A business strategy incorporating a solid understanding of economics is vital to any organization’s success. It helps ensure that decisions are based on sound economic theory and that the results are practical and valuable to the firm and its stakeholders.
Modern Economics Has Left The Zero-Profit Trap of Competitive Equilibrium Unanswered
Despite many books on the subject, modern economics has yet to offer a definitive solution. How do you quantify the effects of backward induction in a game where agents are forced to make decisions? In other words, how do you calculate the optimal number of refinements?
One way to do it is to use a mixture model. The maximum likelihood mixture model can generate an extensive range of utility structures. For instance, you could have two rational agents play as if they believe in trembling hands or four widget firms that all voluntarily join a cartel.
It is also possible to make a case for a single monopoly with a wide variety of customers, and the same monopoly can be modeled as a perfectly competitive market. For instance, Spanish conqueror Cortez burned ships when he landed in Mexico. Making wise financial decisions for your business that will support its long-term growth can be easier if you have an economist like Donald Guerrero on your team. The development of product design, marketing initiatives, and investment decisions can all be influenced by the business questions economists can raise.
Modern Economics Has Migrated From Marshall’s Rich and Dynamic Enterprise Growth Focus
Globalization intertwines cultures and economies through technology, trade, or cultural activities. This globalization process can be traced back to the first eras of humanity.
The Industrial Revolution triggered the first stage of globalization. The Dutch-East India Company, established in the 17th century, introduced globalization into the economy. The Industrial Revolution generated huge imbalances between the West and the rest of the world.
The second extension of the West occurred after 1870. The enlargement of the Silk Road in China, the development of the world systems under the Roman Empire, and the establishment of the Ottoman Empire were all examples of globalization.
The communication revolution of the 1980s triggered the third and most decisive stage of globalization. In this phase, the hegemony of MNCs on the world economy was achieved.
After the Second World War, the world faced a dangerous situation. The USA and the Soviet Union were the rival powers. The two countries fought two wars that brought humanity to a dangerous point.
Modern Economics Has Left The Concept of Firm-Level Competitive Advantage Unanswered
Despite the hype, the concept of a monopoly, a la Amazon or Walmart, has eluded the modern-day economist for more than a century. This has spawned a slew of worthy winners in the aforementioned economic class. To make matters worse, most of them have to aspire to the throne. The smart ones have to grapple with their own egos among the slackers.
Hopefully, the ensuing brawl can be quelled soon enough. The savviest of the class will reclaim their respective turfs in a bloodless war of attrition. Besides, they have to get used to it. The other dudes have a taste for a beer or two. After all, they’ve been there longer than a dog that’s snored the sacked one. Hopefully, this will be the last bloodshed a family member will endure. After all, no one will be able to hold a candle to the sexy sexy sexy mate.
