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TENTH EDITION

MANAGERIAL ECONOMICS
and
BUSINESS STRATEGY

MICHAEL R. ­B AYE / JEFFREY T. PRINCE

TENTH EDITION

Managerial Economics
and Business Strategy
The McGraw-Hill Series Economics
Survey of Economic s Samuelson and Nordhaus Frank
Economics, Microeconomics, and Microeconomics and Behavior
Brue, McConnell, and Flynn Macroeconomics Tenth Edition
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Issues in Economics Today Today, and The Macro Economy Today Advanced Macroeconomics
Ninth Edition Sixteenth Edition Fifth Edition
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Fourth Edition Macroeconomics Cecchetti and Schoenholtz
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Principles of Economics, Principles First Edition Contemporary Labor Economics
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Macroeconomics Managerial Economics
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Baye and Prince
Frank, Bernanke, Antonovics, and Heffetz Managerial Economics and Business Strategy Rosen and Gayer
A Streamlined Approach for: Principles of Tenth Edition Public Finance
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Third Edition Thirteenth Edition International Economics
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Brief Editions: Microeconomics and International Economics
Dornbusch, Fischer, and Startz
Macroeconomics Seventeenth Edition
Macroeconomics
Third Edition Thirteenth Edition
TENTH EDITION

Managerial Economics
and Business Strategy

Michael R. Baye
Bert Elwert Professor of Business Economics & Public Policy
Kelley School of Business
Indiana University

Jeffrey T. Prince
Professor of Business Economics & Public Policy
Harold A. Poling Chair in Strategic Management
Kelley School of Business
Indiana University
MANAGERIAL ECONOMICS AND BUSINESS STRATEGY
Published by McGraw Hill LLC, 1325 Avenue of the Americas, New York, NY 10121. Copyright © 2022 by
McGraw Hill LLC. All rights reserved. Printed in the United States of America. No part of this publication may
be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without
the prior written consent of McGraw Hill LLC, including, but not limited to, in any network or other electronic
storage or transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the
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This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 LWI 24 23 22 21
ISBN 978-1-266-07101-0
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DEDICATION
To Mom.
—Michael R. Baye
To Annie, Kate, Elise, and Henry.
—Jeffrey T. Prince

Source: Federal Trade Commission
Source: The Trustees of Indiana
University
vi
About the Authors
Michael R. Baye is the Bert Elwert Professor of Business Economics & Public Policy at
Indiana University’s Kelley School of Business, and currently serves as the Chairman of the
U.S. Consumer Financial Protection Bureau’s Academic Research Council. He also served as
the Director of the Bureau of Economics at the Federal Trade Commission from July 2007 to
December 2008. He received his BS in economics from Texas A&M University in 1980 and
earned a PhD in economics from Purdue University in 1983. Prior to joining Indiana
University, he taught graduate and undergraduate courses at the Pennsylvania State University,
Texas A&M University, and the University of Kentucky. He has held a variety of editorial
posts in economics, marketing, and business, and currently serves as a co-editor for the
Journal of Economics and Management Strategy.
Professor Baye has won numerous awards for his outstanding teaching and research and
teaches courses in managerial economics and industrial organization at the undergraduate,
MBA, and PhD levels. His research has been published in the American Economic Review,
Journal of Political Economy, Econometrica, Review of Economic Studies, Economic Journal,
and Management Science. It has also been featured in The Wall Street Journal, Forbes, the
New York Times, and numerous other outlets. When he is not teaching or engaged in research,
Mike enjoys activities ranging from camping to shopping for electronic gadgets.
Jeffrey T. Prince is Professor of Business Economics & Public Policy at Indiana
University’s Kelley School of Business. He is also the Harold A. Poling Chair in Strategic
Management and Co-Director of the Institute for Business Analytics at Kelley. From
September 2019 to September 2020, he served as Chief Economist at the Federal
Communications Commission. He received his BA in economics and BS in mathematics and
statistics from Miami University in 1998 and earned a PhD in economics from Northwestern
University in 2004. Prior to joining Indiana University, he taught graduate and undergraduate
courses at Cornell University.
Professor Prince has won top teaching honors as a faculty member at both Indiana
University and Cornell and as a graduate student at Northwestern. He has a broad research
agenda within applied economics, having written and published on topics that include de-
mand in technology markets, Internet diffusion, regulation in health care, risk aversion in in-
surance markets, and quality competition among airlines. He is one of a small number of
economists to have published in both the top journal in economics (American Economic
Review) and the top journal in management (Academy of Management Journal). He currently
serves as a co-editor for the Journal of Economics and Management Strategy and is on the
editorial board for Information Economics and Policy. In his free time, Jeff enjoys activities
ranging from poker and bridge to running and racquetball.
Preface

Thanks to feedback from users around the world, Managerial Economics and Business
Strategy remains the best-selling managerial text in the market. We are grateful to all of you
for allowing us to provide this updated and improved edition. Before highlighting some of the
new features of the tenth edition, we would like to stress that the fundamental goal of the
book—providing students with the tools from intermediate microeconomics, game theory,
and industrial organization that they need to make sound managerial decisions—has not
changed. What has changed are the examples used to make managerial economics come to
life for this generation of students, a stronger integration with data-based decision-making,
and an enriched utilization of new technologies (such as Connect) for enhancing the teaching
and learning experiences of instructors and their students.
This book begins by teaching managers the practical utility of basic economic tools such
as present value analysis, supply and demand, regression, indifference curves, isoquants, pro-
duction, costs, and the basic models of perfect competition, monopoly, and monopolistic com-
petition. Adopters and reviewers also praise the book for its real-world examples and because
it includes modern topics not contained in any other single managerial economics textbook:
oligopoly, penetration pricing, multistage and repeated games, foreclosure, contracting, verti-
cal and horizontal integration, networks, bargaining, predatory pricing, principal–agent prob-
lems, raising rivals’ costs, adverse selection, auctions, screening and signaling, search, limit
pricing, and a host of other pricing strategies for firms enjoying market power. This balanced
coverage of traditional and modern microeconomic tools makes it appropriate for a wide vari-
ety of managerial economics classrooms. An increasing number of business schools are
adopting this book to replace (or use alongside) managerial strategy texts laden with anec-
dotes but lacking the microeconomic tools needed to identify and implement the business
strategies that are optimal in a given situation.
This tenth edition of Managerial Economics and Business Strategy has been revised to
include updated examples and problems, but it retains all of the basic content that made pre-
vious editions a success. The basic structure of the textbook is largely unchanged to ensure a
smooth transition to this edition.

KEY PEDAGOGICAL FEATURES

The tenth edition retains all of the class-tested features of previous editions that enhance stu-
dents’ learning experiences and make it easy to teach from this book.

Headlines
As in previous editions, each chapter begins with a Headline that is based on a real-world
economic problem—a problem that students should be able to address after completing the
chapter. These Headlines are essentially hand-picked “mini-cases” designed to motivate
vii
viii Preface

students to learn the material in the chapter. Each Headline is answered at the end of the relevant
chapter—when the student is better prepared to deal with the complications of real-world
­problems. Reviewers, as well as users, of previous editions praise the Headlines not only because
they motivate students to learn the material in the chapter, but also because the answers at the end
of each chapter help students learn how to use economics to make business decisions.

Learning Objectives
Each chapter includes learning objectives designed to enhance the learning experience.
End-of-chapter problems are denoted with the learning objective(s) to which they relate.

Demonstration Problems
The best way to learn economics is to practice solving economic problems. Every chapter con-
tains Demonstration Problems that provide students with detailed answers to help them verify
that they have mastered the material. Select Demonstration Problems also offer a video walk-
through of the problem, explaining the steps along the way. Students can click the link in their
ebook or key in the URL provided to access the videos and solutions. Videos and solutions are
also provided in the Connect Library, under Instructor Resource for instructors. The goal is in
providing this additional guidance is to minimize time spent with students and instructors
­discussing answers to problems, allowing instructors more time to focus on other concepts.

Inside Business Applications

Most chapters offer Inside Business applications boxes to illustrate how theories explained in
the text relate to a host of different business situations. As in previous editions, this feature is
authored to strike a balance between applications drawn from the current economic literature
and the popular press.

Calculus and Non-Calculus Alternatives

Users can easily include or exclude calculus-based material without losing content or continu-
ity. That’s because the basic principles and formulae needed to solve a particular class of
economic problems (e.g., MR = MC) are first stated without appealing to the notation of cal-
culus. Immediately following each stated principle or formula is a clearly marked Calculus
Alternative. Each of these calculus alternatives states the preceding principle or formula in
calculus notation and explains the relation between the calculus-based and non-calculus-based
formulas. More detailed calculus derivations are relegated to chapter Appendices. Thus, the
book is designed for use by instructors who want to integrate calculus into managerial eco-
nomics and by those who do not require students to use calculus.

Variety of End-of-Chapter Problems

Three types of problems are offered. Highly structured but nonetheless challenging Conceptual
and Computational Questions stress fundamentals. These are followed by Problems and
Applications, which are far less structured and, like real-world decision environments, may
contain more information than is actually needed to solve the problem. Many of these applied
problems are based on actual business events.
Additionally, the new Spectrum case that follows Module Group B includes 13 problems
called Memos that have a “real-world feel” and complement the text. All of these case-based
problems may be assigned on a chapter-by-chapter basis as specific skills are introduced, or as
part of a capstone experience.
 Preface ix

Detailed answers to all problems can be found among the instructor resource material
available via Connect.

Case Study
A case study in business strategy, Spectrum—the Spawn of Time Warner Cable and Charter
Communications—Navigates Challenges from Cord Cutting and Mobile Competition follows
Module Group B and was prepared especially for this text. It can be used either as a capstone
case for the course or to supplement individual chapters. The case allows students to apply core
elements from managerial economics to a remarkably rich business environment. Instructors
can use the case as the basis for an “open-ended” discussion of business strategy, or they can
assign specific “memos” (contained at the end of the case) that require students to apply spe-
cific tools from managerial economics to the case. Teaching notes, as well as solutions to all of
the memos, are provided among the instructor resource material available via Connect.

Flexibility
Instructors of managerial economics have genuinely heterogeneous textbook needs. Reviewers
and users continue to praise the book for its flexibility, and they assure us that sections or even
entire chapters can be excluded without losing continuity. For instance, an instructor wishing
to stress microeconomic fundamentals might choose to cover Chapters 2, 3, 4, 5, 8, 9, 10, 11,
and 12. An instructor teaching a more applied course that stresses business strategy might
choose to cover Chapters 1, 2, 3, 5, 6, 7, 8, 10, 11, and some or all of Module Group A. Each
may choose to include additional content (for example, some or all of Module Group B or the
Time Warner Cable case) as time permits. More generally, instructors can easily omit topics
such as present value analysis, regression, indifference curves, isoquants, or reaction functions
without losing continuity.

CHANGES IN THE TENTH EDITION

We have made every effort to update and improve Managerial Economics and Business
Strategy while assuring a smooth transition to the tenth edition. Following is a summary of
the pedagogical improvements, enhanced supplements, and content changes that make the
tenth edition an even more powerful tool for teaching and learning managerial economics and
business strategy.
∙ New and updated mini-cases on topics such as: Google Search, Netflix Pricing, and a
range of mergers.
∙ New and updated end-of-chapter problems.
∙ New and updated Headlines.
∙ New and updated Inside Business applications.
®

∙ New Excel Exercises in Connect. As denoted in the text with an Excel icon, this
edition offers students the ability to get more hands-on practice using Excel.
Excel
∙ Content from Chapters 13 and 14 in the previous edition are now placed in stand- Exercises
alone modules that permit instructors to easily pick-and-choose topics to include along
with their conventional materials.
∙ Spectrum—the Spawn of Time Warner Cable and Charter Communications—Navigates
Challenges from Cord Cutting and Mobile Competition replaces the old Time Warner
Cable Case.
x Preface

Chapter-by-Chapter Changes
∙ Chapter 1 contains a new section discussing how managers make data-driven deci-
sions, setting the stage to incorporate the use of data to solve managerial problems
throughout the remainder of the text. It also contains new and updated examples and
two new end-of-chapter problems centered on the use of data analysis for managerial
decision-making.
∙ Chapter 2 contains two updated and one new Inside Business applications. The new
application discusses globalization and the supply of automobiles from China.
∙ Chapter 3 contains updated examples and several new elasticity tables. It also con-
tains a new Inside Business about strategy in digital markets. In addition, it has a new
section about data-driven demand curves and another new Inside Business application
about the use of data to estimate demand for gamers.
∙ Chapter 4 contains an updated Inside Business application and updated end-of-
chapter problems.
∙ Chapter 5 contains a new Inside Business application on artificial intelligence and
cost minimization. It also includes new sections on data-driven production and cost
functions, and there are two new end-of-chapter problems based on these new sections.
∙ Chapter 6 offers a new Headline on vertical integration, two updated Inside Business
applications, and a new Inside Business application on outsourcing.
∙ Chapter 7 contains a new Headline on the Sprint/T-Mobile merger along with updated
examples and industry data. It also provides a new Inside Business application on
demand elasticities and a new end-of-chapter problem.
∙ Chapter 8 contains an updated Headline and two new end-of-chapter problems.
∙ Chapter 9 contains an updated Inside Business applications and two new end-of-
chapter problems focused on data-driven decision-making.
∙ Chapter 10 contains a new Inside Business application examining Canadian gaso-
line markets, as well as an updated Inside Business application and Demonstration
Problem. It also contains a new end-of-chapter problem on competition between
Google and Amazon in the smart home market.
∙ Chapter 11 contains a new Inside Business application on bundling telecommuni-
cations services to reduce churn. It also includes an updated Headline and Inside
Business application, as well as two new end-of-chapter problems on data-driven
decision-making.
∙ Chapter 12 contains an updated Inside Business application.
∙ Module Group A (formerly Chapter 13) has been transformed into four self-­
contained, concise and easy-to-navigate modules on entry prevention, lessening
­competition, restructuring game timing, and overcoming network effects.
∙ Module Group B (formerly Chapter 14) has been transformed into three self-­
contained, concise and easy-to-navigate modules on regulatory constraint on
market power; regulation of markets with externalities, public goods, or incomplete
information; and government policy and international markets.

Remote Proctoring & Browser-Locking Capabilities

New remote proctoring and browser-locking capabilities, hosted by Proctorio within Connect,
provide control of the assessment environment by enabling security options and verifying the
identity of the student.
 Preface xi

Seamlessly integrated within Connect, these services allow instructors to control stu-
dents’ assessment experience by restricting browser activity, recording students’ activity, and
verifying students are doing their own work.
Instant and detailed reporting gives instructors an at-a-glance view of potential academic
integrity concerns, thereby avoiding personal bias and supporting evidence-based claims.

ACKNOWLEDGMENTS
We thank the many users of Managerial Economics and Business Strategy who provided both
direct and indirect feedback that has helped improve your book. This includes thousands of
students at Indiana University’s Kelley School of Business and instructors worldwide who
have used this book in their own classrooms, colleagues who unselfishly gave up their own
time to provide comments and suggestions, and reviewers who provided detailed suggestions
to improve this and previous editions of the book. We especially thank the following profes-
sors, past and present, for enlightening us on the market’s diverse needs and for providing
suggestions and constructive criticisms to improve this book.

Contributing reviewers for this edition:

Anthony Paul Andrews, Governors
State University
Kelly Blanchard, Purdue University—
West Lafayette
Larry Chavis, University of North
Carolina—Chapel Hill
Kristen Collett-Schmitt, University of
Notre Dame
James Dana, Northeastern University
Tina Das, Elon University
Brooks Depro, Elon University
David Hudgins, Texas A&M
University—Corpus Christi
Jim Lee, Texas A&M University—
Corpus Christi
Abiodun Ojemakinde, Albany State
University
Mark Pingle, University of
Nevada—Reno
Barbara W. K. Son, Anaheim University
Denise Stanley, California State
University—Fullerton

Contributing reviewers for previous editions:

Fatma Abdel-Raouf, Goldey-Beacom College
Burton Abrams, University of Delaware
Rashid Al-Hmoud, Texas Tech University
Anthony Paul Andrews, Governors
State University
Sisay Asefa, Western Michigan University
Simon Avenell, Murdoch University
Narine Badasyan, Murray State University
Joseph P. Bailey, University of Maryland
Dale G. Bails Christian Brothers University
Dean Baim, Pepperdine University
Sheryl Ball, Virginia Polytechnic University
Klaus Becker, Texas Tech University
Richard Beil, Auburn University
Barbara C. Belivieu, University of
Connecticut
Dan Black, University of Chicago
Louis Cain, Northwestern University
Kerem Cakirer, Indiana University
Leo Chan, University of Kansas
Robert L. Chapman, Florida
Metropolitan University
Joni Charles, Texas State
University—San Marcos
Basanta Chaudhuri, Rutgers
University—New Brunswick
xii Preface
Shuo Chen, State University of New York
at Geneseo
Xiujian Chen, State University of New
York—Binghamton University
Kwang Soo Cheong, Johns Hopkins
University
Christopher B. Colburn, Old Dominion
University
Daniel Patrick Condon, Dominican
University
Michael Conlin, Syracuse University
Cristanna Cook, Husson University
Keith Crocker, Penn State University
Ian Cromb, University of Western Ontario
Dean Croushore, Federal Reserve
Wilffrid W. Csaplar Jr., Bethany College
Shah Dabirian, California State University,
Long Beach
Joseph DaBoll-Lavioe, Nazareth College
of Rochester
Robert Daffenbach, University of Oklahoma
George Darko, Tusculum College
Tina Das, Elon University
Ron Deiter, Iowa State University
Jonathan C. Deming, Seattle Pacific
University
Casey Dirienzo, Appalachian State
University
Eric Drabkin, Hawaii Pacific University
Martine Duchatelet, Barry University
Keven C. Duncan, University of Southern
Colorado
Yvonne Durham, Western Washington
University
Jeffrey Edwards, North Carolina
A&T University
Eugene F. Elander, Brenau University
Ibrahim Elsaify, Goldey-Beacom College
David Ely, San Diego State University
Mark J. Eschenfelder, Robert Morris
University
Li Feng, Texas State University–San
Marcos
David Figlio, University of Florida
Ray Fisman, Graduate School of Business,
Columbia University
Silke Forbes, Case Western Reserve
University
David Gerard, Carnegie Mellon University
Sharon Gifford, Rutgers University
Lynn G. Gillette, Northeast Missouri
State University
Otis Gilley, Louisiana Tech University
Roy Gobin, Loyola University
Stephan Gohmann, University of Louisville
Steven Gold, Rochester Institute of
Technology
Julie Hupton Gonzalez, University of
California—Santa Cruz
Thomas A. Gresik, Mendoza College of
Business (University of Notre Dame)
Andrea Mays Griffith, California
State University
Madhurima Gupta, University of
Notre Dame
Carl Gwin, Pepperdine University
Gail Heyne Hafer, Lindenwood College
Karen Hallows, George Mason University
William Hamlen Jr., SUNY Buffalo
Shawkat Hammoudeh, Drexel University
Mehdi Harian, Bloomsburg University
Nile W. Hatch, Marriott School (Brigham
Young University)
Clifford Hawley, West Virginia University
Ove Hedegaard, Copenhagen Business School
Martin Heintzelman, Clarkson University
Steven Hinson, Webster University
Hart Hodges, Western Washington University
Robert L. Holland, Purdue University
Jack Hou, California State University—
Long Beach
Craig Hovey, Brenau University,
Gainesville
Lowel R. Jacobsen, William Jewell College
Thomas D. Jeitschko, Michigan State
University
Anand Jha, Texas A&M International
University

Jaswant R. Jindia, Southern University
Russell Kashian, University of
Wisconsin—Whitewater
Paul Kattuman, Judge Business School
(Cambridge University)
Brian Kench, University of Tampa
Kimberley L. Kinsley, University of
Mary Washington
Peter Klein, University of Georgia,
University of Missouri—Columbia
Audrey D. Kline, University of Louisville
Robert A. Krell, George Mason University
Paul R. Kutasovic, New York Institute
of Technology
W. J. Lane, University of New Orleans
Daniel Lee, Shippensburg University
Dick Leiter, American Public University
Canlin Li, University of California—Riverside
Chung-Ping Loh, University of North
Florida
Vahe Lskavyan, Ohio University—Athens
Heather Luea, Newman University
Nancy L. Lumpkin, Georgetown College
Thomas Lyon, University of Michigan
Richard Marcus, University of
Wisconsin—Milwaukee
Vincent Marra, University of Delaware
Wade Martin, California State University,
Long Beach
Catherine Matraves, Michigan State
University—East Lansing
John Maxwell, Indiana University
David May, Oklahoma City University
Alan McInnes, California State University,
Fullerton
Christopher McIntosh, University
of Minnesota Duluth
Kimberly L. Merritt, Oklahoma Christian
University
Edward Millner, Virginia Commonwealth
University
John Moran, Syracuse University
Shahriar Mostashari, Campbell University
Preface xiii
John Morgan, Haas Business School
(University of California—Berkeley)
Ram Mudambi, Temple University
Francis Mummery, California State
University—Fullerton
Inder Nijhawan, Fayetteville State University
Albert A. Okunade, University of Memphis
Walton M. Padelford, Union University
Darrell Parker, Georgia Southern University
Harlan Platt, Northeastern University
Stephen Pollard, California State University,
Los Angeles
Dwight A. Porter, College of St. Thomas
Stanko Racic, University of Pittsburgh
Eric Rasmusen, Indiana University
Matthew Roelofs, Western Washington
University
Christian Roessler, National University
of Singapore
Stefan Ruediger, Arizona State University
Bansi Sawhney, University of Baltimore
George L. Schatz, Maine Maritime Academy
Craig Schulman, University of Arkansas
Karen Schultes, University of
Michigan—Dearborn
Peter M. Schwartz, University of North
Carolina
Richard Alan Seals Jr., Oklahoma
City University
Charles Sebuhara, Virginia Technical
University
Edward Shinnick, University College
Ireland
Dean Showalter, Southwest Texas
State University
Chandra Shrestha, Virginia Commonwealth
University
Karen Smith, Columbia Southern University
John Stapleford, Eastern University
Mark Stegeman, University of Arizona
Ed Steinberg, New York University
Barbara M. Suleski, Cardinal Stritch College
Caroline Swartz, University of North
Carolina Charlotte
xiv Preface

Joseph K. Tanimura, San Diego State Thomas White, Fontbonne University

University
Bill Taylor, New Mexico Highlands
University
Roger Tutterow, Kennesaw State College
Nora Underwood, University of
Central Florida
Lskavyan Vahe, Ohio University
Lawrence White, Stern School of Business
(New York University)
Leonard White, University of Arkansas
Keith Willett, Oklahoma State
University—Stillwater
Mike Williams, Bethune Cookman College
Richard Winkelman, Arizona State
University
Laura Youderian, Xavier University
Eduardo Zambrano, University of
Notre Dame
Rick Zuber, University of North Carolina,
Charlotte

We thank Adam Huenecke, Kelly Delso, Tim Vertovec, and Kevin Moran at McGraw Hill for
all they have done to make this project a success. We also thank those whose who contributed
to the development of this edition: Mark Wilson of West Virginia State University and Susan
Bell of Seminole State College for their careful review of Connect content, Patricia Turco of
Milwaukee Area Technical College for her PowerPoint development, and our team of testbank
authors who worked to ensure the content is error free: Archana Dube and Denise Stanley of
California State Fullerton, Casey Dirienzo of Elon University, and Abiodun Ojemakinde of
Albany State University, as well as those who contributions informed the prior edition: Mitchell
Baye, Patrick Scholten, Eric Schmidbauer, Susan Kayser, Kyle Anderson, and Vikram Ahuja
for suggestions and assistance during various stages of the revision, and Ellie Mafi-Kreft,
Haizhen Lin, and Steven Kreft, who graciously agreed to class test the Connect features in their
classrooms. Finally, we thank our families for their continued love and support.
As always, we welcome your comments and suggestions for the next edition. Please feel
free to write to us directly at mbaye@indiana.edu or jeffprin@indiana.edu.

Michael R. Baye
Jeffrey T. Prince

SUPPLEMENTS
We know the content and reliability of new editions and book supplements are of utmost impor-
tance to users of our book. Because of this, and unlike most other managerial economics books,
we personally are involved in crafting and accuracy checking virtually every content update and
supplement for our book. Below we discuss popular features of some of the supplements that
have been greatly expanded for this edition. The following ancillaries are available for quick
download and convenient access via the instructor resource material available through Connect.

Cases
In addition to the Spectrum case, nearly a dozen full-length cases were updated and prepared
to accompany Managerial Economics and Business Strategy. These cases complement the
textbook by showing how real-world businesses use tools like demand elasticities, markup
pricing, third-degree price discrimination, bundling, Herfindahl indices, game theory, and
 Preface xv

predatory pricing to enhance profits or shape business strategies. The cases are based on ac-
tual decisions by companies that include Microsoft, Heinz, Visa, Staples, American Airlines,
and Nasdaq. Expanded teaching notes and solutions for all of the cases—including the
Spectrum case—are also provided.

PowerPoint Slides
Thoroughly updated and fully editable PowerPoint presentations with animated figures and
graphs, make teaching and learning a snap. For instance, a simple mouse click reveals the
firm’s demand curve. Another click reveals the associated marginal revenue curve. Another
click shows the firm’s marginal cost. A few more clicks, and students see how to determine
the profit-maximizing output, price, and maximum profits. Animated graphs and tables are
also provided for all other relevant concepts (like Cournot and Stackelberg equilibrium, nor-
mal form and extensive form games, and the like).

Solutions Manual
We have prepared a solutions manual that provides detailed answers to all end-of-chapter
problems, all of which have been class-tested for accuracy.

Test Bank
An updated test bank, offers well over 1,000 multiple-choice questions categorized by learn-
ing objectives, AACSB learning categories, Bloom’s taxonomy objectives, and level of
difficulty.

Computerized Test Bank

Test Builder within Connect allows you to create tests that can be printed or administered
within your LMS. This cloud-based application includes a modern, streamlined interface for
easy assessment creation. Content can easily be configured to match your course needs, in-
cluding the ability to:
∙ Easily pinpoint the most relevant content through robust filtering options.
∙ Manipulate the order of questions.
∙ Adjust point values.
∙ Scramble questions and/or answers.
∙ Pin questions to a specific location within a test.
∙ Determine your preferred treatment of algorithmic questions.
∙ Add instructions.
∙ Configure default settings.
Instructors: Student Success Starts with You
Tools to enhance your unique voice
Want to build your own course? No problem. Prefer to use our
turnkey, prebuilt course? Easy. Want to make changes throughout the
65%
Less Time
semester? Sure. And you’ll save time with Connect’s auto-grading too.
Grading

Study made personal

Incorporate adaptive study resources like
SmartBook® 2.0 into your course and help your
students be better prepared in less time. Learn
more about the powerful personalized learning
experience available in SmartBook 2.0 at
www.mheducation.com/highered/connect/smartbook

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Affordable solutions, Solutions for

added value your challenges
Make technology work for you with A product isn’t a solution. Real
LMS integration for single sign-on access, solutions are affordable, reliable,
mobile access to the digital textbook, and come with training and
and reports to quickly show you how ongoing support when you need it
each of your students is doing. And with and how you want it. Visit www.
our Inclusive Access program you can supportateverystep.com for videos
provide all these tools at a discount to and resources both you and your
your students. Ask your McGraw Hill students can use throughout the
representative for more information. semester.

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Students: Get Learning that Fits You
Effective tools for efficient studying
Connect is designed to make you more productive with simple, flexible, intuitive tools that maximize your
study time and meet your individual learning needs. Get learning that works for you with Connect.

Study anytime, anywhere “I really liked this

Download the free ReadAnywhere app and access your app—it made it easy
online eBook or SmartBook 2.0 assignments when it’s to study when you
convenient, even if you’re offline. And since the app don’t have your text-
automatically syncs with your eBook and SmartBook 2.0
assignments in Connect, all of your work is available book in front of you.”
every time you open it. Find out more at
www.mheducation.com/readanywhere - Jordan Cunningham,
Eastern Washington University

Everything you need in one place

Your Connect course has everything you need—whether reading on
your digital eBook or completing assignments for class, Connect makes
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McGraw Hill works directly with Accessibility Services
Departments and faculty to meet the learning needs
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 Connect Economics
Asset Alignment with
Bloom’s Taxonomy
We Take Students Higher

As a learning science company we create content that supports higher order thinking skills. Within Connect®,
we tag assessments accordingly so you can filter your search, assign it, and receive reporting on it. These
content asset types can be associated with one or more levels of Bloom’s Taxonomy.

The chart below shows a few of the key assignable economics assets with McGraw Hill Connect aligned with
Bloom’s Taxonomy. Take your students higher by assigning a variety of applications, moving them from simple
memorization to concept application.

Econ
Application- Writing
Math Interactive Everyday
SmartBook 2.0 Videos Exercises Based Assignment
Preparedness Graphs Current
Activities Plus
Events Blog*

✓
Thinking Skills
Higher Order

CREATE

EVALUATE
✓ ✓ ✓
ANALYZE
✓ ✓ ✓ ✓ ✓
APPLY
✓ ✓ ✓ ✓ ✓ ✓ ✓
UNDERSTAND
✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
Thinking Skills
Lower Order

REMEMBER
✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓
* Outside of Connect.
SmartBook 2.0
Adaptively aids students to study more efficiently by highlighting where
in the chapter to focus, asking review questions and pointing them to
passages in the text until they understand. Assignable and assessable.

Math Preparedness
Math Preparedness assignments help students refresh important prerequisite topics
necessary to be successful in economics. Tutorial videos are included to help illustrate
math concepts to students visually.

Videos
Select Economic Naturalist examples have been developed into videos that
show how to employ basic economic principles to understand and explain
what you observe in the world around you. All videos are closed captioned
and are assignable with assessment questions for improved retention.

Exercises
Exercises with algorithmic variations provide ample opportunities for students to practice
and hone quantitative skills. Graphing Exercises provide opportunities for students to
draw, interact with, manipulate, and analyze graphs.

Interactive Graphs
Interactive Graphs provide visual displays of real data and economic concepts for students
to manipulate. All graphs are accompanied by assignable assessment questions and
feedback to guide students through the experience of learning to read and interpret
graphs and data.

Application-Based Activities
Immersive real-life scenarios engage students and put them in the role of everyday
economists. Students practice their economic thinking and problem-solving skills as they
apply course concepts and see the implications of their decisions as they go. Each activity
is designed as a 15-minute experience, unless students eagerly replay for a better outcome.

ECON Everyday Current Events Blog

Our Econ Everyday blog saves instructors time brining current, student-centered content into
their course all semester long. Short articles, written for principles-level students, is tagged
by topic to bring currency into your course. We also provide discussion questions to help you
drive the conversation forward. Visit www.econeveryday.com and subscribe for updates.

Writing Assignment Plus

Writing Assignment Plus delivers a learning experience that helps students improve their
written communication skills and conceptual understanding. Faculty can assign, monitor,
grade, and provide feedback on writing projects efficiently. Built-in grammar and writing
review helps students improve writing quality while an originality check helps students
correct central plagiarism before submission. End result? Improved workplace skills of
writing in critical thinking.

For more information, please visit: www.mheducation.com/highered/economics

Another random document with
no related content on Scribd:
Courtesy Universal Pictures Corporation.
Staging a Movie Prize-Fight.
Notice how each actor in the foreground has to play his part, no matter how
unimportant. To make the scene realistic, each “extra” must appear as
interested as any spectator at a real prize-fight.

But let us pass on beyond the outer offices, and see where the girl
with the collie went.
Through a hallway we come suddenly into a vast, dark, cavernous
interior, high and wide and shadowy. From somewhere off at our left
comes a sound of hammering, where a new “set” is being erected.
Off at the right is more hammering and pounding with the squeaking
of nails being drawn as another set, in which the “shooting” has been
finished, is being “struck,” or taken down. From a far corner of the
great cavern there is a radiance of bluish-green light, where one of
the companies is “working.”
Curiously enough, this huge dark place is called the “light” stage. It
gets its name from the fact that scenes can be photographed on it
only with artificial light.
All about is a labyrinth of still standing sets—here a corner of a
business office, and just beyond the interior of a drawing room in a
rich home, with a beautiful curved stairway mounting ten feet or so
into nothing at the right. Next comes the corner of a large restaurant.
Under the guidance of an assistant director, in the glare of a single
bluish-green Cooper-Hewitt “bank” turned on as a work light,
property men are “dressing” it. They are putting yellow table-cloths
on the tables (in the finished picture they will look white; in reality
they are yellow instead of white in order not to be too glaring, before
the picture can be exposed long enough to bring out the contours
and details that are more important in the darker places); and
hanging a row of horse-race pictures along the wall.
This is a big studio, supposed to be making a dozen or more
pictures at once. We are surprised that on this whole great dark
“light” stage only one company is working; we learn that two others
are “shooting” elsewhere on the lot; one in back of the carpenter
shop, where a clever director has found an ideal “location” for his
purpose right under his nose, and another on one of the big
“daylight” stages that we shall see presently. Several other
companies are out on location miles from the studio—one perhaps in
another State on a trip that will last a couple of weeks. Still others
are not at the “shooting” stage of their picture at all; one or two are
still “casting,” one that follows the methods used by Griffith is “in
rehearsal,” and still others are merely waiting while scenario writer
and director work out the final details of the scenario or “continuity,”
or while the director “sits in” with the cutter or “screen editor” and title
writer to put the finishing touches on the completed product.
We go over to the corner where the one company on the big stage
is “shooting.” A dozen people are sitting around on chairs or stools,
just outside the lights. About in the middle of them, with a whole
phalanx of lights at right and left, two cameras are set up. Beside
them, in a comfortable folding camp-chair with a back rest, sits the
director. He is wearing what a humorous writer has called the
“director’s national costume” of soft shirt, knickerbockers, and
puttees. On the floor beside his chair is a megaphone.
 If you hold your hands together with the palms flat, making a
narrow angle about a third of a right angle, you can get an idea of
what a camera “sees.” This angle is called the “camera angle.” Only
what happens within that narrow angle will be recorded on the film.
Sometimes white chalk-lines are drawn on the floor to mark the
camera angle; what is within the lines will be photographed, while
what is outside will not show.
Along the sides of this open space that the camera will photograph
are ranged the bright white carbon lights and the bluish-green
vacuum lights that illumine the scene. Overhead, suspended by
heavy chains from tracks that traverse the ceiling of the great stage,
are more lights; white carbon “dome” lights, and additional bluish-
green Cooper-Hewitt “overhead banks.”
Courtesy Brown Bros.
How a Motion Picture Interior is Made.
A mass of complicated paraphernalia is necessary to light and equip a
motion-picture stage. The tall lights with the lines across them are the
“Cooper-Hewitts,” or vacuum lights, called “banks.” The smaller square
lights are the white arc-lights or “Kliegs.” The snake-like cables on the floor
carry the electricity.
Courtesy W. W. Hodkinson Corporation.
Engine Trouble on a Dakota Prairie.
To get the scenes shown in this story of a transcontinental tour the motion-
picture company travelled almost across the continent.
Courtesy Goldwyn Pictures Corporation.
When the Hero is the Captain of a Steam Shovel.
Note how the reflectors, seen at the bottom of the picture, are tilted down to
throw the light up into the face of the engineer, while the camera is raised to
the right place on a platform.

Thin bluish smoke, like vapor, curls outward and upward from
most of the white carbon lights. They give off a good deal of heat. A
couple of spot-lights like those used in theaters are situated on
scaffolding higher than a man’s head, behind the cameras to left and
to right, with an attendant in charge of each.
In the bright glare the faces of all who are not “made up” with
grease paint and powder look greenish yellow. All color values are
distorted. Tan-colored shoes look green.
A scene has just been taken. The assistant director turns to an
electrician. “Kill ’em!” he says. The electrician goes to the different
lights, pulling switches to “cut ’em off.” In a moment only one of the
bluish-green “double banks” is left to serve as a working light. This is
to save electricity, of which the array of lights takes an enormous
amount.
The scene that has been taken is, we will say, of an old-fashioned
New England sitting room. In the center is a marble-topped table. In
a far corner is a “what-not,” with marble shelves. There is a
bookcase against one of the walls, and old prints and lithographs are
hung here and there. In one place is a needlework “sampler,” with a
design and motto.
The director is talking with the two actresses who were in the
scene. They are in costumes of the Civil War period, with flounces
and hoopskirts. They are supposed to be sisters.
Suddenly the director decides to take the scene over again. He
has thought of a bit of more effective action that will get the point he
is trying to make in the story over more effectively. “We’ll shoot it
again,” he says. “Let’s run through it once more first.”
The two actresses, already thoroughly familiar with the scene,
rehearse it again, adding the new bit of detail as the director instructs
them. He is not quite satisfied, and takes one of the parts himself,
showing the actress how he wants her to put her hand up to her
face. Finally she does it to suit him, and he is satisfied. “All right,” he
says, “we’ll shoot it.—Lights!”
The lights are switched on once more, and in the bright, sputtering
glare the sisters walk into the scene. Just before they cross the line
into the camera angle both camera men start grinding.
After about fifteen seconds of action the director nods, well
pleased. “Cut!” he says shortly, and both camera men stop.
Half an hour’s preparation and rehearsal for fifteen seconds of
action!
Again the lights are switched off. The man in charge of the script,
sitting on a stool with a sheet of paper snapped on a board on his
lap, puts down the number of the scene and adds details of costume
—what each sister is wearing, the flowers that one is carrying in her
hand, and so on—to have a complete record in case of “retake,” or
other scenes that match with this before or after.
 “Now we’ll move up on ’em,” says the director. The cameras are
moved closer, and the action of the preceding scenes is repeated.
This time the cameras are so close that the faces of the actresses
will appear large on the screen, with every detail of expression
showing. Before the close-ups are begun, the lights are moved up,
too, and one of the spot lights switched around more to one side to
give an attractive “back lighting” effect on the hair of the sisters, that
appears almost like a halo, later, when it is seen on the screen.
Before each scene is taken an assistant holds a slate with the
director’s name, the head camera man’s name, and the number of
the scene, written on it, in front of the cameras, and the camera men
grind a few turns. In this way, the “take” is made.
When the different “takes” are finally matched together in the
finished picture these numbers will be cut off, but they are necessary
to facilitate the work of identifying the hundreds or even thousands of
different shots of which the final picture is composed.
Leaving the great dark “light stage” we pass on into the lot beyond.
In front of us is another great stage, but this time open to the sky.
Instead of artificial lights, there are great white cloth “reflectors,” to
deflect the sunlight on to the scene and intensify the light where
under the sun’s direct rays alone there would be shadows.
Sets, actors, camera men and action are all as they were on the
other stage, except that instead of a profusion of sets we find here
only one or two, as not nearly so many scenes are taken here as on
the other stage.
Formerly nearly all scenes were taken in sunlight, and studios
were built that had no provision for lighting except the sun. But while
the film industry was still in its infancy the development of artificial
lighting made possible results that could not be secured with sunlight
alone, and since that time artificial lighting is used on most motion-
picture scenes that represent “interiors.”
About us on the “lot” are other stages, covered with glass, that lets
in the sunlight but keeps out the rain, so that work may go on
uninterruptedly. On most of these a combination of natural and
artificial light is used—electric lights as in the “light stage,”
supplemented by daylight.
We pass on to the property houses—great buildings like
warehouses ranged one behind the other. In one place we find a
room where modeling is going on; skilled artists are making statues
that will be used in a picture depicting the life of a sculptor. In
another place special furniture is being made. One great warehouse-
like building is devoted to “flats” and “drops,” of which the differing
sets can in part, at least, be built. Then there are the costume rooms,
and the “junk” rooms, with knick-knacks of all descriptions.
You’d be amazed to know how many properties are needed in the
making of even the simplest motion pictures. Take, for instance, the
set that we have already described—an old New England sitting-
room. The furniture, the marble-topped table and the what-not with
its marble shelves and the chairs and possibly a hair-cloth sofa, were
of course obvious. The old prints and lithographs and even the
sampler, hardly less so; but in addition to these, think of the
ornaments that would have to appear on the what-not shelves and
the kind of lamp that would be on the table and what books there
would have to be in the bookcase. Without these details, the room
would not look natural.
Take a look around the room where you are reading this page.
Notice how many little things there are that you would never think of
arranging, if you were to have carpenters and property men
reconstruct it for you as a set for a picture. Newspapers—all the
hundred and one little things, left here and there, that go to make a
home what it is—even to the scratches on the walls, or the corner
knocked off one arm of a chair.
Courtesy United Artists Corporation.
Douglas Fairbanks as D’Artagnan in “The Three Musketeers.”
Here are presented all three basic characteristics of a good story—
fascinating characters engaged in stirring action, at an interesting time and
place. Note the careful details of costuming, and decorations of the old
furniture.
 Courtesy United Artists Corporation.
Another Scene from “The Three Musketeers.”
See how even the flagstones of this narrow alley of
Old France have been reproduced with faithful care.

The property man of a famous director once told me: “I’ve got the
greatest collection of junk in the whole business. Just odds and
ends. No one thing in the whole outfit worth anything in itself, but the
King (he was referring to the director) would be crazy if he sold it for
ten thousand dollars—yes, or twenty-five thousand, either. I tell you,
sometimes junk is the most important thing in a picture.”
After a set has been built, it is usually “dressed” by hiring first the
furniture from one of the concerns that have grown up for just this
purpose—renting furniture, old or new, to motion-picture companies
that want to use it for a few weeks. If, in addition to what has been
rented, the producing company is able to supply bits of “junk” from its
own property room and make the set look more natural, so much the
better.
The story is told of one enterprising concern in Los Angeles that
started in collecting beer-bottles just after prohibition went into effect.
Since the bottles were no longer returnable, they were able to buy
them here and there for almost nothing, until they had on hand a
tremendous supply. The word went around that such and such a
concern was in the market for bottles, and every boy in Los Angeles
gathered up what he could find and took them around while the
market was still good. People thought they were crazy, and had a
good laugh at the movie industry that didn’t know any more than to
buy up hundreds and hundreds of old beer-bottles that nobody would
ever be able to use again.
Then one of the producing companies wanted a batch of bottles
for some bar-room scene and found that they didn’t happen to have
any on the lot. They went to the big property concern that they
usually traded with, only to find that they, too, didn’t happen to have
any beer-bottles. So they went to the concern that had been buying
them all up at junk prices.
Certainly they could have some bottles—all they wanted! They
would be thirty cents a week each, and a dollar apiece for any that
were broken or not returned. Take it or leave it!
The corner on old beer-bottles had suddenly become profitable.
The producing company tried to get bottles elsewhere and beat the
monopoly—but time was pressing. When the overhead of a single
company is running at hundreds of dollars a day, a property man will
not be forgiven if he holds up the whole production while he scours
the city to save money on beer-bottles. The price was paid.
 But let us get on with our tour of the studio. We have not yet come
to one of the most important places of all—the laboratory where the
film is developed.
The laboratory work of many producing companies is not done on
the lot at all, but is sent away to one of the big commercial
laboratories that does work for many different companies. But
several of the larger producers have their own laboratory plants.
In the laboratory we visit first the developing-room, feeling our way
cautiously into the dark around many corners that cut off every
possible ray of light from outside. Walking on wet slats we reach at
last the chamber in the middle of what seems to be an almost
impenetrable labyrinth, and in the dim red light can barely make out
the vats where the strips of celluloid, wound back and forth on
wooden hand-racks, are being dipped into the developer.
Nowadays many of the laboratories are equipped with complicated
developing machines, that combine all the processes of developing,
washing, “fixing,” and drying in one. Where prints, made from the
original negative, are being developed, tinting is added. The
undeveloped film, tightly wound in small rolls, is threaded through
one end of the developing machine in the dark-room; it travels over
little cog-wheels that mesh into the holes at the edges of the film,
and goes down into a long upright tube filled with developer. Coming
back out of this, still on the cogs, it travels next down into a tube of
clear water for washing. Then down into another tube containing
“hypo,” and up again for another tube and second washing. Then,
still winding along on the little cogs it travels through a partition and
out into a light room, where it passes through an airshaft for drying,
across an open space for inspection, and is finally wound into as
tight a roll as it started from in its undeveloped state.
In the printing-room, still in the dim red light, we see half a dozen
printing-machines at work, with raw film and negative feeding
together past the aperture where the single flash of white light makes
the exposure that leaves the negative image upon the print.
Next, in daylight once more, we see the great revolving racks of
the drying-room used for film developed by the hand process—with
hundreds of feet of the celluloid ribbon wrapped around and around
great wooden drums.
In the assembling-room we find girls at work winding up strips of
film and cementing or patching the ends of the film together to make
a continuous reel.
Another room is more interesting still. This room is dark once
more, with a row of high-speed projection machines along one side
and a blank wall on the other. Here the finished film, colored and
patched, receives its final inspection. Against the white wall four or
five pictures are flickering simultaneously. Since the projection
machines are only a few feet away from the white surface that acts
as a screen, each picture measures only two or three feet long and
two-thirds as much in height. In one picture we may see a jungle
scene; alongside it a reel of titles is being flashed through, one after
another; next to this again is the “rush stuff” for a news reel with the
president shaking hands so fast it looks as if he had St. Vitus dance;
next comes a beautifully colored scenic, and at the end of the row
the dramatic climax of a “society film,” rushing along at nearly double
its normal theater speed.
Leaving the laboratory, we pass down a street, bordered on one
side by a row of little boxlike offices that are used by the directors of
the different companies; opposite, in a similar row of offices, the
scenario writers are housed. The end of the street brings us back
once more to the building that houses the administrative offices
through which we came when we entered.
If we had time we could visit the menagerie that lies at the rear of
the studio proper, and that makes even the line-up of a circus tent
look tame. Or, we could spend a day watching the company shooting
the storm scene at the back edge of the lot, where the customary old
airplane propeller has been mounted on a solid block with a motor
attached and backed up alongside the scenes to furnish a gale of
wind.
But we have already seen enough for an introduction.
 To make a six-reel picture takes from three or four weeks to twice
as many months and costs all the way from ten or fifteen thousand
dollars to half a million, and sometimes even a million. You can
imagine the investment required where a producing organization is
running ten or a dozen companies at once, each turning out pictures
at top speed.
Only the other day one of the Hollywood studios changed hands at
the sale price of three-quarters of a million dollars. Some are worth
twice that amount.
But it is not the size of the investment that counts. It is the quality
of the finished product. That is the thing we want to look farther into.

Courtesy Goldwyn Pictures Corporation.

Filming an Old Engineer on a Fast-Moving Locomotive.
Notice how close director and assistant director are to the line of the
“camera angle.” The director using a small megaphone to overcome the
noise of the train and the rushing air.
Courtesy Goldwyn Pictures Corporation.
Another Railroad Scene.
The umbrella put up to shade the company gives an idea of the length of
time often necessary to take even the simplest scenes. Hours, possibly, were
spent at this one spot.
 CHAPTER V
MAKING A MOTION PICTURE

Once I was turned loose in New York City with thirty-odd thousand
dollars and a novel by a popular author, and told to make a movie
out of them.
Suppose that should happen to you. How would you begin?
Of course you would want to make a better picture than so many
of these other fellows seem able to turn out. But how would you
start? Just by hiring some actors and a camera man and telling them
to get busy?
It is not so easy as that.
The first thing for me, to be sure, was getting together the men
who would help make the photoplay. Re-writing the story into a
scene-by-scene continuity, hiring a studio and attending to all the
business details, selecting a cast, picking out the “locations” for
scenes, designing the “sets” and supervising the construction of
them, and “directing” the scenes, is more than any one person can
do. The Swiss Family Robinson itself couldn’t do it alone.
So I selected and hired a director, and a camera man, and a
continuity writer, and an art director to design the sets. That took
quite a while.
Then the trouble began.
The director decided he wanted an assistant director; the camera
man decided he wanted an assistant camera man; the art director
decided that I didn’t know what I was doing, and the “owners”
decided that everything done so far was all wrong.
 That brought out two very interesting things about motion pictures
that apply to lots of other businesses as well. And sports, too, if you
like, and almost everything else.
The first is the matter of coöperation.
When the rowers in a boat pull only when they feel like it, the boat
goes wabbling all over the place, instead of straight ahead, and
everybody gets his knuckles barked. Everybody has to pull together.
Imagine a football team without any teamwork!
Movies are so complicated, in the making, that dozens of people,
hundreds often, have to pull together when they are being made.
That very thing is one of the big reasons why moving pictures to-
day aren’t any better than they are. Mostly movie people haven’t yet
learned to pull well together, or how exceedingly important it is in the
making of pictures.
If you can’t work with other fellows without bucking and kicking,—
don’t ever try motion-picture work.
The other trouble was with the owners. There were too many
bosses on the job, which always makes a mess.
That quaint, humorous philosopher, “Josh Billings,” once said, “It
ain’t ignorance that makes so much trouble; it’s so many people
knowing too many things that ain’t so.”
With movies, that’s an ever-present danger.
Mostly, we’re all of us so sure of things, that we saw or heard or
thought or remember, that we just know we’re right, about this or
that, and can’t be wrong. If we know a little bit about surveying, we
feel we can tell surveyors how to survey, and so on. And the less we
know about a thing (as long as we do know something about it) and
the more indefinite that thing and the knowledge about it are, the
more we think we know about it.
Take stories: when you read one, you know whether you like it or
not; but could you tell how it would be apt to strike other people? It’s
easy to think you can do that—and most motion-picture producers
and financiers are sure they can. But as a matter of fact, an editor,
trained for years in the selection of stories, could probably do a lot
better.
In motion pictures, the man who puts up the money for a
production has to be pretty wise to realize how much less he
probably knows about motion pictures than the men he hires to
make the pictures for him.
As yet, few owners or producers of motion pictures know enough
to keep their hands off all the things that they ought to leave to their
employees.
Well, to get back to this particular movie.
We got another director, and then decided to give him an assistant
after all. And we got another camera man—and then gave him an
assistant. We got a cast, and started off to the city where most of the
work was to be done.
I say “we.” That is correct. The owners insisted on “sitting in” on
everything, so that each decision was a compromise, instead of
being the best judgment of the one they had hired to make that
picture for them.
When we came to taking the first scenes we made a discovery.
Our hero was a sissy.
He looked like a regular fellow—we had every reason to suppose
he was at least as much of a regular fellow as most actors can be.
But he threw a baseball the way a girl does.
He couldn’t even throw a custard pie. Luckily we didn’t want him
to. But we did want him to look and act like a man’s man, and mostly
it was mighty hard for him.
He had fifteen or twenty different suits, but no sign of a tennis-
racket, or baseball glove, or golf-stick.
He couldn’t drive an automobile. But he was supposed to be a
wonderful actor—just the man to play a hero!
Then, along came the property man.
 You will remember that a chain is no stronger than its weakest link.
A motion picture, that is made by the combined efforts of a whole
group of people, all pulling together, is much the same way. If any
one of the group, on whom some particular duty depends, is
ignorant, or inexperienced, or lazy, or pig-headed, the defects of his
work will mar the finished film.
If the actors can’t act well, the picture will be laughed at; if the
camera man is poor, the photography will be poor, and so on.
The property man is the one who has to see that the details of a
picture are correct; that if the hero has a handkerchief showing in his
pocket when he walks out of one scene, he has it when he walks into
the next, and so on.
When you realize that a picture is usually taken location by
location and set by set, instead of in the natural order of the scenes,
you can realize how important it is to have some one check up on all
the details.