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End Notes | |
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Investment Decisions: Look Ahead and Reason Back | |
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Compounding and Discounting | |
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How to Determine Whether Investments are Profitable | |
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Breakeven Analysis | |
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Choosing the Right Manufacturing Technology | |
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Shutdown Decisions and Breakeven Prices | |
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Sunk Costs and Post-Investment Hold-Up | |
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Anticipate Hold-Up | |
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Summary & Homework Problems | |
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End Notes | |
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Pricing, Costs, and Profits | |
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Simple Pricing | |
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Background: Consumer Values and Demand Curves | |
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Marginal Analysis of Pricing | |
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Price Elasticity and Marginal Revenue | |
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What Makes Demand More Elastic? | |
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Forecasting Demand Using Elasticity | |
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Stay-Even Analysis, Pricing, and Elasticity | |
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Cost-Based Pricing | |
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Summary & Homework Problems | |
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End Notes | |
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Economies of Scale and Scope | |
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Increasing Marginal Cost | |
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Economies of Scale | |
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Learning Curves | |
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Economies of Scope | |
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Diseconomies of Scope | |
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Summary & Homework Problems | |
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End Notes | |
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Understanding Markets and Industry Changes | |
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Which Industry or Market? | |
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Shifts in Demand | |
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Shifts in Supply | |
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Market Equilibrium | |
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Predicting Industry Changes Using Supply and Demand | |
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Explaining Industry Changes Using Supply and Demand | |
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Prices Convey Valuable Information | |
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Market Making | |
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Summary & Homework Problems | |
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End Notes | |
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Relationships between Industries: The Forces Moving Us Toward Long-Run Equilibrium | |
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Competitive Industries | |
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The Indifference Principle | |
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Monopoly | |
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Summary G Homework Problems | |
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End Notes | |
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Strategy: The Quest to Keep Profit from Eroding | |
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Strategy is Simple | |
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Sources of Economic Profit | |
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The: Three Basic Strategies | |
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Summary & Homework Problems | |
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End Notes | |
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Foreign Exchange, Trade, and Bubbles | |
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The Market for Foreign Exchange | |
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The Effects of a Currency Devaluation | |
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Bubbles | |
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How Can We Recognize Bubbles? | |
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Purchasing Power Parity | |
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Summary & Homework Problems | |
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End Notes | |
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Pricing for Greater Profit | |
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More Realistic and Complex Pricing | |
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Pricing Commonly Owned Products | |
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Revenue or Yield Management | |
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Advertising and Promotional Pricing | |
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Psychological Pricing | |
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Summary & Homework Problems | |
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End Notes | |
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Direct Price Discrimination | |
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Introduction | |
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Why (Price) Discriminate? | |
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Direct Price Discrimination | |
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Robinson-Patman Act | |
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Implementing Price Discrimination Schemes | |
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Only Schmucks Pay Retail | |
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Summary & Homework Problems | |
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End Notes | |
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Indirect Price Discrimination | |
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Introduction | |
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Indirect Price Discrimination | |
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Volume Discounts as Discrimination | |
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Bundling Different Goods Together | |
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Summary & Homework Problems | |
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End Notes | |
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Strategic Decision Making | |
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Strategic Games | |
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Sequential-Move Games | |
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Simultaneous-Move Games | |
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What Can I Learn from Studying Games Like the Prisoners' Dilemma? | |
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Other Games | |
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Summary & Homework Problems | |
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End Notes | |
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Bargaining | |
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Strategic View of Bargaining | |
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Nonstrategic view of Bargaining | |
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Conclusion | |
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Summary & Homework Problems | |
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End Notes | |
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Uncertainly | |
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Making Decisions With Uncertainty | |
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Random Variables and Probability | |
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Uncertainty in Pricing | |
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Run Experiments to Reduce Uncertainty | |
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Minimizing Expected Error Costs | |
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Risk Versus Uncertainty | |
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Summary & Homework Problems | |
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End Notes | |
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Auctions | |
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Oral Auctions | |
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Second-Price Auctions | |
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First-Price Auctions | |
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Bid Rigging | |
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Common-Value Auctions | |
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Summary & Homework Problems | |
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End Notes | |
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The Problem of Adverse Selection | |
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Insurance and Risk | |
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Anticipating Adverse Selection | |
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Screening | |
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Signaling | |
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Adverse Selection and Internet Sales | |
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Summary & Homework Problems | |
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End Notes | |
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The Problem of Moral Hazard | |
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Introduction | |
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Insurance | |
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Moral Hazard versus Adverse Selection | |
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Shirking | |
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Moral Hazard in Lending | |
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Moral Hazard and The 2008 Financial Crisis | |
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Summary & Homework Problems | |
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End Notes | |
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Organizational Design | |
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Getting Employees to Work in the Firm's Best Interests | |
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Principal-Agent Relationships | |
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Principles for Controlling Incentive Conflict | |
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Marketing versus Sales | |
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Franchising | |
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A Framework for Diagnosing and Solving Problems | |
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Summary & Homework Problems | |
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End Notes | |
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Getting Divisions to Work in the Firm's Best Interests | |
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Incentive Conflict between Divisions | |
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Transfer Pricing | |
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Functional Silos versus Process Teams | |
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Budget Games: Paying People to Lie | |
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Summary & Homework Problems | |
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End Notes | |
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Managing Vertical Relationships | |
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Incentive Conflicts Between Retailers and Manufacturers | |
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A Variety of Contractual and Organizational Forms Can Address Incentive Conflict | |
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Tax Avoidance | |
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Antitrust Risks | |
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Do Not Buy a Customer or Supplier Simply Because it is Profitable | |
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Summary & Homework Problems | |
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End Notes | |
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Wrapping Up | |
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You Be the Consultant | |
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Low Profits on Rental Apartments | |
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Excess Inventory of Prosthetic Heart Valves | |
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High Transportation Costs at a Coal-Burning Utility | |
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Overpaying for Acquired Hospitals | |
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Losing Money on Homeowner's Insurance | |
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Quantity Discounts on Hip Replacements | |
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What You Should Have Learned | |
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End Note | |
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Epilogue: Can Those Who Teach, Do? | |
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Glossary | |
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Index | |