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Interactive Spreadsheet Modules and Excel Apps

Keat, Young, and Erfle’s Managerial Economics, Seventh Edition, is accom-

panied by two different kinds of Microsoft Excel® learning aids. Interactive
Spreadsheet Modules are study aids intended to supplement and reinforce
concepts in the text. They can be used in class, assigned as homework, or for
student exploration. The index of modules on the opposite page contains the
number of the module, the topic covered, and the page in the textbook to
which the module is relevant.

Excel Apps challenge students to build various economic models from data
provided. They also allow readers to turn the static figures and tables in the
text into dynamic illustrations, which will strengthen students’ understanding
of the topics covered and their ability to use Excel. A list of the Excel Apps can
be found on the inside back cover of this text.
In the textbook you will see the icon or the icon in the margin indi-
APP

cating Interactive Spreadsheet Modules or Excel Apps are available for that
topic.

Getting Started with Interactive Spreadsheet

Modules

Step 1) Students and faculty can download Interactive Spreadsheet Modules at the
Keat, Young, and Erfle Companion Website: www.pearsonhighered.com/
keat.
Step 2) Open the Interactive Spreadsheet Module, and read through the objective
and brief description.
Step 3) Analyze the solved example in its current form. (Several modules include
graphs. To view a graph, press GRAPH at the bottom of the spread-
sheet. To return to the text, press name of module at the bottom of the
spreadsheet.)
Step 4) Enter new data to create alternative outcomes. (Only the cells into which
data can be entered are unprotected. All other cells are protected.)
Step 5) Analyze the new outcome.
Module
No. Interactive Spreadsheet Module Page

3A Supply and demand curves 46

4A Arc elasticity 70
4B Point and arc elasticities 80
4C Elasticity calculation applications 80
5A Compound growth rate 139
6A Production functions: quantities and dollars 190
6B Production functions in dollars (total graph) 190
6C Production functions in dollars (unit graph) 190
8A Output and price under perfect competition 258, 320
8B Output and price under imperfect competition (total graph) 329
8C Output and price under imperfect competition (unit graph) 329
8BA Volume-cost-profit (price and unit costs) 347
8BB Volume-cost-profit (solving for the missing variable) 347
8BC Volume-cost-profit (revenue and total cost) 348
8BD Volume-cost-profit (comparing two companies) 350
10A Revenue maximization model 398
12A Capital budgeting for mutually exclusive projects 467
12B Expansion project 470
12C Replacement project 470
12D Valuation of common stock with non-constant growth 473
12E Weighted cost of capital 475
12F Expected value and standard deviation 479
12G Expansion project and scenario analysis for chapter “Solution” 495
13A Transfer pricing 523
13B Multinational corporate budgeting 527
TVM1 Time value of money online
TVM2 Annuity calculations online
TVM3 Bond value calculations online
 Managerial
Economics

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 Seventh Edition

Managerial
Economics
Economic Tools for Today’s
Decision Makers

Paul G. Keat
Thunderbird School of Global Management

Philip K. Y. Young
Nth Degree Systems, Inc. and Duke Corporate Education

Stephen E. Erfle
Dickinson College

Boston  Columbus  Indianapolis  New York  San Francisco  Upper Saddle River

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Library of Congress Cataloging-in-Publication Data

Keat, Paul G.
Managerial economics : economic tools for today’s decision makers / Paul G. Keat, Philip K.Y. Young,
Stephen E. Erfle. -- 7th ed.
  p. cm.
ISBN 978-0-13-302026-7
1. Managerial economics. I. Young, Philip K. Y. II. Erfle, Stephen E. (Stephen Eugene) III. Title.
HD30.22.K39 2014
338.5024’658--dc23
2012038213
10 9 8 7 6 5 4 3 2 1
ISBN 10:    0-13-302026-6
ISBN 13: 978-0-13-302026-7

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 To my wife, Sheilah, our children, Diana and Andrew, and our seven
grandchildren—P. G. K.

To my grandchildren, Hayden and Emerson—P. K. Y. Y.

To my children, David, Kate, and Vera—S. E. E.

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 Brief Contents

Preface    xix
About the Authors    xxv
Chapter 1 Introduction    1
Chapter 2 The Firm and Its Goals     18
Chapter 3 Supply and Demand    38
Appendix 3A   The Mathematics of Supply and Demand     65
Chapter 4 Demand Elasticity    68
Appendix 4A  Applications of Supply and Demand    100
Chapter 5 Demand Estimation and Forecasting     114
Appendix 5A   The Demand for White Zinfandel in Los Angeles     167
Appendix 5B  Understanding Consumer Behavior Through Testing    175
Chapter 6 The Theory and Estimation of Production     180
Appendix 6A  Productivity in Services    220
Appendix 6B  The Multiple-Input Case    231
Appendix 6C   Analyzing Production Functions with the Use of Calculus     242
Chapter 7 The Theory and Estimation of Cost     248
Appendix 7A   A Mathematical Restatement of the Short-Run Cost Function     291
Appendix 7B  The Estimation of Cost    295
Appendix 7C   Interview with a Supply Chain Management Executive     306
Chapter 8 Pricing and Output Decisions: Perfect Competition and Monopoly     310
Appendix 8A   The Use of Calculus in Pricing and Output Decisions     343
Appendix 8B  Break-Even Analysis (Volume-Cost-Profit)    345
Chapter 9 Pricing and Output Decisions: Monopolistic Competition
and Oligopoly    361
Appendix 9A   A Mathematical Restatement of Monopolistic Competition    387
Chapter 10 Special Pricing Practices    390
Chapter 11 Game Theory and Asymmetric Information     432
Chapter 12 Capital Budgeting and Risk     461
Appendix 12A  The Value of a Corporation    507

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viii Brief Contents

Chapter 13 The Multinational Corporation in a Global Setting     509

Chapter 14 Government and Industry: Challenges and Opportunities
for Today’s Manager    533
Chapter 15 The Global Soft Drink Industry     556
Appendix A    Statistical and Financial Tables    563
Index    579
­

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 Contents

Preface    xix
About the Authors    xxv
Chapter 1   Introduction    1
Introduction: Economics and Managerial Decision Making     2
A Brief Review of Important Economic Terms and Concepts     5
The Case of Global Foods, Inc.: Situations and Solutions     9
Summary of the Situations and Solutions     11
Global Application: The BRIC Countries     14
Summary    15
Important Concepts    16
Questions    16

Chapter 2   The Firm and Its Goals     18

Introduction    19
The Firm    19
Coase and the Internet    22
The Economic Goal of the Firm and Optimal Decision Making     22
Goals Other Than Profit    23
Economic Goals    23
Noneconomic Objectives    25
Do Companies Really Try to Maximize Profits?    26
Profit Maximization, Restated    28
Maximizing the Wealth of Stockholders     29
Market Value Added and Economic Value Added     31
Economic Profits    32
Global Application    34
Summary    35
Important Concepts    35
Questions    36

Chapter 3   Supply and Demand    38

Introduction    39
Market Demand    39
Market Supply    42
Market Equilibrium    44
Comparative Statics Analysis    46
Short-Run Market Changes: The “Rationing Function” of Price     46
Long-Run Market Analysis: The “Guiding” or “Allocating Function” of Price     48
Using Supply and Demand in Forecasting     52
Supply, Demand, and Price: The Managerial Challenge     53
Global Application: The Bric Countries and the Supply and Demand for Oil     53
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Summary    56
Important Concepts    56
Questions    57
Problems    58
Appendix 3A The Mathematics of Supply and Demand     65
Chapter 4   Demand Elasticity    68
The Economic Concept of Elasticity     69
The Price Elasticity of Demand     69
Measurement of Price Elasticity    70
The Determinants of Elasticity    75
The Effect of Elasticity on Price and Quantity     77
The Elasticity of Derived Demand     78
Elasticity in the Short Run and in the Long Run     79
Demand Elasticity and Revenue    80
The Mathematics of Elasticity and Revenue     83
Empirical Elasticities    84
The Cross-Price Elasticity of Demand     86
Empirical Elasticities    87
Income Elasticity    87
Other Elasticity Measures    90
Elasticity of Supply    90
Global Application: Price Elasticities in Asia     91
Summary    93
Important Concepts    94
Questions    94
Problems    96
Appendix 4A Applications of Supply and Demand     100
Chapter 5   Demand Estimation and Forecasting    114
Demand Estimation    115
Introduction    115
Key Chapter Objectives    115
The Critical Importance of Good Data     116
Introduction to Regression Analysis    117
Specifying the Regression Equation and Obtaining the Data     117
Estimating and Interpreting the Regression Coefficients     120
Statistical Evaluation of the Regression Results     122
Review of Key Steps for Analyzing Regression Results     124
Implications of Regression Analysis for Management Decisions     125
Problems in the Use of Regression Analysis     125
The Identification Problem    126
Multicollinearity    127
Autocorrelation    128
Examples of Regression Analysis Across the Disciplines     129
Global Application: Food in Spain, Cigarettes in Taiwan     130
Forecasting    132
Introduction    132
Subjects of Forecasts    132
Demand Estimating and Demand Forecasting     133

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Prerequisites of a Good Forecast     133

Forecasting Techniques    133
Expert Opinion    135
Opinion Polls and Market Research     135
Surveys of Spending Plans    136
Economic Indicators    136
Projections    139
Econometric Models    153
Global Application: Forecasting Exchange Rates     156
Summary    159
Important Concepts    159
Questions    161
Problems    162
Appendix 5A The Demand for White Zinfandel in Los Angeles     167
Appendix 5B Understanding Consumer Behavior Through
Testing    175
Chapter 6   The Theory and Estimation of Production     180
The Production Function    181
A Short-Run Analysis of Total, Average, and Marginal Product     183
The Law of Diminishing Returns     185
The Three Stages of Production in the Short Run     188
Derived Demand and the Optimal Level of Variable Input Usage     190
The Case of Multiple Inputs (Abridged Version)     191
The Long-Run Production Function    193
The Estimation of Production Functions     196
The Various Forms of a Production Function     196
The Cobb-Douglas Production Function    198
Statistical Estimation of Production Functions     200
Aggregate Production Functions    203
The Importance of Production Functions in Managerial Decision
Making    205
Careful Planning Can Help a Firm to Use Its Resources in a Rational Manner     205
Going “Beyond the Curves”: Current Production Issues and Challenges for
Today’s Managers    207
Call Centers: Applying the Production Function to a Service     209
Global Application: Shifting Trends in Global Outsourcing     210
Summary    211
Important Concepts    212
Questions    213
Problems    214
Appendix 6A Productivity in Services     220
Appendix 6B The Multiple-Input Case     231
Appendix 6C Analyzing Production Functions with the Use of
Calculus    242
Chapter 7   The Theory and Estimation of Cost     248
The Importance of Cost in Managerial Decisions     249
The Definition and Use of Cost in Economic Analysis     251
Historical Versus Replacement Cost    251

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Opportunity Cost Versus Out-of-Pocket Cost     251

Sunk Versus Incremental Cost    252
The Relationship Between Production and Cost     253
The Short-Run Cost Function    255
Increasing Cost Efficiency in the Short Run     257
Alternative Specifications of the Total Cost Function     258
The Long-Run Cost Function    260
The Relationship Between Long-Run Production and Long-Run Cost     260
Economies of Scale    263
The Long-Run Average Cost Curve as the Envelope of Short-Run Average Cost     265
Using Long-Run Average Cost as a Decision-Making Tool: The Importance of
Coordinating Production Plans with Market Forecasts     267
The Learning Curve    269
Economies of Scope    272
Economies of Scale: The Short Run Versus the Long Run     273
Supply Chain Management    273
Examples of Ways Companies Have Cut Costs to Remain
Competitive    276
Cautionary Note to Managers About the Use of Cost-Cutting as a
Strategy    279
Global Applications: Li & Fung Will Do It All for You     280
Summary    282
Important Concepts    282
Questions    283
Problems    285
Appendix 7A A Mathematical Restatement of the Short-Run Cost
Function    291
Appendix 7B The Estimation of Cost     295
Appendix 7C Interview with a Supply Chain Management
Executive    306
Chapter 8   Pricing and Output Decisions: Perfect Competition and
Monopoly    310
Introduction    311
Competition and Market Types in Economic Analysis     313
The Meaning of Competition    313
Examples of Market Types    314
Market Types and Competition in Theory and Reality     315
Pricing and Output Decisions in Perfect Competition     316
The Basic Business Decision    316
Key Assumptions of the Perfectly Competitive Market     316
The Total Revenue–Total Cost Approach to Selecting the Optimal Output Level     320
The Marginal Revenue–Marginal Cost Approach to Finding the Optimal Output
Level    321
Economic Profit, Normal Profit, Loss, and Shutdown     324
The Competitive Market in the Long Run     327
Pricing and Output Decisions in Monopoly Markets     329
The Implications of Perfect Competition and Monopoly for Managerial
Decision Making    333

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Global Application: The $736,000 Bluefin Tuna     335

Summary    338
Important Concepts    338
Questions    339
Problems    340
Appendix 8A The Use of Calculus in Pricing and Output
Decisions    343
Appendix 8B Break-Even Analysis (Volume-Cost-Profit)     345
Chapter 9   Pricing and Output Decisions: Monopolistic Competition and
Oligopoly    361
Introduction    361
Monopolistic Competition    363
Oligopoly    365
Market Concentration    365
Pricing in an Oligopolistic Market: Rivalry and Mutual
Interdependence    367
Competing in Imperfectly Competitive Markets     369
Nonprice Competition    369
The Reality of Monopolistic Competition and Oligopoly: “Imperfect”
Competition    371
Strategy: The Fundamental Challenge for Firms in Imperfect
Competition    372
Industrial Organization    374
The Structure-Conduct-Performance Paradigm    374
The “New” Theory of Industrial Organization     375
Strategy and the Ideas of Michael Porter     376
Concluding Remarks on the Linkages Between Managerial Economics and
Strategy    378
Global Application: The World’s Market for Beer     378
Summary    380
Important Concepts    380
Questions    381
Problems    382
Appendix 9A A Mathematical Restatement of Monopolistic
Competition    387
Chapter 10   Special Pricing Practices    390
Introduction    391
Cartel Arrangements    391
Cases of Price Fixing by Cartels     393
Price Leadership    396
Barometric Price Leadership    396
Dominant Price Leadership    397
Revenue Maximization    398
Price Discrimination    399
Third-Degree Discrimination    401
Examples of Price Discrimination    404
Some Examples of Price Discrimination Practices     406
Pricing in the Hotel Industry: Example of Price Discrimination     407

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Tying Arrangements: A Possible Extension of Price Discrimination     409

Social Welfare Implications of Price Discrimination     410
Nonmarginal Pricing    410
Cost-Plus Pricing    411
Incremental Pricing and Costing Analysis     414
Multiproduct Pricing    415
Products Complementary in Demand    416
Products Substitutable in Demand    417
Joint Products with Fixed Proportions     417
Joint Products in Variable Proportions     419
Transfer Pricing    420
No External Markets    420
External Markets    421
Other Pricing Practices    422
Global Application: The Decline of European Cartels     423
The European Carton-Board Cartel    423
The European Vitamin Cartel    423
Some Recent Cases of Price Fixing     423
Price Discrimination by Airlines    424
An Airline Pricing Example    425
Summary    426
Important Concepts    427
Questions    427
Problems    428

Chapter 11   Game Theory and Asymmetric Information     432

Introduction    433
Game Theory: Modeling the Strategy of Conflict     434
The Prisoners’ Dilemma    437
The Basics of Bargaining    439
A General Framework    442
Asymmetric Information    443
The Lemons Model    443
Using Signals to Avoid the Lemons Problem     446
Job Market Signaling    446
Screening in Insurance Markets    448
Moral Hazard and Principal-Agent Problems     450
Creating Incentive-Compatible Mechanisms    451
Summary    453
Important Concepts    455
Questions    456
Problems    457

Chapter 12   Capital Budgeting and Risk    461

Introduction    462
The Capital Budgeting Decision    463
Types of Capital Budgeting Decisions     463
Time Value of Money    464
Methods of Capital Project Evaluation     464
Net Present Value    464
Internal Rate of Return    466
The Profitability Index    467

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NPV Versus IRR    467

Capital Budgeting in Practice    470
Cash Flows    470
Types of Cash Flows    471
Cost of Capital    472
Debt    473
Equity    473
The Weighted Cost of Capital     475
The Capital Budgeting Model    475
Capital Rationing    477
Risk Versus Uncertainty    477
Sources of Business Risk    478
The Measures of Risk    478
Expected Value    479
The Standard Deviation    480
Discrete Versus Continuous Distributions and the Normal Curve     481
The Coefficient of Variation    482
Capital Budgeting Under Conditions of Risk     483
Two Other Methods for Incorporating Risk     484
The Risk-Adjusted Discount Rate    484
Certainty Equivalents    485
Present Value Break-Even Analysis    486
Sensitivity and Scenario Analysis    486
Simulation    487
Decision Trees    488
Real Options in Capital Budgeting     490
Real Options in Practice    491
An Abandonment Option    491
Global Application    493
Political Risk    493
Containing International Risk    494
Capital Budgeting in Practice    494
Summary    498
Important Concepts    498
Questions    499
Problems    500
Appendix 12A The Value of a Corporation     507
Chapter 13   The Multinational Corporation in a Global Setting     509
Introduction    510
Opportunities for Multinational Corporations in a Global
Economy    511
Expanding the Dressings Category Throughout the World     511
Doing Business in India    513
Brief Introduction to Some of India’s Key Industries     513
The Business and Investment Climate     515
Socioeconomic and Political Factors    515
McDonald’s in India    516
Risks Faced by a Multinational Corporation     517
Exchange Rates    518

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Exchange Rate Hedging    518

Offsetting Transactions    519
The Forward Market    519
The Futures Market    519
Currency Options    519
Currency Swaps    520
Foreign Direct Investment    520
Multinational Capital Budgeting    521
Intercompany Fund Flows    521
Inflation Rates    521
Exchange Rates    521
Tax Differences    521
Differences in Cash Flows    522
Cost of Capital    522
The Final Project Valuation    522
The Repositioning of Funds    523
Multinational Transfer Pricing    523
Multinational Transfer Pricing Example    524
Transfer Pricing in Practice    525
Global Application: Tony the Tiger Meets a Bengal Tiger     526
Summary    530
Important Concepts    531
Questions    531
Problems    531

Chapter 14   Government and Industry: Challenges and Opportunities for

Today’s Manager    533
Introduction    534
The Rationale for Government Involvement in a Market Economy     534
Providing a Legal Framework for Competition: The Antitrust Laws     535
The Clayton Act (1914)    535
Dealing with Market Externalities: Another Key Function of Government in the Market
Economy    538
Stabilization of the Aggregate Economy: Monetary and Fiscal
Policy    541
Monetary Policy    541
Fiscal Policy    541
Lags    542
Subprime Loan Financial Crisis of 2007 to 2009     542
Background    542
Securitization of Mortgaged-Backed Securities    543
Disappearing Liquidity Challenges the Financial System     544
Changing Bank Regulations to Avoid Future Crises     545
Global Financial Deregulation and Growth in International Capital Flows     546
Government Deregulation, Mergers, and Acquisitions     546
Why Firms Merge    548
Government Protection of Intellectual Property (IP)     551
Global Application: The Failed Attempt to Merge by General Electric and
Honeywell    553
Summary    554
Important Concepts    554
Questions    555

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Contents

Chapter 15   The Global Soft Drink Industry     556

Introduction    556
Factors and Trends Influencing Demand     556
Factors and Trends Influencing Supply     558
Energy Drinks    559
Appendix A Statistical and Financial Tables     563
Index    579

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 Preface

One day after class, a student in one of our courses commented on the managerial
economics text then being used: “This book is very dry. What it needs is a plot!” To a
large extent, the idea for this text stemmed from this remark. This is a text that we be-
lieve will excite readers about managerial economics as well as inform them about this
vital part of management education. Each chapter begins with a Situation, in which
managers in a fictional company, Global Foods, Inc., must make certain key decisions
about their products in the beverage industry. After the relevant economic concepts
or tools of analysis are presented, each chapter ends with a Solution, a suggested way
in which these concepts or tools can be used to help managers make the best decision.
We are well aware of the reputation that economics courses have among some
business students, that they are “too theoretical and not practical enough for the real
world.” In our opinion, nothing could be further from the truth. We know that the in-
structors in managerial economics will agree with us on this matter. We hope that this
text will serve as a solid supplement to their classroom efforts to demonstrate to their
students the importance and utility of economic theory for business decision making.
This text is designed for upper-level undergraduate and first-year MBA courses in
managerial economics and applied economics. The first two chapters form a general
introduction to economics and economic reasoning. A review of the mathematical con-
cepts and tools used in the text has been placed on the Companion Website. In addition
to discussing the applications of economic theory to the firm, our text (as is the custom
with all texts in managerial economics) includes chapters on various tools of analysis
that are helpful to business decision makers but that are not part of the core of tradi-
tional microeconomic theory. These are demand, production, and cost estimation using
regression analysis, forecasting, capital budgeting, and risk analysis. A discussion of lin-
ear programming is also available online, along with a review of the time value of money.

Improvements in the Seventh Edition

As in all our previous editions, this edition’s changes are based on our classroom
teaching, consulting engagements, and corporate education seminars. In addition, we
have received a number of useful suggestions from the reviewers of our sixth edition.
In this seventh edition, we welcome co-author, Stephen Erfle of Dickinson College.
Steve has been of particular help in revising and improving the quantitative sections of
our text. He has also provided a major addition: the use of Excel in the presentation
of many of the numerical and graphical illustrations presented throughout the text.
Here are noteworthy additions, improvements, and enhancements to this edition:
➤ We developed Excel Applications (Excel Apps) for a number of the numerical and
graphical illustrations used throughout the text. These apps, noted with the icon,
are available to readers on our website and an index delineating what is in each APP
Excel App is provided on the inside rear cover of the text. They allow readers to
turn the static figures and tables in the text into dynamic illustrations, and they will
also strengthen students’ ability to use Excel, which we believe is a critical skill in
today’s job market.

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➤ We have developed a series of regression Excel Apps that provide readers with a
more detailed discussion of many of the topics in regression analysis touched on in
Chapter 5. See the Excel Apps listing on the back cover for additional information
about coverage about regression topics in various chapters.
➤ We have completely rewritten Chapter 11, “Game Theory and Asymmetric
Information.” User feedback requested more in-depth coverage of this chal-
lenging topic. The chapter now includes increased coverage of game theory and
bargaining as well as a more in-depth discussion of adverse selection and moral
hazard.
➤ Chapter 15, “Managerial Economics in Action,” is an entirely new chapter.
Throughout the text, we try to show how the economic concepts and tools of
analysis can be applied to the beverage industry by introducing in each chapter a
Situation and a Solution for our hypothetical company called Global Foods. In our
concluding chapter, we discuss how the basic concepts of supply and demand can
be applied to the real global soft drink industry. This chapter was written especially
for this edition by a seasoned industry consultant, Farshad Sarmad. Using current
industry data and his own experiences, Farshad shows how the factors affecting sup-
ply and demand can be applied to various segments of the soft drink industry in
countries around the world.
➤ Significant developments in information and communications technology (e.g.,
cloud computing, social media, and Internet commerce) have enabled businesses to
store massive amounts of data generated in digital format. We introduce readers to
these developments in Chapter 5, “Demand Estimation and Forecasting.” We asked
Dr. Mukal Patki, a business analytics specialist at PayPal, to help us with this task.
In Appendix 5B, “Understanding Consumer Behavior Through Testing,” he talks
about how “big data” has enabled companies to conduct in-depth studies of con-
sumer behavior using a technique called “test and learn.”
➤ In Chapter 14, “Government and Industry: Challenges and Opportunities for
Today’s Manager,” we have added a discussion of patent laws and the concept of
protecting intellectual property (IP), such as trademarks and copyrights. These are
significant ways that government affects commerce in a free market economy. This
section was written by Riyon Harding, an expert in the commercialization of IP at
IBM, a company that is recognized throughout the world for the number of new
patents it receives from the U.S. government every year.
➤ To give readers a better idea of how managerial economics can be applied in some
of the BRIC countries (Brazil, Russia, India, and China), we asked Navin Punjabi,
a professor of business in Mumbai, to discuss some of the challenges of doing busi-
ness in India (Chapter 13). We also asked Lisa Vortsman, a product manager for the
dressings category in an actual “Global Foods” company (Lisa requested that her
company not be identified) to talk about the challenges of increasing the demand
for this category in countries like Russia and Brazil.
➤ We have also received the help of outside experts to improve our discussions about
other topics of importance and current interest in business. F. John Mathis, Profes-
sor of Global Economics and Finance, has written a highly informative summary of
the causes and consequences of the 2008 financial crisis (Chapter 14). To provide
our readers with a better idea of the actual challenges of initiating and implement-
ing a supply chain management system, we interviewed Steve Martson. Steve, a
recently retired executive who has led supply chain systems implementation in
companies such as Dell and IBM, talks about some of his experiences working in
this very important field (Appendix 7C).

As we have done in all of our previous editions, we have updated our examples wher-
ever appropriate. We have kept some of the examples that we first introduced in our
previous editions if we believe they serve as good teaching illustrations, regardless of
when they occurred.

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Preface

Features
The Case of Global Foods
This case, which runs throughout the entire text, helps to integrate and apply the key
concepts presented in each chapter with an everyday consumer product: soft drinks
and other nonalcoholic beverages. Each chapter’s Situation and Solution are based
on actual challenges faced by companies in the beverage industry. The stories told in
each case are intended to stimulate reader interest by bringing the concepts and tools
of analysis to life, which are presented in the graphs and numerical examples.

Global Applications
The Global Applications sections exemplify how the concepts and tools of analysis can
be applied in other countries. In this edition, more examples, both in the Global Ap-
plication sections and in the main body of the chapter, are drawn from world growth
markets such as China, India, Brazil, and Russia.

In-Text Icons
References to the Mathematical Appendix are noted by the symbol and references
to the appendix about the Time Value of Money are noted by the symbol TVM . As ex-
plained on the inside front cover, there are now two types of Excel icons. References
to Excel exercise modules are noted by and a listing of Excel modules is provided
on the inside front cover. References to Excel Apps are noted by APP
and a list of Excel
Apps is provided on the inside rear cover.

Learning Objectives
Each chapter begins with a list of Learning Objectives, which outline the concepts
students should be able to take away once they’ve read the chapter. These Learning
Objectives frame the tools that future managers need to know to succeed.

Ancillary Materials
Companion Website (www.pearsonhighered.com/keat)
The website contains Internet exercises, activities, and resources related specifically
for Managerial Economics: Economic Tools for Today’s Decision Makers.
A number of other resources are available on the Companion Website such as the
Mathematical Appendix, Time Value of Money Appendix, and Excel exercise modules.
The modules provide students with templates of the economic models in the text. In this
edition, we have introduced a new feature for our Companion Website: E­ xcel Apps APP .
A listing of Excel Apps is provided on the inside back cover. The Excel Apps provide
students with instructions to build their own models. In so doing, they gain a deeper
understanding of the underlying assumptions of the models themselves.
Business Simulation: New to the seventh edition is an online, computer-based business
simulation available on the text’s Companion Website. In this simulation, a student be-
comes the product manager of ‘alpha’, a consumer product similar to bottled water or
soft drinks. The student has the choice of being a low-price competitor (e.g., a private-
label bottled water) or a premium-price competitor (e.g., Evian or San Pellegrino). The
student competes against two computer-generated companies. One is a low-price com-
petitor; the other is a premium-priced competitor. Students make decisions on price,
marketing, process development (to lower costs), and production capacity. By making
these decisions and getting the results, students learn in a dynamic and engaging way

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xxii Preface

about the concepts of price and marketing elasticities and the interdependency of pric-
ing in oligopolistic markets.
Online Study Guide: The Online Study Guide offers students another opportunity to
sharpen their problem-solving skills and to assess their understanding of the text mate-
rial. The Online Study Guide grades each question submitted by the student, provides
immediate feedback for correct and incorrect answers, and allows students to e-mail
results to up to four e-mail addresses.

Instructor’s Resource Center

This password-protected site is accessible from www.pearsonhighered.com/keat and
hosts all of the resources listed below. Instructors may click on the Resources link to
access files or may contact their sales representative for additional information.
Online Instructor’s Manual: This manual, written by the textbook authors, contains all
answers to the questions and problems found in the text.
Online Test Item File and TestGen: Written by James Holcomb of the University of Texas,
El Paso, and available to instructors in test generator software (TestGen with Quizmaster),
this test bank contains multiple-choice questions and a set of analytical questions for use
in testing students on the material presented in each chapter of the text. Answers are also
provided. TestGen’s graphical interface enables instructors to view, edit, and add ques-
tions; transfer questions to tests; and print different forms of tests. Instructors also have
the option of reformatting tests with fonts and styles, margins, and headers and footers,
as in any word-processing document. Search and sort features let the instructor quickly
locate questions and arrange them quickly in a preferred order. Quizmaster can work
with your school’s computer network to automatically grade the exams, store the results
electronically, and allow the instructor to view and print a variety of reports.
Online PowerPoint Presentation: This lecture presentation tool, prepared by Gary F.
Wilkinson of Indiana Wesleyan University, offers outlines and summaries of important
text material, tables and graphs, and additional examples. The package allows instruc-
tors to make full-color, professional-looking presentations and custom handouts for
­students.

Acknowledgments
We wish to thank our colleagues at Thunderbird School of Global Management and
Dickinson College, and former colleagues at IBM and Pace University for their help
and encouragement in our work for this and all previous editions. We also wish to
thank those who have helped us to improve this seventh edition. As noted earlier,
they are: Riyon Harding, Stephen C. Marston, Dr. F. John Mathis, Dr. Navin Punjabi,
Dr. Mukal Patki, Farshad Samad, and Lisa Vortsman.
We also thank Dr. Jack Yurkiewicz, professor of management science at Pace
University, for writing the material on linear programming that is available on our
Companion Website; Professor Gary Wilkinson of Indiana Wesleyan University for
preparing the PowerPoint presentation; and Professor James Holcomb of the Univer-
sity of Texas, El Paso, for preparing the Test Item File.
Our appreciation also goes to the reviewers of the seventh edition: Nelson
Altamirano, National University; Cassandra DiRienzo, Elon University; Kenneth
C. Fah, Ohio Dominican University; Rajeev Goel, Illinois State University; James
Holcomb, University of Texas, El Paso; John S. Howe, University of Missouri, Columbia;
M. Ebru Kongar, Dickinson College; Matthew Roelofs, Western Washington University;
Jennifer VanGilder, Ursinus College; and Gary F. Wilkinson, Indiana Wesleyan Uni-
versity. We also wish to thank Benjamin Greene, Anne Marie Weichert, and Qiaoling

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Preface

Yuan of Dickinson College, all of whom provided us with comments from a student’s
perspective on the text, end-of-chapter problems, Excel Apps, and the Online Study
Guide.
And we continue to be grateful to all the reviewers of the previous six editions:
Michael J. Applegate, Oklahoma State University; Mina Baliamoune, University of
North Florida; Robert Britt, West Virginia University; Stacey Brook, University of Sioux
Falls; Peter Brust, University of Tampa; Charles Callahan, III, State University of New
York at Brockport; John Conant, Indiana State University; Richard Cox, University
of Arkansas; Brad Ewing, Texas Technical University; Lewis Freiberg, Northeastern
Illinois University; Edward H. Heinze, Valparaiso University; George Hoffer, Virginia
Commonwealth University; Al Holtmann, University of Miami; Richard A. Jenner,
San Francisco State University; Aric Krause, Westminster College; Douglas Lamdin,
­University of Maryland, Baltimore County; Dale Lehman, Fort Lewis College; Jerry
Manahan, Midwestern State University; Cynthia McCarty, Jacksonville State Univer-
sity; Yale L. Meltzer, College of Staten Island; L. W. (Bill) Murray, University of San
Francisco; Alex Orlov, Radford University; Jan Palmer, Ohio University–Athens; Leila
J. Pratt, The University of Tennessee at Chattanooga; L. B. Pulley, University of
Virginia; Mathew Roelofs, Western Washington University; Roy Savoian, Lynch-
burg College; Frederica Shockley, California State University–Chico; Ken Slaysman,
York College of Pennsylvania; William Doyle Smith, University of Texas at El Paso;
Robert Stuart, Rutgers University; James Tallant, Cape Fear Community College;
Mo-Yin Tam, University of Illinois at Chicago; Yien-I Tu, University of Arkansas; Law-
rence White, New York University; Richard Winkelman, Arizona State University; Daryl
N. Winn, University of Colorado; Darin Wohlgemuth, Iowa State University; Richard
Zuber, University of North Carolina at Charlotte; and Habib Zuberi, Central Michigan
University.
In closing, we would like to express our appreciation to the helpful, encouraging,
and patient team at Pearson: Donna Battista, Editor in Chief; Adrienne D’Ambrosio,
Executive Acquisitions Editor; Nancy Freihofer, Production Project Manager; and
Sarah Dumouchelle, Editorial Project Manager, and Tiffany Rupp, Project Editor,
S4Carlisle Publishing Services.

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 About the Authors

Paul G. Keat has been a member of the Global Business Faculty at Thunderbird School
of Global Management for the past twenty-five years. At present he is an Associate Pro-
fessor Emeritus. Prior to his coming to Thunderbird, he was associated for many years
with the International Business Machines Corporation in professional and managerial
capacities.
His education includes a B.B.A. in accounting from the Baruch School of the City
University of New York, an M.A. from Washington University, and an M.A. and Ph.D.
in economics from the University of Chicago.
Dr. Keat began his IBM career in the department of economic research and then
moved into the long-range planning area. Later, as a member of the finance function,
he spent several years at IBM’s European headquarters in Paris, as manager in the fi-
nancial planning area and then as the financial manager for the company’s European
software business. After his return to the United States, Dr. Keat served as manager in
the pricing area of one of the company’s manufacturing groups. Before leaving IBM
in 1987, he was associated with the company’s International Finance, Planning and
Administration School (IFPA), where he taught managerial economics, lectured on
finance in a number of company-related courses, and managed academic courses. He
also taught at IBM’s IFPA School at La Hulpe, Belgium.
Dr. Keat has taught at several U.S. universities, including Washington University,
the City University of New York (CUNY), and Iona College. He was an adjunct profes-
sor of finance at the Lubin Graduate School of Business at Pace University, and he also
taught in Pace University’s Executive MBA program.

Philip K. Y. Young (www.philipkyoung.com) is the founder and president of Nth

­Degree Systems, Inc., a consulting firm that provides customized education and train-
ing programs to major corporations around the world. He recently co-founded Learn-
ing Burst Academy (www.learningbursts.com), a company that produces courses in
business education in an innovative, digital format. He is also a member of the global
faculty network of Duke Corporate Education. He has thirty years of teaching experi-
ence as a professor of economics in MBA programs and over twenty-five years of expe-
rience developing and teaching customized education and training programs.
Most of Dr. Young’s teaching career was spent in the Lubin School of Business
at Pace University in New York, followed by several years as clinical professor of man-
agement at Thunderbird School of Global Management. His list of clients includes a
number of multinational corporations in industries such as information technology,
telecommunications, fast-moving packaged consumer goods, consulting services, ad-
vertising and public relations, pharmaceuticals, semiconductor manufacturing and
design, diversified manufacturing, and financial services. He teaches for these com-
panies in the United States, Latin America, western and central Europe, Asia, and the
Middle East.
Dr. Young received a B.A. from the University of Hawaii, a master’s degree in
international relations from Columbia University, and a Ph.D. in economics from New
York University.

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xxvi About the Authors

Stephen E. Erfle began his career as a managerial economist during a 1994–1995 sab-
batical at Seagram Classics Wine Company (SCWC). During those fourteen months,
he maintained offices at Sterling Vineyards and at Mumm Cuvée Napa, where, re-
spectively, the finance and marketing departments of SCWC resided. Trained as a
microeconomic theorist, he began to use his economist’s toolkit to analyze concrete
business questions, such as, Should Mumm raise the price of Brut Prestige a dollar a
bottle? When does it make sense to have another tasting room associate on the floor
in Sterling’s tasting room?
On returning to Dickinson College, Dr. Erfle decided to refocus his teaching in
a more applied direction. He helped found the International Business and Manage-
ment department and major during the late 1990s. One of the core courses in that ma-
jor is his course, Managerial Economics, which uses Excel as a teaching platform. This
course is modeled after what he did during his SCWC sabbatical. In the past fifteen
years, he has taught more than a thousand undergraduates how to build economic
models in order to do comparative statics analysis and how to do regression modeling
in Excel.
Dr. Erfle received a B.S. in mathematics and B.A. in economics from the Univer-
sity of California, Davis, and a master’s and Ph.D. in economics from Harvard Univer-
sity. He has also taught in the Economics Department at Dickinson College and in the
School of Social Sciences at the University of California, Irvine. He is also involved in
wine education; he has taught wine-tasting classes and conducted wine tastings since
his graduate school days as the resident economics and wine tutor for Harvard’s Lev-
erett House.

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Another random document with
no related content on Scribd:
 CHAPTER VI.
REPTON’S MERRY BELLS.

“Barrow’s big boulders, Repton’s merry bells,

Foremark’s cracked pancheons, and Newton’s egg shells.”

Thus does a local poet compare Repton bells with those of

neighbouring parishes. It is not intended to defend the comparison,
for as Dogberry says, “Comparisons are odorous”! but to write an
account of the bells, derived from all sources, ancient and modern.
Llewellynn Jewitt, in Vol. XIII. of the Reliquary, describing the bells
of Repton, writes, “at the church in the time of Edward VI. there were
iij great bells & ij small.” Unfortunately “the Churchwardens’ and
Constables’ accounts of the Parish of Repton” only extend from the
year 1582 to 1635. I have copied out most of the references to our
bells entered in them, which will, I hope, be interesting to my
readers.
Extracts from “the Churchwardens’ and Constables’ accounts of the
Parish of Repton.”

A.D. 1583. The levy for the bell vjˡⁱ ixˢ 0

It’ spent at takying downe the bell xvjᵈ
It’ payd to the Bellfounder xxxiijˢ iijᵈ
It’ bestowed on the s’vants at casting
of ye bell xvjᵈ
It’ expensys drawing up the bell vijᵈ
It’ to the ryngers the xviiᵗʰ day of
november xijᵈ
A.D. 1584. Recevyd of the levy for the bell vjˡⁱ xˢ vijᵈ
It’ of Bretby towards the bell vjˢ viijᵈ
It’ spent at taking downe ye bell viijᵈ
 It’ bestowed on the bell founder ijᵈ
It’ Payd to Bellfounder for weight, i.e.,
iiij score & ij pounds iijˡⁱ xiˢ viijᵈ
A.D. 1585. It’ for a bell rope for the great bell ijˢ
It’ to John Pratt for makinge iiij newe
bellropes vˢ
It’ the day before Saynt Hew’s day for
mendyng the bels, & for nayles viijᵈ
A.D. 1586. It’ of our ladie’s even, given to the
ringers for the preservation of
our Queene xijᵈ
Our ladie’s even, eve of the
Annunciation of the Blessed
Virgin Mary (March 25th).
Preservation of our Queene Elizabeth
from the Babington Conspiracy.
A.D. 1587. It’ given unto the ringers uppon
coronation daye iijᵈ
A.D. 1589. It’ for a bell rope ijˢ viijᵈ
A.D. 1590. It’ payde to francis Eaton for
mendynge the irons aboutt the
bells ijˢ iijᵈ
A.D. 1592. It’ payde to Ralphe Weanwryghte for
trussynge the bells agyne the
Coronacyon daye iijˢ
A.D. 1600. It’ spent in takinge downe ye beell xijᵈ
It’ payd to John Welsh fordowne
takinge hitt donne vjᵈ
It’ spent in lodinge hitt iiijᵈ
It’ spent in charges going with the
beell to Nottingham, being towe
days and one night vjˢ viijᵈ
It’ payd to ye bellfounder for castinge
ye beell iiijˡⁱ xviijˢ
It’ spent with him ijᵈ
It’ payd for yookeinge ye Beell and ijˢ viijᵈ
 for greysse
It’ spent uppon them that holpe with
the beell xᵈ
A.D. 1603. It’ given to the ringers uppon New
yeares daye morninge vjᵈ
It’ given to ye ringers upon St. James
daye (July 25th) xijᵈ
It’ given to ye ringers the v daye of
August xijᵈ
A.D. 1605. It’ payd at hanginge up ye greatte bell vjᵈ
It’ bestowed of ye Ringers at ye first
Ringinge of ye bells vijᵈ
It’ payd for greese for ye bells viijᵈ
A.D. 1607. It’ given to ye Ringers uppon
Christmas daye morning iiijᵈ
A.D. 1614. It’ towe bellclappers
A.D. 1615. The names of them that gave money
to bye the newe beell 80
(Repton, 62. Milton, 18.)
Sum gathered xijˡⁱ viijˢ viijᵈ
A.D. 1623. First paide for castinge the bell vˡⁱ
It’ given to the Ringers at the time of
Prince Charlles his comminge
forth of spaine. (Oct. 1623). xijᵈ

Extract from the diary of Mr. George Gilbert.

“A.D. 1772, Oct. 7th. The third bell was cracked, upon ringing
at Mr. John Thorpe’s wedding. The bell upon being taken
down, weighed 7 cwt. 2 qr. 18lb., clapper, 24lb. It was
sold at 10d. per lb., £35. 18s. Re-hung the third bell, Nov.
21st, 1774. Weight 8 cwt. 3 qr. 24lb., at 13d. per lb., £54.
7s. 8d., clapper, 1 r. 22 lb., at 22d., £1. 2s. 10d. £55. 9s
6½d.”
 This is all the information I can gather about “Repton’s merry bells”
from ancient sources.
For some time our ring of six bells had only been “chimed,” owing
to the state of the beams which supported them, it was considered
dangerous to “ring” them.
During the month of January, 1896, Messrs. John Taylor and Co.,
of Loughborough, (descendants of a long line of bell-founders),
lowered the bells down, and conveyed them to Loughborough,
where they were thoroughly cleansed and examined. Four of them
were sound, but two, the 5th and 6th, were found to be cracked, the
6th (the Tenor bell) worse than the 5th. The crack started in both
bells from the “crown staple,” from which the “clapper” hangs; it (the
staple) is made of iron and cast into the crown of the bell. This has
been the cause of many cracked bells. The two metals, bell-metal
and iron, not yielding equally, one has to give way, and this is
generally the bell metal. The “Canons,” as the projecting pieces of
metal forming the handle, and cast with the bell, are called, and by
which they are fastened to the “headstocks,” or axle tree, were found
to be much worn with age. All the “Canons” have been removed,
holes have been drilled through the crown, the staples removed, and
new ones have been made which pass through the centre hole, and
upwards through a square hole in the headstocks, made of iron, to
replace the old wooden ones. New bell-frames of iron, made in the
shape of the letter H, fixed into oak beams above and below, support
the bells, which are now raised about three feet above the bell
chamber floor, and thus they can be examined more easily.
During the restoration of the Church in 1886, the opening of the
west arch necessitated the removal of the ringers’ chamber floor,
which had been made, at some period or other, between the ground
floor and the groined roof, so the ringers had to mount above the
groined ceiling when they had to ring or chime the bells. There,
owing to want of distance between them and the bells, the labour
and inconvenience of ringing was doubled, the want of sufficient
leverage was much felt: now the ringers stand on the ground floor,
and with new ropes and new “sally-guides” their labour is lessened,
and the ringing improved.
 When the bells were brought back from Loughboro’ I made careful
“rubbings” of the inscriptions, legends, bell-marks, &c., before they
were raised and fixed in the belfry. The information thus obtained,
together with that in Vol. XIII. of the Reliquary, has enabled me to
publish the following details about the bells.
The “rubbings” and “squeezes” for the article in the Reliquary were
obtained by W. M. Conway (now Sir Martin Conway) when he was a
boy at Repton School.
 Plate 6.

REPTON BELL MARKS AND ORNAMENTS.

The 1st (treble) Bell.

On the haunch, between three lines, one above, two below,
 FRAVNCIS THACKER OF LINCOLNS INN ESQᴿ, 1721.

a border: fleurs-de-lis (fig. 7): Bell-mark of Abraham Rudhall, (a

famous bell-founder of Gloucester): border (fig. 7).
A catalogue of Rings of Bells cast by A. R. and others, from 1684-
1830, is in the Bodleian Library, Oxford: this bell is mentioned as the
gift of Francis Thacker.
At the east end of the north aisle of our Church there is a mural
monument to his memory.
The 2nd Bell.
On the crown a border of fleurs-de-lis (fig. 9). Round the haunch,

Is sweetly toling men do call to taste on meats that feed the soule

between two lines above and below, then below the same border
(fig. 9) inverted.

1622 Godfrey Thacker Iane Thacker

This bell is referred to in the Churchwardens’ accounts under

dates 1615 and 1623.
The 3rd Bell.
Round the haunch, between two lines,
THOˢ. GILBERT & IOHN TETLEY CHVRCH WARDENS 1774 PACK & CHAPMAN
OF LONDON FECIT

Below, a border, semicircles intertwined.

This is the bell referred to in the extract quoted above from George
Gilbert’s diary.
The 4th Bell.
Round the haunch, between six lines (3 above and 3 below),

✠ Melodie Nomen Tenet Magdelene

a shield: three bells (two and one), with a crown between them (fig.
1), (Bell mark of Richard Brasyer, a celebrated Norwich Bell founder,
who died in 1513) a lion’s head on a square (fig. 2): a crown on a
square (fig. 3); and a cross (fig. 5).
The 5th Bell.
Round the haunch, between two lines, one above, one below,

✠ Vox du̅ i̅ ihū x̅ r̅ i̅ vox exultarionis

same marks (except the crown) as No. 4 Bell: a king’s head crowned
(fig. 4): and a cross (fig. 6). Below this, round the haunch, a beautiful
border composed of a bunch of grapes and a vine leaf (fig. 8),
alternately arranged.
 Below, the Bell mark of John Taylor and Co. within a double circle,
a triangle interlaced with a trefoil, and a bell in the centre. Above the
circle the sacred emblem of S. John Baptist, the lamb, cross, and
flag. The name of the firm within the circle.
RECAST 1896.
The 6th Bell (the tenor Bell).
Round the haunch, between four lines, two above, and two below,

Hec Campana Sacra Fiat Trinitate Beata GILB THACKAR ESQ IC MW CH

WARDENS 1677

(no bell marks).

Below, a border like that on the fifth Bell.

RECAST 1896.

G. WOODYATT, VICAR.
J. ASTLE, }
CHURCHWARDENS.
T. E. AUDEN, }

Bell mark of J. Taylor and Co. on the opposite side.

(Owing to the difference of the type of the inscription, and names,
it is supposed that this bell was recast in 1677, so it may have been
one of the “three great bells” in Edward VI.’s time.)
The following particulars of the bells have been supplied by
Messrs. John Taylor & Co.

Diameter. Height. Note. Weight.

ft. in. ft. in. cwt. qr. lbs.
No. I. 2 9½ 2 3 C♯ 7 3 19
 ” II. 2 10¾ 2 4½ B 7 2 27
” III. 3 0½ 2 4½ A 8 1 18
” IV. 3 2 2 6½ G♯ 9 2 21
” V. 3 6 2 10 F♯ 12 2 26
” VI. 3 11 3 1 E 17 3 0

Total 3 tons 4 cwts. 0 qrs. 27 lbs.

Key-note E major.
To complete the octave, two more bells are required, D ♯ and E,
then indeed Repton will have a “ring” second to none.
 CHAPTER VII.
THE PRIORY.

THE PRIORY FOUNDED, &c.

Before we write an account of the next most important event in the
history of Repton, viz., the founding of Repton Priory, we must go
back to the year 1059, when Calke Abbey is supposed to have been
founded by Algar, Earl of Mercia. Dr. Cox is of opinion that it was
founded later, at the end of the reign of William (Rufus), or at the
beginning of that of Henry I. circa 1100. About that date a Priory of
Canons regular of St. Augustine, dedicated to St. Giles, was
founded. Many benefactors made grants of churches, lands, &c., a
list of all these will be found in Cox’s Derbyshire Churches, vol. iii., p.
346. There is a curious old Chronicle, written in Latin, by one
T(h)omas de Musca, Canon of Dale Abbey. Each section of the
Chronicle begins with a letter which, together, form the Author’s
name, a monkish custom not uncommon. The section beginning with
an E. (Eo tempore) records the arrival, at Deepdale, of the Black
Canons, as they were called, from Kalc (Calke). Serlo de Grendon,
Lord of Badeley or Bradeley, near Ashbourne, “called together the
Canons of Kalc, and gave them the place of Deepdale.” Here, about
1160, the Canons “built for themselves a church, a costly labour, and
other offices,” which became known as Dale Abbey, in which they
lived for a time, “apart from the social intercourse of men,” but “they
began too remissly to hold themselves in the service of God; they
began to frequent the forest more than the church; more to hunting
than to prayer or meditation, so the King ordered them to return to
the place whence they came,” viz., Calke. During the reign of Henry
II., Matilda, widow of Randulf, 4th Earl of Chester, who died 1153,
granted to God, St. Mary, the Holy Trinity, and to the Canons of
Calke, the working of a quarry at Repton, (Repton Rocks), together
with the advowson of the church of St. Wystan at Repton, &c., &c.,
on condition that as soon as a suitable opportunity should occur, the
Canons of Calke should remove to Repton, which was to be their
chief house, and Calke Abbey was to become subject to it. “A
suitable opportunity occurred” during the episcopate of Walter
Durdent, Bishop of Coventry only, at first, afterwards of Lichfield. He
died at Rome, Dec. 7th, 1159. The usual date given for the founding
of Repton Priory is a.d. 1172, but this must be wrong for the simple
reason that Matilda addresses the Charter of Foundation to Bishop
Walter Durdent, who died, as we saw, in 1159: moreover, the
“remains” of the Priory belong to an earlier date; probably the date
1172 refers to the coming of the Canons from Calke to Repton, as
Dugdale writes, “About the year 1172, Maud, widow of Randulf,
removed the greater part of them here (Repton), having prepared a
church and conventual buildings for their reception.” To those
interested in Charters, copies of the original, and many others, can
be read in Bigsby’s “History of Repton,” Dugdale’s “Monasticon,” and
Stebbing-Shaw’s Article in Vol. II. of “the Topographer,” in which he
has copied several “original Charters, not printed in the Monasticon,”
which were in the possession of Sir Robert Burdett, Bart., of
Foremark, and others.
 Plate 7.

Repton Priory.

The Charters, containing grants, extend from Stephen’s reign,

(1135-1154), to the reign of Henry V., (1413-1422), and include the
church of St. Wystan, Repton, with its chapels of Newton Solney,
Bretby, Milton, Foremark, Ingleby, Tickenhall, Smisby, and Measham,
the church at Badow, in Essex, estates at Willington, including its
church, and Croxall.
In 1278 a dispute arose between the Prior of Repton and the
inhabitants of the Chapelry of Measham, which had been granted to
the Priory about 1271. The chancel of Measham Church was “out of
repair,” and the question was, who should repair it? After
considerable debate, it was settled that the inhabitants would re-
build the chancel provided that the Priory should find a priest to
officiate in the church, and should keep the chancel in repair for ever
after, both of which they did till the dissolution of the Priory.
 In the year 1364 Robert de Stretton, Bishop of Lichfield (1360-
1386), was holding a visitation at Repton in the Chapter House of the
Priory. For some reason or other, not known, the villagers, armed
with bows and arrows, swords and cudgels, with much tumult, made
an assault on the Priory gate-house. The Bishop sent for Sir Alured
de Solney, and Sir Robert Francis, Lords of the Manors of Newton
Solney and Foremark, who came, and quickly quelled this early
“town and gown” row, without any actual breach of the peace. The
monument in the crypt of Repton Church, where it was placed during
the “restoration” of 1792, is supposed to be an effigy of Sir Robert
Frances. “The Bishop proceeded on his journey, and, on reaching
Alfreton, issued a sentence of interdict on the town and Parish
Church of Repton, with a command to the clergy, in the neighbouring
churches, to publish the same under pain of greater
excommunication.” See Lichfield Diocesan Registers.
On October 26th, 1503, during the reign of Henry VII., an
inquisition was held at Newark. A complaint was heard against the
Prior of Repton for not providing a priest “to sing” the service in a
chapel on Swarkeston Bridge, “nor had one been provided for the
space of twenty years, although a piece of land between the bridge
and Ingleby, of the annual value of six marks, had been given to the
Prior for that purpose.”

THE PRIORY DISSOLVED AND DESTROYED.

The Priory of Repton was dissolved in the year 1538. By the
advice of Thomas Cromwell—malleus monachorum—the hammer of
the monks—Henry VIII. issued a commission of inquiry into the
condition, &c., of the monasteries in England. A visitation was made
in 1535, the results were laid before the House of Commons, in a
report commonly known as the “Black Book.” In 1536 an Act was
passed for the suppression of all monasteries possessing an income
of less than £200. a year. By this Act 376 monasteries were
dissolved, and their revenues, £32,000. per annum, were granted to
the King, by Divine permission Head of the Church! Repton Priory
was among them. In the Valor Ecclesiasticus (27 Henry VIII.) the
gross annual value of the temporalities and spiritualities is given as
£167. 18s. 2½d. In 1535, Dr. Thomas Leigh and Dr. Richard Layton,
visited Repton and gave the amount as £180. Also they reported, as
they were expected, that the Canons were not living up to their vows,
&c., &c., and “Thomas Thacker was put in possession of the scite of
the seid priory and all the demaynes to yᵗ apperteynying to oʳ
sov’aigne lorde the Kynges use the xxvj day of October in the xxx
yere of oʳ seid sov’aigne lorde Kyng henry the viijᵗʰ.” There is a very
full inventory of the goods and possessions in the Public Record
Office, Augmentation Office Book, 172. A transcript of this inventory
is given by Bigsby in his History of Repton, also by W. H. St. John
Hope, in Vol. VI. of the Derbyshire Archæological Journal. From this
inventory, and Mr. St. John Hope’s articles in the journal, a very good
account and description can be given of the Priory as it was at the
time of its dissolution.
The dissolved Priory was granted to Thomas Thacker in 1539, he
died in 1548, leaving his property to his son Gilbert. He, according to
Fuller (Church History, bk. vi., p. 358), “being alarmed with the news
that Queen Mary had set up abbeys again (and fearing how large a
reach such a precedent might have), upon a Sunday (belike the
better day, the better deed) called together the carpenters and
masons of that county, and plucked down in one day (churchwork is
a cripple in going up, but rides post in coming down) a most beautiful
church belonging thereto, saying “he would destroy the nest, for fear
the birds should build therein again”.” The destruction took place in
the year 1553. How well he accomplished the work is proved by the
ruins uncovered during the years 1883-4.
This Gilbert died in 1563, as set forth on the mural tablet in the
south aisle of Repton Church, a copy of which I have made, so that
my readers may see what sort of a person he was who “wrought
such a deed of shame.” Gilbert sold the remains of the Priory to the
executors of Sir John Port in 1557, he and his descendants lived at
the Hall till the year 1728, when Mary Thacker, heiress of the Manor
of Repton Priory, left it, and other estates, to Sir Robert Burdett, of
Foremark, Bart. Since that time the Hall has been occupied by the
Headmasters of Repton School.
 REPTON PRIORY DESCRIBED.
The Priory followed the usual plan of monastic buildings, differing
chiefly in having the cloister on the north of its church, instead of the
south. This alteration was necessary owing to the river Trent being
on the north. In choosing a site for monasteries the water supply was
of the first consideration, as everything, domestic and sanitary,
depended on that. The Conventual buildings consisted of Gate-
house, Cloister, with Church on its south side, Refectory or Fratry on
its north. The Chapter Rouse, Calefactorium, with Dormitory above
them, on its east side. Kitchens, buttery, cellars, with Guest Hall over
them, on its west side. The Infirmary, now Repton Hall, “beside the
still waters” of the Trent, on the north of the Priory. The Priory
precincts, (now the Cricket ground), were surrounded by the existing
wall on the west, south, and east sides; on the north flowed, what is
now called, “the Old Trent,” and formed a boundary in that direction.

Plate 8.
 Sir John Porte Knt. The Founder of Repton School. (F. C. H.) (Page 62.)

Gilbert Thacker. (Page 54.)

On the east side of the Priory was the Mill. The wall, with arch-
way, through which the water made its way across the grounds in a
north-westerly direction, is still in situ in the south-east corner of the
Cricket ground. The Priory, and well-stocked fish ponds, were thus
supplied with water for domestic, sanitary, and other purposes.
The bed of the stream was diverted to its present course, outside
the eastern boundary wall, by Sir John Harpur, in the year 1606.
The Gate-house (now represented by the School Arch, which was
its outer arch, and wall) consisted of a square building with an upper
chamber, and other rooms on the ground floor for the use of the
porter. Two “greate gates,” with a wicket door let into one of them, for
use when the gates were closed, or only pedestrians sought for
admission, provided an entrance to the Priory. Proceeding through
the arch-way of the Gate-house, we find ourselves in the precincts.
In the distance, on our left hand, was the Parish Church of St.
Wystan, on our right the Priory Church and conventual buildings.
The Priory Church consisted of nave, with north and south aisles,
central tower, north and south transepts, choir, with aisles, and a
south chapel, and a presbytery to the east of the choir. The Nave (95
ft. 6 in. long, and, with aisles, 51 ft. 8 in. wide) “was separated from
the aisles by an arcade of six arches, supported by clustered pillars
of good design, and must have been one of the most beautiful in this
part of the country, all of exceptionally good character and design,
and pertained to the transitional period of architecture which
prevailed during the reign of Edward I., (1272-1307), when the
severe simplicity of the Early English was merging into the more
flowing lines of the Decorated.” In the north aisle the foundations of
an older church, perhaps the original one, were discovered in 1883-
4.
There were several Chapels in the Nave, two of which are named,
viz., “Oʳ lady of petys Chapell” and the “Chapell of Saint Thomas,”
with images, “reredoses, of wood gylte, and alebaster,” “and a
partition of tymber seled ouerin seint Thom’s Chapell.” “vij. peces of
tymber and lytell oulde house of tymber,” probably the remains of a
shrine, and “xij. Apostells,” i.e. images of them. “j sacrying bell,”
sanctus bell, used during the celebration of the mass. In the floor, in
front of the central tower arch, a slab was discovered, (6 ft. 4 in. by 3
ft. 2 in.), bearing a rudely cut cross, with two steps, and an
inscription, in Old English letters, partly obliterated, round the margin
“(Orate pro) anima magistri edmundi duttoni quondam canonici huius
ecclisie qui obiit ... januarii anno diu mcccclᵒ cui’ ppic (deus Amen).”
This slab is now lying among the ruins at the east end of the Pears
School.
Central Tower (25 ft. by 21 ft. 6 in.) supported by four large piers.
Between the two eastern piers there was a pulpitum, a solid stone
screen (5 ft. 4½ in. deep), with a door in the centre (4 ft. 4½ in.
wide). In the northern half was a straight stone stair leading to the
organ loft above, where was “j ould pair of Organs,” a phrase often
met with in old inventories, and church accounts, in describing that
instrument of music. Through the passage under the screen we
enter the Choir. The step leading down to the choir floor, much worn
by the feet of the canons and pilgrims, is still in situ. The Choir (26 ft.
wide, 31 ft. long) was separated from the south Choir aisle, by an
arcade of five arches, from the north choir aisle, by an arcade of
three arches. All traces of the Canons’ stalls have gone, but there
was room for about thirty-four, thirteen on each side, and four
returned at the west end of the Choir. In the Choir was the High Altar
with “v. great Images” at the back of which was a retable, or ledge of
alabaster, with little images, (on a reredos with elaborate canopies
above them). “iiij lytle candlestyks” and “a laumpe of latten,” i.e., a
metal chiefly composed of copper, much used in church vessels,
also “j rode” or cross.
On the south of the choir was a chapel dedicated to St. John, with
his image, and alabaster table, similar to that in the choir. To the
south of St. John’s Chapel was the “Chapel our Lady” similarly
ornamented, these two chapels were separated from the south
transept by “partitions of tymber,” or screens, the holes in which the
screens were fixed are still to be seen in the bases of the pillars. On
the east of the choir was the Presbytery. In the South Transept was
the Chapel of St. Nicholas with images of St. John and St. Syth, (St.
Osyth, daughter of Frithwald, over-lord of the kingdom of Surrey, and
Wilterberga daughter of King Penda). Of the North Choir Aisle
nothing remains: it is supposed that in it was the shrine of St.
Guthlac, whose sanctus bell is thus referred to by the visitors in their
report “superstitio—Huc fit peregrinatio ad Sanctum Guthlacum et ad
eius campanam quam solent capitibus imponere ad restinguendum
dolorem capitis.” “Superstition. Hither a pilgrimage is made to (the
shrine of) St. Guthlac and his (sanctus) bell, which they were
accustomed to place to their heads for the cure of headache.” The
North Transept was separated from the north choir aisle by an
arcade of three arches, immediately to the east of which the
foundations of a wall, about six feet wide, were discovered, which,
like those in the north nave aisle, belonged to an older building.
Many beautiful, painted canopies, tabernacle work, &c., were found
among the débris of the north transept and aisle, which no doubt
adorned the shrines, and other similar erections, which, before the
suppression of the monasteries, had been destroyed, and their relics
taken away—that is, probably, the reason why we find no mention of
the shrines of St. Guthlac, or St. Wystan in the Inventory.
In the western wall of the North Transept there was a curious
recess (13 ft. 10 in. by 4 ft. 10 in.) which may have been the
armarium, or cupboard of the Vestry, to hold the various ornaments,
and vestments used by the Canons, “j Crosse of Coper, too tynacles,
(tunicles), ij albes, ij copes of velvet, j cope of Reysed Velvet, iiij
towels & iiij alter clothes, ij payented Alterclothes,” &c., &c.
Leaving the Church, we enter the Cloister, through the door at the
east end of the Nave, it opened into the south side of the Cloister (97
ft. 9 in. long by 95 ft. wide). Here were “seats,” and “a lavatory of
lead,” but, owing to alterations, very little indeed is left except the
outside walls. Passing along the eastern side we come to the
Chapter House, the base of its entrance, divided by a stone mullion
into two parts, was discovered, adjoining it on the north side was a
slype, or passage, through which the bodies of the Canons were
carried for interment in the cemetery outside. The slype (11¾ ft. wide
by 25½ ft. long) still retains its roof, “a plain barrel vault without ribs,
springing from a chamfered string course.” Next to the slype was the
Calefactorium or warming room. Over the Chapter House, Slype,
and Calefactorium was the Dormitory or Dorter, which was
composed of cells or cubicles.
The Fratry or Refectory occupied the north side of the Cloister,
here the Canons met for meals, which were eaten in silence,
excepting the voice of the reader. A pulpit was generally built on one
of the side walls, from which legends, &c., were read. Underneath
the Fratry was a passage, leading to the Infirmary, and rooms, used
for various purposes, Scriptorium, &c. At the east end of the Fratry
was the Necessarium, well built, well ventilated, and well flushed by
the water from the Mill race.
At the west end of the Fratry was the Buttery. The west side of the
Cloister was occupied by the Prior’s Chamber, and five others called,
in the Inventory, “the Inner,” “Gardyn,” “Next,” “Halle,” and “Hygh
Chambers.” All were furnished with “fether bedds, &c., &c.,” for the
use of guests, who were received and entertained in this part of the
Priory. Underneath these rooms were “the Kychenn,” “Larder,”
“Bruhouse,” &c., called the Cellarium, over which the Cellarer had
supreme authority. Originally the Cellarium was divided into three
parts, Kitchen, Cellar, and Slype or passage into the south side of
the Cloister. The part assigned to the Kitchen was sub-divided into
three rooms, one on the east side, two on the west. One of these two
(the south) has a vaulted roof, with plain square ribs, the boss where
they meet has been carved, and a part of one of the ribs has been
ornamented with the dog tooth moulding, for about 18 inches, there it
stopped unfinished, in the walls are many recesses for the reception
of “plate,” &c.
The Cellar was a long room (89 ft. by 26 ft.), divided into two
“alleys” by a row of six massive Norman columns, four of which
remain, one has a scollopped capital, the others are plain. The floor
above was divided in a similar manner, with the Prior’s Chamber at
the north end, the Guest Hall, divided into the various rooms
mentioned above, and a chamber over the slype, which was
probably used as a parlour by the guests.