Assignment:
Discussion question 1
Asymmetric Information and Used Cars
Many police officers positions require the applicant to have a college degree even though the tasks of a police officer rarely call upon college course material. Why don't police departments increase their applicant pool by dropping this requirement?
Be sure to cite all source used.
Discussion 2
Warren Buffett Identifies What Went Wrong at Wells Fargo -- The Motley Fool
This week we look at the principle-agent problem and what when wrong at Wells Fargo. What about the incentive system resulted in massive creation of fake accounts by the retail operation and why did it only get worse from there? As you dig into this remember Froeb's rule from Chapter 1"Avoid the temptation to think about the problem from the employee's point of view...{and ask} how does the organization give employees enough information to make good decisions and the incentives to do so?" page 8 Be sure to cite all source used.
Discussion question 2
Loyalty Payments-Supply Chain Rules
Intel made large loyalty payments to HP in exchange for HP buying most of their chips from Intel instead of rival AMD. AMD sued Intel under the antitrust laws, and Intel settled the case by paying $1.25 billion to AMD.
- What incentive conflict was being controlled by these loyalty payments?
- What advice did Intel ignore when they adopted this practice?
- Why did they ignore it?
Be sure to cite all source used.
Assignment paper
Assignment: Dealing with Risk, Asymmetric Information, and Incentives
Earlier in the quarter we discussed Southwest Airlines' use of game theory to create new strategy. Continue to research Southwest Airlines or a company of your choice and write a six to eight (6 to 8) page paper in which you:
- Evaluate a company's recent (with in the last year) actions dealing with risk and uncertainty.
- Offer advice for improving risk management.
- Examine an adverse selection problem your company is facing and recommend how it should minimize its negative impact on transactions.
- Determine the ways your company is dealing with the moral hazard problem and suggest best practices used in the industry to deal with it.
- Identify a principal-agent problem in your company and evaluate the tools it uses to align incentives and improve profitability.
- Examine the organizational structure of your company and suggests ways it can be changed to improve the overall profitability.
- Use at least five (5) quality academic resources in this assignment. Note: One of your references regarding your should have been published within the last 6 months. Note: Wikipedia does not qualify as an academic resource.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.