Managerial Economics applies the benefits of micro-economic modeling to management problems.
On the one hand, formal modeling is employed for a positive analysis of organizations,
institutions and individual behavior. On the other hand, the respective predictions are tested
using laboratory and field evidence.

Managerial economics has to bridge the gap between a mere (often verbal) description of
specific situations and (sometimes hopelessly abstract) formal models. By bridging this gap,
managerial economists hope to obtain better predictions then when using a less structured
(more verbal) approach.